Mechanics of “Stapling” the Units of Finance Trust and the REIT  Pursuant to the provisions of the Declarations of Trust for Finance Trust and the REIT at all times each REIT unit must be ‘‘stapled’’  to a Finance Trust unit (and each Finance Trust unit must be ‘‘stapled’’ to a REIT unit) unless there is an “event of uncoupling” (as  described below). As part of the Plan of Arrangement, as described in the REIT’s information circular dated August 20, 2008, the  REIT and Finance Trust entered into a support agreement (the “Support Agreement”) which provided, among other things, for the  co-ordination of the declaration and payment of all distributions so as to provide for simultaneous record dates and payment dates;  for co-ordination so as to permit the REIT to perform its obligations pursuant to the REIT’s Declaration of Trust, Unit Option Plan,  Distribution Reinvestment Plan and Unit Purchase Plan (“DRIP”) and Unitholder Rights Plan; for Finance Trust to take all such  actions and do all such things as are necessary or desirable to enable and permit the REIT to perform its obligations arising under  any security issued by the REIT (including securities convertible, exercisable or exchangeable into Stapled Units); for Finance Trust  to take all such actions and do all such things as are necessary or desirable to enable the REIT to perform its obligations or exercise  its rights under its convertible debentures; and for Finance Trust to take all such actions and do all such things as are necessary or  desirable to issue Finance Trust units simultaneously (or as close to simultaneously as possible) with the issue of REIT units and to  otherwise ensure at all times that each holder of a particular number of REIT units holds an equal number of Finance Trust units,  including participating in and cooperating with any public or private distribution of Stapled Units by, among other things, executing  prospectuses or other offering documents.  In the event that the REIT issues additional REIT units, pursuant to the Support Agreement, the REIT and Finance Trust will  coordinate so as to ensure that each subscriber receives both REIT units and Finance Trust units, which shall trade together as  Stapled Units. Prior to such event, the REIT shall provide notice to Finance Trust to cause Finance Trust to issue and deliver the  requisite number of Finance Trust units to be received by and issued to, or to the order of, each subscriber as the REIT directs. In  consideration of the issuance and delivery of each such Finance Trust unit, the REIT (solely as agent for and on behalf of the  purchaser) or the purchaser, as the case may be, shall pay (or arrange for the payment of) a purchase price equal to the fair market  value (as determined by Finance Trust in consultation with the REIT) of each such Finance Trust unit at the time of such issuance.  The remainder of the subscription price for Stapled Units shall be allocated to the issuance of REIT units by the REIT. The proceeds  received by Finance Trust from any such issuance shall be invested in additional notes of the same series as the U.S. Holdco Notes  or distributed to unitholders of Finance Trust. An event of uncoupling (“Event of Uncoupling”) shall occur only: (a) in the event that unitholders of the REIT vote in favour of the  uncoupling of units of Finance Trust and units of the REIT such that the two securities will trade separately; or (b) at the sole  discretion of the trustees, but only in the event of the bankruptcy, insolvency, winding-up or reorganization (under an applicable law  relating to insolvency) of the REIT or U.S. Holdco or the taking of corporate action by the REIT or U.S. Holdco in furtherance of any  such action or the admitting in writing by the REIT or U.S. Holdco of its inability to pay its debts generally as they become due. Under Finance Trust’s Declaration of Trust, the assets of Finance Trust may be invested only in:  The Finance Trust Declaration of Trust provides that Finance Trust shall not make any investment, take any action or omit to take  any action which would result in the units of Finance Trust not being considered units of a ‘‘mutual fund trust’’ for purposes of the  Income Tax Act (Canada) (the “Tax Act”) or that would disqualify Finance Trust as a “fixed investment trust” under the Internal  Revenue Code of 1986 as amended (the “Code”) and the applicable regulations. In order to qualify as a ‘‘fixed investment trust’’  under the Code, Finance Trust generally may not acquire assets other than the U.S. Holdco Notes or certain investments in cash or  cash equivalents.  (a) U.S. Holdco Notes; and  (b) temporary investments in cash, term deposits with a Canadian chartered bank or trust company registered under the laws of  a province of Canada, short-term government debt securities, or money market instruments (including banker’s acceptances)  of, or guaranteed by, a Schedule 1 Canadian bank (“Cash Equivalents”), but only if each of the following conditions are  satisfied: (a) if the Cash Equivalents have a maturity date, the trustees hold them until maturity; (b) the Cash Equivalents are  required to fund expenses of Finance Trust, a redemption of units, or distributions to unitholders, in each case before the next  distribution date; and (c) the purpose of holding the Cash Equivalents is to prevent funds from being non-productive, and not  to take advantage of market fluctuations.  Investment Restrictions H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  Page 3 of 45 