I BELIEVE THAT THE CONCEPTS OF FAMILY, RELATIONSHIP AND INTEGRITY ARE INSTANTLY RECOGNISABLE IN GROSVENOR THROUGHOUT THE WORLD AND ARE VALUED AS IMPORTANT ASPECTS OF OUR BUSINESS.

I am very pleased to report the successful establishment of the new-look Grosvenor. In 2000, we changed our management structure, adopted a new image and moved our main offices in the UK and US. We achieved this with as little disruption as we dared hope, retaining, we believe, the full support of our financial and business partners. This has opened a new chapter in the Grosvenor story.

The new organisation has a small central team and autonomous Operating Companies in Britain and Ireland, the Americas, Continental Europe and Australia Asia Pacific. We are confident that this gives us a good balance between longer-term strategic decision-making and shorter-term exploitation of specific opportunities. The central research activity, concentrating on the interaction of different economies internationally and their impact on property markets, complements the Operating Companies' research into local markets. We aim to use relevant experience in one part of the world to our benefit elsewhere.

Each of our Operating Companies made good progress in 2000, contributing to a total return on capital for the Group of 16.4%.

The first move of the London office for over 150 years was a momentous event. We left behind our rabbit warren of overcrowded cellular offices and now operate in a completely modern open plan building. This has proved to be an outstanding success. The extra space, the visibility of individuals and the vastly superior ability to communicate is already bringing us genuine business advantages. The building also reflects more accurately the Group's business style.

With so much change occurring, we have paid particular attention to the culture of the new organisation to make sure that we preserve the things which make Grosvenor different. This is not a question of nationality but is rooted firmly in the concepts of family, relationship and integrity. I believe that these are things which are instantly recognisable in Grosvenor throughout the world and are valued as important aspects of our business.

For many years, we have stressed the role of research and a better understanding of risk in value-based business management. In the short term, the property industry often rewards the guru whose intuitive skills are strong but whose organisation lacks depth of expertise and continuity. Our long term approach requires more objectivity. The foundation for this is education. Last year, I decided to make my own commitment to this more explicit. I was pleased to accept the Chairmanship of the RICS Foundation which has been formed as a major contributor to new ideas and greater understanding in property. My family's charitable foundation also endowed the new Grosvenor Professor of Real Estate Finance at Cambridge University. I hope these initiatives will generate new concepts and greater efficiency in the industry.

It is possible that we have witnessed the end of one of the longest growth periods any of us are likely to experience. In Britain, where consumer confidence stayed subdued for the early years of the growth period, we may not notice its passing as much as those in the United States. The cooling of the world economy will lessen demand, reducing windfall gains, but the absence of a destabilising glut of new supply in any of the major markets, bodes very well for stability in the medium term. We expect that Europe will become more influential in determining growth patterns around the world as the USA reverts to trend growth.

As a private company domiciled in the UK we are denied the relief afforded to publicly held groups where UK tax is charged only on the repatriated proceeds of overseas disposals. This legislation was given another turn of the screw in the Finance Act 2000, further inhibiting genuine international investment. We have made representations through the parliamentary process and continue to campaign vigorously to remove this constraint on our operations.

At the end of 2000, Jimmy James retired from the Board. His contribution to the Group's evolution since 1971, first as Chief Executive and latterly as a non-executive director, has been enormous. The great distinction he achieved personally in his career is some gratification to me for his loyalty and dedication to the Grosvenor family. We are fortunate to have been able to appoint Robin Broadhurst as a new non-executive director. Michael Billinghurst, Managing Director of our Australian operations also retired; my fellow directors and I thank him for his invaluable contribution over the past 16 years.

The Duke of Westminster OBE TD DL
15 March 2001

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