There is a possibility that the Company’s internally generated cash may not be sufficient to repay all of its outstanding indebtedness. However, the Company may elect to repay indebtedness through refinancings or through the issuance of equity securities. In particular, under the terms of the Company’s convertible debentures, the Company is permitted to elect to satisfy the principal amount due on redemption or maturity of those debentures through the issuance of common shares. The Company also has the option to satisfy interest payments on its 7.0% Debentures and 7.25%  Debentures in the same manner.  Upon the expiry of the term of the financing on any particular property owned by the Company, refinancing on a conventional mortgage loan basis may not be available in the amount required or may be available only on terms less favourable to the Company than the existing financing. Also, a credit disruption in the capital markets could have an adverse impact on the Company’s ability to meet its obligations and grow its business. To limit the Company’s exposure to overall reductions in credit availability in poor economic times, the Company’s strategy is to stagger its long-term debt maturities and maintain an adequate level of cash or undrawn credit capacity. First Capital Realty also attempts to arrange stand-alone, limited recourse project financing to further mitigate the potential risk of a lack of replacement financing. In addition, the Company limits the amount of floating rate debt it will incur at any one time in order to insulate itself from interest rate volatility. The Company also strives to maintain and improve its access to capital markets. Interest rates effect the profitability of commercial properties as interest paid on mortgages secured by commercial properties represents a significant cost in the ownership of properties.  The Company’s strategy to spread the maturities of its debt is also helpful to mitigate its exposure to interest rate fluctuations. The following chart summarizes the Company’s fixed and variable components of mortgages and credit facilities. From time to time, the Company may enter into interest rate swap contracts to modify the interest rate profile of its outstanding debt without an exchange of the underlying principal amount. Any ongoing difference payable or receivable on such transactions is recorded as an adjustment to interest expense. The Company’s U.S. investment is self-sustaining and financed in part by U.S. dollar-denominated credit facilities, which are serviced by the cash flow generated by the dividends from its U.S. investment. This reduces the Company’s exposure to fluctuations in foreign currency exchange rates. Exchange Rate Risk Interest Rate Risk (thousands of dollars) 2003 2002 Fixed rate mortgage debt $ 639,733 81.4% $ 424,683 70.5% 7.5% debentures – – 15,237 2.5% Variable rate credit facilities  –  hedged 38,895 4.9% 15,776 2.6% Variable rate credit facilities  –  unhedged 107,673 13.7% 146,624 24.4% Total mortgages and credit facilities $ 786,301 100.0% $ 602,320 100.0% 39 First Capital Realty Annual Report 2003