The following summary is not intended to be legal or tax advice to any particular holder of Income Participating Securities of Medical Facilities Corporation. Holders of Income Participating Securities (as well as prospective purchasers) should consult their own tax advisors in determining the application to them of any Canadian federal, provincial, U.S. federal, state, local, foreign or other tax consequences of the purchase, ownership and disposition of Income Participating Securities.

Each Income Participating Security ("IPS") represents: (a) Cdn$5.90 aggregate principal amount of 12.5% subordinated notes of Medical Facilities Corporation and (b) one common share of Medical Facilities Corporation. Total monthly distributions of Cdn$0.0917 paid on each IPS represents an interest payment of Cdn$0.0615 and a dividend of Cdn$0.0302.

Canadian taxpayer
Canadian resident individuals who receive "eligible dividends" in 2006 and subsequent years will be entitled to an enhanced gross-up and dividend tax credit, resulting in a reduction of income taxes otherwise payable on those dividends. Medical Facilities Corporation has designated that all of its dividends paid in 2006 are "eligible dividends" for these purposes. Medical Facilities Corporation also advises that all of its dividends will be designated as "eligible dividends" for 2007 and subsequent years, unless indicated otherwise.

United States taxpayer - Withholding Tax Considerations
Dividends (i.e. the dividend portion of the distributions paid on MFC's IPSs) received by U.S. persons from "qualified foreign corporations" qualify as "qualified dividends" and, under current regulations, are generally subject to a preferential tax rate if the U.S. person receiving the dividend meets the "holding period requirement" described below.

Interest paid by Medical Facilities Corporation on its subordinate notes will be exempt from Canadian withholding tax. Dividends paid by Medical Facilities Corporation to a U.S. IPS holder (who, at all relevant times, is a resident of the United States and not resident, or deemed to be resident, in Canada, for purposes of the Canada-U.S. Income Tax Convention) in respect of the common shares generally will be subject to a 15% Canadian withholding tax.

Dividends paid by Medical Facilities Corporation to a U.S. holder that is exempt from tax in the United States may be exempt from Canadian withholding tax. Such holders should consult their own tax advisors with respect to the availability of an exemption to Canadian withholding tax pursuant to Article XXI of the Canadian Treaty.

U.S. holders that are being subject to Canadian withholding tax in excess of the amounts set out above are encouraged to consult their own brokers and confirm that their distributions are being appropriately taxed.
The "holding period requirement" requires the stock to have been held for more than 60 days in the 121-day period that begins 60 days before the ex-dividend date.

A "qualified foreign corporation" includes any foreign corporation (1) incorporated in the possession of the U.S., (2) eligible for the benefits of a comprehensive income tax treaty with the U.S., or (3) whose stock is "readily tradable on an established securities market in the United States." The term "qualified foreign corporation" does not include any foreign corporation that, for the taxable year of the corporation in which the dividend is paid, or the preceding taxable year, is a passive foreign investment company (PFIC).

Medical Facilities Corporation, is a corporation formed under the laws of the province of British Columbia in Canada, and therefore should be eligible for treaty benefits under the Canada-United States Income Tax Convention, which is a treaty that the Treasury Department has determined is satisfactory for this purpose. Assuming that Medical Facilities Corporation is not currently a PFIC and was not a PFIC in the preceding tax year, dividends received by U.S. persons meeting the holding period requirement from Medical Facilities Corporation should be treated as dividends from a "qualified foreign corporation" and therefore eligible for "qualified dividend" status.