Recovery in the Asian economies boosted activity throughout the region as investors regained confidence and began to consider new projects. Grosvenor's teams in Sydney, Brisbane, Hong Kong and Singapore had a busy year. Significantly, we bought a 15% stake in Asia Standard International Group Limited, a listed Hong Kong property company.

AUSTRALIA

Australia's economy continued to demonstrate strong growth during 1999 with most property sectors looking very positive. The improvement in South East Asian markets has undoubtedly been a factor. Gross Domestic Product grew by 4.2% during the year.

Most of our assets are in Sydney where the office market has been active. Rents have firmed as a result of falling vacancy levels. Retail property has remained strong based on high consumer confidence. Demand for industrial land and investments remains strong and owner-occupiers and listed trusts are active in the market.

Against the background of this strong economy, our Australian team, based in Sydney and Brisbane, has had a very busy year.

During the year we continued our relationship with Buccleuch Estates Ltd with whom we have invested in Australia for nearly 30 years. Our current joint venture is in the progressive development of the Sir Joseph Banks Corporate Park in Botany.

We also entered into a new joint venture with Tucker Seabrook for the development of their new headquarters at the Botany corporate park; completion is scheduled for the first quarter of 2000. Tucker Seabrook is one of Australia's oldest companies and is an importer and distributor of fine wines and liquor.

In Sydney, we expanded our holdings near the M2 motorway in Seven Hills where we acquired a 2.25 hectare (5.5 acre) property in 1997. The motorway is to be extended within the next five years to include the first stage of the proposed western orbital system that will pass close to our new purchases. Our acquisition included two industrial/warehouse buildings totalling 17,000m2 (183,000 sq ft). The vendor, a leading retail group, took a 10 year lease back over the larger building of 11,000m2 (118,400 sq ft). The purchase also included a 3 hectare (7.4 acre) parcel of land for future development.

In Brisbane we acquired two well located industrial/distribution properties, in the South Western suburbs, with total building areas of 38,500m2 (400,000 sq ft).

SOUTH EAST ASIA

Grosvenor has offices in Hong Kong and Singapore. Both markets continued their recovery during 1999.

We consolidated our presence in the area with a 15% investment, costing £29.5 million, in Asia Standard International Group. We shall work closely with the majority shareholder, Asia Orient Holdings, which retained a 54% share, in developing the strategy for the Group. At the same time, Ayala International also acquired shares in Asia Standard. This is Ayala's second investment with Grosvenor in Asia. The other is in the Forum Shopping Centre, Orchard Road, Singapore, in which Grosvenor has a 17% holding. After the difficult trading period of the last 18 months the centre is fully let and performing well.

Asia Standard has grown steadily since its establishment in 1983. Its main focus is on quality residential developments in the Hong Kong market, but it also has interests in commercial property and hotels. Our intention is to work closely with Asia Standard to increase its development programme at the most opportune time in the property cycle.

At the end of the year we concluded a joint venture with Hong Kong Land to pursue residential investment opportunities. Our team continues to research new opportunities particularly Hong Kong, Singapore and Japan.


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