Dear Lyon Stockholder
    
Northern California Division

2000 also was a successful year for William Lyon Homes, Inc. in Northern California. Under the leadership of Division President Doug Bauer, we delivered more homes and produced higher sales than ever before. During 2000, on an combined basis with our unconsolidated joint ventures, we delivered 615 new homes, with an average price of $417,000, generating total revenue of $257.6 million.

We believe our strategy of being an opportunistic niche builder is the primary reason for our success. We build in 11 different cities, with home prices ranging from $150,000 in Lathrop to over $1,000,000 in Pleasanton. By expanding geographically within different market segments of Northern California, we have diversified our product mix, while focusing on acquiring entitled lots to maintain a two-year supply of lot inventory.

Despite the very active environmental and slow-growth movements in Northern California, we were able to obtain the necessary federal, state and local permits to start development of a 526-unit golf course-oriented community in the city of San Jose, in the heart of the Silicon Valley. In California's capital intensive market, this project and many of our other California projects will be developed in a joint venture, enabling us to reduce our capital investments as well as minimize our risk.

We will open our first communities in the Sacramento market in 2001.

We believe this market will provide us the opportunity to produce more affordably priced housing in the greater Northern California market.

Lyon Ridge, Plan 2, in Antioch, CA; Northern California Division Staff.
   
Monte Verde at Rancho Dorado, Plan 2 and Plan 3, in San Marcos, CA.