SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                                  ____________
                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of report (Date of earliest event reported):  MAY 1, 2003

                              EMERITUS CORPORATION
               (Exact name of registrant as specified in charter)

                      WASHINGTON     1-14012     91-1605464
    (State or other jurisdiction of incorporation)     (Commission File Number)
                        (IRS Employer Identification No.)

                              Raymond R. Brandstrom
        Vice President of Finance, Chief Financial Officer, and Secretary
                              Emeritus Corporation
                         3131 Elliott Avenue, Suite 500
                            Seattle, Washington 98121
               (Address of principal executive offices) (Zip Code)

                                 (206) 298-2909
              (Registrant's telephone number, including area code)


<PAGE>

ITEM  2.      ACQUISITION  OR  DISPOSITION  OF  ASSETS

     This  Form 8-K amends the interim report on Form 10-Q dated March 31, 2003,
(filed  May  9, 2003) to include Item 7 (a) Financial Statements, and Item 7 (b)
Pro  Forma  Financial  Information.

ITEM  7.      FINANCIAL  STATEMENTS  AND  EXHIBITS

(a)     Financial  statements  of  business  acquired

The  combined  balance  sheets of the Eight Facilities operated by Balanced Care
Corporation  Acquired by Emeritus Corporation as of March 31, 2003, and June 30,
2002,  and the combined statements of operations, cash flows, and changes in net
equity (deficit) of parent company for the nine months ended March 31, 2003, and
the  year  ended  June  30,  2002,  and  notes thereto and report of Independent
Auditors  relating  to  the  June  30,  2002,  financial  statements.

(b)     Unaudited  Pro  Forma  Financial  Information:

i.   Emeritus Corporation Pro Forma Consolidated Balance Sheet as of March 31,
     2003;
ii.  Emeritus Corporation Pro Forma Consolidated Statements of Operations for
     the three months ended March 31, 2003, and the year ended December 31,
     2002;
iii. Notes to the Pro Forma Consolidated Financial Statements;

(c)     Exhibits:

23.1     Consent  of  KPMG  LLP

<PAGE>
<TABLE>
<CAPTION>

                          INDEX TO FINANCIAL STATEMENTS
                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION



                                                                         PAGES:
<S>                                                                      <C>
Independent AuditorsReport. . . . . . . . . . . . . . . . . . . . . . .       1
Financial Statements:
Combined Balance Sheet at June 30, 2002 . . . . . . . . . . . . . . . .       2
Combined Statement of Operations for the year ended June 30, 2002 . . .       3
Combined Statement of Changes in Net Equity (Deficit) of Parent Company
    for the year ended June 30, 2002. . . . . . . . . . . . . . . . . .       4
Combined Statement of Cash Flows for the year ended June 30, 2002 . . .       5
Notes to Combined Financial Statements. . . . . . . . . . . . . . . . .       6

Condensed Financial Statements (Unaudited):
Combined Balance Sheets as of March 31, 2003 and June 30, 2002. . . . .      11
Combined Statements of Operations for the nine months ended
  March 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . . . . .      12
Combined Statements of Changes in Net Deficit of Parent Company
  for the nine months ended March 31, 2003. . . . . . . . . . . . . . .      13
Combined Statements of Cash Flows for the nine months
  ended March 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . .      14
Notes to Combined Financial Statements. . . . . . . . . . . . . . . . .      15
</TABLE>


<PAGE>



                          INDEPENDENT AUDITORS' REPORT

The  Board  of  Directors
Emeritus  Corporation:

We  have audited the accompanying combined balance sheet of the Eight Facilities
Operated by Balanced Care Corporation Acquired by Emeritus Corporation (Acquired
Facilities),  as  described  in  note  1,  as  of June 30, 2002, and the related
statements of operations, changes in net equity (deficit) of parent company, and
cash  flows for the year then ended. These combined financial statements are the
responsibility  of the Acquired Facilities' management. Our responsibility is to
express  an  opinion  on  these  financial  statements  based  on  our  audit.

We  conducted our audit in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audit  provides  a
reasonable  basis  for  our  opinion.

In  our  opinion,  the  combined  financial statements referred to above present
fairly,  in  all  material  respects,  the  combined  financial  position of the
Acquired Facilities as of June 30, 2002, and the results of their operations and
their  cash  flows  for  the  year  then  ended  in  conformity  with accounting
principles  generally  accepted  in  the  United  States  of  America.


/s/  KPMG, LLP


Baltimore,  Maryland
June  23,  2003

<PAGE>

<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                             COMBINED BALANCE SHEET
                                  JUNE 30, 2002
                                 (IN THOUSANDS)
                                     ASSETS


<S>                                                                   <C>
Current Assets:
 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .  $   70
 Accounts receivable (net of allowance for doubtful accounts of $59)     294
  Prepaid expenses and other current assets. . . . . . . . . . . . .      82
                                                                      -------
 Total current assets. . . . . . . . . . . . . . . . . . . . . . . .     446
Restricted investments . . . . . . . . . . . . . . . . . . . . . . .     526
Property and equipment, net (note 3) . . . . . . . . . . . . . . . .     300
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5
                                                                      -------
                                                                      $1,277
                                                                      =======

                  LIABILITIES AND NET DEFICIT OF PARENT COMPANY

Current Liabilities:
 Current portion of long-term debt (note 5). . . . . . . . . . . . .  $   14
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .      46
 Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . .     242
 Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . .     175
  Unearned rent revenue. . . . . . . . . . . . . . . . . . . . . . .     350
                                                                      -------
 Total current liabilities . . . . . . . . . . . . . . . . . . . . .     827
Long-term debt, net of current portion (note 5). . . . . . . . . . .       2
Straight-line lease liability. . . . . . . . . . . . . . . . . . . .     397
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .     124
                                                                      -------
 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .   1,350

Commitments and contingencies (note 6 and 10). . . . . . . . . . . .       -

Net deficit of parent company. . . . . . . . . . . . . . . . . . . .     (73)
                                                                      -------
                                                                      $1,277
                                                                      =======
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>


<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                         COMBINED STATEMENT OF OPERATIONS
                            YEAR ENDED JUNE 30, 2002
                                  (IN THOUSANDS)




<S>                                         <C>
Revenues:
  Resident services. . . . . . . . . . . .  $12,209
  Other revenues . . . . . . . . . . . . .       76
                                            --------
                                             12,285

Operating expenses:
  Facility operating expenses:
         Salaries, wages, and benefits . .    4,870
         Other operating expenses. . . . .    3,108
  Management fees. . . . . . . . . . . . .      749
  Lease expense. . . . . . . . . . . . . .    3,953
  Depreciation and amortization. . . . . .       83
  Loss on impairment of long-lived assets.      924
                                            --------
          Total operating expenses . . . .   13,687
                                            --------
       Loss from operations. . . . . . . .   (1,402)

Other income (expense):
  Interest and other income. . . . . . . .        2
  Interest expense . . . . . . . . . . . .       (4)
                                            --------
          Loss before income taxes . . . .   (1,404)
Provision for income taxes (note 7). . . .      (23)
                                            --------
          Net loss . . . . . . . . . . . .  $(1,427)
                                            ========
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>


<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
    COMBINED STATEMENTS OF CHANGES IN NET EQUITY (DEFICIT) OF PARENT COMPANY
                            YEAR ENDED JUNE 30, 2002
                                  (IN THOUSANDS)


<S>                                              <C>
Balance at June 30, 2001. .                      $ 1,532
Net distributions to parent company                 (178)
Net loss. . . . . . . . . .                       (1,427)
                                                 --------
Balance at June 30, 2002. .                      $   (73)
                                                 ========
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>

<TABLE>
<CAPTION>

                                EIGHT FACILITIES OPERATED BY
                                  BALANCED CARE CORPORATION
                              ACQUIRED BY EMERITUS CORPORATION
                              COMBINED STATEMENT OF CASH FLOWS
                                  YEAR ENDED JUNE 30, 2002
                                       (IN THOUSANDS)




<S>                                                                                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(1,427)
   Adjustments to reconcile net loss to net cash used for
    operating activities:
      Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . .       83
      Loss on impairment of long-lived assets. . . . . . . . . . . . . . . . . . .      924
   Changes in operating assets and liabilities, excluding effects of acquisitions:
      Decrease in receivables, net . . . . . . . . . . . . . . . . . . . . . . . .       12
      Decrease in prepaid expenses and other current assets. . . . . . . . . . . .        5
      Increase in current liabilities. . . . . . . . . . . . . . . . . . . . . . .      215
      Decrease in straight-line lease liability. . . . . . . . . . . . . . . . . .      (44)
                                                                                    --------
            Net cash used in operating activities. . . . . . . . . . . . . . . . .     (232)
                                                                                    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . .       (2)
      Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       35
                                                                                    --------
            Net cash provided by investing activities. . . . . . . . . . . . . . .       33
                                                                                    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . .      (14)
      Decrease in other liabilities. . . . . . . . . . . . . . . . . . . . . . . .      (19)
      Net distributions to parent company. . . . . . . . . . . . . . . . . . . . .     (178)
                                                                                    --------
            Net cash used in financing activities. . . . . . . . . . . . . . . . .     (211)
                                                                                    --------
            Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . .     (410)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . .      480
                                                                                    --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . .  $    70
                                                                                    ========


SUPPLEMENTAL CASH FLOW INFORMATION
      Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     2
                                                                                    ========
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                                  June 30, 2002
                             (Dollars in thousands)
(1)     BACKGROUND

On April 30, 2003, Operations Transfer Agreements with respect to eight assisted
living  facilities  (the Acquired Facilities) were entered into by and among the
operator-lessees  of  the  facilities  (the  operator-lessees),  Balanced  Care
Corporation  (BCC),  BCC  subsidiaries  managing  the facilities (the managers),
collectively  the  Transferor,  and  Emeritus  Corporation  (Emeritus or the new
operator)  and  the owners of the facilities. In December 2002 and January 2003,
BCC  subsidiaries  acquired six of the operator-lessees; the operator-lessees of
the  remaining  two  facilities  were  BCC  subsidiaries.

The  facilities  were  leased pursuant to the terms of previous Lease Agreements
between  the  owner  and  the operator-lessees, and were managed pursuant to the
terms  of  previous  management  agreements between the operator-lessees and the
managers.  Emeritus  and  the  owner  have  entered  into new Lease and Security
Agreements with respect to the Acquired Facilities and the previous lessees, the
owner,  manager  and  certain  others  have  executed  certain  settlement  and
termination  agreements.

The  Acquired  Facilities' financial statements for the year ended June 30, 2002
are  presented  for  the  purposes of complying with the Securities and Exchange
Commission's  rules  and  regulations  regarding  acquired  businesses.

The  combined  financial  statements  of  the  Acquired  Facilities  reflect the
historical  accounts  of the operator-lessees of the assisted living facilities,
including  management  fees  charged  by  BCC  subsidiaries  to  the  individual
facilities.  Such  fees,  calculated  as  a  percentage of revenue, are based on
management  agreements.  However,  BCC has operated certain other businesses and
has  provided  certain services to the Acquired Facilities, including financial,
legal,  accounting,  human  resources  and  information  systems  services.
Accordingly,  management  fees  and  other  expense  allocations to the Acquired
Facilities may not be representative of costs of such services to be incurred in
the  future  (see  note  9).


(2)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

(a)     REVENUE  RECOGNITION
Resident  service revenues are recognized when services are rendered and consist
of  resident  fees  and  other  ancillary  services provided to residents of the
assisted  living  facilities.

(b)     CASH  AND  CASH  EQUIVALENTS
Cash  equivalents  consist of highly liquid instruments with original maturities
of  three  months  or  less.

(c)     RESTRICTED  INVESTMENTS
Restricted investments consist of certificates of deposit that have been pledged
as  collateral  for  certain  of the Acquired Facilities' lease commitments. The
amounts  are  equivalent  to  three  months  lease  payments  and  are generally
restricted  through  the  initial  lease  term.

(d)     PROPERTY  AND  EQUIPMENT
Property  and  equipment  are  stated  at cost less accumulated depreciation or,
where  appropriate,  the  present value of the related capital lease obligations
less  accumulated amortization. Depreciation is computed using the straight-line
method  over the estimated useful lives of the assets (see note 3). Expenditures
for  maintenance  and  repairs  necessary  to maintain property and equipment in
efficient operating condition are charged to operations. Costs for additions and
betterments  are  capitalized.

(e)     IMPAIRMENT  OF  LONG-LIVED  ASSETS
Management  reviews  its  long-lived  assets and certain identifiable intangible
assets  for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to  be  held  and  used is measured by a comparison of the carrying amount of an
asset  to  undiscounted  future  net  cash  flow expected to be generated by the
asset.  The  amount of impairment loss is determined by comparing the historical
carrying value of the asset to its estimated fair value. Estimated fair value is
determined  through  an evaluation of recent financial performance and projected
discounted  cash  flows  of  the  facilities  using  standard industry valuation
techniques.  This  comparison  is  performed  on  a  facility-by-facility basis.

(f)     STRAIGHT-LINE  LEASE  LIABILITY
Straight-line  lease  liabilities  represent lease deposit funding received from
REITs  relating to lease transactions. The Acquired Facilities pay rent on these
funds  and  amortizes the related straight-line lease liability over the initial
lease  term  as  a  reduction  of  rent  expense.

(g)     NET  EQUITY  OF  PARENT  COMPANY
The  parent  companies  of  the  operator-lessees  transfer excess cash from the
Acquired  Facilities and make working capital advances and corporate allocations
to  the  Acquired  Facilities.  These  advances  include  amounts  to  fund cash
shortfalls, advances for accounts payable and amounts paid for employee benefits
and  other  items.  The resulting net balance of the aforementioned transactions
plus the parent companies' initial investment in the Acquired Facilities and the
cumulative  deficit  of  the  Acquired Facilities is classified as net equity of
parent  company  in  the  accompanying  balance  sheet.

(h)     INCOME  TAXES
The Acquired Facilities are included in the parent companies' federal income tax
returns.  The  income  taxes  reported  in  the  Acquired  Facilities  financial
statements  are  an  allocation  of  income  taxes calculated as if the Acquired
Facilities  were  a  separate taxpayer. The Acquired Facilities follow the asset
and liability method of accounting for income taxes. Under this method, deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to  differences  between  financial  statement carrying amounts of
existing  assets  and  liabilities  and  their  respective  tax  bases.

(i)     USE  OF  ESTIMATES
The  preparation  of  the  combined  financial  statements  in  conformity  with
generally  accepted  accounting principles requires management to make estimates
and  assumptions.  These  assumptions  affect the reported amounts of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and  the  reported  amounts of revenues and expenses
during  reported  period.  Actual  results  could  differ  from these estimates.

(3)     PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following  at  June  30,  2002:

<TABLE>
<CAPTION>



                                  ESTIMATED
                                 USEFUL LIFE          2002
                               ---------------        ----
<S>                             <C>                   <C>
Land and land improvements . .      2-5 years         $ 53
Leasehold improvements . . . .  Term of lease          217
Fixed and moveable equipment .     3-20 years          162
                                                      ----
                                                       432
Less: accumulated depreciation                         132
                                                      ----
                                                      $300
                                                      ====
</TABLE>


Depreciation  expense  was  $71  in  2002.  At June 30, 2002, fixed and moveable
equipment  included approximately $16 of assets that have been capitalized under
capital  leases.  Amortization  of the leased assets is included in depreciation
expense.

(4)     ACCRUED  EXPENSES

Accrued  expenses  consist  of  the  following  at  June  30,  2002:

<TABLE>
<CAPTION>


<S>                                  <C>
Accrued property taxes               $ 40
Accrued rent . . . . .                 73
Other accrued expenses                 62
                                     ----
                                     $175
                                     ====
</TABLE>



 (5)     LONG-TERM  DEBT

Long-term  debt  at  June  30, 2002 consists of capital lease obligations having
principal  and  interest  payable  monthly.

(6)     LEASES

The  Acquired  Facilities  are  leased  under  operating  lease  agreements with
Healthcare  Realty  Trust. As described in note 1, the leases were terminated on
April  30,  2003.

(7)     INCOME  TAXES

The  provision  for  income  taxes  for the year ended June 30, 2002 consists of
current  state  income  taxes.

A  reconciliation  of  income  tax expense computed at the statutory federal tax
rate  on  income  to  the  actual  income  tax  expense  is  as  follows:

<TABLE>
<CAPTION>



<S>                                                 <C>
Income taxes computed at statutory rate. . . .      $(477)
State income taxes, net of federal tax benefit         23
Effect of items not deductible for tax puposes          4
Change in the beginning of the year valuation
   allowance for deferred tax assets allocated
   to tax expense. . . . . . . . . . . . . . .        473
                                                    ------
                    Income tax provision . . .      $  23
                                                    ======
</TABLE>


Deferred  income taxes reflect temporary differences between the carrying amount
of  assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Deferred tax assets consist of the following as of June
30,  2002:

<TABLE>
<CAPTION>



<S>                                                   <C>
Straight-line rents not included in income . . .      $   119
Vacation and other accruals. . . . . . . . . . .           20
Net operating loss carryforward. . . . . . . . .        2,911
Allowance for doubtful accounts. . . . . . . . .           23
Depreciation and amortization due to differences
   in book/tax basis . . . . . . . . . . . . . .          264
                                                      --------
                    Gross deferred tax assets. .        3,337
Valuation allowance. . . . . . . . . . . . . . .       (3,337)
                                                      --------
                    Net deferred tax assets. . .      $     -
                                                      ========
</TABLE>


At  June  30,  2002,  the  Company  had  net  operating  loss  carryforwards  of
approximately  $7,600  that  expire  at  various  dates  through 2022. These net
operating loss carryforwards may be significantly limited under various sections
of  the  Internal  Revenue  Code.

(8)     IMPAIRMENT  OF  LONG-LIVED  ASSETS

In  2002,  the  economic  environment in which the facilities operate negatively
affected  the  operating results of the Acquired Facilities, resulting in a loss
from  operations.  As  a  result,  management  applied  Statement  of  Financial
Accounting  Standards  No.  121.  In  accordance  with  SFAS No. 121, management
estimated  the future cash flows expected to result from those assets to be held
and  used.  In estimating the future cash flows for determining whether an asset
is  impaired,  and  if  expected  future cash flows used in measuring assets are
impaired,  management grouped its assets at the lowest level for which there are
identifiable  cash  flows,  the facility level. After determining the facilities
subject  to an impairment charge, management determined the estimated fair value
of  such  facilities.  The carrying value of property and equipment exceeded the
fair  value  by  $924  at  June  30,  2002.

(9)     OTHER  RELATED  PARTY  TRANSACTIONS

Management  fees represent fees for certain corporate administrative and general
services,  including  financial,  legal,  accounting,  human  resources  and
information systems services provided by BCC. Management fees have been provided
at  a  range of 6% to 7% of total revenues of each facility. Management believes
that this allocation method is reasonable. However, management believes that the
Acquired  Facilities'  corporate  administrative  and  general  expenses  on  a
stand-alone  basis  may have been different had the Acquired Facilities operated
as  an  unaffiliated  entity.

(10)     LITIGATION

The  Acquired  Facilities  are  party  to  various  claims,  legal  actions, and
complaints  arising  in  the  ordinary  course  of  business.  In the opinion of
management, all such matters are without merit or are of such a kind, or involve
such  amounts,  that  their  unfavorable  disposition  would not have a material
adverse effect on the financial position, results of operations or the liquidity
of  the  Acquired  Facilities.


<PAGE>

<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                             COMBINED BALANCE SHEET
                                 (IN THOUSANDS)
                                     ASSETS


                                                MARCH 31, 2003
                                                  UNAUDITED       JUNE 30, 2002
                                               ----------------  ---------------
<S>                                            <C>               <C>
Current Assets:
 Cash and cash equivalents. . . . . . . . . .  $             7   $           70
 Accounts receivable. . . . . . . . . . . . .              245              294
  Prepaid expenses and other current assets .               91               82
                                               ----------------  ---------------
 Total current assets . . . . . . . . . . . .              343              446
Restricted investments. . . . . . . . . . . .              526              526
Property and equipment, net . . . . . . . . .            1,760              300
Other assets. . . . . . . . . . . . . . . . .                5                5
                                               ----------------  ---------------
                                               $         2,634   $        1,277
                                               ================  ===============

                  LIABILITIES AND NET DEFICIT OF PARENT COMPANY

Current Liabilities:
 Current portion of long-term debt. . . . . .  $            31   $           14
 Accounts payable . . . . . . . . . . . . . .               80               46
 Accrued payroll. . . . . . . . . . . . . . .              207              242
 Accrued expenses . . . . . . . . . . . . . .            1,473              175
 Deferred revenue . . . . . . . . . . . . . .              533              350
                                               ----------------  ---------------
 Total current liabilities. . . . . . . . . .            2,324              827
Long-term debt, net of current portion. . . .                -                2
Straight-line lease liability . . . . . . . .              348              397
Other long-term liabilities . . . . . . . . .              105              124
                                               ----------------  ---------------
 Total liabilities. . . . . . . . . . . . . .            2,777            1,350

Net deficit of parent company . . . . . . . .             (143)             (73)
                                               ----------------  ---------------
                                               $         2,634   $        1,277
                                               ================  ===============
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                        COMBINED STATEMENTS OF OPERATIONS
                    NINE MONTHS ENDED MARCH 31, 2003 AND 2002
                                  (IN THOUSANDS)


                                               2003       2002
                                             UNAUDITED  UNAUDITED
                                            ----------  ---------
<S>                                         <C>          <C>
Revenues:
  Resident services. . . . . . . . . . . .  $    9,020   $9,229
  Other revenues . . . . . . . . . . . . .         169       49
                                            -----------  -------
Total revenues . . . . . . . . . . . . . .       9,189    9,278

Operating expenses:
  Facility operating expenses:
         Salaries, wages, and benefits . .       3,557    3,705
         Other operating expenses. . . . .       2,457    2,166
  Management fees. . . . . . . . . . . . .         570      564
  Lease expense. . . . . . . . . . . . . .       2,983    2,963
  Depreciation and amortization. . . . . .         106       63
                                            -----------  -------
          Total operating expenses . . . .       9,673    9,461
                                            -----------  -------
       Loss from operations. . . . . . . .        (484)    (183)

Other income (expense):
  Interest expense . . . . . . . . . . . .          (2)      (1)
                                            -----------  -------
          Loss before income taxes . . . .        (486)    (184)
Provision for income taxes (note 7). . . .          15       17
                                            -----------  -------
          Net loss . . . . . . . . . . . .  $     (501)  $ (201)
                                            ===========  =======
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>


<TABLE>
<CAPTION>

                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
         COMBINED STATEMENTS OF CHANGES IN NET DEFICIT OF PARENT COMPANY
                  NINE MONTHS ENDED MARCH 31, 2003 (UNAUDITED)
                                  (IN THOUSANDS)


<S>                                                   <C>
Balance at June 30, 2002 . . . . . . . . . . . . . .  $   (73)
Net distributions to parent. . . . . . . . . . . . .   (1,116)
Property and equipment contributed by parent company    1,547
Net loss . . . . . . . . . . . . . . . . . . . . . .     (501)
                                                      --------
Balance at March 31, 2003. . . . . . . . . . . . . .  $  (143)
                                                      ========
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>

<TABLE>
<CAPTION>
                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                        COMBINED STATEMENTS OF CASH FLOWS
                    NINE MONTHS ENDED MARCH 31, 2003 and 2002
                                 (IN THOUSANDS)


                                                                                      2003      2002
                                                                                    UNAUDITED UNAUDITED
                                                                                    --------- ---------
<S>                                                                                 <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   (501)  $(201)
   Adjustments to reconcile net loss to net cash used for
    operating activities:
      Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . .       106      63
   Changes in operating assets and liabilities, excluding effects of acquisitions:
      Decrease (increase) in receivables, net. . . . . . . . . . . . . . . . . . .        50     (74)
      Decrease in prepaid expenses and other current assets. . . . . . . . . . . .        (9)    (15)
      Increase in current liabilities. . . . . . . . . . . . . . . . . . . . . . .     1,479     219
      Decrease in straight-line lease liability. . . . . . . . . . . . . . . . . .       (49)    (33)
                                                                                    ---------  ------
            Net cash provided by (used in) operating activities. . . . . . . . . .     1,076     (41)
                                                                                    ---------  ------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . .       (19)    (25)
      Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         -      33
                                                                                    ---------  ------
            Net cash provided by (used in) investing activities. . . . . . . . . .       (19)      8
                                                                                    ---------  ------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . .       (11)    (10)
      Borrowings on long-term debt . . . . . . . . . . . . . . . . . . . . . . . .        26       -
      Decrease in other liabilities. . . . . . . . . . . . . . . . . . . . . . . .       (19)    (14)
      Net cash distributions to Parent . . . . . . . . . . . . . . . . . . . . . .    (1,116)   (189)
                                                                                    ---------  ------
            Net cash used in financing activities. . . . . . . . . . . . . . . . .    (1,120)   (213)
                                                                                    ---------  ------
            Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . .       (63)   (246)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . .        70     480
                                                                                    ---------  ------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . .  $      7   $ 234
                                                                                    =========  ======


SUPPLEMENTAL CASH FLOW INFORMATION
      Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      2   $   1
                                                                                    =========  ======
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
      Property and equipment contributed by parent company . . . . . . . . . . . .  $  1,547   $   -
                                                                                    =========  ======
</TABLE>


            SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
<PAGE>


                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                             March 31, 2003 and 2002
                             (Dollars in thousands)

(1)     BACKGROUND  AND  BASIS  OF  PRESENTATION

(a)     BACKGROUND

On April 30, 2003, Operations Transfer Agreements with respect to eight assisted
living  facilities  (the Acquired Facilities) were entered into by and among the
operator-lessees  of  the  facilities  (the  operator-lessees),  Balanced  Care
Corporation  (BCC),  BCC  subsidiaries  managing  the facilities (the managers),
collectively  the  Transferor,  and  Emeritus  Corporation  (Emeritus or the new
operator)  and  the owners of the facilities. In December 2002 and January 2003,
BCC  subsidiaries  acquired six of the operator-lessees; the operator-lessees of
the  remaining  two  facilities  were  BCC  subsidiaries.

The  facilities  were  leased pursuant to the terms of previous Lease Agreements
between  the  owner  and  the operator-lessees, and were managed pursuant to the
terms  of  previous  management  agreements between the operator-lessees and the
managers.  Emeritus  and  the  owner  have  entered  into new Lease and Security
Agreements  with  respect  to the Acquired Facilities; and the previous lessees,
the  owner,  manager  and  certain  others  have executed certain settlement and
termination  agreements.

The  Acquired  Facilities'  financial statements for the nine months ended March
31,  2003  and  2002  are  presented  for  the  purposes  of  complying with the
Securities  and  Exchange  Commission's rules and regulations regarding acquired
businesses.

The  combined  financial  statements  of  the  Acquired  Facilities  reflect the
historical  accounts  of the operator-lessees of the assisted living facilities,
including  management  fees  charged  by  BCC  subsidiaries  to  the  individual
facilities.  Such  fees,  calculated  as  a  percentage of revenue, are based on
management  agreements.  However,  BCC has operated certain other businesses and
has  provided  certain services to the Acquired Facilities, including financial,
legal,  accounting,  human  resources  and  information  systems  services.
Accordingly,  management  fees  and  other  expense  allocations to the Acquired
Facilities may not be representative of costs of such services to be incurred in
the  future.

In  September 2002, the operator-lessees ceased making lease payments and sought
to  renegotiate  the  terms  of  the  leases. Accordingly, at March 31, 2003 the
leases  are in default and the financial statements at such date reflect accrued
and  unpaid  rents  of  $  1,239.

<PAGE>


                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                             March 31, 2003 and 2002
                             (Dollars in thousands)


(b)     BASIS  OF  PRESENTATION

The  combined  financial  statements  as of and for the nine-month periods ended
March  31,  2003  and 2002 are unaudited but, in the opinion of management, have
been  prepared on the same basis as the audited financial statements and reflect
all  adjustments,  consisting  of normal recurring accruals necessary for a fair
presentation of the information set forth therein. The results of operations for
the nine-month period ended March 31, 2003 are not necessarily indicative of the
operating  results  to  be expected for the full year or any other period. These
combined  financial  statements and notes should be read in conjunction with the
combined  financial  statements  and  notes  included  in  the audited financial
statements  of  the  Acquired  Facilities for the year ended June 30, 2002 filed
herewith.


(2)     ACQUISITION  OF  OPERATOR-LESSEES

As described in note 1, BCC subsidiaries acquired six of the operator-lessees in
December  2002  and  January  2003.  The  acquisition increased the basis in the
facilities  and equity of the parent company by $1,547. Such amount consisted of
the  purchase  price  of  $1,201 and contributed property and equipment of $346.




             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

     On  May  1, 2003, Emeritus Corporation (the "Company") entered into a lease
agreement  with certain affiliates of Healthcare Realty Trust ("HRT"), for eight
assisted  living  communities  (the  "Acquired  Facilities")  in  four  states
containing  an  aggregate  of  approximately  490  units.

     The  following  unaudited  pro  forma consolidated financial statements are
presented  to  illustrate  the  effects  of  the  acquisition  on the historical
financial  position  and operating results.  The Acquired Facilities have a June
30  fiscal  year end, and the following unaudited pro forma financial statements
are  presented  using  the  Company's  December  31  fiscal  year  end.

     The  following  unaudited  pro forma consolidated balance sheet of Emeritus
Corporation at March 31, 2003, gives effect to the acquisition as if it occurred
as  of  that date.  The following unaudited pro forma consolidated statements of
operations  of  Emeritus  Corporation for the three months ended March 31, 2003,
and  the  year ended December 31, 2002, gives effect to the acquisition as if it
occurred  as  of  January  1,  2002.

     The unaudited pro forma consolidated financial statements have been derived
from,  and  should  be  read  in  conjunction  with, the historical consolidated
financial  statements,  including  the  notes  thereto,  of  the Company and the
Acquired  Facilities.  For  the Company, those financial statements are included
in Emeritus Corporation's Annual Report on Form 10-K for the year ended December
31,  2002,  and  Emeritus  Corporation's  Quarterly  Report on Form 10-Q for the
quarter  ended  March  31,  2003.  For  the Acquired Facilities, those financial
statements  are  filed herewith.  The unaudited pro forma consolidated financial
statements are presented for informational purposes only and are not necessarily
indicative  of  the  financial  position or results of operations of the Company
that  would  have  occurred had the acquisition been consummated as of the dates
indicated.  In  addition,  the  unaudited  pro  forma  consolidated  financial
statements  are  not necessarily indicative of the future financial condition or
operating  results  of  the  Company.

<PAGE>


<TABLE>
<CAPTION>

                                                EMERITUS CORPORATION
                                   UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                                   MARCH 31, 2003
                                                   (IN THOUSANDS)


ASSETS
                                                                    ACQUIRED      PRO FORMA                EMERITUS
                                                       EMERITUS    FACILITIES    ADJUSTMENTS               COMBINED
                                                      ----------  ------------  -------------             ----------
<S>                                                   <C>         <C>           <C>            <C>        <C>
Current Assets:
 Cash and cash equivalents . . . . . . . . . . . . .  $   4,954   $         7   $         93     (a,b,j)  $   5,054
 Short-term investments. . . . . . . . . . . . . . .      2,903                                               2,903
 Trade accounts receivable, net. . . . . . . . . . .      1,612           245           (245)        (a)      1,612
 Other receivables . . . . . . . . . . . . . . . . .      3,189                                               3,189
 Prepaid expenses and other current assets . . . . .      5,195            91            (91)        (a)      5,195
                                                      ----------  ------------  -------------             ----------
 Total current assets. . . . . . . . . . . . . . . .     17,853           343           (243)                17,953
                                                      ----------  ------------  -------------             ----------

Property and equipment, net. . . . . . . . . . . . .    119,173         1,760         (1,760)        (a)    119,173
Property held for development. . . . . . . . . . . .      1,254                                               1,254
Notes receivable from and investments in affiliates.      6,453                                               6,453
Restricted deposits. . . . . . . . . . . . . . . . .      5,555           526           (526)        (a)      5,555
Lease acquisition costs, net . . . . . . . . . . . .      6,082                          500         (b)      6,582
Other assets, net. . . . . . . . . . . . . . . . . .      5,030             5             (5)        (a)      5,030
                                                      ----------  ------------  -------------             ----------
 Total assets. . . . . . . . . . . . . . . . . . . .  $ 161,400   $     2,634   $     (2,034)              $162,000
                                                      ==========  ============  =============             ==========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilities:
 Current portion of long-term debt . . . . . . . . .  $   3,404   $        31   $        (31)        (a)  $   3,404
 Trade accounts payable. . . . . . . . . . . . . . .      3,145            80            (80)        (a)      3,145
 Accrued employee compensation and benefits. . . . .      5,526           207           (207)        (a)      5,526
 Accrued interest. . . . . . . . . . . . . . . . . .      1,320                                               1,320
 Accrued real estate taxes . . . . . . . . . . . . .      1,387                                               1,387
 Accrued dividends on preferred stock. . . . . . . .     14,989                                              14,989
 Other accrued expenses. . . . . . . . . . . . . . .      8,501         1,473         (1,473)        (a)      8,501
 Deferred revenue. . . . . . . . . . . . . . . . . .      3,915           533           (533)        (a)      3,915
 Other current liabilities . . . . . . . . . . . . .      5,580                                               5,580
                                                      ----------  ------------  -------------             ----------
 Total current liabilities . . . . . . . . . . . . .     47,767         2,324         (2,324)                47,767
                                                      ----------  ------------  -------------             ----------

Long-term debt, less current portion . . . . . . . .    119,825                          600         (j)    120,425
Convertible debentures . . . . . . . . . . . . . . .     32,000                                              32,000
Deferred gain on sale of communities . . . . . . . .     20,233                                              20,233
Deferred rent. . . . . . . . . . . . . . . . . . . .      2,516                                               2,516
Straight-line lease liability. . . . . . . . . . . .                      348           (348)        (a)
Other long-term liabilities. . . . . . . . . . . . .        502           105           (105)        (a)        502
                                                      ----------  ------------  -------------             ----------
 Total liabilities . . . . . . . . . . . . . . . . .    222,843         2,777         (2,177)               223,443
                                                      ----------  ------------  -------------             ----------
Minority interests . . . . . . . . . . . . . . . . .        358                                                 358
Redeemable preferred stock . . . . . . . . . . . . .     25,000                                              25,000
Commitments and contingencies
Shareholders' Deficit:
Preferred Stock
Common Stock . . . . . . . . . . . . . . . . . . . .          1                                                   1
Additional paid-in capital . . . . . . . . . . . . .     69,328                                              69,328
Accumulated other comprehensive gain (loss). . . . .      1,391                                               1,391
Accumulated deficit. . . . . . . . . . . . . . . . .   (157,521)         (143)           143         (a)   (157,521)
                                                      ----------  ------------  -------------             ----------
 Total shareholders' deficit . . . . . . . . . . . .    (86,801)         (143)           143                (86,801)
                                                      ----------  ------------  -------------              ---------
 Total liabilities and shareholders' deficit . . . .  $ 161,400   $     2,634   $     (2,034)              $162,000
                                                      ==========  ============  =============              =========
</TABLE>


 SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>


<TABLE>
<CAPTION>

                                               EMERITUS CORPORATION
                             UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                                     FOR THE THREE MONTHS ENDED MARCH 31, 2003
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                   ACQUIRED      PRO FORMA              EMERITUS
                                                      EMERITUS    FACILITIES    ADJUSTMENTS             COMBINED
                                                     ----------  ------------  -------------            ---------
<S>                                                  <C>         <C>           <C>            <C>       <C>
Revenues:
  Community revenue . . . . . . . . . . . . . . . .  $  43,087   $     2,963   $                         $46,050
  Other service fees. . . . . . . . . . . . . . . .        993            67                               1,060
  Management fees . . . . . . . . . . . . . . . . .      3,097                                             3,097
                                                     ----------  ------------  -------------            ---------
          Total operating revenues. . . . . . . . .     47,177         3,030                              50,207
                                                     ----------  ------------  -------------            ---------

Expenses:
  Community operations. . . . . . . . . . . . . . .     28,646         2,130           (190)       (c)    30,586
  General and administrative. . . . . . . . . . . .      5,404                                             5,404
  Depreciation and amortization . . . . . . . . . .      1,846            90            (40)     (d,e)     1,896
  Facility lease expense. . . . . . . . . . . . . .      8,604         1,001           (139)       (f)     9,466
  Impairment of property and equipment
                                                     ----------  ------------  -------------             --------
          Total operating expenses. . . . . . . . .     44,500         3,221           (369)              47,352
                                                     ----------  ------------  -------------             --------
          Income (loss) from operations . . . . . .      2,677          (191)           369                2,855

Other income (expense):
  Interest income . . . . . . . . . . . . . . . . .        156            (0)                                156
  Interest expense. . . . . . . . . . . . . . . . .     (3,274)           (1)            16      (g,k)    (3,259)
  Other, net. . . . . . . . . . . . . . . . . . . .         48                                                48
                                                     ----------  ------------  -------------             --------
          Net other expense . . . . . . . . . . . .     (3,070)           (1)            16               (3,055)
                                                     ----------  ------------  -------------             --------

          Net Income (loss) before taxes. . . . . .       (393)         (192)           385                 (200)

Income tax provision. . . . . . . . . . . . . . . .                       15            (15)      (h)
                                                     ----------  ------------  -------------             --------
          Net Income (loss) . . . . . . . . . . . .       (393)         (207)           400                 (200)

Preferred stock dividends . . . . . . . . . . . . .      1,870                                             1,870
                                                     ----------  ------------  -------------            ---------
          Net income (loss) to common shareholders.  $  (2,263)  $      (207)  $        400              $(2,070)
                                                     ==========  ============  =============             ========

Loss per common share - basic and diluted . . . . .      (0.22)                                            (0.20)
                                                     ==========                                      ============

Weighted average number of common shares
      outstanding - basic and diluted . . . . . . .     10,247                                            10,247
                                                     ==========                                      ============
</TABLE>



 SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>


<TABLE>
<CAPTION>

                                                EMERITUS CORPORATION
                             UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                                   FOR THE TWELVE-MONTHS ENDED DECEMBER 31, 2002
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                   ACQUIRED      PRO FORMA               EMERITUS
                                                      EMERITUS    FACILITIES    ADJUSTMENTS              COMBINED
                                                     ----------  ------------  -------------             ---------
<S>                                                  <C>         <C>           <C>            <C>        <C>
Revenues:
  Community revenue . . . . . . . . . . . . . . . .  $ 137,662   $    12,127   $                         $149,789
  Other service fees. . . . . . . . . . . . . . . .      4,575           146                                4,721
  Management fees . . . . . . . . . . . . . . . . .     10,892                                             10,892
                                                     ----------  ------------  -------------             ---------
          Total operating revenues. . . . . . . . .    153,129        12,273                              165,402
                                                     ----------  ------------  -------------             ---------

Expenses:
  Community operations. . . . . . . . . . . . . . .     93,822         9,031           (748)        (c)   102,105
  General and administrative. . . . . . . . . . . .     21,112                                             21,112
  Depreciation and amortization . . . . . . . . . .      7,223            57            (45)      (d,e)     7,235
  Facility lease expense. . . . . . . . . . . . . .     29,975         3,961           (511)        (f)    33,425
  Impairment of property and equipment. . . . . . .                      924           (924)        (i)
                                                     ----------  ------------  -------------             ---------
          Total operating expenses. . . . . . . . .    152,132        13,973         (2,228)              163,877
                                                     ----------  ------------  -------------             ---------
          Income (loss) from operations . . . . . .        997        (1,700)         2,228                 1,525

Other income (expense):
  Interest income . . . . . . . . . . . . . . . . .        403             0                                  403
  Interest expense. . . . . . . . . . . . . . . . .    (11,728)           (5)            65       (g,k)   (11,668)
  Other, net. . . . . . . . . . . . . . . . . . . .      4,105                                              4,105
                                                     ----------  ------------  -------------             ---------
          Net other expense . . . . . . . . . . . .     (7,220)           (5)            65                (7,160)
                                                     ----------  ------------  -------------             ---------

          Net Income (loss) before taxes. . . . . .     (6,223)       (1,705)         2,293                (5,635)

Income tax provision. . . . . . . . . . . . . . . .                       23            (23)       (h)
                                                     ----------  ------------  -------------             ---------
          Net Income (loss) . . . . . . . . . . . .     (6,223)       (1,728)         2,316                (5,635)
                                                     ----------  ------------  -------------             ---------

Preferred stock dividends . . . . . . . . . . . . .      7,343                                              7,343
                                                     ----------  ------------  -------------             ---------
          Net income (loss) to common shareholders.  $ (13,566)  $    (1,728)  $      2,316              $(12,978)
                                                     ==========  ============  =============             =========


Loss per common share - basic and diluted . . . . .      (1.33)                                             (1.27)
                                                     ==========                                       ============

Weighted average number of common shares
      outstanding - basic and diluted . . . . . . .     10,207                                             10,207
                                                     ==========                                       ============
</TABLE>



 SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>




                              EMERITUS CORPORATION
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(1)     The  Acquisition

     On  May  1,  2003,  the Company entered into a lease agreement with certain
affiliates  of  Healthcare  Realty  Trust  ("HRT"),  for  eight  assisted living
communities  (the  "Acquired Properties") in four states containing an aggregate
of  approximately  490 units.  The Company has no obligation with respect to the
Acquired  Facilities  other  than  its  responsibilities  under the lease, which
includes  the  option  to  purchase,  solely  at  the discretion of the Company.

     The lease is for an initial 10-year period with three 5-year extensions and
includes  an  opportunity  for  the  Company to purchase the Acquired Facilities
anytime  during  the  second year for $42.2 million and a purchase option in the
third  year  at  a  3%  premium  over  the  original  purchase option price.  In
addition, the lease gives the Company the right of first refusal to purchase any
of  the  properties if the owner decides to sell. The lease is a net lease, with
base  rental  approximating $3.45 million annually with a lease escalator at the
end  of  the  first  and  second  lease years based on a percentage of increased
operating  revenues,  with  an  aggregate  annual  cap  of  $275,000,  and lease
escalators  each year thereafter based on increases in the consumer price index.
HRT  agreed  to  fund  up  to $500,000 for capital expenditure requirements. The
capital  expenditures  funded by HRT will increase the basis and purchase option
and  carry  a 10% lease rate. All of the Acquired Facilities in this acquisition
are  purpose-built  assisted  living  communities  in which the Company plans to
offer  both  assisted  and  memory  loss  services  in  selected  communities.

     HRT  also  agreed  to  extend  a  $600,000  loan to the Company for working
capital  purposes and for capital and other improvements to the facilities. This
loan  will  have  a  10-year  term  with  no extensions, bearing interest at 10%
annually  with  monthly  interest-only  payments.  In  addition,  if the Company
exercises  its  purchase  option  at  any  time  on  any  facility, the pro rata
principal  portion  of  the  loan  will  become  due  at  the time the option is
exercised.

(2)     Pro  Forma  Adjustments

a)     To  remove  all  assets, liabilities and net deficit of Parent company of
the Acquired Facilities as Emeritus acquired the Properties through an operating
lease  agreement.

b)     To  record  lease  acquisition  costs of approximately $ 500,000 incurred
subsequent  to  March  31,  2003.

c)     To  eliminate  management  fees  charged by Balanced Care to the Acquired
Facilities  of  $190,000 for the three months ended March 31, 2003, and $748,000
for  the twelve months ended December 31, 2002, since Emeritus is not hiring any
additional  administrative  staff  to  operate  the  Acquired  Facilities.

d)     To  eliminate depreciation and amortization on the Acquired Facilities as
Emeritus  acquired  the  buildings  through  an  operating  lease  agreement.

e)     To  record  amortization  of  lease acquisition costs of $ 13,000 for the
three  months  ended  March  31,  2003,  and $50,000 for the twelve months ended
December  31,  2002,  based  on  the  initial  ten-year  lease  term.

f)     To  eliminate facility lease expense of $1.0 million for the three months
ended  March 31, 2003, and $4.0 million for the year ended December 31, 2002 for
leases  not  assumed  by  Emeritus  and  to record facility lease expense in the
amount  of  $862,000 for the three months ended March 31, 2003, and $3.5 million
for  the  year ended December 31, 2002, related to the Acquired Facilities based
on  the  lease  agreement.

g)     To  eliminate  interest expense on debt that was not assumed by Emeritus.

h)     To  eliminate  tax  recorded  on the Acquired Facilities since Emeritus's
effective  rate  is  0%.

i)     To  eliminate  impairment  of  property and equipment that would not have
been  recorded  had  the  transaction  occurred  on  January  1,  2002.

j)     To record cash and note payable of approximately $600,000 for the working
capital  loan  from  HRT.

k)     To  record interest expense of approximately $15,000 for the three months
ended  March 31, 2003, and $60,000 for the year ended December 31, 2002, related
to  the  working  capital  note  which  requires  monthly interest-only payments
bearing  interest  at  10%  annually.



<PAGE>


                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  registrant  has  duly  caused this report to be signed on its behalf by the
undersigned,  hereunto  duly  authorized.






EMERITUS  CORPORATION

By:     /s/  Raymond  R.  Brandstrom
        ----------------------------
        Raymond  R.  Brandstrom
        Vice  President  of  Finance,
        Chief  Financial  Officer,  and  Secretary


Dated:  July  15,  2003
[{"type": "8-K", "sequence": "1", "filename": "esc8k052003.txt", "secsgml_size_bytes": 66088}]
{"company-data": {"conformed-name": "EMERITUS CORP\\WA\\", "cik": "0001001604", "assigned-sic": "8050", "irs-number": "911605464", "state-of-incorporation": "WA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-14012", "film-number": "03786975"}, "business-address": {"street1": "3131 ELLIOTT AVENUE", "street2": "SUITE 500", "city": "SEATTLE", "state": "WA", "zip": "98121", "phone": "2062982909"}, "mail-address": {"street1": "3131 ELLIOTT AVE STE 500", "city": "SEATTLE", "state": "WA", "zip": "98121"}}
SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                                  ____________
                                    FORM 8-K

                                 CURRENT REPORT

                       PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

         Date of report (Date of earliest event reported):  MAY 1, 2003

                              EMERITUS CORPORATION
               (Exact name of registrant as specified in charter)

                      WASHINGTON     1-14012     91-1605464
    (State or other jurisdiction of incorporation)     (Commission File Number)
                        (IRS Employer Identification No.)

                              Raymond R. Brandstrom
        Vice President of Finance, Chief Financial Officer, and Secretary
                              Emeritus Corporation
                         3131 Elliott Avenue, Suite 500
                            Seattle, Washington 98121
               (Address of principal executive offices) (Zip Code)

                                 (206) 298-2909
              (Registrant's telephone number, including area code)
ITEM  2.      ACQUISITION  OR  DISPOSITION  OF  ASSETS

     This  Form 8-K amends the interim report on Form 10-Q dated March 31, 2003,
(filed  May  9, 2003) to include Item 7 (a) Financial Statements, and Item 7 (b)
Pro  Forma  Financial  Information.

ITEM  7.      FINANCIAL  STATEMENTS  AND  EXHIBITS

(a)     Financial  statements  of  business  acquired

The  combined  balance  sheets of the Eight Facilities operated by Balanced Care
Corporation  Acquired by Emeritus Corporation as of March 31, 2003, and June 30,
2002,  and the combined statements of operations, cash flows, and changes in net
equity (deficit) of parent company for the nine months ended March 31, 2003, and
the  year  ended  June  30,  2002,  and  notes thereto and report of Independent
Auditors  relating  to  the  June  30,  2002,  financial  statements.

(b)     Unaudited  Pro  Forma  Financial  Information:

i.   Emeritus Corporation Pro Forma Consolidated Balance Sheet as of March 31,
     2003;
ii.  Emeritus Corporation Pro Forma Consolidated Statements of Operations for
     the three months ended March 31, 2003, and the year ended December 31,
     2002;
iii. Notes to the Pro Forma Consolidated Financial Statements;

(c)     Exhibits:

23.1     Consent  of  KPMG  LLP
INDEX TO FINANCIAL STATEMENTS
                          EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION

                                                                         PAGES:
Independent AuditorsReport. . . . . . . . . . . . . . . . . . . . . . .       1
Financial Statements:
Combined Balance Sheet at June 30, 2002 . . . . . . . . . . . . . . . .       2
Combined Statement of Operations for the year ended June 30, 2002 . . .       3
Combined Statement of Changes in Net Equity (Deficit) of Parent Company
    for the year ended June 30, 2002. . . . . . . . . . . . . . . . . .       4
Combined Statement of Cash Flows for the year ended June 30, 2002 . . .       5
Notes to Combined Financial Statements. . . . . . . . . . . . . . . . .       6

Condensed Financial Statements (Unaudited):
Combined Balance Sheets as of March 31, 2003 and June 30, 2002. . . . .      11
Combined Statements of Operations for the nine months ended
  March 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . . . . .      12
Combined Statements of Changes in Net Deficit of Parent Company
  for the nine months ended March 31, 2003. . . . . . . . . . . . . . .      13
Combined Statements of Cash Flows for the nine months
  ended March 31, 2003 and 2002 . . . . . . . . . . . . . . . . . . . .      14
Notes to Combined Financial Statements. . . . . . . . . . . . . . . . .      15
INDEPENDENT AUDITORS' REPORT

The  Board  of  Directors
Emeritus  Corporation:

We  have audited the accompanying combined balance sheet of the Eight Facilities
Operated by Balanced Care Corporation Acquired by Emeritus Corporation (Acquired
Facilities),  as  described  in  note  1,  as  of June 30, 2002, and the related
statements of operations, changes in net equity (deficit) of parent company, and
cash  flows for the year then ended. These combined financial statements are the
responsibility  of the Acquired Facilities' management. Our responsibility is to
express  an  opinion  on  these  financial  statements  based  on  our  audit.

We  conducted our audit in accordance with auditing standards generally accepted
in  the  United  States  of  America.  Those  standards require that we plan and
perform  the  audit  to  obtain reasonable assurance about whether the financial
statements  are free of material misstatement. An audit includes examining, on a
test  basis,  evidence  supporting  the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audit  provides  a
reasonable  basis  for  our  opinion.

In  our  opinion,  the  combined  financial statements referred to above present
fairly,  in  all  material  respects,  the  combined  financial  position of the
Acquired Facilities as of June 30, 2002, and the results of their operations and
their  cash  flows  for  the  year  then  ended  in  conformity  with accounting
principles  generally  accepted  in  the  United  States  of  America.

/s/  KPMG, LLP

Baltimore,  Maryland
June  23,  2003
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                             COMBINED BALANCE SHEET
                                  JUNE 30, 2002
                                 (IN THOUSANDS)
                                     ASSETS
Current Assets:
 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .  $   70
 Accounts receivable (net of allowance for doubtful accounts of $59)     294
  Prepaid expenses and other current assets. . . . . . . . . . . . .      82
                                                                      -------
 Total current assets. . . . . . . . . . . . . . . . . . . . . . . .     446
Restricted investments . . . . . . . . . . . . . . . . . . . . . . .     526
Property and equipment, net (note 3) . . . . . . . . . . . . . . . .     300
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5
                                                                      -------
                                                                      $1,277
                                                                      =======

                  LIABILITIES AND NET DEFICIT OF PARENT COMPANY

Current Liabilities:
 Current portion of long-term debt (note 5). . . . . . . . . . . . .  $   14
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . .      46
 Accrued payroll . . . . . . . . . . . . . . . . . . . . . . . . . .     242
 Accrued expenses (note 4) . . . . . . . . . . . . . . . . . . . . .     175
  Unearned rent revenue. . . . . . . . . . . . . . . . . . . . . . .     350
                                                                      -------
 Total current liabilities . . . . . . . . . . . . . . . . . . . . .     827
Long-term debt, net of current portion (note 5). . . . . . . . . . .       2
Straight-line lease liability. . . . . . . . . . . . . . . . . . . .     397
Other liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .     124
                                                                      -------
 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . .   1,350

Commitments and contingencies (note 6 and 10). . . . . . . . . . . .       -

Net deficit of parent company. . . . . . . . . . . . . . . . . . . .     (73)
                                                                      -------
                                                                      $1,277
                                                                      =======
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                         COMBINED STATEMENT OF OPERATIONS
                            YEAR ENDED JUNE 30, 2002
                                  (IN THOUSANDS)
Revenues:
  Resident services. . . . . . . . . . . .  $12,209
  Other revenues . . . . . . . . . . . . .       76
                                            --------
                                             12,285

Operating expenses:
  Facility operating expenses:
         Salaries, wages, and benefits . .    4,870
         Other operating expenses. . . . .    3,108
  Management fees. . . . . . . . . . . . .      749
  Lease expense. . . . . . . . . . . . . .    3,953
  Depreciation and amortization. . . . . .       83
  Loss on impairment of long-lived assets.      924
                                            --------
          Total operating expenses . . . .   13,687
                                            --------
       Loss from operations. . . . . . . .   (1,402)

Other income (expense):
  Interest and other income. . . . . . . .        2
  Interest expense . . . . . . . . . . . .       (4)
                                            --------
          Loss before income taxes . . . .   (1,404)
Provision for income taxes (note 7). . . .      (23)
                                            --------
          Net loss . . . . . . . . . . . .  $(1,427)
                                            ========
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
    COMBINED STATEMENTS OF CHANGES IN NET EQUITY (DEFICIT) OF PARENT COMPANY
                            YEAR ENDED JUNE 30, 2002
                                  (IN THOUSANDS)
Balance at June 30, 2001. .                      $ 1,532
Net distributions to parent company                 (178)
Net loss. . . . . . . . . .                       (1,427)
                                                 --------
Balance at June 30, 2002. .                      $   (73)
                                                 ========
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                                  BALANCED CARE CORPORATION
                              ACQUIRED BY EMERITUS CORPORATION
                              COMBINED STATEMENT OF CASH FLOWS
                                  YEAR ENDED JUNE 30, 2002
                                       (IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $(1,427)
   Adjustments to reconcile net loss to net cash used for
    operating activities:
      Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . .       83
      Loss on impairment of long-lived assets. . . . . . . . . . . . . . . . . . .      924
   Changes in operating assets and liabilities, excluding effects of acquisitions:
      Decrease in receivables, net . . . . . . . . . . . . . . . . . . . . . . . .       12
      Decrease in prepaid expenses and other current assets. . . . . . . . . . . .        5
      Increase in current liabilities. . . . . . . . . . . . . . . . . . . . . . .      215
      Decrease in straight-line lease liability. . . . . . . . . . . . . . . . . .      (44)
                                                                                    --------
            Net cash used in operating activities. . . . . . . . . . . . . . . . .     (232)
                                                                                    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . .       (2)
      Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       35
                                                                                    --------
            Net cash provided by investing activities. . . . . . . . . . . . . . .       33
                                                                                    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . .      (14)
      Decrease in other liabilities. . . . . . . . . . . . . . . . . . . . . . . .      (19)
      Net distributions to parent company. . . . . . . . . . . . . . . . . . . . .     (178)
                                                                                    --------
            Net cash used in financing activities. . . . . . . . . . . . . . . . .     (211)
                                                                                    --------
            Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . .     (410)
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . .      480
                                                                                    --------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . .  $    70
                                                                                    ========

SUPPLEMENTAL CASH FLOW INFORMATION
      Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . .  $     2
                                                                                    ========
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                                  June 30, 2002
                             (Dollars in thousands)
(1)     BACKGROUND

On April 30, 2003, Operations Transfer Agreements with respect to eight assisted
living  facilities  (the Acquired Facilities) were entered into by and among the
operator-lessees  of  the  facilities  (the  operator-lessees),  Balanced  Care
Corporation  (BCC),  BCC  subsidiaries  managing  the facilities (the managers),
collectively  the  Transferor,  and  Emeritus  Corporation  (Emeritus or the new
operator)  and  the owners of the facilities. In December 2002 and January 2003,
BCC  subsidiaries  acquired six of the operator-lessees; the operator-lessees of
the  remaining  two  facilities  were  BCC  subsidiaries.

The  facilities  were  leased pursuant to the terms of previous Lease Agreements
between  the  owner  and  the operator-lessees, and were managed pursuant to the
terms  of  previous  management  agreements between the operator-lessees and the
managers.  Emeritus  and  the  owner  have  entered  into new Lease and Security
Agreements with respect to the Acquired Facilities and the previous lessees, the
owner,  manager  and  certain  others  have  executed  certain  settlement  and
termination  agreements.

The  Acquired  Facilities' financial statements for the year ended June 30, 2002
are  presented  for  the  purposes of complying with the Securities and Exchange
Commission's  rules  and  regulations  regarding  acquired  businesses.

The  combined  financial  statements  of  the  Acquired  Facilities  reflect the
historical  accounts  of the operator-lessees of the assisted living facilities,
including  management  fees  charged  by  BCC  subsidiaries  to  the  individual
facilities.  Such  fees,  calculated  as  a  percentage of revenue, are based on
management  agreements.  However,  BCC has operated certain other businesses and
has  provided  certain services to the Acquired Facilities, including financial,
legal,  accounting,  human  resources  and  information  systems  services.
Accordingly,  management  fees  and  other  expense  allocations to the Acquired
Facilities may not be representative of costs of such services to be incurred in
the  future  (see  note  9).

(2)     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

(a)     REVENUE  RECOGNITION
Resident  service revenues are recognized when services are rendered and consist
of  resident  fees  and  other  ancillary  services provided to residents of the
assisted  living  facilities.

(b)     CASH  AND  CASH  EQUIVALENTS
Cash  equivalents  consist of highly liquid instruments with original maturities
of  three  months  or  less.

(c)     RESTRICTED  INVESTMENTS
Restricted investments consist of certificates of deposit that have been pledged
as  collateral  for  certain  of the Acquired Facilities' lease commitments. The
amounts  are  equivalent  to  three  months  lease  payments  and  are generally
restricted  through  the  initial  lease  term.

(d)     PROPERTY  AND  EQUIPMENT
Property  and  equipment  are  stated  at cost less accumulated depreciation or,
where  appropriate,  the  present value of the related capital lease obligations
less  accumulated amortization. Depreciation is computed using the straight-line
method  over the estimated useful lives of the assets (see note 3). Expenditures
for  maintenance  and  repairs  necessary  to maintain property and equipment in
efficient operating condition are charged to operations. Costs for additions and
betterments  are  capitalized.

(e)     IMPAIRMENT  OF  LONG-LIVED  ASSETS
Management  reviews  its  long-lived  assets and certain identifiable intangible
assets  for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to  be  held  and  used is measured by a comparison of the carrying amount of an
asset  to  undiscounted  future  net  cash  flow expected to be generated by the
asset.  The  amount of impairment loss is determined by comparing the historical
carrying value of the asset to its estimated fair value. Estimated fair value is
determined  through  an evaluation of recent financial performance and projected
discounted  cash  flows  of  the  facilities  using  standard industry valuation
techniques.  This  comparison  is  performed  on  a  facility-by-facility basis.

(f)     STRAIGHT-LINE  LEASE  LIABILITY
Straight-line  lease  liabilities  represent lease deposit funding received from
REITs  relating to lease transactions. The Acquired Facilities pay rent on these
funds  and  amortizes the related straight-line lease liability over the initial
lease  term  as  a  reduction  of  rent  expense.

(g)     NET  EQUITY  OF  PARENT  COMPANY
The  parent  companies  of  the  operator-lessees  transfer excess cash from the
Acquired  Facilities and make working capital advances and corporate allocations
to  the  Acquired  Facilities.  These  advances  include  amounts  to  fund cash
shortfalls, advances for accounts payable and amounts paid for employee benefits
and  other  items.  The resulting net balance of the aforementioned transactions
plus the parent companies' initial investment in the Acquired Facilities and the
cumulative  deficit  of  the  Acquired Facilities is classified as net equity of
parent  company  in  the  accompanying  balance  sheet.

(h)     INCOME  TAXES
The Acquired Facilities are included in the parent companies' federal income tax
returns.  The  income  taxes  reported  in  the  Acquired  Facilities  financial
statements  are  an  allocation  of  income  taxes calculated as if the Acquired
Facilities  were  a  separate taxpayer. The Acquired Facilities follow the asset
and liability method of accounting for income taxes. Under this method, deferred
tax  assets  and  liabilities  are  recognized  for  the future tax consequences
attributable  to  differences  between  financial  statement carrying amounts of
existing  assets  and  liabilities  and  their  respective  tax  bases.

(i)     USE  OF  ESTIMATES
The  preparation  of  the  combined  financial  statements  in  conformity  with
generally  accepted  accounting principles requires management to make estimates
and  assumptions.  These  assumptions  affect the reported amounts of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  financial  statements  and  the  reported  amounts of revenues and expenses
during  reported  period.  Actual  results  could  differ  from these estimates.

(3)     PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following  at  June  30,  2002:
ESTIMATED
                                 USEFUL LIFE          2002
                               ---------------        ----
Land and land improvements . .      2-5 years         $ 53
Leasehold improvements . . . .  Term of lease          217
Fixed and moveable equipment .     3-20 years          162
                                                      ----
                                                       432
Less: accumulated depreciation                         132
                                                      ----
                                                      $300
                                                      ====
Depreciation  expense  was  $71  in  2002.  At June 30, 2002, fixed and moveable
equipment  included approximately $16 of assets that have been capitalized under
capital  leases.  Amortization  of the leased assets is included in depreciation
expense.

(4)     ACCRUED  EXPENSES

Accrued  expenses  consist  of  the  following  at  June  30,  2002:
Accrued property taxes               $ 40
Accrued rent . . . . .                 73
Other accrued expenses                 62
                                     ----
                                     $175
                                     ====
(5)     LONG-TERM  DEBT

Long-term  debt  at  June  30, 2002 consists of capital lease obligations having
principal  and  interest  payable  monthly.

(6)     LEASES

The  Acquired  Facilities  are  leased  under  operating  lease  agreements with
Healthcare  Realty  Trust. As described in note 1, the leases were terminated on
April  30,  2003.

(7)     INCOME  TAXES

The  provision  for  income  taxes  for the year ended June 30, 2002 consists of
current  state  income  taxes.

A  reconciliation  of  income  tax expense computed at the statutory federal tax
rate  on  income  to  the  actual  income  tax  expense  is  as  follows:
Income taxes computed at statutory rate. . . .      $(477)
State income taxes, net of federal tax benefit         23
Effect of items not deductible for tax puposes          4
Change in the beginning of the year valuation
   allowance for deferred tax assets allocated
   to tax expense. . . . . . . . . . . . . . .        473
                                                    ------
                    Income tax provision . . .      $  23
                                                    ======
Deferred  income taxes reflect temporary differences between the carrying amount
of  assets and liabilities for financial reporting purposes and the amounts used
for income tax purposes. Deferred tax assets consist of the following as of June
30,  2002:
Straight-line rents not included in income . . .      $   119
Vacation and other accruals. . . . . . . . . . .           20
Net operating loss carryforward. . . . . . . . .        2,911
Allowance for doubtful accounts. . . . . . . . .           23
Depreciation and amortization due to differences
   in book/tax basis . . . . . . . . . . . . . .          264
                                                      --------
                    Gross deferred tax assets. .        3,337
Valuation allowance. . . . . . . . . . . . . . .       (3,337)
                                                      --------
                    Net deferred tax assets. . .      $     -
                                                      ========
At  June  30,  2002,  the  Company  had  net  operating  loss  carryforwards  of
approximately  $7,600  that  expire  at  various  dates  through 2022. These net
operating loss carryforwards may be significantly limited under various sections
of  the  Internal  Revenue  Code.

(8)     IMPAIRMENT  OF  LONG-LIVED  ASSETS

In  2002,  the  economic  environment in which the facilities operate negatively
affected  the  operating results of the Acquired Facilities, resulting in a loss
from  operations.  As  a  result,  management  applied  Statement  of  Financial
Accounting  Standards  No.  121.  In  accordance  with  SFAS No. 121, management
estimated  the future cash flows expected to result from those assets to be held
and  used.  In estimating the future cash flows for determining whether an asset
is  impaired,  and  if  expected  future cash flows used in measuring assets are
impaired,  management grouped its assets at the lowest level for which there are
identifiable  cash  flows,  the facility level. After determining the facilities
subject  to an impairment charge, management determined the estimated fair value
of  such  facilities.  The carrying value of property and equipment exceeded the
fair  value  by  $924  at  June  30,  2002.

(9)     OTHER  RELATED  PARTY  TRANSACTIONS

Management  fees represent fees for certain corporate administrative and general
services,  including  financial,  legal,  accounting,  human  resources  and
information systems services provided by BCC. Management fees have been provided
at  a  range of 6% to 7% of total revenues of each facility. Management believes
that this allocation method is reasonable. However, management believes that the
Acquired  Facilities'  corporate  administrative  and  general  expenses  on  a
stand-alone  basis  may have been different had the Acquired Facilities operated
as  an  unaffiliated  entity.

(10)     LITIGATION

The  Acquired  Facilities  are  party  to  various  claims,  legal  actions, and
complaints  arising  in  the  ordinary  course  of  business.  In the opinion of
management, all such matters are without merit or are of such a kind, or involve
such  amounts,  that  their  unfavorable  disposition  would not have a material
adverse effect on the financial position, results of operations or the liquidity
of  the  Acquired  Facilities.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                             COMBINED BALANCE SHEET
                                 (IN THOUSANDS)
                                     ASSETS

                                                MARCH 31, 2003
                                                  UNAUDITED       JUNE 30, 2002
                                               ----------------  ---------------
Current Assets:
 Cash and cash equivalents. . . . . . . . . .  $             7   $           70
 Accounts receivable. . . . . . . . . . . . .              245              294
  Prepaid expenses and other current assets .               91               82
                                               ----------------  ---------------
 Total current assets . . . . . . . . . . . .              343              446
Restricted investments. . . . . . . . . . . .              526              526
Property and equipment, net . . . . . . . . .            1,760              300
Other assets. . . . . . . . . . . . . . . . .                5                5
                                               ----------------  ---------------
                                               $         2,634   $        1,277
                                               ================  ===============

                  LIABILITIES AND NET DEFICIT OF PARENT COMPANY

Current Liabilities:
 Current portion of long-term debt. . . . . .  $            31   $           14
 Accounts payable . . . . . . . . . . . . . .               80               46
 Accrued payroll. . . . . . . . . . . . . . .              207              242
 Accrued expenses . . . . . . . . . . . . . .            1,473              175
 Deferred revenue . . . . . . . . . . . . . .              533              350
                                               ----------------  ---------------
 Total current liabilities. . . . . . . . . .            2,324              827
Long-term debt, net of current portion. . . .                -                2
Straight-line lease liability . . . . . . . .              348              397
Other long-term liabilities . . . . . . . . .              105              124
                                               ----------------  ---------------
 Total liabilities. . . . . . . . . . . . . .            2,777            1,350

Net deficit of parent company . . . . . . . .             (143)             (73)
                                               ----------------  ---------------
                                               $         2,634   $        1,277
                                               ================  ===============
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                        COMBINED STATEMENTS OF OPERATIONS
                    NINE MONTHS ENDED MARCH 31, 2003 AND 2002
                                  (IN THOUSANDS)

                                               2003       2002
                                             UNAUDITED  UNAUDITED
                                            ----------  ---------
Revenues:
  Resident services. . . . . . . . . . . .  $    9,020   $9,229
  Other revenues . . . . . . . . . . . . .         169       49
                                            -----------  -------
Total revenues . . . . . . . . . . . . . .       9,189    9,278

Operating expenses:
  Facility operating expenses:
         Salaries, wages, and benefits . .       3,557    3,705
         Other operating expenses. . . . .       2,457    2,166
  Management fees. . . . . . . . . . . . .         570      564
  Lease expense. . . . . . . . . . . . . .       2,983    2,963
  Depreciation and amortization. . . . . .         106       63
                                            -----------  -------
          Total operating expenses . . . .       9,673    9,461
                                            -----------  -------
       Loss from operations. . . . . . . .        (484)    (183)

Other income (expense):
  Interest expense . . . . . . . . . . . .          (2)      (1)
                                            -----------  -------
          Loss before income taxes . . . .        (486)    (184)
Provision for income taxes (note 7). . . .          15       17
                                            -----------  -------
          Net loss . . . . . . . . . . . .  $     (501)  $ (201)
                                            ===========  =======
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
         COMBINED STATEMENTS OF CHANGES IN NET DEFICIT OF PARENT COMPANY
                  NINE MONTHS ENDED MARCH 31, 2003 (UNAUDITED)
                                  (IN THOUSANDS)
Balance at June 30, 2002 . . . . . . . . . . . . . .  $   (73)
Net distributions to parent. . . . . . . . . . . . .   (1,116)
Property and equipment contributed by parent company    1,547
Net loss . . . . . . . . . . . . . . . . . . . . . .     (501)
                                                      --------
Balance at March 31, 2003. . . . . . . . . . . . . .  $  (143)
                                                      ========
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                        COMBINED STATEMENTS OF CASH FLOWS
                    NINE MONTHS ENDED MARCH 31, 2003 and 2002
                                 (IN THOUSANDS)

                                                                                      2003      2002
                                                                                    UNAUDITED UNAUDITED
                                                                                    --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   (501)  $(201)
   Adjustments to reconcile net loss to net cash used for
    operating activities:
      Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . .       106      63
   Changes in operating assets and liabilities, excluding effects of acquisitions:
      Decrease (increase) in receivables, net. . . . . . . . . . . . . . . . . . .        50     (74)
      Decrease in prepaid expenses and other current assets. . . . . . . . . . . .        (9)    (15)
      Increase in current liabilities. . . . . . . . . . . . . . . . . . . . . . .     1,479     219
      Decrease in straight-line lease liability. . . . . . . . . . . . . . . . . .       (49)    (33)
                                                                                    ---------  ------
            Net cash provided by (used in) operating activities. . . . . . . . . .     1,076     (41)
                                                                                    ---------  ------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchases of property and equipment. . . . . . . . . . . . . . . . . . . . .       (19)    (25)
      Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         -      33
                                                                                    ---------  ------
            Net cash provided by (used in) investing activities. . . . . . . . . .       (19)      8
                                                                                    ---------  ------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payment on long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . .       (11)    (10)
      Borrowings on long-term debt . . . . . . . . . . . . . . . . . . . . . . . .        26       -
      Decrease in other liabilities. . . . . . . . . . . . . . . . . . . . . . . .       (19)    (14)
      Net cash distributions to Parent . . . . . . . . . . . . . . . . . . . . . .    (1,116)   (189)
                                                                                    ---------  ------
            Net cash used in financing activities. . . . . . . . . . . . . . . . .    (1,120)   (213)
                                                                                    ---------  ------
            Decrease in cash and cash equivalents. . . . . . . . . . . . . . . . .       (63)   (246)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . .        70     480
                                                                                    ---------  ------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . .  $      7   $ 234
                                                                                    =========  ======

SUPPLEMENTAL CASH FLOW INFORMATION
      Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      2   $   1
                                                                                    =========  ======
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES:
      Property and equipment contributed by parent company . . . . . . . . . . . .  $  1,547   $   -
                                                                                    =========  ======
SEE ACCOMPANYING NOTES TO COMBINED FINANCIAL STATEMENTS.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                             March 31, 2003 and 2002
                             (Dollars in thousands)

(1)     BACKGROUND  AND  BASIS  OF  PRESENTATION

(a)     BACKGROUND

On April 30, 2003, Operations Transfer Agreements with respect to eight assisted
living  facilities  (the Acquired Facilities) were entered into by and among the
operator-lessees  of  the  facilities  (the  operator-lessees),  Balanced  Care
Corporation  (BCC),  BCC  subsidiaries  managing  the facilities (the managers),
collectively  the  Transferor,  and  Emeritus  Corporation  (Emeritus or the new
operator)  and  the owners of the facilities. In December 2002 and January 2003,
BCC  subsidiaries  acquired six of the operator-lessees; the operator-lessees of
the  remaining  two  facilities  were  BCC  subsidiaries.

The  facilities  were  leased pursuant to the terms of previous Lease Agreements
between  the  owner  and  the operator-lessees, and were managed pursuant to the
terms  of  previous  management  agreements between the operator-lessees and the
managers.  Emeritus  and  the  owner  have  entered  into new Lease and Security
Agreements  with  respect  to the Acquired Facilities; and the previous lessees,
the  owner,  manager  and  certain  others  have executed certain settlement and
termination  agreements.

The  Acquired  Facilities'  financial statements for the nine months ended March
31,  2003  and  2002  are  presented  for  the  purposes  of  complying with the
Securities  and  Exchange  Commission's rules and regulations regarding acquired
businesses.

The  combined  financial  statements  of  the  Acquired  Facilities  reflect the
historical  accounts  of the operator-lessees of the assisted living facilities,
including  management  fees  charged  by  BCC  subsidiaries  to  the  individual
facilities.  Such  fees,  calculated  as  a  percentage of revenue, are based on
management  agreements.  However,  BCC has operated certain other businesses and
has  provided  certain services to the Acquired Facilities, including financial,
legal,  accounting,  human  resources  and  information  systems  services.
Accordingly,  management  fees  and  other  expense  allocations to the Acquired
Facilities may not be representative of costs of such services to be incurred in
the  future.

In  September 2002, the operator-lessees ceased making lease payments and sought
to  renegotiate  the  terms  of  the  leases. Accordingly, at March 31, 2003 the
leases  are in default and the financial statements at such date reflect accrued
and  unpaid  rents  of  $  1,239.
EIGHT FACILITIES OPERATED BY
                            BALANCED CARE CORPORATION
                        ACQUIRED BY EMERITUS CORPORATION
                     Notes to Combined Financial Statements
                             March 31, 2003 and 2002
                             (Dollars in thousands)

(b)     BASIS  OF  PRESENTATION

The  combined  financial  statements  as of and for the nine-month periods ended
March  31,  2003  and 2002 are unaudited but, in the opinion of management, have
been  prepared on the same basis as the audited financial statements and reflect
all  adjustments,  consisting  of normal recurring accruals necessary for a fair
presentation of the information set forth therein. The results of operations for
the nine-month period ended March 31, 2003 are not necessarily indicative of the
operating  results  to  be expected for the full year or any other period. These
combined  financial  statements and notes should be read in conjunction with the
combined  financial  statements  and  notes  included  in  the audited financial
statements  of  the  Acquired  Facilities for the year ended June 30, 2002 filed
herewith.

(2)     ACQUISITION  OF  OPERATOR-LESSEES

As described in note 1, BCC subsidiaries acquired six of the operator-lessees in
December  2002  and  January  2003.  The  acquisition increased the basis in the
facilities  and equity of the parent company by $1,547. Such amount consisted of
the  purchase  price  of  $1,201 and contributed property and equipment of $346.

             UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

     On  May  1, 2003, Emeritus Corporation (the "Company") entered into a lease
agreement  with certain affiliates of Healthcare Realty Trust ("HRT"), for eight
assisted  living  communities  (the  "Acquired  Facilities")  in  four  states
containing  an  aggregate  of  approximately  490  units.

     The  following  unaudited  pro  forma consolidated financial statements are
presented  to  illustrate  the  effects  of  the  acquisition  on the historical
financial  position  and operating results.  The Acquired Facilities have a June
30  fiscal  year end, and the following unaudited pro forma financial statements
are  presented  using  the  Company's  December  31  fiscal  year  end.

     The  following  unaudited  pro forma consolidated balance sheet of Emeritus
Corporation at March 31, 2003, gives effect to the acquisition as if it occurred
as  of  that date.  The following unaudited pro forma consolidated statements of
operations  of  Emeritus  Corporation for the three months ended March 31, 2003,
and  the  year ended December 31, 2002, gives effect to the acquisition as if it
occurred  as  of  January  1,  2002.

     The unaudited pro forma consolidated financial statements have been derived
from,  and  should  be  read  in  conjunction  with, the historical consolidated
financial  statements,  including  the  notes  thereto,  of  the Company and the
Acquired  Facilities.  For  the Company, those financial statements are included
in Emeritus Corporation's Annual Report on Form 10-K for the year ended December
31,  2002,  and  Emeritus  Corporation's  Quarterly  Report on Form 10-Q for the
quarter  ended  March  31,  2003.  For  the Acquired Facilities, those financial
statements  are  filed herewith.  The unaudited pro forma consolidated financial
statements are presented for informational purposes only and are not necessarily
indicative  of  the  financial  position or results of operations of the Company
that  would  have  occurred had the acquisition been consummated as of the dates
indicated.  In  addition,  the  unaudited  pro  forma  consolidated  financial
statements  are  not necessarily indicative of the future financial condition or
operating  results  of  the  Company.
EMERITUS CORPORATION
                                   UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
                                                   MARCH 31, 2003
                                                   (IN THOUSANDS)

ASSETS
                                                                    ACQUIRED      PRO FORMA                EMERITUS
                                                       EMERITUS    FACILITIES    ADJUSTMENTS               COMBINED
                                                      ----------  ------------  -------------             ----------
Current Assets:
 Cash and cash equivalents . . . . . . . . . . . . .  $   4,954   $         7   $         93     (a,b,j)  $   5,054
 Short-term investments. . . . . . . . . . . . . . .      2,903                                               2,903
 Trade accounts receivable, net. . . . . . . . . . .      1,612           245           (245)        (a)      1,612
 Other receivables . . . . . . . . . . . . . . . . .      3,189                                               3,189
 Prepaid expenses and other current assets . . . . .      5,195            91            (91)        (a)      5,195
                                                      ----------  ------------  -------------             ----------
 Total current assets. . . . . . . . . . . . . . . .     17,853           343           (243)                17,953
                                                      ----------  ------------  -------------             ----------

Property and equipment, net. . . . . . . . . . . . .    119,173         1,760         (1,760)        (a)    119,173
Property held for development. . . . . . . . . . . .      1,254                                               1,254
Notes receivable from and investments in affiliates.      6,453                                               6,453
Restricted deposits. . . . . . . . . . . . . . . . .      5,555           526           (526)        (a)      5,555
Lease acquisition costs, net . . . . . . . . . . . .      6,082                          500         (b)      6,582
Other assets, net. . . . . . . . . . . . . . . . . .      5,030             5             (5)        (a)      5,030
                                                      ----------  ------------  -------------             ----------
 Total assets. . . . . . . . . . . . . . . . . . . .  $ 161,400   $     2,634   $     (2,034)              $162,000
                                                      ==========  ============  =============             ==========

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current Liabilities:
 Current portion of long-term debt . . . . . . . . .  $   3,404   $        31   $        (31)        (a)  $   3,404
 Trade accounts payable. . . . . . . . . . . . . . .      3,145            80            (80)        (a)      3,145
 Accrued employee compensation and benefits. . . . .      5,526           207           (207)        (a)      5,526
 Accrued interest. . . . . . . . . . . . . . . . . .      1,320                                               1,320
 Accrued real estate taxes . . . . . . . . . . . . .      1,387                                               1,387
 Accrued dividends on preferred stock. . . . . . . .     14,989                                              14,989
 Other accrued expenses. . . . . . . . . . . . . . .      8,501         1,473         (1,473)        (a)      8,501
 Deferred revenue. . . . . . . . . . . . . . . . . .      3,915           533           (533)        (a)      3,915
 Other current liabilities . . . . . . . . . . . . .      5,580                                               5,580
                                                      ----------  ------------  -------------             ----------
 Total current liabilities . . . . . . . . . . . . .     47,767         2,324         (2,324)                47,767
                                                      ----------  ------------  -------------             ----------

Long-term debt, less current portion . . . . . . . .    119,825                          600         (j)    120,425
Convertible debentures . . . . . . . . . . . . . . .     32,000                                              32,000
Deferred gain on sale of communities . . . . . . . .     20,233                                              20,233
Deferred rent. . . . . . . . . . . . . . . . . . . .      2,516                                               2,516
Straight-line lease liability. . . . . . . . . . . .                      348           (348)        (a)
Other long-term liabilities. . . . . . . . . . . . .        502           105           (105)        (a)        502
                                                      ----------  ------------  -------------             ----------
 Total liabilities . . . . . . . . . . . . . . . . .    222,843         2,777         (2,177)               223,443
                                                      ----------  ------------  -------------             ----------
Minority interests . . . . . . . . . . . . . . . . .        358                                                 358
Redeemable preferred stock . . . . . . . . . . . . .     25,000                                              25,000
Commitments and contingencies
Shareholders' Deficit:
Preferred Stock
Common Stock . . . . . . . . . . . . . . . . . . . .          1                                                   1
Additional paid-in capital . . . . . . . . . . . . .     69,328                                              69,328
Accumulated other comprehensive gain (loss). . . . .      1,391                                               1,391
Accumulated deficit. . . . . . . . . . . . . . . . .   (157,521)         (143)           143         (a)   (157,521)
                                                      ----------  ------------  -------------             ----------
 Total shareholders' deficit . . . . . . . . . . . .    (86,801)         (143)           143                (86,801)
                                                      ----------  ------------  -------------              ---------
 Total liabilities and shareholders' deficit . . . .  $ 161,400   $     2,634   $     (2,034)              $162,000
                                                      ==========  ============  =============              =========
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
EMERITUS CORPORATION
                             UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                                     FOR THE THREE MONTHS ENDED MARCH 31, 2003
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                   ACQUIRED      PRO FORMA              EMERITUS
                                                      EMERITUS    FACILITIES    ADJUSTMENTS             COMBINED
                                                     ----------  ------------  -------------            ---------
Revenues:
  Community revenue . . . . . . . . . . . . . . . .  $  43,087   $     2,963   $                         $46,050
  Other service fees. . . . . . . . . . . . . . . .        993            67                               1,060
  Management fees . . . . . . . . . . . . . . . . .      3,097                                             3,097
                                                     ----------  ------------  -------------            ---------
          Total operating revenues. . . . . . . . .     47,177         3,030                              50,207
                                                     ----------  ------------  -------------            ---------

Expenses:
  Community operations. . . . . . . . . . . . . . .     28,646         2,130           (190)       (c)    30,586
  General and administrative. . . . . . . . . . . .      5,404                                             5,404
  Depreciation and amortization . . . . . . . . . .      1,846            90            (40)     (d,e)     1,896
  Facility lease expense. . . . . . . . . . . . . .      8,604         1,001           (139)       (f)     9,466
  Impairment of property and equipment
                                                     ----------  ------------  -------------             --------
          Total operating expenses. . . . . . . . .     44,500         3,221           (369)              47,352
                                                     ----------  ------------  -------------             --------
          Income (loss) from operations . . . . . .      2,677          (191)           369                2,855

Other income (expense):
  Interest income . . . . . . . . . . . . . . . . .        156            (0)                                156
  Interest expense. . . . . . . . . . . . . . . . .     (3,274)           (1)            16      (g,k)    (3,259)
  Other, net. . . . . . . . . . . . . . . . . . . .         48                                                48
                                                     ----------  ------------  -------------             --------
          Net other expense . . . . . . . . . . . .     (3,070)           (1)            16               (3,055)
                                                     ----------  ------------  -------------             --------

          Net Income (loss) before taxes. . . . . .       (393)         (192)           385                 (200)

Income tax provision. . . . . . . . . . . . . . . .                       15            (15)      (h)
                                                     ----------  ------------  -------------             --------
          Net Income (loss) . . . . . . . . . . . .       (393)         (207)           400                 (200)

Preferred stock dividends . . . . . . . . . . . . .      1,870                                             1,870
                                                     ----------  ------------  -------------            ---------
          Net income (loss) to common shareholders.  $  (2,263)  $      (207)  $        400              $(2,070)
                                                     ==========  ============  =============             ========

Loss per common share - basic and diluted . . . . .      (0.22)                                            (0.20)
                                                     ==========                                      ============

Weighted average number of common shares
      outstanding - basic and diluted . . . . . . .     10,247                                            10,247
                                                     ==========                                      ============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
EMERITUS CORPORATION
                             UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
                                   FOR THE TWELVE-MONTHS ENDED DECEMBER 31, 2002
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                                   ACQUIRED      PRO FORMA               EMERITUS
                                                      EMERITUS    FACILITIES    ADJUSTMENTS              COMBINED
                                                     ----------  ------------  -------------             ---------
Revenues:
  Community revenue . . . . . . . . . . . . . . . .  $ 137,662   $    12,127   $                         $149,789
  Other service fees. . . . . . . . . . . . . . . .      4,575           146                                4,721
  Management fees . . . . . . . . . . . . . . . . .     10,892                                             10,892
                                                     ----------  ------------  -------------             ---------
          Total operating revenues. . . . . . . . .    153,129        12,273                              165,402
                                                     ----------  ------------  -------------             ---------

Expenses:
  Community operations. . . . . . . . . . . . . . .     93,822         9,031           (748)        (c)   102,105
  General and administrative. . . . . . . . . . . .     21,112                                             21,112
  Depreciation and amortization . . . . . . . . . .      7,223            57            (45)      (d,e)     7,235
  Facility lease expense. . . . . . . . . . . . . .     29,975         3,961           (511)        (f)    33,425
  Impairment of property and equipment. . . . . . .                      924           (924)        (i)
                                                     ----------  ------------  -------------             ---------
          Total operating expenses. . . . . . . . .    152,132        13,973         (2,228)              163,877
                                                     ----------  ------------  -------------             ---------
          Income (loss) from operations . . . . . .        997        (1,700)         2,228                 1,525

Other income (expense):
  Interest income . . . . . . . . . . . . . . . . .        403             0                                  403
  Interest expense. . . . . . . . . . . . . . . . .    (11,728)           (5)            65       (g,k)   (11,668)
  Other, net. . . . . . . . . . . . . . . . . . . .      4,105                                              4,105
                                                     ----------  ------------  -------------             ---------
          Net other expense . . . . . . . . . . . .     (7,220)           (5)            65                (7,160)
                                                     ----------  ------------  -------------             ---------

          Net Income (loss) before taxes. . . . . .     (6,223)       (1,705)         2,293                (5,635)

Income tax provision. . . . . . . . . . . . . . . .                       23            (23)       (h)
                                                     ----------  ------------  -------------             ---------
          Net Income (loss) . . . . . . . . . . . .     (6,223)       (1,728)         2,316                (5,635)
                                                     ----------  ------------  -------------             ---------

Preferred stock dividends . . . . . . . . . . . . .      7,343                                              7,343
                                                     ----------  ------------  -------------             ---------
          Net income (loss) to common shareholders.  $ (13,566)  $    (1,728)  $      2,316              $(12,978)
                                                     ==========  ============  =============             =========

Loss per common share - basic and diluted . . . . .      (1.33)                                             (1.27)
                                                     ==========                                       ============

Weighted average number of common shares
      outstanding - basic and diluted . . . . . . .     10,207                                             10,207
                                                     ==========                                       ============
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
EMERITUS CORPORATION
         NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(1)     The  Acquisition

     On  May  1,  2003,  the Company entered into a lease agreement with certain
affiliates  of  Healthcare  Realty  Trust  ("HRT"),  for  eight  assisted living
communities  (the  "Acquired Properties") in four states containing an aggregate
of  approximately  490 units.  The Company has no obligation with respect to the
Acquired  Facilities  other  than  its  responsibilities  under the lease, which
includes  the  option  to  purchase,  solely  at  the discretion of the Company.

     The lease is for an initial 10-year period with three 5-year extensions and
includes  an  opportunity  for  the  Company to purchase the Acquired Facilities
anytime  during  the  second year for $42.2 million and a purchase option in the
third  year  at  a  3%  premium  over  the  original  purchase option price.  In
addition, the lease gives the Company the right of first refusal to purchase any
of  the  properties if the owner decides to sell. The lease is a net lease, with
base  rental  approximating $3.45 million annually with a lease escalator at the
end  of  the  first  and  second  lease years based on a percentage of increased
operating  revenues,  with  an  aggregate  annual  cap  of  $275,000,  and lease
escalators  each year thereafter based on increases in the consumer price index.
HRT  agreed  to  fund  up  to $500,000 for capital expenditure requirements. The
capital  expenditures  funded by HRT will increase the basis and purchase option
and  carry  a 10% lease rate. All of the Acquired Facilities in this acquisition
are  purpose-built  assisted  living  communities  in which the Company plans to
offer  both  assisted  and  memory  loss  services  in  selected  communities.

     HRT  also  agreed  to  extend  a  $600,000  loan to the Company for working
capital  purposes and for capital and other improvements to the facilities. This
loan  will  have  a  10-year  term  with  no extensions, bearing interest at 10%
annually  with  monthly  interest-only  payments.  In  addition,  if the Company
exercises  its  purchase  option  at  any  time  on  any  facility, the pro rata
principal  portion  of  the  loan  will  become  due  at  the time the option is
exercised.

(2)     Pro  Forma  Adjustments

a)     To  remove  all  assets, liabilities and net deficit of Parent company of
the Acquired Facilities as Emeritus acquired the Properties through an operating
lease  agreement.

b)     To  record  lease  acquisition  costs of approximately $ 500,000 incurred
subsequent  to  March  31,  2003.

c)     To  eliminate  management  fees  charged by Balanced Care to the Acquired
Facilities  of  $190,000 for the three months ended March 31, 2003, and $748,000
for  the twelve months ended December 31, 2002, since Emeritus is not hiring any
additional  administrative  staff  to  operate  the  Acquired  Facilities.

d)     To  eliminate depreciation and amortization on the Acquired Facilities as
Emeritus  acquired  the  buildings  through  an  operating  lease  agreement.

e)     To  record  amortization  of  lease acquisition costs of $ 13,000 for the
three  months  ended  March  31,  2003,  and $50,000 for the twelve months ended
December  31,  2002,  based  on  the  initial  ten-year  lease  term.

f)     To  eliminate facility lease expense of $1.0 million for the three months
ended  March 31, 2003, and $4.0 million for the year ended December 31, 2002 for
leases  not  assumed  by  Emeritus  and  to record facility lease expense in the
amount  of  $862,000 for the three months ended March 31, 2003, and $3.5 million
for  the  year ended December 31, 2002, related to the Acquired Facilities based
on  the  lease  agreement.

g)     To  eliminate  interest expense on debt that was not assumed by Emeritus.

h)     To  eliminate  tax  recorded  on the Acquired Facilities since Emeritus's
effective  rate  is  0%.

i)     To  eliminate  impairment  of  property and equipment that would not have
been  recorded  had  the  transaction  occurred  on  January  1,  2002.

j)     To record cash and note payable of approximately $600,000 for the working
capital  loan  from  HRT.

k)     To  record interest expense of approximately $15,000 for the three months
ended  March 31, 2003, and $60,000 for the year ended December 31, 2002, related
to  the  working  capital  note  which  requires  monthly interest-only payments
bearing  interest  at  10%  annually.
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the  registrant  has  duly  caused this report to be signed on its behalf by the
undersigned,  hereunto  duly  authorized.

EMERITUS  CORPORATION

By:     /s/  Raymond  R.  Brandstrom
        ----------------------------
        Raymond  R.  Brandstrom
        Vice  President  of  Finance,
        Chief  Financial  Officer,  and  Secretary

Dated:  July  15,  2003