EARLY WARNING REPORT                 UNDER NATIONAL INSTRUMENT 62-103 

1. Name and Address of Offeror:

ValueAct Capital Master Fund, L.P.

435 Pacific Avenue, 4th Floor

San Francisco, CA 94133

2. The designation and number or principal amount of securities and the offeror's securityholding percentage in the class of securities of which the offeror acquired ownership or control in the transaction or occurrence giving rise to the obligation to file the news release, and whether it was ownership or control that was acquired in those circumstances:

On September 2, 2009, ValueAct Capital Master Fund, L.P. ("ValueAct Master Fund") entered into a Support Agreement (the "Support Agreement") with DH Technologies Development PTE Ltd. (the "Buyer"). Pursuant to the terms of the Support Agreement, ValueAct Master Fund made certain representations and agreements for the benefit of the Buyer in consideration for the Buyer's entering into a Stock and Asset Purchase Agreement (the "Transaction Agreement"), dated September 2, 2009, with MDS Inc. (the "Issuer"). Under the Transaction Agreement, the Buyer has agreed to purchase from the Issuer its MDS Analytical Technologies business, subject to shareholder and regulatory approvals and other closing conditions.

In the Support Agreement, ValueAct Master Fund agreed with the Buyer during the term of the Support Agreement, among other things and subject to certain exceptions: (i) not to sell or transfer its shares of the Issuer or any voting rights with respect to such shares until the day following the record date to be set for the Issuer's shareholder meeting to approve the Transaction Agreement (provided that the foregoing does not prohibit ValueAct Master Fund from selling or hedging its economic interest in the Issuer's shares); (ii) not to solicit, initiate, encourage or enter into certain other types of acquisition transactions involving the Issuer and (iii) to vote all of its Issuer shares at any meeting of the Issuer's shareholders in favour of the transactions contemplated by the Transaction Agreement and against any action that is intended or would reasonably be expected to impede or interfere with the transactions contemplated by the Transaction Agreement.

The Support Agreement and ValueAct Master Fund's obligations under the Support Agreement shall terminate upon the earliest of: (i) the consummation of the transactions contemplated by the Transaction Agreement; (ii) the termination of the Transaction Agreement in accordance with its terms; (iii) the occurrence of certain changes to the recommendation of the board of directors of the Issuer with respect to the Transaction Agreement and (iv) December 29, 2009.

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