##### 





UNITED STATES SECURITIES AND EXCHANGE COMMISSION
    Washington, D.C. 20549
    FORM 10-K
  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  For the
    fiscal year ended December 31, 2006
  Commission File Number 1-16499
  SUNRISE
    SENIOR LIVING,
    INC. (Exact name of registrant as specified in its charter)
  Delaware

54-1746596(State or other jurisdiction 
    incorporation or organization)

(I.R.S. Employer
    Identification No.)7902 Westpark Drive
    McLean, VA

22102(Address of principal 
    executive offices)

(Zip Code)   (703) 273-7500
    Title of Each Class

Name of Each Exchange on Which RegisteredCommon stock, $.01 par value per share

New York Stock Exchange     o þ
  o þ
  o þ
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  Large accelerated
    filer þ

Accelerated
    filer o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    company o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 





TABLE OF
    CONTENTS
  PagePART IItem 1.


Business


6Item 1A.


Risk Factors


30Item 1B.


Unresolved Staff Comments


47Item 2.


Properties


48Item 3.


Legal Proceedings


48Item 4.


Submission of Matters to a Vote of Security Holders


52PART IIItem 5.


Market for Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities


53Item 6.


Selected Financial Data


54Item 7.


Managements Discussion and Analysis of Financial Condition
    and Results of Operations


57Item 7A.


Quantitative and Qualitative Disclosures About Market Risk


106Item 8.


Financial Statements and Supplementary Data


107Item 9.


Changes in and Disagreements with Accountants on Accounting and
    Financial Disclosure


175Item 9A.


Controls and Procedures


175Item 9B.


Other Information


187PART IIIItem 10.


Directors, Executive Officers and Corporate Governance


188Item 11.


Executive Compensation


192Item 12.


Security Ownership of Certain Beneficial Owners and Management
    and Related Stockholder Matters


221Item 13.


Certain Relationships and Related Transactions, and Director
    Independence


226Item 14.


Principal Accountant Fees and Services


230PART IVItem 15.


Exhibits and Financial Statement Schedules


231SIGNATURES









232  2




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##### 



This annual report on
    Form 10-K
    contains forward-looking statements that involve risks and
    uncertainties. Although we believe the expectations reflected in
    such forward-looking statements are based on reasonable
    assumptions, there can be no assurance that our expectations
    will be realized. Our actual results could differ materially
    from those anticipated in these forward-looking statements as a
    result of various factors, including, but not limited to:
  
    the time required for us to prepare and file our 2007
    Form 10-K,
    Form 10-Q
    for the quarter ending March 31, 2008 and
    Form 10-Qs
    for the first three quarters of 2007, and for Ernst &
    Young LLP to audit our 2007 financial statements and review our
    Form 10-Qs;
    our ability to remediate material weaknesses in our internal
    controls over financial reporting;
    the outcome of the Securities and Exchange Commissions
    (SEC) investigation;
    the outcomes of pending putative class action and derivative
    litigation;
    the outcome of the lawsuit filed by our former CFO;
    the outcome of the Trinity OIG investigation and qui tam
    proceeding;
    the outcome of the IRS audit of the Companys tax
    returns for the tax years ended December 31, 2005 and 2006
    and employment tax returns for 2004, 2005 and 2006;
    the outcome of the exploration of strategic alternatives;
    our ability to comply with the terms of the amendments to our
    bank credit facility or to obtain a further extension of the
    period for providing the lenders with required financial
    information;
    development and construction risks;
    acquisition risks;
    licensing risks;
    business conditions;
    competition;
    changes in interest rates;
    our ability to manage our expenses;
    market factors that could affect the value of our
    properties;
    the risks of downturns in general economic conditions;
    availability of financing for development; and
    other risk factors contained in this
    Form 10-K.  Information provided in this
    Form 10-K
    for 2007 and 2008 is preliminary and remains subject to audit by
    Ernst & Young LLP. As such, this information is not
    final or complete, and remains subject to change, possibly
    materially.
  We assume no obligation to update or supplement
    forward-looking statements that become untrue because of
    subsequent events. Unless the context suggests otherwise,
    references herein to Sunrise, the
    Company, we, us and
    our mean Sunrise Senior Living, Inc. and our
    consolidated subsidiaries.
  Explanatory
    Note
  Accounting
    Restatement
  Form 10-K Form 10-Q Form 10-K Form 10-K Form 10-K/A Form 10-Qs, Form 10-K Form 10-K, Form 10-Qs
 3




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##### 



Form 10-Q
  Form 10-K
          Form 10-K:
  
    the impact of the restatement adjustments for 2003 and prior
    periods cumulatively on the Companys retained earnings as
    of January 1, 2004;
    the impact of the restatement adjustments for 2005 and 2004 on
    income before the provision for income taxes for 2005 and 2004;
    the consolidated statements of income and consolidated
    statements of cash flows for 2005 and 2004 as previously
    reported and after giving effect to the restatement adjustments;
    and
    the consolidated balance sheets as of December 31, 2005 and
    2004 as previously reported and as restated.  Rule 10-01
  Form 10-K,
  Form 10-K,
  Special
    Independent Committee Inquiry
    Form 10-K,
 4




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##### 



Form 10-K,
  Ineffectiveness
    of Internal Control Over Financial Reporting and Disclosure
    Controls and Procedures
  Form 10-K, Internal
    Control-Integrated Framework Issued by the Committee of
    Sponsoring Organizations of the Treadway Commission.
  SEC
    Investigation
  Form 10-K,
  Pending
    Putative Securities Class Actions and Derivative
    Litigation
  Form 10-K,
 5




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##### 



PART I Item 1. Business



Overview



Sunrise, a Delaware corporation, is a provider of senior living
    services in the United States, Canada, the United Kingdom
    and Germany. Founded in 1981, we began with a simple but
    innovative vision  to create an alternative senior
    living option that would emphasize quality of life and quality
    of care. We offer a full range of personalized senior living
    services, from independent living, to assisted living, to care
    for individuals with Alzheimers and other forms of memory
    loss, to nursing, rehabilitative and hospice care. We also
    develop senior living communities for ourselves, for ventures in
    which we retain an ownership interest and for third parties.



Our long-range strategic objective is to grow our senior living
    business through a management services business model that is
    built on long-term management contracts. Our four primary growth
    drivers consist of: (1) generating revenue growth from our
    existing operating portfolio of owned and managed communities;
    (2) adding additional communities through new construction,
    primarily with venture partners; (3) generating profitable
    growth through the delivery of hospice and other ancillary
    services; and (4) maximizing our return on our equity
    investment in unconsolidated ventures and other invested capital.



We generate income primarily from: 
    management fees for operating communities, which can also
    include incentive management fees;
    resident fees for communities that are owned by Sunrise;
    development and pre-opening fees related to the development of
    new Sunrise communities;
    our share of income and losses for those communities in which we
    have an ownership interest;
    recapitalizations and sales of communities by ventures in which
    Sunrise owns an equity interest; and
    fees for hospice services.      Significant
    2006 Developments
  Acquisitions
   6




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##### 



20-year
    Venture
    Recapitalizations
    Buyout
    of Management Contracts
          Germany
    Venture
   7




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##### 



Impairment
    of Long-Lived Assets
    Redemption
    of Convertible Notes
    Change
    in Ownership of Sunrise Communities
    Senior
    Living Condominium Developments
      The
    Fountains
  30-year
 8




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##### 



Legal
    and Accounting Fees Related to the Accounting
    Review
    Significant
    2007 Developments
  New
    Ventures
      Change
    in Ownership of Sunrise Communities
    Real
    Estate Transactions
        Bank
    Credit Facility
   9




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##### 



Trinity
    Hospice
  qui tam qui tam qui tam
        Senior
    Living Condominium Developments
    Impairment
    of Long-Lived Assets
    Sunrise
    At Home
   10




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##### 



Legal
    and Accounting Fees Related to Accounting Review, Special
    Independent Committee Inquiry and Related Matters
  qui tam
  Strategic
    Alternatives
    Significant
    2008 Developments
  Bank
    Credit Facility
    
    waived delivery by the Company of all 2006 quarterly financial
    statements and financial statements for the quarters ended
    March 31, 2007, June 30, 2007 and September 30,
    2007;
    modified to April 15, 2008 the delivery date for the 2006
    audited financial statements;
    modified to April 30, 2008 the delivery date for
    preliminary 2007 unaudited annual financial statements;
    modified to May 31, 2008 the delivery date for the
    preliminary unaudited financial statements for the quarter
    ending March 31, 2008;
    modified to July 31, 2008 the delivery date for the 2007
    audited annual financial statements;
    modified to August 20, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    March 31, 2008; and
    modified to September 10, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    June 30, 2008.     11




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##### 



Real
    Estate Transactions
  Form 10-K),
  Senior
    Living Condominium Developments
    The
    Senior Living Industry
    
    Independent livingis designed to meet the needs of
    seniors who choose to live in an environment surrounded by their
    peers where they receive services such as housekeeping, meals
    and activities, but are not reliant on assistance with
    activities of daily living (for example, bathing, eating and
    dressing), although some residents may contract out for those
    services.
    Assisted livingmeets the needs of seniors who seek
    housing with supportive care and services including assistance
    with activities of daily living, Alzheimers care and other
    services (for example, housekeeping, meals and activities).
    Skilled nursingmeets the needs of seniors whose care
    needs require
    24-hour
    skilled nursing services or who are receiving rehabilitative
    services following an adverse event (for example, a broken hip
    or stroke).     12




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##### 



Senior
    Living Services
  24-hour
  Assisted
    Living
      Basic
    Assisted Living
    
    assistance with activities of daily living, such as eating,
    bathing, dressing, personal hygiene, and grooming;
    three meals per day served in a common dining room;
    coordination of special diets;
    emergency call systems in each unit;
    transportation to stores and community services;
    assistance with coordination of physician care, physical therapy
    and other medical services;
    health promotion and related programs;
    housekeeping services; and
    social and recreational activities.  Medication
    Management
    Assisted
    Living Extended Levels of Care
   13




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##### 



Reminiscence
    Care
    Independent
    Living and Skilled Nursing
    Hospice
    Services
      
    supervision of the patients medical needs;
    nurses that make regular visits and address the medical concerns
    of the patient. They explain the progression of the disease,
    teach family members how to perform physical care and coordinate
    medications. A certified nurses aide may also assist with
    personal care needs such as bathing, changing bed linens and
    perhaps light housekeeping;
    social workers help patients and family members cope with
    life-limiting illnesses and ascertain their impact on the
    family. They foster open communication and find ways to fulfill
    individual and family needs while providing guidance about loss
    and grief;
    pastoral care and religious services in the home;
    volunteers who provide patient companionship, relief for the
    caregiver and can also assist the patient with tasks important
    to them; and
    bereavement services.    Other
    Services
     14




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##### 



Managed
    Communities
          New
    Community Development
    
    market area demographics;
    market area demand and competitive supply;
    target site characteristics;
    probability of obtaining zoning approvals; and
    the ability to cluster our communities to optimize management
    resources.       15




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##### 




    site selection and contract signing;
    zoning, site plan approval and building permits;
    construction; and
    community opening.          
    as a source of financing for the development of new communities;
    obtaining development and management fees; and
    potential appreciation in the underlying real estate of our
    communities.  Form 10-K.
  Greystone
    Development Activities
       16




---



##### 



and/or
  Senior
    Living Condominium Developments
        2006
    and 2007 Property Information
     17




---



##### 



2006
    Change in Operating Communities
  Number of Communities


Total Resident CapacityUnconsolidated











UnconsolidatedConsolidated (1)


Ventures (2)


Managed (3)


Total


Consolidated (1)


Ventures (2)


Managed (3)


TotalBeginning number December 31, 2005


62



156



197



415



8,351



16,485



25,837



50,673Opened (developed by Sunrise)


1



22



7



30



100



2,027



1,191



3,318Acquisitions


3



9



7



19



204



2,225



1,115



3,544Terminations/Dispositions


(2)







(22)



(24)



(94)







(5,290)



(5,384)Expansions/Other Adjustments(4)


1



(4)



3







85



(304)



238



19Ending number, December 31, 2006


65



183



192



440



8,646



20,433



23,091



52,170   (1)
    Activity in 2006 includes one community opened, three
    communities acquired, one community we bought from a venture
    partner and two communities that were sold. The opened community
    was contributed to a venture in April 2007.(2)
    Activity in 2006 includes 22 communities developed by Sunrise,
    nine other communities acquired (six from the Aston Gardens
    portfolio, three communities sold and one purchased by Sunrise,
    which moved to the consolidated portfolio.(3)
    Activity in 2006 includes three communities opened by Greystone.
    Changes reflect buyout of 18 contracts by Five Star and four
    other terminations.(4)
    During 2006, we acquired 100% of a community that was previously
    in an unconsolidated venture and three communities in which we
    had an ownership interest became managed only. Changes in
    resident capacity includes unit expansions for existing
    communities. 18




---



##### 



2006
    Operating Communities
  Number of Communities


Total Resident CapacityUnconsolidated








UnconsolidatedLocation

Consolidated


Ventures


Managed


Consolidated


Ventures


ManagedAlabama










1











194Arizona


2



1



1



257



390



354Arkansas










1











163California


8



31



21



919



2,933



2,986Colorado


1



7



3



74



623



476Connecticut


2



1



3



168



102



518District of Columbia






2



1







343



136Delaware






1











82



Florida


6



8



5



1,687



2,726



1,570Georgia


3



5



11



98



630



970Hawaii










1











392Illinois


1



13



11



303



1,410



1,130Indiana


4







2



279







403Kansas






2



1







197



164Kentucky










3











327Louisiana


1



1



2



91



70



98Maryland


3



2



11



513



233



1,276Maine






1











185



Massachusetts






8



8







603



794Michigan


1



11



3



77



1,266



300Minnesota






4



12







364



590Missouri


1



2



2



77



296



179Nebraska










1











166Nevada










2











306New Jersey


2



14



15



495



1,218



1,526New Mexico


2











97







New York


1



14



4



100



1,399



719North Carolina


2



1



7



166



207



750Ohio


13



4



5



840



236



506Oklahoma






1



2







291



240Pennsylvania


4



18



2



765



1,519



291South Carolina


1







5



39







511Tennessee










1











115Texas


1



3



11



145



270



1,731Utah










2











327Virginia


6



7



16



1,456



765



1,218Washington






2



5







226



407West Virginia










1











167Wisconsin










1











192United Kingdom






12











1,156



Germany






5











518



Canada






2



9







175



899Total


65



183



192



8,646



20,433



23,091  19




---



##### 



2006
    Communities Under Construction
  Number of Communities


Total Resident CapacityUnconsolidated








UnconsolidatedLocation

Consolidated


Ventures


Managed


Consolidated


Ventures


ManagedArizona


1



2







127



170



California


2



1







192



78



Florida










1











60Georgia






1











89



Illinois






1



3







53



899Indiana










1











142Kansas






1



1







71



242Maryland






1











407



Massachusetts






1











96



Michigan






1











89



New York










1











334Oklahoma










1











174Texas






2



2







151



529Utah






1











159



Virginia






1











89



United Kingdom


1



6







89



593



Germany






5











524



Canada


1











256







Total


5



24



10



664



2,569



2,380   2007
    Change in Operating Communities
  Number of Communities


Total Resident CapacityUnconsolidated











UnconsolidatedConsolidated (1)


Ventures (2)


Managed (3)


Total


Consolidated (1)


Ventures (2)


Managed (3)


TotalBeginning number December 31, 2006


65



183



192



440



8,646



20,433



23,091



52,170Opened (developed by Sunrise)






19



3



22







1,867



691



2,558Acquisitions










1



1











106



106Terminations






(1)



(5)



(6)







(100)



(838)



(938)Expansions/Other Adjustments (4)


1







(1)







37



45



(61)



21Ending number, December 31, 2007


66



201



190



457



8,683



22,245



22,989



53,917   (1)
    Activity in 2007 includes the acquisition of one community from
    venture partners and one formally managed community and
    contributed one community to a venture.(2)
    Activity in 2007 includes 19 communities developed by Sunrise in
    which we maintained an ownership interest and one contract
    termination.(3)
    Activity in 2007 includes the opening of three communities
    managed by Greystone and the acquisition of one management
    contract. Five other contracts were also terminated and we
    acquired one managed community.(4)
    Changes in resident capacity include unit expansions for
    existing communities. 20




---



##### 



2007
    Operating Communities
  Number of Communities


Total Resident CapacityUnconsolidated








UnconsolidatedLocation

Consolidated


Ventures


Managed


Consolidated


Ventures


ManagedAlabama










1











194Arizona


2



3



1



257



575



386Arkansas










1











163California


8



32



20



919



2,994



2,826Colorado


1



7



3



74



623



476Connecticut


2



1



3



168



102



518District of Columbia


1



1



1



110



233



137Delaware






1











82



Florida


6



8



5



1,687



2,745



1,570Georgia


3



5



11



98



630



970Hawaii










1











392Illinois


1



14



11



303



1,473



1,130Indiana


4







2



279







403Kansas






3



2







268



406Kentucky










3











327Louisiana


1



1



2



91



70



98Maryland


3



2



11



513



233



1,276Maine






1











185



Massachusetts






9



8







699



802Michigan


1



12



3



77



1,376



300Minnesota






4



12







358



562Missouri


1



2



2



77



296



179Nebraska










1











166Nevada










2











306New Jersey


2



14



15



495



1,218



1,526New Mexico


2











97







New York






15



2







1,499



243North Carolina


2



1



7



166



207



750Ohio


13



4



4



840



236



410Oklahoma






1



3







291



419Pennsylvania


4



18



2



765



1,513



283South Carolina


1







5



39







511Tennessee










1











115Texas


1



5



12



145



434



2,049Utah










2











263Virginia


7



7



15



1,483



765



1,168Washington






2



5







226



407West Virginia










1











167Wisconsin










1











192United Kingdom






17











1,642



Germany






8











841



Canada






3



9







431



899Total


66



201



190



8,683



22,245



22,989  21




---



##### 



2007
    Communities Under Construction
  Number of Communities


Total Resident CapacityUnconsolidated








UnconsolidatedLocation

Consolidated


Ventures


Managed


Consolidated


Ventures


ManagedAlabama






















18Arizona






2











268



California


2



2







194



128



Colorado






1











80



Florida






1



1







80



60Georgia






2











168



Illinois


1







1



142







344Indiana






1











140



48Kentucky






1











80



Louisiana






2











151



Maryland






1











407



Michigan






1











80



Nevada






1











96



New Jersey






1











93



New York










1











332North Carolina






1











74



Pennsylvania


1



1







76



79



South Carolina










1











222Texas






1



2







80



439Utah






1











159



Virginia






1











89



Washington










1











309United Kingdom






8











800



Germany






1











110



Canada


4











468







Total


8



30



7



880



3,162



1,772   Company
    Operations
  Operating
    Structure
  Form 10-K
   22




---



##### 



Senior
    Living Operations
          Community
    Staffing
        Staff
    Education and Training
   23




---



##### 



Quality
    Improvement Processes
    Family and Resident Feedback.
  Regular Quality Assurance Inspections.
  Third-Party Reviews. on-site
  Sales and
    Marketing
   24




---



##### 



e-newsletter,
  Development
    Greystone
    Operations
            Trinity
    Operations
   25




---



##### 



Competition
    Government
    Regulation
  Senior Living.
  
    personnel education, training, and records;
    administration and supervision of medication;
    the provision of limited nursing services;
    admission and discharge criteria;
    documentation, reporting and disclosure requirements;
    staffing requirements;
    monitoring of resident wellness;
    physical plant specifications;
    furnishing of resident units;
    food and housekeeping services;
    emergency evacuation plans; and
    resident rights and responsibilities.    and/or
   26




---



##### 



Hospice.
  
    personnel education, training, and records;
    administration and supervision of medication;
    the provision of nursing services;
    admission and discharge criteria;
    documentation and reporting requirements;
    staffing requirements; and
    resident rights and responsibilities.       27




---



##### 



qui tam
  Other.
    Employees
   28




---



##### 



Website
  http://www.sunriseseniorliving.com. Form 10-K, Form 10-Q, Form 8-K,
 29




---



##### 



Item 1A.
    Risk
    Factors  In connection with the safe harbor provisions of the Private
    Securities Litigation Reform Act of 1995, set forth below are
    cautionary statements identifying important factors that could
    cause actual events or results to differ materially from any
    forward-looking statements made by or on behalf of us, whether
    oral or written. We wish to ensure that any forward-looking
    statements are accompanied by meaningful cautionary statements
    in order to maximize to the fullest extent possible the
    protections of the safe harbor established in the Private
    Securities Litigation Reform Act of 1995. Accordingly, any such
    statements are qualified in their entirety by reference to, and
    are accompanied by, the following important factors that could
    cause actual events or results to differ materially from our
    forward-looking statements. If any of the following risks
    actually occur, our business, financial condition or results of
    operations could be negatively affected, and the trading price
    of our common stock could decline.
  These forward-looking statements are based on
    managements present expectations and beliefs about future
    events. As with any projection or forecast, these statements are
    inherently susceptible to uncertainty and changes in
    circumstances. There may be additional risks and uncertainties
    not presently known to us or that we currently deem immaterial
    that also may impair our business operations. You should not
    consider this list to be a complete statement of all potential
    risks or uncertainties.
  We have separated the risks into the following categories:
  
    Risks related to our failure to timely file periodic reports
    with the SEC and the state of our internal controls over
    financial reporting;
    Risks related to the pending SEC investigation and pending
    litigation arising out of our pending restatement, other pending
    government proceedings and other pending litigation;
    Risks related to our business operations;
    Risks related to the senior living industry; and
    Risks related to our organization and structure.  Risks
    Related to our Failure to Timely File Periodic Reports with the
    SEC and the State of our Internal Controls over Financial
    Reporting
  Our failure to timely file our 2007
    Form 10-K
    could jeopardize our listing on the New York Stock Exchange and
    could reduce the liquidity and lead to a drop in the price of
    our common stock if our shares are suspended from trading or
    delisted.
  Form 10-K Form 10-K Form 10-K Form 10-K. Form 10-K. Form 10-K
  Our failure to timely prepare and file our financial
    reports precludes us from accessing the public markets to raise
    debt or equity capital and could result in the acceleration of
    amounts outstanding under our existing Bank Credit Facility,
    construction loans and permanent financing and our need to
    replace existing letters of credit.
   30




---



##### 




    waived delivery by the Company of all 2006 quarterly financial
    statements and financial statements for the quarters ended
    March 31, 2007, June 30, 2007 and September 30,
    2007;
    modified to April 15, 2008 the delivery date for the 2006
    audited financial statements;
    modified to April 30, 2008 the delivery date for
    preliminary 2007 unaudited annual financial statements;
    modified to May 31, 2008 the delivery date for the
    preliminary unaudited financial statements for the quarter
    ending March 31, 2008;
    modified to July 31, 2008 the delivery date for the 2007
    audited annual financial statements;
    modified to August 20, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    March 31, 2008; and
    modified to September 10, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    June 30, 2008.         31




---



##### 



We have identified material weaknesses in our internal
    control over financial reporting and expect to incur substantial
    additional costs to address these control deficiencies and in
    connection with our ongoing efforts to comply with
    Section 404 of the Sarbanes-Oxley Act of 2002.
  Form 10-K
  Form 10-K, Form 10-K,
    Outstanding comments from past SEC staff review and any
    additional comments from future SEC staff review may require
    that we amend our periodic reports filed with the SEC, which
    could lead to significant changes in our past and current
    disclosure.
  Form 10-K Form 10-Q Form 10-K Form 10-K Form 10-Q Form 10-K Form 10-K. Form 10-K
 32




---



##### 



Form 10-K,
  Risks
    Related to the Pending SEC Investigation and Pending Litigation
    Arising Out of our Pending Restatement, Other Pending Government
    Proceedings and Other Pending Litigation
  The SECs formal investigation and pending putative
    securities class action and derivative litigation have resulted
    in significant costs and expenses, diverted resources and could
    have a material adverse effect on our business, financial
    condition and results of operations.
  Form 10-K, Form 10-K,
    We are involved in other litigation matters that will
    continue to divert our resources and attention, and could result
    in substantial monetary damages that could have a material
    adverse effect on our financial condition and results of
    operations if we do not prevail.
  Form 10-K,
  The Trinity OIG investigation and IRS audit may result in
    substantial fines and penalties, which could harm our financial
    condition, results of operations and cash flow.
  Form 10-K,
 33




---



##### 



Our potential indemnification obligations and limitations
    of our director and officer liability insurance may have a
    material adverse effect on our financial condition and results
    of operations.
  Form 10-K,
      Our exploration of strategic alternatives may not result
    in any sale transaction.
    Risks
    Relating to Our Business Operations
  We may be unable to manage effectively our growth and
    expansion, which may harm our financial condition and operating
    results.
   34




---



##### 



Due to the dependency of our revenues on private pay
    sources, events which adversely affect the ability of seniors to
    afford our monthly resident fees or entrance fees (including
    downturns in housing markets or the economy) could cause our
    occupancy rates, revenues and results of operations to
    decline.
  and/or
  Any delays we experience in developing new communities
    could impede our growth and adversely affect our revenues and
    results of operations.
      
    difficulties or delays in obtaining zoning, land use, building,
    occupancy, licensing and other required governmental permits for
    the construction of new communities;
    failure to complete construction of new communities on budget
    and on schedule;
    failure of third-party contractors and subcontractors to perform
    under their contracts;
    shortages of labor or materials that could delay projects or
    make them more expensive;
    adverse weather conditions or acts of God that could delay
    construction projects;
    difficulties in developing new types of senior living products
    with which we have less experience;
    difficulties in finding suitable sites for future development
    activities at acceptable prices;
    increased costs resulting from changes in general economic
    conditions or increases in the costs of materials; and 35




---



##### 




    increased costs as a result of addressing changes in laws and
    regulations or how existing laws and regulations are applied.    Our failure to secure additional financing to fund our
    development and acquisition activities could slow our growth and
    could adversely affect our revenues and results of
    operations.
          Our international operations are subject to a variety of
    risks that could adversely affect those operations and thus our
    profitability and operating results.
   36




---



##### 



lease-up
  Our expansion into new offerings may not be successful and
    could adversely impact our growth.
        pre-tax
    Our failure to attract partners for developing senior
    living communities in the future could adversely affect our
    revenues and results of operations, and harm our ability to
    finance the construction of new communities.
   37




---



##### 



Early termination or non-renewal of our management
    agreements could cause a loss in revenues.
    Ownership of the communities we manage is heavily
    concentrated with three of our business partners.
      The operations of Sunrise and the operations of entities
    that we have or may acquire may not be integrated successfully
    or the intended benefits of such transactions may not be
    realized or may be subject to unforeseen liabilities, any of
    which could have a negative impact on our revenues, expenses and
    operating results.
    
    the acquired portfolios or business operations may not perform
    as well as we anticipate due to various factors, including
    disruptions caused by the integration of operations with us and
    changes in macro-economic conditions;
    the diversion of management attention to the integration of the
    operations of the acquisitions could have a material adverse
    effect on the continued operation and expansion of our existing
    business;
    we may not effectively integrate the operations of these
    acquisitions;
    we may experience difficulties and incur greater than
    anticipated expenses related to the assimilation and retention
    of the employees from these acquisitions; and 38




---



##### 




    following any one of these acquisitions, we may not achieve any
    expected cost savings and operating efficiencies in connection
    with such acquisition, such as the elimination of redundant
    administrative costs and community management costs.  and/or
  Our current and future investments in ventures could be
    adversely affected by our lack of sole
    decision-making
    authority, our reliance on venture partners financial
    condition, any disputes that may arise between us and our
    venture partners and our exposure to potential losses from the
    actions of our venture partners.
    
    we share decision-making authority with our venture partners
    regarding major decisions affecting the ownership or operation
    of the venture and the community, such as the sale of the
    community or the making of additional capital contributions for
    the benefit of the community and the approval of the annual
    operating and capital budgets, which may prevent us from taking
    actions that are opposed by our venture partners;
    prior consent of our venture partners may be required for a sale
    or transfer to a third party of our interests in the venture,
    which restricts our ability to dispose of our interest in the
    venture;
    our venture partners might become bankrupt or fail to fund their
    share of required capital contributions, which may delay
    construction or development of a community or increase our
    financial commitment to the venture;
    our venture partners may have business interests or goals with
    respect to the community that conflict with our business
    interests and goals, which could increase the likelihood of
    disputes regarding the ownership, management or disposition of
    the community;
    disputes may develop with our venture partners over decisions
    affecting the community or the venture, which may result in
    litigation or arbitration that would increase our expenses and
    distract our officers
    and/or
    directors from focusing their time and effort on our business,
    and possibly disrupt the day-to-day operations of the community
    such as delaying the implementation of important decisions until
    the conflict or dispute is resolved; and
    we may suffer losses as a result of the actions of our venture
    partners with respect to our venture investments.  The refinancing or sale of communities held in ventures
    may not result in future distributions to us.
   39




---



##### 



Liability claims against us in excess of insurance limits
    could adversely affect our financial condition and results of
    operations.
          Our results of operations could be adversely affected if
    we are required to perform under various financial guarantees or
    support arrangements that we have entered into as part of our
    operating strategy.
   40




---



##### 



lease-up
  Our failure to generate sufficient cash flow to cover
    required interest, principal and operating lease payments could
    result in defaults of the related debt or operating
    leases.
    Our failure to comply with financial obligations contained
    in debt instruments could result in the acceleration of the debt
    extended pursuant to such debt instruments, trigger other rights
    and restrict our operating and acquisition activity, and in the
    case of ventures, may cause acceleration of the ventures
    debt repayment obligations and any correlated Sunrise guarantee
    obligations.
    
    require us to meet certain financial tests. For example, our
    Bank Credit Facility requires us not to exceed certain leverage
    ratios, to maintain certain fixed-charges coverage ratios and
    have a consolidated net worth of at least $450 million as
    adjusted each quarter and to meet other financial ratios;
    require consent for a change in control; and
    restrict our ability and our subsidiaries ability to
    borrow additional funds, dispose of all or substantially all
    assets, or engage in mergers or other business combinations in
    which we are not the surviving entity without lender consent.     41




---



##### 



Interest rate increases could adversely affect our
    earnings because a portion of our total debt is floating rate
    debt.
    We may be adversely affected by fluctuations in currency
    exchange rates.
  non-U.S. dollar
  Termination of resident agreements and vacancies in
    communities could adversely affect our revenues and
    earnings.
    The discovery of environmental problems at any of the
    communities we own or operate could result in substantial costs
    to us, which would have an adverse effect on our earnings and
    financial condition.
   42




---



##### 



clean-up
    Our hospice revenue is dependent on payments from Medicare
    and Medicaid. If there are changes in the rates or methods
    governing these payments for our services, our net patient
    service revenue and profits could materially decline.
    Our hospice business is subject to a Medicare cap amount
    which is calculated by Medicare. Our hospice revenue and
    profitability could be adversely affected by limitations on
    Medicare payments.
  program-by-program
  If any of our hospice programs fail to comply with the
    Medicare conditions of participation, that program could be
    terminated from the Medicare program, thereby adversely
    affecting our net patient service revenue and
    profitability.
   43




---



##### 



Risks
    Related to the Senior Living Industry
  Competition in our industry is high and may increase,
    which could impede our growth and have a material adverse effect
    on our revenues and earnings.
    Our success depends on attracting and retaining skilled
    personnel, and increased competition for or a shortage of
    skilled personnel could increase our staffing and labor costs,
    which we may not be able to offset by increasing the rates we
    charge to our residents.
    The need to comply with government regulation of senior
    living communities may increase our costs of doing business and
    increase our operating costs.
    
    personnel education, training, and records;
    administration and supervision of medication;
    the provision of limited nursing services; 44




---



##### 




    admission and discharge criteria;
    documentation, reporting and disclosure requirements;
    staffing requirements;
    monitoring of resident wellness;
    physical plant specifications;
    furnishing of resident units;
    food and housekeeping services;
    emergency evacuation plans; and
    resident rights and responsibilities.    and/or
       45




---



##### 



Anti-Kickback
    Risks
    Relating to our Organization and Structure
  Anti-takeover provisions in our governing documents and
    under Delaware law could make it more difficult to effect a
    change in control.
    
    Board authority to issue preferred stock without stockholder
    approval. Our Board of Directors is authorized to issue
    preferred stock having a preference as to dividends or
    liquidation over the common stock without stockholder approval.
    The issuance of preferred stock could adversely affect the
    voting power of the holders of our common stock and could be
    used to discourage, delay or prevent a change in control of
    Sunrise;
    Staggered board and board size fixed within
    range. Our Board of Directors is divided into three
    classes. The total number of directors is fixed by a two-thirds
    vote of the board within a range of a minimum of two and a
    maximum of 11. These provisions may make it more difficult for a
    third party to gain control of our Board of Directors. At least
    two annual meetings of stockholders, instead of one, would
    generally be required to affect a change in a majority of our
    Board of Directors;
    Filling of Board vacancies; removal. Any vacancy
    occurring in the Board of Directors, including any vacancy
    created by an increase in the number of directors, shall be
    filled for the unexpired term by the vote of a majority of the
    directors then in office, and any director so chosen shall hold
    office for the remainder of the full term of the class in which
    the new directorship was created or the vacancy occurred.
    Directors may only be removed with cause by the affirmative vote
    of the holders of at least a majority of the outstanding shares
    of our capital stock then entitled to vote at an election of
    directors;
    Other constituency provision. Our Board of Directors
    is required under our certificate of incorporation to consider
    other constituencies, such as employees, residents, their
    families and the communities in which we and our subsidiaries
    operate, in evaluating any proposal to acquire us. This
    provision may allow our Board of Directors to reject an
    acquisition proposal even though the proposal was in the best
    interests of our stockholders subject to any overriding
    applicable law;
    Call of special meetings. A special meeting of our
    stockholders may be called only by the chairman of the board,
    the president, by a majority of the directors or by stockholders
    possessing at least 25% of the voting power of the issued and
    outstanding voting stock entitled to vote generally in the
    election of directors. This provision limits the ability of
    stockholders to call special meetings; 46




---



##### 




    Stockholder action instead of meeting by unanimous written
    consent. Any action required or permitted to be taken
    by the stockholders must be affected at a duly called annual or
    special meeting of such holders and may not be affected by any
    consent in writing by such holders, unless such consent is
    unanimous. This provision limits the ability of stockholders to
    take action by written consent in lieu of a meeting;
    Supermajority vote of stockholders or the directors required
    for bylaw amendments. A two-thirds vote of the
    outstanding shares of common stock is required for stockholders
    to amend the bylaws. Amendments to the bylaws by directors
    require approval by at least a two-thirds vote of the directors.
    These provisions may make more difficult bylaw amendments that
    stockholders may believe are desirable;
    Two-thirds stockholder vote required to approve some
    amendments to the certificate of incorporation. A
    two-thirds vote of the outstanding shares of common stock is
    required for approval of amendments to the foregoing provisions
    that are contained in our certificate of incorporation. All
    amendments to the certificate of incorporation must first be
    proposed by a two-thirds vote of directors. These supermajority
    vote requirements may make more difficult amendments to these
    provisions of the certificate of incorporation that stockholders
    may believe are desirable; and
    Advance notice bylaw. We have an advance notice
    bylaw provision requiring stockholders intending to present
    nominations for directors or other business for consideration at
    a meeting of stockholders to notify us no later than
    60 days before the meeting or 15 days after the notice
    of the meeting date is mailed or public notice of the meeting is
    given, if less than 75 days notice of the meeting
    date is given or made to stockholders. This provision limits the
    ability of stockholders to make nominations for directors or
    introduce other proposals that are not timely received for
    consideration at a meeting.    Our Board of Directors has adopted a stockholder rights
    plan that could discourage a third party from making a proposal
    to acquire us.
    Our management has influence over matters requiring the
    approval of stockholders.
    Item 1B.
    Unresolved
    Staff Comments  Form 10-K Form 10-Q
 47




---



##### 



Form 10-K Form 10-K Form 10-Q Form 10-K Form 10-K. Form 10-K Form 10-K,
  Item 2.
    Properties    SFAS 66
    Accounting for the Sales of Real Estate
  Item 3.
    Legal
    Proceedings  CGB
    Occupational Therapy
    Bellaire
    Litigation
    Trinity
    OIG Investigation and Qui TamAction
   48




---



##### 



qui tam qui tam Qui tam qui tam Qui tam United States ex rel. Joyce Roberts, et
    al., v. KRG Capital, LLC, et al.
      IRS
    Audit
    Lawsuit
    Filed by Former CFO
   49




---



##### 



SEC
    Investigation
    Putative
    Class Action Litigation
  United
    Food & Commercial Workers Union Local 880-Retail Food
    Employers Joint Pension Fund, et al. v. Sunrise Senior
    Living, Inc., et al. First New York Securities, L.L.C. v. Sunrise Senior
    Living, Inc., et al. In re
    Sunrise Senior Living, Inc. Securities Litigation No. 07-CV-00102-RBW)
  Putative
    Shareholder Derivative Litigation
  Brockton Contributory Retirement System v.
    Paul J. Klaassen, et al. Catherine Molner v. Paul J.
    Klaassen, et al. 1/31/2007); Robert Anderson v. Paul J. Klaassen, et al. 2/5/2007).
 50




---



##### 



Peter V. Young, et al. v. Paul L. Klaassen, et
    al. No. 2770-N
  Nicholas Von
    Guggenberg v. Paul J. Klaassen, et al. 8/11/2006); Catherine Molner v. Paul J. Klaassen, et al. 9/6/2006). Von Guggenberg Molner Von Guggenberg Molner
  Delaware
    General Corporation Law Section 211 Litigation
  Form 8-K
 51




---



##### 



Other
    Lawsuits and Claims
    Item 4.
    Submission
    of Matters to a Vote of Security Holders   52




---



##### 



PART II Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities        Quarterly
    Market Price Range of Common Stock
  Quarter Ending

High


LowMarch 31, 2008 (through February 29, 2008)

$
30.65


$
24.64   Quarter Ended

High


LowMarch 31, 2007

$
41.50


$
30.10June 30, 2007

$
42.97


$
36.43September 30, 2007

$
41.05


$
33.00December 31, 2007

$
39.70


$
26.78   Quarter Ended

High


LowMarch 31, 2006

$
39.68


$
31.64June 30, 2006

$
39.62


$
26.29September 30, 2006

$
32.12


$
24.40December 31, 2006

$
33.68


$
29.05   Quarter Ended

High


LowMarch 31, 2005

$
24.93


$
21.40June 30, 2005

$
27.58


$
23.15September 30, 2005

$
33.50


$
25.80December 31, 2005

$
37.47


$
30.37   Holders
    Dividends
    Issuer
    Purchases of Equity Securities
   53




---



##### 



Item 6.
    Selected
    Financial Data    December 31,2005


2004


2003


20022006(1)


as Restated(2)(3)


as Restated(2)


as Restated(2)(4)


as Restated(2)(Unaudited)


(Unaudited)(Dollars in thousands, except per share amounts)STATEMENTS OF INCOME DATA:Operating revenues(5)

$
1,648,399


$
1,509,438


$
1,267,640


$
998,283


$
728,184Operating expenses(5)


1,713,137



1,468,175



1,277,274



1,003,499



723,530(Loss) income from operations


(64,738
)


41,263



(9,634
)


(5,216
)


4,654Gain on the sale and development of real estate and equity
    interests


51,347



81,723



14,025



51,276



71,224Sunrises share of earnings, return on investment in
    unconsolidated communities and loss on profit sharing investments


42,845



12,615



(70
)


962



3,818Net income


20,357



87,089



1,114



14,705



28,314Net income per common share(6)(7):Basic

$
0.42


$
2.10


$
0.03


$
0.35


$
0.63Diluted


0.40


$
1.82


$
0.03



0.34



0.62BALANCE SHEET DATA:Total current assets as restated

$
356,084


$
326,888


$
282,524


$
204,726


$
257,614Total current assets as previously reported






416,772



330,695



235,895



254,386Total current liabilities as restated


421,109



280,684



203,998



137,526



83,594Total current liabilities as previously reported






341,909



252,551



164,772



114,747Property and equipment as restated


609,385



494,069



359,070



509,833



293,753Property and equipment as previously reported






458,546



369,632



412,228



299,683Property and equipment subject to a sales contract, net as
    restated


193,158



255,231



473,485



459,187



161,978Property and equipment subject to a sales contract, net as
    previously reported


















Property and equipment subject to financing, net as restated


62,520



64,174



28,988







Property and equipment subject to financing, net as previously
    reported


















Goodwill as restated


218,015



153,328



121,825



104,475



32,749Goodwill as previously reported






165,028



123,713



106,139



32,749Total assets as restated


1,817,428



1,587,785



1,506,453



1,501,608



1,188,926Total assets as previously reported






1,328,276



1,105,756



1,009,798



1,116,151Total debt as restated


190,605



248,396



191,666



270,332



456,969Total debt as previously reported






202,789



191,666



198,122



456,969 54




---



##### 



December 31,2005


2004


2003


20022006(1)


as Restated(2)(3)


as Restated(2)


as Restated(2)(4)


as Restated(2)(Unaudited)


(Unaudited)(Dollars in thousands, except per share amounts)Deposits related to properties subject to a sales contract as
    restated


240,367



324,782



599,071



540,382



155,845Deposits related to properties subject to a sales contract as
    previously reported


















Liabilities related to properties accounted for under the
    financing method as restated


66,283



64,208



24,247







Liabilities related to properties accounted for under the
    financing method as previously reported


















Deferred income tax liabilities as restated


89,267



78,004



63,637



65,010



54,778Deferred income tax liabilities as previously reported






165,957



148,790



129,661



96,112Total liabilities as restated


1,153,612



1,082,689



1,135,170



1,083,323



772,424Total liabilities as previously reported






691,418



580,658



517,919



648,472Stockholders equity as restated(6)


647,301



492,385



369,703



389,191



415,535Stockholders equity as previously reported






632,677



523,518



490,276



465,818OPERATING AND OTHER DATA:Cash dividends declared per common share

$



$



$



$



$
Communities (at end of period):Communities consolidated


65



61



60



66



81Communities in unconsolidated ventures


183



156



125



120



100Communities managed for third party owners


192



198



195



187



28Total


440



415



380



373



209Resident capacity:Communities consolidated


8,646



7,980



7,943



8,539



5,497Communities in unconsolidated ventures


20,433



16,485



10,929



10,561



8,781Communities managed for third party owners


23,091



26,208



24,237



23,651



2,322Total


52,170



50,673



43,109



42,751



16,600     (1)
    
    In September 2006, we acquired 100% of the equity interests in
    Trinity a large provider of hospice services in the United
    States. The operating results of Trinity are included in our
    consolidated statements of income beginning September 13,
    2006.(2)
    
    The financial information included in this table for the years
    2002 through 2005 has been restated to correct errors in the
    accounting for real estate projects, investments in real estate
    ventures, stock-based compensation and other matters as
    discussed in Note 2 to our Consolidated Financial
    Statements. The table below reconciles income before provision
    for income taxes previously reported and restated for the years
    2005, 2004, 2003 and 2002. 55




---



##### 



(3)
    
    In May 2005, we acquired 100% of
    the equity interests in Greystone, a developer and manager of
    CCRCs. The operating results of Greystone are included in our
    restated consolidated statement of income beginning May 10,
    2005.(4)
    
    In March 2003, we completed the
    acquisition of all of the outstanding stock of Marriott
    International, Inc.s wholly owned subsidiary, MSLS, which
    owns and operates senior independent full-service and assisted
    living communities. The operating results of MSLS are included
    in our restated consolidated statement of income beginning
    March 28, 2003.(5)
    
    In 2006, Five Star bought out 18
    management contracts and we received $134.7 million related
    to their buyout. We also wrote off $25.4 in unamortized
    management contract intangible assets. In 2005, Five Star bought
    out 12 management contracts and we received $83.0 million
    related to their buyout. We also wrote off $14.6 million in
    unamortized management contract intangible assets.(6)
    
    In October 2005, we completed a
    two-for-one
    stock split in the form of a 100% stock dividend. As a result of
    the stock split, each stockholder received one additional share
    of common stock for each share on that date. All per share
    amounts have been adjusted to reflect the stock split for all
    periods presented.(7)
    
    In February 2006, we completed the
    redemption of our remaining 5.25% convertible subordinated notes
    due February 1, 2009 through the issuance of common stock.
    Prior to the redemption date, substantially all of the
    approximately $120 million principal amount of the notes
    outstanding at the time the redemption was announced had been
    converted into approximately 6.7 million shares of common
    stock. The conversion price was $17.92 per share in accordance
    with the terms of the indenture governing the notes.  Accounting
    Restatement
  Years Ended December 31,2005


2004


2003


2002(Unaudited)


(Unaudited)Income before provision for income taxes, as previously reported

$
126,213


$
80,456


$
97,153


$
88,163Restatement Adjustments:Real estate sales


48,893



(57,259
)


(57,942
)


(28,148
)Costs of real estate projects


(2,336
)


(5,036
)


(2,197
)


(4,168
)Equity method investments with preferences


(4,024
)


(4,112
)


(4,016
)


962Stock-based compensation


(2,255
)


(687
)


(4,224
)


(3,547
)Revenue recognition for Greystone development contracts


(13,034
)










Other adjustments


(11,645
)


(12,733
)


(8,369
)


(5,064
)Income before provision for income taxes, as restated


141,812



629



20,405



48,198(Provision for) benefit from income taxes, as restated


(54,723
)


485



(5,700
)


(19,884
)Net income, as restated

$
87,089


$
1,114


$
14,705


$
28,314  56




---



##### 



Years Ended December 31,2003


2002As Previously


Increase





As Previously


IncreaseReported


(Decrease)


As Restated


Reported


(Decrease)


As Restated(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Total operating revenues

$
1,096,260


$
(97,977
)

$
998,283


$
421,539


$
20,293


$
441,832Total operating expenses


1,072,451



(68,952
)


1,003,499



390,052



47,126



437,178Income (loss) from operations


23,809



(29,025
)


(5,216
)


31,487



(26,833
)


4,654Other non-operating expense


(16,571
)


(8,327
)


(24,898
)


(24,120
)


(7,218
)


(31,338
)Gain on the sale and development of real estate and equity
    interests


85,677



(34,401
)


51,276



80,261



(9,037
)


71,224Sunrises share of earnings, return on investment in
    unconsolidated communities and loss on profit sharing investments


5,343



(4,381
)


962



695



3,123



3,818Minority interests


(1,105
)


(614
)


(1,719
)


(160
)






(160
)Income before income taxes


97,153



(76,748
)


20,405



88,163



(39,965
)


48,198(Provision for) benefit from for income taxes


(34,975
)


29,275



(5,700
)


(33,502
)


13,618



(19,884
)Net income

$
62,178


$
(47,473
)

$
14,705


$
54,661


$
(26,347
)

$
28,314Earnings per share data:Basic net income per common share

$
1.46


$
(1.11
)

$
0.35


$
1.22


$
(0.59
)

$
0.63Diluted net income per common share


1.32



(0.98
)


0.34



1.12



(0.50
)


0.62Total assets

$
1,009,798


$
491,810


$
1,501,608


$
1,116,151


$
72,775


$
1,188,926Total debt


198,122



72,210



270,332



456,969







456,969Stockholders equity


490,276



(101,085
)


389,191



465,818



(50,283
)


415,535   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
     57




---



##### 




    management fees for operating communities, which can also
    include incentive management fees;
    resident fees for communities that are owned by Sunrise;
    development and pre-opening fees related to the development of
    new Sunrise communities;
    our share of income and losses for those communities in which we
    have an ownership interest;
    recapitalizations and sales of communities by ventures in which
    Sunrise has an equity interest; and
    fees for hospice services.      Management
    of Communities
    Development
    of Communities
     58




---



##### 



Senior
    Living Condominium Developments
    Special
    Independent Committee Inquiry and Accounting Review
  Special
    Independent Committee Inquiry
      
    no evidence of backdating or other intentional misconduct with
    respect to the grants on the 38 grant dates examined, including
    those specifically questioned by the SEIU, or the possible
    errors identified by the Special Independent Committee in the
    accounting for stock options;
    no evidence of an intention to reach an inappropriate accounting
    result with respect to the two categories of real estate
    accounting errors reviewed, no knowledge that these accounting
    errors were incorrect at the time they were made, and no
    evidence that information was concealed from review by the
    external auditors at the time the accounting judgments were
    made; and 59




---



##### 




    no evidence that any director or officer who traded in the
    months prior to the announcement of the Accounting Review had
    material non-public information relating to either of these two
    categories of real estate accounting errors.      Form 10-K.
    Accounting
    Review
    
    real estate sales;
    costs of real estate projects;
    equity method investments with preferences;
    revenue recognition for Greystone contracts;
    stock-based compensation;
    reimbursed expenses; and
    other adjustments.   60




---



##### 



Accounting
    for Real Estate Sales
      Accounting for Sales of Real Estate
  Initial
    Investment and Options to Reacquire
    Cash Flow
    Preferences
    Continuing
    Support Obligations
   61




---



##### 



Accounting
    for Costs of Real Estate Projects
  ccounting for Costs and
    Initial Rental Operations of Real Estate Projects
    (SFAS 67),
    Accounting
    for Equity Method Investments with Preferences
  No. 78-9, Accounting for Investments in Real Estate Ventures (SOP 78-9) and/or SOP 78-9.
  Revenue
    Recognition for Greystone Contracts
   62




---



##### 



Accounting
    for Stock-Based Compensation
  Overview
      Number of


Number of


Number ofCategory of Stock Option Grants

Granting Dates


Awards


SharesGrants with key focus of the Special Independent Committee
    inquiry


14



1,915



11,844,392Grants with limited review by the Special Independent Committee


24



2,558



12,785,072Additional grants tested by the Company as a result of certain
    procedures performed during the Special Independent Committee
    inquiry


14



36



666,150Remaining granting dates reviewed by the Company


13



36



352,350Total


65



4,545



25,647,964     and/or
    CumulativeAmount ofRestatementAdjustmentsCategory of Restatement

(pre-tax)September 14, 1998 Stock Option Repricing

$
27,302Cancellation and Reissuance of Stock Options


6,144Modification of Stock Option Awards


2,578Grant of Stock Options to CEO


3,213Other Miscellaneous Stock Option Issues


4,274$
43,511    63




---



##### 



September 14,
    1998 Stock Option Repricing
  Accounting for Certain
    Transactions Involving Stock Compensation an Interpretation of
    APB Opinion No. 25
  and/or
    Cancellation
    and Reissuance of Stock Options
  out-of-the-money).
   64




---



##### 



Modification
    of Stock Option Awards
    Grant
    of Stock Options to CEO
    Other
    Miscellaneous Stock Option Issues
    Sensitivity
    Analysis
       65




---



##### 



Accounting
    for Reimbursed Expenses
  No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent
    (EITF 99-19)
  Other
    Adjustments
    Form 10-K
  EquityCost of


MethodReal


Real


Investments





Greystone





Total


Tax


TotalEstate


Estate


with


Stock-Based


Revenue


Other


Adjustments


Effects of


AdjustmentsYear

Sales


Projects


Preferences


Compensation


Recognition


Adjustments


Pre-Tax


Adjustments


Net of Tax1996 (unaudited)

$



$



$



$
(92
)

$



$



$
(92
)

$
36


$
(56
)1997 (unaudited)


67











(770
)










(703
)


274



(429
)1998 (unaudited)


(772
)










(4,087
)










(4,859
)


1,895



(2,964
)1999 (unaudited)


(12,141
)










(12,336
)










(24,477
)


9,546



(14,931
)2000 (unaudited)


(24,345
)


(743
)


(26,850
)


(7,929
)






(1,268
)


(61,135
)


23,033



(38,102
)2001 (unaudited)


(13,924
)


(1,600
)


22,974



(7,583
)






(1,366
)


(1,499
)


1,119



(380
)2002 (unaudited)


(28,148
)


(4,168
)


962



(3,547
)






(5,064
)


(39,965
)


13,618



(26,347
)2003 (unaudited)


(57,942
)


(2,197
)


(4,016
)


(4,224
)






(8,369
)


(76,748
)


29,279



(47,469
)Cumulative effect on Jan. 1, 2004 opening retained
    earnings


(137,205
)


(8,708
)


(6,930
)


(40,568
)






(16,067
)


(209,478
)


78,800



(130,678
)2004


(57,259
)


(5,036
)


(4,112
)


(688
)






(12,731
)


(79,826
)


32,255



(47,571
)2005


48,893



(2,336
)


(4,024
)


(2,255
)


(13,034
)


(11,645
)


15,599



(10,252
)


5,347Total

$
(145,571
)

$
(16,080
)

$
(15,066
)

$
(43,511
)

$
(13,034
)

$
(40,443
)

$
(273,705
)

$
100,803


$
(172,902
)   Significant
    Developments
   66




---



##### 



Critical
    Accounting Policies and Estimates
    Investments
    in Unconsolidated Communities
        and/or
       67




---



##### 



Real
    Estate Sales
                 68




---



##### 



Revenue
    Recognition for Professional Fees from Development
    Activities
  percentage-of-completion cost-to-cost
  Capitalization
    Related to Development Projects
        Loss
    Reserves For Certain Self-Insured Programs
       69




---



##### 



Valuation
    of Goodwill, Intangible Assets and Long-Lived
    Assets
    Accounting
    for Guarantees
    Income
    Taxes
   70




---



##### 



Results
    of Operations
    
    management services provided to operating and pre-opened
    communities for unconsolidated ventures and third-party owners
    including reimbursable contract services (which represents the
    reimbursement of community contract services expense);
    professional services from development, marketing and other;
    resident and ancillary fees for the delivery of senior living
    services to our consolidated communities; and
    hospice and other ancillary services.    
    development and venture expense for site selection, zoning,
    community design, construction management and financing incurred
    for development communities;
    community and ancillary expense, which includes labor, food,
    marketing and other direct community expenses for our
    consolidated communities;
    lease expense for certain consolidated communities;
    general and administrative expense related to headquarters and
    regional staff expenses and other administrative costs;
    loss on financial guarantees;
    provision for doubtful accounts;
    impairment of long-lived assets;
    depreciation and amortization;
    write-off of unamortized contract costs; and
    reimbursable contract service expense related to unconsolidated
    ventures and third-party owners.  Accounting for Sales of Real
    Estate
 71




---



##### 



% ChangeYear Ended December 31,


2006 vs


2005 vs2006


2005


2004


2005


2004(Restated)


(Restated)(Dollars in thousands, except per share amounts)Operating revenue:Management fees

$
120,064


$
104,823


$
87,505



14.5
%


19.8
%Buyout fees(1)


134,730



83,036







62.3
%


N/AProfessional fees from development, marketing and other


25,717



24,920



10,949



3.2
%


127.6
%Resident and ancillary fees


455,909



384,667



366,624



18.5
%


4.9
%Reimbursable contract services


911,979



911,992



802,562







13.6
%Total operating revenue


1,648,399



1,509,438



1,267,640



9.2
%


19.1
%Operating expenses:Development and venture expense


70,474



41,966



23,345



67.9
%


79.8
%Community and ancillary


351,600



296,109



275,957



18.7
%


7.3
%Community lease expense


50,966



49,770



46,978



2.4
%


5.9
%General and administrative


134,073



106,601



86,080



25.8
%


23.8
%Loss on financial guarantees


89,676











N/A



N/AProvision for doubtful accounts


14,632



1,675



2,325



773.6
%


(28.0
)%Impairment of long-lived assets


15,730



2,472







536.3
%


N/ADepreciation and amortization


48,648



42,981



40,027



13.2
%


7.4
%Write-off of unamortized contract costs


25,359



14,609







73.6
%


N/AReimbursable contract services


911,979



911,992



802,562







13.6
%Total operating expenses


1,713,137



1,468,175



1,277,274



16.7
%


14.9
%(Loss) income from operations


(64,738
)


41,263



(9,634
)


(256.9
)%


(528.3
)%Other non-operating income (expense):Interest income


9,577



6,231



5,590



53.7
%


11.5
%Interest expense


(6,204
)


(11,882
)


(12,315
)


(47.8
)%


(3.5
)%(Loss) gain on investments


(5,610
)


2,036







(375.5
)%


N/AOther income


6,706



3,105



4,111



116.0
%


(24.5
)%Total other non-operating income (expense)


4,469



(510
)


(2,614
)


(976.3
)%


(80.5
)%Gain on the sale and development of real estate and equity
    interests


51,347



81,723



14,025



(37.2
)%


482.7
%Sunrises share of earnings and return on investment in
    unconsolidated communities


43,702



13,472



1,508



224.4
%


793.4
%Loss from investments accounted for under the profit sharing
    method


(857
)


(857
)


(1,578
)


0
%


(45.7
)%Minority interest income (expense)


6,916



6,721



(1,078
)


2.9
%


(723.5
)%Income before provision for income taxes


40,839



141,812



629



(71.2
)%


NM(Provision for) benefit from income taxes


(20,482
)


(54,723
)


485



(62.57
)%


NMNet income

$
20,357


$
87,089


$
1,114



(76.6
)%


NMBasic net income per common share

$
0.42


$
2.10


$
0.03



(79.5
)%


NMDiluted net income per common share


0.40



1.82


$
0.03



(78
)%


NMTotal communitiesConsolidated


65



62



60



4.8
%


3.3
%Unconsolidated


183



156



125



17.3
%


24.8
%Managed


192



197



195



(2.5
)%


1.0
%Total


440



415



380



6.0
%


9.2
%Resident capacity


52,170



50,673



43,109



3.0
%


17.5
%     (1)
    
    In 2006, Five Star bought out 18 contracts and we received
    $134.7 million related to their buyout and wrote-off the
    remaining $25.4 million unamortized management contract
    intangible asset. In 2005, Five Star bought out 72




---



##### 



12 management contracts and we received $83.0 million
    related to their buyout and wrote-off the remaining
    $13.8 million unamortized management contract intangible
    asset.         
    receipt of $134.7 million in 2006 in connection with the
    buyout of 18 management contracts as compared to the receipt of
    $83.0 million received from Five Star in 2005 in connection
    with the buyout of 12 management contracts;
    an increase of $30.2 million in Sunrises share
    of earnings and return on investment in unconsolidated
    communities in 2006 related to three venture
    recapitalizations;
    a loss on financial guarantees of $89.7 million related to
    operating deficit agreements in Germany, cash shortfall
    guarantees for the Fountains Portfolio and a loss related to
    construction cost overrun guarantees on a condominium project;
    an increase of $28.5 million in Development and
    venture expense which is largely attributed to our
    acquisition of Greystone and our accelerated development efforts;
    an increase in the provision for doubtful accounts of
    $13.0 million in 2006 primarily related to the write off of
    a receivable resulting from prior fundings under a guarantee
    which was previously determined to be collectible;
    an increase in general and administrative expense of
    $27.5 million;
    recognition of impairment losses of $15.7 million in 2006
    compared to $2.5 million in 2005 relating to communities
    whose carrying amounts were less then their expected cash flows;
    a write-off of $25.4 million in 2006 as compared to
    $14.6 million in 2005 primarily with respect to the
    intangible assets related to the Five Star management
    contracts; and
    a decrease of $30.4 million in Gain on the sale and
    development of real estate and equity interests.   73




---



##### 



Operating
    Revenue
  Management
    fees
  2006
    Compared to 2005
    
    $6.9 million of incremental revenues in 2006 from 31
    management contracts obtained in 2005 from the Greystone and The
    Fountains acquisitions that were included for a full year in
    2006;
    $7.7 million from increased fees associated with existing
    communities due to increases in rates and occupancy;
    $4.8 million of incremental revenues from 36 new
    communities managed in 2006 for unconsolidated ventures and
    third parties that were included for a full year in 2006;
    $2.8 million increase due to fees collected for services
    related to recapitalizing, refinancing or assisting in the sale
    of senior living communities;
    $2.3 million decrease in guarantee amortization due to the
    expirations of guarantees in 2006;
    $9.7 million decrease due to contract terminations in
    2005; and
    $5.1 million of incremental revenues from international
    communities.  2005
    Compared to 2004
    
    $6.4 million from 31 management contracts obtained in 2005
    from the Greystone and The Fountains acquisitions;
    $9.1 million from increased fees associated with existing
    communities due to increases in rates and occupancy; and
    $1.9 million from 20 new communities managed in 2005 for
    unconsolidated ventures and third parties (other than the
    Greystone and The Fountains acquisitions).  Buyout
    fees
    Professional
    fees from development, marketing and other
  2006
    Compared to 2005
       74




---



##### 



2005
    Compared to 2004
    
    $10.2 million from an additional 13 communities under
    development in 2005 compared to 2004; and
    a decrease of $2.1 million from financing fees received in
    2004 for securing debt on behalf of Sunrise REIT.
    the remaining increase was largely due to an increase in
    international development.  Resident
    and ancillary fees
  2006
    Compared to 2005
    
    $47.8 million from existing consolidated communities of
    which $43.5 million is due to increases in rate and
    $4.3 million is due to increases in occupancy;
    $20.6 million from the acquisition of Trinity in the third
    quarter of 2006;
    $4.1 million from the acquisition of three consolidated
    communities; and
    $1.3 million decrease from the disposition of two
    consolidated communities in 2006.  2005
    Compared to 2004
    
    $35.3 million from existing communities resulting from
    increases in occupancy, average daily rates and other ancillary
    services;
    a decrease of $8.7 million due to the deconsolidation of a
    VIE;
    a decrease of $10.2 million from the sale of four
    consolidated communities to Sunrise REIT in December 2004.
    Revenue from these communities is now included in
    Management fees;
    $6.3 million from the acquisition of two consolidated
    communities and other ancillary services in 2005 and
    2004; and
    a decrease of $4.6 million from the closing of four
    consolidated communities in 2004.  Reimbursable
    contract services
    Operating
    Expenses
  Development
    and venture expense
  2006
    Compared to 2005
    
    $13.0 million from activity of Greystone that was included
    for a full year in 2006; 75




---



##### 




    $10.0 million from North American development. There were
    29 North American communities under development in 2006 compared
    to 28 in 2005; and
    $3.0 million from European development. The increase was
    primarily due to continuing development in the United Kingdom
    and the weakening of the U.S. dollar against the British
    pound and Euro from 2005 to 2006.  2005
    Compared to 2004
    
    $14.3 million from the post acquisition activity of
    Greystone;
    $3.6 million from European development. There were 28
    European communities under development in 2005 compared to 17
    communities under development in 2004; and
    partially offset by a decrease of $2.7 million related to
    Canadian development and the completion of one Canadian
    community in 2005.  Community
    and ancillary
  2006
    Compared to 2005
    
    $34.3 million from existing communities resulting primarily
    from increases in occupancy;
    $18.5 million from the acquisition of Trinity hospice in
    the third quarter of 2006;
    $4.0 million from the acquisition of three consolidated
    communities;
    $1.0 million decrease from the closing of two consolidated
    communities in 2005.  2005
    Compared to 2004
    
    $26.9 million from existing consolidated communities
    resulting primarily from increases in occupancy;
    a decrease of $6.9 million from the sale of four
    consolidated communities to Sunrise REIT in December 2004;
    $3.8 million from the acquisition of one consolidated
    community and other ancillary services from The Fountains;
    $3.4 million from costs associated with hurricanes in 2005;
    a decrease of $4.7 million due to the deconsolidation of a
    VIE;
    a decrease of $3.6 million from the closure of four
    consolidated communities in 2004; and
    $2.4 million from the acquisition of a consolidated
    community in the second quarter of 2004.  Community
    lease expense
  2006
    Compared to 2005
   76




---



##### 



2005
    Compared to 2004
    General
    and administrative
  2006
    Compared to 2005
    
    $9.0 million in salaries, employee benefits, travel and
    related costs associated with additional employees to support
    the increased number of communities we manage;
    $4.7 million in accounting fees, of which $2.6 million
    relates to professional fees incurred related to the
    Companys accounting restatement;
    $5.0 million loss for possible damages related to the
    Trinity OIG investigation and qui tam action;
    $5.1 million international expense to support new
    communities in Canada, the UK and Germany;
    $1.8 million in transition costs for Five Star contracts;
    and
    additional expense increases for telephone, repairs and
    maintenance, and other miscellaneous expenses.  2005
    Compared to 2004
    
    $13.4 million in salaries, employee benefits, travel and
    related costs associated with additional employees to support
    the increased number of communities we manage;
    $6.0 million from software maintenance and related costs;
    $3.3 million of integration costs relating to the Fountains
    acquisition; and
    a decrease of $2.0 million related to the implementation of
    Sarbanes-Oxley internal control requirements from 2004.  Loss on
    financial guarantees
    Provision
    for doubtful accounts
  2006
    Compared to 2005
    
    $8.0 million write-off of a receivable resulting from prior
    fundings under a guarantee which were previously deemed to be
    collectible; 77




---



##### 



2005
    Compared to 2004
    Impairment
    of long-lived assets
    Depreciation
    and amortization
  2006
    Compared to 2005
    2005
    Compared to 2004
    Write-off
    of unamortized contract costs
    Other
    Non-operating Income (Expense)
  2006
    Compared to 2005
        2005
    Compared to 2004
    Gain
    on the Sale and Development of Real Estate and Equity
    Interests
   78




---



##### 



2006
    Compared to 2005
    2005
    Compared to 2004
    Sunrises
    Share of Earnings and Return on Investment in Unconsolidated
    Communities
    2006
    Compared to 2005
    2005
    Compared to 2004
    Provision
    for Income Taxes
      Liquidity
    and Capital Resources
  Overview
     79




---



##### 



Long-Term
    Debt
           80




---



##### 




    waived delivery by Sunrise of all 2006 quarterly financial
    statements and financial statements for the quarters ended
    March 31, 2007, June 30, 2007 and September 30,
    2007;
    modified to April 15, 2008 the delivery date for the 2006
    audited financial statements;
    modified to April 30, 2008 the delivery date for
    preliminary 2007 unaudited annual financial statements;
    modified to May 31, 2008 the delivery date for the
    preliminary unaudited financial statements for the quarter
    ending March 31, 2008;
    modified to July 31, 2008 the delivery date for the 2007
    audited annual financial statements;
    modified to August 20, 2008 the delivery date for unaudited
    financial statements for the quarter ending March 31,
    2008; and
    modified to September 10, 2008 the delivery dated for the
    unaudited financial statements for the quarter ending
    June 30, 2008.           81




---



##### 



Guarantees
  Guarantors Accounting and Disclosure Requirements for
    Guarantees, Including Indirect Guarantees of Indebtedness of
    Others
  and/or
    FIN 45


FAS 5


TotalLiability


Liability


Liabilityfor Future


for Future


for FutureMaximum Potential


Fundings at


Fundings at


Fundings at


FundingsAmount of Future


December 31,


December 31,


December 31,


duringGuarantee type

Fundings


2006


2006


2006


2006Debt repayment

$
16,832


$
1,210


$



$
1,210


$
Operating deficit


Uncapped



966



50,000



50,966



Income support


Uncapped



1,181



22,354



23,535



945Other










94



94



Total





$
3,357


$
72,448


$
75,805


$
945        82




---



##### 



Senior
    Living Condominium Developments
    The
    Fountains
    Germany
    Venture
    Other
    Guarantees
    Contractual
    Obligations
   83




---



##### 



Payment due by periodMoreLess Than








Than 5Contractual Obligations

Total


1 Year


1-3 Years


4-5 Years


YearsLong-term debt

$
190,605


$
141,923


$
19,469


$
2,290


$
26,923Equity investments in unconsolidated entities


64,645



17,517



47,128







Operating leases


508,570



58,893



117,736



113,345



218,596Total

$
763,820


$
218,333


$
184,333


$
115,635


$
245,519       Cash
    Flows
       84




---



##### 



Stock
    Repurchase Programs
  and/or and/or and/or
    Repurchase ofCommon StockShares


Average Price2002


1,162,800


$
12.812003


7,918,800



13.422004


3,497,336



18.072005


347,980



25.032006






Total at December 31, 2006


12,926,916


$
14.94     Market
    Risk
    EstimatedMaturity Date through December 31,





Total Carrying


Fair Market2007


2008


2009


2010


2011


Thereafter


Value


Value(Dollars in thousands)Debt:Fixed rate

$
34,356


$
16,583


$
1,151


$
162


$
174


$
3,518


$
55,944


$
53,697Average interest rate


























8.47
%


Variable rate

$
107,567


$
855


$
880


$
915


$
1,039


$
23,405


$
134,661


$
134,761Average interest rate


























6.78
%


  85




---



##### 



Interest Rate


2006Note V with international venture


4.37
%

$
1,030LLC Note VI, revolving credit agreement


10.00
%


4,174Promissory Note XIII


7.5
%


11,767Promissory Note XIV


Euribor + 4.25
%


4,834$
21,805       Impact of
    Changes in Accounting Standards
  Accounting for Uncertainty in Income Taxes Accounting for Income
    Taxes
  Fair Value Measurements
  No. 06-8, Applicability of the Assessment of a Buyers
    Continuing Investment under FASB Statement No. 66,
    Accounting for Sales of Real Estate, for Sales of
    Condominiums (EITF 06-8). EITF 06-8 EITF 06-8 EITF 06-8
  The
    Fair Value Option for Financial Assets and Liabilities
 86




---



##### 



Business Combinations Noncontrolling Interests in Consolidated Financial Statements
  Impact of
    Inflation
      2006 and
    2005 (Restated) Quarterly Results of Operations and Balance
    Sheet Data (Unaudited)
      
    The three months ended September 30, 2006 compared to the
    three months ended September 30, 2005;
    The three months ended June 30, 2006 compared to the three
    months ended June 30, 2005;
    The three months ended March 31, 2006 compared to the three
    months ended March 31, 2005;
    The six months ended June 30, 2006 compared to the six
    months ended June 30, 2005; and
    The nine months ended September 30, 2006 compared to the
    nine months ended September 30, 2005.  Quarter EndedMarch 31,


June 30,


September 30,


December 31,


Total2006


2006


2006


2006


2006(Unaudited and in thousands,except per share amounts)Operating revenues:Management fees

$
27,314


$
28,454


$
35,738


$
28,558


$
120,064Buyout fees


4,750



89,623



277



40,080



134,730Professional fees from development, marketing and other


5,847



5,406



4,213



10,251



25,717 87




---



##### 



Quarter EndedMarch 31,


June 30,


September 30,


December 31,


Total2006


2006


2006


2006


2006(Unaudited and in thousands,except per share amounts)Resident and ancillary fees


103,363



106,204



114,352



131,990



455,909Reimbursable contract services


235,397



234,360



224,126



218,096



911,979Total operating revenues


376,671



464,047



378,706



428,975



1,648,399Operating expenses:Development and venture expense


15,855



16,529



14,146



23,944



70,474Community and ancillary


77,659



81,419



87,472



105,050



351,600Community lease expense


12,538



12,752



12,525



13,151



50,966General and administrative


22,752



31,554



33,254



46,513



134,073Loss on financial guarantees














89,676



89,676Provision for doubtful accounts


998



526



698



12,410



14,632Impairment of long-lived assets


160



600







14,970



15,730Depreciation and amortization


11,604



11,610



11,775



13,659



48,648Write-off of unamortized contract costs


939



14,549







9,871



25,359Reimbursable contract services


235,397



234,360



224,126



218,096



911,979Total operating expenses


377,902



403,899



383,996



547,340



1,713,137(Loss) income from operations


(1,231
)


60,148



(5,290
)


(118,365
)


(64,738
)Other non-operating income (expense):Interest income


2,254



1,733



2,084



3,506



9,577Interest expense


(1,777
)


(2,653
)


(482
)


(1,292
)


(6,204
)Gain (loss) on investments










282



(5,892
)


(5,610
)Other income (expense)


512



402



6,869



(1,077
)


6,706Total other non-operating income (expense)


989



(518
)


8,753



(4,755
)


4,469Gain on the sale and development of real estate and equity
    interests


7,068



34,227



3,254



6,798



51,347Sunrises share of (loss) earnings and return on investment
    in unconsolidated communities


(2,414
)


2,006



23,141



20,969



43,702(Loss) gain from investments accounted for under the
    profit-sharing method


(476
)


(387
)


937



(931
)


(857
)Minority interests


716



2,128



1,890



2,182



6,916Income (loss) before provision for income taxes


4,652



97,604



32,685



(94,102
)


40,839(Provision for) benefit from income taxes


(2,332
)


(48,919
)


(16,381
)


47,150



(20,482
)Net income (loss)

$
2,320


$
48,685


$
16,304


$
(46,952
)

$
20,357Earnings (loss) per share data(1):Basic net income (loss) per common share

$
0.05


$
0.98


$
0.33


$
(0.94
)

$
0.42Diluted net income (loss) per common share


0.05



0.95



0.32



(0.94
)


0.40     (1)
    
    The sum of per share amounts for the quarters may not equal the
    per share amount for the year due to a variance in shares used
    in the calculations or rounding. 88




---



##### 



March 31,


June 30,


September 30,2006


2006


2006(Unaudited)ASSETSCurrent Assets:Cash and cash equivalents

$
69,553


$
107,491


$
58,750Accounts receivable, net


56,488



69,599



71,919Notes receivable, net


17,148



9,152



6,067Due from unconsolidated communities


69,767



83,022



98,316Deferred income taxes, net


20,525



20,525



20,525Restricted cash


19,243



21,901



24,510Prepaid expenses and other current assets


19,166



20,168



22,664Total current assets


271,890



331,858



302,751Property and equipment, net


509,687



512,188



577,648Property and equipment subject to a sales contract, net


253,158



204,993



203,845Property and equipment subject to financing, net


64,237



63,529



62,885Notes receivable


4,074



13,761



13,972Intangible assets, net


103,912



87,572



116,161Goodwill


153,328



153,375



214,744Investments in unconsolidated communities


65,099



68,676



99,271Investments accounted for under the profit-sharing method


771



1,460



13,560Investments


5,610



5,610



5,610Restricted cash


117,458



160,309



157,892Other assets, net


15,352



15,850



16,377Total assets

$
1,564,576


$
1,619,181


$
1,784,716LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt

$
52,335


$
55,265


$
59,295Outstanding draws on bank credit facility










100,000Accounts payable


6,260



925



7,832Accrued expenses


130,405



200,889



192,464Deferred revenue


7,166



8,237



4,365Entrance fees


27,918



28,109



38,378Self-insurance liabilities


28,279



31,125



37,954Total current liabilities


252,363



324,550



440,288Long-term debt, less current maturities


64,917



53,192



56,408Deposits related to properties subject to a sales contract


325,350



252,063



254,043Liabilities related to properties accounted for under the
    financing method


65,112



65,928



65,118Investment accounted for under the profit-sharing method


6,423



7,020



9,099Self-insurance liabilities


63,143



67,086



68,696Guarantee liabilities


4,155



4,049



3,531Deferred gains on the sale of real estate and deferred revenues


40,168



44,136



46,729Deferred income tax liabilities


78,004



78,004



78,004Other long-term liabilities, net


38,436



38,883



58,134Total liabilities


938,071



934,911



1,080,050Minority interests


7,578



11,712



9,308Stockholders Equity:Common stock


502



504



506Additional paid-in capital


436,326



440,540



446,289Retained earnings


180,954



229,653



245,945Accumulated other comprehensive income


1,145



1,861



2,618Total stockholders equity


618,927



672,558



695,358Commitments and contingenciesTotal liabilities and stockholders equity

$
1,564,576


$
1,619,181


$
1,784,716    89




---



##### 



Consolidated
    Statements of Income
  For The Quarter Ended March 31, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(In thousands, except per share amounts)

(Unaudited)Operating revenues:Management fees

$
25,790


$
(3,968
)

$
21,822Professional fees from development, marketing and other






3,820



3,820Resident and ancillary fees


84,951



4,572



89,523Reimbursable contract services


279,057



(67,447
)


211,610Total operating revenues


389,798



(63,023
)


326,775Operating expenses:Development and venture expense






5,440



5,440Community and ancillary


65,283



3,737



69,020Community lease expense


12,361



365



12,726General and administrative


17,971



2,815



20,786Provision for doubtful accounts






458



458Depreciation and amortization


5,157



4,803



9,960Reimbursable contract services


279,057



(67,447
)


211,610Total operating expenses


379,829



(49,829
)


330,000Income (loss) from operations


9,969



(13,194
)


(3,225
)Other non-operating income (expense):Interest income


1,710



(136
)


1,574Interest expense


(907
)


(1,595
)


(2,502
)Other expense






(418
)


(417
)Total other non-operating income (expense)


803



(2,149
)


(1,345
)Gain on the sale and development of real estate and equity
    interests


640



359



999Sunrises share of losses and return on investment in
    unconsolidated communities


1,524



(3,238
)


(1,714
)Loss from investments accounted for under the profit-sharing
    method






(730
)


(730
)Minority interests


(217
)






(217
)Income (loss) before provision for income taxes


12,719



(18,952
)


(6,232
)(Provision for) benefit from income taxes


(4,706
)


7,111



2,405Net income (loss)

$
8,013


$
(11,841
)

$
(3,827
)Earnings (loss) per share data:Basic net income (loss) per common share

$
0.20


$
(0.29
)

$
(0.09
)Diluted net income (loss) per common share


0.19



(0.28
)


(0.09
)  90




---



##### 



Consolidated
    Statements of Income
  For the Quarter Ended June 30, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands, except per share amounts)Operating revenues:Management fees

$
29,606


$
(4,695
)

$
24,911Professional fees from development, marketing and other






8,701



8,701Resident and ancillary fees


85,922



4,561



90,483Reimbursable contract services


297,358



(79,190
)


218,168Total operating revenues


412,886



(70,623
)


342,263Operating expenses:Development and venture expense






8,570



8,570Community and ancillary


66,167



3,111



69,278Community lease expense


12,044



1,216



13,260General and administrative


20,097



2,810



22,907Provision for doubtful accounts






476



476Impairment of long-lived assets






2,472



2,472Depreciation and amortization


5,974



4,633



10,607Reimbursable contract services


297,358



(79,190
)


218,168Total operating expenses


401,640



(55,902
)


345,738Income (loss) from operations


11,246



(14,721
)


(3,475
)Other non-operating income (expense):Interest income


1,484



(417
)


1,067Interest expense


(950
)


(1,784
)


(2,734
)Other expense






(1,282
)


(1,282
)Total other non-operating income (expense)


534



(3,483
)


(2,949
)Gain on the sale and development of real estate and equity
    interests


1,112



53,562



54,674Sunrises share of earnings and return on investment in
    unconsolidated communities


3,696



(969
)


2,727Loss from investments accounted for under the profit-sharing
    method






(483
)


(483
)Minority interests


(179
)


1,257



1,078Income before provision for income taxes


16,409



35,163



51,572Provision for income taxes


(6,071
)


(13,836
)


(19,907
)Net income

$
10,338


$
21,327


$
31,665Earnings per share data:Basic net income per common share

$
0.25


$
0.52


$
0.77Diluted net income per common share


0.23



0.43



0.66  91




---



##### 



Consolidated
    Statements of Income
  For The Quarter Ended September 30, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands, except per share amounts)Operating revenues:Management fees

$
30,595


$
(1,541
)

$
29,054Professional fees from development, marketing and other






4,692



4,692Resident and ancillary fees


90,882



11,043



101,925Reimbursable contract services


341,736



(98,511
)


243,225Total operating revenues


463,213



(84,317
)


378,896Operating expenses:Development and venture expense






13,629



13,629Community and ancillary


69,642



8,775



78,417Community lease expense


12,219



(578
)


11,641General and administrative


24,143



4,842



28,985Provision for doubtful accounts






377



377Depreciation and amortization


8,976



2,487



11,463Reimbursable contract services


341,736



(98,511
)


243,225Total operating expenses


456,716



(68,979
)


387,737Income (loss) from operations


6,497



(15,338
)


(8,841
)Other non-operating income (expense):Interest income


1,592



(180
)


1,412Interest expense


(1,065
)


(3,079
)


(4,144
)Other income






1,687



1,687Total other non-operating income (expense)


527



(1,572
)


(1,045
)Gain on the sale and development of real estate and equity
    interests


2,898



23,308



26,206Sunrises share of earnings and return on investment in
    unconsolidated communities


7,801



8,857



16,658Loss from investments accounted for under the profit-sharing
    method






386



386Minority interests


(185
)


3,021



2,836Income before provision for income taxes


17,538



18,662



36,200Provision for income taxes


(6,489
)


(7,484
)


(13,973
)Net income

$
11,049


$
11,178


$
22,227Earnings per share data:Basic net income per common share

$
0.27


$
0.26


$
0.53Diluted net income per common share


0.24



0.22



0.46  92




---



##### 



Consolidated
    Statements of Income
  For The Quarter Ended December 31, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands, except per share amounts)Operating revenues:Management fees

$
108,863


$
(79,827
)

$
29,036Buyout fees






83,036



83,036Professional fees from development, marketing and other


14,298



(6,591
)


7,707Resident and ancillary fees


93,396



9,340



102,736Reimbursable contract services


338,191



(99,202
)


238,989Total operating revenues


554,748



(93,244
)


461,504Operating expenses:Development and venture expense


11,973



2,354



14,327Community and ancillary


71,524



7,870



79,394Community lease expense


11,777



366



12,143General and administrative


28,505



5,418



33,923Provision for doubtful accounts






364



364Depreciation and amortization


23,325



2,235



25,560Reimbursable contract services


338,191



(99,202
)


238,989Total operating expenses


485,295



(80,595
)


404,700Income from operations


69,453



(12,649
)


56,804Other non-operating income:Interest income


2,191



(13
)


2,178Interest expense


(596
)


(1,906
)


(2,502
)Gain (loss) on investments






2,036



2,036Other income


3,939



(821
)


3,118Total other non-operating income


5,534



(704
)


4,830Gain on the sale and development of real estate and equity
    interests


4,580



(4,736
)


(156
)Sunrises share of earnings and return on investment in
    unconsolidated communities


214



(4,413
)


(4,199
)Loss from investments accounted for under the profit-sharing
    method






(30
)


(30
)Minority interests


(234
)


3,258



3,024Income before provision for income taxes


79,547



(19,274
)


60,273(Provision for) benefit from income taxes


(29,205
)


5,956



(23,249
)Net income

$
50,342


$
(13,318
)

$
37,024Earnings per share data:Basic net income per common share

$
1.19


$
(0.31
)

$
0.88Diluted net income per common share


1.01


$
(0.26
)


0.75  93




---



##### 



Consolidated
    Balance Sheet
  March 31, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
158,715


$
(60,218
)

$
98,497Short-term investments


12,500







12,500Accounts receivable, net


49,808



2,140



51,948Notes receivable, net


2,862







2,862Deferred income taxes, net


25,239



14,393



39,632Due from unconsolidated communities


56,768



(7,607
)


49,161Restricted cash






8,599



8,599Prepaid expenses and other current assets


25,705



(15,721
)


9,984Total current assets


331,597



(58,414
)


273,183Property and equipment, net


384,241



(11,438
)


372,803Property and equipment subject to a sales contract, net






475,560



475,560Property and equipment subject to financing, net






38,401



38,401Notes receivable


40,420



(14,472
)


25,948Intangible assets, net


85,166



(7,871
)


77,295Goodwill


123,713



(1,888
)


121,825Investments in unconsolidated communities


96,689



(61,662
)


35,027Investments accounted for under the profit-sharing method






2,582



2,582Investments


7,882



(2,271
)


5,611Investment in Sunrise REIT debentures


20,549







20,549Restricted cash






74,374



74,374Other assets, net


44,632



(26,850
)


17,782Total assets

$
1,134,889


$
406,051


$
1,540,940LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt

$
16,498


$



$
16,498Accounts payable and accrued expenses


202,600



(69,355
)


133,245Deferred revenue


9,291



(5,835
)


3,456Entrance fees






25,809



25,809Self-insurance liabilities






20,283



20,283Total current liabilities


228,389



(29,098
)


199,291Long-term debt, less current maturities


171,873







171,873Deposits related to properties subject to a sales contract






607,671



607,671Liabilities related to properties accounted for under the
    financing method






34,058



34,058Investments accounted for under the profit-sharing method






5,422



5,422Guarantee liabilities






2,210



2,210Self-insurance liabilities






49,052



49,052Deferred gains on the sale of real estate and deferred revenues






8,227



8,227Deferred income tax liabilities


151,139



(87,332
)


63,807Other long-term liabilities, net


46,520



(19,613
)


26,907Total liabilities


597,921



570,597



1,168,518Minority interests


1,516







1,516Stockholders equity:Common stock


208







208Additional paid-in capital


258,209



31,381



289,590Retained earnings


279,809



(192,090
)


87,719Deferred compensation  restricted stock


(8,387
)






(8,387
)Accumulated other comprehensive income


5,613



(3,837
)


1,776Total stockholders equity


535,452



(164,546
)


370,906Commitments and contingenciesTotal liabilities and stockholders equity

$
1,134,889


$
406,051


$
1,540,940  94




---



##### 



Consolidated
    Balance Sheet
  June 30, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
95,771


$
(42,231
)

$
53,540Accounts receivable, net


50,833



1,639



52,472Notes receivable, net


13,938







13,938Deferred income taxes, net


24,089



15,543



39,632Due from unconsolidated communities


64,767



(7,244
)


57,523Restricted cash






5,212



5,212Prepaid expenses and other current assets


18,678



(15,941
)


2,737Total current assets


268,076



(43,022
)


225,054Property and equipment, net


395,249



(11,048
)


384,201Property and equipment subject to a sales contract, net






315,232



315,232Property and equipment subject to financing, net






52,616



52,616Notes receivable


23,033



(12,757
)


10,276Management contracts and leaseholds, net


92,156



(4,728
)


87,428Goodwill


159,801



(5,379
)


154,422Investments in unconsolidated communities


108,267



(67,693
)


40,574Investments accounted for under the profit-sharing method






1,548



1,548Investments


7,435



(1,824
)


5,611Investment in Sunrise REIT debentures


22,390







22,390Restricted cash






92,139



92,139Other assets, net


51,418



(26,479
)


24,939Total assets

$
1,127,825


$
288,605


$
1,416,430LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt

$
15,767


$



$
15,767Accounts payable and accrued expenses


176,990



(49,667
)


127,323Deferred revenue


10,748



(4,953
)


5,795Entrance fees


26,111







26,111Self-insurance liabilities






18,815



18,815Total current liabilities


229,616



(35,805
)


193,811Long-term debt, less current maturities


167,600







167,600Deposits related to properties subject to a sales contract






390,805



390,805Liabilities related to properties accounted for under the
    financing method






50,071



50,071Investments accounted for under the profit-sharing method






5,635



5,635Guarantee liabilities






2,136



2,136Self-insurance liabilities






54,036



54,036Deferred gains on the sale of real estate and deferred revenues






18,847



18,847Deferred income tax liabilities


153,269



(89,462
)


63,807Other long-term liabilities, net


25,295



27,008



52,303Total liabilities


575,780



423,271



999,051Minority interests


1,343



6,630



7,973Stockholders equity:Common stock


212







212Additional paid-in capital


265,010



32,014



297,024Retained earnings


290,146



(170,763
)


119,383Deferred compensation  restricted stock


(9,490
)






(9,490
)Accumulated other comprehensive income


4,824



(2,547
)


2,277Total stockholders equity


550,702



(141,296
)


409,406Commitments and contingenciesTotal liabilities and stockholders equity

$
1,127,825


$
288,605


$
1,416,430  95




---



##### 



Consolidated
    Balance Sheet
  September 30, 2005AsPreviously


Increase


AsReported


(Decrease)


Restated(Unaudited)(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
118,483


$
(43,621
)

$
74,862Accounts receivable, net


51,990



3,790



55,780Notes receivable, net


15,291







15,291Deferred income taxes, net


26,565



13,067



39,632Due from unconsolidated communities


66,538



(9,889
)


56,649Restricted cash






5,029



5,029Prepaid expenses and other current assets


29,683



(16,389
)


13,294Total current assets


308,550



(48,013
)


260,537Property and equipment, net


434,944



31,024



465,968Property and equipment subject to a sales contract, net






250,961



250,961Property and equipment subject to financing, net






60,619



60,619Notes receivable


27,984



(10,724
)


17,260Management contracts and leaseholds, net


100,547



(2,346
)


98,201Goodwill


164,279



(5,379
)


158,900Investments in unconsolidated communities


127,678



(59,106
)


68,572Investments accounted for under the profit-sharing method






1,107



1,107Investments


7,569



(1,959
)


5,610Investment in Sunrise REIT debentures


26,247







26,247Restricted cash






93,636



93,636Other assets, net


49,823



(31,612
)


18,211Total assets

$
1,247,621


$
278,208


$
1,525,829LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt

$
24,227


$



$
24,227Accounts payable and accrued expenses


212,956



(39,443
)


173,513Deferred revenue


13,936



(7,008
)


6,928Entrance fees


25,750



(2,585
)


23,165Self-insurance liabilities






20,350



20,350Total current liabilities


276,869



(28,686
)


248,183Long-term debt, less current maturities


201,884



44,203



246,087Deposits related to properties subject to a sales contract






318,862



318,862Liabilities related to properties accounted for under the
    financing method






57,750



57,750Investments accounted for under the profit-sharing method






5,704



5,704Guarantee liabilities






3,710



3,710Self-insurance liabilities






58,122



58,122Deferred gains on the sale of real estate and deferred revenues






17,528



17,528Deferred income tax liabilities


160,237



(96,430
)


63,807Other long-term liabilities, net


34,975



24,853



59,828Total liabilities


673,965



405,616



1,079,581Minority interests


1,373



3,014



4,387Stockholders equity:Common stock


427







427Additional paid-in capital


273,028



33,291



306,319Retained earnings


301,195



(159,585
)


141,610Deferred compensation  restricted stock


(11,450
)






(11,450
)Accumulated other comprehensive income


9,083



(4,128
)


4,955Total stockholders equity


572,283



(130,422
)


441,861Commitments and contingenciesTotal liabilities and stockholders equity

$
1,247,621


$
278,208


$
1,525,829  96




---



##### 



Results
    of Operations
  Three
    Months Ended September 30, 2006 Compared to the Three
    Months Ended September 30, 2005
  Operating
    Revenues
        Operating
    Expenses
           97




---



##### 



Other
    Non  Operating Income
        Gain
    on the Sale and Development of Real Estate and Equity
    Interests
    Sunrisess
    Share of Earnings and Return on Investment in Unconsolidated
    Communities
    Provision
    for Income Taxes
    Three
    Months Ended June 30, 2006 Compared to the Three Months
    Ended June 30, 2005
  Operating
    Revenues
   98




---



##### 



Operating
    Expenses
            Other
    Non  Operating Expense
     99




---



##### 



Gain
    on the Sale and Development of Real Estate and Equity
    Interests
    Sunrisess
    Share of Earnings and Return on Investment in Unconsolidated
    Communities
    Provision
    for Income Taxes
    Three
    Months Ended March 31, 2006 Compared to the Three Months
    Ended March 31, 2005
  Operating
    Revenues
       100




---



##### 



Operating
    Expenses
              Other
    Non-Operating Income (Expense)
       101




---



##### 



Gain
    on the Sale and Development of Real Estate and Equity
    Interests
    Sunrises
    Share of Losses and Return on Investment in Unconsolidated
    Communities
    Provision
    for (Benefit from) Income Taxes
    Six
    Months Ended June 30, 2006 Compared to the Six Months Ended
    June 30, 2005
  Operating
    Revenues
         102




---



##### 



Operating
    Expenses
                Other
    Non-Operating Income
       103




---



##### 



Gain
    on the Sale and Development of Real Estate and Equity
    Interests
    Sunrises
    Share of Earnings (Losses) and Return on Investment in
    Unconsolidated Properties
    Provision
    for Income Taxes
    Nine
    Months Ended September 30, 2006 Compared to the Nine Months
    Ended September 30, 2005
  Operating
    Revenues
         104




---



##### 



Operating
    Expenses
                Other
    Non-Operating Income (Expense)
       105




---



##### 



Gain
    on the Sale and Development of Real Estate and Equity
    Interests
    Sunrises
    Share of Earnings and Return on Investment in Unconsolidated
    Communities
    Provision
    for Income Taxes
    Item 7A.
    Quantitative
    and Qualitative Disclosure About Market Risk   106




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data    PageReport of Independent Registered Public
    Accounting Firm

108Consolidated Balance Sheets

109Consolidated Statements of Income

110Consolidated Statements of Changes in
    Stockholders Equity

111Consolidated Statements of Cash Flows

112Notes to Consolidated Financial Statements

113  107




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   
          Share-Based
    Payment
      
 108




---



##### 



SUNRISE
    SENIOR LIVING, INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,(In thousands, except per share and share amounts)

2006


2005(Restated)ASSETSCurrent Assets:Cash and cash equivalents

$
81,990


$
145,078Accounts receivable, net


75,055



58,546Notes receivable, net


4,174



16,461Due from unconsolidated communities


105,688



54,256Deferred income taxes, net


29,998



20,525Restricted cash


34,293



11,609Prepaid insurance


5,485



4,338Prepaid expenses and other current assets


19,401



16,075Total current assets


356,084



326,888Property and equipment, net


609,385



494,069Property and equipment subject to a sales contract, net


193,158



255,231Property and equipment subject to financing, net


62,520



64,174Notes receivable


17,631



3,956Intangible assets, net


103,771



96,674Goodwill


218,015



153,328Investments in unconsolidated communities


104,272



63,340Investments accounted for under the profit-sharing method






558Investments






5,610Restricted cash


143,760



106,176Other assets, net


8,832



17,781Total assets

$
1,817,428


$
1,587,785LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Current maturities of long-term debt

$
91,923


$
52,372Outstanding draws on bank credit facility


50,000



Accounts payable


14,113



13,649Accrued expenses


176,893



158,619Deferred revenue


8,703



7,720Entrance fees


38,098



26,961Self-insurance liabilities


41,379



21,363Total current liabilities


421,109



280,684Long-term debt, less current maturities


48,682



196,024Deposits related to properties subject to a sales contract


240,367



324,782Liabilities related to properties accounted for under the
    financing method


66,283



64,208Investment accounted for under the profit-sharing method


29,148



5,664Guarantee liabilities


75,805



4,444Self-insurance liabilities


72,993



62,823Deferred gains on the sale of real estate and deferred revenues


51,958



28,226Deferred income tax liabilities


89,267



78,004Other long-term liabilities, net


58,000



37,830Total liabilities


1,153,612



1,082,689Minority interests


16,515



12,712Stockholders Equity:Preferred stock, $0.01 par value, 10,000,000 shares
    authorized, no shares issued and outstanding






Common stock, $0.01 par value, 120,000,000 share
    authorized, 50,572,092 and 43,452,790 shares issued and
    outstanding at December 31, 2006 and 2005, respectively


506



435Additional paid-in capital


445,275



326,207Retained earnings


198,991



178,634Deferred compensation  restricted stock






(12,323
)Accumulated other comprehensive (loss) income


2,529



(569
)Total stockholders equity


647,301



492,384Commitments and contingenciesTotal liabilities and stockholders equity

$
1,817,428


$
1,587,785    109




---



##### 



SUNRISE
    SENIOR LIVING, INC.CONSOLIDATED STATEMENTS OF INCOME
  Years Ended December 31,(In thousands, except per share amounts)

2006


2005


2004(Restated)


(Restated)Operating revenue:Management fees

$
120,064


$
104,823


$
87,505Buyout fees


134,730



83,036



Professional fees from development, marketing and other


25,717



24,920



10,949Resident and ancillary fees


455,909



384,667



366,624Reimbursable contract services


911,979



911,992



802,562Total operating revenues


1,648,399



1,509,438



1,267,640Operating expenses:Development and venture expense


70,474



41,966



23,345Community and ancillary


351,600



296,109



275,957Community lease expense


50,966



49,770



46,978General and administrative


134,073



106,601



86,080Loss on financial guarantees and other contracts


89,676







Provision for doubtful accounts


14,632



1,675



2,325Impairment of long-lived assets


15,730



2,472



Depreciation and amortization


48,648



42,981



40,027Write-off of unamortized contract costs


25,359



14,609



Reimbursable contract services


911,979



911,992



802,562Total operating expenses


1,713,137



1,468,175



1,277,274(Loss) income from operations


(64,738
)


41,263



(9,634
)Other non-operating income (expense):Interest income


9,577



6,231



5,590Interest expense


(6,204
)


(11,882
)


(12,315
)(Loss) gain on investments


(5,610
)


2,036



Other income


6,706



3,105



4,111Total other non-operating income (expense)


4,469



(510
)


(2,614
)Gain on the sale and development of real estate and equity
    interests


51,347



81,723



14,025Sunrises share of earnings and return on investment in
    unconsolidated communities


43,702



13,472



1,508Loss from investments accounted for under the profit-sharing
    method


(857
)


(857
)


(1,578
)Minority interests


6,916



6,721



(1,078
)Income before provision for income taxes


40,839



141,812



629(Provision for) benefit from income taxes


(20,482
)


(54,723
)


485Net income

$
20,357


$
87,089


$
1,114Earnings per share data:Basic net income per common share

$
0.42


$
2.10


$
0.03Diluted net income per common share

$
0.40



1.82


$
0.03    110




---



##### 



SUNRISE
    SENIOR LIVING, INC.
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  AccumulatedShares of


Common


Additional








OtherCommon


Stock


Paid-in


Retained


Deferred


ComprehensiveStock


Amount


Capital


Earnings


Compensation


Income (Loss)


Total(In thousands)Balance at January 1, 2004 (As previously stated)


41,961


$
420


$
273,168


$
221,109


$
(6,564
)

$
2,143


$
490,276Effect of restatement










30,936



(130,678
)






(1,340
)


(101,082
)Balance at January 1, 2004 (Restated)


41,961



420



304,104



90,431



(6,564
)


803



389,194Net income (Restated)














1,114











1,114Foreign currency translation, net of tax






















1,603



1,603Sunrises share of investees other comprehensive
    income






















759



759Total comprehensive income (Restated)


























3,476Issuance of common stock to employees


2,679



26



30,387















30,413Repurchase of common stock


(3,498
)


(34
)


(63,159
)














(63,193
)Conversion of convertible debt










8















8Issuance of restricted stock


22







400







(400
)






Amortization of restricted stock


















2,119







2,119Forfeiture of restricted stock


(26
)






(310
)






310







Tax effect from the exercise of non-qualified stock options










7,686















7,686Balance at December 31, 2004 (Restated)


41,138



412



279,116



91,545



(4,535
)


3,165



369,703Net income (Restated)














87,089











87,089Foreign currency translation, net of tax






















(3,231
)


(3,231
)Sunrises share of investees other comprehensive
    income






















(503
)


(503
)Total comprehensive income (Restated)


























83,355Issuance of common stock to employees


2,248



22



31,307















31,329Repurchase of common stock


(348
)


(3
)


(8,709
)














(8,712
)Conversion of convertible debt


3







55















55Issuance of restricted stock


412



4



10,995







(10,997
)






2Amortization of restricted stock


















3,209







3,209Tax effect from the exercise of non-qualified stock options










13,443















13,443Balance at December 31, 2005 (Restated)


43,453



435



326,207



178,634



(12,323
)


(569
)


492,384Net Income














20,357











20,357Foreign currency translation, net of tax






















2,205



2,205Sunrises share of investees other comprehensive
    income






















893



893Total comprehensive income


























23,455Issuance of common stock to employees


374



3



5,161















5,164Conversion of convertible debt


6,700



67



117,917















117,984Issuance of restricted stock


45



1



532















533Forfeiture of restricted stock










(5
)














(5
)Adoption of SFAS 123R










(12,323
)






12,323







Stock-based compensation expense










5,846















5,846Tax effect from the exercise of non-qualified stock options










1,940















1,940Balance at December 31, 2006


50,572


$
506


$
445,275


$
198,991


$



$
2,529


$
647,301    111




---



##### 



SUNRISE
    SENIOR LIVING, INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years Ended December 31,2005


20042006


(Restated)


(Restated)(In thousands)Operating activitiesNet income

$
20,357


$
87,089


$
1,114Adjustments to reconcile net income to net cash provided by
    operating activities:Gain on sale and development of real estate and equity interests


(51,347
)


(81,723
)


(14,025
)(Gain) loss from investments accounted for under the
    profit-sharing method


857



857



1,578(Gain) loss from application of financing method


(1,155
)


(528
)


Gain on sale of investment in Sunrise REIT debentures






(2,036
)


Loss (gain) on sale of investments


5,610







Sunrises share of earnings and return on investment in
    unconsolidated communities


(12,285
)


(13,423
)


(5,005
)Write-off of unamortized contract costs


25,359



15,395



Impairment of long-lived assets


15,730



2,472



Loss on financial guarantees


89,676







Distributions of earnings from unconsolidated communities


66,669



26,895



6,513Minority interest in income/loss of controlled entities


(6,916
)


(6,721
)


1,078Provision for bad debts


14,632



1,675



2,325Provision for deferred income taxes


(584
)


31,925



(9,795
)Depreciation and amortization


48,648



42,195



40,027Amortization of financing costs


1,404



1,483



2,018Write-off of capitalized project costs






2,336



5,036Amortization of deferred compensation


6,463



5,465



2,882Changes in operating assets and liabilities:(Increase) decrease in:Accounts receivable


(23,242
)


3,850



(13,796
)Due from unconsolidated communities


(83,451
)


(6,279
)


(16,146
)Prepaid expenses and other current assets


(4,041
)


(3,425
)


(3,212
)Other assets


6,694



(6,189
)


(2,517
)Increase (decrease) in:Accounts payable and accrued expenses


13,862



62,227



41,849Entrance fees


913



1,095



998Self-insurance liabilities


30,186



21,885



24,038Deferred revenue and gains on the sale of real estate


983



33,034



21,090Net cash provided by operating activities


165,022



219,554



86,050Investing activitiesCapital expenditures


(187,326
)


(134,291
)


(111,316
)Acquisitions of business assets


(103,491
)


(75,532
)


Dispositions of property


83,290



56,246



146,139Cash obtained in consolidation of Greystone






10,922



Change in restricted cash


(60,268
)


(43,831
)


11,462Purchases of short-term investments


(172,575
)


(62,825
)


(26,350
)Proceeds from short-term investments


172,575



77,725



11,450Increase in investments and notes receivable


(343,286
)


(158,697
)


(159,825
)Proceeds from investments and notes receivable


376,061



187,042



141,082Investments in unconsolidated communities


(77,371
)


(64,080
)


(27,987
)Distributions of capital from unconsolidated communities


5,954



9,273



8,742Net cash used in investing activities


(306,437
)


(198,048
)


(6,276
)Financing activitiesNet proceeds from exercised options


4



29,065



29,726Additional borrowings of long-term debt


154,140



149,539



112,781Repayment of long-term debt


(90,781
)


(137,296
)


(119,451
)Contribution from minority interests


15,669



5,000



Distributions to minority interest


(630
)


(1,021
)


(724
)Financing costs paid


(75
)


(2,622
)


(392
)Repurchases of common stock






(8,712
)


(63,193
)Net cash provided by (used in) in financing activities


78,327



33,953



(41,253
)Net (decrease) increase in cash and cash equivalents


(63,088
)


55,459



38,521Cash and cash equivalents at beginning of year


145,078



89,619



51,098Cash and cash equivalents at end of year

$
81,990


$
145,078


$
89,619    112




---



##### 



Sunrise
    Senior Living, Inc.



Notes to
    Consolidated Financial Statements 1.
    Organization
    and Presentation  Organization
      Basis
    of Presentation
  EITF 04-5, Determining Whether a General Partner, or the General
    Partners as a Group, Controls a Limited Partnership or Similar
    Entity When the Limited Partners Have Certain Rights
    (EITF 04-5) EITF 04-5 EITF 04-5.
  Stock
    Split
  two-for-one
  2.
    Restatement
    of Consolidated Financial Statements  Overview
   113




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounting
    for Real Estate Sales
      Accounting for Sales of Real Estate
  Initial
    Investment and Options to Reacquire
    Cash Flow
    Preferences
    Continuing
    Support Obligations
   114




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Accounting
    for Costs of Real Estate Projects
  Accounting for Costs and
    Initial Rental Operations of Real Estate Projects
    (SFAS 67),
    Accounting
    for Equity Method Investments with Preferences
  No. 78-9, Accounting for Investments in Real Estate Ventures (SOP 78-9) and/or SOP 78-9.
 115




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Revenue
    Recognition for Greystone Contracts
    Accounting
    for Stock-Based Compensation
    CumulativeAmount ofRestatementAdjustmentsCategory of Restatement

(pre-tax)September 14, 1998 Stock Option Repricing

$
27,302Cancellation and Reissuance of Stock Options


6,144Modification of Stock Option Awards


2,578Grant of Stock Options to CEO


3,213Other Miscellaneous Stock Option Issues


4,274$
43,511   September 14,
    1998 Stock Option Repricing
  Accounting for Certain
    Transactions Involving Stock Compensation an interpretation of
    APB Opinion No. 25
  and/or
 116




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Cancellation
    and Reissuance of Stock Options
  out-of-the-money).
      Modification
    of Stock Option Awards
     117




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Grant of
    Stock Options to CEO
    Other
    Miscellaneous Stock Option Issues
      Accounting
    for Reimbursed Expenses
  No. 99-19, Reporting Revenue Gross as a Principal Versus Net as an Agent
    (EITF 99-19)
  Other
    Adjustments
   118




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)


EquityCost of


MethodReal


Real


Investments





Greystone





Total


Tax


TotalEstate


Estate


with


Stock-Based


Revenue


Other


Adjustments


Effects of


AdjustmentsYear

Sales


Projects


Preferences


Compensation


Recognition


Adjustments


Pre-Tax


Adjustments


Net of Tax1996 (unaudited)

$



$



$



$
(92
)

$



$



$
(92
)

$
36


$
(56
)1997 (unaudited)


67











(770
)










(703
)


274



(429
)1998 (unaudited)


(772
)










(4,087
)










(4,859
)


1,895



(2,964
)1999 (unaudited)


(12,141
)










(12,336
)










(24,477
)


9,546



(14,931
)2000 (unaudited)


(24,345
)


(743
)


(26,850
)


(7,929
)






(1,268
)


(61,135
)


23,033



(38,102
)2001 (unaudited)


(13,924
)


(1,600
)


22,974



(7,583
)






(1,366
)


(1,499
)


1,119



(380
)2002 (unaudited)


(28,148
)


(4,168
)


962



(3,547
)






(5,064
)


(39,965
)


13,618



(26,347
)2003 (unaudited)


(57,942
)


(2,197
)


(4,016
)


(4,224
)






(8,369
)


(76,748
)


29,279



(47,469
)Cumulative effect on Jan. 1, 2004 opening retained
    earnings


(137,205
)


(8,708
)


(6,930
)


(40,568
)






(16,067
)


(209,478
)


78,800



(130,678
)2004


(57,259
)


(5,036
)


(4,112
)


(688
)






(12,731
)


(79,826
)


32,255



(47,571
)2005


48,893



(2,336
)


(4,024
)


(2,255
)


(13,034
)


(11,645
)


15,599



(10,252
)


5,347Total

$
(145,571
)

$
(16,080
)

$
(15,066
)

$
(43,511
)

$
(13,034
)

$
(40,443
)

$
(273,705
)

$
100,803


$
(172,902
)     Stock-


Stock-


Stock-


Income Tax


Stock-BasedBased


Based


Based


Effect Relating


CompensationCompensation


Compensation


Compensation


to Stock-Based


ExpensePreviously


Expense


Expense As


Compensation


Net ofYear

Reported


Adjustment


Restated


Expense


Income Tax1996 (unaudited)

$



$
92


$
92


$
(36
)

$
561997 (unaudited)






770



770



(300
)


4701998 (unaudited)






4,087



4,087



(1,594
)


2,4931999 (unaudited)






12,336



12,336



(4,811
)


7,5252000 (unaudited)






7,929



7,929



(3,092
)


4,8372001 (unaudited)






7,583



7,583



(2,958
)


4,6252002 (unaudited)


700



3,547



4,247



(1,614
)


2,6332003 (unaudited)


2,728



4,224



6,952



(2,704
)


4,248Cumulative effect on
    Jan. 1, 2004 opening
    retained earnings


3,428



40,568



43,996



(17,109
)


26,8872004


2,100



688



2,788



(1,091
)


1,6972005


3,200



2,255



5,455



(2,124
)


3,331Total

$
8,728


$
43,511


$
52,239


$
(20,324
)

$
31,915


119




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Effect
    of Restatement Adjustments
  Statements
    of Income
    Sunrise
    Senior Living, Inc.
  Consolidated
    Statements of Income
  Years Ended December 31,2005


2004As








AsPreviously


Increase


As


Previously


Increase


As(in thousands except per share amounts):

Reported


(Decrease)


Restated


Reported


(Decrease)


RestatedOperating revenue:Management fees

$
188,005


$
(83,182
)

$
104,823


$
90,184


$
(2,679
)

$
87,505Buyout fees






83,036



83,036











Professional fees


40,715



(15,795
)


24,920



16,775



(5,826
)


10,949Resident and ancillary fees


355,151



29,516



384,667



342,786



23,838



366,624Reimbursable contract services


1,235,608



(323,616
)


911,992



996,726



(194,164
)


802,562Total operating revenues


1,819,479



(310,041
)


1,509,438



1,446,471



(178,831
)


1,267,640Operating expenses:Development and venture expense


31,541



10,425



41,966



14,638



8,707



23,345Community and ancillary


272,616



23,493



296,109



258,667



17,290



275,957Community lease expense


48,401



1,369



49,770



47,085



(107
)


46,978General and administrative


90,716



15,885



106,601



72,362



13,718



86,080Provision for doubtful accounts






1,675



1,675







2,325



2,325Impairment of long-lived assets






2,472



2,472











Depreciation and amortization


43,432



(451
)


42,981



21,378



18,649



40,027Write-off of unamortized contract costs






14,609



14,609











Reimbursable contract services


1,235,608



(323,616
)


911,992



996,726



(194,164
)


802,562Total operating expenses


1,722,314



(254,139
)


1,468,175



1,410,856



(133,582
)


1,277,274(Loss) income from operations


97,165



(55,902
)


41,263



35,615



(45,249
)


(9,634
)Other non-operating income (expense):Interest income


6,977



(746
)


6,231



8,533



(2,943
)


5,590Interest expense


(3,518
)


(8,364
)


(11,882
)


(7,069
)


(5,246
)


(12,315
)Gain on investments






2,036



2,036











Other income (expense)


3,939



(834
)


3,105







4,111



4,111Total other non-operating income (expense)


7,398



(7,908
)


(510
)


1,464



(4,078
)


(2,614
)Gain on sale and development of real estate and equity interests


9,230



72,493



81,723



34,684



(20,659
)


14,025Sunrises share of earnings and return on investment in
    unconsolidated communities


13,235



237



13,472



9,394



(7,886
)


1,508Loss from investments accounted for under the profit-sharing
    method






(857
)


(857
)






(1,578
)


(1,578
)Minority interests


(815
)


7,536



6,721



(701
)


(377
)


(1,078
)Income before provision for income taxes


126,213


$
15,599



141,812



80,456



(79,827
)


629(Provision for) benefit from income taxes


(46,471
)


(8,252
)


(54,723
)


(29,769
)


30,254



485Net income

$
79,742


$
7,347


$
87,089


$
50,687


$
(49,573
)

$
1,114Earnings per share data:Basic net income per common share

$
1.92


$
0.18


$
2.10


$
1.25


$
(1.22
)

$
0.03Diluted net income per common share


1.67



0.15



1.82



1.12



(1.09
)


0.03  120




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Balance
    Sheets
    Sunrise
    Senior Living, Inc.
    Consolidated Balance Sheet
 December 31, 2005AsPreviously


Increase


As(in thousands)

Reported


(Decrease)


RestatedASSETSCurrent assets:Cash and cash equivalents

$
225,279


$
(80,201
)

$
145,078Accounts receivable, net


59,384



(838
)


58,546Notes receivable, net


16,461







16,461Due from unconsolidated communities


58,358



(4,102
)


54,256Deferred income taxes, net


20,721



(196
)


20,525Restricted cash






11,609



11,609Prepaid insurance






4,338



4,338Prepaid expenses and other current assets


36,569



(20,494
)


16,075Total current assets


416,772



(89,884
)


326,888Property and equipment, net


458,546



35,523



494,069Property and equipment subject to a sales contract, net






255,231



255,231Property and equipment subject to financing, net






64,174



64,174Note receivable


6,325



(2,369
)


3,956Intangible assets, net


86,241



10,433



96,674Goodwill


165,028



(11,700
)


153,328Investments in unconsolidated communities


137,905



(74,565
)


63,340Investments accounted for under the profit sharing method






558



558Investments


7,589



(1,979
)


5,610Restricted cash






106,176



106,176Other assets, net


49,870



(32,089
)


17,781Total assets

$
1,328,276


$
259,509


$
1,587,785LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt

$
51,368


$
1,004


$
52,372Accounts payable


256,173



(242,524
)


13,649Accrued expenses






158,619



158,619Deferred revenue


8,415



(695
)


7,720Entrance fees


25,953



1,008



26,961Self-insurance liabilities






21,363



21,363Total current liabilities


341,909



(61,225
)


280,684Long-term debt, less current maturities


151,421



44,603



196,024Deposits related to properties subject to a sales contract






324,782



324,782Liabilities related to properties accounted for under the
    financing method






64,208



64,208Investments accounted for under the profit sharing method






5,664



5,664Guarantee liabilities






4,444



4,444Self-insurance liabilities






62,823



62,823Deferred gains on the sale of real estate and deferred revenues






28,226



28,226Deferred income tax liabilities


165,957



(87,953
)


78,004Other long-term liabilities, net


32,131



5,699



37,830Total liabilities


691,418



391,271



1,082,689Minority interests


4,181



8,531



12,712Stockholders equity:Common stock


435







435Additional paid-in capital


294,400



31,807



326,207Retained earnings


351,538



(172,904
)


178,634Deferred compensation  restricted stock


(12,323
)






(12,323
)Accumulated other comprehensive income


(1,373
)


804



(569
)Total stockholders equity


632,677



(140,293
)


492,384Commitments and contingenciesTotal liabilities and stockholders equity

$
1,328,276


$
259,509


$
1,587,785  121




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Sunrise
    Senior Living, Inc.
  Consolidated
    Balance Sheet
 December 31, 2004AsPreviously


Increase


As(in thousands)

Reported


(Decrease)


RestatedASSETSCurrent assets:Cash and cash equivalents

$
141,883


$
(52,264
)

$
89,619Short-term investments


14,900







14,900Accounts receivable, net


61,999



397



62,396Notes receivable, net


2,875







2,875Due from unconsolidated communities


55,823



(7,846
)


47,977Deferred income taxes, net


25,412



14,049



39,461Restricted cash






8,308



8,308Prepaid insurance






13,289



13,289Prepaid expenses and other current assets


27,803



(24,104
)


3,699Total current assets


330,695



(48,171
)


282,524Property and equipment, net


369,632



(10,562
)


359,070Property and equipment subject to a sales contract, net






473,485



473,485Property and equipment  subject to financing, net






28,988



28,988Note receivable


40,700



(14,278
)


26,422Intangible assets, net


83,336



(8,355
)


74,981Goodwill


123,713



(1,888
)


121,825Investments in unconsolidated communities


93,016



(60,017
)


32,999Investments accounted for under the profit sharing method






2,553



2,553Investments


7,416



(1,805
)


5,611Investment in Sunrise REIT debentures


20,757







20,757Restricted cash






65,646



65,646Other assets, net


36,491



(24,899
)


11,592Total assets

$
1,105,756


$
400,697


$
1,506,453LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt

$
35,264


$



$
35,264Accounts payable


-0-



8,972



8,972Accrued expenses


185,219



(70,414
)


114,805Deferred revenue


6,202



(2,707
)


3,495Entrance fees


25,866







25,866Self-insurance liabilities






15,596



15,596Total current liabilities


252,551



(48,553
)


203,998Long-term debt, less current maturities


156,402







156,402Deposits related to properties subject to a sales contract






599,071



599,071Liabilities related to properties accounted for under the
    financing method






24,247



24,247Investments accounted for under the profit sharing method






5,413



5,413Guarantee Liabilities






1,540



1,540Self-insurance liabilities






46,705



46,705Deferred gains on the sale of real estate and deferred revenue






6,986



6,986Deferred income taxes


148,790



(85,153
)


63,637Other long-term liabilities, net


22,915



4,256



27,171Total liabilities


580,658



554,512



1,135,170Minority interests


1,580







1,580Stockholders equity:Common stock


412







412Additional paid-in capital


247,999



31,116



279,115Retained earnings


271,796



(180,250
)


91,546Deferred compensation  restricted stock


(4,535
)






(4,535
)Accumulated other comprehensive income


7,846



(4,681
)


3,165Total stockholders equity


523,518



(153,815
)


369,703Total liabilities and stockholders equity

$
1,105,756


$
400,697


$
1,506,453  122




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Cash
    Flows
    Years Ended December 31,2005


2004As








AsPreviously


Increase


As


Previously


Increase


AsReported


(Decrease)


Restated


Reported


(Decrease)


RestatedOperating activitiesNet income

$
79,742


$
7,347


$
87,089


$
50,687


$
(49,573
)

$
1,114Adjustments to reconcile net income to net cash provided by
    operating activities:Gain on sale and development of real estate and equity interests


(9,230
)


(72,493
)


(81,723
)


(34,684
)


20,659



(14,025
)Gain on sale of Sunrise REIT Debentures


(3,939
)


1,903



(2,036
)










Gain from application of financing method






(528
)


(528
)










Gain from investment accounted for under the profit-sharing
    method






857



857







1,578



1,578Sunrises share of earnings and return on investment in
    unconsolidated communities


(13,235
)


(188
)


(13,423
)


(9,394
)


4,389



(5,005
)Impairment of long-lived assets






2,472



2,472











Write-off of unamortized contract costs






15,395



15,395











Distributions of earnings from unconsolidated communities


8,293



18,602



26,895



7,501



(988
)


6,513Minority interests in income/loss of controlled entities


815



(7,536
)


(6,721
)


701



377



1,078Provision for bad debts


1,531



144



1,675



1,364



961



2,325Provision for deferred income taxes


21,858



10,067



31,925



17,843



(27,965
)


(9,795
)Depreciation and amortization


43,432



(1,237
)


42,195



21,378



18,649



40,027Write-off of capitalized project costs






2,336



2,336







5,036



5,036Amortization of financing costs


1,483







1,483



2,018







2,018Amortization of deferred compensation


3,210



2,255



5,465



2,119



763



2,882Changes in operating assets and liabilities:(Increase) decrease inAccounts receivable


13,196



(9,346
)


3,850



(12,835
)


(961
)


(13,796
)Prepaid expenses and other current assets


(22,207
)


18,782



(3,425
)


(26,310
)


23,098



(3,212
)Due from unconsolidated communities






(6,279
)


(6,279
)






(16,146
)


(16,146
)Other assets


2,671



(8,860
)


(6,189
)


(2,517
)






(2,517
)Increase (decrease) in:Accounts payable and accrued expenses


68,755



(6,528
)


62,227



66,926



(25,077
)


41,849Entrance fees


87



1,008



1,095



997



1



998Self-insurance liabilities






21,885



21,885







24,038



24,038Deferred revenue and gains on the sale of real estate


2,288



30,746



33,034



431



20,659



21,090Net cash provided by (used in) operating activities


198,750



20,804



219,554



86,225



(502
)


86,050 123




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Years Ended December 31,2005


2004As








AsPreviously


Increase


As


Previously


Increase


AsReported


(Decrease)


Restated


Reported


(Decrease)


RestatedInvesting activitiesCapital expenditures


(134,291
)






(134,291
)


(110,662
)






(110,989
)Acquisition of business assets


(75,532
)






(75,532
)










Cash obtained in consolidation of Greystone






10,922



10,922











Cash obtained from Sunrise At Home


1,138



(1,138
)














Disposition of property


56,246







56,246



146,139







146,139Purchases of short-term investments


(62,825
)






(62,825
)


(26,350
)






(26,350
)Proceeds from short-term investments


77,725







77,725



11,450







11,450Increase in investments and notes receivable


(158,697
)






(158,697
)


(159,825
)






(159,825
)Proceeds from investments and notes receivable


187,042







187,042



141,082







141,082Change in restricted cash


(3,908
)


(39,923
)


(43,831
)


12,762



(1,300
)


11,462Contributions to unconsolidated communities


(64,080
)






(64,080
)


(27,987
)






(27,987
)Distributions from unconsolidated communities


27,875



(18,602
)


9,273



7,754



988



8,742Net cash used in investing activities


(149,307
)


(48,741
)


(198,048
)


(5,637
)


(312
)


(6,276
)Financing activitiesNet proceeds from exercised options


29,065







29,065



29,726







29,726Additional borrowings of long-term debt


148,539



1,000



149,539



112,781







112,781Repayment of long-term debt


(137,296
)






(137,296
)


(119,451
)






(119,451
)Capital contributed by At Home stockholders


5,000







5,000











Distribution to minority interest


(1,021
)






(1,021
)


(724
)






(724
)Financing costs paid


(1,622
)


(1,000
)


(2,622
)


(392
)






(392
)Repurchases of common stock


(8,712
)






(8,712
)


(63,193
)






(63,193
)Net cash provided by (used in) in financing activities


33,953







33,953



(41,253
)






(41,253
)Net increase (decrease) in cash and cash equivalents


83,396



(27,937
)


55,459



39,335



(814
)


38,521Cash and cash equivalents at beginning of period


141,883



(52,264
)


89,619



102,548



(51,450
)


51,098Cash and cash equivalents at end of period

$
225,279


$
(80,201
)

$
145,078


$
141,883


$
(52,264
)

$
89,619  124




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  3.
    Significant
    Accounting Policies    Cash
    and Cash Equivalents
    Restricted
    Cash
  self-insurance
  Allowance
    for Doubtful Accounts
    Notes
    Receivable
    Due
    from Unconsolidated Communities
    Property
    and Equipment
   125




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Real
    Estate Sales
  Accounting for Sales of Real
    Estate
     126




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
              Capitalization
    of Interest Related to Development Projects
  Capitalization of Interest Cost,
    ( Capitalization of Interest Cost in
    Financial Statements That Include Investments Accounted for by
    the Equity Method
 127




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Goodwill
    and Intangible Assets
        Investments
    in Unconsolidated Communities
    Consolidation of Variable Interest Entities
  EITF 04-5 ,
    Determining Whether a General Partner, or the General Partners
    as a Group, Controls a Limited Partnership or Similar Entity
    When the Limited Partners Have Certain Rights, EITF 04-5.
  The
    Equity Method of Accounting for Investments in Common Stock No. 78-9, Accounting for Investments in Real Estate Ventures (SOP 78-9). SOP 78-9 and/or
 128




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          Deferred
    Financing Costs
    Loss
    Reserves For Certain Self-Insured Programs
       129




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Employee
    Health and Dental Benefits
    Continuing
    Care Agreements
      Interest on Receivables and
    Payables
   130




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Accounting
    for Guarantees
    Asset
    Retirement Obligations
  Accounting for Conditional Asset Retirement
    Obligations  an interpretation of FASB Statement
    No. 143, Asset Retirement Obligations
      Income
    Taxes
    Revenue
    Recognition for Management, Development and Professional
    Fees
     131




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    percentage-of-completion cost-to-cost
      Stock-Based
    Compensation
  Share-Based Payments Accounting for Stock-Based
    Compensation Accounting for Stock Issued to Employees,
    Foreign
    Currency Translation
    Advertising
    Costs
   132




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Legal
    Contingencies
    Future
    Adoption of Accounting Standards
  Accounting for Uncertainty in Income Taxes Accounting for Income
    Taxes
  Fair Value Measurements
  No. 06-8, Applicability of the Assessment of a Buyers Continuing
    Investment under FASB Statement No. 66, Accounting for
    Sales of Real Estate, for Sales of Condominiums (EITF 06-8). EITF 06-8 EITF 06-8 EITF 06-8
  The
    Fair Value Option for Financial Assets and Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial Statements
 133




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  4.
    Allowance
    for Doubtful Accounts    AccountsReceivable


Other Assets


TotalBalance January 1, 2004

$
3,679






$
3,679Provision for doubtful accounts


2,325







2,325Write-offs


(4,116
)






(4,116
)Balance, December 31, 2004


1,888







1,888Provision for doubtful accounts


1,675







1,675Write-offs


(1,065
)






(1,065
)Balance, December 31, 2005


2,498







2,498Provision for doubtful accounts


6,632


$
8,000



14,632Write-offs


(1,626
)






(1,626
)Balance, December 31, 2006

$
7,504


$
8,000


$
15,504     5.
    Property
    and Equipment    December 31,2005Asset Lives


2006


RestatedLand and land improvements


15 years


$
76,456


$
63,253Building and building improvements


40 years



330,431



290,216Furniture and equipment


3-10 years



122,479



93,997529,366



447,466Less accumulated depreciation and amortization






(125,315
)


(98,914
)404,051



348,552Construction in progress






205,334



145,517Property and equipment, net





$
609,385


$
494,069       6.
    Acquisitions  Raiser
    Portfolio
   134




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Net working capital

$
0.9Property and equipment


17.0Management contracts


21.0Entrance fee liability and future service obligations


(11.5
)Total purchase price (including transaction costs)

$
27.4     Trinity
    Hospice, Inc.
      Net working capital

$
3.7Property and equipment


1.5Intangible assets


9.7Goodwill


59.3Other assets


0.4Total purchase price (including transaction costs)

$
74.6     Greystone
    Communities, Inc.
  not-for-profit not-for-profit
 135




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Net working capital deficit

$
(1.8
)Property and equipment


0.6Management and development contracts


13.8Goodwill


36.4Total purchase price (including transaction costs)

$
49.0       The
    Fountains
       136




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Net working capital deficit

$
(0.5
)Property and equipment, net


21.4Management contracts


7.8Other assets


0.3Total purchase price (including transaction costs)

$
29.0     7.
    Sales of
    Real Estate    December 31,2006


2005


2004Properties accounted for under basis of performance of services

$
1.8


$
0.6


$
0.2Properties accounted for previously under profit-sharing method










3.9Properties accounted for previously under deposit method


35.3



81.3



4.5Land sales


5.4



(0.2
)


0.2Sale of equity interests and other sales


8.8







5.2Total gains on sale

$
51.3


$
81.7


$
14.0   Basis
    of Performance of Services
    Profit-sharing
    Method
           137




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2006


2005


2004Revenue

$
19,902


$
11,077


$
2,035Expenses


(16,528
)


(10,310
)


(2,718
)Income (Loss) from Operations before depreciation


3,374



767



(683
)Depreciation Expense






1,964



742Distributions to Other Investors


(4,231
)


(3,588
)


(1,637
)Loss from Investments Accounted for Under profit-sharing method

$
(857
)

$
(857
)

$
(1,578
)Investments Accounted for Under the Profit-Sharing Method, net

$
29,148


$
(5,106
)Property and equipment subject to profit sharing, net


136,806



60,901     Condominium
    Sales
    Financing
    Method
      December 31,2006


2005


2004Property and equipment subject to financing, net

$
62,520


$
64,174Liabilities relating to properties subject to financing method


(66,283
)


(64,208
)Depreciation expense


1,959



363


$
Development fees received, net of costs






1,335


$
524Management fees received


981



93



   Deposit
    method
   138




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    December 31,2006


2005


2004Property subject to sales contract, net

$



$
10,142Deposits related to properties subject to a sales contract






(13,843
)Depreciation expense


296



331


$
8Management fees received


198



192



4Development fees received, net of costs










       December 31,2006


2005


2004Properties subject to a sales contract, net

$
193,158


$
197,781Deposits related to properties subject to a sales contract


(240,367
)


(236,692
)Depreciation expense


8,257



7,168


$
5,681Development fees received, net of costs


20



1,412



2,529Management fees received


3,738



3,023



2,525       December 31,2006


2005


2004Properties subject to a sales contract, net

$



$
47,308Deposits related to properties subject to a sales contract






(74,247
)Depreciation expense


848



6,644


$
11,576Development fees received, net of costs










8Management fees received


617



4,548



7,443     Sale
    of Equity Interests
  No. 98-8, Accounting for Transfers of Investments That Are in Substance
    Real Estate (EITF 98-8),
 139




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
   Land
    Sales
    8.
    Variable
    Interest Entities    Consolidated
    VIEs
  
    The entity that Sunrise has a management agreement with is a
    continuing care retirement community located in the
    U.S. comprised of 254 continuing care retirement community
    apartments, 32 assisted living units, 27 Alzheimer care
    apartments, and 60 skilled nursing beds. Sunrise has included
    $21.4 million and $22.7 million, respectively, of net
    property and equipment related to this entity in its 2006 and
    2005 consolidated balance sheets and $25.2 million and
    $25.8 million, respectively, of debt. Sunrise guaranteed in
    2006 and 2005 $23.8 million and $24.4 million,
    respectively, of this debt.
    Six of the eight consolidated VIEs are investment partnerships
    formed with third-party partners to invest capital in the
    pre-finance stage of certain Greystone projects. When the
    initial development services are successful and permanent
    financing for the project is obtained, the partners are repaid
    their initial invested capital plus fees generally between 50%
    and 75% of their investment. Greystone, which was acquired by
    Sunrise in May 2005, is a developer and manager of CCRCs.
    Sunrise has included $13.8 million of cash related to these
    ventures in the 2006 consolidated balance sheet. At
    December 31, 2005, only three Greystone VIEs were
    consolidated. In Sunrises 2005 consolidated balance sheet,
    $5.0 million of cash is related to these ventures. During
    2006, one of the three ventures was no longer a VIE and was
    deconsolidated and four new Greystone investment partnerships
    were formed to invest capital.
    The remaining consolidated VIE is Sunrise At Home Senior Living
    Services, Inc. (Sunrise At Home), a venture between
    Sunrise and two third parties. The venture offers home health
    services by highly trained staff members in customers
    homes and had annual revenue of approximately $19 million
    in 2006. Sunrise has included $0.8 million and
    $1.4 million, respectively, of net working capital related
    to the venture in the 2006 and 2005 consolidated balance sheets.
    In June 2007, Sunrise At Home was merged with Alliance Care and
    Sunrise received a preferred equity interest in Alliance Care.
    Alliance Care provides services to seniors, including physician
    house calls and mobile diagnostics, home care and private duty
    services through 20 local offices located in five states.
    Additionally, Alliance Care operates over 125 Healthy Lifestyle
    Centers providing therapeutic rehabilitation and wellness
    programs in senior living facilities. As a result of the merger,
    Sunrise is no longer the primary beneficiary and deconsolidated
    Sunrise At Home as of the merger date.
    A development venture formed in September 2005 for the
    development of a luxury senior living community in the
    U.S. was under development at December 31, 2005.
    Included in the 2005 consolidated balance sheet is land which is
    pledged as collateral for the $19.8 million of debt related
    to this entity. As of the first quarter of 2006, this venture
    was no longer a VIE and was deconsolidated.  Unconsolidated
    VIEs
  
    Sunrise has six ventures with Sunrise REIT.  
    Two are development ventures located in Canada. One venture was
    formed in December 2004 for the development of a senior living
    community which was operating at December 31, 2006, with
    total assets of $16.1 million, no senior debt and annual
    revenue of $4.9 million in 2006 and the other was formed in
    June 140




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  2005 for the development of a senior living community which was
    operating at December 31, 2006, with total assets of
    $15.9 million, senior debt of $11.1 million and annual
    revenue of $3.3 million in 2006.  
    Two additional development ventures which were formed in June
    2006 for the development of senior living communities in the
    U.S. were operating at December 31, 2006. One had
    total assets of $13.3 million, senior debt of
    $9.4 million and annual revenue of $0.6 million in
    2006 and the other had total assets of $19.4 million,
    senior debt of $12.2 million and annual revenue of
    $1.4 million in 2006.
    One operating venture was formed in December 2004 and contains
    15 operating communities. This operating venture had total
    assets of $229.8 million, senior debt of
    $125.4 million and annual revenue of $75.5 million in
    2006.
    In August 2005, Sunrises partner sold its ownership
    interest in 13 senior living communities to Sunrise REIT. At
    December 31, 2006, this venture has total assets of
    $184.6 million, senior debt of $185.7 million, and
    annual revenue of $65.8 million.  
    A seventh venture, which was formed in April 2004, is a
    Greystone development project located in the U.S. This project
    was under construction at December 31, 2006, with total
    assets of $60.3 million and senior debt of
    $16.2 million.    9.
    Dispositions
    and Buyout of Management Contracts  Sunrise
    Senior Living Real Estate Investment Trust
    30-year
  lease-up
 141




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Buyout
    of Management Contracts
        10.
    Notes
    Receivable    December 31,Interest Rate(1)


2006


2005RestatedPromissory Note XIII


7.5
%

$
11,767


$
11,245Promissory Note XIV


Euribor + 4.25
%


4,834



2,103Note VI, revolving credit agreement


10.00
%


4,174



2,596Note V with international venture


4.37
%


1,030



915Promissory Note IV


(2
)






2,576Subordinated Loan Agreement I


10.75
%






938Other notes receivable










4421,805



20,417Current maturities






4,174



16,461$
17,631


$
3,956     (1)
    
    Interest rate at December 31, 2006(2)
    
    Higher of 6% or LIBOR plus 3.0%     142




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          lease-up
    11.
    Intangible
    Assets and Goodwill    December 31,


Estimated2006


2005


Useful LifeRestatedManagement contracts, less accumulated amortization of $13,242
    and $9,922

$
88,581


$
89,915



1-30 yearsLeaseholds, less accumulated amortization of $3,162 and $2,747


4,721



5,136



10-29 yearsOther intangibles, net


10,469



1,623



1-40 years$
103,771


$
96,674    143




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      12.
    Investments
    in Unconsolidated Communities    SunriseVenture

OwnershipKarrington of Findlay Ltd


50.00
%Sunrise/Inova McLean Assisted Living, LLC


40.00
%Sunrise Highland Park Senior Living, LLC (1)


35.00
%Sunrise GEM One, LLC (1)


35.00
%AU-HCU Holdings, LLC (2)


30.00
%RCU Holdings, LLC (2)


30.00
%SunVest, LLC (2)


30.00
%AL One Investments, LLC


25.36
%Metropolitan Senior Housing, LLC


25.00
%Sunrise at Gardner Park, LP


25.00
%Sunrise Floral Vale Senior Living, LP


25.00
%Cheswick & Cranberry, LLC


25.00
%BG Loan Acquisition LP


25.00
%Sunrise Aston Gardens Venture, LLC


25.00
%Master MorSun, LP


20.00
%Master MetSun, LP


20.00
%Sunrise First Assisted Living Holdings, LLC


20.00
%Sunrise Second Assisted Living Holdings, LLC


20.00
%Sunrise Beach Cities Assisted Living, LP


20.00
%AL U.S. Development Venture, LLC


20.00
%Sunrise IV Senior Living Holdings, LLC


20.00
%Sunrise of Aurora, LP


20.00
%Sunrise of Erin Mills, LP


20.00
%PS Germany Investment (Jersey) LP


20.00
%PS UK Investment (Jersey) LP


20.00
%Sunrise First Euro Properties LP


20.00
%Master CNL Sun Dev I, LLC


20.00
%Sunrise Bloomfield Senior Living, LLC


20.00
%Sunrise Hillcrest Senior Living, LLC


20.00
%Sunrise New Seasons Venture, LLC


20.00
%Sunrise US UPREIT, LLC


15.40
%SunKap Coral Gables, LLC


15.00
% 144




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  SunriseVenture

OwnershipSanta Monica AL, LLC


15.00
%Sunrise Third Senior Living Holdings, LLC


10.00
%Sunrise Connecticut Avenue Assisted Living, LLC


10.00
%Cortland House, LP


10.00
%AEW/Sunrise Senior Housing Portfolio, LLC


10.00
%     (1)
    
    Properties related to investments are accounted for under the
    financing method of accounting. See Note 7.(2)
    
    Properties related to investments are accounted for under the
    profit-sharing method of accounting. See Note 7.      December 31,2006


2005


2004Assets, principally property and equipment

$
4,370,376


$
3,283,725


$
2,187,253Liabilities, principally long-term debt


3,554,326



2,486,720



1,481,407Equity


816,050



797,005



705,846Revenue


846,479



625,371



491,090Net (loss) income


(56,968
)


24,051



175,292         Years Ended December 31,2006


2005


2004Restated


RestatedSunrises share of earnings (losses) in unconsolidated
    communities

$
(11,997
)

$
(13,073
)

$
(5,005
)Return on investment in unconsolidated communities


55,699



26,545



6,513$
43,702


$
13,472


$
1,508      145




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Transactions
  20-year
                13.
    Bank
    Credit Facility   146




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          
    waived delivery by Sunrise of all 2006 quarterly financial
    statements and financial statements for the quarters ended
    March 31, 2007, June 30, 2007 and September 30,
    2007;
    modified to April 15, 2008 the delivery date for the 2006
    audited financial statements;
    modified to April 30, 2008 the delivery date for
    preliminary 2007 unaudited annual financial statements;
    modified to May 31, 2008, the delivery date for the
    preliminary unaudited financial statements for the quarter
    ending March 31, 2008;
    modified to July 31, 2008 the delivery date for the 2007
    audited annual financial statements;
    modified to August 20, 2008 the delivery date for unaudited
    financial statements for the quarter ending March 31,
    2008; and
    modified to September 10, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    June 30, 2008.   147




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        wholly-owned
    14.
    Long-Term
    Debt    December 31,2006


2005RestatedOutstanding draws on Bank Credit Facility

$
50,000


$
5.25% convertible subordinated notes due 2009






119,937Borrowings from Sunrise REIT


35,112



44,078Mortgages, notes payable and other


105,493



84,381190,605



248,396Current maturities


(141,923
)


(52,372
)$
48,682


$
196,024   Convertible
    Subordinated Notes
   148




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Borrowings
    from Sunrise REIT
      Other
    Mortgage and Notes Payable
         149




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2007

$
141,9232008


17,4382009


2,0312010


1,0772011


1,213Thereafter


26,923$
190,605       15.
    Income
    Taxes    December 31,2006


2005RestatedDeferred tax assets:Sunrise operating loss carryforwards  federal

$
1,910


$
1,391Sunrise operating loss carryforwards  state


4,476



4,055Sunrise operating loss carryforwards  foreign


2,515



246Sunrise At Home loss carryforwards  federal and state


5,891



5,797Sunrise At Home deferred tax assets, net


1,302



438Financial guarantees


38,719



Accrued health insurance


17,159



10,313Self insurance liabilities


8,826



7,110Stock based compensation


7,518



5,727Tax credits


6,277



10,042Accrued expenses and reserves


15,001



11,042Other


17,324



8,770 150




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  December 31,2006


2005RestatedGross deferred tax assets


126,918



64,931Sunrise valuation allowance


(3,800
)


(2,221
)Foreign deferred tax valuation allowance


(2,071
)


Sunrise At Home valuation allowance


(7,193
)


(6,235
)Net deferred tax assets


113,854



56,475Deferred tax liabilities:Investments in ventures


(80,093
)


(26,250
)Basis difference in property and equipment and intangibles


(84,599
)


(86,719
)Prepaid expenses


(5,932
)


(598
)Other


(2,499
)


(387
)Total deferred tax liabilities


(173,123
)


(113,954
)Net deferred tax liabilities

$
(59,269
)

$
(57,479
)            151




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Years Ended December 31,2006


2005


2004Restated


RestatedCurrent:Federal

$
15,837


$
15,139


$
5,751State


5,202



5,563



1,509Foreign


26



2,096



2,050Total current expense (benefit)


21,065



22,798



9,310Deferred:Federal


(1,258
)


29,544



(8,749
)State


902



(77
)


(697
)Foreign


(228
)


2,458



(349
)Total deferred expense (benefit)


(584
)


31,925



(9,795
)Total tax expense (benefit)

$
20,481


$
54,723


$
(485
)    152




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Years Ended December 31,2006


2005


2004Restated


RestatedDomestic income (loss) before tax expense

$
46,878


$
131,687


$
(1,539
)Foreign income (loss) before tax expense


(6,039
)


10,125



2,168Total income before tax expense (in thousands)

$
40,839


$
141,812


$
629Tax at US Federal statutory rate


35.0
%


35.0
%


35.0
%State taxes, net


4.2
%


3.9
%


4.1
%Work Opportunity Credits


(1.0
)%


(1.2
)%


(116.0
)%Change in valuation allowance


8.8
%


1.0
%


26.0
%Tax exempt interest


(3.6
)%


(0.1
)%


(48.3
)%Tax contingencies


3.5
%


(1.0
)%


Other


3.3
%


1.0
%


22.1
%50.2
%


38.6
%


(77.1
)%       16.
    Stockholders
    Equity  Stock
    Option Plans
  Share-Based Payment Statement of Cash Flows
   153




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Twelve Months Ended Dec. 31,(In thousands, except per share data)

2005


2004Net income:

$
87,089


$
1,114Add: Compensation expense included in net income, net of tax


3,331



1,696Less: Total share-based employee compensation expense determined
    under fair-value method for all awards, net of tax


(9,359
)


(10,215
)Pro forma net income (loss)

$
81,061


$
(7,405
)Basic net income (loss) per share:As reported

$
2.10


$
0.03Pro forma

$
1.96


$
(0.18
)Diluted net income (loss) per share:As reported

$
1.82


$
0.03Pro forma

$
1.70


$
(0.17
)   Stock
    Options
       154




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2006

2005

2004Risk free interest rate

4.8% - 5.2%

4.3% - 4.5%

3.5%Expected dividend yield





Expected term (years)

5.1 - 9.1

3.9 - 5.6

3.9Expected volatility

56.1% - 60.7%

32.3 - 62.0%

48.7%     Weighted


RemainingAverage


ContractualShares


Exercise Price


TermOutstanding  beginning of year


4,312


$
14.54Granted


52



36.05Exercised


(404
)


12.63Forfeited


(106
)


19.16Expired


(87
)


12.74Outstanding-end of year


3,767



14.96



5.1Vested and expected to vest  end of year


3,678



14.96



5.1Exercisable  end of year


3,521



14.88



5.0         Restricted
    Stock
   155




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Weighted AverageGrant DateShares


Fair ValueNonvested, January 1, 2004


642


$
12.82Granted


20



19.32Vested


(106
)


12.43Canceled


(25
)


12.30Nonvested, December 31, 2004


531



13.18Granted


412



26.67Vested


(101
)


13.12Canceled






Nonvested, December 31, 2005


842



19.79Granted


45



35.75Vested


(37
)


24.48Canceled


(16
)


25.22Nonvested, December 31, 2006


834


$
20.34         Restricted
    Stock Units
   156




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Repurchase
    of Outstanding Shares
  and/or
  Shares


Average Price2002


1,163


$
12.812003


7,918


$
13.422004


3,498


$
18.072005


348


$
25.032006






Total at December 31, 2006


12,927


$
14.94     Stockholder
    Rights Agreement
       157




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  17.
    Net
    Income Per Common Share    Years Ended December 31,2006


2005


2004Numerator for basic net income per share:Net income

$
20,357


$
87,089


$
1,114Numerator for diluted net income per share:Net income

$
20,357


$
87,089


$
1,114Assumed conversion of convertible notes, net of tax






4,376



Diluted net income

$
20,357


$
91,465


$
1,114Denominator:Denominator for basic net income per common share 
    weighted average shares


48,947



41,456



40,604Effect of dilutive securities:Employee stock options and restricted stock


1,775



2,234



1,958Convertible notes






6,695



Denominator for diluted net income per common share 
    weighted average shares plus assumed conversions


50,722



50,385



42,562Basic net income per common share:

$
0.42


$
2.10


$
0.03Diluted net income per common share:

$
0.40


$
1.82


$
0.03     18.
    Commitments
    and Contingencies  Leases
     158




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    and/or
      2007

$
58,8932008


58,9592009


58,7772010


58,5652011


54,780Thereafter


218,596$
508,570   Letters
    of Credit
    Land
    Purchase Commitments
    Guarantees
   159




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Guarantors Accounting
    and Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others
  and/or
    FIN 45


FAS 5


TotalLiability


Liability


Liabilityfor Future


for Future


for FutureMaximum Potential


Fundings at


Fundings at


Fundings at


FundingsAmount of Future


December 31,


December 31,


December 31,


duringGuarantee type

Fundings


2006


2006


2006


2006Debt repayment

$
16,832


$
1,210


$



$
1,210


$
Operating deficit


Uncapped



966



50,000



50,966



Income support


Uncapped



1,181



22,354



23,535



945Other










94



94



Total





$
3,357


$
72,448


$
75,805


$
945       The
    Fountains
   160




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Germany
    Venture
    Legal
    Proceedings
  CGB
    Occupational Therapy
    Bellaire
    Litigation
    Trinity
    OIG Investigation and Qui Tam Action
   161




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    qui tam qui tam Qui tam qui tam Qui tam United States ex rel. Joyce Roberts, et
    al., v. KRG Capital, LLC, et al.
      IRS
    Audit
    Lawsuit
    Filed by Former CFO
   162




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    SEC
    Investigation
    Putative
    Class Action Litigation
  United
    Food & Commercial Workers Union Local 880-Retail Food
    Employers Joint Pension Fund, et al. v. Sunrise Senior
    Living, Inc., et al. First New York Securities, L.L.C. v. Sunrise Senior
    Living, Inc., et al. In re
    Sunrise Senior Living, Inc. Securities Litigation No. 07-CV-00102-RBW)
  Putative
    Shareholder Derivative Litigation
  Brockton Contributory Retirement
    System v. Paul J. Klaassen, et al. Catherine Molner v. Paul J.
    Klaassen, et al. 1/31/2007); Robert Anderson v. Paul J. Klaassen, et al. 2/5/2007).
 163




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Peter V. Young, et al. v. Paul L. Klaassen, et al. No. 2770-N
  Nicholas Von Guggenberg v.
    Paul J. Klaassen, et al. 8/11/2006); Catherine Molner v. Paul J. Klaassen, et al. 9/6/2006). Von Guggenberg Molner Von Guggenberg Molner
  Other
    Lawsuits and Claims
   164




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  19.
    Related-Party
    Transactions  Sunrise
    REIT
    Years Ended December 31,2006*


2005


2004Restated


RestatedManagement fees

$
16,448


$
11,443


$
156Reimbursable contract services


130,455



70,525



1,551Gain on sale and development of real estate


43,223



575



2,385Interest income received from Sunrise REIT convertible debentures






1,028



30Interest incurred on borrowings from Sunrise REIT


3,312



2,611



28Equity in earnings in unconsolidated communities


4,326



718



25     *
    
    Sunrise REIT was acquired by Ventas, Inc. in April 2007.  Sunrise
    Senior Living Foundation
  not-for-profit and/or son-in-law
   165




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  12-month
       166




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Fairfax
    Community Ground Lease
  99-year
  Corporate
    Use of Residence
  99-year 99-year
  Purchase
    of Condominium Unit
    Service
    Evaluators Incorporated
  brother-in-law sister-in-law
  on-site on-site on-site
 167




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Greystone
    Earnout Payments
    Unconsolidated
    Ventures
      Aetna
    Healthcare
    20.
    Employee
    Benefit Plans  401K
    Plan
    Executive
    Deferred Compensation Plan
   168




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Chief
    Executive Officer Deferred Compensation Plan
  12-year
  21.
    Fair
    Value of Financial Instruments            22.
    Information
    about Sunrises Segments   169




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Senior Living Developmentand Operations


Hospice Care


TotalRevenues

$
1,628,190


$
20,209


$
1,648,399Interest income


9,476



101



9,577Interest expense


6,194



10



6,204Sunrises share of earnings and return on investment in
    unconsolidated communities


43,702







43,702Depreciation and amortization


47,817



831



48,648Provision for income taxes


20,429



53



20,482Net income


20,276



81



20,357Investments in unconsolidated communities


104,272







104,272Goodwill


158,352



59,663



218,015Segment assets


1,734,193



83,235



1,817,428Expenditures for long-lived assets


187,269



57



187,326         23.
    Accrued
    Expenses    December 31,2006


2005Accrued salaries and bonuses

$
47,346


$
45,680Accrued employee health and other benefits


64,487



48,599Other accrued expenses


65,060



64,340$
176,893


$
158,619   24.
    Subsequent
    Events  2007
  New
    Ventures
   170




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      Change
    in Ownership of Sunrise Communities
    Real
    Estate Transactions
        Bank
    Credit Facility
    Trinity
    Hospice
  qui tam qui tam
 171




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  qui tam
        Impairment
    of Long-Lived Assets
    Senior
    Living Condominium Projects
      Sunrise
    At Home
   172




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Legal
    and Professional Fees
    2008
  Bank
    Credit Facility
    
    waived delivery by the Company of all 2006 quarterly financial
    statements and financial statements for the quarters ended
    March 31, 2007, June 30, 2007 and September 30,
    2007;
    modified to April 15, 2008 the delivery date for the 2006
    audited financial statements;
    modified to April 30, 2008 the delivery date for
    preliminary 2007 unaudited annual financial statements;
    modified to May 31, 2008 the delivery date for the
    preliminary unaudited financial statements for the quarter
    ending March 31, 2008;
    modified to July 31, 2008 the delivery date for the 2007
    audited annual financial statements;
    modified to August 20, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    March 31, 2008; and
    modified to September 10, 2008 the delivery date for the
    unaudited financial statements for the quarter ending
    June 30, 2008.       173




---



##### 



Sunrise
    Senior Living, Inc.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  non-cash)
  Senior
    Living Condominium Developments
    25.
    Quarterly
    Results of Operations (Unaudited)    Q1


Q2


Q3


Q4


Total2006Operating revenue

$
376,671


$
464,047


$
378,706


$
428,975


$
1,648,399Net income (loss)


2,320



48,685



16,304



(46,952
)


20,357Basic net income (loss) per common share

$
0.05


$
0.98


$
0.33


$
(0.94
)

$
0.42Diluted net income (loss) per common share


0.05



0.95



0.32



(0.94
)


0.402005 (as restated)Operating revenue

$
326,775


$
342,263


$
378,896


$
461,504


$
1,509,438Net (loss) income


(3,827
)


31,665



22,227



37,024



87,089Basic net (loss) income per common share

$
(0.09
)

$
0.77


$
0.53


$
0.88


$
2.10Diluted net (loss) income per common share


(0.09
)


0.66



0.46



0.75



1.822005 (as previously reported)Operating revenue

$
388,292


$
413,221


$
463,218


$
554,748


$
1,819,479Net income


8,013



10,338



11,049



50,342



79,742Basic net income per common share

$
0.20


$
0.25


$
0.27


$
1.19


$
1.92Diluted net income per common share


0.19



0.23



0.24



1.01



1.67     (1)
    
    The sum of per share amounts for the quarters may not equal the
    per share amount for the year due to a variance in shares used
    in the calculations or rounding.    
    real estates sales;
    cost of real estate projects;
    equity method investments with preferences;
    revenue recognition for Greystone contracts;
    stock-based compensation;
    reimbursed expenses; and
    other adjustments. 174




---



##### 



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures      
    Set clear standards of ethical business conduct that are
    understood throughout the Company and uniformly enforced;
    Establish a compliance program that is appropriately staffed and
    funded;
    Enhance the technical skills and experience of the finance and
    accounting functions and strengthen internal controls and
    processes to prevent and detect future accounting
    errors; and
    Achieve best practices in corporate governance and improve Board
    oversight.    
    Current managements conclusions concerning our disclosure
    controls and procedures as of December 31, 2006;
    Current managements annual report on internal controls
    over financial reporting and the independent auditor attestation
    required for our fiscal year 2006 Annual Report on
    Form 10-K
    (the 2006
    Form 10-K),
    pursuant to Section 404 of the Sarbanes-Oxley Act (see
    Managements Report on Internal Control Over
    Financial Reporting and the corresponding Report of
    Independent Registered Public Accounting Firm); and
    Identification of changes in internal controls over financial
    reporting during the fourth quarter of 2006.  Board
    Remedial Framework
    Personal Accountability.
 175




---



##### 



re-establishing
        Culture of Compliance.
       176




---



##### 




    Designing and implementing a company wide compliance program to
    facilitate adherence to applicable laws, statutes, regulations,
    the Code of Conduct and internal policies and controls;
    Training on the Code of Conduct, including clear communication
    of what behavior is acceptable and unacceptable;
    Monitoring compliance with the Code of Conduct;
    Monitoring receipt of annual employee acknowledgements of intent
    to adhere to the Code of Conduct;
    Re-emphasizing the availability of the anonymous Hotline through
    which employees at all levels can anonymously submit information
    or express concerns regarding accounting, financial reporting,
    or other irregularities of which they have become aware or have
    observed;
    Monitoring operation of the Hotline, which will continue to be
    answered by an independent vendor, including the processing of
    complaints
    and/or
    reported violations, and determining how to address each call in
    a timely manner, including review and investigation, as
    appropriate; and
    Reporting, on a regular basis, to the Governance and Compliance
    Committee.    Enhanced internal controls and processes.
  
    Assess the quality and resource levels of the finance staff, and
    hire, as needed, industry skilled and technically experienced
    finance employees to supplement the existing employee base;
    Provide mandatory training to all finance employees on
    accounting issues addressed in the restatement to enhance
    awareness and understanding of accounting principles;
    Provide on-going training to all finance employees on evolving
    interpretations of accounting standards and best practices under
    GAAP and on Sunrises written accounting policies;
    Review and, to the extent needed, revise existing accounting
    policies, and create new written accounting policies in all
    critical accounting areas, including management judgment and
    discretion, and post each accounting policy on Sunrises
    intranet where it can be readily accessed by employees;
    Enhance the controls regarding manual journal entries, including
    requirements for written documentation for all proposed entries;
    Establish clear, written lines of authority within the finance
    and accounting functions of the Company;
    Require segregation of duties for manual journal entries so that
    an individual who reviews and approves any proposed journal
    entry is separate from the person who initiated it;
    Establish a formal close calendar for each financial reporting
    period that is sufficient to provide appropriate time to process
    the close of the accounting records and analyze the reported
    results;
    Create a quarterly balance sheet review process, to be
    supervised by the Controller or Assistant Controller, to ensure
    that quarterly reconciliations of all balance sheet accounts are
    performed, documented and reviewed;
    Create a formal Disclosure Committee, consisting of senior
    management, that is responsible for reviewing all disclosures
    and filings for accuracy and compliance with applicable laws and
    regulations and for providing those draft disclosures to the
    Audit Committee with sufficient time for thorough review; 177




---



##### 




    Enhance the Internal Audit function to test the efficacy of
    controls around key accounting processes, including the
    existence of written accounting analyses, approved by the CAO or
    CFO, prior to any binding commitment of the Company to a deal;
    manual journal entries and supporting documentation; and account
    reconciliations; and
    Cause a review of existing information technology systems to be
    performed, and invest in the improvements recommended by the
    review so that the systems are commensurate with the complexity
    of Sunrises business and financial reporting requirements
    and can improve the reliability of Sunrises financial
    reporting by reducing the need for manual processes, reducing
    the opportunities for errors and omissions, and decreasing
    reliance on manual controls to detect and correct inaccuracies.  Strengthen Corporate Governance.
           178




---



##### 




    Quarterly meetings with the CEO, CFO, COO, Internal Auditor, and
    General Counsel, and with the external auditors, in separate
    executive sessions, to provide a forum in which concerns and
    issues can be candidly raised;
    Review of all draft disclosures timely provided by
    managements Disclosure Committee; and
    Monitoring corporate performance against managements
    strategic and business plans, including reviewing the operating
    results on a regular basis to evaluate whether the business is
    being properly managed, which it will report to the Board.      
    Fixed annual date for consideration of grants to executive
    officers and other employees;
    Grants for new hires or grants for promotion or retention will
    be made only at a regularly scheduled meeting subsequent to the
    event;
    Formalizing, in a written document, the stock option and equity
    award granting procedures;
    Establishing the process to be followed for nominating employees
    for stock option and equity awards; 179




---



##### 




    Directing management to automate appropriate functions in order
    to minimize the potential for human error; and
    Directing management to provide mandatory training and education
    to ensure that all employees involved in the administration of
    equity awards understand the Companys equity award
    granting processes.    
    Management submission of written bonus objectives, by February 1
    of the year in which bonuses are to be considered, and prompt
    consideration of those objectives;
    Quarterly review of managements progress in meeting its
    bonus objectives;
    Year end review of individual performance against objectives,
    including demonstrable commitment to a strong control
    environment; and
    Development of a long term equity incentive plan aligned with
    satisfaction of the Companys long term goals and
    objectives.        DISCLOSURE
    CONTROLS AND PROCEDURES
    Form 10-K, Rule 13a-15(e) Form 10-K Form 10-Qs Form 10-K
 180




---



##### 



Form 10-K,
  MANAGEMENTS
    REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
            Material
    Weakness in Internal Control over Financial Reporting
    
    real estate sales;
    costs of real estate projects; 181




---



##### 




    equity method investments with preferences;
    revenue recognition for Greystone development contracts;
    stock based compensation;
    reimbursed expenses;
    certain judgmental accruals and reserves; and
    other adjustments.    1.
    Entity-Level Control
    Environment    2.
    Transaction
    Documentation and Written Accounting Policies    3.
    Communication
    and Information Flow    4.
    Process
    and Transaction Level Controls       182




---



##### 



Remediation
    Steps to Address Material Weaknesses
    :
  Changes in Senior Management.
  Expansion of the Accounting Policy Group.
  Other Additional Accounting Personnel.
  Change in Reporting Relationships.
  SOX Compliance Officer.
  Improved Disclosure Controls. Form 10-K
 183




---



##### 



Managements Interaction with the Board of
    Directors.
  Comprehensive Accounting and Corporate
    Policies.
    Codification of the Authority and Approval Limits Delegated
    to Management by the Board of Directors.
  New Training Programs.
  Formal Assessment of Accounting Personnel.
  CHANGES
    IN INTERNAL CONTROL OVER FINANCIAL REPORTING DURING FOURTH
    QUARTER OF 2006
  Rule 13a-15(f)
 184




---



##### 



185




---



##### 



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                Entity-Level
    Control Environment
   186




---



##### 



Transaction
    Documentation and Written Accounting Policies
    Communication
    and Information Flow
    Process
    and Transaction Level Controls
              Item 9B.
    Other
    Information   187




---



##### 



PART III Item 10.
    Directors,
    Executive Officers and Corporate Governance  Information
    Regarding Directors
    Age atMarch 1,


Director


Term


Position(s) HeldNominees:

2008


Since(1)


Expires


With
    SunriseRonald V. Aprahamian


61



1995



2008


DirectorTeresa M. Klaassen (2)


52



1981



2008


Director and Chief Cultural OfficerStephen D. Harlan


74



2007



2008


DirectorThomas J. Donohue


69



1995



2009


DirectorJ. Douglas Holladay


61



2000



2009


DirectorWilliam G. Little


65



2004



2009


DirectorCraig R. Callen


52



1999



2010


DirectorPaul J. Klaassen (2)


50



1981



2010


Director and Chief Executive OfficerLynn Krominga (3)


57



2007



2010


Non-Executive Chair of the Board            Ronald V. Aprahamian
  Teresa M. Klaassen
  Stephen D. Harlan
 188




---



##### 



Thomas J. Donohue
  J. Douglas Holladay
  William G. Little
  Craig R. Callen
  Paul J. Klaassen Netherland-American
 189




---



##### 



Lynn Krominga start-up
  Information
    Regarding Executive Officers
    Tiffany L. Tomasso,
  Mark S. Ordan
  Richard J. Nadeau
 190




---



##### 



John F. Gaul,
  Michael B. Lanahan
    Corporate
    Governance Guidelines, Committee Charters and Codes of
    Conduct
  www.sunriseseniorliving.com
    Annual
    Certifications
  Form 10-K.
  Executive
    Sessions of Non-Management Directors
    Communications
    with the Board of Directors
       191




---



##### 



Audit
    Committee
    Audit
    Committee Financial Experts
  35-year
  Section 16(a)
    Beneficial Ownership Reporting Compliance
    Item 11.
    Executive
    Compensation  COMPENSATION
    DISCUSSION AND ANALYSIS
  Overview
   192




---



##### 



Compensation
    Committee Process
            Elements
    of 2006 Executive Compensation
      Element

Objectives and Basis

FormBase Salary

Provide base compensation that is competitive for each role

CashAnnual Incentive Bonus

Annual incentive to drive company and individual performance

CashEquity Awards

Long-term incentive to drive company performance and align
    executives interests with stockholders interests;
    retain executives through potential wealth accumulation

Stock options or restricted stockPerquisites

Provided instead of additional base salary

Various (as described below)Deferred Compensation

Provide tax-deferred means to save for retirement or increased
    stock ownership through deferrals in company stock

Eligibility to participate in 401(k) plan, Bonus Deferral
    Program and non-qualified deferred compensation plan(s)  193




---



##### 



Form 10-K,
  2006 Base
    Salaries
        2006
    Annual Incentive Bonuses
       194




---



##### 



Form 10-K,
  Equity
    Incentive Compensation
  Types
    of Equity Incentive Compensation
  and/or
   195




---



##### 



Timing
    of Equity Grants
    2006
    Equity Awards
    Other
    Compensation
  Perquisites
    
    supplemental medical and dental insurance for himself and his
    family;
    use of an automobile reasonably acceptable to him and the
    Compensation Committee (or an automobile allowance as determined
    by the Compensation Committee); and
    the payment or reimbursement for other benefits (such as
    executive air travel and health club or other membership fees or
    dues) as may be approved by the Compensation Committee.     196




---



##### 



Executive
    Deferred Compensation Plan
      Nonqualified
    Deferred Compensation for CEO
  12-year
  Severance
    and Change in Control Payments
        Long-Term
    Incentive Cash Bonus Plan
   197




---



##### 



Form 10-K
  Compensation
    Deductibility Policy
    Engagement
    of Independent Compensation Consultant
   198




---



##### 



Return of
    CEO Equity Awards
  Form 10-K, 2003-2005
  Enhanced
    Compensation Committee Processes
  As described
    in greater detail in Item 9A of this
    Form 10-K:
  Annual
    Bonuses and Incentive Compensation
    
    management submission of written bonus objectives, by February 1
    of the year in which bonuses are to be considered, and prompt
    consideration of those objectives;
    quarterly review of managements progress in meeting its
    bonus objectives;
    year end review of individual performance against objectives,
    including demonstrable commitment to a strong control
    environment; and
    development of a long term equity incentive plan aligned with
    satisfaction of the Companys long term goals and
    objectives.  Equity
    Awards
    
    fixed annual date for consideration of grants to executive
    officers and other employees;
    grants for new hires or grants for promotion or retention will
    be made only at a regularly scheduled meeting subsequent to the
    event;
    formalizing, in a written document, the stock option and equity
    award granting procedures;
    establishing the process to be followed for nominating employees
    for stock option and equity awards;
    directing management to automate appropriate functions in order
    to minimize the potential for human error; and
    directing management to provide mandatory training and education
    to ensure that all employees involved in the administration of
    equity awards understand the Companys equity award
    granting processes.  Clawback
    Policy
   199




---



##### 



Automobile
    Allowances
    Personal
    Use of Company Aircraft
   200




---



##### 



REPORT OF
    THE COMPENSATION COMMITTEE
    OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
  Form 10-K Form 10-K.
      *
  *
       *
    
    On March 16, 2008, Mr. Callen was named Chairman of
    the Compensation Committee.  **
    
    Member of the Compensation Committee since November 2007.   SUMMARY
    COMPENSATION TABLE
  Change inPension ValueandNonqualifiedNon-Equity


DeferredStock


Option


Incentive Plan


Compensation


All OtherName and




Salary


Bonus


Awards


Awards


Compensation


Earnings


Compensation


TotalPrincipal Position

Year


($)


($)(1)


($)(2)


($)(3)


($)


($)


($)(4)


($)Paul J. Klaassen
    Chairman of the Board and Chief Executive
    Officer(5)


2006


$
501,923


$



$
553,206


$



$



$



$
686,476


$
1,741,605Bradley B. Rush
    Chief Financial
    Officer(6)


2006



367,596







371,275



112,005











3,979



854,855Thomas B. Newell President(7)


2006



426,635







547,632















21,919



996,186Tiffany L. Tomasso
    Chief Operating Officer


2006



388,846







399,233



106,862











11,415



906,356Michael B. Lanahan
    Chairman of
    Greystone


2006



364,000



364,000



634,410















38,320



1,400,730   Form 10-K,
   201




---



##### 



Form 10-K.
  Form 10-K.
    
    For Mr. Klaassen, the amount set forth in this column is
    comprised of:  °
    $541,877, representing the aggregate incremental cost during
    2006 to Sunrise of personal use by Mr. and Mrs. Klaassen of
    fractional interests in aircraft purchased by Sunrise under
    several fractional interest ownership programs and additional
    charter flights. We calculated the incremental cost of personal
    use of the aircraft fractional ownership interests by adding
    (a) the variable operating cost of the flights for personal
    travel (e.g., hourly charges, fuel adjustment costs, landing
    fees, catering charges and ground transportation), (b) a
    pro-rated portion, based on the total flight hours flown for
    personal as compared to business use, of the fixed costs for the
    aircraft (i.e., the monthly management fees for flight crews,
    aircraft maintenance, storage and other fixed program costs
    relating to the use and operation of the aircraft in 2006 and
    the depreciation expense recorded in the 2006 financial
    statements relating to the purchase price paid for the
    fractional ownership interests and aircraft upgrades) and
    (c) miscellaneous other travel related expenses. The
    incremental cost for personal use of charter flights equals the
    amount billed and paid by the Company for such flights;°
    $27,192, representing the aggregate incremental cost during 2006
    to Sunrise of personal use by Mr. Klaassen of a
    Company-owned automobile. We calculated the incremental cost of
    the personal use of the automobile by adding the insurance
    premium, gasoline and depreciation expense we recorded in the
    Companys 2006 financial statements relating to the
    automobile;°
    $250, representing supplemental medical and dental insurance
    payments for Mr. Klaassen and his family, as required by
    his employment agreement;°
    $5,000, representing the Companys 401(k) match for
    2006; and°
    $112,157, representing 2006 earnings on a non-qualified deferred
    compensation plan established for Mr. Klaassen pursuant to
    his employment agreement.  
    For Mr. Rush, the amount set forth in this column is
    comprised of:  °
    $125, representing the Companys 401(k) match for
    2006; and°
    $3,854, representing the Companys contributions to the
    EDCP for 2006.  
    For Mr. Newell, the amount set forth in this column is
    comprised of:  °
    $7,343, representing the Companys 401(k) match for
    2006; and°
    $14,576, representing the Companys contributions to the
    EDCP for 2006.  
    For Ms. Tomasso, the amount set forth in this column is
    comprised of:  °
    $4,584, representing the Companys 401(k) match for
    2006; and 202




---



##### 



°
    $6,831, representing the Companys contributions to the
    EDCP for 2006.  
    For Mr. Lanahan, the amount set forth in this column is
    comprised of:  °
    $17,247, representing the cost to the Company of dues and fees
    for two club memberships during 2006;°
    $9,073, representing the Greystone 401(k) match for
    2006; and  °
    $12,000, representing the car allowance provided to
    Mr. Lanahan for 2006 pursuant to his employment agreement.       203




---



##### 



GRANTS OF
    PLAN-BASED AWARDS
  All Other Stock


All Other OptionAwards: Number of


Awards: Number of


Equity Exercise or


Grant Date FairShares of Stock or


Securities


Base Price of


Value of Stock andGrant


Units


Underlying Options


Option Awards


Option AwardsName

Date


(#)


(#)


($/Sh)


($)(1)Paul J. Klaassen


3/8/06



17,815
(2)

$



$



$
181,968Bradley B. Rush


















Thomas B. Newell


















Tiffany L. Tomasso


3/8/06



4,466
(3)










26,598Michael B. Lanahan


















     Form 10-K,
    Narrative
    to Summary Compensation Table and Grants of Plan-Based Awards
    Table
  Employment
    Agreements
    Paul J. Klaassen Employment Agreement
     204




---



##### 



and/or and/or
  12-year
    Michael B. Lanahan Employment Agreement
       205




---



##### 



Return of
    CEO Equity Awards
  Form 10-K, 2003-2005
  Automobile
    Allowances
  Form 10-K,
  Personal
    Use of Company Aircraft
   206




---



##### 



OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END
  Option Awards


Stock AwardsEquityIncentive


EquityEquity














Plan


Incentive PlanIncentive














Awards:


Awards:Plan














Number of


Market orAwards:











Market


Unearned


Payout ValueNumber of


Number of


Number of








Number of


Value of


Shares,


of UnearnedSecurities


Securities


Securities








Shares or


Shares or


Units or


Shares, UnitsUnderlying


Underlying


Underlying








Units of


Units of


Other


or OtherUnexercised


Unexercised


Unexercised


Option





Stock That


Stock That


Rights That


Rights ThatOptions


Options


Unearned


Exercise


Option


Have Not


Have Not


Have Not


Have Not(#)


(#)


Options


Price


Expiration


Vested


Vested


Vested


VestedName

Exercisable


Unexercisable


(#)


($)


Date


(#)


($)(1)


(#)


($)Paul J. Klaassen


500,000










$
8.50



9/11/2010



4,478
(2)

$
137,564







200,000











8.50



9/11/2010



27,777
(3)


853,3095,090
(4)


156,365Bradley B. Rush(5)


12,500



12,500







13.40



9/10/2013



4,127



126,781







80,000











30.02



9/8/2015



13,182



404,95150,000



1,536,000Thomas B. Newell(6)


221,272











12.50



3/3/2008



250,000



7,680,000







140,000











10.00



5/11/2011



3,000



92,160100,000











30.02



9/8/2015Tiffany L. Tomasso


15,000











10.00



5/11/2011



83,892
(7)


2,577,162







60,000











13.58



5/17/2012



18,750
(8)


576,000100,000











30.02



9/8/2015



744
(9)


22,856Michael B. Lanahan






















37,000
(10)


1,136,640







     Form 10-K,
  Form 10-K,
  Form 10-K,
     207




---



##### 



208




---



##### 



OPTION
    EXERCISES AND STOCK VESTED
  Options Awards


Stock AwardsNumber of Shares





Number of SharesAcquired on


Value Realized


Acquired on


Value RealizedExercise


on Exercise(1)


Vesting


on VestingName

(#)


($)


(#)


($)(5)Paul J. Klaassen





$




26,614
(2)

$
988,841Bradley B. Rush














Thomas B. Newell


96,000



2,307,600



1,000
(3)


37,590Tiffany L. Tomasso










9,972
(4)


371,461Michael B. Lanahan














     Form 10-K,
        Deferred
    Compensation
  Executive Deferred Compensation Plan
  General
    Investment and Earnings.
 209




---



##### 



Payouts and Distributions.
  15-year
        Mr. Klaassens Deferred Compensation
    Account
    12-year
 210




---



##### 



NONQUALIFIED
    DEFERRED COMPENSATION
  Aggregate



AggregateExecutive

Registrant

Earnings

Aggregate

BalanceContributions

Contributions

in Last

Withdrawals/

at Lastin Last FY

in Last FY

FY

Distributions

FYEName(1)

($)(2)

($)(3)

($)

($)

($)Paul J. Klaassen

EDCP:  $

EDCP:  $

EDCP:$16,979

EDCP:  $

EDCP:  $227,299Klaassen

Klaassen

Klaassen Account:

Klaassen

Klaassen Account:Account: 

Account: 

112,157

Account: 

1,169,225

(4)Bradley B. Rush

625

3,854

4,660



48,338

(5)Thomas B. Newell

72,618

14,576

34,831



253,641

(6)Tiffany L. Tomasso

2,163

6,831

65,492



531,681Michael B. Lanahan









               Potential
    Payments Upon Termination and Change in Control
  Severance
    and Change in Control Payments
     211




---



##### 




    accrued base salary and any bonus amount earned but not yet paid;
    any base units issued to the named executive officer pursuant to
    our Bonus Deferral Program that were vested upon grant;
    any reimbursement for outstanding business expenses incurred but
    not yet paid;
    accrued vacation pay;
    amounts payable pursuant to the Companys (or, in the case
    of Mr. Lanahan, Greystones) 401(k) plan; and
    amounts set forth in the Aggregate Balance at Last
    FYE column of the Nonqualified Deferred Compensation Table
    above.    Mr. Klaassen
  Mr. Klaassen-
    Employment Agreement
    
    Mr. Klaassen, annual payments, for three consecutive years,
    equal to the sum of his annual base salary and bonus for the
    year of termination; and
    Ms. Klaassen (and his children through their attainment of
    age 22) in the event of his death (including after
    termination for one of the reasons set forth above), and to
    Mr. Klaassen in the event of his disability (including
    after termination for one of the reasons set forth above),
    medical insurance through the date he attains, or would have
    attained (in the case of death), age 65.    
    Mr. Klaassen (or his beneficiaries), immediately after the
    effective date of termination, an amount equal to his base
    salary and annual bonus amount for the remaining portion of the
    rolling five-year term of the employment agreement (as if there
    had been no early termination due to the reasons set forth
    above);
    Mr. Klaassen (or his beneficiaries), annual payments, for
    three consecutive years, equal to the sum of his annual base
    salary and bonus for the year of termination; and
    Ms. Klaassen (and his children through their attainment of
    age 22) in the event of his death (after termination
    of his employment agreement for one of the reasons set forth
    above), and to Mr. Klaassen (including his children through
    their attainment of age 22) in the event of his
    disability, medical insurance through the date he attains, or
    would have attained (in the case of death), age 65.   212




---



##### 




    Mr. Klaassen (or his beneficiaries), immediately after the
    effective date of termination, an amount equal to his base
    salary and annual bonus amount for the remaining portion of the
    rolling five-year term of the employment agreement (as if there
    had been no early termination after the change in control);
    Mr. Klaassen (or his beneficiaries), annual payments, for
    three consecutive years, equal to the sum of his annual base
    salary and bonus for the year of termination; and
    Ms. Klaassen (and his children through their attainment of
    age 22) in the event of his death (after termination
    of his employment agreement following a change in control), and
    to Mr. Klaassen in the event of his disability (after
    termination of his employment agreement following a change in
    control), medical insurance through the date he attains, or
    would have attained (in the case of death), age 65.      Mr. Klaassen -
    Equity Agreements
    Mr. Klaassen -
    Estimate of Payments
    Termination by Death orTermination by Sunrise


Disability, byfor Good Cause, or by


Klaassen for GoodKlaassen Other Than for


Reason, or by


Termination withinGood Reason, Death or


Sunrise Other Than


Six Months After aDisability


for Good Cause


Change in ControlPresent Value of Severance(1)

$
1,500,000


$
3,772,564
(2)

$
3,772,564
(2)Present Value of Medical Insurance(3)


500,000



500,000



500,000Equity Acceleration(4)


1,147,238



1,147,238



1,147,238Disposition Fee(5)










18,608,073Tax Gross-Up










11,908,259Total

$
3,147,238


$
5,419,802


$
35,936,134    213




---



##### 




    good reason is generally defined to mean:  °
    the assignment by the board of directors to Mr. Klaassen of
    duties materially inconsistent with the duties of chief
    executive officer;°
    a material change in the nature or scope of
    Mr. Klaassens authority;°
    the occurrence of material acts or conduct on the part of
    Sunrise or its officers and representatives which have as their
    purpose forcing the resignation of Mr. Klaassen or
    preventing him from performing his duties and responsibilities;°
    a material breach by Sunrise of any material provision of the
    employment agreement; or°
    requiring Mr. Klaassen to be based more than 50 miles
    from McLean, Virginia.  
    good cause is generally defined to mean:  °
    any material breach by Mr. Klaassen of the terms of
    employment agreement;°
    Mr. Klaassens willful commission of acts of
    dishonesty in connection with his position;°
    chronic absenteeism (other than by reason of disability);°
    Mr. Klaassens willful failure or refusal to perform
    the essential duties of his position;°
    conviction of a felony; or°
    Mr. Klaassens engaging in illegal or other wrongful
    conduct substantially detrimental to the business or reputation
    of Sunrise.  
    change in control is generally defined to mean:  °
    any person or group becomes the beneficial owner of 20% or more
    of the common stock of Sunrise;°
    a change in the composition of a majority of the board of
    directors of Sunrise (with certain specified exceptions);°
    a merger, reorganization or similar transaction in which the
    owners of the outstanding common stock of Sunrise immediately
    before the transaction are not expected to own immediately after
    the transaction, in substantially the same proportions as
    immediately before the transaction, more than 60% of the common
    stock entitled to vote generally in the election of
    directors; or 214




---



##### 



°
    a plan of liquidation, or a plan or agreement for the sale or
    other disposition of all or substantially all of the assets, of
    Sunrise.  
    disability is generally defined to mean the
    inability of Mr. Klaassen, due to illness, accident or any
    other physical or mental incapacity, to perform his duties in a
    normal manner for a period of six consecutive months.  Mr. Lanahan
  Mr. Lanahan
    - Employment Agreement
    
    a severance payment equal to the remaining salary payments due
    to Mr. Lanahan during the remaining four-year employment
    agreement (based on his base salary as of termination), plus 50%
    of the annual average bonus payments paid to Mr. Lanahan,
    which severance payment is required to be paid over the
    remaining initial term of the employment agreement; and
    health insurance premiums for COBRA coverage for the one-year
    period following the date of such termination or resignation
    (excluding the premiums Mr. Lanahan would have paid if he
    was still employed by us during the one-year period).      Mr. Lanahan -
    Equity Agreement
   215




---



##### 



Mr. Lanahan
    - Estimate of Payments
    Termination by Sunrise Other Than forCause on or after January 1, 2008, or


Termination by Sunrise Other Than forby Mr. Lanahan for Good Reason


Cause or for Permanent DisabilityPrior to May 10, 2009


Prior to January 1, 2008(1)Severance(2)

$
1,041,832


$
1,041,832Health Insurance(3)


17,786



17,786Equity Acceleration(4)


1,136,640



1,136,640Total

$
2,196,258


$
2,196,258             
    cause is generally defined to mean:  °
    a material breach by Mr. Lanahan of any of his obligations
    under his employment agreement;°
    the willful failure by Mr. Lanahan to comply with the
    reasonable directions of the President of Sunrise in achieving
    the objectives of Sunrise or any of its subsidiaries or
    affiliates to which Mr. Lanahan is assigned pursuant to his
    employment agreement;°
    Mr. Lanahans failure to adhere to any written policy
    of Sunrise or any of its subsidiaries or affiliates if
    Mr. Lanahan has been given a reasonable opportunity to
    comply with such policy or cure his failure to comply;°
    the appropriation (or attempted appropriation) of a material
    business opportunity of a Sunrise or any of its subsidiaries or
    affiliates, including attempting to secure or securing any
    personal profit in connection with any transaction entered into
    on behalf of Sunrise or any of its subsidiaries or affiliates;°
    the misappropriation (or attempted misappropriation) of any of
    the funds or property of Sunrise or any of its subsidiaries or
    affiliates;°
    reporting to work under the influence of alcohol or illegal
    drugs, or using alcohol or illegal drugs, whether or not at the
    workplace, in such fashion as to cause economic harm to Sunrise
    or any of its subsidiaries or affiliates;°
    a willful act by Mr. Lanahan which has a materially
    detrimental effect on the reputation or business of Sunrise or
    any of its subsidiaries or affiliates; 216




---



##### 



°
    any breach of fiduciary duty, gross negligence or willful
    misconduct with respect to Sunrise or any of its subsidiaries or
    affiliates which is not cured (if possible) to the reasonable
    satisfaction of Sunrise within 15 days after notice to
    Mr. Lanahan; or°
    Mr. Lanahans conviction of, indictment for, pleading
    guilty to, entering a plea of no contest with respect to, or
    being charged with (where such charge is not dismissed or
    otherwise resolved favorably to Mr. Lanahan in six months)
    any felony or any charge of fraud, embezzlement, theft, offense
    involving moral turpitude or a violation of any federal or state
    securities or tax law.  
    good reason is generally defined to mean:  °
    a material failure by Sunrise to perform its obligations under
    the employment agreement which continues and is uncured for
    15 days after written notice thereof has been given to
    Sunrise by Mr. Lanahan; or°
    a material and adverse change in Mr. Lanahans duties
    and responsibilities not agreed to by Mr. Lanahan (other
    than termination for cause).  
    permanent disability is generally defined to mean
    the inability, for a period of six consecutive months, of
    Mr. Lanahan to adequately perform his regular duties, with
    reasonable accommodations, due to a physical or mental illness,
    condition or disability.  Mr. Rush,
    Mr. Newell and Ms. Tomasso
  Senior
    Executive Severance Plan
      
    two times the sum of (i) the executive officers
    annual base salary (calculated as the greater of the annual base
    salary payable at the time of termination or 12 times the
    highest monthly base salary paid or payable to the executive
    officer over the preceding 12 months), plus (ii) the
    executive officers annual bonus (calculated as the highest
    amount paid as bonus payments in a single year during the last
    three years); and
    two years of continued welfare benefits coverage pursuant to the
    Companys benefit plans.       217




---



##### 



gross-up
  Equity
    Agreements
    Estimate
    of Payments
    Bradley B. Rush


Thomas B. Newell


Tiffany L. TomassoSeverance(1)

$
945,000


$
1,742,000


$
1,189,432Welfare Benefits(2)


32,226



44,828



32,562Equity Acceleration(3)


2,067,732



7,772,160



3,176,018Total

$
3,044,958


$
9,558,988


$
4,398,012        218




---



##### 




    change in control is generally defined to mean:  °
    the acquisition by a third party of more than 50% of the
    outstanding common stock of Sunrise;°
    a change in the composition of the board of directors of Sunrise
    pursuant to which the members of the Sunrise board on the
    effective date of the severance plan, or any successor board
    member approved by a majority of the then-existing Sunrise board
    members, cease to constitute at least a majority of the board of
    directors;°
    a liquidation or dissolution of Sunrise approved by its
    stockholders; or°
    the consummation of a reorganization, merger or sale or other
    disposition of substantially all of the assets of Sunrise
    unless, following the transaction, (i) the holders of the
    outstanding common stock immediately prior to the transaction
    own more than 50% of the outstanding common stock of the
    resulting entity in substantially the same proportions as their
    ownership of the outstanding common stock immediately prior to
    the transaction, and (ii) no person or entity who did not
    previously own 35% or more of the outstanding common stock of
    all voting securities of Sunrise owns 35% or more of the
    outstanding common stock of the resulting entity, and
    (iii) at least a majority of the members of the Sunrise
    board prior to the transaction continue to serve as members of
    the board of the resulting entity.  
    good reason is generally defined to mean:  °
    a reduction in the executives base salary, fringe benefits
    or bonus eligibility;°
    a substantial reduction in the executives responsibilities
    or areas of supervision, or a request for the executive to
    report to a lower level supervisor;°
    a substantial increase in responsibilities or areas of
    supervision without an appropriate increase in compensation;°
    relocation outside the executives existing metropolitan
    area; or°
    a requirement to report to a new supervisor where the executive
    and new supervisor have irreconcilable working relationship
    problems.  
    cause is generally defined to mean:  °
    an executives conviction for fraud or theft against
    Sunrise, or a crime involving moral turpitude, compromise of
    trade secrets or other valuable proprietary information of
    Sunrise; or°
    gross or willful misconduct that causes and will continue to
    cause substantial and material harm to the business and
    operations of Sunrise or any of its affiliates.     219




---



##### 



Compensation
    Committee Interlocks and Insider Participation
    Director
    Compensation
    Annual Retainer

$
25,000Committee Meeting Fees (telephonic and in-person)

$
1,000Committee Chair Annual Retainer:Audit Committee

$
25,000Compensation Committee

$
5,000Nominating and Corporate Governance Committee

$
5,000     Form 10-K.
  DIRECTOR
    COMPENSATION
  Change inPensionValue andNon-Equity


NonqualifiedFees








Incentive


DeferredEarned or


Stock


Option


Plan


Compensation


All OtherPaid in


Awards


Awards


Compensation


Earnings


Compensation


TotalName

Cash ($)


($)


($)(1)(2)


($)


($)


($)


($)Ronald V.
    Aprahamian

$
55,000






$
259,927














$
314,927Craig Callen


35,000







259,927















294,927Thomas J. Donahue


42,000







259,927















301,927J. Douglas Holladay


32,000







259,927















291,927William G. Little


28,000







259,927















287,927   Form 10-K.
 220




---



##### 



Ronald Aprahamian


188,000Craig Callen


132,000Thomas Donohue


158,000J. Douglas Holladay


76,000William G. Little


40,000   Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Stock
    Owned By Management
    Amount andNature of


Percent ofBeneficial


Common StockName and Position(s) with
    Sunrise

Ownership(1)


OutstandingPaul J. Klaassen(2)
    Chairman of the Board and Chief Executive Officer


6,008,903



11.7
%Teresa M. Klaassen(2) 
    Chief Cultural Officer and Director


6,008,903



11.7
%Thomas B. Newell(3) 
    President


661,315



1.3
%Tiffany L. Tomasso(4)
    Chief Operating Officer


293,623



*Michael B. Lanahan(5)
    Chairman of Greystone


37,926



*Bradley B. Rush(6)
    Chief Financial Officer


0



*Ronald V. Aprahamian(7)
    Director


190,000



*Craig R. Callen(8)
    Director


132,000



*Thomas J. Donahue(9)
    Director


199,510



*Steven D. Harlan(10)
    Director


0



*J. Douglas Holladay(11)
    Director


76,000



*Lynn Krominga(12)
    Director


0



*William G. Little (13) 
    Director


62,000



*All current executive officers and directors as a group
    (13 
    persons)(14)


7,233,732



14.0
%   ­
    ­
  *
    
    Less than one percent.(1)
    
    Under
    Rule 13d-3
    under the Securities Exchange Act of 1934, a person has
    beneficial ownership of any securities as to which such person,
    directly or indirectly, through any contract, arrangement,
    undertaking, relationship or otherwise has or shares voting
    power and/or investment power and as to which such person has 221




---



##### 



the right to acquire such voting and/or investment power within
    60 days. Percentage of beneficial ownership as to any
    person as of a particular date is calculated by dividing the
    number of shares beneficially owned by such person by the sum of
    the number of shares outstanding as of such date and the number
    of shares as to which such person has the right to acquire
    voting and/or investment power within 60 days.(2)
    
    Represents 5,071,494 shares held jointly by the Klaassens,
    as tenants by the entirety, 60,089 shares held directly by
    Mr. Klaassen, 27,777 shares of restricted stock held
    by Mr. Klaassen, 700,000 shares issuable upon exercise
    of stock options held by Mr. Klaassen that are exercisable
    within 60 days of February 29, 2008, 28,397 restricted
    stock units held by Mr. Klaassen that are exercisable
    within 60 days of February 29, 2008 and
    121,146 shares held by The Klaassen Family Private
    Foundation (See also Common Stock Owned By Principal
    Stockholders). Of the 5,071,494 shares held jointly
    by the Klaassens, 1,500,000 shares are pledged to the
    counterparty of a prepaid variable forward contract relating to
    the forward sale of up to 1,500,000 shares of common stock
    in five tranches. See Principal Holders of Voting
    Securities. Effective March 16, 2008,
    Mr. Klaassen no longer serves as Chairman of the Board but
    continues to serve as Chief Executive Officer and as a director.(3)
    
    Represents 200,043 shares held directly and
    461,272 shares issuable upon the exercise of stock options
    that are exercisable within 60 days of February 29,
    2008. The date of Mr. Newells separation as the
    Companys President was December 19, 2007.(4)
    
    Represents 12,259 shares held directly, 102,642 shares
    of restricted stock, 175,000 shares issuable upon the
    exercise of stock options that are exercisable within
    60 days of February 29, 2008 and 3,722 restricted
    stock units that are exercisable within 60 days of
    February 29, 2008.(5)
    
    Represents 37,000 shares of restricted stock and
    926 shares of common stock held directly.(6)
    
    Mr. Rushs employment terminated on May 2, 2007.(7)
    
    Represents 188,000 shares issuable upon the exercise of
    stock options that are exercisable within 60 days of
    February 29, 2008 and 2,000 shares which
    Mr. Aprahamian has the power to vote and the power to
    dispose of as trustee.(8)
    
    Represents 132,000 shares issuable upon the exercise of
    stock options that are exercisable within 60 days of
    February 29, 2008.(9)
    
    Represents 158,000 shares issuable upon the exercise of
    stock options that are exercisable within 60 days of
    February 29, 2008 and 41,510 shares of common stock
    held directly.(10)
    
    Mr. Harlan became a director of Sunrise on June 20,
    2007.(11)
    
    Represents 76,000 shares issuable upon the exercise of
    stock options that are exercisable within 60 days of
    February 29, 2008.(12)
    
    Ms. Krominga became a director of Sunrise on
    September 5, 2007 and became Chair of the Board on
    March 16, 2008.(13)
    
    Represents 22,000 shares held directly and
    40,000 shares issuable upon the exercise of stock options
    that are exercisable within 60 days of February 29,
    2008.(14)
    
    Includes 1,579,000 shares issuable upon the exercise of
    stock options that are exercisable within 60 days of
    February 29, 2008 and 32,119 restricted stock units that
    are exercisable within 60 days of February 29, 2008. 222




---



##### 



Principal
    Holders of Voting Securities
    PercentAmount and

ofNature of

CommonName and Address of

Beneficial

StockBeneficial Owner

Ownership(1)

OutstandingPaul J. and Teresa M. Klaasen(1)


6,008,903



11.7
%7902 Westpark Drive
    McLean, VA 22102Earnest Partners, LLC(2)


3,504,501



6.9
%Fourteenth Street, Suite 2300
    Atlanta, GA 30309T. Rowe Price Associates, Inc. and T. Rowe Price Small-
    Cap Stock Fund, Inc.(3)


4,397,600



8.7
%100 E. Pratt Street
    Baltimore, MD 21202Scoggin Capital Management, L.P. II(4)


2,825,000



5.6
%Scoggin, LLC
    Craig Effron 
    Curtis Schenker660 Madison Avenue
    New York, NY 10021Scoggin International Fund, Ltd.c/o Swiss
    Financial Services (Bahamas) Ltd. 
    One Montague Place,
    4th
    Floor 
    East Bay Street 
    P.O. Box EE-17758 
    Nassau, BahamasScoggin Worldwide Fund, Ltd.c/o Q&H
    Corporate Services, Ltd. 
    3rd
    Floor, Harbor Centre 
    P.O. Box 1348George Town, Grand Cayman, Cayman IslandsWesley Capital Management, LLC(5)


2,824,076



5.6
%Arthur Wrubel 
    John Khoury717 5th Avenue, 14th Floor 
    New York, NY 10022   ­
    ­
  (1)
    
    The Schedule 13G/A dated February 13, 2008 states
    that the reporting persons have shared voting power over the
    entire number of such shares and shared dispositive power with
    respect to 4,508,903 of such shares.(2)
    
    The Schedule 13G/A dated January 30, 2008 of Earnest
    Partners, LLC states that it has sole power to vote
    1,088,067 shares of Sunrise common stock, shared voting
    power with respect to 1,051,234 shares of Sunrise common
    stock and sole dispositive power with respect to
    3,504,501 shares of Sunrise common stock.(3)
    
    The Schedule 13G/A dated February 14, 2008 of T. Rowe
    Price Associates, Inc. and T. Rowe Price Small-Cap Stock Fund,
    Inc. states that (a) T. Rowe Price Associates, Inc. has
    sole voting power with respect to 439,000 shares of Sunrise
    common stock and sole dispositive power with respect to
    4,397,600 shares of 223




---



##### 



Sunrise common stock and (b) T. Rowe Price Small-Cap Stock
    Fund, Inc. has sole voting power with respect to
    2,639,600 shares of Sunrise common stock. T. Rowe Price
    Associates, Inc. states in its Schedule 13G/A that the
    filing of the Schedule 13G/A shall not be construed as an
    admission that it is the beneficial owner of the securities
    referred to, which beneficial ownership is expressly denied by
    T. Rowe Price Associates, Inc.(4)
    
    The Schedule 13G/A dated February 12, 2008 states
    that the reporting persons have sole or shared voting or
    dispositive power with respect to the shares as follows:  Sole Voting


Shared Voting


Sole


Shared DispositiveReporting Person

Power


Power


Dispositive Power


PowerScoggin CapitalManagement, L.P. II


1,000,000







1,000,000



Scoggin, LLC


1,495,000



330,000



1,495,000



330,000Craig Effron






2,825,000







2,825,000Curtis Schenker






2,825,000







2,825,000Scoggin International
    Fund, Ltd.


1,300,000







1,300,000



Scoggin Worldwide Fund,
    Ltd.


195,000







195,000



   (5)
    
    The Schedule 13G/A dated February 13, 2008 of Wesley
    Capital Management, LLC, Mr. Arthur Wrubel and
    Mr. John Khoury states that they each have shared power to
    vote and to dispose of 2,824,076 shares of Sunrise common
    stock.  Equity
    Compensation Plan Information
    
    The number of securities to be issued upon the exercise of
    outstanding options, warrants and rights;
    The weighted-average exercise price of such outstanding options,
    warrants and rights; and
    Other than securities to be issued upon the exercise of such
    outstanding options, warrants and rights, the number of
    securities remaining available for future issuance under the
    plans.  Number of





Number of SecuritiesSecurities to be


Weighted


Remaining AvailableIssued Upon


Average Exercise


for Future IssuanceExercise of


Price of


Under EquityOutstanding


Outstanding


Compensation PlansOptions,


Options,


(ExcludingWarrants


Warrants and


Securities ReflectedPlan Category

and Rights


Rights


in Column(a))(A)


(B)


(C)Equity compensation plans approved by stockholders(1)


3,566,178
(2)

$
15.17



1,928,030
(3)Equity compensation plans not approved by stockholders(4)


237,815



11.85



75,154Total


3,803,993



14.96



2,003,184     (1)
    
    Consists of the Sunrise Senior Living, Inc. 1995 Stock Option
    Plan, as amended, 1997 Stock Option Plan, 1998 Stock Option
    Plan, 1999 Stock Option Plan, 2000 Stock Option Plan, 2001 Stock
    Option Plan, 2002 Stock Option and Restricted Stock Plan, 2003
    Stock Option and Restricted Stock Plan, Employee Stock Purchase
    Plan, as amended, and options to purchase up to
    100,000 shares of Sunrise common stock under the
    1996 Directors Option Plan, as amended. 224




---



##### 



(2)
    
    Includes 37,953 restricted stock units. The weighted-average
    exercise price in column (B) does not take these restricted
    stock units into account.(3)
    
    Includes 1,303,044 shares available for issuance under the
    Sunrise Employee Stock Purchase Plan, as amended and 624,986
    available for issuance under the stock option plans.(4)
    
    Consists of Sunrises 1996 Non-Incentive Stock Option Plan,
    as amended, and options to purchase 50,000 shares of
    Sunrise common stock under a 1997 amendment to the
    1996 Directors Option Plan, which amendment was not
    approved by Sunrises stockholders. We refer to
    Sunrises 1996 Non-Incentive Stock Option Plan, as amended,
    in this
    Form 10-K
    as the 1996 Non-Incentive Plan, and Sunrises
    1996 Directors Stock Option Plan, as amended, in this
    Form 10-K
    as the 1996 Director Plan.  1996
    Non-Incentive Plan
      split-up,
    1996 Director
    Plan
     225




---



##### 



split-ups,
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Transactions
    with Related Persons
  Sunrise
    Senior Living Foundation
  not-for-profit and/or son-in-law
    12-month
 226




---



##### 



Fairfax
    Community Ground Lease
  99-year
  Corporate
    Use of Residence
  99-year 99-year
  Purchase
    of Condominium Unit
   227




---



##### 



Service
    Evaluators Incorporated
  brother-in-law sister-in-law
  on-site on-site on-site
  Compensation
    to Teresa Klaassen
    Greystone
    Earnout Payments
    Possible
    Purchase of Aircraft Interests by Mr. Klaassen
    Review,
    Approval or Ratification of Transactions with Related
    Persons
   228




---



##### 



Director
    Independence
  Independence
    Standards
    Annual
    Independence Review
       229




---



##### 



Item 14.
    Principal
    Accountant Fees and Services  Independent
    Registered Public Accountants Fees
    Fiscal Year EndedDecember 31,Type of Fee

2006


2005Audit Fees(1)

$
3,026,350


$
16,920,550Audit Related Fees(2)


49,650



266,300Tax Fees(3)


174,693



1,496,879All Other Fees






Total

$
3,250,693


$
18,683,729    (1)
    
    Audit fees include audits of consolidated financial statements,
    Sarbanes-Oxley Section 404 attest services, reviews of unaudited
    quarterly financial statements in 2005 and international
    statutory audits. Audit fees for 2005 reflect restatement
    expenses for 2005 and prior periods actually paid in 2006
    through February 29, 2008.(2)
    
    Audit related fees include assurance and related services
    provided by our independent auditors that are reasonably related
    to the performance of the audit or review of our consolidated
    financial statements and are not included above under
    Audit Fees. These services principally include
    accounting consultations.(3)
    
    Tax services principally include tax compliance, tax advice, and
    tax planning.  Pre-Approval
    of Audit and Non-Audit Services
     230




---



##### 



Part
    IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  Form 10-K:
    Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets  December 31, 2006
    and 2005Consolidated Statements of Income  Years Ended
    December 31, 2006, 2005 and 2004Consolidated Statements of Changes in Stockholders
    Equity  Years Ended December 31, 2006, 2005 and
    2004Consolidated Statements of Cash Flows  Years Ended
    December 31, 2006, 2005 and 2004Notes to Consolidated Financial Statements           Form 10-K
 231




---



##### 



SIGNATURES      By:
    /s/  Paul
    J. Klaassen       PRINCIPAL EXECUTIVE OFFICERPRINCIPAL FINANCIAL OFFICERBy:

/s/ Paul J. Klaassen

By:

/s/ Richard J. NadeauPaul J. Klaassen, Director and



Richard J. Nadeau, Chief Financial OfficerChief Executive OfficerPRINCIPAL ACCOUNTING OFFICERBy:

/s/ Julie A. PangelinanJulie A. Pangelinan,
    Chief Accounting  OfficerDIRECTORSBy:

/s/ Ronald V. AprahamianRonald V. Aprahamian, DirectorBy:

/s/ Craig R. CallenCraig R. Callen,  DirectorBy:

/s/ Thomas J. DonohueThomas J. Donohue, DirectorBy:

/s/ Stephen D. HarlanStephen D. Harlan, DirectorBy:

/s/ J. Douglas HolladayJ. Douglas Holladay, DirectorBy:

/s/ Paul J. KlaassenPaul J. Klaassen, Director and Chief Executive  OfficerBy:

/s/ Teresa M. KlaassenTeresa M. Klaassen,  DirectorBy:

/s/ Lynn KromingaLynn Krominga, Chair of the BoardBy:

/s/ William G. LittleWilliam G. Little, Director  232




---



##### 



EXHIBIT
    INDEX
  INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number2
.1

Stock Purchase Agreement dated as of December 30, 2002 by
    and among Marriott International, Inc., Marriott Senior Holding
    Co., Marriott Magenta Holding Company, Inc. and Sunrise Assisted
    Living, Inc.

10-K

March 27, 2003

2.32
.2

Amendment No. 1 to Stock Purchase Agreement, dated as of
    March 28, 2003, by and among Marriott International, Inc.,
    Marriott Senior Holding Co., Marriott Magenta Holding Company,
    Inc. and Sunrise Assisted Living, Inc.

8-K

April 9, 2003

2.22
.3

Master Agreement (CNL Q3 2003 Transaction) dated as of the
    30th day of September, 2003 by and among (i) Sunrise
    Development, Inc., (ii) Sunrise Senior Living Management,
    Inc., (iii) Twenty Pack Management Corp., Sunrise Madison
    Senior Living, L.L.C. and Sunrise Development, Inc.
    (collectively, as the Tenant), (iv) CNL Retirement Sun1
    Cresskill NJ, LP, CNL Retirement Edmonds WA, LP, CNL Retirement
    Sun1 Lilburn GA, LP and CNL Retirement Sun1 Madison NJ LP, and
    (v) Sunrise Senior Living, Inc.

8-K

October 15, 2003

2.42
.4

Securities Purchase Agreement by and among Sunrise Senior
    Living, Inc., Greystone Partners, Ltd., Concorde Senior Living,
    LLC, Mahalo Limited, Westport Advisors, Ltd., Greystone
    Development Company, LLC, Michael B. Lanahan, Paul F. Steinhoff,
    Jr., Mark P. Andrews and John C. Spooner, dated as of
    May 2, 2005.

10-Q

August 9, 2005

2.12
.5

Asset Purchase Agreement by and among Sunrise Senior Living
    Investments, Inc., Fountains Continuum of Care Inc. and various
    of its subsidiaries and affiliates, and George B. Kaiser, dated
    as of January 19, 2005.

10-Q

May 10, 2005

10.12
.6

Facilities Purchase and Sale Agreement by and among Sunrise
    Senior Living Investments, Inc., and Fountains Charitable Income
    Trust and various of its subsidiaries and affiliates, dated as
    of January 19, 2005.

10-Q

May 10, 2005

10.22
.7

Purchaser Replacement and Release Agreement by and among Sunrise
    Senior Living, Inc. and various of its subsidiaries and
    affiliates and Fountains Charitable Income Trust and various of
    its subsidiaries and affiliates, dated as of February 18,
    2005.

10-Q

May 10, 2005

10.32
.8

Agreement and Plan of Merger, dated as of August 2, 2006,
    by and among Sunrise Senior Living, Inc. (Sunrise),
    a newly-formed indirect wholly owned subsidiary of Sunrise and
    Trinity Hospice, Inc., American Capital Strategies, Ltd. and
    certain affiliates of KRG Capital Partners, LLC, as the
    principal stockholders of Trinity Hospice, Inc.*

N/A

N/A

N/A3
.1

Restated Certificate of Incorporation of Sunrise.

S-1

October 8, 1996

3.1 233




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number3
.2

Certificate of Amendment to Restated Certificate of
    Incorporation of Sunrise regarding name change.

10-Q

August 13, 2003

3.13
.3

Certification of Elimination of the Series C Junior
    Participation Preferred Stock of Sunrise Senior Living,
    Inc.

8-K

April 27, 2006

3.13
.4

Certification of Designation of the Series D Junior
    Participating Preferred Stock.

8-K

April 21, 2006

3.13
.5

Amended and Restated Bylaws of Sunrise, as amended.

8-K

March 18, 2008

3.14
.1

Form of Common Stock Certificate.*

N/A

N/A

N/A4
.2

Stockholder Rights Agreement.

S-1/A

October 23, 1996

4.24
.3

Amendment No. 1 to Rights Agreement, dated as of
    December 17, 1998, between Sunrise and First Union National
    Bank of North Carolina.

8-K

December 21, 1998

99(a)4
.4

Rights Agreement between Sunrise Senior Living, Inc. and
    American Stock Transfer & Trust Company, as
    Rights Agent dated April 24, 2006.

8-K

April 21, 2006

4.14
.5

Indenture, dated as of January 30, 2002, between Sunrise
    and First Union National Bank, as Trustee.

S-3

April 5, 2002

4.110
.1

1995 Stock Option Plan, as amended.+

10-K

March 31, 1998

10.2010
.2

1996 Directors Stock Option Plan, as amended.+

10-K

March 31, 1998

10.2110
.3

1996 Non-Incentive Stock Option Plan, as amended.+

10-Q

May 15, 2000

10.810
.4

1997 Stock Option Plan, as amended.+

10-K

March 31, 1998

10.2510
.5

1998 Stock Option Plan, as amended.+

10-K

March 31, 1999

10.4110
.6

1999 Stock Option Plan.+

10-Q

May 13, 1999

10.110
.7

2000 Stock Option Plan.+

10-K

March 12, 2004

10.410
.8

2001 Stock Option Plan.+

10-Q

August 14, 2001

10.1510
.9

2002 Stock Option and Restricted Stock Plan.+

10-Q

August 14, 2002

10.110
.10

2003 Stock Option and Restricted Stock Plan.+

10-Q

August 13, 2002

10.110
.11

Form of Executive Restricted Stock Agreement.+

10-Q

May 10, 2005

10.410
.12

Form of Restricted Stock Unit.+

8-K

March 14, 2006

10.110
.13

Form of Director Stock Option Agreement.+

8-K

September 14, 2005

10.2 234




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number10
.14

Form of Stock Option Certificate.*+

N/A

N/A

N/A10
.15

Restricted Stock Agreement by and between Sunrise Senior Living,
    Inc. and Michael B. Lanahan, dated as of May 10, 2005.+

10-Q

August 9, 2005

10.210
.16

Form of Sunrise Assisted Living Holdings, L.P. Class A
    Limited Partner Unit Agreement.+

10-K

March 29, 2002

10.8910
.17

Sunrise Employee Stock Purchase Plan, as amended.+

Def 14A

April 7, 2005

B10
.18

Executive Deferred Compensation Plan, effective June 1,
    2001.+

10-Q

August 14, 2001

10.1410
.19

Amendment to Sunrise Assisted Living Executive Deferred
    Compensation Plan.+

10-Q

August 13, 2003

10.210
.20

Second Amendment to Sunrise Assisted Living Executive Deferred
    Compensation Plan.*+

N/A

N/A

N/A10
.21

Third Amendment to Sunrise Assisted Living Executive Deferred
    Compensation Plan.*+

N/A

N/A

N/A10
.22

Fourth Amendment to Sunrise Assisted Living Executive Deferred
    Compensation Plan.*+

N/A

N/A

N/A10
.23

Fifth Amendment to Sunrise Assisted Living Executive Deferred
    Compensation Plan.*+

N/A

N/A

N/A10
.24

Bonus Deferral Programs for Certain Executive Officers.+

8-K

March 14, 2006

10.210
.25

Sunrise Assisted Living, Inc. Long Term Incentive Cash Bonus
    Plan effective August 23, 2002.+

10-Q

November 13, 2002

10.110
.26

Amendment 1 to the Sunrise Assisted Living, Inc. Long Term
    Incentive Cash Bonus Plan.+

10-K

March 16, 2005

10.3210
.27

Sunrise Senior Living, Inc. Senior Executive Severance Plan.+

10-K

March 16, 2006

10.5310
.28

Form of Indemnification Agreement.+

10-K

March 16, 2006

10.5410
.29

Amended and Restated Employment Agreement dated as of
    November 13, 2003 by and between Sunrise and Paul J.
    Klaassen.+

10-K

March 12, 2004

10.110
.30

Amendment No. 1 to Amended and Restated Employment
    Agreement by and between Sunrise and Paul J. Klaassen.*+

N/A

N/A

N/A10
.31

Employment Agreement by and between Sunrise Senior Living, Inc.
    and Michael B. Lanahan, dated as of May 10, 2005.+

10-Q

August 9, 2005

10.1 235




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number10
.32

2006 Non-Employee Director Fees and Other Compensation.*+

N/A

N/A

N/A10
.33

2006 Summary of Certain Compensation Arrangements for Named
    Executive Officers.*+

N/A

N/A

N/A10
.34

Master Credit Facility Agreement by and between Sunrise
    Riverside Assisted Living, L.P., Sunrise Parma Assisted Living,
    L.L.C., Sunrise Wilton Assisted Living, L.L.C., Sunrise Wall
    Assisted Living, L.L.C., Sunrise Weston Assisted Living, Limited
    Partnership and Glaser Financial Group, Inc. dated as of
    November 29, 2001, as amended.

10-Q

May 14, 2002

10.610
.35

Loan and Security Agreement dated as of May 8, 2001 by and
    among Sunrise Fairfax Assisted Living, L.L.C. and Chevy Chase
    Bank, F.S.B.

10-Q

August 14, 2001

10.110
.36

Guaranty of Payment dated as of May 8, 2001 by Sunrise
    Assisted Living, Inc. in favor of Chevy Chase Bank, F.S.B. for
    loan to Sunrise Fairfax Assisted Living, L.L.C.

10-Q

August 14, 2001

10.210
.37

Financing Agreement dated as of March 24, 2003 by and
    between Sunrise Assisted Living, Inc. as Borrower and Bank of
    America, N.A. as Lender.

10-Q

May 15, 2003

10.110
.38

Guaranty of Payment dated as of March 24, 2003 by Sunrise
    Development, Inc., Sunrise Assisted Living Investments, Inc. and
    Sunrise Assisted Living Management, Inc. in favor of Bank of
    America, N.A.

10-Q

May 15, 2003

10.210
.39

Revolving Credit Note dated as of March 24, 2003 by Sunrise
    Assisted Living, Inc. as Borrower and Bank of America, N.A. as
    Lender in the principal amount of $50 million.

10-Q

May 15, 2003

10.310
.40

Credit Agreement by and among Sunrise Senior Living, Inc. and
    certain subsidiaries, as the Borrowers, the subsidiaries of the
    Borrower as identified therein, as the Guarantors, Bank of
    America, N.A., as the Administrative Agent, Swing Line Lender
    and L/C Issuer, Wachovia Bank, National Association, as
    Syndication Agent, and other lender parties thereto, dated as of
    December 2, 2005.

8-K

December 8, 2005

10.110
.41

Pledge, Assignment and Security Agreement between Sunrise Senior
    Living, Inc. and Bank of America, N.A., as Administrative Agent,
    dated as of December 2, 2005.*

N/A

N/A

N/A 236




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number10
.42

First Amendment to Credit Agreement by and among Sunrise Senior
    Living, Inc. and certain subsidiaries, as the Borrowers, the
    subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of March 6, 2006.*

N/A

N/A

N/A10
.43

Second Amendment to the Credit Agreement by and among Sunrise
    Senior Living, Inc. and certain subsidiaries, as the Borrowers,
    the subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of January 31, 2007.*

N/A

N/A

N/A10
.44

Third Amendment to Credit Agreement by and among Sunrise Senior
    Living, Inc. and certain subsidiaries, as the Borrowers, the
    subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of June 27, 2007.*

N/A

N/A

N/A10
.45

Fourth Amendment to Credit Agreement by and among Sunrise Senior
    Living, Inc. and certain subsidiaries, as the Borrowers, the
    subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of September 17, 2007.*

N/A

N/A

N/A10
.46

Fifth Amendment to Credit Agreement by and among Sunrise Senior
    Living, Inc. and certain subsidiaries, as the Borrowers, the
    subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of January 31, 2008.*

N/A

N/A

N/A10
.47

Sixth Amendment to Credit Agreement by and among Sunrise Senior
    Living, Inc. and certain subsidiaries, as the Borrowers, the
    subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of February 19, 2008.*

N/A

N/A

N/A10
.48

Pledge, Assignment and Security Agreement between Sunrise Senior
    Living, Inc. and Bank of America, N,A., as Administrative Agent,
    dated as of February 19, 2008.*

N/A

N/A

N/A 237




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number10
.49

Seventh Amendment to Credit Agreement by and among Sunrise
    Senior Living, Inc. and certain subsidiaries, as the Borrowers,
    the subsidiaries of the Borrower as identified therein, as the
    Guarantors, Bank of America, N.A., as the Administrative Agent,
    Swing Line Lender and L/C Issuer, and other lender parties
    thereto, dated as of March 13, 2008.*

N/A

N/A

N/A10
.50

Security Agreement by and among Sunrise Senior Living, Inc. and
    certain subsidiaries, as the Loan Parties, and Bank of America,
    N.A., as the Administrative Agent, Swing Line Lender and L/C
    Issuer, and other lender parties thereto, dated as of
    March 13, 2008.*

N/A

N/A

N/A10
.51

Second Amended and Restated Operating Agreement of Sunrise
    Second Assisted Living Holdings, LLC dated as of
    December 20, 2002 by and between Sunrise Assisted Living
    Investments, Inc. and US Assisted Living Facilities II,
    Inc.

10-K

March 27, 2003

10.10010
.52

Amended and Restated Master Owner/Manager Agreement dated as of
    December 20, 2002 by and between Sunrise Second Assisted
    Living Holdings, LLC, together with its subsidiaries, and
    Sunrise Assisted Living Management, Inc.

10-K

March 27, 2003

10.10310
.53

Limited Liability Agreement of AL U.S. Development Venture, LLC
    dated as of December 23, 2002 by and between Sunrise
    Assisted Living Investments, Inc. and AEW Senior Housing
    Company, LLC.

10-K

March 27, 2003

10.9810
.54

ROFO Agreement dated as of December 23, 2002 by and between
    AEW Capital Management, L.P., Sunrise Assisted Living, Inc.,
    Sunrise Assisted Living Investments, Inc., Sunrise Assisted
    Living Management, Inc., and Sunrise Development, Inc.

10-K

March 27, 2003

10.9910
.55

Development Agreement dated as of December 23, 2002 by and
    between Sunrise Development, Inc. and certain Sunrise affiliates.

10-K

March 27, 2003

10.10210
.56

Operating Deficit Loan Agreement dated as of December 23,
    2002 by and between Sunrise Assisted Living Management, Inc. and
    certain Sunrise affiliates.

10-K

March 27, 2003

10.10410
.57

Pre-Opening Services and Management Agreement dated as of
    December 23, 2002 by and between Sunrise Assisted Living
    Management, Inc. and certain Sunrise affiliates.

10-K

March 27, 2003

10.10510
.58

Assumption and Reimbursement Agreement made effective as of
    March 28, 2003, by and among Marriott International, Inc.,
    Sunrise Assisted Living, Inc., Marriott Senior Living Services,
    Inc. and Marriott Continuing Care, LLC.

10-Q

May 15, 2003

10.4 238




---



##### 



INCORPORATED BY REFERENCEExhibit







ExhibitNumber

Description

Form

Filing Date with SEC

Number10
.59

Assumption and Reimbursement Agreement (CNL) made effective as
    of March 28, 2003, by and among Marriott International,
    Inc., Marriott Continuing Care, LLC, CNL Retirement Properties,
    Inc., CNL Retirement MA3 Pennsylvania, LP, and CNL Retirement
    MA3 Virginia, LP.

10-Q

May 15, 2003

10.510
.60

Ground Lease, dated June 7, 1994, by and between Sunrise
    Assisted Living Limited Partnership and Paul J. Klaassen and
    Teresa M. Klaassen.

S-1

March 20, 1996

10.1610
.61

Termination of Lease Agreement by and between Sunrise Assisted
    Living Limited Partnership and Paul J. Klaassen and Teresa M.
    Klaassen, dated as of December 13, 2007.*

N/A

N/A

N/A10
.62

Amended and Restated Ground Lease, dated August 29, 2003,
    by and between Sunrise Fairfax Assisted Living, L.L.C. and Paul
    J. Klaassen and Teresa M. Klaassen.*

N/A

N/A

N/A10
.63

Stipulated Final Order of the Delaware Court of Chancery, dated
    September 5, 2007, settling the litigation previously filed
    by Millenco, L.L.C. seeking an order from the Court of Chancery
    of the State of Delaware pursuant to Section 211 of the
    Delaware General Corporation Law.

8-K

September 10, 2007

10.110
.64

Stipulated Final Order of the Delaware Court of Chancery, dated
    October 10, 2007, settling certain litigation filed by SEIU
    Master Trust regarding Sunrise Senior Living Inc.s 2007
    annual meeting of stockholders.

8-K

October 12, 2007

10.110
.65

Letter dated March 16, 2008 regarding surrender of bonus
    compensation.*+

N/A

N/A

N/A21


Subsidiaries of the Registrant.*

N/A

N/A

N/A31
.1

Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*

N/A

N/A

N/A31
.2

Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*

N/A

N/A

N/A32


Certification of Chief Executive Officer and Chief Financial
    Officer Pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

N/A

N/A

N/A    +
    
    Represents management contract or compensatory plan or
    arrangement.*
    
    Filed herewith. 239