The significant IFRS differences that will potentially have an impact on the Trusts’ financial statements include the following:  1) Under Canadian GAAP, issued units of the Trusts are presented as equity in the combined balance sheet. A Trust unit is a  financial instrument for both Canadian GAAP and IFRS purposes. Under IFRS if there is a mandatory requirement to  distribute taxable income or distributable cash (a “contractual requirement to deliver cash”), this would result in Trust units  being considered as a liability. At the June 2010 annual meeting of unitholders of the REIT, an amendment was made to the  Declaration of Trust whereby distributions are no longer mandatory, rather they are now to be made at the discretion of the  trustees, thereby eliminating this potential issue under IFRS. Finance Trust is still reviewing this issue.  2) IFRS defines investment property as property held by the REIT to earn rental income, capital appreciation or both. Assets  classified as income properties on the balance sheet of the REIT qualify as investment property under IFRS.  Under IFRS, the REIT has a choice of measuring an investment property using the historical cost model or the fair value  model. The cost model is generally consistent with Canadian GAAP and would require that the fair value be disclosed in the  notes to the financial statements. Under the fair value model, investment property is measured at fair value, and changes in  fair value are recorded through earnings each reporting period, which could lead to income statement volatility in future  periods. Under the fair value model there are no charges for depreciation as there are under the cost model.  Page 35 of 45  Significant elements of the Trusts’ IFRS conversion plan include:  Area  Key Activities  Progress to Date  Financial Statement Presentation and  Disclosure  Identification of differences between IFRS and Canadian  GAAP  Complete  Assess and select accounting policy choices  Complete  Quantify the effects of the difference based on accounting  policies selected  Complete  Prepare opening and quarterly financial statements and  related note disclosures  In progress  Business Impacts  Identify required resources - valuation and accounting - for  technical analysis and implementation during the transition  Complete  Develop a real estate valuation strategy  Complete  Complete real estate valuation for the opening balance  sheet as at January 1, 2010  Complete  Identify impact on contractual agreements and financial  covenants  Complete  Where required, make amendments to agreements  Complete  Processes and Systems  Identify changes required to current financial reporting  systems  Complete  Identify data collection requirements and implement  process to collect data  Complete  Evaluate and select methods to address the need for dual  record keeping during 2010  Complete  Internal Control over Financial Reporting  and Disclosure  Ensure documentation of processes and systems are in  place  In progress  Ensure appropriate changes to internal controls to address  existing accounting policies and requirement for dual  record keeping during 2010  Complete  Assess effectiveness of controls  Ongoing  Training  Technical training of accounting staff  Ongoing  Educate Boards of Trustees, Audit Committees and Senior  Management on the effects of IFRS  Senior management is updated  regularly. Boards of Trustees and  Audit Committees are updated  quarterly  Communication to all other internal and external  stakeholders  Ongoing quarterly external  communication through MD&A  H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010 