Amica Mature Lifestyles Inc.
TSX : ACC

Amica Mature Lifestyles Inc.

October 14, 2005 07:00 ET

Amica Mature Lifestyles Announces First Quarter Results for 2006

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 14, 2005) - Amica Mature Lifestyles Inc. (TSX:ACC) -

CONFERENCE CALL TO BE HELD OCTOBER 14TH, 2005 1:00 PM (EDT)

Mr. Samir Manji, Chairman, President and CEO of Amica Mature Lifestyles Inc., a leading brand manager in the management, marketing, design and development of luxury housing and services for mature lifestyles, is pleased to announce the Company's results for the three month period ended August 31, 2005.

Highlights of the First Quarter

As described in greater detail in the accompanying Management's Discussion and Analysis, for the three months ended August 31, 2005, in each case as compared to the same period in 2004:

- MARPAS(1) increased 5.6% on a same community(2) basis.

- Cash flow from operations increased $0.1 million to $1.6 million.

- Net earnings attributable to common shareholders increased $0.2 million to $0.3 million.

- Per share net earnings attributable to common shareholders increased $0.01 per share to $0.02 per share.

- Cash flow per share decreased $0.02 per share to $0.11 per share.

- EBITDA(3) decreased $0.1 million to $2.7 million.

"We continue to witness strong demand for our luxury retirement residences in all of the markets in which we operate," said Samir A. Manji, Chairman, President and CEO. "This is reflected in an overall occupancy of 97% in our mature communities and the corresponding financial results we have achieved despite the divestitures that were made last year that contributed to the results for the comparative period in the prior fiscal year. With the momentum continuing on the operational front in large part due to the strong foundation in place, we continue to dedicate greater resources to business development, which we believe will assist in generating a minimum of four new long term management contracts in the current fiscal year. At the same time, the execution of our business development strategy should allow us to create strong relationships in the various markets we operate in and new markets so that for years beyond the current fiscal year, we are able to continually source additional long term management contracts in a sustainable fashion. Each new contract will be accretive to our financial results in our Management Operations given the strong foundation we now have in place that we can leverage going forward with each new contract achieved."

Four Amica Wellness & Vitality™ Residences are currently under construction for which the Company has long term management contracts ranging from 25 years to 99 years. The Company has equity interests ranging from 0% to 34% in the joint ventures that are constructing these various developments. The Company earns design and marketing fees during the construction of these projects. Two of these retirement communities, both located in the Greater Toronto Area (GTA), will open in fiscal 2006.

Refining our Portfolio

Amica at Bearbrook Court located in Ottawa, Ontario, in which the company has a 10% equity interest, is currently undergoing a $3.5 million renovation. To raise this property to Amica's stringent physical standards, this major renovation will include significant enhancements to the amenity areas, suites and the creation of an assisted living wing.

Mr. Manji stated, "We continue to explore the potential divestiture of our seven 100% owned assets as previously announced in our fiscal 2005 annual report. The ultimate divestiture of these assets, with the retention of long term management contracts for each, reflects our focus on management versus ownership."

"We are seeing strong results operationally as our brand continues to evolve within the markets where we operate into the preeminent brand that is recognized for luxury independent living for seniors who are choosing to make a lifestyle change," said Colin Halliwell, Chief Operating Officer. "As we expand within existing and new markets, we are confident that the name recognition will be a key source for prospective residents who want five-star service and quality and believe there is absolutely no substitute for the Amica brand."

Looking Ahead

Amica at City Centre, located in Mississauga, Ontario, in which the company has a 34% equity interest, is scheduled to open during the second quarter of the fiscal year. This $65 million development includes a 138 suite luxury rental retirement residence and a 145 suite condominium tower. Over 96% of the condominiums have been sold and the lease-up of the rental residence is now underway. Mr. Halliwell added, "The opening of this spectacular five-star residence will bring our total portfolio currently operational in the GTA to six, with an additional three under development. We have no doubt that like our other residence that have been constructed in the GTA, Amica at City Centre will set a new benchmark for high end retirement living and improve the lifestyle of the residents who will call this home."

Amica at Newmarket, located in Newmarket, Ontario, in which the company has a 16% equity interest, is scheduled to open during the third quarter of the fiscal year. Mr. Manji continued, "The pre-leasing we are witnessing for this beautiful residence is on its way to breaking records previously achieved in leasing our independent living suites. While preleasing is still in its early stages, we are certain that this residence will reshape how prospective residents in Newmarket and the surrounding cachement areas view retirement living and will shatter any previous negative stereotypes people have associated with retirement housing. Imagine a high-end hotel environment for seniors - that is what we expect to achieve in this exciting $27 million development which we plan to open by February 2006."

The Company has thirteen Wellness & Vitality™ Residences under management and four additional management contracts in place for new Wellness & Vitality™ Residences under development. In addition, a strong pipeline is being developed for additional management contracts. The company continues to have a very strong cash balance. Most importantly, Amica's outstanding team of dedicated people continue in their collective pursuit and vision of building a Company that is "The best in the world at delivering superior Wellness & Vitality™ within exceptional independent living retirement communities".

Amica Mature Lifestyles Inc., a Vancouver based public company, is a leading brand manager in the management, marketing, design and development of luxury housing and services for mature lifestyles. There are 17 Amica Wellness & Vitality™ Residences, including four under development. The common shares of Amica are traded on the Toronto Stock Exchange under the symbol "ACC".

(1) MARPAS is defined by the Company as Monthly Average Revenue Per Available Suite and is equal to gross monthly revenues generated at the seniors residences divided by the number of suites. MARPAS is used by the Company to measure period-over-period performance of its properties.

(2) Same communities is defined by the Company as mature communities that were classified as income-producing properties for the full current fiscal year and the full prior comparative fiscal year.

(3) EBITDA is equal to net earnings plus (i) income taxes expense plus (ii) interest expense plus (iii) depreciation and amortization plus (iv) other expense less (v) earnings from discontinued operations, net of income taxes less (vi) other income less (vii) non-controlling interest. EBITDA is the same as earnings before other operating items as disclosed in the consolidated financial statements. EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles, and EBITDA should not be considered as an alternative to net earnings, cash flow from operations or any other measure of performance prescribed by generally accepted accounting principles. EBITDA of Amica Mature Lifestyles Inc. may also not be comparable to EBITDA used by other companies, which may be calculated differently. EBITDA is included because the Company's management believes it can be used to measure the Company's performance, ability to service debt, fund capital expenditures and expand its business. See note 1 for a reconciliation of net earnings to EBITDA.

Forward-Looking Information

Statements made in this MD&A that are not historical facts are forward-looking statements. Forward-looking statements can be identified because they generally contain the words "anticipate", "believe", "estimate", "plan", "expect", "project", or similar words. Such forward-looking statements are estimates reflecting the best judgment of the Company based upon current information and involve a number of risks and uncertainties and other factors that may cause actual results, performance, or achievements of the Company to differ materially from future results expressed, projected or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on the Company's forward-looking statements. These statements are made as of the date of this document and, except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Management's Discussion and Analysis

The following Management's Discussion and Analysis (MD&A) for the three months ended August 31, 2005, is provided as of October 13, 2005. It should be read in conjunction with the interim consolidated financial statements for that period and the MD&A (which includes a discussion of business risks) and audited consolidated financial statements for the year ended May 31, 2005. Except as disclosed in this MD&A, there has been no material change in the information disclosed in the MD&A for the year ended May 31, 2005. A summary of selected financial data for the past eight quarters is disclosed in note 2.

All dollar amounts referred to in this document are in Canadian dollars. The financial statements are prepared in accordance with Canadian generally accepted accounting principles (GAAP). This document will contain reference to the following terms - EBITDA and MARPAS. Please refer to footnotes 1 and 3.



Financial Highlights

Management Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
(Expressed in thousands of dollars) 2005 2004
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Management operations:
Revenues
Management fees from
100% owned communities $ 426 $ 395
Management fees from 13% to 62.5%
owned communities 367 251
Design and marketing fees from new
developments under construction 512 506
Other 60 -
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1,365 1,152
General and administrative expenses (1,273) (1,055)
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$ 92 $ 97
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Ownership and Corporate Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
(Expressed in thousands of dollars) 2005 2004
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Ownership and corporate operations:
Retirement communities operating
revenues $ 8,621 $ 8,892
Distribution from investments 39 -
Expenses:
Retirement communities operating (5,353) (5,540)
Corporate (133) (98)
Fees paid to and reported in
management operations (551) (492)
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$ 2,623 $ 2,762
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Cash Flow From Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
(Expressed in thousands of dollars) 2005 2004
--------------------------------------------------------------------
Cash flow from continuing operations $ 1,634 $ 1,387
Cash flow from discontinued
operations - 129
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$ 1,634 $ 1,516
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Per Share Cash Flow From Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
--------------------------------------------------------------------
Cash flow from continuing operations $ 0.11 $ 0.12
Cash flow from discontinued
operations - 0.01
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$ 0.11 $ 0.13
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THREE MONTHS ENDED AUGUST 31, 2005
(Compared with the three months ended August 31, 2004.)

Operational Review and Analysis
(All properties are 100% owned unless stated otherwise.)


Overview

On May 31, 2005, the Company sold Amica at Bearbrook Court, a 111 suite retirement community located in Ottawa, Ontario to a joint venture in which the Company has a 10% equity interest. In accordance with GAAP, this investment is now accounted for under the cost method of accounting and its operations are not consolidated in the Company's consolidated financial statements as of May 31, 2005, impacting the results of operations for the three month period ended August 31, 2005.

A comparison of the financial results for the three month period ended August 31, 2005, to the comparative period ended August 31, 2004, reflects the following: an increase in cash flow from operations of $0.1 million to $1.6 million; a decrease in diluted cash flow per share of $0.02 per share to $0.11 per share; a decrease in consolidated revenues of $0.1 million to $9.5 million; a decrease in EBITDA(3) of $0.1 million to $2.7 million; and an increase in net earnings attributable to common shareholders of $0.2 million to $0.3 million.

Management Operations

For the three month period ended August 31, 2005, fee revenues increased $0.2 million to $1.4 million and general and administrative expenses increased $0.2 million to $1.3 million resulting in earnings from management operations remaining the same at $0.1 million.

The $0.2 million increase in fee revenues is mainly due to increases in management fees due to increased rents and occupancy levels at the retirement communities and the opening of Amica at West Vancouver located in West Vancouver, British Columbia in April 2005.

The $0.2 million increase in general and administrative expenses is mainly attributable to a $0.1 million increase in salaries and wages and a $0.1 million increase in stock option expense. General and administrative expenses are expected to continue to increase in fiscal 2006 as new staff is added to support the Company's anticipated growth.

Ownership Operations and Corporate Operations

Revenues

Retirement communities operating revenues decreased $0.3 million to $8.6 million for the three month period ended August 31, 2005, as compared to the same period in 2004. The $0.3 million decrease in retirement communities operating revenues is due to a $0.5 million increase in revenues from same communities(2) offset by a $0.8 million decrease in revenues due to the sale of Amica at Bearbrook Court.

Same community MARPAS(1) (monthly average revenue per available suite) increased 5.6% when compared to the comparative period.

Expenses

Retirement communities operating expenses decreased $0.2 million to $5.4 million for the three month period ended August 31, 2005. The decrease in retirement communities operating expenses is due to a $0.4 million increase in same community expenses offset by a $0.6 million decrease in expenses due to the sale of Amica at Bearbrook Court.

Earnings Before Other Operating Items (EBITDA)

As result of the changes in management and ownership operations, EBITDA decreased $0.1 million to $2.7 million.

Other Items

Interest expense

Interest expense decreased $0.3 million to $1.5 million mainly due to a $0.2 million decrease in interest expense as a result of the conversion to equity of some and early redemption of the balance of the $15.1 million in 8.25% unsecured convertible debentures (Debentures) in December 2004.

Other income

Other income increased $0.3 million when compared to the comparative prior period mainly as a result of a $0.2 million increase in interest income due to increased cash on hand.

Income taxes

Income taxes expense increased $0.3 million mainly due to the $0.5 million increase in earnings.

Imputed interest on convertible debentures, net of income taxes

Imputed interest on convertible debentures, net of income taxes decreased $0.1 million due to the conversion and early redemption of the Debentures.

Net earnings and earnings per share

For the three month period ended August 31, 2005, the Company had earnings from continuing operations and net earnings attributable to common shareholders of $0.3 million ($0.02 per share basic and diluted earnings from continuing operations and net earnings attributable to common shareholders). For the three month period ended August 31, 2004, the Company had earnings from continuing operations of $nil ($nil per share basic and diluted earnings from continuing operations) and net earnings attributable to common shareholders of $0.1 million ($0.01 per share basic and diluted net earnings attributable to common shareholders).

Balance Sheet Analysis

The following table summarizes the significant changes in Amica's assets, liabilities and shareholders' equity:



---------------------------------------------------------------------
(Expressed in Increase/
millions of dollars) (Decrease) Explanation
---------------------------------------------------------------------
Income-producing
properties $ (0.8) - Capital expenditures increased
income-producing properties
(IPP) by $0.1
- Depreciation expense decreased
IPP by $0.9

Mortgages payable (1.1) - Principal payments decreased
mortgages payable by $1.1

Share capital 0.3 - Exercise of stock options
increased share capital by $0.3

Contributed surplus 0.1 - Stock options issued increased
contributed surplus by $0.1
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Cash Flow

Cash flow from continuing operations increased $0.2 million as compared to the prior comparative period while total cash flow from operations increased $0.1 million. After taking into consideration other changes in non-cash operating working capital, total cash flow decreased $0.3 million to $nil. In the immediate term, cash flow from operations may decrease depending upon the timing of the sale of the Company's seven 100% owned properties. The Company will seek long term management contracts from the prospective purchaser(s) which, coupled with new management contracts, will generate sufficient cash flow to offset the foregone cash flow from the sale of these properties.

Liquidity and Capital Resources

The Company's cash balance at August 31, 2005, was $18.7 million. For the three month period ended August 31, 2005, cash flow generated from operations before changes in non-cash operating working capital was $1.6 million. Cash flow from operations will be impacted by the timing of the disposition of the Company's seven 100% owned properties. This strategic disposition will be undertaken in an orderly manner and may or may not be completed by fiscal year end. This impact will be mitigated by the recurring management fees that are expected to continue to be earned from these properties and the income from investing the net cash realized on sale and from savings in future capital expenditures. The proceeds from these sales will be used to finance the Company's growth strategy.

The Company also anticipates that the equity available in its wholly owned assets available for mortgaging should the need arise, cash on hand and cash generated from operations will be sufficient for the Company to meet its obligations and growth objectives for fiscal 2006.

Generally, the Company, sometimes in conjunction with its development partner, funds all funding shortfalls in joint ventures and investments in co-tenancy properties under development. The Company charges interest on these advances and is indemnified by the other joint venture or co-tenancy investors. As well, the Company may provide guarantees in excess of its proportionate interest in the joint venture and co-tenancies and is indemnified by the other investors. As at August 31, 2005, the Company provided guarantees totaling $28.4 million as compared to $7.9 million in the comparative period for the indebtedness on certain properties in excess of the indebtedness otherwise disclosed in the consolidated financial statements. In management's opinion, substantiated in some cases by third party appraisals, these properties have a value, in the aggregate, in excess of their obligations.

In fiscal 2006, the Company expects to spend $1.8 million on capital expenditures and $12.0 million on new investments.



Outstanding Share Data

-------------------------------------------------------
Outstanding as of
Designation October 13, 2005
-------------------------------------------------------
Common shares 14,480,021
Options to acquire common shares 842,387
-------------------------------------------------------


Looking Ahead

As disclosed in the MD&A for the year ended May 31, 2005, the Company's business plan for fiscal 2006 focuses on improving all aspects of the Company's business with the goal of meeting the Company's vision - "To Be The Best in the World at Delivering Superior Wellness & Vitality™ Within Exceptional Independent Living Retirement Communities".

The Company continues to believe that it will achieve all of its three key objectives for fiscal 2006:

- Increase cash flow from operations over fiscal 2005 by at least 10%.

- Increase in MARPAS by at least 6.0%.

- Generate a minimum of four new long term management contracts.

The objective to increase cash flow from operations by at least 10% will be impacted by the timing of the sale of any or all of the Company's 100% owned properties.

Disclosure Controls and Procedures

The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in filings made pursuant to Multilateral Instrument 52-109 is recorded, processed, summarized and reported within the time periods specified in the Canadian Securities Administrators rules and forms. The Chief Executive Officer and Chief Financial Officer have evaluated the Company's disclosure controls and procedures as of August 31, 2005, and concluded that the Company's current disclosure controls and procedures are effective.

Critical Accounting Policies

The significant accounting policies used by the Company in preparing its consolidated financial statements are described in note 2 to the consolidated financial statements for the year ended May 31, 2005, and should be read to ensure proper understanding and evaluation of the estimates and judgments made by management in preparing these financial statements. The Company's financial statements are prepared in accordance with Canadian GAAP.



NOTES

1. Reconciliation of Net Earnings to EBITDA

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
(Expressed in thousands of dollars) 2005 2004
--------------------------------------------------------------------
Net earnings $ 346 $ 258
Add:
Interest expense 1,542 1,887
Depreciation and amortization 905 850
Other expense - 13
Income tax expense 332 75
Deduct:
Earnings from discontinued operations - (182)
Other income (335) -
Non-controlling interest (75) (42)
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EBITDA $ 2,715 $ 2,859
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2. Two Year Summary by Quarter

(Expressed in thousands of dollars except for per share amounts)
-----------------------------------------------------------------------
1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
(4) (4) (4) (4)
-------------------------- ------------- --------------- --------------
2006 2005 2005 2004 2005 2004 2005 2004
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Consolidated
revenues from
continuing
operations $9,474 $9,552 $9,835 $8,996 $9,685 $8,829 $9,474 $8,552

Earnings (loss):
Management
operations $ 92 $ 97 $ (61)$ 48 $ (179) $ 259 $ (84) $ (36)
Ownership and
corporate
operations 2,623 2,762 3,012 2,672 3,051 2,473 2,718 2,623

Earnings
before other
operating
items
(EBITDA) 2,715 2,859 2,951 2,720 2,872 2,732 2,634 2,587

Earnings
(loss) from
continuing
operations 346 76 1,396 (321) 72 543 (34) (1,065)

Earnings
(loss) from
discontinued
operations,
net of
income taxes - 182 (317) (34) (688) (113) (16) 753

Net earnings
(loss)
attributable
to common
share-
holders $ 346 $ 129 $1,091 $ (306) $ (648) $ 322 $ (44) $ (433)

Basic and
diluted
earnings
(loss) per
share
Continuing
operat-
ions $ 0.02 $ 0.00 $ 0.10 $(0.03) $ 0.00 $ 0.04 $ 0.00 $(0.10)
Discontinued
operations 0.00 0.01 (0.02) 0.00 (0.05) (0.01) 0.00 0.06
Net earnings
(loss)
attributable
to common
share-
holders $ 0.02 $ 0.01 $ 0.08 $(0.03) $(0.05) $ 0.03 $ 0.00 $(0.04)

Cash flow
from operations
Continuing
opera-
tions $1,634 $1,387 $1,428 $1,383 $1,523 $1,255 $1,319 $1,206
Discontinued
operations - 129 57 173 33 140 149 288
Total $1,634 $1,516 $1,485 $1,556 $1,556 $1,395 $1,468 $1,494

Basic and
diluted per
share cash
flow from
operations
Continuing
operations $ 0.11 $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.11 $ 0.11 $ 0.10
Discontinued
operations 0.00 0.01 0.00 0.01 0.00 0.01 0.02 0.03
Total $ 0.11 $ 0.13 $ 0.12 $ 0.13 $ 0.12 $ 0.12 $ 0.13 $ 0.13
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(4) Quarterly results have been restated to reflect discontinued
operations.


Forward-Looking Information

Statements made in this MD&A that are not historical facts are forward-looking statements. Forward-looking statements can be identified because they generally contain the words "anticipate", "believe", "estimate", "plan", "expect", "project", or similar words. Such forward-looking statements are estimates reflecting the best judgment of the Company based upon current information and involve a number of risks and uncertainties and other factors that may cause actual results, performance, or achievements of the Company to differ materially from future results expressed, projected or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on the Company's forward-looking statements. These statements are made as of the date of this document and, except as required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

(1) MARPAS is defined by the Company as Monthly Average Revenue Per Available Suite and is equal to gross monthly revenues generated at the seniors residences divided by the number of suites. MARPAS is used by the Company to measure period-over-period performance of its properties.

(2) Same communities is defined by the Company as mature communities that were classified as income-producing properties for the full current fiscal year and the full prior comparative fiscal year.

(3) EBITDA is equal to net earnings plus (i) income taxes expense plus (ii) interest expense plus (iii) depreciation and amortization plus (iv) other expense less (v) earnings from discontinued operations, net of income taxes less (vi) other income less (vii) non-controlling interest. EBITDA is the same as earnings before other operating items as disclosed in the consolidated financial statements. EBITDA is not intended to represent cash flow from operations as defined by generally accepted accounting principles, and EBITDA should not be considered as an alternative to net earnings, cash flow from operations or any other measure of performance prescribed by generally accepted accounting principles. EBITDA of Amica Mature Lifestyles Inc. may also not be comparable to EBITDA used by other companies, which may be calculated differently. EBITDA is included because the Company's management believes it can be used to measure the Company's performance, ability to service debt, fund capital expenditures and expand its business. See note 1 for a reconciliation of net earnings to EBITDA.



Consolidated Balance Sheets
--------------------------------------------------------------------
AUGUST 31 MAY 31
2005 2005
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(Expressed in thousands of dollars) (unaudited) (audited)

ASSETS
Properties:
Income-producing $ 120,000 $ 120,826
Investment in co-tenancy
properties 7,144 7,016
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127,144 127,842
Cash and cash equivalents 18,690 19,542
Management fees receivable 1,270 1,028
Mortgages receivable 4,500 4,500
Deferred financing costs, net of
accumulated amortization 423 482
Other assets 3,248 3,029
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$ 155,275 $ 156,423
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Mortgages payable $ 102,249 $ 103,372
Accounts payable and accrued
liabilities 4,106 5,056
Accrued interest payable 419 481
Future income taxes 5,301 5,017
Non-controlling interest 1,668 1,743
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113,743 115,669

Shareholders' equity:
Share capital 38,839 38,505
Contributed surplus 1,700 1,602
Retained earnings 993 647
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41,532 40,754
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$ 155,275 $ 156,423
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See accompanying notes to consolidated financial statements.

Samir A. Manji, CA Leonard Barkin, FCA
DIRECTOR DIRECTOR


Consolidated Statements of Operations and Retained Earnings

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
--------------------------------------------------------------------
(Expressed in thousands of dollars, (unaudited) (unaudited)
except per share amounts) (restated)

Consolidated revenues from
continuing operations $ 9,474 $ 9,552
--------------------------------------------------------------------
Management operations:
Revenues $ 1,365 $ 1,152
General and administrative expenses (1,273) (1,055)
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92 97
Ownership and corporate operations:
Retirement communities operating
revenues 8,621 8,892
Distributions from investments 39 -
Expenses:
Retirement communities operating (5,353) (5,540)
Corporate (133) (98)
Fees to management operations (551) (492)
--------------------------------------------------------------------
2,623 2,762
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Earnings before other operating items 2,715 2,859
Depreciation and amortization (905) (850)
--------------------------------------------------------------------

Earnings from operations 1,810 2,009
Interest expense (1,542) (1,887)
Other income (expense) 335 (13)
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Earnings before income taxes and
non-controlling interest 603 109
Income taxes:
Current expense 48 48
Future expense 284 27
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332 75
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Earnings before non-controlling interest 271 34
Non-controlling interest 75 42
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Earnings from continuing operations 346 76
Earnings from discontinued
operations, net of income taxes - 182
--------------------------------------------------------------------
Net earnings 346 258
Imputed interest on convertible
debentures, net of income taxes - (129)
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Net earnings attributable to common
shareholders 346 129
Retained earnings, beginning of period 647 119
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Retained earnings, end of period $ 993 $ 248
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Basic and diluted earnings per share
Continuing operations $ 0.02 $ -
Discontinued operations - 0.01
--------------------------------------------------------------------
Net earnings attributable to common
shareholders $ 0.02 $ 0.01
--------------------------------------------------------------------

See accompanying notes to consolidated financial statements.


Consolidated Statements of Cash Flow from Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
--------------------------------------------------------------------
(Expressed in thousands of dollars) (unaudited) (unaudited)
(restated)
Earnings from continuing operations $ 346 $ 76
Items not involving cash:
Stock-based compensation 98 24
Depreciation and amortization 905 850
Amortization of deferred financing costs 46 69
Amortization of deemed debt
discount on convertible debentures - 368
Other 30 15
Future income taxes 284 27
Non-controlling interest (75) (42)
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Cash flow from continuing operations 1,634 1,387
Cash flow from discontinued operations - 129
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Cash flow from operations before
changes in non-cash operating
working capital $ 1,634 $ 1,516
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See accompanying notes to consolidated financial statements.


Consolidated Statements of Cash Flows

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
--------------------------------------------------------------------
(Expressed in thousands of dollars) (unaudited) (unaudited)
(restated)
Cash provided by (used in):
Operations:
Cash flow from operations before
changes in non-cash operating working
capital $ 1,634 $ 1,516
Other changes in non-cash
operating working capital (1,621) (1,222)
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13 294
Investments:
Investment in co-tenancy properties (158) (197)
Loans due from co-tenancy properties 187 (1,340)
Expenditures on income-producing
properties (79) (711)
Restricted cash (26) 1,223
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(76) (1,025)
Financing:
Principal repayments on mortgages
payable (1,123) (748)
Issuance of common shares for cash,
net of costs 334 4
Deferred financing costs - (6)
Capital contributions from
non-controlling interest - 429

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(789) (321)
--------------------------------------------------------------------
Decrease in cash and cash equivalents (852) (1,052)
Cash and cash equivalents,
beginning of period 19,542 3,244
--------------------------------------------------------------------
Cash and cash equivalents, end of
period $ 18,690 $ 2,192
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Supplementary information:
Non-cash investing & financing
activities:
Non-controlling interest $ - $ 1,894
Assumption of mortgage payable - 5,163
Mortgage payable provided on
acquisition of income-producing
property - 330
Assumption of working capital on
acquisition of interest - 294
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See accompanying notes to consolidated financial statements.


Notes to Consolidated Financial Statements
(Unaudited)


1. Basis of Presentation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in Canada. The consolidated financial statements have been prepared from the books and records without audit, however, in the opinion of management, all adjustments which are necessary to the fair presentation of the results of the interim period have been made.

These interim consolidated financial statements do not include all disclosures required under Canadian generally accepted accounting principles for annual financial statements and should be read in conjunction with the audited consolidated financial statements, and management's discussion and analysis for the year ended May 31, 2005. The accounting policies applied in these interim financial statements are consistent with those applied in the audited consolidated financial statements, and management's discussion and analysis for the year ended May 31, 2005.

2. Significant Accounting Policies

The accounting policies applied in these interim financial statements are consistent with those applied in the audited consolidated financial statements, and management's discussion and analysis report for the year ended May 31, 2005.



3. Discontinued Operations

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
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(thousands) (thousands)
Revenues $ - $ 519
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Earnings from operations - 276
Interest expense - 135
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- 141
Income taxes recovery - 41
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$ - $ 182
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4. Information on Common Shares

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ASSIGNED VALUE
NUMBER OF (in thousands
COMMON SHARES of dollars)
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Authorized
Unlimited number of common shares

Unlimited number of preferred shares

Issued
August 31, 2005 14,480,021 $ 38,839
Stock options outstanding 839,887
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5. Information on Stock Options

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STOCK OPTIONS WEIGHTED
OUTSTANDING AVERAGE PRICE
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Balance May 31, 2005 634,950 $ 3.06
Granted 314,102 5.19
Exercised (109,165) 3.07
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Balance August 31, 2005 839,887 $ 3.86
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NUMBER WEIGHTED
OUTSTANDING AVERAGE LIFE
RANGE OF AND EXERCISABLE REMAINING WEIGHTED
EXERCISE PRICE AUGUST 31, 2005 (YEARS) AVERAGE PRICE
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$1.80 to $3.15 280,703 1.8 $ 2.58
$3.20 to $5.50 559,184 7.0 4.50
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839,887 5.3 $ 3.86
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6. Stock-Based Compensation

The Company has established a share option plan (the "Plan") for directors, officers, employees and consultants of the Company. The aggregate number of common shares reserved for issuance under the Plan is 2,466,666. Pursuant to the Plan, non-transferable options to purchase common shares are granted by the Board of Directors at an exercise price based on the market price of the common shares at the time the option is granted. Options must be exercised within a period of up to ten years from the option grant date and vest as determined by the Board of Directors.

The Company accounts for employee stock options using the fair value method. Included in general and administrative expenses, and retirement communities operating expenses is a total of $98,000 (2004 - $24,000) in stock compensation expense.

Stock compensation expense has been calculated by an option pricing model using the following factors: volatility of 28.62% (2004 - 27.20%), term of three to seven years (2004 - 3 years), dividend rate of nil (2004 - nil) and risk-free interest rate of 3.27% - 3.69% (2004 - 3.37%). The average fair value of options granted during the three months ended August 31, 2005 was $1.89 (2004 - $0.75).



7. Earnings Per Share

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3 MONTHS ENDED 3 MONTHS ENDED
AUGUST 31, AUGUST 31,
2005 2004
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Denominator for basic
earnings per share 14,459,910 11,485,333
Effect of dilutive stock options 222,755 84,022
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Denominator for diluted
earnings per share 14,682,665 11,569,355
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8. Guarantees

The Company has provided guarantees totaling $28,400,000 (2004 - $7,935,000) for the indebtedness on certain properties in excess of the indebtedness otherwise consolidated in these financial statements. In the opinion of management, these properties have a value in excess of the indebtedness that is guaranteed and independent third party appraisals have confirmed that the majority of these properties have a value in excess of the indebtedness that is guaranteed. As well, the other investors in these properties have indemnified the Company for their guarantees. The Company earns a fee for providing these guarantees.

The Company remains as a guarantor on mortgages on income-producing properties sold in the amount of $21,000,000 (2004 - $10,800,000) at August 31, 2005. The properties were sold for $32,100,000 (2004 - $15,850,000). The purchasers have indemnified the Company for these guarantees. In the opinion of management, these properties have a value in excess of these guarantees.



Amica Wellness & Vitality™ Residences

Amica at Arbutus Manor Vancouver, British Columbia
Amica at The Balmoral Club Toronto, Ontario
Amica at Bayview Toronto, Ontario
Amica at Bayview Gardens(i) Toronto, Ontario
Amica at Bearbrook Court Ottawa, Ontario
Amica at Beechwood Village Sidney, British Columbia
Amica at City Centre(i) Mississauga, Ontario
Amica at Douglas House Victoria, British Columbia
Amica at Dundas(i) Dundas, Ontario
Amica at Erin Mills Mississauga, Ontario
Amica at Mayfair Port Coquitlam, British Columbia
Amica at Newmarket(i) Newmarket, Ontario
Amica at Rideau Manor Burnaby, British Columbia
Amica at Somerset House Victoria, British Columbia
Amica at Swan Lake Markham, Ontario
Amica at Villa Da Vinci Woodbridge, Ontario
Amica at West Vancouver West Vancouver, British Columbia
(i) Under development


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