FFO per diluted share was 35 cents compared to 37 cents in the fourth quarter of 2002, adjusted for a non-recurring $1.6 million (4 cents per diluted share) lease termination income. The decline in the quarter is due to a 36% increase in the average diluted shares outstanding, combined with a relative decline in percent rent traditionally received in the fourth quarter which has been received more evenly throughout the year in 2003. First Capital Realty’s significant accounting policies are described in Note 1 to the Consolidated Financial Statements. Management believes the policies which are most subject to estimation and management’s judgment are those as outlined below. For acquisitions subsequent to September 12, 2003, in accordance with CICA 1581 and CICA 3062, management is required to perform the procedures listed below. Many of these procedures are subject to estimation and management judgment. Under Canadian GAAP, management is required to write down to fair value any long-lived asset that is determined to have been permanently impaired. First Capital Realty’s long-lived assets consist of investments in income properties and mortgages receivable. The fair value of investments in income properties is dependent upon anticipated future cash flows from operations over the anticipated holding period. The review of anticipated cash flows involves subjective assumptions of estimated occupancy, rental rates and a residual value. In addition to reviewing anticipated cash flows, management assesses changes in business climates and other factors, which may affect the ultimate value of the property. These assumptions are subjective and may not be ultimately achieved. The fair value of mortgages receivable depends upon the financial covenant of the issuer and the economic value of the underlying security. In the event these factors result in a carrying value that exceeds the sum of the undiscounted cash flows expected to result from the direct use and eventual disposition of the property, an impairment would be recognized.  Amortization is recorded on buildings using a 5%, 40-year sinking fund basis. A significant portion of the acquisition cost of each property is allocated to the building. The allocation of the acquisition cost to the building and the determination of the useful life are based upon management’s 33 First Capital Realty Annual Report 2003 Amortization Impairment of Assets Property Acquisitions SUMMARY OF SIGNIFICANT ACCOUNTING ESTIMATES AND POLICIES Summary of Critical Accounting Estimates • Estimate the value of serviced land “as if vacant” as of the acquisition date; • Estimate the value of the building “as if vacant” as of the acquisition date; • Allocate that value among land, site improvements and building; • Allocate the value of the above and below-market leases to the intangible assets; • Calculate the value and associated life of the tenant relationships, if any, by taking the direct identifiable benefits of the tenant relationship and discounting that to its present value; and, • Estimate the fair value of the tenant improvements and leasing commission.