I'm not an HR person so am sure there will be lots of better answers than mine but as a person who's given and gotten a lot of reviews over the years, some thoughts:
Best advice I can give is to be honest and be prepared. I know of way too many managers over the years who don't feel comfortable communicating negative feedback to their employees...or just communicate some but gloss over much. In some cases it's because they don't like conflict or confrontation and it just makes them feel really uncomfortable. In some cases it's because they get intimidated by employees who are defensive or confrontational. But you have to do it.
Because the employee will never improve if you're not completely honest with them. This is about learning.
And if you ever have to fire an employee, having a trail of positive reviews can be a real problem. Again, seen that many times.
Another reason is other employees. It will get around if somebody got a good review when others feel they're a poor performer and vice versa. So be honest.
As you're doing, find a good template for an employee review and be thorough in filling it out. Make sure to have examples for both positives and negatives. Take a few days to fill it out because things will keep popping into your head to include in the review. If you do it all the night before you're going to miss a lot and do a disservice to your employees.
Be constructive when talking about areas to improve.
Don't just talk "at" the person, talk with them. Let them provide feedback and input while making sure to communicate your points. You might have a particular project they screwed up on, for example. Ask them how they felt about it first, let them talk, then share your perspective. Often that creates a much more productive dialog than just dumping on them. But you still get the same point across.
Have an action plan at the end for what you want them to do to address weaknesses and continue their positives. But make it constructive and positive. This should be something they're happy about because it's helping them develop and contribute to the company.
There shouldn't be surprises in the interview. If you know somebody really has performance issues and it's going to be a negative review, make sure you've given them feedback and counseling and such before. And if it's a rave review, they also should have received recognition previously. An old adage - you should never be surprised when you get fired or promoted. Same with reviews, should never be surprised if it's a negative review or a positive review.
All that said, lots of people think reviews are a total waste of time. To each their own. If you're doing them, make the most of them. I think they can be real helpful.
I'm done spewing...see what others say.