RESULTS OF OPERATIONS Funds from Operations In management’s view, funds from operations (“FFO”) is a commonly accepted and meaningful indicator of financial performance in the real estate industry. FFO does not recognize amortization as an operating expense or recognize future income taxes until they are paid. First Capital Realty believes that financial analysts, investors and stockholders are better served when the clear presentation of comparable period operating results generated from FFO disclosure supplements Canadian generally accepted accounting principles (“GAAP”) disclosure. The Company’s method of calculating FFO may be different from methods used by other corporations or REITs and accordingly, may not be comparable to such other corporations or REITs. FFO is presented to assist investors in analyzing the Company’s performance and to provide an indication of the Company’s ability to fund capital expenditures, dividends and other cash needs. FFO (i) does not represent cash flow from operations as defined by GAAP, (ii) is not indicative of cash available to fund all cash flow needs and liquidity, including the ability to pay dividends, and (iii) should not be considered as an alternative to net income (which is determined in accordance with GAAP) for purposes of evaluating operating performance.  The Company’s funds from operations are calculated below: Funds from operations on a diluted basis totalled $1.38 per common share for the year ended December 31, 2003, compared to $1.33, exclusive of a $0.04 per share for a one-time lease termination income, in 2002. The increase in FFO was primarily due to the effect of acquisitions and development in 2002 and 2003.  Net Operating Income (thousands of dollars) 2003 2002 Net income for the year $ 44,026 $ 29,634 Add (deduct): Amortization 11,364 8,859 Loss (gain) on disposition of marketable securities (74) 138 Loss (gain) on disposition of land and shopping centres 275 (591) Non-cash compensation expense 273 – Equity income from Equity One, Inc. (19,095) (21,606) Dividend income from Equity One, Inc. 19,033 18,575 Dilution gain on investment in Equity One, Inc. (17,911) (3,290) Future income taxes 22,162 13,522 Funds from operations $ 60,053 $ 45,241 (thousands of dollars) 2003 2002 Same property $ 55,643 $ 54,607 Acquisitions 26,042 12,381 Development and redevelopment 13,680 9,459 Lease termination income 492 1,870 Net operating income $ 95,857 $ 78,317 Net operating income increased by $17.5 million in 2003 to $95.9 million. 23 First Capital Realty Annual Report 2003