HENRY MAYO NEWHALL MEMORIAL HOSPITAL, HENRY MAYO NEWHALL MEMORIAL HEALTH FOUNDATION, INC., SANTA CLARITA HEALTH CARE ASSOCIATION, INC.

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1 HENRY MAYO NEWHALL MEMORIAL HOSPITAL, HENRY MAYO NEWHALL MEMORIAL HEALTH FOUNDATION, INC., SANTA CLARITA HEALTH CARE ASSOCIATION, INC. EXHIBIT C CONTINUING DISCLOSURE ANNUAL REPORT Operating Data. As of September 30, 2006 Non-Financial Please answer each of the following questions: a) Has there been a change in the name and titles of officers since the last annual report? (Check one) Yes X No If yes, please indicate name and title. Senior Management The Hospital s senior management team includes a number of personnel who, in turn, supervise various department heads, administrators and managers who have direct responsibility for various clinical, ancillary and support departments. Summary information concerning the principal members of the Hospital s management team is presented below. Roger E. Seaver, President and Chief Executive Officer (58) Mr. Seaver was hired as President and Chief Executive Officer of the Hospital in From 1997 to 2000, he served as President and Chief Executive Officer at Northridge Hospital Medical Center, a 370-bed hospital located in Northridge, California. Mr. Seaver has also held executive positions at Glendale Memorial Hospital for 19 years, including Chief Financial Officer, Chief Operating Officer and Chief Executive Officer, from 1992 to Mr. Seaver holds a bachelor s degree from the University of South Dakota and a master s degree in business administration from Pepperdine University in Malibu, California. John Schleif, Chief Operating Officer (61) Mr. Schleif joined the Hospital in 2004 as Chief Operating Officer. Prior to 2004, he served as Administrator of Scripps Memorial Hospital Encinitas, a 140-bed hospital in Encinitas, California. Mr. Schleif has also held executive positions with other hospitals and health systems in California and Hawaii including Good Samaritan Hospital in Los Angeles, California and The Queen s Medical Center and The Queen s Health System in Honolulu, Hawaii. He holds a bachelor s degree from St. Olaf College, Northfield, Minnesota, and a master s degree in hospital and health administration from the University of Iowa, Iowa City, Iowa. Mr. Schleif is a Fellow of the American College of Healthcare Executives. C.R. Hudson, Chief Financial Officer (57) Mr. Hudson joined the Hospital in 2001 as Chief Financial Officer. Prior to coming to the Hospital, he held a Director s position at KPMG LLP s health care consulting practice, where he provided Medicare and Medi-Cal reimbursement strategy and operational and

2 organizational services to health care providers. He has also held executive positions at MedPartners and Charter Medical Centers. Mr. Hudson holds a bachelor s degree in accounting from San Diego State University in San Diego, California, and is a certified public accountant (non-practicing). Diane Lynch, Director of Nursing (60) Ms. Lynch joined the Hospital in 2001 as Chief Nursing Officer. Prior to coming to the Hospital, she served as the Licensing & Accreditation Coordinator for Kaiser Permanente in Bellflower, California. She also served as the Director of Nursing for Valley Hospital and held a Regional Director position for MedPartners with a focus in physician practice management. She has held a board position with the national case management association and currently is certified through the American Nurses Association as a Nurse Administrator. She holds a bachelor s degree and master s degree from the University of LaVerne in business and health care administration. Diane Vose, Foundation President (59) Ms. Vose began her career at the Hospital in late 1981 in development and community relations. She became part of the Foundation when it was first organized in Working under the expertise of two Foundation presidents as Director of Development and Executive Director, Ms. Vose took over as President of the Foundation in She is responsible for all fundraising programs of the Foundation, including planning, organizing, managing and marketing the fund development program, as well as the development, recruitment and management of a 30-member Board of Directors and related committees, volunteers and support groups. Ms. Vose is active in several community organizations including the Santa Clarita Valley (SCV) Chamber of Commerce Board of Directors, SCV Health PAC, KHTS Radio Advisory Board, SCV Child and Family Foundation Advisory Board and SCV Soroptimist International. Ms. Vose is also a member of the Association for Healthcare Philanthropy and the Southern California Association for Hospital Development. b) Please describe any new material litigation, or a material adverse result in a litigation since the date of the last report. None c) Please describe any significant sale, destruction or loss of real property or other material assets since the date of the last report. None d) Please describe any changes in licensing. None (other than bed change described below) Please update the information that appeared under the following headings in Appendix A to the Official Statement for the Bonds for the most recent Fiscal Year, as appropriate: Bed Capacity Table under the heading Introduction - Licenses and Accreditation; Medical Staff; Employees; Recent Operating Performance-Utilization Data; Recent Operating Performance -Financial Information, and - Management s Discussion and Analysis of Financial Results. BED CAPACITY Category Bed Capacity Medical Surgical 119 Intensive Care 12 Perinatal 17 Psychiatry 23 Skilled Nursing 27 Rehabilitation 19 Total 217

3 MEDICAL STAFF As of December 15, 2006, the Hospital s medical staff included 225 physicians in 34 specialties, with an average age of 49 years. Of these physicians, 183 are board certified. The medical staff members are identified by specialty, average age and board certification below: Medical Staff By Specialty* Specialty Number Average Age Board Certified % Board Certified Anesthesiology % Cardiovascular Disease Dermatology Emergency Medicine Endocrinology Family Medicine Gastroenterology General Dentistry General Surgery Gynecology Hematology/Oncology Infectious Disease Internal Medicine Nephrology Neurology Neurosurgery Obstetrics/Gynecology Ophthalmology Oral/Maxillofacial Surgery Orthopedic Surgery Otolaryngology Pathology Pediatrics Physical Med/Rehabilitation Plastic Surgery Podiatry Psychiatry Pulmonary Disease Radiation Oncology Radiology Rheumatology Thoracic Surgery Urology Vascular Surgery Totals % Source: The Hospital * Includes Active, Associate, General Dentist and Provisional

4 The following table lists the top twenty admitting physicians by specialty for the Fiscal Year ended September 30, The top twenty admitting physicians, with an average age of approximately 49, accounted for approximately 59% of the Hospital s admissions (excluding newborns). Specialty Top Twenty Admitting Physicians (October 1, 2005 to September 30, 2006) Age Years on Admissions Medical Staff Number Percent Psychiatry % Internal Medicine % Internal Medicine % Internal Medicine % Internal Medicine % Family Practice % Obstetrics/Gynecology % Obstetrics/Gynecology % Family Practice % Internal Medicine % Obstetrics/Gynecology % General Surgery % Internal Medicine % Obstetrics/Gynecology % Obstetrics/Gynecology % Nephrology % Obstetrics/Gynecology % Internal Medicine % General Surgery % Internal Medicine % Totals 7, % Average Age of Admitting Physician 49 Source: Hospital records EMPLOYEES As of May 25, 2006, the Hospital employed 784 full-time equivalent employees ( FTEs ). Two labor unions represent approximately 75% of the Hospital s employees. California Nurses Association (CNA) represents approximately 340 registered nurses and United Electrical, Radio & Machine Workers of America (UE) represents approximately 500 nonprofessional employees. Initial collective bargaining agreements with both unions were ratified by the respective memberships of the bargaining units on December 18, 2000 and were executed on December 24, The current CNA contract expires January 21, 2009 and the current UE contract expires on January 31, Management considers its relations with employees to be good. The CNA contracts provides for annual focal step increases and the UE contract provides for a performance based pay increase conducted annually on their anniversary date. The Hospital s employee benefit package was modified to include a matching contribution (subject to certain limits) by the Hospital to employee retirement programs. The Hospital contracts with a private company for services in the following support areas: inpatient and outpatient rehab services, dietary, housekeeping, security and maintenance. Under this agreement, the contractor provides management services for these functions and employs the staff assigned to these areas of approximately 130 FTEs.

5 Utilization Data The following table sets forth the Hospital s utilization data for the fiscal years ended September 30, 2004, 2005 and Fiscal Year Ended September 30, Beds Acute Women s Transitional Care Acute Rehabilitation Behavioral Health Totals Patient Days Acute 35,006 37,251 38,846 Women s 3,607 3,941 4,100 Transitional Care 6,017 6,502 6,642 Acute Rehabilitation 3,486 2,779 2,904 Behavioral Health 6,168 5,888 6,234 Totals 54,284 56,361 58,726 Occupancy Acute 73.2% 77.9% 81.2% Women s 58.1% 63.5% 66.1% Transitional Care 66.1% 66.0% 67.4% Acute Rehabilitation 50.3% 40.1% 41.9% Behavioral Health 73.5% 70.1% 74.3% Totals 68.5% 71.2% 74.1% Outpatient Visits Emergency Department 38,562 39,934 41,486 All Other (1) 29,172 32,650 30,761 Totals 67,734 72,584 72,247 (1) Includes radiology, nuclear medicine and physical therapy. Source: Hospital Records Management s Discussion and Analysis of Financial Results Critical Accounting Policies and Estimates. The Hospital s Board of Directors and senior management have established policies and procedures that govern the financial affairs of the Hospital. Specific Committees of the Board oversee the financial affairs of the Hospital and make recommendations to the Board concerning certain capital expenditures, the management and investment of funds and the incurrence of debt. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions based on available information that 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 the reporting period. Actual results could materially differ from those estimates. The following is a description of some of the key estimates and significant accounting policies. Net patient service revenue is recognized and patient accounts receivable is recorded as services are

6 provided and is reported at the estimated net realizable amounts from patients, third-party payors, and others for services rendered, including estimated retroactive adjustments under reimbursement agreements with third-party payors. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Investments in equity securities with readily determinable market values and all debt securities are stated at fair value based on quoted market prices. Unrealized gains and losses, except those determined to be other than temporary losses, are excluded from excess of revenues over expenses. Management determines the appropriate classification of all marketable securities. All investments held at September 30, 2006 and 2005 are designated as other than trading. Investment income, which is presented as a nonoperating component of excess of revenues over expenses, includes all unrestricted realized gains and losses, interest, and dividends, net of investment management fees. For a more comprehensive description of accounting policies of the Hospital, please refer to the footnotes to the audited financial statements included in Appendix B. Reorganization. In November 2001, the Hospital filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Under Chapter 11, the Hospital continued to operate under court protection from its creditors and claimants while developing and implementing a reorganization plan to address operating problems. These operating problems were found to have resulted from: extensive repair costs, in excess of federal funds received, for damage to the Facilities after the 1994 Northridge earthquake; the costs of compliance with state seismic safety standards; and the incurrence of substantial liabilities in certain program areas due to negotiated at risk provisions in various health plan capitation agreements. The Hospital s Reorganization Plan was approved in federal bankruptcy court in June The secured claims consisted primarily of the 2001 Bonds, whose terms and payment arrangements remained relatively unchanged. Payment arrangements were established for all approved liabilities to unsecured creditors and other unsecured claims. All liabilities for unsecured creditors are scheduled to be paid by July 2, In February 2003, the Hospital obtained a Chapter 11 exit financing loan with its bank, which loan is insured by the Office and secured by a subordinate deed of trust. The loan matures in July 2010, and the outstanding balance as of March 31, 2007 was $3,266,667. Overview. The Hospital s operating income for the three fiscal years ended September 30, 2004, 2005 and 2006 was $6.9 million, $3.9 million and $8.9 million, respectively. The Hospital s excess of revenue over expenses, including investment and other income, was $7.7 million, $4.0 million and $9.9 million for the three fiscal years ended September 30, 2004, 2005 and 2006, respectively. The Hospital had property and equipment (including the renovation of existing facilities) totaling $48.2 million in fiscal year 2004, $52.2 million in fiscal year 2005 and $63.9 million in fiscal year Fiscal Year 2006 Compared to Fiscal Year The Hospital s net patient service revenue increased 9.5% from $130.6 million during fiscal year 2005 to $143.0 million in fiscal year 2006 primarily due to insurance contract rate increases. Acute patient days increased 4.3% from 37,251 to 38,846, women s patient days increased 4.0% from 3,941 to 4,100, transitional days increased 2.2% from 6,502 to 6,642, acute rehabilitation days increased 4.5% from 2,779 to 2,904, and behavioral health days increased 5.8% from 5,888 to 6,234, during fiscal year 2006 as compared to fiscal year Emergency department visits increased by 3.9% from 39,934 during fiscal 2005 to 41,486 in fiscal 2006 while all other outpatient visits declined by 5.8% from 32,650 during fiscal 2005 to 30,761 in fiscal During fiscal 2006, acute average length of stay increased from 4.32 days to 4.39 days. The aggregate of salaries and wages and employee benefits increased $4.3 million from $57.8 million during fiscal year 2005 to $62.1 million in fiscal year 2006, representing the largest component of the increase in operating expenses primarily due to annual wage increases. Supplies increased $3.4 million from $17.7 million during fiscal year 2005 to $21.1 million in fiscal year 2006, representing the second largest component of the increase in operating expenses primarily due to increases in implants in the surgery department. Purchased services, representing the third largest component, increased $2.1 million from $8.7 million during fiscal year 2005 to $10.8 million during fiscal year 2006 because there were additional services performed and rate increases imposed by the service providers.

7 Other income and non-patient revenue, including contributions and interest income, increased from $953,000 during fiscal year 2005 to $2.7 million for fiscal year Unrestricted liquidity declined by $1.7 million to $12.9 million at September 30, 2006, representing 36 days cash on hand compared to 44 days cash on hand at September 30, The decrease in cash resulted from funding capital expenditures, a portion of which will be reimbursed from a portion of the proceeds of the 2007 Bonds. Fiscal Year 2005 Compared to Fiscal Year The Hospital s net patient service revenue increased 2.7% from $127.2 million during fiscal year 2004 to $130.6 in fiscal year Acute patient days increased 6.4% from 35,006 to 37,251, women s patient days increased 9.3% from 3,607 to 3,941, and transitional days increased 8.1% from 6,017 to 6,502 during fiscal year 2005 as compared to fiscal year This increased utilization was offset in part by declines in acute rehabilitation days of 20.3% from 3,486 to 2,779 and in behavioral health days of 4.5% from 6,168 to 5,888 during fiscal year 2005 compared to the prior fiscal year. Emergency department visits increased by 3.6% from 38,562 during fiscal 2004 to 39,934 in fiscal 2005 while all other outpatient visits increased by 11.9% from 29,172 during fiscal 2004 to 32,650 in fiscal During fiscal 2005, acute average length of stay increased from 4.29 days to 4.32 days. The aggregate of salaries and wages and employee benefits increased $2.5 million from $55.3 million during fiscal year 2004 to $57.8 million in fiscal year 2005, representing the largest component of the increase in operating expenses primarily due to annual wage increases. Supplies increased by $2.0 million from $15.7 million during fiscal year 2004 to $17.7 million in fiscal year 2005, representing the second largest component of the increase in operating expenses. Facility costs, representing the third largest component, increased by $1.7 million, from $2.3 million during fiscal year 2004 to $4.0 million in fiscal year Other income and non-patient revenue, including contributions and interest income, declined from $1.5 million during fiscal year 2004 to $953,000 for fiscal year In fiscal year 2004 contributions were $653,000 and in fiscal year 2005 contributions were $4,000. The decrease in contributions were the result of reaching the mid-point of a three-year capital campaign drive that began in January, Unrestricted liquidity increased by $1.3 million to $14.6 million at September 30, 2005, representing 44 days cash on hand compared to 42 days cash on hand at September 30, Development of Master Plan. To date, all improvements on the Hospital s campus have been implemented through conditional use permits issued by the City of Santa Clarita (the City ). The Hospital currently is discussing its long-term facility needs with the City, with the intention of obtaining approval of a master plan for its Campus. If approved by the Hospital s Board and the City Council, the master plan is expected to include significant capital additions to the Hospital s facilities. It is not possible at this time to project the total cost to implement the master plan, when it will be fully developed, nor the expected funding sources. None of the Project components require approval of a master plan. Capital Resources. The Hospital s liquidity for the year ended September 30, 2006 was derived principally from net cash provided by operating activities. Net cash provided by operating activities for years ended September 30, 2004, 2005 and 2006 was $7.8 million, $9.8 million and $20.1 million, respectively. Management believes that future cash provided by operating activities and the cash proceeds from financings should be adequate to meet known debt service requirements and to finance planned capital expenditures and other presently known operating needs. Earthquake Grant Recovery. After the January 1994 Northridge Earthquake, the Federal Emergency Management Administration ( FEMA ) granted the Association $15 million in the form of reimbursement for eligible costs of repairing damage to the Hospital s acute care facilities. As a result of a routine audit conducted by FEMA in , FEMA is contesting the eligibility of payment of approximately $1.9 million and has issued notice of such to the Association. The Association believes that all payments made by FEMA were appropriate; accordingly, no specific reserves for repayment have been made.

8 JOINT VENTURE In December 2005, the Hospital entered into a joint venture agreement with Tower Imaging Medical Group, Inc., a California professional corporation ( TIMG ), whereby the Hospital and TIMG formed Tower Imaging Valencia, LLC, a California for-profit limited liability company (the Joint Venture ). The Joint Venture was formed for the purpose of developing and providing outpatient radiology services outside of the Facilities. The Joint Venture agreement has a term of ten years, unless otherwise terminated or extended in accordance with the provisions thereof, and it provides for a 50/50 split of profits and losses from operations of the Joint Venture between the Hospital and TIMG. TIMG manages the daily business affairs of the Joint Venture and receives compensation from the Hospital for such management services. The Hospital provides TIMG with certain services, such as information technology and maintenance, and also rents certain property to the Joint Venture. At September 30, 2006, the Joint Venture had approximately $3.4 million in total assets, $2.7 million in total liabilities and, for the fiscal year then ended, a net loss from operations of $144,000. To date, the Hospital has invested $1,361,117 in the Joint Venture. Through March 31, 2007, there was a profit of $36,224 on the investment in the Joint Venture. The Hospital has no current plans to make any additional investments in the Joint Venture. In June 2006, the Hospital sold certain assets to the Joint Venture for $1 million, which assets had a carrying value of approximately $475,000. The Joint Venture paid for the assets with a 5 year, 8.3% unsecured promissory note, which is reflected as part of other assets on the statement of financial position in the Hospital s audited financial statements. In addition, 50% of the recorded gain was offset against the carrying value of the Hospital s investment in the Joint Venture and 50% was recorded as a gain on sale of assets. The carrying value of the Hospital s investment in the Joint Venture (approximately $90,000) is also reflected in other assets on the statement of financial position in the Hospital s audited financial statements. Financial a) Please attach a copy of your most recent financial statements. 2001, 2002 and 2006 inclosed. b) Please review Section 5 of the Continuing Disclosure Agreement and confirm that no material Listed Event has occurred. Please describe any material Listed Event that has occurred since the date of the last report. None LAI:

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