Optimized. Enhanced. INVESTOR PRESENTATION NOVEMBER 2017 TSX: DR

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Moris Lloyd
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1 Optimized. Enhanced. INVESTOR PRESENTATION NOVEMBER 2017 TSX: DR

2 Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of certain securities laws, including the safe harbour provisions of the Securities Act (Ontario) and other provincial securities law in Canada. These forward-looking statements include, among others, statements with respect to our objectives, goals and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words may, will, could, should, would, suspect, outlook, believe, plan, anticipate, estimate, expect, intend, forecast, objective and continue (or the negative thereof), and words and expressions of similar import, are intended to identify forward-looking statements. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in these forward-looking statements. For more information on the risk factors related to these forward-looking statements, please refer to the management s discussion and analysis, annual information form and ongoing quarterly filings of Medical Facilities Corporation available on SEDAR at 2

3 MFC: A Quality Healthcare Provider Well-Positioned for Growth Majority ownership in five specialty surgical hospitals and one ambulatory surgery center Specialty Surgical Hospitals: 48 operating rooms and 156 overnight rooms Ambulatory Surgery Center: 2 operating rooms 2016 Revenue: US$339.5 million 2016 EBITDA: US$90.7 million 2016 Income from Operations: US$68.1 million 3

4 MFC Specialty Surgical Hospitals Our physician owned hospitals benefit from direct physician involvement in facility management resulting in SUPERIOR PROCESSES AND EFFICIENCIES Specialty surgical hospitals have consistently demonstrated HIGHER PATIENT SATISFACTION ratings resulting from HIGHER QUALITY OF CARE RECEIVED Facility Operating Since Acquired Operating Rooms Overnight Rooms Square Feet Arkansas Surgical Hospital ,000 Unity Medical and Surgical Hospital ,000 Oklahoma Spine Hospital ,000 Black Hills Surgical Hospital ,000 Sioux Falls Specialty Hospital ,000 4

5 Payor Mix 2016 MFC Facility Service Revenue 2016 U.S. Healthcare System 8% 10% 37% 55% 49% 41% Private Insurance Government Other Private Insurance Government Other 5 Source: Statista 2017

6 The U.S. Healthcare Landscape Facility type Number* Services MFC s position Acute Care Hospital Approx. 5,500 General medicine and surgery, including emergency and maternity care, open 24/7 Specialty Surgical Hospital <300 physician-owned Selected elective procedures (e.g. orthopedics, neurosurgery, pain management) Owns 5 in conjunction with physician partners Ambulatory Surgery Center Approx. 5,500 Selective elective procedures Day surgery only Owns 2, one as department of specialty surgical hospital 6 * Estimated total U.S.

7 Growing Demand for Healthcare (millions) (US$ billion) Population ,000 4,000 3,000 2,000 National Health Expenditure DRIVERS: Overall population growth Aging population 100 1, E 2020E 0 Under 45 years 45 to 64 years 65 years and over National Health Expenditure (US$ billion) Source: U.S. Census Bureau, 2010 based on National Population Projections 2008; 2015 & 2020 based on National Population Projections Centers for Medicare & Medicaid Services, National Health Expenditure Projections

for operating enhancements High quality and optimum clinical outcomes

8 Strict Acquisition Criteria Accretion, with growth available from a local strong provider base, attractive demographics, and opportunities for operating enhancements High quality and optimum clinical outcomes Continued strong earnings and opportunity for growth Controlling position by MFC 8

management and spine surgery 62% ownership acquired for US$26.

9 Recent Acquisitions Unity Medical and Surgical Hospital Locally and nationally recognized specialty hospital for patient care and satisfaction Focus on orthopedic, ophthalmology, podiatry, pain management and spine surgery 62% ownership acquired for US$26.63 million Prairie States Surgical Center Ambulatory Surgical Center focused on orthopedic procedures Merged into Sioux Falls Surgical Hospital 9

10 Financial Review 10

11 Factors Driving Our Results Revenues Case Counts Case Mix Payor Mix Ancillary Services Level of Revenue Operating Margins Salaries & Benefits Drugs & Supplies (incl. implants) General & Administrative 11

12 Operating Results Q (US$ millions, except where noted otherwise) Q Q Change % YTD REVENUE % INCOME FROM OPERATIONS (12.3%) OPERATING MARGIN 14.0% 18.0% (22.2%) 15.3% 20.1% EBITDA (1.4%) CASH DISTRIBUTIONS (C$ MILLIONS) PAYOUT RATIO 70.7% 83.1% (14.9%) 74.9% 69.0% 1 EBITDA, distributions, cash available for distribution and payout ratio are non-ifrs financial measures. Please refer to Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures sections in the Management s Discussion and Analysis of Consolidated Financial Condition and Results of Operations for the three-month and nine-month periods ended September 30, Nine months ended September 30, 2017.

13 Well-Resourced for Growth Cash and cash equivalents: $52.1 million Current ratio: 2.4x Net Debt/Equity: 48.8% Debt/EBITDA (LTM): 1.6x 13

14 Strong Cash Flow 1 Distributions Cash Available for Distribution (including realized gains/losses on FX forward contracts) 2 Cash Available for Distribution (Excluding realized gains/losses on FX forward contracts) (C$ millions) % 2016 PAYOUT RATIO Payout Ratio % 84.3% 85.2% 76.7% 69.0% Cash available for distribution and payout ratio are non-ifrs financial measures. Please refer to Non-IFRS Financial Measures and Reconciliation of Non-IFRS Financial Measures sections in the Management s Discussion and Analysis of Consolidated Financial Condition and Results of Operations for the respective periods. 2. Including realized gains/losses of FX forward contracts for years

15 Investment Highlights Long-term track record of delivering stable returns to shareholders Highly rated, high quality facilities with strong organic growth opportunities Favorable industry consolidation trends Resources in place to execute on growth strategy Experienced, entrepreneurial management team 15

16 Management Robert O. Horrar President and Chief Executive Officer Formerly: Community Health Systems, Humana Tyler C. Murphy Chief Financial Officer Formerly: Tenet Healthcare, HealthSouth James D. Rolfe Chief Development Officer Formerly: VMG Health, Community Health Systems 16

17 Board of Directors Marilynne Day-Linton, CPA, CA Chair of the Board of Directors David R. Bellaire Operating Partner, Waud Capital Partners Stephen Dineley, FCPA, FCA Corporate Director Irving R. Gerstein, C.M., O.Ont Corporate Director Robert O. Horrar President and Chief Executive Officer Dale Lawr, CPA, CA Corporate Director Jeffrey C. Lozon Corporate Director Reza Shahim, M.D. Neurosurgeon 17

18 Capital Markets Profile* (as at November 10, 2017) Stock Symbol: Shares Outstanding: TSX: DR 31.0 million Price: $ Week Low / High: $11.14/$19.90 Market Capitalization: $391.8 million Annualized Distribution (per share): $1.125 Current Yield: 8.5% Payout Ratio (TTM):** 69.0% 18 *All figures in Canadian dollars **As at December 31, 2016

Investor Update MARCH 2018

Investor Update MARCH 2018 TSX: DR Forward-Looking Statements This presentation may contain forward-looking statements within the meaning of certain securities laws, including the safe harbour provisions