TSE:FTS fully insured. Transmission and distribution assets are covered under a self-insurance scheme which is supplemented by a standby financing arrangement with one of the Company’s commercial bankers. Also, the Corporation obtained a US$62 million short-term credit facility to finance the acquisition of BECOL. In November 2001, US$45 million of this short-term credit facility was replaced by BECOL with ten-year debt. The ability to raise financing in the currency of the underlying investment provides a natural hedge against foreign currency exchange rate risk.  In October 2001, Belize was hit by Hurricane Iris causing  an estimated US$2.5 million in damages to the Company’s electricity system. Revenue loss was approximately US$200,000 to US$300,000.  The Corporation continues to be exposed to foreign currency fluctuations to the extent that earnings from foreign subsidiaries exceed financing costs. For every one cent appreciation in the Canadian dollar, consolidated earnings would decline approximately $50,000.  The results of BECOL are highly sensitive to rainfall levels. Over the longer term, rainfall amounts should average out but there may be significant variations in any given year. All Fortis utilities are exposed to climatic factors which are generally addressed by regulatory mechanisms. The Corporation uses a centralized insurance management function to enable a higher level of insurance expertise and to reduce the liability exposure of the Fortis Group of Companies. Interest Rates: The Corporation has exposure to interest rate risk as movement in interest rates associated with short-term debt facilities and refinancing of long-term debt impact future earnings. Fortis has limited exposure to interest rate risk as less than 17 per cent of the Corporation’s total debt at December 31, 2001 was subject to variable interest rates. Newfoundland Power’s allowed return is at risk to changes in interest rates as the automatic adjustment formula used to set the Company’s allowed return is based on long-term Canada bond rates. Foreign Exchange : Earnings from Belize Electricity, BECOL, Caribbean Utilities and FortisUS Energy are denominated in US dollars. Both the Cayman Island dollar and the Belizean dollar are pegged to the US dollar. The Cayman Island dollar is equal to 1.2 US dollars while the Belizean dollar is equal to 0.5 US dollars. Foreign earnings derived in currencies other than the US dollar must be converted into US dollars before repatriation. Due to the small size and cyclical nature of the economy in Belize, conversion of local currency into US dollars may be subject to restrictions from time to time. Market Conditions: The Fortis Group of Companies is exposed to economic risks. The growth of each company is partially dependent on the economic conditions of its operating territory. The impact to the Corporation of an economic slowdown in a particular operating territory is mitigated by the geographic diversification of the Fortis Group of Companies. Earnings and cash flow from these operations are exposed to changes in foreign exchange rates. In December 2000, the Corporation significantly reduced its exposure to foreign currency exchange rate fluctuations by entering into a US dollar currency swap. Through the use of the currency swap, the interest payment on the $100 million debenture was converted into a US dollar interest payment, providing a currency match between US dollar income and the financing costs.  40 FORTIS Inc. 2OO1 Annual Report