Corporate governance report

Compliance statement

Mondi has complied throughout the year with the principles contained in the South African King III Code of Corporate Governance Principles (available at www.iodsa.co.za) and the UK Corporate Governance Code issued by the Financial Reporting Council (available at www.frc.org.uk) save as set out below:

  • the Boards determined that the DLC sustainable development committee provided the appropriate oversight for the sustainability reporting in the Integrated report and financial statements 2013 rather than the DLC audit committee, as recommended under King III. Due to the nature of Mondi’s business the DLC sustainable development committee regularly reviews all key sustainability issues for the Group, meeting six times a year and reports directly to the Boards. Therefore it is considered to be better placed to review the integrity of the sustainability reporting. The DLC sustainable development committee provides the assurance on sustainability issues in the Integrated report and financial statements 2013; and
  • although Cyril Ramaphosa stepped down as joint chairman on 3 May 2013, he had not been considered independent when originally appointed to the Boards due to his connection with Mondi through the Shanduka Group which has a shareholding in Mondi Shanduka Newsprint Proprietary Limited.

A more detailed analysis of Mondi’s compliance with King III is available on the Mondi Group website.

Board structure

[DLC Board]

Mondi comprises Mondi Limited, registered and listed in South Africa, and Mondi plc, registered and listed in the UK. Each entity has its own board of directors comprising the same individuals. This enables the effective management of the dual listed structure as a single unified economic enterprise with due consideration being given to the interests of the ordinary shareholders of both Mondi Limited and Mondi plc.

Leadership of the Boards comes from the joint chairmen who have agreed a rolling agenda to ensure that all key matters reserved for the consideration of the directors is covered in the annual cycle of meetings. Ahead of each meeting they review the proposed agendas, which will include additional items as required by the business operations or wider economic environment. One example during 2013 was the request from the chairmen to include a detailed presentation on Mondi’s tax management practices following the widespread criticism of large organisations regarding their tax arrangements. This enabled the directors to challenge Mondi’s approach and practices and to satisfy themselves that they were appropriate.

In line with governance practice the Boards delegate certain responsibilities to committees. The role of each committee is described later in this report. There is however co-ordination between the committee chairs and the joint chairmen and reports from each committee meeting are made at the following board meeting. This ensures that directors are kept informed and the chairmen can ensure that all aspects of the board’s mandate have been addressed.

The matters reserved for the Boards together with the terms of reference of each of the governance committees are available on Mondi’s website and are reviewed at least on an annual basis but also when there have been changes in circumstances, governance or regulation. During 2013 certain of the committee terms of reference were updated in response to the UK governance code changes introduced at the end of 2012, in particular relating to audit committees.

Key board responsibilities:
  • review and approval of the Mondi Group strategy
  • setting the Group’s values, governance and ethical standards
  • oversight of the Group’s operations including the integrity of financial performance, controls and compliance
  • material acquisitions and disposals and major capital expenditure
  • risk and reward structures
  • shareholder communications
  • Group policies
Key 2013 considerations:
  • received reports on fatalities and considered management’s response and actions
  • reviewed and approved the Group’s strategy
  • appointment of a new joint chairman
  • oversight of the integration of Nordenia into the Mondi Consumer Packaging business unit
  • reviewed Mondi’s approach to tax management
  • considered the impacts of the modernisation and mechanisation of the forestry operations in South Africa
  • reviewed and approved a Group diversity policy
  • launched an Odd-lot Offer
  • approved a variety of stay in business capex and new expansionary and energy related projects

Board meetings are chaired by one of the joint chairmen. Whether this is Fred Phaswana or David Williams is usually dependent upon the location of the meeting with Fred chairing those in South Africa and David those held in Europe. They oversee the issue of appropriate, accurate and well presented materials and ensure there is sufficient debate and consultation with management and advisers as well as between the directors themselves during meetings in order that effective decisions are reached.

In an effort to nurture productive relationships between the directors and management, opportunities to receive presentations directly from those responsible for the work are encouraged. The Boards meet with as many employees as possible, utilising site visits, off-site meetings and board dinners as well as meeting presentations. This also helps to give them exposure to potential future successors for executive management roles.

The Boards support the appropriate governance structures and processes through a regular programme of review and challenge of key areas such as divisional performance and trends, treasury and IT. There is also an annual review of Group policies and corporate governance compliance, testing what remains appropriate and effective and where changes may be warranted.

Composition of the Boards

The directors holding office during the year ended 31 December 2013 are listed below, together with their attendance at board meetings. As at 31 December 2013 there were nine directors: the joint chairmen, four non-executive directors each considered by the Boards to be independent and three executive directors. There continues to be a strong mix of skills and industry experience, particularly in Europe and South Africa, locations important to Mondi’s operations. Those in office as at the date of this report, together with their biographical details, can be found in the Board of directors section.

Directors Position Independent Board member since Mondi Limited board
(one meeting)
Mondi plc board
(one meeting)
DLC board
(six meetings)
Fred Phaswana¹ Joint chairman Yes June 2013 4
Cyril Ramaphosa² Joint chairman No May 2007 1 1 2
David Williams Joint chairman Yes May 2007 1 1 6
Stephen Harris Non-executive director Yes March 2011 1 1 6
David Hathorn Chief executive officer No May 20073 1 1 6
Andrew King Chief financial officer No October 2008 1 1 6
Imogen Mkhize Non-executive director Yes May 2007 1 1 6
John Nicholas Non-executive director Yes October 2009 1 1 6
Peter Oswald Chief executive officer, Europe & International Division No January 2008 1 1 6
Anne Quinn Senior independent non-executive director Yes May 2007 1 1 6
  1. 1 Fred Phaswana was appointed a director of both Mondi Limited and Mondi plc on 1 June 2013 and attended all meetings held since that date.
  2. 2 Cyril Ramaphosa stepped down from the Boards at the conclusion of the annual general meetings of Mondi Limited and Mondi plc held on 3 May 2013 and attended all meetings up to that date.
  3. 3 David Hathorn was appointed a director of Mondi Limited in May 1997.
Composition of the Boards [graph]
Diversity on the Boards (%) [graph]
Non-executive director tenure [graph]
Nationalities represented on the Boards [graph]

A policy is in place pursuant to which each director may obtain independent professional advice at Mondi’s expense in the furtherance of their duties as a director of either Mondi Limited or Mondi plc. No requests were received during the year.

Throughout the year to 31 December 2013, in line with market practice, Mondi maintained directors’ and officers’ liability insurance.

Board responsibilities

Principal responsibilities of the joint chairmen:
  • lead and manage the dynamics of the Boards, ensuring their effectiveness, consideration of succession and setting the agenda
  • ensure high standards of corporate governance and ethical behaviour
  • ensure that the Boards set a clear and appropriate strategy for the Group
  • ensure effective communication with shareholders and other stakeholders
Principal responsibilities of the chief executive officer:
  • leads the business, in particular the execution of strategy
  • chairs the DLC executive committee and leads and motivates the management team
  • ensures the Group has effective processes, controls and risk management systems
  • ensures the Boards receive accurate, timely and clear information about the Group’s performance

Mondi has joint chairmen, Fred Phaswana and David Williams, with the chief executive officer role held separately by David Hathorn. Fred joined the Boards on 1 June 2013, replacing Cyril Ramaphosa who retired from the Boards on 3 May 2013. Having joint chairmen, one based in South Africa and the other in the UK, ensures that the Group and its shareholders benefit from an extensive knowledge and experience of the jurisdictions relating specifically to its dual listed structure. The joint chairmen maintain a regular dialogue with each other and manage the Boards through mutual agreement.

The division of responsibilities between the joint chairmen and the chief executive officer has been clearly defined and approved by the Boards. They do however work closely on matters such as the relationships with major shareholders, governments, analysts, media and other external relationships.

David Hathorn, chief executive officer, does not hold any directorships external to Mondi. The main positions held by Fred Phaswana and David Williams outside the Mondi Group are detailed in their biographies set out in the Board of directors section. There have been no changes to the commitments of David Williams during the year or for Fred Phaswana since joining the Boards.

Both Fred Phaswana and David Williams were independent upon appointment. Details relating to Fred’s appointment can be found in the DLC nominations committee section of this report.

The Boards continue to consider that the chairmen’s external directorships do not interfere with the time they devote to Mondi, with both having attended all meetings and made themselves available to management and other directors when required.

Anne Quinn is the senior independent director, having been appointed to this role in August 2009.

Principal responsibilities of the senior independent director:
  • provides support to, and acts as a sounding board for, the joint chairmen
  • available as a point of contact for shareholders
  • available as an intermediary for the other directors, as necessary
  • chairs a meeting of the non-executive directors at which the performance of the joint chairmen is considered

Philip Laubscher is the company secretary of Mondi Limited and Carol Hunt the company secretary of Mondi plc. They work together on the co-ordination of Mondi’s DLC structure.

Company secretaries:
  • they are appointed and removed by the Boards and are accountable to the Boards as a whole
  • they are both professionally qualified and have gained experience over a number of years (their biographies are detailed in the DLC executive committee and company secretaries section)
  • they report at each board meeting on relevant corporate governance and regulatory matters and changes, including the provision of advice on the performance of directors’ duties and the continuing obligations of the JSE and LSE
  • they ensure the timely distribution of meeting packs ahead of each meeting

Pursuant to the Listings Requirements of the JSE, the Boards confirm that they have reviewed and are satisfied that each of the company secretaries are competent and have the relevant qualifications and experience.

In assessing their competence the Boards have considered the expected role and duties pursuant to the requirements in both South Africa and the UK of the Companies Acts, governance codes and continuing obligations of the stock exchanges on which Mondi is listed and considered their respective compliance with each of these. The Boards have reviewed their performance not only during the last year but since joining Mondi. The Boards concluded that the company secretaries have each complied with all the requirements of the Companies Acts, governance codes and continuing obligations of the relevant stock exchanges.

While all directors have access to the advice and services of the company secretaries, the company secretaries maintain an arms-length relationship with the Boards. They do not take part in board deliberations and only advise on matters of governance, form or procedure. Throughout the year they have ensured compliance with board procedures, providing independent advice to the Boards on governance and compliance matters as necessary.

Non-executive director meetings

Non-executive director meetings, chaired by one of the joint chairmen (except when their performance is being considered), are held twice a year. These meetings focus particularly on the performance of the executives but the agendas are driven by the non-executive directors and cover a variety of topics. One of these meetings is attended by the chief executive officer in order to provide input to the discussions on executive performance and succession.

Training and development

When new directors join the Boards they undertake an induction. The starting point is for one of the company secretaries to meet with the director to explain the dual listed company structure and its implications for the operation of the Boards. The committee and governance framework will also be considered with a copy of the directors’ handbook, containing all the key documents of reference for directors, provided. The handbook is kept up to date and is available to all directors via an iPad application.

While there is an outline induction programme in place this is discussed with each new director to ensure that it can be tailored to meet any specific requirements they may have. The programme generally includes meetings with each member of the executive committee and key advisers in addition to site visits. Fred Phaswana, who joined the Boards in June 2013, has been undertaking an induction and additionally is meeting with the heads of key corporate functions such as Group treasury and Group tax.

All directors are encouraged to attend workshops and seminars relevant to their respective roles and details of such programmes are provided regularly by the company secretaries.

Part of the Boards’ annual rolling agenda is also focused on updating skills and knowledge. During the year Mondi’s UK legal advisers facilitated a session on the duties and responsibilities of directors in UK listed companies and an economist from one of Mondi’s relationship banks gave a presentation on the global economic outlook. In order to assist directors in obtaining a greater understanding of the newly expanded Consumer Packaging segment, the business unit management gave a detailed presentation including an overview of products, the market and innovation in addition to a review of operations generally. This was further supplemented in June with a site visit to the former Nordenia plant at Gronau, Germany, producing advanced films and components, so that the directors could see the operations first hand and meet more of the local management team. In addition, in August the directors visited the release liner plant, Inncoat in Raubling, Germany.

The company secretaries provide a report to the Boards at each meeting that covers developments in governance and regulation, explaining what impact there may be for Mondi and updating the directors on implementation plans. These reports also cover the wider consultations that are undertaken by various regulatory bodies by way of general information. Other corporate function specialists report on their respective functions to the Boards to enable the directors to gain a greater insight into the way Mondi is managed and to provide opportunities to question processes, resources and key risks.

There is a policy in place setting out the parameters regarding the appointment of any executive director as a non-executive of another company. Although valuable experience can be gained from such roles it is important for the Boards to ensure the appropriateness and number of such commitments. A director will retain any fee paid to them in respect of directorships external to Mondi. Peter Oswald is currently the only executive director holding an external position, being a non-executive director of Telekom Austria AG. His current fee is set at €15,000 per annum plus a meeting attendance allowance which for 2013 amounted to €1,800 in total for the year.

Performance evaluation

As reported last year, there were two key themes from the 2012 review, namely:

  • the monitoring of the integration of recent acquisitions into the Mondi Group; and
  • continuing to review the composition of the Boards to ensure appropriate succession and skills to complement Mondi’s strategic direction.

As explained above, during 2013 the directors have monitored the integration into the Group of the acquisitions completed at the end of 2012 in accordance with the action plan from the 2012 review.

There has been consideration of the composition of the Boards and the appropriateness of the current skills base in light of Mondi’s strategic direction. There was a change of one of the joint chairmen during the year. In 2013 both Anne Quinn and Imogen Mkhize completed their six year terms with Mondi. The joint chairmen undertook a more detailed review of their performance including consideration of the governance code requirements, evaluation feedback, shareholder opinion and reviewed this against the time they devote to their duties at Mondi and their other directorships and business commitments. The views of their fellow directors and their contribution to the board debate through their preparedness to openly challenge and question was considered. The composition of the Boards and current skills mix were also taken into account before it was confirmed that both Anne and Imogen remained independent and able to contribute effectively to Mondi in the best interests of shareholders.

The review of the Boards and committees in 2013 was an independent external evaluation conducted by Independent Audit Limited, which has no other connection with Mondi. Independent Audit Limited provided feedback to the joint chairmen for their review of individual director performance.

Following a review of the programmes, agendas and papers for each board and committee meeting over a 12 month period, one-on-one interviews were conducted with each director, executive committee member and company secretary. The report highlighted the positive and open dynamics of the Boards, noting the high degree of trust between the executive and non-executive directors. There is open discussion between the executive and non-executive directors during the evolution of business strategies and the consideration of options with all participants being prepared to challenge the status quo and ask awkward questions as appropriate.

The report from the review was initially discussed with the chairmen and then presented to the DLC nominations committee and ultimately to the Boards for consideration and the development of an action plan to address the key findings. In addition, the chairmen have considered any individual directors’ development requirements.

The key actions to be taken by the Boards following the external evaluation are:

  1. as the Group’s products and geographic spread continue to grow, to consider the future need for non-executive directors with direct exposure to these areas;
  2. to encourage non-executive directors to engage in regular knowledge development of the business of the Group; and
  3. to continue to evolve the risk report format.

In addition, the non-executive directors, led by Anne Quinn as the senior independent director, and with input from Independent Audit Limited and the executive directors, undertook a review of the performance of each of the joint chairmen. They focused in particular on the change from Cyril Ramaphosa to Fred Phaswana, noting that Fred has settled into the role well and has provided a new perspective at board debates.

The Boards continue to benefit from the annual review process, the results from which help guide the future focus of meeting agendas and behaviours.

Procedure for conflicts of interest

Company law, the memorandum of incorporation of Mondi Limited and the articles of association of Mondi plc allow directors to manage potential conflicts. A formal procedure for the reporting and review of any potential conflicts of interest involving the Boards with support from the company secretaries are in place, with authorisations reviewed on an annual basis.

DLC committees

The DLC committees, to which the Boards delegate specific areas of responsibility as described below, have authority to make decisions according to their terms of reference. Work programmes are agreed by each committee that are designed around the annual business calendar and their respective terms of reference. Each committee reviews its terms of reference on an annual basis and these are available on the Mondi Group website at: www.mondigroup.com or on request. The committees are empowered, through their terms of reference, to seek independent professional advice at Mondi’s expense in the furtherance of their duties.

Only committee members are entitled to attend committee meetings, although the chairmen of each committee can invite, as they consider appropriate, management and advisers to meetings to provide information, answer questions and generally to assist the committees in carrying out their duties. An indication of the regular attendees is given for each committee.

DLC audit committee

Our work during 2013 was focused on the integrity of the Group’s financial reporting, the independence and effectiveness of the external and internal audit activities, the Group’s risk management processes and assessing the Group’s internal controls. During 2014, we will oversee the rotation of our audit partner in South Africa and consider the changes planned by the regulatory bodies.

Composition

Members throughout the year: Committee member since: Meeting attendance
(four meetings in the year):
Stephen Harris March 2011 4
John Nicholas, chairman October 2009 4
Anne Quinn May 2007 4

Other regular attendees

  • chief executive officer
  • chief financial officer
  • Group financial controller
  • heads of internal audit
  • South African and UK representatives from Deloitte

Meeting schedule and attendance

  • met four times during the year
  • meetings are planned around the Group’s financial reporting cycle
  • 100% attendance at each of the four meetings by each member

Key responsibilities

  • monitor the integrity of the Group’s financial statements and financial announcements and the disclosures made
  • review the consistency of the application of significant accounting policies and the impact of any changes
  • oversee the relationship with the external auditors and the effectiveness of the audit process as a whole
  • review the adequacy and effectiveness of the Group’s system of internal control
  • oversee the Group’s risk management processes
  • monitor and review the effectiveness of the Group’s internal audit function
  • review the Group’s performance against aspects of the code of business ethics reserved for review by the committee
  • review the adequacy and security of the Group’s arrangements for employees and third parties to raise concerns

Composition

The committee is constituted as a statutory committee in respect of the duties set out in the South African Companies Act 2008 and a DLC committee of the Boards in respect of other duties assigned to it by the Boards.

All members of the committee are independent non-executive directors. The Boards consider each member has appropriate knowledge and understanding of financial matters, sufficient to enable them to consider effectively the financial and accounting issues that are presented to the committee. The Boards consider John Nicholas, the chairman of the committee, to have specific recent and relevant financial experience. The biographies detailing the experience of each member of the committee can be found in the Board of directors section.

In accordance with the Listings Requirements of the JSE, the committee has considered and satisfied itself that Andrew King, Mondi’s chief financial officer, has appropriate expertise and experience. Andrew is a chartered accountant and throughout his career has held various finance and business development roles. The committee has also considered and satisfied itself of the appropriateness of the expertise and adequacy of resources of the finance function and expertise of the senior management responsible for the finance function.

Meetings of the audit committee during 2013

The committee operates under formal terms of reference and these are reviewed annually. The committee considers that it has appropriately discharged its responsibilities as set out in its terms of reference during the year and has operated in compliance with relevant legal, regulatory and other responsibilities. There were no specific one-off matters requiring review or decision during 2013, so the committee agenda covered the regular matters reserved for its consideration. Matters covered by the committee during the meetings held in the year included:

February 2013
  • reviewed the full year results and the announcement of those results, with input provided by reports from the Group financial controller and Deloitte
  • reviewed the Group integrated report and financial statements 2012
  • reviewed Deloitte’s audit effectiveness, independence and objectivity leading to the consideration of their reappointment
  • reviewed the Group risk management policy, plan and risk tolerance levels and most significant risks
  • met with the heads of internal audit and Deloitte, separately and without management present
May 2013
  • reviewed the interim management statement
  • reviewed the effectiveness of internal controls and risk management systems and procedures
  • received a presentation from Deloitte of the audit management letter
  • reviewed the competition compliance programme with the aid of a presentation from the chief financial officer who chairs the divisional competition compliance committees
  • reviewed the elements of the code of business ethics reserved for the committee together with the business integrity policy
August 2013
  • reviewed the half yearly results and the announcement of those results, with input provided by reports from the Group financial controller and Deloitte
  • considered the restatement of comparative information as a result of the adoption of new accounting pronouncements
  • discussed the UK Government’s Cyber Security Health Check and input from Mondi
November 2013
  • reviewed the interim management statement
  • considered the implications of new accounting pronouncements assisted by a report from the Group financial controller
  • reviewed and approved the external audit plan, fees and engagement letters with input provided by the chief financial officer, Group financial controller and Deloitte
  • reviewed IT risk management assisted by a presentation from the information management director
  • reviewed and updated the committee terms of reference to include recent governance developments
  • agreed the committee’s work programme for 2014

In addition, there are several matters that are considered at every meeting of the committee including the report from the internal audit function, an in depth review of three of the most significant Group risks and the review of non-audit fee services provided by Deloitte.

A key role of the committee is to ensure that the interests of shareholders are protected, in particular with regard to the financial reporting of the Group and the controls in place to protect against misstatement. Although oversight and review of material matters are considered throughout the year, at the February meeting the integrity of the Group’s integrated report and financial statements is assessed and the clarity of disclosures reviewed. The committee has assisted the Boards in their assessment of the report to ensure that the disclosures are complete and in context and that the strategic and directors’ reports fairly reflect the financial performance as set out in the financial statements. The committee received a detailed report on the financial statements from the Group financial controller outlining the significant matters, in particular those areas where management judgement had been made. They also received a report on the audit from Deloitte. These reports were presented in the meeting and provided the opportunity for challenge by the committee. The committee also met with Deloitte without management present in order to discuss the audit in general.

Significant issues related to the financial statements

The audit committee has considered each of the following items based on discussions with and submissions by management and satisfied themselves as to the accounting treatment and presentation thereof. The most significant items were discussed with the external auditors during the planning stage and on completion of the audit and are set out in their audit report.

The key considerations in relation to the 2013 financial statements were:

  • Capitalisation of tangible assets

    The Group operates a number of large, capital intensive facilities and incurs significant amounts of capital expenditure. In 2013, the Group incurred €405 million of capital expenditure. In approving significant capital projects, the Boards approve the underlying assumptions including the estimated useful lives of these investments. The committee has reviewed the submissions by management in respect of the significant capital expenditure during the year, summarising the depreciation rates applied, estimated residual values and the carrying values of the Group’s tangible assets. In particular in the current year, the committee has considered the investments in the significant energy related projects brought into operation during 2013. The committee has interrogated management and satisfied itself of the appropriateness of the assumptions made, the consistency of those assumptions compared to the initial approvals and the basis on which any changes were made.

    The committee has also considered the internal audit reports completed in respect of the Group’s procurement and capital expenditure processes, in which there were no significant weaknesses identified.

  • Impairment of assets

    The Group’s operations are exposed to a number of risks, as described in the Risk management section and below under Principal risks and uncertainties which may impact their underlying financial performance. In addition, goodwill of €550 million is included as an asset in the statement of financial position. As set out in the accounting policies under note 1, the Group reviews its assets at least annually and whenever there is any indication that certain of its assets may be impaired.

    The critical underlying assumptions and outcomes are reviewed by the committee. The committee has considered the sensitivities underlying the primary assumptions to determine the consequences that reasonably possible changes in such assumptions may have on the recognised value of the underlying assets. The most significant assumptions are set out in note 11 of the financial statements.

    The committee has satisfied itself that the only significant impairments in the current year are those of the assets of the uncoated fine paper Neusiedler mill in Austria in light of the restructuring announced during 2013 and in Merebank, South Africa following the closure of the newsprint machine.

  • Critical assumptions in respect of afforestation and retirement benefits

    Significant judgement is required in determining the assumptions to be applied for the valuation of the Group’s afforestation asset and retirement benefit obligations. Such assumptions are based, as far as possible, on observable market data and, in the case of the retirement benefit obligations, the input and advice of actuaries. These assumptions, and the basis on which they are determined, were evaluated by the committee, comparing them both to the assumptions used in the previous year and prevailing market conditions. The most significant assumptions and sensitivities are disclosed in note 13 for afforestation and note 23 for retirement benefits in the financial statements. The committee satisfied itself that the assumptions used were reasonable.

  • Tax provisions

    The Group has operations in a number of geographical locations, is subject to a number of tax jurisdictions and is exposed to a number of cross border and complex tax arrangements. The committee receives regular reports from management about ongoing tax audits and new legislative developments that may impact the Group’s tax positions.

    The committee has evaluated the Group’s most significant tax exposures, the corporate judgements and related tax provisions recognised by management and satisfied itself that these are appropriate.

  • New accounting pronouncements including restatements

    The impact of new accounting pronouncements have been considered in detail by the committee. In particular, in the current year, the committee has reviewed the adoption of IFRS9, 10, 11 and 12 and IAS19 (revised) and the consequent restatement of comparative information. The committee reviewed the submissions by management on the conclusions reached for the treatment of entities previously classified as joint ventures and subject to proportionate consolidation and discussed the reasons why Mondi Shanduka Newsprint should be consolidated and comparative information restated.

External audit

Deloitte & Touche in South Africa and Deloitte LLP in the UK (together ‘Deloitte’) were appointed at the time of Mondi’s demerger from Anglo American plc in July 2007. The South African audit partner’s tenure is scheduled to conclude after the audit of the 2014 results. The audit of the 2012 results was the first year of tenure for the current UK audit partner. The committee anticipates putting the audit out to tender ahead of the rotation of the UK audit partner in 2016.

When considering the tender process a key factor in the committee’s choice will be the ability of the audit firm to effectively manage the complexities of Mondi’s dual listed company structure and geographic footprint.

A formal framework for the assessment of the effectiveness of the external audit process and quality of the audit has been adopted by the committee, covering all aspects of the audit service provided by Deloitte. The main focus is on: the audit team, in particular the lead audit partners; the approach to planning and execution of the audit, including the role of management in the process; and how effective the communications between the audit team and the committee are, including how value is added as well as the formal reporting of issues. The committee has also incorporated a review of auditor independence and objectivity.

The assessment is managed annually through the use of questionnaires to the committee members, key management and finance function personnel directly involved with the audit process at both Group and divisional level. The feedback from this process is collated and reviewed by the committee with a report and agreed action plan provided to both management and the Deloitte audit team. In addition, the committee will consider the findings of the review of the Mondi audit by the regulators that will be issued at least once in every five-year period.

For the review of the 2013 audit the committee considered the audit team, having been consistent with the prior year audit and thereby providing continuity of knowledge; and the approach to the audit plan, including engagement with management and the committee to agree the materiality levels and which sites would be individually reviewed. Consideration was given to the work undertaken against the agreed plan, including feedback from Deloitte’s visits to specific Mondi locations, their involvement in the audit of the significant consolidation of the Europe & International Division, as well as questioning any deviations from the plan and the reasons for this. Of particular importance is the timely consideration of, and engagement with management and the committee on, areas requiring specific judgement as set out above. The committee chairman has also met with the Deloitte audit partners to discuss the results of the audit without management present. Representatives from Deloitte report to the committee on their independence and objectivity and the mechanisms employed to ensure this is maintained. They present their firm’s own quality control procedures and report on the output from the audit quality review of Deloitte by the Financial Reporting Council. There are also Group policies in place regarding the employment of ex-audit staff and the provision of non-audit services.

The committee, having considered all relevant matters, has concluded that it is satisfied that auditor independence, objectivity and effectiveness have been maintained. The committee confirmed that Deloitte & Touche is included in the JSE list of accredited auditors. Following these considerations the committee made a recommendation to, which was accepted by, the Boards that resolutions to reappoint Deloitte be proposed at the annual general meetings of Mondi Limited and Mondi plc, to be held in May 2014.

Non-audit services

A policy is in place that governs the provision of non-audit services provided by Deloitte to Mondi, including the requirement for the pre-approval of such services. These services are generally confined to matters where specific knowledge and understanding of Mondi is required. The committee approved delegation limits within the policy so that the chief financial officer and the audit committee chairman are able to approve requests for the provision of non-audit services. These are also within a ceiling limit for the year, with requests falling outside these limits being referred to the full committee for consideration. The policy also clearly sets out those services that the auditor is prohibited from providing such as financial information systems design and internal audit outsourcing. At each committee meeting all approved non-audit services since the last report are presented for review. This enables regular oversight of one aspect of the auditor independence and objectivity.

The breakdown of the fees paid to Deloitte, including the split between audit and non-audit fees, is included in note 3 to the financial statements. The non-audit fees for 2013 represent 7% of the audit fee paid.

Risk management and internal control

The Group is exposed to risks and uncertainties which may have an impact on future performance and financial results, as well as on its ability to meet certain social and environmental objectives.

The executive committee, mandated by the Boards, has established a Group-wide system of internal control to manage Group risks. The Group-wide system, which complies with corporate governance codes in South Africa and the UK, supports the Boards in discharging their responsibility for ensuring that the wide range of risks associated with Mondi’s diverse international operations is effectively managed.

Continuous monitoring of risk and control processes across all key risk areas provides the basis for regular reports to management, the executive committee and the Boards. On an annual basis, the executive committee, the audit committee and the Boards conduct a formal systematic review of the Group’s most significant risks and uncertainties and the monitoring of and response to those risks. These risks are assessed against pre-determined risk tolerance limits, established by the Boards, taking both the likelihood and severity of the risk factors into consideration.

The audit committee is responsible for overseeing the Group-wide risk management system and those risks which fall outside the remit of the sustainable development committee, which oversees all sustainability risks and the management thereof. Over the course of the year, the committee has reviewed in detail each of the principal risks set out in the strategic report under Risk management as well as further operational, compliance and financial risks considered to be significant. These additional risks are listed below. The committee has considered management’s presentations regarding the nature of the risks, their likelihood and potential impact on the Group’s financial position and performance and evaluated the monitoring and mitigation, where appropriate, of those risks. In evaluating the Group’s risk management and internal control, the committee has considered both the internal and external audit reports and received confirmation from the finance heads of the business units that financial control frameworks have operated satisfactorily.

The Group’s internal audit function is responsible for providing independent assurance to the executive committee, the audit committee and the Boards on the effectiveness of the Group’s risk management process and for evaluating the internal control environment to ensure controls are adequately designed and are operating efficiently and effectively. Actions are taken to correct internal control deficiencies as they are identified.

Risk management

The risk management framework addresses all significant strategic, sustainability, financial, operational and compliance-related risks which could undermine the Group’s ability to achieve its business objectives in a sustainable manner. The risk management framework is designed to be flexible, to ensure that it remains relevant at all levels of the business given the diversity of the Group’s locations, markets and production processes; and dynamic, to ensure that it remains current and responsive to changing business conditions.

Clear accountability for risk management in the day-to-day activities of the Group is a key performance criterion for the Group’s line managers, who are provided with appropriate support through Group policies and procedures as well as training and awareness programmes. Risk management is embedded in all decision making processes, with holistic risk assessments conducted as part of all investment decisions. The requisite risk and control capability is assured through board and executive committee challenge and appropriate management selection and skills development.

Internal control

The Group’s system of internal control, embedded in all key operations, is designed to provide reasonable rather than absolute assurance that the Group’s business objectives will be achieved, within risk tolerance levels defined by the Boards. Regular management reporting provides a balanced assessment of key risks and controls and is an important component of the Boards’ assurance.

Key elements of the Group’s system of internal control are:

  • a focused business strategy, restricting potential risk exposure;
  • a clearly-defined organisation structure with established and reasonable division of responsibilities;
  • Group financial, business conduct, operating and administrative policies and procedures which incorporate statements of required behaviour;
  • annual risk-profiling by local businesses and the Group to identify, monitor and manage significant risks, with the results discussed at business reviews and internal control, audit and risk meetings;
  • a continuous review of operating performance;
  • a comprehensive reporting system, including monthly results, annual budgets and periodic forecasts, monitored by the executive committee and Boards;
  • approval by the Boards of all major investments, with proposals being subject to rigorous strategic and commercial examination;
  • a centrally co-ordinated internal audit programme, using internal and external resources to support the Boards in ensuring a sound control environment;
  • completion by business unit management of a six-monthly internal control assessment, confirming compliance with Group policies and procedures, detailing controls in operation and listing any weaknesses; and
  • assurance activities covering the key business risks summarised and reported annually to the Boards, the audit committee and the sustainable development committee.

Principal risks and uncertainties

The audit committee has satisfied itself that the Group has effective systems and controls in place to manage its key risks within the risk tolerance levels established by the Boards. In addition to the risks discussed in the strategic report under Risk management, the committee has also considered the following significant risks during the course of the year.

Attraction and retention of key skills and talent
The complexity of operations and geographic diversity of the Group is such that high-quality, experienced employees are required in all locations. The Group monitors its staff turnover levels, diversity and training activities and conducts regular employee surveys.

Appropriate reward and retention strategies are in place to attract and retain talent at all levels of the organisation. These include a share based incentive scheme as described in note 25 of the financial statements.
Employee and contractor safety*
The Group’s employees work in potentially dangerous environments where hazards are ever-present and must be managed. The Group engages in extensive safety communication sessions, involving employees and contractors, at all operations. The Nine Safety Rules to Live By, applied across the Group, are integral to the safety strategy. Operations conduct statutory safety committee meetings where management and employees are represented.

A risk-based approach underpins all safety and health programmes. All business units and operations are required to have safety improvement plans in place.

The goal of zero harm was not met during 2013. It is regrettable that there were four fatalities during the year – two in Russia and two in South Africa. The TRCR (per 200,000 hours worked) was 0.78* (2012: 0.79).
Governance risks
The Group operates in a number of legal jurisdictions and non-compliance with legal and governance requirements in these jurisdictions could expose the Group to significant risk if not adequately managed. The Group operates a comprehensive training and compliance programme, supported by regular self-certification and reporting as well as its confidential reporting hotline for all stakeholders, Speakout.
Financial risks
Mondi’s trading and financing activities expose the Group to financial risks that, if left unmanaged, could adversely impact current or future earnings. These risks relate to the currencies in which the Group conducts its activities, interest rate and liquidity risks as well as exposure to customer credit risk. Mondi’s approach to financial risk management is described in note 34 and note 35 of the financial statements.
  1. * reviewed by the sustainable development committee

Internal audit

The audit committee has responsibility for monitoring and reviewing the effectiveness of the Group’s internal audit function and appoints and discharges the heads of internal audit (the equivalent of the chief audit executive as envisaged by King III). The heads of internal audit have direct access and responsibility to the committee and work closely with the committee in liaison with Deloitte. Each year the committee considers and approves the internal audit plan, receiving progress reports at each meeting on how the team are meeting the plan and discussing any changes or shortfall in targets. The committee agrees deviations from plan as the need arises during the year, usually as a result of major acquisitions or a change in Group risk profile highlighted through audit reports and through matters raised via the confidential reporting hotline, Speakout.

The internal audit team plan and undertake audits of the businesses in a systematic way, in accordance with the plan agreed with the committee, to ensure that the overall control environment within the business is appropriate, effective and complies with Mondi controls and procedures. The audit results are reported to the operational management and the implementation of the agreed recommendations are followed up on a regular basis by the internal audit team. The internal audit reports presented to the committee include details of audits carried out, the results and management’s response to matters raised during the audits, and fraud and Speakout cases identified, as well as the adequacy and structure of the team. The committee regularly challenges the nature and speed of management’s response to issues raised in audits and to Speakout messages in order to satisfy themselves that this has been appropriate to the circumstances. Maintaining sound oversight and control of activities through the use of internal audit reviews is considered by the committee to be a key element of its work.

The structure and resources of the internal audit function are also regularly reviewed. The last external review of the internal audit function was carried out in 2010 by PricewaterhouseCoopers. That review concluded positively on the effectiveness of the internal audit function while making some recommendations to further improve on this. Since that review the committee has monitored progress with the implementation of the recommendations and annually reviews the effectiveness of the function. The committee has concluded that the heads of internal audit provide appropriate leadership of the internal audit function which remains effective in carrying out its remit. The committee has determined that external reviews will be carried out every five years with the next scheduled for 2015.

Speakout

The Group has a confidential reporting hotline called ‘Speakout’ operated by an independent third party. Speakout, monitored by the audit committee, enables employees, customers, suppliers, managers or other stakeholders, on a confidential basis, to raise concerns about conduct that is considered to be contrary to Mondi’s values. It makes communication channels available to any person in the world who has information about unethical practice in the Group’s operations. During 2013, 79 Speakout messages were received covering a number of areas.

DLC nominations committee

The key challenge for the committee during 2013 was the search for a replacement joint chairman with the departure of Cyril Ramaphosa in May. Mondi’s dual listing creates its own challenges, the joint chairmanship being one of them. Ensuring that the individual not only had appropriate skills but also the right character to enable the Boards to continue to function openly, transparently and effectively was critical. We were fortunate to have candidates from a variety of backgrounds put forward. In Fred Phaswana we have found someone who has fitted seamlessly into the Mondi role while bringing a fresh perspective and challenge to the Boards and their deliberations.

Composition

Members throughout the year: Committee member since: Meeting attendance
(four meetings in the year):
Stephen Harris March 2011 4
Imogen Mkhize January 2008 4
John Nicholas October 2009 4
Anne Quinn May 2007 4
Fred Phaswana ¹ June 2013 1
Cyril Ramaphosa ² May 2007 to May 2013 2
David Williams, chairman May 2007 4
  1. 1 Fred Phaswana was appointed a member of the committee on 1 June 2013 and has attended all meetings since that date.
  2. 2 Cyril Ramaphosa retired from the committee on 3 May 2013. He was not able to attend all meetings in the year up to that date, in part due to the committee’s consideration of his replacement.

Other regular attendees

  • chief executive officer

Meeting schedule and attendance

  • met four times during the year
  • 100% attendance at each of the four meetings except that Cyril Ramaphosa was unable to attend one meeting

Key responsibilities

  • review the structure, size and composition of the Boards and committees
  • consider succession planning and management development
  • conducting a selection process, identifying and nominating candidates for the Boards and executive management
  • ensuring new appointees are provided with a full and appropriate induction

Although David Williams chairs this committee he is not permitted to chair meetings during sessions regarding his performance. Neither will he be able to chair meetings at which the appointment of his successor is discussed.

During the year the committee considered a number of regular matters in accordance with its terms of reference. These included a review of the time commitment of non-executive directors and the composition and length of terms of service of members of each committee. The main consideration in 2013, however, was the recruitment of a replacement for the joint chairmanship role with Cyril Ramaphosa having announced in January that he would step down at the conclusion of the annual general meetings in May. The process for the appointment is given in more detail below. In addition, both Anne Quinn and Imogen Mkhize completed their six year terms and the reviews undertaken by the committee are explained above. Overall it was concluded that while the present composition of the Boards remained appropriate, future changes to the directors would need to include consideration of broader skills particularly able to support the strategic focus on developing the consumer exposed packaging segments.

The succession plans for the executives and senior management are considered annually. The presentation is broken down by corporate function, divisional and business units, detailing the current role holder as well as the likely successor candidates ready now and in three and five years’ time. The review also includes a presentation on the talent review process within the Group with a particular emphasis this year on what is being done to redress the gender balance, enhancing the number of female candidates put forward and actions being taken to provide a more flexible working environment. These actions are explained in more detail below.

Succession for the directors themselves was also discussed and consideration given to the skills required going forward in order to support the Group in its strategy. It was concluded that, at this time, the directors provide an appropriate mix, with international manufacturing and engineering experience. It was, however, acknowledged that if Mondi’s consumer exposed packaging businesses continue to expand, more experience in downstream manufacturing may be required.

The committee is responsible for overseeing the annual board evaluation as explained earlier in this report. In 2013 this was an independent external review.

The committee continued to be of the view that, in line with best practice, all directors should stand for re-election at the annual general meetings of Mondi Limited and Mondi plc.

Appointments to the Boards

During 2013 the only change to the composition of the Boards was the appointment of a new joint chairman following the decision by Cyril Ramaphosa to step down at the conclusion of the annual general meetings in May.

The appointment of the new joint chairman was carried out in accordance with the committee’s established procedure. The senior independent director led the search with assistance from a leading executive search firm, Egon Zehnder. The committee considered the required characteristics for the role including the type of board, sector and business experience needed. Additionally there were the challenges of the dual listing, namely the South African Ministry of Finance national identity requirements, and that the individual would be required to work alongside Mondi’s other co-chairman. A short list of nine candidates, two of whom were female, were reviewed by the committee, with each being a South African national who has held senior positions in major companies. Ultimately, having also reviewed each candidate’s independence and any potential conflicts of interest and conducted one-on-one interviews with a number of the directors both executive and non-executive, there was consensus that Fred Phaswana be appointed.

The committee recommended Fred’s appointment to the Boards as he brings to Mondi extensive industry experience gained in board and senior business leadership roles over many years. He worked for BP in a number of capacities in both Africa and Europe, served as an independent director of Anglo American plc and is currently chairman of Standard Bank Group and The Standard Bank of South Africa. He is also involved in public life in South Africa, chairing the South African Institute of International Affairs.

It is confirmed that Egon Zehnder do not have any other business relationships with Mondi.

At least annually the committee reviews the composition of the Boards and each of its committees to ensure that they remain appropriate. The Mondi Boards are relatively small and it is recognised that this can mean there is little flexibility to change the committee compositions, however, natural changes to the composition of the Boards that has occurred has resulted in there freshing of the committees.

Terms of appointment

On appointment each non-executive director receives letters of appointment from each of Mondi Limited and Mondi plc setting out, among other things, their term of appointment, the expected time commitment for their duties to Mondi and details of any DLC committees of which they are a member. Non-executive directors are initially appointed for a three year term, although Mondi now follows governance best practice with all directors standing for re-election by shareholders at each annual general meeting.

Diversity

As a global organisation operating in 30 countries, diversity is encouraged and Mondi is committed to the fair and equitable treatment of all. Mondi employs, empowers and develops competent people with the necessary potential required to expand their careers and become valuable participants in sustaining its competitive business advantage. As the management of people is seen as a function and responsibility of line management, so is the creation of a culture that embraces diversity.

In South Africa we are committed to making a positive contribution to the process of transformation. We have taken active steps to meet the requirements of broad-based black economic empowerment (BBBEE), including establishing transformation forums in our South African operations to allow our employees to discuss equity and training-related issues and ideas.

In line with our philosophy of encouraging diversity and excluding discrimination, we provide equal opportunity for men and women in the Group. The Group’s diversity statistics can be found in the strategic report under Mondi’s global footprint. There are currently two female directors representing 22% of the Boards. While our aim will be to maintain this level of female representation on the Boards going forward, it remains important that the composition of the Boards includes the right mix of skills, knowledge and experience and it may not always be appropriate to consider diversity on the Boards only in terms of gender.

The Boards have continued to monitor the Mondi talent pool and have considered gender diversity performance indicators. Specific recruitment commitments with a percentage of female candidates at long and short list stage for each management function, in accordance with industry standards, have been agreed. During 2013 we implemented a ‘Flexible Working @ Mondi – Toolkit’, which offers several proposals and examples for part-time working such as home working, flexible hours, job sharing or a combination of these options. This more flexible approach to working provides employees who experience challenging work-life demands a way to balance these demands to the advantage of all parties.

Diversity has become an integral part of the Group’s leadership programmes, with training modules at the Mondi Academy such as ‘Intercultural Diversity & International Business Competence’ contributing to a wider understanding of diversity within Mondi. There are also development programmes targeted at female employees and an increasing involvement with universities to encourage female graduates to consider careers within the Group. During 2013 there has been a particular focus on high performing, internationally mobile female employees, offering targeted support through the Mondi Mentoring programme.

The Boards have adopted a formal diversity policy for the Group which sets out guidelines for such matters as recruitment, the use of search firms, succession and annual reviews. While it is recognised that there is more work to do Mondi believes that continually sharing best practice, networking and sharing experiences both internally and externally we are making progress.

DLC remuneration committee

The committee believes that the remuneration policy will continue to motivate our senior team to achieve the Group’s objectives and deliver sustained returns for our shareholders. We also believe that the remuneration of executives during 2013 reflects our successes to date in the delivery of our strategy.

Composition

Members throughout the year: Committee member since: Meeting attendance
(four meetings in the year):
Stephen Harris March 2011 4
Imogen Mkhize May 2007 4
Anne Quinn, chairman May 2007 4
David Williams May 2007 4

Other regular attendees

  • chief executive officer
  • joint chairman (Fred Phaswana)
  • Group head of reward
  • external remuneration consultant

Meeting schedule and attendance

  • met four times during the year
  • 100% attendance at each of the four meetings

Key responsibilities

  • making recommendations on the Group’s policy on senior management remuneration
  • determination of the remuneration packages for each executive director and members of senior management, including pension rights and any compensation payments
  • determination of the remuneration of the joint chairmen
  • implementation of employee share schemes

The committee’s full report on directors’ remuneration, including details of the Group’s remuneration policies and practices, is set out in the Remuneration report.

DLC sustainable development committee

2013 has been a difficult year for Mondi with four fatalities. These are reported on elsewhere in this integrated report. The committee was encouraged by the pro-active approach and leadership of the executive management in reviewing the Group’s approach to safety and addressing the concerns expressed by the committee.

 

Composition

Members throughout the year: Committee member since: Meeting attendance
(six meetings in the year):
Stephen Harris, chairman March 2011 6
David Hathorn May 2007 6
Anne Quinn August 2009 6

Other regular attendees

  • Group head of sustainable development
  • Group head of safety and health

Meeting schedule and attendance

  • met six times during the year
  • 100% attendance at each of the six meetings

Key responsibilities

  • oversees the Group’s strategy, targets and performance on safety, health, the environment, social responsibility, other sustainable development matters and business ethics

The committee oversees and monitors the progress of our sustainable development targets, strategy and performance. This drives much of the committees’ annual agenda. The committee is also responsible for ensuring the Group’s sustainable development strategy, policies and commitments are aligned with global best practice. Furthermore, the committee oversees performance in respect of safety, health, environment, forestry, product stewardship and community matters across the Group. It monitors performance against environmental targets, receives safety performance reports including details of major incidents within the Group and monitors management’s response to such incidents.

Following the fatalities experienced during the year the committee, with full support and input from the executives, undertook a review of the Group’s focus on the prevention of incidents. The executive committee presented their proposals for a refocus on low probability, high impact incidents, providing a detailed action plan that would be rolled out throughout the Group. This plan has received the full support of the committee.

A summary report from the directors on the Group’s sustainability practices is set out in Understanding our material sustainable development issues and further details, including a full review of Mondi’s sustainability activities and progress in 2013, can be found on the Mondi Group website.

Mondi Limited social and ethics committee

During the year the committee, now in its second year, finalised its annual work plan and focused on reviewing Mondi Limited’s compliance with various obligations under the South African Companies Act and regulation.

Composition

Members throughout the year: Committee member since: Meeting attendance
(two meetings in the year):
Stephen Harris February 2012 2
David Williams February 2012 2
Imogen Mkhize, chairman February 2012 2

Other regular attendees

  • executive management who present on relevant topics

Meeting schedule and attendance

  • met twice during the year
  • 100% attendance at each of the two meetings

Key responsibilities

  • monitors activities relating to social and economic development, good corporate citizenship, the environment, health and public safety, consumer relationships, labour and employment
  • oversees those areas that overlap with the responsibilities of the DLC audit committee and DLC sustainable development committee, having access to the deliberations of these other committees

In considering Mondi Limited’s community engagement activities the committee noted commendable projects, such as the Mkhondo development programme where Mondi Limited entered into a public-private partnership with provincial and municipal authorities to provide residents of the area a choice to pursue rural livelihoods in planned and serviced agri-villages or in newly serviced urban residential developments. Another Mondi Limited initiative is Mondi Zimele which provides equity, loans and business development support to empower emerging businesses in Mondi Limited’s value chain and surrounding communities.

The committee was satisfied that Mondi Limited has sufficient policies, procedures and practices in place to adequately address the matters identified in its terms of reference. The committee did not identify any incidents of non-compliance with any laws and regulations, standards or codes relevant to its area of responsibility, and was satisfied with Mondi Limited’s activities as examined against the 10 principles set out in the United Nations Global Compact Principles, the OECD recommendations regarding corruption, the Employment Equity Act, the principles of good corporate citizenship, environment, health and safety standards, consumer protection regulation, and the ILO Protocol on decent working conditions. The committee noted in particular the requirements of the revised BBBEE Codes and will actively monitor the effect thereof on Mondi Limited, specifically having regard to the Forest Sector Code.

DLC executive committee

Continuing to drive our operational excellence programmes and ensuring that the organisation is appropriately structured to deal with the ongoing challenges created by the macroeconomic climate were focus areas for 2013. Overseeing the integration of Nordenia into the Consumer Packaging business unit and reviewing and approving a number of new expansionary and energy projects have also been priorities for the committee.

Composition

Members throughout the year: Committee member since: Meeting attendance
(11 meetings in the year):
David Williams, chairman May 2007 11
Andrew King May 2007 11
John Lindahl August 2011 11
Peter Oswald May 2007 11
Ron Traill June 2008 11

Other regular attendees

  • business unit managers
  • representatives from corporate functions each of whom present on relevant topics

Meeting schedule and attendance

  • met 11 times during the year
  • 100% attendance at each of the 11 meetings

Key responsibilities

  • day-to-day management of the Group within the limits set by the Boards
  • monitoring financial, operational and safety performance
  • policy implementation
  • strategy implementation

Communication with stakeholders

The chief executive officer and chief financial officer have a regular programme of dialogue with the institutional shareholders, analysts and fund managers, that is based around the financial reporting calendar. Investors are regularly offered the opportunity to meet with the joint chairmen and other directors.

In September 2013 Mondi hosted a Capital Markets Day for investors and analysts in London, where the executive directors, together with other key senior management, including business unit heads and innovation managers, shared insights into the Mondi business. Some non-executive directors also attended the day.

Analysts and brokers briefings relating to Mondi and the packaging and paper industry are circulated to the directors, further enhancing their understanding of investor views.

Following the full and half-yearly results road shows, feedback from the dialogue with shareholders is provided by the brokers direct to the Boards. In addition, analysis of Mondi’s performance against its peers is reviewed by the directors on a regular basis. All contact with investors is strictly controlled through the application of Group guidelines to ensure that no price sensitive information is made available on a selective basis and that all shareholders are treated equally. Financial reports, trading updates and news about the business operations are available to all shareholders on the Mondi Group website.

The Group head of sustainable development also maintains a dialogue on socially responsible investment through focused briefings with interested investors and stakeholders.

Throughout the year responses are given to correspondence received from shareholders and other interested parties on a variety of subjects.

Shareholders may choose to receive financial reports and other communications from the Group via electronic means. Facilities are also available for the electronic submission of proxy votes for general meetings. Furthermore, shareholders can use the opportunity of the annual general meetings to question the directors about Mondi’s activities and prospects.

During 2013, Mondi did not receive any requests for access to records under the South African Promotion of Access to Information Act 2000.

Dealing in securities

The Boards have adopted a share dealing code for dealing in securities of Mondi Limited and Mondi plc which is based on regulatory and governance best practice in South Africa and the UK. The code sets out the restrictions placed on directors, senior management and other key employees with regard to their share dealing to ensure that they do not abuse their access to information about the Group pending its public release and availability to shareholders and other interested parties. The code is reviewed regularly and updated as required to ensure continued compliance with regulation and best practice. Regular reminders of the procedures to be followed are issued and periodic training is provided to relevant employees.

All dealings by directors and persons discharging managerial responsibilities and their connected persons are announced to the JSE and the LSE when they occur. Details of the directors’ interests in the shares of both Mondi Limited and Mondi plc can be found in the Remuneration report.

Business ethics

The Boards have adopted a code of business ethics, which applies throughout the Group and sets out five fundamental principles that govern the way in which Mondi and its employees conduct business. Three of the principles are monitored and reviewed by the sustainable development committee (human rights, stakeholders and sustainability) and two by the audit committee (legal compliance and honesty and integrity).

The code incorporates the requirement for the Group to comply with all applicable laws and regulations. Although the Group does not have a single compliance function the legal teams of each division, together with the company secretaries of both Mondi Limited and Mondi plc, have oversight of compliance, including consideration of the application of non-binding rules, codes and standards. Regular reports are presented to the Boards, or relevant committees, on compliance matters.

The detailed application of the principles of the code is documented in Mondi’s policies and procedures, in particular the business integrity policy and the sustainable development policy. These policies have been rolled out across the Group and regular training is provided to all relevant employees. The directors believe that the Group has robust compliance systems and procedures in place in relation to the code. The directors are not aware of any material non-compliance with the code. The code is available on the Mondi Group website.

Mondi has not been engaged in any legal actions for anti-competitive behaviour, anti-trust or monopoly practices during the year. Mondi has also not received any material fines or non-monetary sanctions for non-compliance with laws and regulations.

Annual general meetings

The annual general meetings of Mondi Limited and Mondi plc will be held on 14 May 2014 in Johannesburg and London respectively. It is expected that all directors and, in particular, the chairmen of the committees will be present.

Separate resolutions will be proposed for each item of business to be considered at the annual general meetings with the voting at the meetings conducted by polls. The voting results will be announced on the JSE and LSE and made available on the Mondi Group website as soon as practicable following the close of both meetings.

The notices of the annual general meetings, which include explanations of each resolution, are contained in separate circulars which are sent to all shareholders in advance of the meetings, in accordance with the corporate governance codes of South Africa and the UK.