Directors' report

The disclosures below, together with the biographies under Board of directors and the Corporate governance report, form the Directors' report.

The disclosures relating to principal risks and the likely future developments in the business of the Group have been included in the Strategic report.

Share capital

Full details of the Group's share capital can be found in note 24 to the financial statements.

Purchase of own shares

At the annual general meeting of Mondi plc held in May 2013 shareholder approval was received to undertake an odd-lot offer. In connection with this, shareholders passed a resolution authorising Mondi plc to repurchase ordinary shares in Mondi plc from shareholders holding less than 100 ordinary shares in Mondi plc. As a result, on 17 July 2013 Mondi plc repurchased 96,591 Mondi plc ordinary shares of €0.20 each on the UK share register at a price of 965.43 pence per share and 322,727 Mondi plc ordinary shares of €0.20 each on the South African branch register at a price of 13903.10 rand cents per share.

The shares repurchased under the odd-lot offer were temporarily held as treasury shares before being transferred to the Mondi Employee Share Trust on 30 July 2013. There was, therefore, no change to the issued ordinary share capital of Mondi plc.

Substantial interests

Mondi Limited

Based on the Mondi Limited share register as at 31 December 2013, the directors are aware of the following shareholders holding directly 5% or more of the issued share capital of Mondi Limited:

ShareholderShares%
GEPF Equity24,679,78120.86
Coronation Fund Managers15,803,47913.36
State Street Bank and Trust6,765,6335.72
Allan Gray6,331,2425.35
Old Mutual6,109,7775.16

Save as indicated above, the directors have not been advised of and have no certainty whether any of the shareholders could be beneficially interested in 5% or more of the issued share capital of Mondi Limited.

Mondi plc

As at 31 December 2013, the Group had received notifications from the following parties in the voting rights of Mondi plc. The number of shares and percentage interests shown are as disclosed at the date on which the holding was notified.

ShareholderShares%
Investec Asset Management Proprietary Limited17,789,6984.84
AXA S.A.17,210,4714.69
Standard Life Investments Limited16,476,0214.49
Old Mutual Plc11,978,9843.26
Norges Bank11,025,1983.00
Sanlam Investment Management Proprietary Limited10,936,1283.00

No changes in interests have been notified between 1 January 2014 and the date of this report.

Additional information for Mondi plc shareholders

The information for Mondi plc shareholders required pursuant to the UK Companies Act can be found under Additional information for Mondi plc shareholders.

Special resolutions of Mondi Limited subsidiaries

During 2013 the following special resolutions were passed by subsidiaries of Mondi Limited:

  • the adoption of a new memorandum of incorporation by Mondi Shanduka Newsprint Proprietary Limited;
  • the adoption of a new memorandum of incorporation by Siyaqhubeka Forests Proprietary Limited; and
  • change of name and amendments to the company's main business by Mondi Sacherie Moderne Holdings Proprietary Limited.

Greenhouse gas emissions 1

Climate change as a result of man-made greenhouse gas (GHG) emissions represents one of the greatest threats to our environment, society and economy. Mondi is committed to making a real contribution to the battle against climate change through more efficient use of energy, increasing our use of renewable energy, reducing landfilled waste, and helping to manage forests sustainably and contribute to minimising deforestation.

In 2010, Mondi committed to reducing our CO2e emissions per unit of saleable production from our mills by 15% by 2014, against a 2004 base year. We have already met and exceeded this target and will be setting a new commitment and reporting on it in 2014.

Specific CO<sub>2</sub>e emissions from our material operations [graph]

A corporate GHG inventory is the basis for accounting emissions-related risks and opportunities for Mondi. We focus on GHG emissions from our own operations, as well as along our value chains and product portfolios (Scope 3 emissions)5. We report our GHG emissions according to the Greenhouse Gas Protocol, published by the WBCSD and the World Resources Institute, and have reported our scope 1 and 2 GHG data in compliance with ISO 14064:1-2006. ERM CVS has provided reasonable assurance on our scope 1 and 2 GHG data in accordance with ISO14064.

Employees

Mondi has formal and informal processes to communicate with and engage employees across the Group. In addition to electronic communications and publications, regular local briefing sessions by managers focus on safety, operational objectives and performance, financial performance and the Group's values and culture. The Group has a number of performance-related pay schemes that reward employees for the pursuit and achievement of business objectives, and the majority of our employees participate in a performance-related pay scheme. In 2013 a Group-wide employee survey was conducted and will be followed up through feedback and consultation sessions during 2014.

Applications for employment by disabled persons are fully considered, bearing in mind the aptitudes and abilities of the applicant concerned. In the event of employees becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be consistent with that of other employees.

Research and development activities

In addition to research and development (R&D) in ecosystem conservation, Mondi's R&D Innovation Centres and R&D-related activities focus on product stewardship. Our investment in R&D is integral to the development of new products, further developing existing products as well as our on-going process optimisation, all the time anticipating market trends and new technologies. The resultant innovations are tailor-made to our customers' requirements, and are economical as well as ecologically responsible. These innovations also support our customers and other stakeholders within Mondi's supply chain to address their respective sustainability challenges through responsible product solutions. Mondi's investment into R&D during 2013 amounted to €14 million.

Political donations

No political donations were made during 2013 and it is Mondi's policy not to make such donations.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic report. The most significant risks and the Group's related management and mitigating actions are set out in the Corporate governance report. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements.

Mondi's geographical spread, product diversity and large customer base mitigate potential risks of customer or supplier liquidity issues. Ongoing initiatives by management in implementing profit improvement initiatives which include ongoing investment in its operations, plant optimisation, cost-cutting, and restructuring and rationalisation activities have consolidated the Group's leading cost position in its chosen markets. Working capital levels and capital expenditure programmes are strictly monitored and controlled.

The Group meets its funding requirements from a variety of sources as more fully described in note 19 of the financial statements. The availability of some of these facilities is dependent on the Group meeting certain financial covenants all of which have been complied with. Mondi had €792 million of undrawn committed debt facilities as at 31 December 2013 which should provide sufficient liquidity in the medium term. The Group's debt facilities have maturity dates of between 1 and 12 years, with an average maturity of 3.7 years.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, including an assessment of the current macroeconomic environment, indicate that the Group should be able to operate well within the level of its current facilities and related covenants.

The directors have reviewed the overall Group strategy, the budget for 2014 and subsequent years, considered the assumptions contained in the budget and reviewed the critical risks which may impact the Group's performance. After making such enquiries, the directors are satisfied that the Group remains solvent and has adequate liquidity in order to meet its obligations and continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the integrated report and financial statements.

Auditors

Each of the directors of Mondi Limited and Mondi plc at the date when this report was approved confirms that:

  • so far as each of the directors is aware, there is no relevant audit information of which the Group's auditors are unaware; and
  • each director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself aware of any relevant audit information and to establish that the Group's auditors are aware of that information.

Deloitte & Touche and Deloitte LLP (together 'Deloitte') have indicated their willingness to continue as auditors of Mondi Limited and Mondi plc respectively. The Boards have decided that resolutions to reappoint them will be proposed at the annual general meetings of Mondi Limited and Mondi plc scheduled to be held on 14 May 2014.

The reappointment of Deloitte has the support of the DLC audit committee, which will be responsible for determining their audit fee on behalf of the directors.

Note 3 to the financial statements sets out the auditors' fees both for audit and non-audit work.

Events occurring after 31 December 2013

With the exception of the proposed final dividend for 2013, included in note 10 to the financial statements, there have been no material reportable events since 31 December 2013.

Annual general meetings

The annual general meeting of Mondi Limited will be held at 11.30 (SA time) on Wednesday 14 May 2014 at the Hyatt Regency, 191 Oxford Road, Rosebank, Johannesburg 2132, Republic of South Africa and the annual general meeting of Mondi plc will be held at 10.30 (UK time) on Wednesday 14 May 2014 at Haberdashers' Hall, 18 West Smithfield, London EC1A 9HQ, UK. The notices convening each meeting, which are sent separately to shareholders, detail the business to be considered and include explanatory notes for each resolution. The notices are available on the Mondi Group website at: www.mondigroup.com.

This Directors' report was approved by the Boards on 27 February 2014 and is signed on their behalf.

Philip Laubscher
Company secretary

Mondi Limited
4th Floor, No. 3 Melrose Boulevard
Melrose Arch 2196
PostNet Suite #444
Private Bag X1
Melrose Arch 2076
Gauteng
Republic of South Africa

Registration No. 1967/013038/06

Carol Hunt
Company secretary

Mondi plc
Building 1, 1st Floor
Aviator Park
Station Road
Addlestone
Surrey
KT15 2PG
UK

Registered No. 6209386