Interest Expense The Company’s interest expense is comprised of the following: (thousands of dollars) 2003 2002 Mortgages and credit facilities Secured by Canadian properties $ 34,329 $ 29,104 Secured by investment in Equity One 4,393 4,350 38,722 33,454 Debentures and convertible debentures 4,602 7,172 Total interest expense $ 43,324 $ 40,626 The factors affecting each component of interest expense are discussed below. Interest expense on mortgages and credit facilities secured by Canadian assets is comprised of the following: Interest Expense on Mortgages and Credit Facilities – Canada The increase of $6.8 million in interest paid on Canadian mortgages and credit facilities in 2003 over 2002 primarily results from increased borrowing by the Company to fund acquisitions and development activities. The increase in interest expense in 2003 was a result of an increase in the gross debt and was partially offset by a decrease in the weighted average interest rate on the Company’s Canadian fixed rate borrowings, from 7.3% at December 31, 2002 to 7.0% at December 31, 2003, and by an increase in the interest capitalized to properties under development. Interest expense on mortgages and credit facilities secured by the investment in Equity One is summarized as: Measured in U.S. currency, the interest expense on the U.S. facilities has increased by 14% in 2003 from 2002 as a result of the higher debt balance. The change in the U.S. exchange rate during 2003, has offset this increase. (thousands of dollars) 2003 2002 Interest expense $ 34,329 $ 29,104 Interest capitalized 3,481 1,796 Other 132 228 Total Canadian mortgage and credit facilities interest paid $ 37,942 $ 31,128 (thousands of dollars) 2003 2002 Ending debt balance – December 31 (US$) $ 83,926 $ 68,947 Interest expense (US$) $ 3,147 $ 2,771 Average exchange rate $ 1.40 $ 1.57 Interest expense (Cdn$) $ 4,393 $ 4,350 25 First Capital Realty Annual Report 2003 Interest Expense on Credit Facilities – United States