H&R REIT AND H&R FINANCE TRUST - MD&A - December 31, 2010  Segmented disclosure by geographic location is provided as follows:  Debentures payable increased by $256.6 million to $822.3 million at December 31, 2010 from $565.7 million at December 31, 2009. During the year ended December 31, 2010, the REIT issued Series A, Series B and Series C Senior Debentures with a carrying  value of $350.8 million in aggregate, issued 2020 Convertible Debentures with a carrying value of $89.2 million, and repaid in full the  Non-Convertible Debentures which had a carrying value of $188.8 million at December 31, 2009. See the consolidated financial  statements of the REIT for detailed information regarding the various debentures payable.  In February 2010, the REIT repaid the outstanding Non-Convertible Debentures having an aggregate face value of $200 million for a  total repurchase price of $230 million. The repurchase price included accrued interest of approximately $2 million. The REIT  recognized a one-time non-recurring charge to the combined statement of earnings of approximately $39 million, representing the  difference between the repurchase price, excluding accrued interest expense, and the carrying value of the Non-Convertible  Debentures of $189 million.  Accounts payable and accrued liabilities increased by $3.5 million from $167.0 million at December 31, 2009 to $170.5 million at  December 31, 2010. Other payables and accruals increased as a result of transactions occurring in the normal course of business  operations including an increase of $5.7 million due to increased interest accrued on all of the debentures. Also included in accrued  liabilities is the total interest accrued to date on the non-recourse mortgages under default of $8.1 million (December 31, 2009 -  $11.7 million). This amount has decreased $3.6 million as the lenders have now taken title to five properties. As at December 31, 2010, the REIT did not exceed the normal growth guidelines at any time prior to 2011 and has qualified for the  REIT Exemption beginning in 2011. Accordingly, the REIT and holders of REIT units will not become subject to the SIFT Rules (as  defined herein) and the REIT will not be liable to pay tax, provided that the REIT continues to qualify for the REIT Exemption at all  times after 2010. As a result, the future income tax liability of $138.1 million recorded as at December 31, 2009 has been recognized  into income.  Page 23 of 45  Future Income Tax Liability  Accounts Payable and Accrued Liabilities  Maturity Date  Contractual  Interest  Rate  Effective  Interest  Rate  Conversion  Price  Face Value (in millions)  Carrying Value December 31, 2010 (in millions)   Carrying Value December 31, 2009 (in millions)  2013 6.65% Convertible Debentures  Jun 30, 2013  6.65%  9.10%  $23.11  $115.0 $108.8  $106.7  2014 6.75% Convertible Debentures  Dec 31, 2014  6.75%  12.30%  14.00  145.0 120.2  119.4 2017 6.00% Convertible Debentures  Jun 30, 2017  6.00%  8.60%  19.00  175.0 153.3  150.8 2020 5.90% Convertible Debentures  Jun 30, 2020  5.90%  7.53%  23.50  100.0  89.2  -  Series A Senior Debentures  Feb 3, 2015  5.20%  5.40%  n/a  115.0 114.1   -  Series B Senior Debentures  Feb 3, 2017  5.90%  6.06%  n/a  115.0 114.1  -  Series C Senior Debentures  Dec 1, 2018  5.00%  5.30%  n/a  125.0  122.6  -  Non-Convertible Debentures  -  11.50%  12.90%  n/a  -  -  188.8 $890.0 $822.3  $565.7  (in thousands of dollars)  December 31, 2010 December 31, 2009  Mortgages payable - Canada  $1,890,881  $1,950,224  Mortgages payable - United States  815,826  868,252  Total  $2,706,707  $2,818,476  Debentures Payable 