Report of the Directors

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Principal activities

The principal activity of the Company is that of a holding company. The principal activities of the Group during the year were property development, investment and trading.

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Incorporation

Development Securities PLC is incorporated in Great Britain and registered in England and Wales, registration number 1528784.

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Business review and future developments

A review of the Group's operations, the current state of the business and future prospects, including financial and non-financial key performance indicators, principal risks and uncertainties, is contained in the Chairman’s Statement, Chief Executive’s Statement, Operating Review and Financial Review, and should be read in conjunction with this report. The principal risks of the Group are set out in Risks. The information which comprises the business review as required by Section 417(1) of the Companies Act 2006 may be found in the Operating Review and in the Corporate Responsibility Report.

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Results and dividends

The profit for the financial year attributable to shareholders amounted to £1,678,000 (2009: £10,694,000 loss). An interim Ordinary dividend of £1,974,000 representing 2.4 pence per Ordinary share was paid on 9th September 2010 (2009: £974,000 representing 2.4 pence per Ordinary share) in respect of those shares in issue prior to the Placing and Rights Issue. The Board recommends a final Ordinary dividend of 2.4 pence per Ordinary share amounting to £2,936,000 payable on 6th July 2011 to shareholders on the register at 3rd June 2011 (2009: £1,974,000 representing 2.4 pence per Ordinary share). Subject to shareholder approval this makes a total dividend payment of 4.8 pence per Ordinary share for 2010, maintained from the previous year.

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Group structure

Details of the Group’s principal subsidiary undertakings are disclosed in note 12(c).

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Share capital

In July and August 2010, following the receipt of valid responses, the Company issued 40,096,030 Ordinary shares of 50 pence each in connection with a Placing and Rights Issue raising gross proceeds of £100,240,000. Of the 40,096,030 Ordinary shares, 4,110,000 were issued on 28th July 2010 in connection with the Placing and the remaining 35,986,030 were issued in connection with the Rights Issue on 11th August 2010. The Company’s issued share capital of 122,352,504 Ordinary shares of 50 pence each as at 31st December 2010 represents a single class of shares, with all shares ranking equally and fully paid. Details of the share capital are set out in note 18.

The rights and obligations attaching to the shares are specified in the Company’s Articles of Association, or alternatively may be governed by statute. There are no restrictions on the transfer of shares in the Company other than those specified by law or regulation. There are no restrictions on voting rights other than as specified by the Articles of Association.

Three resolutions relating to share capital will be proposed as Special Business at the forthcoming Annual General Meeting. The full text of the resolutions can be found in the Notice of Annual General Meeting.

Special Resolution 14. The current authority for the Company to purchase its own shares expires at the end of the forthcoming Annual General Meeting. A special resolution is to be proposed at the Annual General Meeting to authorise the repurchase of up to 12,235,250 Ordinary shares, representing approximately 10.0 per cent of the Company's issued share capital. The Directors have no present intention of making any market purchases of the Company's shares, but if they believed such action would enhance net assets or earnings per share, they would consider exercising their authority. As at the date of this report, the Company has an unexpired authority to repurchase 12,256,000 Ordinary shares.

Ordinary Resolution 15. The Directors will be seeking the renewal of the power to allot shares or grant rights to subscribe for, or to convert any security into shares. The authority sought will be in two separate tranches. The authority in the first tranche will allow the Directors to allot new shares and other 'relevant securities' up to a nominal value of £20,392,084 which is equivalent to one-third of the total issued Ordinary share capital of the Company. The authority in the second tranche will allow the Directors to allot new shares and other relevant securities only in connection with a rights issue up to a further nominal value of £20,392,084, which is again equivalent to one-third of the total issued Ordinary share capital of the Company. This is in line with corporate governance guidelines. The Directors have no present intention of exercising this authority. However, the Directors consider it desirable to have the maximum flexibility permitted by corporate governance guidelines to respond to market developments and to enable allotments to take place to finance business opportunities as they arise.

Special Resolution 16. If the Directors wish to allot new shares and other relevant securities, or sell treasury shares for cash (other than in connection with an employee share scheme), company law requires that these shares are offered first to members in proportion to their existing holdings. The Directors seek authority to renew the disapplication of shareholders' pre-emptive rights under Section 561 of the Companies Act 2006. The purpose of paragraph (i) of Resolution 16 is to authorise the Directors to allot new shares pursuant to the authority given by paragraph (i) of Resolution 15 for cash either (a) in connection with a pre-emptive offer or rights issue or (b) otherwise up to a nominal value of £3,058,812 (being equivalent to 5.0 per cent of the total issued Ordinary share capital of the company), in each case without the shares first being offered to existing members in proportion to their existing holdings.

The purpose of paragraph (ii) of Resolution 16 is to authorise the Directors to allot new shares pursuant to the authority given by paragraph (ii) of Resolution 15 for cash in connection with a rights issue without the shares first being offered to existing members in proportion to their existing holdings. This is in line with corporate governance guidelines. The Board considers the authority sought to be appropriate in order to allow the Company flexibility to finance business opportunities or to conduct a pre-emptive offer or rights issue without the need to comply with the strict requirements of the statutory pre-emption provisions. The Board intends to adhere to the provisions in the Pre-emption Group's Statement of Principles not to allot shares on a non pre-emptive basis (other than pursuant to a rights issue or pre-emptive offer) in excess of an amount equal to 7.5 per cent of the total issued Ordinary share capital of the Company within a rolling three-year period without prior consultation with members.

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Change of control

The Company has entered into significant agreements with its commercial partners, which contain change of control clauses and which may give rise to termination or renegotiation in that event. If enforced, the Company may be deprived of potential future earning capacity from such schemes. The Company is party to a number of committed bank facilities which upon a change of control are terminable at the bank’s discretion. In addition, under such circumstances the Company’s share option schemes would normally vest or become exercisable subject to the satisfaction of the performance conditions.

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Corporate Governance

The Company’s statement on corporate governance can be found in the Corporate Governance Report of the financial statements. The Corporate Governance Report forms part of this Report and is incorporated into it by cross-reference.

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Share option schemes

Options over 120,000 shares were granted to senior management under the Executive Share Option Scheme 2005. Further details of the share option schemes are contained in note 18 and in the Remuneration Report.

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Directors

The Directors serving during the year and up to the date of signing the Group financial statements were as follows:
D S Jenkins
M H Marx
G Prothero
C J Barwick
M S Weiner
V M Mitchell
M S Soames
S C Bates (Appointed 15th January 2010)

P V S Manduca resigned 7th May 2010

Brief biographical details are shown in Board of Directors.

All Directors will be retiring at the next Annual General Meeting and, being eligible, will offer themselves for re-election. C J Barwick is required to offer himself for re-election in accordance with the Articles of Association and Combined Code. The other Directors are voluntarily offering themselves for re-election as a matter of best practice following the Placing and Rights Issue. Following the performance evaluation of the Board, all Directors were judged to have made a significant contribution to the Board’s deliberations, reflecting their commitment to the role.

The Articles of Association deal with the appointment and replacement of Directors.

Under the Companies Act 2006 a Director must avoid a situation where he or she has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the Company’s interests. No conflicts of this sort have arisen during the year under review.

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Directors' service contracts and interests in the Company's shares

The unexpired period of Directors' service contracts and the interests in the shares of the Company of the Directors who were in office as at 31st December 2010 are disclosed in the Remuneration Report.

Other than as disclosed in the Remuneration Report, none of the Directors had any material interest in any contract that was significant in relation to the Group’s business at any time during the period, other than a service contract.

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Directors’ and officers’ liability insurance

Article 155 of the Company’s Articles of Association provides, among other things, that, insofar as permitted by law, every Director shall be indemnified by the Company against all costs, charges, expenses, losses or liabilities incurred in the execution and discharge of the Directors’ duties, power or office. The Company maintains Directors’ and officers’ liability insurance, which is reviewed annually, and is considered to be adequately insured.

The third party indemnity insurance was in force during the financial year and also at the date of approval of the financial statements.

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Articles of Association

The Articles of Association may be amended by a special resolution of the shareholders.

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Annual General Meeting

The Annual General Meeting will be held on 27th May 2011 at 12.00 noon on the 14th Floor Portland House, Bressenden Place, London SW1E 5DS.

At the meeting, resolutions will be proposed to receive the Annual Report and financial statements, approve the Remuneration Report, re-elect Directors, declare a final dividend, re-appoint PricewaterhouseCoopers LLP as auditors and authorise the Directors to determine their remuneration. In addition, shareholders will be asked to renew the authority for the Company to make market purchases of its own shares, the general authority of the Directors to issue shares, the authority to dis-apply pre-emption rights, the renewal of the yearly authority to call a general meeting other than an Annual General Meeting on 14 days’ notice and also to amend the Articles of Association, primarily to take account of the coming into force of the Companies (Shareholders’ Rights) Regulations 2009 and the implementation of the last parts of the Companies Act 2006.

Full details of all the resolutions can be found in the enclosed Notice of Annual General Meeting, which is also displayed on the Company's website.

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Financial risk management

Disclosures in respect of financial risk management objectives and exposures are set out in note 16(c).

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Charitable donations

Charitable donations during the year were £112,124 (2009: £52,482). The Group supported a number of charities serving the community in which the Group operates. This included national and local charitable organisations and covered a wide range of causes including education, public services, community support schemes and events organised on behalf of major charities.

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Other substantial interests

At the date of this report, the Directors have been notified of the interests in 3.0 per cent or more of the Company’s issued share capital shown in the table below. These interests were notified to the Company pursuant to Disclosure and Transparency Rule 5.

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Employees

The Group is committed to the principle of equal opportunity in employment. Current and potential employees are offered the same opportunities regardless of gender, race, colour, religion, nationality, ethnic origin, age, sexual orientation, marital status or disability. It is the Group’s policy to apply best practice in the employment of the disabled, including, wherever possible, the retraining and retention of staff who become disabled during their employment.

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Payment policy

Amounts due to suppliers are settled promptly within their terms of payment, except in cases of dispute. The number of creditor days outstanding for the Company at 31st December 2010 was 7.2 days (2009: 1 day).

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Auditors

Our auditors, PricewaterhouseCoopers LLP, have indicated their willingness to continue in office, and a resolution that they be re-appointed will be proposed at the forthcoming Annual General Meeting.

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Post balance sheet events

Details of events which have occurred since 31st December 2010 and up to the date of this Report are disclosed in note 27 to the financial statement.

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Disclosure of information to auditors

Each of the persons who is a Director at the date of approval of this report confirms that:

1. So far as he/she is aware, there is no relevant audit information of which the Group's auditors are unaware; and
2. He/she has taken all the steps that he/she ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information.

This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

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Approved by the Board of Directors

Signed by order of the Board:
G Prothero
Finance Director
1st March 2011

Further reading

• Corporate Governance