H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  (3) The 2014 and 2017 Convertible Debentures are dilutive for the three months ended December 31, 2010. Debenture interest of $7.2 million is added to FFO for  the three months ended December 31, 2010 and 19,735,888 Stapled Units are included in the diluted weighted average number of Stapled Units outstanding for  that period. (4) The 2014 Convertible Debentures are dilutive for the three months ended December 31, 2009. Debenture interest of $3.7 million is added to FFO and  10,714,286 Stapled Units are included in the diluted weighted average number of Stapled Units outstanding for that period.  (5) The 2014 and 2017 Convertible Debentures are dilutive for the year ended December 31, 2009. Debenture interest of $6.2 million is added to FFO and  4,600,371 Stapled Units are included in the diluted weighted average number of Stapled Units outstanding for that period.  (6) The 2014 and 2017 Convertible Debentures are dilutive for the three months and year ended December 31, 2010. Debenture interest of $7.2 million and $27.9  million, respectively, is added to NFFO and 19,735,888 and 19,871,740 Stapled Units are included in the diluted weighted average number of Stapled Units  outstanding for the respective periods.  (7) The 2014 and 2017 Convertible Debentures are dilutive for the three months and year ended December 31, 2009. Debenture interest of $3.7 million and $6.2  million is added to NFFO and 10,914,515 Stapled Units and 4,600,371 Stapled Units are included in the diluted weighted average number of Stapled Units  outstanding for the respective periods  . • An increase of $2.3 million in property operating income due to acquisitions during 2010; • An increase of $0.8 million due to lower interest expense; • An increase of $2.0 million in straight lining of contractual rent;  • A decrease of $0.9 million in property operating income primarily due to the average U.S./Canadian dollar foreign  exchange rate of $1.00 for Q4 2010 as compared to $1.05 during Q4 2009;  • A decrease of $0.9 million in property operating income from properties sold between October 1, 2009 and December 31,  2010; • A decrease of $0.4 million due to an increase in non-recoverable property operating costs;  • A decrease of $0.5 million due to lower interest income, lower trust expenses and lower current income taxes; and  • A decrease of $0.6 million due to higher property management fees.  • A decrease of $8.2 million in property operating income primarily due to the average U.S./Canadian dollar foreign  exchange rate of $1.03 as compared to $1.14 for the year ended December 31, 2009;  • A decrease of $6.1 million in property operating income from properties sold between January 1, 2009 and December 31,  2010; • A decrease of $4.0 million due to lower interest income, higher trust expenses and higher current income taxes;  • A decrease of $2.5 million due to higher property management fees;  • A decrease of $1.1 million in property operating income due to tenants who filed for protection under Chapter 11 of the  United States Bankruptcy Code and subsequently terminated their leases; and  Page 26 of 45  The primary reasons for the decrease of $15.6 million in NFFO between the year ended December 31, 2010 as compared to the  same period in 2009 are: NFFO adjusts FFO for: the net gain or loss on derivative instruments and foreign exchange as these are non-cash items which will  vary from quarter to quarter; the additional recoveries for capital expenditures in excess of items expensed in property operating  costs as these also vary from quarter to quarter and in the view of the Trusts’ management, this volatility is not indicative of the  Trusts’ performance, and the loss on repayment of debentures is a one-time, non-recurring item and as such is not in the normal  course of operations. In addition, the Trusts have adjusted its NFFO for mortgage interest accruals on non-recourse mortgage  defaults, the gain on extinguishment of debt along with other non-recurring items such as lease termination fees. FFO is reconciled  to AFFO which is reconciled to cash provided by operations.  The primary reasons for the increase of $1.7 million in NFFO between Q4 2009 and Q4 2010 are: