H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  The change in net earnings for both the three months and year ended December 31, 2010 as compared to the respective 2009  periods is mainly due to the income tax recovery, loss on repayment of debentures, change in impairment loss on income properties,  gain on extinguishment of debt, net earnings from discontinued operations and the strengthening of the Canadian dollar as  compared to the U.S. dollar.  Page 9 of 45  RESULTS OF OPERATIONS Three months ended December 31  Year ended December 31  (in thousands of dollars except per unit amounts) 2010 2009  % Change  2010 2009  % Change  Operating revenue:  Rentals from income properties  $160,262  $151,668 6 $615,572  $605,165 2 Interest income  265  1,621 (84) 2,589  6,222 (58) 160,527  153,289 5 618,161  611,387 1 Operating expenses:  Property operating costs  55,680  50,535 10 204,084  195,615 4 Interest 44,263  46,284 (4) 179,519  182,671 (2) Depreciation and amortization  30,952  34,864 (11) 125,134  128,643 (3) 130,895  131,683 (1) 508,737  506,929 - Net property operating income  29,632  21,606 37 109,424  104,458 5 Net loss on foreign exchange  (4,453)  (2,125) (6,775)  (20,509) Impairment loss on income properties  (14,862)  (268) (14,862)  (14,764) Unrealized gain (loss) on derivative instruments  2,648  (1,213) (5,521)  3,463 Loss on repayment of debentures  -  - (38,834)  - Gain (loss) on extinguishment of debt  (332)  - 17,296  - Trust expenses  (1,792)  (2,600) (8,897)  (8,551) Net earnings before income taxes, non-controlling  interest and discontinued operations  10,841  15,400  51,831  64,097  Income tax recovery (expense)  (45)  17,395 122,845  9,249 Net earnings before non-controlling interest and  discontinued operations  10,796  32,795  174,676  73,346  Non-controlling interest  (588)  (1,307) (6,272)  (3,049) Net earnings from continuing operations  10,208  31,488 168,404  70,297 Net earnings (loss) from discontinued operations  381  (1,618) 3,944  16,228 Net earnings $10,589  $29,870 $172,348  $86,525 Basic net earnings per Stapled Unit  Continuing operations  $0.07  $0.22 $1.16  $0.50 Discontinued operations  -  (0.01) 0.03  0.11 $0.07  $0.21 $1.19  $0.61 Diluted net earnings per Stapled Unit  Continuing operations  $0.07  $0.20 $1.16  $0.46 Discontinued operations  -  (0.01) 0.03  0.10 $0.07  $0.19 $1.19  $0.56