Income Tax Information

2012 Conversion from an Income Trust to a Corporate Structure

This summary is of a general nature only and is not exhaustive of all possible Canadian federal income tax considerations associated with the July 1, 2012 conversion from an income trust to a corporate structure (the "Arrangement"). This summary is not intended to be, nor should it be construed to be, legal or tax advice to any particular purchaser and no representations with respect to the income tax consequences to any particular holder of former Extendicare REIT units(Unitholders) are made. Accordingly, Unitholders should consult their own tax advisors about the tax consequences to them of the Arrangement in their own particular circumstances.

Unitholders Resident in Canada

A holder of REIT units deemed to be a resident in Canada for purposes of the Income Tax Act (Canada), (a "Resident Holder"), who disposes of REIT Units in exchange for Common Shares of Extendicare Inc. pursuant to the Arrangement will be deemed to have disposed of each such REIT Unit for proceeds of disposition equal to the "cost amount" (as defined in the Tax Act) of such REIT Unit to the Resident Holder immediately before the disposition, and to have acquired each Common Share received in exchange for a REIT Unit at a cost equal to the "cost amount" to the Resident Holder of such REIT Unit immediately before the disposition. The "cost amount" of a REIT Unit to a Resident Holder will generally be equal to the "adjusted cost base" (as defined in the Tax Act) of the REIT Unit to the Resident Holder. As a consequence, a Resident Holder will neither realize a capital gain nor a capital loss on the disposition of REIT Units in exchange for Common Shares pursuant to the Arrangement. A Resident Holder will not need to file an income tax election in order to achieve this tax deferral.

The Tax Act provides that to the extent the fair market value of a Common Share immediately following the exchange exceeds the fair market value of a REIT Unit, any such excess is deemed to be a benefit that the exchanging Resident Holder is required to include in income for the taxation year that includes the Effective Date. The REIT intends to take the position that the fair market value of a Common Share at the time of the exchange is equal to the fair market value of a REIT Unit immediately prior to the exchange, however such a determination as to the fair market value of a Common Share and a REIT Unit is not binding on the CRA or a court.

Dividends and Former Extendicare REIT Distributions – Canadian Tax Information

The following information is intended to assist shareholders of Extendicare Inc. and former unitholders of Extendicare REIT and Exchangeable LP units in the preparation of their income tax returns and does not constitute legal or tax advice. Securityholders are advised to consult with a tax advisor as residency and other circumstances may vary.

Dividends of Extendicare Inc.

It is anticipated that all dividends declared and paid on the Common Shares of Extendicare Inc. will be designated as "eligible dividends" for Canadian federal income tax purposes, and will qualify for the enhanced dividend tax credit. However, there may be limitations on the ability of Extendicare to designate all or any portion of any dividends as "eligible dividends" and, accordingly, no assurance can be given as to the extent to which any dividends will be designated as "eligible dividends". The dividends paid by Extendicare Inc. in 2012 were "eligible" dividends.

Canadian Withholding Tax Obligations

For foreign resident (non-Canadian) holders of Common Shares of Extendicare Inc. the dividend will be subject to Canadian withholding tax at the rate applicable to foreign resident holders when distributed to such holders. This may be a 25% rate, or lower, if the foreign resident is in a treaty country.

With respect to former foreign holders of Extendicare REIT units, the portion of the distribution that was taxable income for Canadian tax purposes (estimated to be 30% for 2012) will be subject to Canadian withholding tax at the rate applicable to foreign resident holders when distributed to such holders. This may be a 25% rate, or lower, if the foreign resident is in a treaty country.

Computershare Trust Company of Canada (Computershare), the transfer agent for Extendicare will withhold any applicable Canadian withholding tax from the dividends paid to registered holders, other than CDS. For non-registered accounts, the broker/administrator holding the Extendicare securities on account is responsible for withholding the applicable Canadian withholding tax before paying the dividends to U.S. persons and foreign residents.

Former Extendicare REIT 2012 Distributions for Canadian Residents Only

With respect to distributions paid by Extendicare REIT, the predecessor of Extendicare, in 2012, 70.48% of the distributions were characterized as tax-deferred returns of capital.

For holders of REIT Units, the 2012 tax components of the distributions declared from January to June 2012, were:

• Box 49 - "eligible" dividend of $0.12398 per unit; and
• Box 42 - return of capital of $0.29602 per unit.

Details of the monthly components are provided in the T3 form as submitted to CDS, and included in the document list at the top of this page.

2006-2012 Distributions for Canadian Residents Only

A summary of the return of capital components of the former Extendicare REIT distributions for 2006-2012 is included in the document list at the top of this page.

Exchangeable LP Units

Exchangeable LP Units documents are included in the document list at the top of this page.

NR4 Reporting 2012 - Former Extendicare REIT Distributions for Non-Canadian Residents

The income distribution component of the 2012 distributions paid by Extendicare REIT of $0.12398 per unit had two components for purposes of NR4 reporting. One component is an actual dividend flow-through and designated to residents of Canada as a dividend. However, for non-residents, it is treated as "trust income" - code 11 on the NR4. The other component is comprised of non-portfolio earnings subject to SIFT tax, the after-tax amount of which is deemed a dividend for both residents and non-residents of Canada, and is classified as code 09 on the NR4. The remaining tax deferred return of capital portion is not reported on the NR4.

NR4 2011 (split of $0.12398 income)

• Dividend income (code 09) - $0.05083 per unit
• Trust income (code 11) - $0.07315 per unit

Redemption of Class B Limited Partnership Units - November 10, 2011

The former Class B limited partnership units of Extendicare Limited Partnership (Exchangeable LP Units) were exchangeable for former Extendicare REIT Units on a 1:1 basis at any time prior to November 10, 2011.

On November 10, 2011, Extendicare LP redeemed all of the Exchangeable LP Units then outstanding in exchange for one REIT Unit for each Exchangeable LP Unit. The redemption price for each Exchangeable LP Unit redeemed by Extendicare LP was an amount equal to the sum of: (a) the closing price of a REIT Unit on the TSX on November 9, 2011; and (b) the amount of all declared and unpaid distributions on such Exchangeable LP Unit as of the date of redemption (being the October distribution of $0.07 per unit).

The closing price of the REIT Units on the TSX on November 9, 2011 was $7.24, therefore the redemption price per unit was $7.31 ($7.24 + $0.07).