16th Feb 2012 08:45
Mondi Limited(Incorporated in the Republic of South Africa)(Registration number: 1967/013038/06)JSE share code: MND ISIN: ZAE000156550Mondi plc(Incorporated in England and Wales)(Registration number: 6209386)JSE share code: MNP ISIN: GB00B1CRLC47LSE share code: MNDI
16 February 2012
As part of the dual listed company structure, Mondi Limited and Mondi plc (together "Mondi Group") notify both the JSE Limited ("JSE") and the London Stock Exchange of matters required to be disclosed under the JSE Listings Requirements and/or the Disclosure Rules and Transparency Rules and/or the Listing Rules of the United Kingdom Listing Authority.
Mondi Group makes an offer to acquire the minority interest in Mondi Swiecie S.A.
Mondi Group has made an all cash public tender offer of PLN69.00(EUR16.48) per share ("Offer") for 17 million shares representing 34% of theshare capital of Mondi Swiecie S.A. ("Mondi Swiecie") that it does notalready own. Mondi Swiecie is listed on the Warsaw Stock Exchange. The Offerrepresents a premium of 15.6% over the last three months average price ofPLN59.71 (EUR14.26) and a premium of 4.1% over the last six months averageprice of PLN66.26 (EUR15.82).Mondi Swiecie is a leading integrated manufacturer of virgin andrecycled container board in Central Eastern Europe (CEE). In 2011 it produced1,333 thousand tonnes of containerboard at its operations in Swiecie, Poland.Mondi Swiecie presently employs approximately 1,020 people under its ManagingDirector Maciej Kunda. This acquisition would bring into full ownership anasset of the Mondi Group, further streamlining its corporate structure.
Mondi Swiecie today announced its results for the year ended 31 December 2011. The company generated EBITDA of PLN610m (EUR148m), operating profit of PLN457m (EUR111m) and net earnings of PLN396m (EUR96m). As of 31 December 2011 it had net cash of PLN70m (EUR16m), gross assets of PLN2,729m (EUR612m) and shareholders' equity of PLN1,830m (EUR410m). A translation of the company's announced Consolidated Financial Statements and Report on Business Activities for the year ended 31 December 2011 is set out below. Under the Offer, the implied equity value of the whole of Mondi Swiecie is PLN3.5bn (EUR824m) and represents an EV/EBITDA multiple of approximately 5.5x and a P/E multiple of approximately 8.7x for 2011.
The Offer is expected to be concluded in mid April 2012. Full acceptance of the Offer would result in an aggregate cash consideration payable by the Mondi Group on closing of PLN1.2bn (EUR280m). The Offer is conditional on Mondi Group achieving minimum acceptances of 14% of Mondi Swiecie shares (to bring the Mondi Group's total interest in the company to not less than 80%). After completion of the Offer, Mondi intends to delist Mondi Swiecie from the Warsaw Stock Exchange. The Offer will be funded by Mondi Group's existing cash resources and from existing committed bank facilities available to it.
In accordance with the provisions of the JSE Listings Requirements,the unaudited pro forma financial effects set out below are included for thepurpose of illustrating the effects of a full acceptance of the Offer on MondiGroup's underlying earnings, basic earnings from continuing operations, basicearnings from continuing and discontinued operations, headline earnings, netasset value and tangible net asset value per ordinary share, for the half yearended 30 June 2011 as if such transaction had occurred on 1 January 2011 forincome statement purposes and 30 June 2011 for statement of financial positionpurposes. These unaudited pro forma financial effects are the responsibilityof the directors and have been prepared in accordance with the guidelinesissued by the South African Institute of Chartered Accountants.
These unaudited pro forma financial effects are presented for illustrative purposes only and because of their nature, may not give a fair reflection of Mondi Group's financial position nor the effect on future earnings following the acquisition:
Per Mondi Ordinary Share Reviewed Unaudited(Euro cents) before after Percentage Acquisition 3 Acquisition 4 Change Underlying earnings 1 38.2 41.8 9.4Basic earnings from continuing 39.0 42.5 9.0
operations
Basic earnings from continuing anddiscontinued operations 41.6 45.1 8.4Headline earnings 2 39.4 42.9 8.9Diluted underlying earnings 1 37.7 41.2 9.3Diluted earnings from continuing 38.5 42.0 9.1operationsDiluted earnings from continuing anddiscontinued operations 41.0 44.5 8.5Diluted headline earnings 2 38.9 42.4 9.0Net asset value 6.40 5.86 (8.4)Tangible net asset value 5.93 5.39 (9.1)Notes:
1. Underlying earnings per share excludes the impact of special items.
2. The presentation of headline earnings per share is mandated under JSE listings requirements. Headline earnings has been calculated in accordance with Circular 3/2009, "Headline Earnings", as issued by the South African Institute of Chartered Accountants.
3. The Group financial information has been extracted, without adjustment, from the Group's reviewed results for the six months ended 30 June 2011.
4. The adjustments to earnings, on the basis that the acquisition had occurredon 1 January 2011 for income statement purposes and 30 June 2011 for statementof financial position purposes, include the following main items:
- The exclusion of the non-controlling interest charge in respect of Mondi Swiecie
- The estimated finance charges associated with the financing of the consideration
- Assumed taxation rate of 26.25%
Net asset value and tangible net asset value, on the basis that theacquisition had occurred on 1 January 2011 for income statement purposes and30 June 2011 for statement of financial position purposes, are reduced by theestimated consideration of EUR280 million./endsContact:Mondi GroupLora Rossler
Group Corporate Affairs Manager
Tel: +27 (0)31 451 2111 or +27 (0)83 627 0292
E-mail: lora.rossler@mondigroup.co.za
Kerry Crandon
Group Communications Manager
Tel: +27 (0)11 994 5425 or +27 (0)83 389 3738
E-mail: kerry.crandon@mondigroup.com
Andrew King
Group CFO
Tel: +27 (0)11 994 5415 or +27 (0)82 870 8100
E-mail: andrew.king@mondigroup.com
Editors' notes
About Mondi:
Mondi is an international paper and packaging Group, with production operations across 31 countries and revenues of EUR 6.2 billion in 2010. The Group's key operations are located in central Europe, Russia and South Africa and as at the end of 2010, Mondi employed approximately 29,000 people.
Mondi is fully integrated across the paper and packaging process,from the growing of wood and the manufacture of pulp and paper (includingrecycled paper), to the conversion of packaging papers into corrugatedpackaging, industrial bags and coatings. The Group is principally involved inthe manufacture of packaging paper, converted packaging products and uncoatedfine paper (UFP).Mondi has a dual listed company structure, with a primary listingon the JSE Limited for Mondi Limited under the ticker code MND and a premiumlisting on the London Stock Exchange for Mondi plc, under the ticker codeMNDI. The Group has been recognised for its sustainability through itsinclusion in the FTSE4Good UK, Europe and Global indices in 2008, 2009 and2010 and the JSE's Socially Responsible Investment (SRI) Index in 2007, 2008,2009 and 2010.
Translation of Mondi Swiecie's Consolidated Financial Statements and Report on Business Activities for the year ended 31 December 2011:
Contents 1. Background 4 2. Core Products 5 2.1. Industry 5 2.2. Product types 5 The position of the Group in the sector and compared to the competition 6 2.4. Structure of sales 8 2.5. Sales markets 8 3. SIGNIFICANT IMPACTS ON THE ACHIEVED RESULTS 9 3.1. Analysis of sales revenues 9 3.2. Analysis of other income statement items 10 3.2.1. Production volume 10 3.2.2. Basic raw materials and services 10 4. Information on other events that took place in 2011 12 4.1. Information on significant agreements 12 4.2. Changes in organisational and capital relationships 12 4.3. Related party transactions 13 4.4. Credits, loan agreements, sureties and guarantees 13 4.5. Utilisation of inflows from issue of securities 14 4.6. Variances from the last published forecast 14 4.7. Management of financial resources and liquidity assessment 14 4.8. Possibility to implement investment projects 15 4.9. Information that is essential for the evaluation of the personnel related situation, assets related situation, financial condition, financial results and changes in the situation as well as information that is essential for the evaluation of the possibility of paying liabilities 15 4.10. Factors and untypical events impacting the result 15 4.11. Activities in the Special Economic Zone 15 4.12. Description of the development and operating drivers 16 4.12.1. External drivers 16 4.12.2. Planned development of the Group 16 4.12.3. Achievements in the area of research and development 17 4.12.4. Current and expected financial position of the Group 17 4.12.5. Factors that will impact the Group's results as expected by the Group 17 4.13. Management and Computerisation 20 4.14. Changes in basic management of the Company and its 20 Group 4.15. Information on proceedings pending before the court, competent body for arbitration proceedings or public administrative 20 body 4.16. Agreements concluded between the Company and Members of 21 the Management Board of the Company 4.17. Remuneration of Members of the Management and 21 Supervisory Bodies 4.18. Outstanding loans, guarantees and sureties granted to Members of the Management and Supervisory Bodies of the Company and their relatives 21 4.19. Shares held by Members of the Management and Supervisory Bodies 22 4.20. Changes in the shareholding structure 22 4.21. Information on the Controlling System for Employee Shares Programme 22 4.22. Agreements with the entity authorised to audit financial statements 22
STATEMENT ON COMPLIANCE WITH THE CODE OF BEST PRACTICE OF CORPORATE 5. GOVERNANCE
24 5.1. Code of Corporate Governance Best Practice that governs the Company and the location where the Code of Best 24 Practice is available to the public 5.2. The extent to which the Company waived the Code of Best Practice, indication of such Practices and reasons for the 26 waiver. 5.3. Basic characteristics of internal audit and risk management systems used in the Company in the preparation of 26 financial statements and consolidated financial statements 5.4. Shareholders that directly or indirectly hold significant parcels of shares, number of shares held by such entities, their participation in the share capital in %, number of votes arising out of the participation in the share capital and their share in % in the total number of votes at the General Meeting of the Company 28 5.5. Holders of any securities giving special controlling powers and description of such powers 29 5.6. Any limitations related to exercising the right to vote, such as limitation to exercise the right to vote by holders of a certain portion or number of votes, time limitations related to exercising the right to vote or regulations providing that, with Company's co-operation, capital rights related to securities are separated from holding securities 29 5.7. Any limitations related to the transfer of ownership title to the Company's securities 29 5.8. Rules of appointing and dismissing managing and supervising persons and their powers, in particular their power to decide about shares issuance or buying out 29 5.9. Rules of amending the Statute or Articles of 30 Association 5.10. General Meeting rules of procedure and basic powers as well as Shareholders' rights and way of exercising such rights, in particular the rules arising out the General Meeting rules of procedure, if such the rules were adopted, unless information in this regard arises out of the law 31 5.11. Members of and changes to the composition of the Company's Management and Supervisory Boards or administration body made over the last fiscal year, the procedure of operation of the Company's Management and Supervisory Boards or administration body and their committees 34 1. BACKGROUND
As of the balance sheet date Mondi Swiecie Group is composed of:
parent company - Mondi Swiecie S.A., and
subsidiary - Swiecie Recykling Sp. z o.o.,
associated company - Polski System Recyklingu - Organizacja Odzysku S.A.
The consolidated financial statements as of 31 December 2011 cover the following companies:
parent company - Mondi Swiecie S.A.,
company valued with the full method - Swiecie Recykling Sp. z o.o.,
company valued with the equity method - Polski System Recyklingu - Organizacja Odzysku S.A.
MondiSwiecie S.A. was established at the beginning of the nineteen nineties. InJanuary 1991, the state-owned entity - Zaklady Celulozy i Papieru w Swieciu -was transformed into a joint-stock company owned entirely by the StateTreasury. In April 1997, 15% of the Company's shares were floated on the WarsawStock Exchange. In August 1997, a majority stake of shares was sold to astrategic investor, Framondi NV of the Netherlands. The Company was renamedFrantschach Swiecie. In November 2004, the Frantschach Group and Mondi Packaging Europe Group mergedto form the Mondi Packaging Group with the common brand and logo. As a resultof the merger, the Company changed its name from Frantschach Swiecie S.A. toMondi Packaging Paper Swiecie S.A. on 20 January 2005.The Frantschach Group was wholly owned by Mondi - one of the leading paper andpackaging companies. Mondi was a member of Anglo American plc, the worldwideleader in mining and natural resources industry, till the end of June 2007. On25 June 2007, the Extraordinary Meeting of Shareholders of Anglo American plc,with the Mondi Group being its member, approved demerger of the Mondi Groupfrom Anglo American plc and decided to list Mondi on the London andJohannesburg Stock Exchanges on 3 July 2007.
On 16 May 2008, the Registration Court registered the rebranded Company's business name - Mondi Swiecie S.A.
SwiecieRecykling commenced its business activities in January 2002 based on theRecovered Paper Purchasing Department of Frantschach Swiecie S.A. FrantschachSwiecie S.A. (now Mondi Swiecie S.A.) took over 100% of shares in the limitedliability company (Swiecie Recykling), thus becoming its sole shareholder.Swiecie Recykling is the major domestic supplier of recovered paper, being oneof the key raw materials for paper production, for Mondi Swiecie S.A. InDecember 2004, the Extraordinary General Meeting of Shareholders adopted theresolution regarding rebranding of this subsidiary from Frantschach SwiecieRecykling Sp. z o.o. to Swiecie Recykling Sp. z o.o. The new name wasregistered in KRS (National Court Register of Companies) on 6 January 2005.
2. CORE Products 2.1. Industry
In line with the strategy implemented by Mondi Swiecie S.A., the Group's activities are focused on manufacturing containerboard. The Group is the Polish leader in its own products and a significant European manufacturer of containerboard.
The Group also manufactures sack paper, whose output in 2012 should be reducedin line with Mondi Group's strategy of grade consolidation. However, theintention is to focus on manufacturing lightweight kraftliners (with a basisweight below 100 gsm) on the fast-growing segment of paper bags and otherapplications.
The substantial improvement in paper quality was made thanks to the implementation of the capital investment programme, which allows the Group to effectively compete with leading paper producers in Europe and worldwide.
The start-up of ECO7 in September 2009 allowed increasing capacity in 2010 to 1.3 million tonnes and in 2011 to 1.4 million tonnes.
The following trends on the main product markets are identified:
- Sack Paper:
Since the Group focus is on manufacturing containerboard, the output of sack paper decreased by 6.6 thousand tonnes compared to 2010.
- Kraftliner:
It is one of the Group's core products. In 2011, its share in the sales volume was 33%. In 2011, the sales volume of this product decreased, whereas its prices increased.
- Recycled papers:
The popularity of this group of papers on the packaging market is rising systematically (average dynamics of growth over last 15 years was approx. 6.5% annually) and now it comprises approx. 68% of total containerboard consumption.
Major factors supporting the substitution of virgin fibre-based grades (Kraftliner, Semi-chemical Fluting) with recycled papers (Testliners, KraftTop X, WB Fluting) are lower prices for the latter grades and their improved quality. Another important factor is a rising environmental awareness of communities, which has a real impact on consumer preferences and their purchasing-related decisions.
Recycled papers are the dominant product group on the Polish containerboard market.
2.2. Product types
Containerboard papers are sold under the common name "ProVantage" used across the entire Mondi Group:
Containerboard:
ProVantageKraftliner (virgin fibre-based paper with an addition of recycled fibre for outer layers of corrugated board),
ProVantageKraftliner XLite (lightweight, virgin fibre-based paper for outer layers of corrugated board),
ProVantageKraft X (lightweight, virgin fibre-based paper with the addition of recycled fibre for outer layers of corrugated board and for manufacture of paper bags),
ProVantageKraftliner Aqua (virgin fibre-based paper with the addition of recycled fibre for outer layers of corrugated board, with increased moisture resistance, offered as a substitute for paraffin-coated papers),
ProVantageKraftTop X (virgin and recycled fibre-based paper for outer layers of corrugated board),
ProVantageTestliner 3 (recycled fibre-based paper for outer layers of corrugated board),
ProVantageFresco Fluting (paper with increased parameters, made of semi-chemical and OCC pulp for inner layers of corrugated board),
ProVantageFluting WB (recycled fibre-based paper for inner layers of corrugated board),
ProVantageFluting Aqua (paper for inner layers of corrugated board, made of semi-chemical pulp, with increased moisture resistance, recommended as the substitute for paraffin and resin-coated Flutings).
2.3 The position of the Group in the sector and compared to the competition
ECO7 that manufactures lightweight recycled paper, and is the response to the increasing industrial demand for such grades allowed significantly increasing the Group's competitiveness in Central-Eastern Europe.
The Group still offers innovative "Aqua" products (ProVantageKraftliner Aqua and ProVantage Fluting Aqua) that are primarily designed forthe manufacture of fruit board packaging. Their characteristic features areincreased moisture and water resistance. In October 2011, a modified product,ProVantage Kraft X, was introduced. It is designed for the production of paperbags. This is a fast-growing, ecological, packaging segment on the Europeanmarket.
The position of the Group in the sector and compared to the competition in particular groups of products is as follows:
Containerboard: KraftlinerProVantageKraftliner (virgin fibre-based paper for outer layers of corrugatedboard) - the Group's core product - Sales in 2011 reached 33% of the totalsales volume, i.e. down 2% (442.8 thousand tonnes in 2011 versus 452.8 thousandtonnes in 2010).ProvantageKraft X (lightweight, virgin fibre-based paper with the addition ofrecycled fibre for outer layers of corrugated board and for the manufacture ofpaper bags). Thanks to the ecological trend in Europe towards reducing themanufacture and use of plastic bags, there are good prospects for thisproduct's future success. In 2011, its sales volume reached 2.3 thousandtonnes. ProVantageKraftliner XLite - thanks to this paper's exceptionally high strengthparameters and very low basis weight, it offers corrugated board manufacturersan additional benefit - more m2 of corrugated board to be made from one tonneof paper. In the audited period, the sales volume of this paper amounted to24.8 thousand tonnes, i.e. up 24% compared to 2010.ProVantageAqua Kraftliner - an innovative product introduced to the Company'sproduct portfolio in 2005. In 2011, the sales volume of this product amountedto 5.4 thousand tonnes, down 14% compared to the sales level in 2010.
Semi-chemical Fluting
ProVantageFluting Fresco - this paper is designed, among other things, for fruit packaging that needs increased moisture resistance. In the audited period, the sales volume of this product reached 162.4 thousand tonnes, i.e. up 5.4% compared to 2010.
ProVantageAqua Fluting - an innovative product introduced to the Company's product portfolio in 2005. The sales volume of this product in 2011 reached 23.8 thousand tonnes, up 10% compared to 2010.
Recycled fibre-based papers
ProVantageTestliner 2: this grade was not produced in 2011. In 2010, its sales volume reached 4.4 thousand tonnes.
ProVantageTestliner 3: in the audited period, the sales volume increased by 4% (from 178.6 thousand tonnes in 2010 to 185.1 thousand tonnes in 2011).
ProVantageWB Fluting: in the audited period, the sales volume increased by 13% (from 245.8 thousand tonnes in 2010 to 277.6 thousand tonnes in 2011).
ProVantageKraftTop X - very good quality virgin and recycled fibre-based paperfor outer layers of corrugated board - the sales volume reached 199.0 thousandtonnes, up 15% (compared to 173.4 thousand tonnes in 2010).
Containerboard products are sold to many foreign manufacturers. Containerboard sold abroad accounted for 67.8% of the sales volume.
On the domestic market, 76.6% of the sold volume of containerboard is recycledpapers. The main domestic competitors are Stora Enso Poland S.A. and foreignmanufacturers, mainly from Germany and Hungary. Sack paper:
The product is fully made from virgin fibre. The main competitor on the domestic sack market is Stora Enso Poland S.A.
The sales volume in 2011 reached 34.8 thousand tonnes, down 16% compared to 2010. Due to the implementation of Group's strategy and the fact that Mondi Swiecie S.A. focuses on manufacturing containerboard, production of sack paper has ceased since January 2012.
After the periodic paper market stagnation caused by the global economic crisis, paper prices were quite stable, with an upward trend in the first half-year of 2011. Another economic slump and prospects of another recession means paper prices have been dropping since the fourth quarter of 2011.
In line with the Group's strategy, the focus was placed on providing awide-range Service to our Customers in 2011. We commenced work on the "ONE"Project with the aim of optimising and harmonising all logistics andsales-related processes, which should strengthen our position in the nearfuture. In spite of the growing prices of raw materials (pulpwood logs,recovered paper) and of transport services, the Group's competitiveness remainsat quite a high level thanks to the consistent implementation of the long-termsales strategy by the Management Board.
2.4. Structure of sales
In 2011, the structure of product sales of the Mondi Swiecie Group by major groups of products was as follows (in thousand tonnes):
Product group 2011 2010 Sack paper 35 41 Kraftliner 475 479 Semi-chemical fluting 186 176 Recycled paper 662 602 Total 1358 1298 2.5. Sales markets
In 2011, the export share of finished products (by volume) remained at a level similar to that of the previous year:
Year 2011 2010 Export share 67% 66% In 2011, the sale of paper grades manufactured by the Group was still focusedon European markets (including the Polish market). The sales volume to thesemarkets in the audited period accounted for 87.5%.
In the audited period, the geographical structure of revenues from the sale of paper by Mondi Swiecie S.A. by main sales markets is as follows:
Country Share in gross revenues Poland 31.0% Germany 14.0% Italy 6.1% Benelux 5.2% France 5.1% Great Britain 5.1% Sweden 3.6% Turkey 3.5% Israel 2.5% Finland 2.1%
Sales to the above-mentioned markets accounted for 78% of Group's gross revenues from the sale of paper.
In the audited period, the domestic market share in the revenues from the saleof paper remained at a similar level and accounted for 31.0% in 2011 versus30.8% in 2010, whereas the domestic market share by volume decreased by 0.9 %.This resulted from the increase in the prices of recycled papers such asTestliner and WB Fluting, which was clearly higher than that applied to othergrades. 3. SIGNIFICANT IMPACTS ON THE ACHIEVED RESULTS
3.1. Analysis of sales revenues
In 2011, the Group's sales revenues totalled PLN 2, 771.1 million, which was22.4% higher than the figure of PLN 2, 263.7 million posted in 2010. The changeresulted from an increase in both product sales revenues and goods andmaterials sales revenues.In 2011, the revenues from the sale of products advanced by PLN 475.0 million(up 21.1%) when compared to 2010. The primary factors contributing to theincrease were the rise in the revenues from the sale of finished products (upPLN 450.3 million), positive difference on exchange rates from the valuationand settlements of receivables (up PLN 24.5 million).Higher revenues from the sale of finished products chiefly resulted from therise in prices for all the grades of paper manufactured by the Group and, tothe lower degree, from the higher sales volume.
The share of paper sales in total sales revenues was 92%.
In 2011, the weighted average price denominated in EUR increased by 13.1% whencompared to the last years' level. Due to the weakening of Polish zloty againstthe euro (by 2.8%), the price denominated in PLN rose by 16.3%. Higher pricesin EUR applied to all the Group's papers. The price for recycled grades such asTestliner and WB Fluting increased by 20.6% on average, chiefly because of asharp rise in recovered paper prices in the reporting period. The prices of theGroup's other grades also rose. Prices increased as follows: Kraftliner by8.6 %, Kraft Top X by 15.0%, and Fresco Fluting by 14.9%. The price of sackpaper rose by 17.3%.
In 2011, the paper sales volume climbed by 59.5 thousand tonnes (up 5%) year on year, while the production output rose by 54.5 thousand tonnes (up 4%).
In 2011, the revenues from green (renewable) energy and red energy(co-generated with heat) certificates totalled PLN 137.6 million. Theserevenues compare with PLN 139.3 million in 2010. The increase of PLN 19.0million in the revenues from green certificates originated primarily fromseparating, at the beginning of 2011, the new units generating electric energyfrom renewable sources. This allowed obtaining an increased number of greencertificates from biomass burning in the CFB and BFB boilers. Another importantcause was the higher output of pulp, which resulted in a rise in RecoveryBoiler steam generation and thus in an increased output of electric power. Therevenues from the sale of red certificates in 2011 are decidedly lower (by PLN20.7 million) compared to the previous year. Sales in 2010 were affected by aone-off event, which was the allocation by the Energy Regulatory Office ofcertificates in arrears for 2008-2009 for the total amount of PLN 13.5 million.However, since the half-year of 2011 the prices of red certificates have beendropping significantly, which adversely affects the sales value and thevaluation of certificates on stock. The increase in the output of finishedproducts and pulp only partially offset the negative impacts of theabove-mentioned events on the value of sales of red certificates.The Group's revenues from the sale of goods and materials in 2011 totalled PLN45.9 million, compared to the revenues of PLN 12.7 million in 2010. One of themajor factors was the increase in the revenues from the sale of CO2 emissionallowances, which also included the surplus generated in 2008-2010.
In addition to the sale of paper, green and red energy certificates and CO2 excess emission allowances, the Group obtains revenues from lease, sale of electric energy, heat and by-products - primarily resin soap and turpentine.
3.2. Analysis of other income statement items
3.2.1. Production volume
The production volume for main groups of products (in thousand tonnes) was asfollows: Products 2011 2010 Containerboard 1 333 1 272 Sack paper 35 41 Total 1 368 1 313 The significantly increased production output of containerboard (when comparedto the analogical period of last year) chiefly results from the optimisation ofperformance of the new paper machine - PM7 - the output of which in 2011 was465 thousand tonnes of paper. This figure is higher by 54 thousand tonnes thanthe output in 2010.
3.2.2. Basic raw materials and services
Basic raw materials used in production are as follows:
Wood (Pulpwood): In view of the insufficient supply of wood on the domestic market, the Group had to satisfy its needs through the less cost-effective import of raw materials.
In 2011, the Group's wood purchasing volume grew by 8% year on year. The riseis attributable to the rebuilding of raw material stocks. In the reportingperiod, the purchase prices of pine and birch rose by 18% on average comparedto the price level in 2010. The rise in the average price reflects the priceincrease from specific supply sources. The State Forest Enterprise remained
thekey pulpwood supplier.
Recovered paper: In the period under review, recovered paper was acquired through Swiecie Recykling. In the reporting period, the average purchase price of recovered paper increased by 17% compared to 2010.
Coal: In 2011, the average price of coal increased by 24% compared to 2010. The Group continued its supply sources diversification policy through coal import.
Biofuels: Biomass was obtained mostly from sawmill sources (bark, wood strapand chips). The remaining portion of biofuels was generated in the internalwoodworking and paper production processes. In the period under review, energygenerated by the Group from renewable sources accounted for approx. 83%. Thisperformance gave rise to the additional revenues from the sale of green energycertificates.Transportation of finished products: In 2011, the Group's expenditures incurredfor transportation of finished products increased by approx 17.1% compared tothe previous year. The rise in transportation costs was primarily the result ofthe increase in the average transportation rate and to a lower extent of therise in the sales volume. The average transportation rate denominated in EURrose by 8.7% compared to 2010. The rise in fuel prices was the major factorcontributing to the change in the average transportation rate. The impacts of the above-mentioned factors (as discussed above: the changes ofthe prices of products and raw materials and hedge) were reflected in the netprofit of PLN 395.9 million compared to the profit of PLN 249.3 milliongenerated in 2010. 4. INFORMAtion on other events that took place in 2011
4.1. Information on significant agreements
In the reporting period the following agreements were signed with Panstwowe Gospodarstwo LeSne Lasy Panstwowe (State Forest Enterprise) with its registered office in Warsaw and State Forest Enterprise subsidiaries:
Wood purchase contracts based on the first and second phases of Internet-basednegotiations for the second half-year of 2011 with the total value of PLN 38.9million. As security for State Forest liability the Group signed a bankguarantee facility agreement of up to PLN 18 million, issued by the bank forthe benefit of the State Forest Enterprise;Wood purchase contract for the second half-year of 2011 entered into onInternet-based system auctions with the value of PLN 60.4 million. As securityfor State Forest liability a bank guarantee facility agreement of up to PLN 18million was entered into and the guarantee facility was issued by the bank forthe benefit of the State Forest Enterprise;Wood purchase contract based on the first phase of Internet-based negotiationsfor the first half-year of 2012 with the value of PLN 46.3 million. As securityfor State Forest liability a bank guarantee facility agreement of up to PLN 18million was entered into and the guarantee facility was issued by the bank forthe benefit of the State Forest Enterprise;
In addition, the Management Board of Mondi Swiecie S.A. entered into:
- on 11 February 2011, a new three-year Guarantee Facility Agreement thatcovers the existing nine-year credit from the European Investment Bank dated asof 30 June 2008 for the amount of PLN 521.8 million with the following banks:RBS Bank (Polska) S.A., the Royal Bank of Scotland NV, BRE Bank S.A., BankPolska Kasa Opieki S.A., and Raiffeisen Bank International AG. After the newAgreement becomes effective (after conditions precedent are fulfilled), theexisting, valid three-year Guarantee Facility Agreement as of 30 June 2008(annexed on 30 October 2009, 30 June 2010 and 30 September 2010) willterminate;- an additional agreement to the Credit Agreement with Mondi Finance plc(previous name Mondi Finance Ltd) as of 29 October 2009 with the credit limitof PLN 200 million, that extends the period of credit's availability till 31March 2014;
Credit Facility (Overdraft) Agreement with the credit facility of PLN 60 million, available by 1 February 2012, with RBS Bank Polska S.A. with the registered office in Warsaw.
4.2. Changes in organisational and capital relationships In the reporting period no changes were made. 4.3. Related party transactions
Revenues from sales to Mondi Group companies (in thousand PLN):
MondiPackaging Paper Sales GmbH 1 745 357 MondiPackaging Swiecie Sp. z o.o. 93 039 MondiPackaging Warszawa Sp. z o.o. 75 918 MondiPackaging BZWP Sp. z o.o. 45 113 MondiPackaging Szczecin S.A. 44 097 Mondiplc 39 425 MondiPackaging Dorohusk Sp. z o.o. 31 525 MondiBags Swiecie Sp. z o.o. 29 900 MondiBags Mielec Sp. z o.o. 14 028 MondiWierzbica Sp. Z o.o. 7 167 SlovwoodRuzomberok, a.s. 1 349 MondiAG 468 MondiCoating GmbH 259 MondiPackaging Solec Sp. z o.o 33 MondiCoating Steti A.S. 17 MondiUncoated Fine & Kraft Paper GmbH 15 MondiCorrugated Services GmbH 10 MondiGruenburg GmbH 10 Total 2 127 730
4.4. Credits, loan agreements, sureties and guarantees
Credits and loans
As of the reporting date the Group had the following loan agreements signed:
with European Investment Bank - a nine-year credit facility for financing thecosts of construction of a new paper machine, PM7, for the amount of PLN 474.3million (secured with a three-year guarantee facility for 110% of the creditfrom the following banks: RBS Bank (Polska) S.A., the Royal Bank of ScotlandN.V., Bank Polska Kasa Opieki S.A., Raiffeisen Bank International AG and BREBank S.A.). This credit facility was valued at PLN 418.2 million in the balancesheet as of 31 December 2011 (nominal value of PLN 417.4 million, increasedwith the reserve for interests of PLN 0.8 million). As per the time schedule,the Group paid the first three quarterly instalments in 2011;
Loan from Mondi Finance plc (a Mondi Group plc entity - the major shareholder of Mondi Swiecie S.A.) with the credit limit of PLN 200 million.
Credit Facility (Overdraft) Agreement with RBS Bank (Polska) S.A. with the credit facility of PLN 60 million.
Consumption of credit facilities and loans in thousands PLN Available Consumed % Short-term 136 717 77 707 57% Long-term 541 531 341 531 63% Total 678 248 419 238 62% Bonds
In the reporting period the Group did not issue any bonds. As of 31 December 2011, the Group did not carry out any bonds.
Guarantee facilities
Information on contingent liabilities (guarantees and sureties) is presented in the "Consolidated Financial Statements of the Group for 2011" under item 30.
4.5. Utilisation of inflows from issue of securities
In the reporting period the Group did not issue any securities.
4.6. Variances from the last published forecast
No forecasts were published in the reporting period.
4.7. Management of financial resources and liquidity assessment
In 2011, the Group generated surplus cash inflows from operating activities,which allowed providing the debt service on due dates and locating cash inshort-term deposits. As of 31 December 2011, the available credit facilitiesand loans were 62% consumed. The remaining credit reserve of approx. PLN 259million, increased with the balance of cash and cash equivalents (PLN 489million) as well as stable sales revenues ensure the Group's unfailingliquidity.Main financial indicators: 31.12.2011 31.12.2010 Return on Sales 14% 11% Return on Equity 28% 21% Total assets turnover ratio 1.02 0.98 Debt/ total assets ratio 33% 38% Equity/ total assets ratio 67% 62% Quick ratio 1.66 0.89
4.8. Possibility to implement investment projects
Over the next 12 months the planned expenditures for non-financial fixed assets, under a cash basis, will amount to PLN 121.7 million and will be financed by the Group's own resources.
Information that is essential for the evaluation of the personnel related situation, assets related situation, financial condition, financial results and changes in the situation as well as information that is essential for the evaluation of the possibility of paying liabilities
The Group's financial results in 2011 reflect the good economic situation onthe European paper market throughout most of the year. Throughout the lastperiod, the average paper sales price increased compared to the previous year;however, the characteristic feature for the last quarter of 2011 was adeclining trend. In 2011, the prices of basic raw materials, namely wood andrecovered paper increased, although the price increase dynamics weresignificantly weaker than those of the previous years. The prices of transportservices grew considerably. The sale of excess CO2 emission allowances stronglycontributed to the financial performance of 2011.
In the last period, the assumptions regarding the production area, including further progress in ECO7 performance optimisation, came true fully.
To further optimise manufacturing costs, the Management Board of the Company decided to commence the process with the aim to buy back the shares in the entity that owns the Power Plant assets, which provides services to the Company and is covered by a long-term contract of lease.
4.10. Factors and untypical events impacting the result
In 2011, no untypical events and factors impacting significantly the Group's result occurred.
4.11. Activities in the Special Economic Zone
Due to the execution of the investment project (PM7 machine), Mondi SwiecieS.A. was granted, on 20 December 2007, the permit to run economic activities inthe Pomorska Special Economic Zone. Thus, the Company was granted theentitlement to be exempt from income tax for some part of its income. Theexisting enterprise of Mondi Swiecie S.A., as well as the areas acquired fromState Forest Enterprise, were included into the area of the Pomorska SpecialEconomic Zone in pursuance with the Regulation of the Council of Ministers of 2November 2007 amending the Regulation regarding the Pomorska Special EconomicZone (Journal of Laws 2007 no. 211 item 1545).The above-mentioned permit authorised Mondi Swiecie S.A. to obtain public aid,which comprises the exemption from corporate income tax starting from thefollowing month after the month when conditions of bearing capital expendituresand reaching the specific employment level have been fulfilled. Mondi SwiecieS.A. fulfilled the above-mentioned conditions in July 2009 and was granted theentitlement to be exempt from the tax for the part of its income since August2009 till the time for which the Pomorska Special Economic Zone wasestablished, which is till 30 November 2017. Thus, the incomes from basicactivities, i.e. sale of finished products were exempt. The permit is now beingexamined by the European Commission for compliance of the public aid grantedwith the common market under Regulation (EC) No. 659/1999 laying down detailedrules for the application of Article 93 of the EC Treaty. The Group expectsthat this process will end in 2012.In the event of the process prolonging beyond 2012, the total domestic limitfor public aid (EUR 37.5 million) that may be granted to the Group with nonecessity of obtaining the consent of the European Commission will be exhaustedthis year. Then, the entitlement of Mondi Swiecie S.A. to be exempt fromcorporate income tax under the permit as referred above would be suspended tillthe European Commission procedure is closed. In this situation, the Group wouldpay monthly advance payments for corporate income tax in the amount thatdisregards the exemption, starting from the month when the allowed domesticlimit was exceeded. Since the Group does not expect that the EuropeanCommission procedure will extend beyond 2012, the full amount of corporateincome tax as covered by the exemption under the permit to run businessactivities in the Pomorska Special Economic Zone should be settled within thecorporate income tax for 2012.New investment project related expenditures are the basis for calculating thepublic aid pursuant to the rules specified in s 4 Clause 3 of the Regulation ofthe Council of Ministers of 5 December 2006 on the Pomorska Special EconomicZone (Journal of Laws 2006, no. 228 item 1667). Based on discountedexpenditures incurred by 31 December 2011, Mondi Swiecie S.A. was authorised toreceive public aid that is not higher than the amount of PLN 247 853 thousand.The public aid comprising the exemption of the part of income from thecorporate income tax may be consumed in the period of time over which MondiSwiecie S.A. shows the income from the activities covered by exemption, whichis that the total income of Mondi Swiecie S.A. less taxed income, not coveredby the exemption, is positive. The calculated amount of public aid consumed by31 December 2011 was PLN 91 802 thousand (this includes discounted amounts ofcorporate income tax exemption, real property tax exemption and the amounts ofrefunding the costs of equipment and providing equipment to workplaces). Out ofthis amount, the discounted value of exemption from corporate income tax wasPLN 83 928 thousand (nominal value of exemption was PLN 104 119 thousand).
4.12. Description of the development and operating drivers
4.12.1. External drivers
The influence of external factors that are significant to the Group's operations and development is described under "Position of the Group in the sector and compared
to the Competition".
4.12.2. Planned development of the Group
In 2012, the Group will continue to make progress by concentrating on four strategy pillars which comprise: strive for Operational Excellence, Customer Focus, Innovation and Human Resources Development.
One of the key activities for this year is to end our works on the preparationof the Group's long-term development strategy till 2020, both in the areas ofpaper production and ensuring the energy sources.At the same time, in consideration of the depressed market, in particular inthe fourth quarter of 2011, the Group will undertake initiatives to sustain thepresent high profitability of its activities through:Maintaining its position on key sales markets, in particular in Poland and EUstates, among other things, by implementing initiatives that aim to improve thequality of products sold and service offered (harmonising logistics-salesprocesses under the ONE Project, extending make-to-stock offer), while keepingthe price competitiveness;
Further managing effectively the area of satisfying energy needs, including,
among other things, through implementation of the Call Option of power generating assets from PEP S.A., responding actively to changing legislation;
Improving the management of working assets of the Group and controlling operating costs more strictly;
Searching for further sources of optimisation for the wood, recovered paper, biomass supply system.
The Management Board of the Group also puts a focus on people development andimproving employee skills. For this reason, the Group has launched and has beenimplementing the Talent Management Programme. Also, the School of Leaders andE-learning have been launched. In addition, the Leadership DevelopmentProgramme is being implemented across the organisation.It is critical for the Group to increase employee safety. Based on the explicit"Zero Tolerance for Unsafe Acts" principle, the work safety and occupationalhygiene growth strategy has been developed and is being implemented with theaim to improve working conditions on a continuous basis.
4.12.3. Achievements in the area of research and development
In 2011, the Group implemented the investment programme with the total outlays(capital expenditures) of PLN 39 million. The major capital projects included:the continuation of PM7 optimisation (Capex of PLN 10 million in 2011) andreplacement of DCS at the Kraft Pulp Plant (Capex of PLN 3 million).
4.12.4. Current and expected financial position of the Group
As of the reporting date, the Group was in a good financial condition due toits operational efficiency, strong sector position, invariably positive cashflows on operating activities and improving financial liquidity ensured througha gradual reduction of external financing. The Group's investment projects arethe basis for maintaining the Group's financial situation safe in the comingyears.
4.12.5. Factors that will impact the Group's results as expected by the Group
In the short-term, the financial condition of the Group will be significantlyimpacted by the trend of paper and basic raw material (wood and recoveredpaper) prices that will be either maintained or changed, PLN/EUR exchange ratestabilisation and optimisation of PM7 performance.
The Group's business is primarily exposed to the following risks:
- market risks (including foreign currency risk, interest risk),- liquidity risk,- credit risk.Market risk
The Group is exposed to market risks related to prices of paper and basic raw materials and services, as well as foreign currency exchange and interest rates.
Paper pricePaper market is highly competitive, partly scattered, with a noticeablesignificant price fluctuation in the past, whose prices are strongly affectedby the change in demand and foreign currency exchange rates. Thanks to itspartial production diversification, the Group, depending on market prices, isprepared to offer a wide range of products, from fully recycled grades toproducts fully made of virgin fibre.
Prices of key raw materials and services
Key raw material prices, i.e. wood and recovered paper, energy and transportservices, which are not fully correlated with the changes of paper prices, havea considerable influence on the Group's results and financial condition.
In particular, performance may be impacted by:
Sales Policy of the major wood supplier - the State Forest Enterprise,
Level of waste paper recovery and of exports of recovered paper,
Due to the power-consuming production: the coal and biomass prices, prices ofCO2 allowances, legal regulations regarding the support for energy generationfrom renewable sources and energy co-generated with heat,
Prices for transport services, both road and rail transport.
The Group has been undertaking a number of initiatives that in particularcomprise diversification of raw material supply sources. Also, the activitiesare being taken to optimise energy costs. For this purpose, the Group hasundertaken steps the aim of which is to exercise the Voluntary Call Optioncovering Saturn Management Sp. z o.o. i Wspolnicy to be bought back from PEPS.A. Saturn Management is the owner of the Power Plant that operates to satisfyMondi Swiecie needs and provides operating services to Mondi Swiecie S.A..
Interest risk
The Group's exposure to the risk of changes in interest rates primarily relates to financial liabilities and short-term cash deposits. As of the balance sheet date, both items compensate significantly, thus reducing the Group's exposure to interest risk. The Group's policy is to manage the interest rate cost using both a mix of fixed and variable rates of interest.
Foreign currency risk
Due to the fact that approximately 67% of finished product sales transactionsare performed in foreign currencies (EUR - 59%, USD - 8%), whereas the most ofthe costs are incurred in the reporting currency, especially in the situationwhere the exchange rate fluctuation is very high, the Group is exposed to thecurrency exchange risk and consequently to high variability of expectedfinancial results. The foreign currency transactional exposure comprises mainlytransactions denominated in EUR, USD and GBP (to a significantly lower extent).The Group uses the hedging policy comprising the coverage of probable futurecapital expenditures (for investment projects the value of which exceeds EUR 5million) and arising balance exposure. The forward contracts that hedge probable future capital expenditures areclassified as the cash flow hedge and hedge accounting rules are applicable tothem. The hedge accounting rules do not apply to forward contracts hedging thebalance exposure.The derivatives used by the Group are valued according to the fair value. Thefair value of foreign exchange forward contracts is determined in relation tothe current forward rates for the contracts with a similar maturity date.For a hedge of the probable future significant capital expenditures that meetsthe criteria of hedge accounting, the part of gains or losses on the hedginginstrument, which was recognised to be the effective hedge, is directly bookedto equity, whereas the part which was recognised to be ineffective is booked tothe current period's financial costs or revenues. For cash flow hedge, gains orlosses booked to equity are transferred to the value of investments commencedin the same period when the hedged probable capital expenditure is booked tothe value of these investments.
Gains and losses caused by the change in the fair value of the transaction to which hedge accounting does not apply are booked directly to the current period's financial revenues or costs.
The Group discontinues applying hedge accounting principles when the hedginginstrument has expired or has been sold, terminated or completed or when thehedge does not meet any longer the conditions allowing applying hedgeaccounting principles to such an instrument. In this event, total gains orlosses on the hedging instrument, which have been booked hitherto on equity arestill shown in equity until the forecast transaction is made. If the forecasttransaction stops being probable, then total gains or net losses as booked toequity are transferred to the current period's net financial result.Derivatives embedded in other financial instruments or contracts that are notfinancial instruments are regarded as separate derivatives if the nature of theembedded instrument and related risks do not directly relate to the nature ofthe basic contract and related risks and if basic contracts are not valuedaccording to the fair value, the changes of which are booked to the incomestatement.
Liquidity risk
Liquidity risks result from the relation of working assets to short-termliabilities. As of 31 December 2011, the current ratio was 2.17 (compared to1.45 at the end of 2010). As of 31 December 2011, the value of available creditlines of the Group amounted to PLN 678.2 million, whereas consumption of themwas PLN 419.2 million. High competitiveness of the Group and its strong market position ensure thatoperating liquidity will be kept and bank financing and co-operation with bankswill be continued. The Group regularly monitors the future liquidity position -short and medium-term forecasts of inflows and expenditures in specificcurrencies are prepared, which are the basis for making decisions to useexternal financing such as credit tranches or overdraft.
Credit risk
The Group enters into hedging transactions and locates its deposits only withrecognised, creditworthy financial institutions. As committed in the financeagreements (the three-year guarantee facility for the 9-year EIB credit) MondiSwiecie S.A. is obliged to carry out such transactions only with financialinstitutions involved in such financing or with Mondi Finance plc.The credit risk related to the receivables is significantly limited due to thefact that the Group's export sales risk is fully covered by the distributioncompany - Mondi Packaging Paper Sales GmbH.
Domestic receivables from unrelated entities are covered by insurance and Customers are subject to the creditworthiness review procedure. Contractor receivables are regularly monitored by the financial service.
4.13. Management and Computerisation
In the reporting period, the projects with the aim to improve businessprocesses, reduce operating costs of IT systems and increase their reliabilitywere launched. Testing of the wood logs, chips and biomass laser measurementsystem for truck's deliveries was commenced. The monitoring system of strategicraw material deliveries was started-up. Work on the wood delivery receipt/acceptance system with virtualisation of IT environment has begun.
Changes in basic management of the Company and its Group
In the reporting period no such events occurred.
4.15.Information on proceedings pending before the court, competent body for
arbitration proceedings or public administrative body
On 4 February 2011, the Management Board of Mondi Swiecie S.A. adopted theresolution concerning the Company's exercising the Voluntary Call Option("Option"), as specified in the General Agreement of 29 April 2002 entered intoby and between the Company and Polish Energy Partners S.A. with its registeredoffice in Warsaw ("PEP") and Saturn Management Spolka z ograniczonaodpowiedzialnoScia i Wspolnicy, Spolka komandytowa with its registered officein Warsaw ("SM sp.k.").As reported by the Management Board in the report as of 4 February 2011, theCall Option is to be exercised on the condition that the Arbitration Court ofthe Polish Chamber of Commerce renders a favourable award for the Company inthe proceedings initiated by the suit brought by the Company against PEP forhaving it determined that the offer for sales of 100% shares of SaturnManagement Sp. z o.o. with its registered office in Warsaw and of all rightsand obligations of PEP as a limited partner in SM sp.k., which was submitted byPEP to the Company in execution of decisions concerning the Voluntary CallOption as specified in the General Agreement, has not expired and is bindingfor PEP on conditions laid down in the Company's suit that is the sales priceis to be fixed on the formula provided in the General Agreement. The suitregarding this issue was brought by the Management Board on 4 February 2011.On 27 June 2011 PEP brought the counter-claim statement to the ArbitrationCourt of the Polish Chamber of Commerce against the Company. In this suit PEPrequests the Arbitration Court to determine, as a principle, that the price forexercising the Option by Mondi covers the reimbursement to PEP of lost benefitsfrom energy in renewable sources and co-generated energy. Moreover, PEPindicated in the above-mentioned counter-claim the detailed mechanism forcalculating the Option price, which is in compliance with the general rules asspecified in the previous clause.On 13 February 2012 the Company received a favourable ruling from theArbitration Court of the Polish Chamber of Commerce, dated 10 February 2012,that the offer for sales of 100% shares of Saturn Management Sp. z o.o. withits registered office in Warsaw and of all rights and obligations of PEP as alimited partner in SM sp.k., which was submitted by PEP on 29 April 2002 inexecution of the General Agreement, is binding for PEP on conditions laid downin the Company's suit that is the sales price is to be fixed on the formulaprovided in the General Agreement. Consequently, PEP's counter-claim wasdismissed by the court. The court decision is final, however it may be appealedin the civil court, based on the Civil Procedure Code. The decision fulfils oneof the conditions precedent for realization of the Voluntary Call Option.
4.16. Agreements concluded between the Company and Members of the Management Board of the Company
The Members of the Management Board are entitled to compensation for not takingcompetitive activities against Mondi Swiecie S.A. for 12 months afterterminating the employment relationship, unless Mondi Swiecie S.A. dischargesthem from this ban before contracts of employment expire.
4.17. Remuneration of Members of the Management and Supervisory Bodies
This information is presented under item 34 of "Consolidated Financial Statements for 2011".
4.18. Outstanding loans, guarantees and sureties granted to Members of the Management and Supervisory Bodies of the Company and their relatives
In the reporting period no such events occurred.
4.19. Shares held by Members of the Management and Supervisory Bodies
As at the balance sheet date, the Members of the Management and Supervisory Bodies held no shares in the Company.
4.20. Changes in the shareholding structure
In current report no. 19/2011 as of 28 September 2011, the Management Board ofMondi Swiecie S.A. informed that on 27 September 2011 the Management Board wasnotified that ING Otwarty Fundusz Emerytalny (ING Open Contributory PensionFund, ("Fund")) withits registered office in Warsaw reduced their stake of shares in the Companyconstituting less than 10% of votes at the general meeting of Mondi SwiecieS.A.. This results from the sales transactions concluded at the Warsaw StockExchange and settled on 22 September 2011.Before selling the shares, the Fund owned 5,331,750 (five million three hundredand thirty one thousand seven hundred and fifty) shares of the Company, whichwas 10.66% of Mondi Swiecie share capital and the Fund was entitled to5,331,750 (five million three hundred and thirty one thousand seven hundred andfifty) votes at the general meeting of the Company, which was 10.66% in thetotal number of votes. On 27 September 2011, the Fund owned 4,998,750 (fourmillion nine hundred and ninety eight thousand seven hundred and fifty) sharesof Mondi Swiecie on its securities account, which is 9.9975% of the sharecapital and entitles casting 4,998,750 (four million nine hundred and ninetyeight thousand seven hundred and fifty) votes at the general meeting ofshareholders of the Company, which is 9.9975% in the total number of votes.
The Mondi Swiecie Group does not have any information on any contracts concluded in 2011 which in the future may cause that proportions of shares held by the present shareholders will change.
4.21. Information on the Controlling System for Employee Shares Programme
In the reporting period no such events occurred.
4.22. Agreements with the entity authorised to audit financial statements
On 9 June 2011, the Supervisory Board of Mondi Swiecie S.A. appointed an entity authorised to audit and review Mondi Swiecie S.A. and Mondi Swiecie Group's semi-annual and annual financial statements - Deloitte Audyt Sp. z o.o.
On 29 June 2011, the Group concluded an agreement for the review of theshortened consolidated financial statements and shortened financial statementsfor the first half-year of 2011 with Deloitte Audyt Sp. z o.o. The totaloutstanding or paid remuneration under this contract for the reviews of thesemi-annual financial statements of the Mondi Swiecie Group amounted to PLN 117thousand. In 2010, these costs amounted to PLN 115 thousand. On 10 November 2011, the Group concluded a contract for the audit of theCompany's annual financial statements, consolidated annual financial statementsand consolidation package for 2011 with Deloitte Audyt Sp. z o.o. The totaloutstanding or paid remuneration under this contract for the audits of theannual financial statements and consolidation package of the Mondi SwiecieGroup amounted to PLN 363 thousand. In 2010, these costs amounted to PLN 388thousand.On 10 November 2011, Swiecie Recykling Sp. z o.o. concluded a contract for theaudit of the annual financial statements for 2011 with Deloitte Audyt Sp.z o.o.The total outstanding or paid remuneration under this contract for the audit ofthe annual financial statements of Swiecie Recykling Sp. z o.o. amounted to PLN42 thousand. In 2010, these costs amounted to PLN 41 thousand.
Furthermore, in 2011 the Group incurred the costs of PLN 109 thousand for Deloitte Group subsidiaries for other services than the audit of financial statements. Such a situation did not take place in 2010.
STATEMENT on complIAnce with THE CODE OF BEST PRACTICE OF CORPORATE GOVERNANCE
5.1 Code of Corporate Governance Best Practice that governs the Company and the location where the Code of Best Practice is available to the public.
In 2011, Mondi Swiecie S.A. complied with the Code of Best Practice forWSE-listed Companies, as laid down in the Attachment to Resolution No. 17/1249/2010 of the Warsaw Stock Exchange Supervisory Board dated 19 May 2010,(excluding the rules specified in B), which is available at www.mondigroup.pl,Corporate Governance.
Fulfilment of the recommendations concerning the information policy and maintaining the company website
Mondi Swiecie S.A. operates the Company's website that meets the requirementsas specified in the Code of Best Practice and ensures access to importantinformation on the Company and is one of the communication forms with theCompany's Shareholders. Mondi Swiecie S.A. publishes its current and periodicreports on the Company's website. Investor Relations at www.mondigroup.plcontain the calendar of the major financial events, periodic financialstatements and information on current events in the Company. The CorporateGovernance part of the website includes the Declaration on Compliance with theCode of Best Practice, corporate documents as well as documents regarding theGeneral Meetings of the Company. All information and data published on thewebsite is also available in English.
Pursuant to the requirement as laid down in Part II, Best Practice for Management Boards of Listed Companies, point 1 (14), Mondi Swiecie S.A. has published on the Company's website the following information about the content of the Company's internal rule of changing
the company authorised to audit financial statements:
"The Company is subject to the rule of changing the company authorised to auditfinancial statements that applies to the Mondi Group. According to the rule,such an entity is chosen for all Group's companies from among renownedinternational auditing companies based on the financial criteria - offeredprice for auditing the financial statements of the companies".
Fulfilment of the recommendation concerning the remuneration policy and rules of defining the policy
Mondi Swiecie S.A. adheres to the rules of defining the remuneration for the Company's employees that are compliant with the internal remuneration rules.
The remuneration rules for Members of Supervisory and Management Boards of theCompany are compliant with the remuneration policy of the Mondi Group (of whichthe Company is member). The aim of the policy is to recruit and motivatecompetent directors complying with the best practice and at the same timeconsider the interests of Shareholders. The major rules of the policy, asdefined and used by the Remuneration Committee of the Mondi Group that hasnon-executive directors of the Mondi Group as its members are as follows:
Remuneration should be on a competitive level for a specific market,
Remuneration structure, in particular the structure of the changeable part ofthe remuneration should depend on achievements, should take into account theinterests of Shareholders and promote achievement of the Mondi Group businessstrategy.
A considerable part of the remuneration should depend on achievement of short- and long-term objectives,
When defining the remuneration for managerial staff of the Group, Mondi takes into account the salary conditions at various areas of the Mondi Group.
The remuneration of Members of the Management Boards of Mondi Group companiesmay be composed of fixed and changeable parts. Members of Management Boards ofGroup's companies are entitled to take part in the Bonus Share Plan (BSP).Under the BSP, the changeable part of the bonus is awarded against achievementof both individual and corporate targets (leading financial indicators and workand health indicators). Part of the bonus awarded may be paid immediately incash and part is paid in deferred shares of Mondi plc (major company of theMondi Group) which vest after three years subject to the executive remaining inthe Group's service. The rules that apply to the changeable part of theremuneration and shares are determined by the Mondi Group RemunerationCommittee.The principle is that the employment relationship with Members of ManagementBoards is based on the employment contracts with a term of notice of severalmonths. The severance pays are paid under the rules of the common labour law. Members of the Company's authorities are appointed in compliancewith the Company's Statute from among the candidates who have the appropriateprofessional knowledge and experience that ensure due performance of theirduties. Information on candidates for Members of Mondi Swiecie Supervisory andManagement Boards is published on the Company's website.
Fulfilment of the recommendation concerning a balanced proportion of women and men in management and supervisory functions in companies
The Mondi Swiecie S.A. standpoint is as follows: When ensuring a balanced proportion of women and men in management andsupervisory bodies, in accordance with Mondi Leadership Criteria, the Companyregards professional and leadership competences as the major criteria ofemployment and promotion of employees, irrespective of gender. Thus, women havethe chances of achieving professional success equal to men. Such actions arecompliant with the rules of the Mondi Global Employment Policy. Under therules, we are committed to:
promote workforce equality and seek to eliminate all forms of unfair discrimination,
recruit and hire the most appropriately skilled individuals, investing in theircareer development; seek to maintain a regular, two-way flow of informationwith employees to maximise their identification with and ability to contributeto our business; seek to maintain a balance in our work and family lives.
5.2 The extent to which the Company waived the Code of Best Practice, indication of such Practices and reasons for the waiver
The Management Board states that in 2011 the Code of Best Practice forWSE-listed Companies, as laid down in the Attachment to Resolution No. 17/1249/2010 of the Warsaw Stock Exchange Supervisory Board dated 19 May 2010, entitled"Code of Best Practice for WSE-Listed Companies" was complied with, excludingthe rules specified below:
Part III "Best Practice for Supervisory Board Members"
Rule 6: Instead of the rule providing that at least two members of theSupervisory Board should meet the criteria of being independent, the Companyhas adhered for many years to the rule according to which the Company'semployees should have their representation in the Supervisory Board membership.Pursuant to s17 of the Company's Statute, the General Meeting of the Company'sShareholders appoints and dismisses the Supervisory Board Members, with 1/3 ofMembers from among the persons elected by the Company's employees. Thehistorical background for the Supervisory Board membership of the personnelrepresentatives ensures that people who are not related to a strategic investorthat has owned a majority of the Company's shares since the privatisationparticipate in the adoption of resolutions of the Supervisory Board.
Rule 8: There are no Supervisory Board committees with membership of people who are independent Members of the Supervisory Board as understood in Rule 6.
Part IV "Best Practices of Shareholders"
Rule 1: The Company does not exclude the presence of representatives of mediaat the General Meetings, but the relevant decision shall be the responsibilityof the Chairman of the General Meeting of Shareholders. 5.3 Basic characteristics of internal audit and risk management systems used in theCompany to the preparation of financial statements and consolidated financialstatements The Management Board of the Company is responsible for the Company's internalaudit system and its effectiveness in relation to the preparation of financialstatements and periodic reports that are prepared and published pursuant toRegulation of 19 February 2009 regarding current and periodic information to bereported by issuers of securities. The aim of the effective internal auditsystem in the financial reporting is to ensure that information presented infinancial statements and periodic reports is adequate and correct.In the preparation of the Company's and Group's financial statements one of thekey audit components comprises the audit of the financial statements by anindependent auditor. Such auditor's responsibilities include: audit ofsemi-annual financial statements as well as preliminary and final audit of theannual consolidated and separate financial statements. The independent auditoris appointed by the Supervisory Board. After the audit, financial statementsare sent to the Company's Supervisory Board Members for their evaluation of theCompany's and Group's financial statements.Internal audit by the Internal Audit Department is a key component of the riskmanagement in relation to the preparation of financial statements. The annualschedule of internal audits is made based on a risk assessment prepared jointlywith the Management Board. In addition to scheduled audits, reviews areconducted that cover the implementation of prior audit recommendations as wellas unscheduled audits are carried out if requested by the Management Board.Internal Audit prepares reports that include recommendations whose aim is tomake audit mechanism more efficient. Such reports are delivered to theManagement Board Members and the Audit Committee. Pursuant to the latestamendments to the Act on certified auditors and their self-government (Journalof Laws No. 77 of 2009, item 649), the Company established the Audit Committeethat, in particular, is responsible for: controlling of the financial reportingprocess; monitoring of the efficiency of internal control system, internalaudit system and risk management; supervision of the execution of financialreview activities; monitoring of independence of a certified auditor and anentity authorised to audit financial statements.The Audit Committee shall meet once a quarter before the Company's SupervisoryBoard meetings to discuss, among other things, ended internal audits executedat the Company, audits of the implementation of audit recommendations and thosearising out of prior audits and to discuss the findings and recommendationsmade by third party auditors. In addition to Audit Committee Members, themeetings of this body are attended by delegated Members of the Company'sManagement Board and the Company's and Mondi Group's Internal Auditors.The Finance Area reporting to the Finance Director is responsible for preparingfinancial statements, periodic financial reports and current reporting of theCompany.
The Company's and Group's financial statements are prepared by middle level management and before being provided to the independent auditor they are checked by the Finance Director.
Financial figures that are the basis for financial statements and periodicreports are taken from the Company's monthly financial and operating reports.Middle and senior level management, jointly with the Finance Area analyseCompany's and particular organisational units' financial performance, comparingit to business assumptions, after accounting books for each calendar months areclosed. Identified errors are corrected on a current basis in the Company's books inline with the accounting policy. The preparation process of financialstatements and periodic reports commences after results of the period ended areapproved by the Finance Director.In the Company, business strategies and plans are reviewed on an annual basis.Medium and senior level management is involved in detailed budgeting thatcovers all Company's areas. The budget and the business plan for the followingyear are adopted by the Company's Management Board and approved by theSupervisory Board. The Company's Management Board, during the year, analysesfinancial results comparing them to the budget, based on the Company'saccounting policy.The Company's accounting policy with regard to statutory reporting is appliedboth to budgeting and during preparation of periodic reporting. The Companyuses coherent accounting principles when presenting financial data in financialstatements, periodic financial reports and other reports delivered toShareholders.
The Company evaluates on a regular basis the quality of internal audit and risk management systems in relation to the preparation of financial statements. Based on the evaluation made, the Management Board of the Company is of the opinion that as of 31 December 2011 there were no weaknesses that could significantly impact the effectiveness of the internal audit in relation to financial reporting.
5.4 Shareholders that directly or indirectly hold significant parcels of shares, number of shares held by such entities, their participation in the share capital in %, number of votes arising out of the participation in the share capital and their share in % in the total number of votes at the General Meeting of the Company
The period of time between 1 January 2011 and 26 September 2011:
1. FRAMONDI N.V.: 33, 000,000 shares = 33,000,000 votes at the General Meetingof the Company = 66% share in the share capital = 66% share in the total numberof votes at the General Meeting of the Company, 2. ING OFE: 5,200,000 shares = 5,200,000 votes at the General Meeting of theCompany = 10.4% share in the share capital = 10.4% share in the total number ofvotes at the General Meeting of the Company, 3. AVIVA OFE AVIVA BZ WBK: 3,655,965 shares = 3,655,965 votes at the GeneralMeeting of the Company = 7.31% share in the share capital = 7.31% share in thetotal number of votes at the General Meeting of the Company.
The share capital of Mondi Swiecie S.A. amounts to PLN 50,000,000 = 50,000,000 common bearer shares with the nominal value of PLN 1 per share.
The period of time between 27 September 2011 and 31 December 2011:
1. FRAMONDI N.V.: 33, 000,000 shares = 33,000,000 votes at the General Meetingof the Company = 66% share in the share capital = 66% share in the total numberof votes at the General Meeting of the Company,
2. ING OFE: 4,998,750 shares = 4,998,750 votes at the General Meeting of the Company = 9.9975% share in the share capital = 9.9975% share in the total number of votes at the General Meeting of the Company,
3. AVIVA OFE AVIVA BZ WBK: 3,655,965 shares = 3,655,965 votes at the GeneralMeeting of the Company = 7.3119% share in the share capital = 7.3119% share inthe total number of votes at the General Meeting of the Company.
The share capital of Mondi Swiecie S.A. amounts to PLN 50,000,000 = 50,000,000 common bearer shares with the nominal value of PLN 1 per share.
5.5 Holders of any securities giving special controlling powers and description of such powers
Any Mondi Swiecie S.A. securities are of a privileged type in this respect.
5.6 Any limitations related to exercising the right to vote, such as limitation toexercise the right to vote by holders of a certain portion or number of votes,time limitations related to exercising the right to vote or regulationsproviding that, with Company's co-operation, capital rights related tosecurities are separated from holding securities
In the reporting period no such events occurred.
5.7 Any limitations related to the transfer of ownership title to the Company's securities
In the reporting period no such events occurred.
5.8 Rules of appointing and dismissing managing and supervising persons and their powers, in particular their power to decide about shares issuance or buying out
The Supervisory Board shall appoint the President and the other Members of the Management Board.
The President, a Member of the Management Board or the entire Management Board may be dismissed by the Supervisory Board before the end of their term of office.
The Management Board shall be composed of one or more Members. The number of Members shall be determined by the Supervisory Board.
The term of office for Members of the Management Board shall last for three consecutive years. The term of office shall be joint for all Members of the Management Board in the meaning of art. 369 s 3 of the Commercial Companies Code.
An employment contract with the Members of the Management Board of the Company shall be executed on behalf of the Company by a representative of the Supervisory Board delegated from among its Members.
The same course shall apply to other actions related to the employment relation of a Member of the Management Board.
The Management Board of the Company, presided over by the President, shall manage the Company and represent it before third parties.
In the case where the Management Board is composed of one person, the Presidentof the Board and in the case where the Management Board is composed of severalMembers, two Members of the Management Board acting jointly or a Member of theManagement Board acting jointly with a holder of a proxy ("prokurent") shall beentitled to make declarations of will on behalf of the Company relating to itsrights and obligation.All matters related to the management of the Company and not restricted to thecapacity of the General Meeting or the Supervisory Board shall be left to theManagement Board, provided that any action in respect of any of the followingactivities at the Company and its subsidiaries shall require the prior approvalof the Supervisory Board:
adoption of an annual operating budget and budget of expenditures for and divestiture of material assets,
incurring an expenditure which is outside the annual budget approved by the Supervisory Board,
any individual sale or purchase of a material asset which exceeds the equivalent of EUR 500,000, also if planned in the annual budget,
any undertaking of any obligations or borrowings which exceeds the equivalentof EUR 250,000, or encumbrance of assets of the Company of the value exceedingthe equivalent of EUR 250,000, outside the annual budget,significant agreements (including agreements with related entities as referredto in the law on information to be provided on a current and periodical basisby issuers of securities), which is:
- agreements that do not exceed one year's duration and the value of which exceeds the equivalent of EUR 500,000,
- agreements that exceed one year's duration and the value of which exceeds the equivalent of EUR 250,000 per year,
acquisition and disposal of real estate, perpetual usufruct or participation in real estate.
The Company's Statute (s35 (3)) provides that the Management Board of theCompany shall be entitled to pay to the Shareholder an advance with respect toa dividend expected as of the end of a fiscal year if the Company possessesmeans sufficient for payment. Payment of such advance requires approval of theSupervisory Board.
The General Meeting of the Company shall be entitled to decide to issue or buy out shares.
The Management Board Regulations specifies in detail the rules of procedure for the Management Board. The Management Board Regulations are adopted by the Management Board and approved by the Supervisory Board.
5.9 Rules of amending the Statute or Articles of Association
In relation to the amendment of the statute, the Statute of Mondi Swiecie S.A. does not include any provisions different than those of the Commercial Companies Code.
The General Meeting of the Company shall be entitled to amend the Statute. It is required to have a majority of three-fourths of votes to amend the Statute. The Statute amendment shall be entered into the KRS (National Court Register of Companies).
The General Meeting of the Company may authorise the Supervisory Board to establish the unified text of the amended Statute or to make other amendments of an editorial type as specified in the General Meeting resolution.
5.10 General Meeting rules of procedure and basic powers as well as Shareholders'rights and way of exercising such rights, in particular the rules arising outthe General Meeting rules of procedure, if such the rules were adopted, unlessinformation in this regard arises out of the law The General Meeting rules of procedure and Meeting's basic powers as well asShareholders' rights and the way of exercising such rights are governed by thefollowing legal provisions:
1. Act as of 15 September 2000 Commercial Companies Code (Journal of Laws 00.94.1037 as later amended),
2. Statute of Mondi Swiecie S.A.,
3. Rules of Procedure of General Meetings of Mondi Swiecie S.A. (available at www.mondigroup.pl; Corporate documents_ General Meetings Rules of Procedure),and
4. Best Practice of Corporate Governance as approved by the Company (available at www.mondigroup.pl; Corporate Governance_Best Practices).
The General Meeting may adopt resolutions irrespective of the number of Shareholders present and the number of represented shares. Each share shall entitle one vote at the General Meeting.
Resolutions of the General Meeting shall be adopted by an absolute majority of votes, unless the provisions of the law or the Statute provide otherwise.
For the case as stipulated in art. 397 of the Commercial Companies Code, the resolution on dissolution of the Company shall require the majority of 3/4 votes cast.
The resolution not to consider an issue placed on the agenda may be adoptedonly if there are important reasons for adopting such a resolution. A relevantmotion should be accompanied by a detailed justification. An item placed on theagenda may be removed from the agenda or may not be considered upon a motionof the Shareholders only if the resolution of the General Meetingof Shareholders is adopted after prior approval by all the present Shareholderswho submitted the motion and if 75% of votes were cast in favour of adoptingthe resolution.
The voting shall be open. A secret ballot shall be ordered with respect to elections or motions on the dismissal of the members of the authorities or liquidators of the Company, as well as with respect to motions to hold the persons mentioned above responsible or in personal matters. Also, a secret ballot shall be ordered at the request of only one present person entitled to vote.
The powers of the General Meeting shall include:
examination and approval of the report of the Management Board
of the Company and of the financial statements for the preceding fiscal year,
adopting a resolution regarding the profit distribution or loss coverage,
discharging the bodies of the Company from performance of duties by them,
changes of the scope of business activity of the Company,
amending the Statute of the Company,
increasing or decreasing the share capital,
merger of the Company and transformation of the Company,
dissolution and liquidation of the Company,
issuance of bonds,
sale or lease of the enterprise of the Company, or its organised part and establishment of limited rights in property thereof,
utilisation of the supplementary (share) and reserve capital,
any decisions regarding claims for compensation of damages inflicted in the course of the Company's formation or during the exercise of the executive or supervisory duties.
Apart from the matters stipulated above, a resolution of the General Meetingshall be required in matters determined in the Commercial Companies Code unlesssuch matters, within the scope permitted by the Commercial Companies Code, aredelegated by this Statute to the competences of the Supervisory Board.Since the convocation of the Meeting, the Company shall publish informationspecified in Article 402³ of the Commercial Companies Code on the Company'swebsite through which website Shareholders may communicate with the Company,including they may notify the Company of granting or withdrawing electronicallythe power of attorney to participate in the Meeting. The Company shall publishon this website, in particular, the form that enables a person authorised toexercise the right to vote and a list of documents the scanned copies of whichshall be attached to the notification of granting the power of attorneyelectronically and the lack of which makes the notification of granting orwithdrawing the power of attorney ineffective towards the Company. The Company shall undertake required actions for identification
of
a Shareholder and the person authorised in order to verify the validity of thepower of attorney granted electronically. Such actions shall be proportional tothe purpose.The General Meeting (hereinafter referred to as "the Meeting") shall be openedby the Chairman of the Supervisory Board, his Deputy and if they both areabsent by the President of the Management Board or a person appointed by thePresident and then, the Chairman of the Meeting shall be elected from among theparties entitled to vote.The Chairman of the General Meeting shall ensure an efficient conduct of theMeeting and observance of the rights and interests of all Shareholders. TheChairman should counteract, in particular, the abuse of rights by theparticipants of the Meeting and should guarantee that the rights of minorityShareholders are respected. The Chairman should not, without a sound reason,resign from his function or put off the signing of the minutes of the Meetingwithout well-grounded reasons.
The Chairman, after signing the attendance record, shall state the proper convocation of the Meeting and its empowerment to adopt resolutions.
If needed, a Scrutiny Commission may be elected from among the parties entitled to participate in the Meeting, whose duties shall include counting votes, taking care of the proper conduct of voting and establishing its results.
Voting on matters of routine/procedure may be carried out only on the issues related to the conduct of the Meeting. The voting procedure cannot apply to resolutions which may have impact on the exercising of rights by the Shareholders.
A resolution not to consider the issue placed on the agenda may be adopted ifit is supported by a relevant motion accompanied by a detailed justificationand only if there are important and related reasons for not adopting theresolution, excluding the issues placed on the agenda at the request of theShareholders. The item placed on the agenda may be removed from the agenda ormay not be considered upon a motion of the Shareholders only if the resolutionof the General Meeting of Shareholders is adopted after prior approval by allthe present Shareholders who submitted such motion and if 75% of votes werecast in favour of adopting the resolution. The Chairman shall lead the debate of the Meeting, present draft resolutionsto the Meeting, undertake decisions in the procedural and technical matters,take care of the effective conduct of the Meeting in accordance with thedetermined agenda and provisions of law, permit participants to take the floor,receive motions and draft resolutions and submit them for discussion, ordervoting, announce its results and state adoption of resolutions.
Short breaks in the session, which do not defer the session, ordered by the Chairman of the Meeting in justified cases, cannot be aimed at hindering the exercising of rights by the shareholders.
The Chairman shall permit participants to take the floor in the sequence they submit their motions to speak.
The Chairman shall be entitled to permit the invited experts and advisors to take the floor.
Answers provided by the Management Board or other persons invitedto the General Meeting to the questions posted by the General Meeting shouldtake into account the fact that the reporting obligations are performed by apublic company in a manner which arises out of the Law applicable to publiccompanies, and certain information cannot be provided otherwise.
In discussing any point under the agenda, each Shareholder shall have the right to a 5- minute speech and a 3- minute reply.
Motions as to modifications of the content of draft resolutions shall be submitted to the Chairman in writing and shall be signed by a submitting party.
Following the end of the discussion, the Chairman, taking into considerationthe discussion and the results of voting on particular motions, shall determinethe final content of the draft resolution being formulated in such a manner soas each entitled party who objects to the merits of a matter can appeal againstit, and he/she shall submit the draft to voting.
A party objecting to a resolution must have an opportunity to concisely present the reasons for the objection.
At the request of a participant in the General Meeting, his/her written statement is recorded in the minutes.
The Scrutiny Commission shall count the votes cast on adopting the resolution.A written statement of the Commission regarding the number of votes shall bedelivered to the Chairman who shall announce the result of voting.
The resolutions shall be deemed adopted if they have been adopted, respectively, in an open or secret ballot and by an appropriate majority of votes as required by the provisions of the Commercial Companies Code and of the Statute.
The Supervisory Board Members shall be elected, subject to s 17 (2) of theCompany's Statute, from among candidates proposed by Shareholders whoparticipate in the Meeting. The candidature for Supervisory Board Membersshould be proposed and justified in detail so as a conscious election ispossible. The approval of being a candidate to the Supervisory Board andapproval for processing and publication of personal particulars by the Companywithin the required scope in relation to being a candidate and member of thepublic company Supervisory Board shall be attached to the application.When candidates to the Supervisory Board Members are proposed, it should betaken into account that at least one Supervisory Board Member should bequalified in accounting and financial review and should meet the conditions ofindependence as specified in art. 56 (3) (1,3 and 5) of the Act of 7 May 2009on certified auditors and their self-government, entities authorised to auditfinancial statements and public supervision (Journal of Laws no. 77, item 649).
The election of Supervisory Board Members in one joint voting shall be allowable only if there are not more candidates than the number of seats/posts in the Supervisory Board and if no Shareholder participating in the Meeting objects to the voting.
In the case where the Supervisory Board is elected by voting in separate groups:
- at the Meeting, for the purpose of electing Supervisory Board Members, at maximum as many groups of shareholders can be established as there are posts in the Supervisory Board to be filled,
the minimum number of shares which is required to establish a group is defined as the number of shares represented in the Meeting divided by the number of posts in the Supervisory Board to be filled,
the group of Shareholders shall be entitled to elect as many Supervisory BoardMembers as the number of shares represented by the group's members is higherthan the calculated minimum number of shares required to establish the group,
the groups of Shareholders can become one group to elect jointly,
the Shareholder can be a member of one group only,
Shareholders being members of the group established for the purpose of electinga Supervisory Board Member provide the Chairman with their written declarationsabout their membership in this group,
the majority of votes in the group determines the election of the Supervisory Board member within this group,
for each of the groups a separate attendance list shall be drawn up; a scrutinycommission shall be elected and a Chairman shall be appointed to preside overthe election,
the resolution regarding the election of the Supervisory Board Member or Members by the group shall be included in the Minutes by a notary public.
In formal matters the Chairman permits to take the floor outside the sequence of submitting a motion to speak.
If the Meeting is attended by parties who have no command of Polish, then the Meeting shall be interpreted by a sworn translator.
Having discussed the issues on the agenda, the Chairman shall declare the Meeting closed.
5.11 Members of and changes to the composition of the Company's Management andSupervisory Boards or administration body made over the last fiscal year, theprocedure of operation of the Company's Management and Supervisory Boards oradministration body and their committees The Supervisory Board of Mondi Swiecie S.A. of VIII term of office (appointedpursuant to the resolution of the Ordinary General Meeting of Shareholders on16 April 2010) in the period of time from 1 January 2011 to 31 December 2011was composed of:
Peter Oswald - Chairman of the Supervisory Board,
Peter Machacek - Deputy Chairman of the Supervisory Board,
Jaroslaw Kurznik - Secretary of the Supervisory Board, elected by the employees of the Company,
Ryszard Gackowski - Member of the Supervisory Board, elected by the employees of the Company,
Franz Hiesinger - Member of the Supervisory Board,
Karol Mergler - Member of the Supervisory Board, elected by the employees of the Company,
Klaus Peller - Member of the Supervisory Board,
Ladimir Enore Pellizzaro - Member of the Supervisory Board,
Walter Seyser - Member of the Supervisory Board.
The Supervisory Board supervises on a continuous basis all areas of the Company's business and performs activities as specified in the following legal provisions:
1. Act of 15 September 2000 Commercial Companies Code (Journal of Laws 00.94.1037 with later amendments),
2. Statute of Mondi Swiecie S.A. (available at the Company's website),
3. Regulations of the Supervisory Board of Mondi Swiecie S.A.(available at the Company's website), and
4. Declaration of Mondi Swiecie S.A. on Compliance with Best Practice of Corporate Governance, excluding the rules specified under B.
A detailed description of the Supervisory Board procedure of operation is available at the Company's website.
Pursuant to the Act of 7 May 2009 on certified auditors and theirself-government, entities authorised to audit financial statements and publicsupervision (Journal of Laws no. 77, item 649) on 20 November 2009 theExtraordinary General Meeting of Shareholders appointed Mr Walter Seyser a new,independent Member of the Supervisory Board who is qualified as specified inthe Act (art. 56 (3) (1,3 and 5)) and a three-Member Audit Committee of theSupervisory Board was established (composed of: Messrs W. Seyser - theChairman, F. Hiesinger, K. Mergler). The Audit Committee Chairman and Membersare appointed by the Supervisory Board from among the Board Members.
The Audit Committee meetings are held before sessions of the Company's Supervisory Board.
The Audit Committee responsibilities shall, in particular, include monitoring of:
a) the financial reporting process;
b) the efficiency of internal control system, internal audit system and risk management;
c) the execution of financial review activities;
d) independence of a certified auditor and an entity authorised to audit financial statements as well as recommending to the Supervisory Board the entity authorised to audit financial statements to perform financial review activities for the Company.
Pursuant to the amended Supervisory Board Regulations, the
Supervisory Board may establish committees from among Board Members to deal with matters to be specified by the Supervisory Board.
The Management Board of the Company shall be obliged to co-operate with the Audit Committee and other committees established by the Supervisory Board and shall enable such committees to execute their responsibilities.
Minutes of meetings of committees shall be taken. The provisions of s12 of the Supervisory Board Regulations shall apply to the Minutes.
The Supervisory Board shall consist of at least 6 members. The
term
of office of the Members of the Supervisory Board shall be three years. The term of office of all the Supervisory Board Members shall be joint in the understanding of article 369 s3 and in connection with art.386 s 2 of the Code of Commercial Companies.
The Members of the Supervisory Board are appointed and dismissed by the GeneralMeeting, provided that one third of the Members is appointed from among personselected by the employees employed in the enterprise of the Company.Resignation, death or other material reason resulting in a decrease in thenumber of the Members of the Supervisory Board appointed by the employees shallgive rise to a supplementary election. The election shall be called by theremaining Member(s) of the Supervisory Board elected by the employees. However,up to the time of appointment of the Members of the Board elected by theemployees, the resolutions of the Supervisory Board shall be valid.
The detailed course of the election of the Members of the Supervisory Board by the employees shall be determined by the election by-laws adopted by the representatives of employees in the Supervisory Board.
The Supervisory Board shall elect the Chairman of the Supervisory Board, one or more Deputy Chairmen and the Secretary of the Board from among its Members.
The meetings of the Supervisory Board shall be called and led by the Chairmanof the Supervisory Board. The Chairman of the Supervisory Board of the previousterm of office shall call and open the first meeting of the newly appointedBoard and shall preside such meeting until a new Chairman is elected.
The Supervisory Board may dismiss the Chairman, Deputy Chairman and the Secretary of the Supervisory Board.
The Supervisory Board shall hold the meetings at the registered office of theCompany or in any other place indicated in the notification as frequently as itis needed for the performance of its duties.The Chairman of the Supervisory Board shall be obliged to call a meeting on awritten request of the Management Board or any one Member of the SupervisoryBoard.
The meeting should be called within 14 days from the day of submitting the request and be held within 14 days from the calling thereof.
The resolutions of the Supervisory Board shall be valid if all Members of theSupervisory Board have been invited to the meeting and at least half of themare present.The resolutions of the Board shall be adopted by a simple majority of votescast, provided that at least half of the Members of the Supervisory Board arepresent at the meeting. If the vote remains undecided, the vote of the Chairmanof the Supervisory Board shall prevail.
The Supervisory Board shall adopt its Regulations where the procedure of its operation is specified in detail.
The Supervisory Board may adopt resolutions through voting in writing upon theorder of the Chairman of the Supervisory Board, excluding the mattersstipulated in s 21 (2) (8 and 9) of the Statute as well as the matters in whichvoting is conducted by a secret ballot.The Supervisory Board may hold meetings and adopt resolutions by telephone orby other means of communication in a way that guarantees communication of allthe present Members of the Supervisory Board.The resolutions adopted in the course of s 20 (4) and (5) shall be valid if allMembers of the Supervisory Board have been informed about the contents of thedraft resolution. Such resolutions shall be recorded in the minutes inaccordance to Article 376 of the Commercial Companies Code.
The Members of the Supervisory Board may participate in adopting resolutions by delivering a vote in writing through another Member of the Board.
The Supervisory Board in particular:
approves the Regulations of the Management Board of the Company,
determines the principles of remuneration of the Members of the Management Board,
appoints and dismisses Members of the Management Board or the entire Management Board in a secret ballot,
suspends the Member or the entire Management Board in the performance of duties in secret ballot due to material reasons,
delegates the Member or Members of the Supervisory Board for the temporaryperformance of duties of the Member of the Management Board in case the Memberor the entire Management Board is suspended, dismissed or unable to perform itsduties due to other reasons,
permits establishing branches abroad at the request of the Management Board,
permits the acquisition and subscribing for shares in companies or joining other companies,
examines the Management Board report on business activities of the Company, financial statements and Management Board proposals regarding profit distribution or loss coverage,
submits to the General Meeting a written report on results of the examination as referred to in 8,
approves the acquisition and disposal of real estate, perpetual usufruct or share in real estate,
elects an auditor auditing the financial statements of the Company,
considers and provides opinions on issues to be covered by the General Meeting's resolutions.
The Members of the Supervisory Board shall exercise their rights and perform duties in person.
Remuneration of Supervisory Board Members shall be fixed by the General Meeting.
Remuneration of Supervisory Board Members delegated to temporarily act as a Member of the Management Board shall be fixed by the Supervisory Board resolution.
The Management Board of Mondi Swiecie S.A. in the period of time from 1 January 2011 to 31 December 2011 was composed of:
Maciej Kunda (President and Chief Executive Officer),
Boguslaw Bielecki (Member of the Management Board and Chief Financial Officer),
Florian Stockert (Member of the Management Board and Sales Director),
Tomasz Katewicz (Member of the Management Board and Production Director),
Jan Zukowski (Member of the Management Board and Investment & Development Director).
The rules of procedure for the Management Board are governed by:
1. Act of 15 September 2000 Commercial Companies Code (Journal of Laws 00.94.1037 with later amendments),
2. Statute of Mondi Swiecie S.A. (available at the Company's website),
3. Regulations of the Management Board of Mondi Swiecie S.A. (available at the Company's website), and
4. Declaration of Mondi Swiecie S.A. on Compliance with Best Practice of Corporate Governance, excluding the rules specified under B.
A detailed description of the Management Board procedure of operation is available at the Company's website.
The Management Board shall be composed of one or more Members. The number of Members shall be determined by the Supervisory Board.
The term of office for Members of the Management Board shall last for three consecutive years. The term of office shall be joint for all members of the Management Board in the meaning of art. 369 s 3 of the Commercial Companies Code.
The Supervisory Board shall appoint the President and the other Members of the Management Board.
The President, the Member of the Management Board or the entire Management Board may be dismissed by the Supervisory Board before the end of their term of office.
The Management Board of the Company, presided over by the President, shall manage
the Company and represent it before third parties.
All matters related to the management of the Company and not restricted to thecapacity of the General Meeting or the Supervisory Board shall be left to theManagement Board, provided that any action in respect of any of the followingactivities at the Company and its subsidiaries shall require the prior approvalof the Supervisory Board:
adoption of an annual operating budget and budget of expenditures for and divestiture of material assets,
incurring an expenditure which is outside the annual budget approved by the Supervisory Board,
any individual sale or purchase of a material asset which exceeds the equivalent of EUR 500,000 also if planned in the annual budget,
any undertaking of any obligations or borrowings which exceeds the equivalentof EUR 250,000, or encumbrance of assets of the Company of the value exceedingthe equivalent of EUR 250,000, outside the annual budget,significant agreements (including agreements with related entities as referredto in the law on information to be provided on the current and periodical basisby issuers of securities), which is:
- agreements that do not exceed one year's duration and the value of which exceeds the equivalent of EUR 500,000,
- agreements that exceed one year's duration and the value of which exceeds the equivalent of EUR 250,000 per year,
acquisition and disposal of real estate, perpetual usufruct or a participation in real estate.
The Management Board Regulations specifies in detail the rules of procedure forthe Management Board. The Management Board Regulations shall be adopted by theManagement Board and approved by the Supervisory Board.In the case where the Management Board is composed of one person, the Presidentof the Board and in the case where the Management Board is composed of severalMembers, two Members of the Management Board acting jointly or the Memberof the Management Board acting jointly with a holder of a proxy ("prokurent")shall be entitled to make declarations of will on behalf of the Companyrelating to its rights and obligation.
An employment contract with the Members of the Management Board of the Company shall be executed on behalf of the Company by a representative of the Supervisory Board delegated from among its Members.
The same course shall apply to other actions related to the employment relation of the Member of the Management Board.
The Management Board of the Group:
President: Maciej Kunda ......................................... Members: Jan Zukowski
..........................................
Florian Stockert
.........................................
Tomasz Katewicz
.........................................
Boguslaw Bielecki
.........................................
Swiecie, 13 February 2012. Consolidated financial statements for the year 2011 TABLE OF CONTENTS Consolidated statement of comprehensive income for the period from 1 January 32011 to 31 December 2011
Consolidated statement of financial position as at 31 December 2011
5
Statement of changes in consolidated equity for the period from 1 January 2011 to 31 December 2011 6
Consolidated statement of cash flows for the period from 1 January 2011
7to 31 December 2011
Explanatory notes to the consolidated financial statements prepared as at
31.12.2011 1 General information 9
2 Accounting principles applied by the Group
11
3 Revenues from operating activities
21 4 Operating costs 22 5 Employment costs 22 6 Other operating revenues 23 7 Other operating costs 23 8 Financial revenues 23 9 Financial expenses 23 10 Income tax 24 11 Dividends 25 12 Profit per share 25
13 Operating lease agreements
26 14 Intangible assets 27 15 Tangible assets 27 16 Emission rights 28
17 Investments in associates valued with equity method assets
28 18 Other financial assets 29 19 Deferred tax assets 30 20 Inventory 31 21 Other financial assets 31 22 Bank credits and loans 35 23 Financial instruments 36 24 Deferred tax provision 42 25 Liabilities 43
26 Remuneration in the Group's capital instruments
43 27 Provisions 43 28 Equity 44
29 Explanatory note to the consolidated statement of cash flows
45
30 Contingent liabilities
46
31 Events after the balance sheet date
46
32 Financial information comparability
46
33 Transactions with related parties
47
34 Management board and supervisory board remuneration
48
35 Remuneration of an auditor or entity authorised to audit financial
48 statements paid or due for the fiscal year CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 JANUARY2011 TO 31 DECEMBER 2011 Note 2011 2010 PLN'000 PLN'000 Continued activities Revenues from sales Revenues from sales of products 2 725 784 2 251
013
Revenues from sales of goods and materials 45 938 12 661 3 2 771 722 2 263 674 Cost of products, goods and materials sold 4 (1 923 422) (1 595 811) Gross profit on sales 848 300 667 863 Other operating revenues 6 2 626 1 078 Cost of sales and distribution (249 026) (222
242)
General and administrative costs (142 514) (113 653) Other operating costs 7 (2 043) (2 322) Profit on operating activity 457 343 330 724 Financial expenses 8 (51 105) (69 264) Financial revenues 9 13 629 2 194 Share in profit of associated entity 101 36 Gross profit 419 968 263 690 Income tax 10 (23 974) (14 373) Net profit from continued activities 395 994 249 317 Discontinued activities - - Net profit for the financial year 395 994 249 317 Attributable to: controlling shareholders 395 994 249 317 minority shareholders - - Net profit (loss) 7.92 4.99per share From continued activities Ordinary profit 12 7.92 4.99 Diluted profit 12 7.92 4.99
From continued and discontinued activities
Ordinary profit 12 - - Diluted profit 12 - - 2011 2010 PLN'000 PLN'000
Profit (loss) on revaluation of fixed assets -
-
Profit (loss) on revaluation of assets available-for-sale -
-
Profit (loss) on cash flows hedging -
-
Exchange differences from converting financial statements -
-of foreign entities
Actuarial profits/(losses) on specific employee benefit -
-programs
Tax on amounts charged directly to capitals -
-
Net profit charged directly to capitals -
- Reclassifications
Reclassification to profit or loss from sales of assets -
-available-for-sale
Reclassification to profit or loss from cash flow hedge -
-
Reclassification to opening balance of items hedged on cash -
-flow
Tax on items reclassified from capitals -
- Net profit (loss) 395 994 249 317
Total - profits and losses recognised 395 994 249
317 Attributable to: controlling shareholders 395 994 249 317 minority shareholders - - 395 994 249 317
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2011
Balance as Balance as Note at at 31.12.2011 31.12.2010 PLN'000 PLN'000 ASSETS Fixed assets (long-term) Tangible assets 15 1 588 783 1 708 439 Intangible assets 14 2 334 2 904 Investments in associated entities valued with 1 126 1 025equity method 17 Financial assets available for sale 175 175 Other financial assets 18 168 495 Deferred tax assets 19 18 492 15 348 1 611 078 1 728 386 Current assets (short-term) Inventory 20 265 679 227 596
Trade receivables and other receivables 21 360 346 339 003
Foreign currency forward contracts 21 2 130 1 410 Cash and cash equivalents 21 489 333 23 303 Income tax 25 - 1 117 513 591 312
Long-term assets held for sale valued at fair -
-value 1 117 513 591 312 TOTAL ASSETS 2 728 591 2 319 698 LIABILITIES AND EQUITY Equity Share capital 28 333 734 333 734 Supplementary capital 1 098 820 848 648 Realised net profit 395 994 249 317 Retained earnings 1 217 2 072 Revaluation reserve capital - - 1 829 765 1 433 771
Equity attributable to equity holders of the parent 1 829 765 1 433
771
Minority shareholders' interest
Long-term liabilities Interest bearing bank credits and loans 341 530 416 366 Provisions 27 3 991 4 064 Deferred tax provision 24 38 450 57 041 384 450 477 471 Short-term liabilities Trade liabilities and other liabilities 418 514 291
904
Current portion of interest bearing bank 22 77 707 100 553credits and loans Foreign currency forward contracts 1 365 199 Income tax 3 780 3 828 Short-term provisions 27 13 010 11 972 514 376 408 456
Liabilities directly related to fixed assets -
-classified as held for sale TOTAL LIABILITIES 898 826 885 927 TOTAL LIABILITIES AND EQUITY 2 728 591 2 319 698
STATEMENT OF CHANGES IN CONSOLIDATED EQUITY FOR THE PERIOD FROM 1 JANUARY 2011 TO 31 DECEMBER 2011
Balance as Balance as at at 31.12.2011 31.12.2010 PLN'000 PLN'000 Opening balance of equity 1 433 771 1 184 453
Changes in adopted accounting principles -
-
Opening balance of equity after adjustments to 1 433 771 1 184 453comparable data
1. Opening balance of share capital, including: 333 734 333 734
- authorised share capital 50 000 50
000
- hyperinflation adjustment 283 734 283
734
1.1. Changes in share capital -
-
1.2. Closing balance of share capital 333 734 333
734 2. Realised net profit 395 994 249 317
3. Retained earnings opening balance 251 389 72
248
3.1. Changes in retained earnings (250 172) (70 177) a) increases (due to) - - - profit distribution - - b) decreases (due to) 250 172 70 177 - profit distribution - -
- contributions to the supplementary capital 250 172 70
177
3.2. Retained earnings closing balance 1 217 2
072
4. Opening balance of supplementary capital 848 648 778
471
4.1. Changes in supplementary capital 250 172 70
177 a) increases (due to) 250 172 70 177 - profit distribution 250 172 70 177 b) decreases (due to) - - - dividends - - 4.2. Closing balance of supplementary capital 1 098 820 848 648
5. Opening balance of revaluation reserve -
-
5.1. Changes in revaluation reserve -
- a) increases (due to) - - - hedging revaluation - - b) decreases (due to) - - - hedging revaluation - -
5.2. Closing balance of revaluation reserve -
- Closing balance of equity 1 829 765 1 433 771 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PERIOD FROM 1 JANUARY 2011 TO 31DECEMBER 2011 2011 2010 PLN'000 PLN'000
CASH FLOWS FROM OPERATING ACTIVITIES
GROSS PROFIT 419 968 263 690 Share in net profits (losses) of subsidiaries valued (101) (36)with equity method
Amortisation and depreciation 153 118 157
360 Exchange gains (losses) (529) (2 666)
Interest and profit sharing (dividend) 24 019 53
665
Profit (loss) on investment activities 21 616 6
838 Change in provisions 964 7 648 Change in inventory (38 083) (53 158) Change in receivables (66 722) (133 657) Change in short-term liabilities excluding credits 132 514 50 955and loans Other adjustments 436 (2 609)
CASH FLOWS FROM OPERATING ACTIVITIES 647 200 348
030 Interest paid (1) - Income tax paid 11 (204)
NET CASH FLOWS FROM OPERATING ACTIVITIES 647 210 347
826
CASH FLOWS FROM INVESTMENT ACTIVITIES
Inflows 23 156 27 475
Disposal of intangible and tangible fixed assets 554 2
612
From financial assets, including: 105
140 In related parties 105 140 dividend and profit sharing 105 140 sales of financial assets - - In other entities - - sales of financial assets - - interest - -
Other inflows from investment activities 22 497 24
722 Outflows 82 429 139 351
Purchase of intangible assets and tangible fixed assets 38 991 109 427
For financial assets, including: -
- In related parties - - In other entities - - purchase of financial assets - -
Advance payments for fixed assets in construction -
-
Other outflows from investment activities 43 438 29
924
NET CASH FLOWS FROM INVESTMENT ACTIVITIES (59 273) (111
877) 2011 2010 PLN'000 PLN'000
CASH FLOWS FROM FINANCIAL ACTIVITIES
Inflows 29 743 634 Credits and loans 29 738 613
Other inflows from financial activities 5
20 Outflows 151 659 244 519
Dividend and other payments to shareholders -
-
Repayment of credits and loans 126 471 188
870
Payment of liabilities arising from financial leases -
- Loans granted 100 - Interest 17 532 29 362
Other outflows from financial activities 7 556 26
286 NET CASH FLOWS FROM FINANCIAL ACTIVITIES (121 916) (243 885) TOTAL NET CASH FLOWS 466 021 (7 936) BALANCE CHANGE IN CASH 466 031 (7 070)
Change in cash due to exchange differences 10
865 CASH OPENING BALANCE 23 313 30 383 CLOSING BALANCE OF CASH 489 333 23 313
EXPLANATORY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS PREPARED AS AT 31 DECEMBER 2011
1. GENERAL INFORMATION The Group parent company's name has been Mondi Swiecie Spolka Akcyjna since thecourt decided to register on 16 May 2008 a new name of the Company. TheExtraordinary General Meeting of Shareholders of the Company adopted aresolution regarding rebranding of the Company from Mondi Packaging PaperSwiecie Spolka Akcyjna to Mondi Swiecie Spolka Akcyjna on 21 March 2008. Theregistered office of the parent company is Swiecie, ul. Bydgoska 1.The Company was established on the basis of the notarised deed, Repertory A no.1887/90 dd. 17 December 1990, in the Individual Notary Public Office No. 18 inWarsaw run by a notary public, Pawel Blaszczak as a result of thetransformation of the state owned company "Zaklady Celulozyi Papieru" with its registered office in Swiecie into a sole shareholdercompany of the State Treasury.
Presently, the Company is registered in the National Court Register of Companies (KRS) in the District Court in Bydgoszcz, 13th Economic Division under KRS No. 25742,
Pursuant to the Polish Statistical Classification of Economic Activities theCompany is classified under no. 17.12 - manufacture of paper and board, whereasaccording to the Warsaw Stock Exchange the Company is presented in the wood
industry sector.
The structure of the Mondi Swiecie Group
As at the balance sheet date the Mondi Swiecie Group comprises:
Parent company - Mondi Swiecie S.A., and
Subsidiary - Swiecie Recykling Sp. z o.o.,
Associated company - Polski System Recyklingu - Organizacja Odzysku S.A.
The consolidated financial statements prepared as at 31 December 2011 cover the following entities:
Parent company - Mondi Swiecie S.A.
Company valued with the full method:
- Swiecie Recykling Sp. z o.o.,
Companies valued with the equity method:
- Polski System Recyklingu - Organizacja Odzysku S.A.
The financial statements of the subsidiary are prepared for the same reporting period as the financial statements of the parent company and using the same rules of accounting.
All balances and transactions between the Group companies have been fully eliminated.
The consolidated financial statements have been prepared in PLN. PLN is a functional and presentation currency for the Group.
Duration of the Group's business
The duration of activities for each company of the Group is indefinite.
The balance sheet date and the period of time covered by the financial statements
Financial statements consist of:
- the data of the year from 1 January to 31 December 2011,- the comparative data of the year from 1 January to 31 December 2010.
Information concerning management board and supervisory board of the parent entity as at 31 December 2011.
Management BoardPresident of the Board: Maciej KundaMembers of the Board: Boguslaw BieleckiTomasz KatewiczFlorian StockertJan Zukowski
Supervisory Board Chairman of the Supervisory Board: Peter Oswald
Members of the Supervisory Board: Peter Machacek Ryszard Gackowski Karol Mergler Franz J. Hiesinger Jaroslaw Kurznik Klaus Peller Ladimir Enore Pellizzaro Walter Seyser
Shareholders' structure of the parent company
Framondi N.V. (S.A. located in Amsterdam, Fort Willemweg 1, 6219 PC Maastricht) - 33 000 000 shares, 66.00% in share capital,
ING OFE - 4 998 750 shares, 10.00% in share capital,
Aviva OFE Aviva BZ WBK - 3 655 965 shares, 7.31% in share capital,
others - 8 345 285 shares, 16.69%.
The final owner of the whole Mondi Group is Mondi plc.
StatementsPursuant to s 92 subsection 1 paragraphs 5 and 6 of the Regulation of theMinister of Finance dated as at 19 February 2009 regarding information to bepublished by issuers of securities on a current and periodic basis and conditions for information required by law of a non-member state to be recognised as equivalent, the Management Board of Mondi Swiecie S.A. declares as follows:
true and fair view of reported financial statements
The Management Board of Mondi Swiecie S.A. composed of the following Members:
Maciej Kunda - President of the Management Board,
Boguslaw Bielecki - Member of Management Board, Financial Director,
Tomasz Katewicz - Member of the Management Board, Production Director,
Florian Stockert - Member of the Management Board, Sales Director,
Jan Zukowski - Member of the Management Board, Investment and Development Director
declares that the consolidated financial statements for the year 2011 andcomparative data have been prepared in accordance with the accounting rules inforce and reflect in a true, reliable and clear manner the financial positionand assets-related condition of the Group and the Group's financial result. Thestatements present the Group's real development, achievements and the review ofthe Company's situation including the description of key risks and hazards.
the appointment of the entity entitled to audit the financial statements
Pursuant to the Statute of Mondi Swiecie S.A., the Management Board of theCompany entrusted the Supervisory Board with the appointment of the authorisedentity to audit the financial statements. The Supervisory Board, by virtue ofthe Resolution of 9 June 2011, at a request of the Management Board, appointed an entity authorised to audit the separate financial statements and the consolidated financial statements forthe year 2011 and to review the separate financial statements and theconsolidated financial statements for the first half-year 2011. Deloitte AudytSp. z o.o., 00-549 Warszawa, ul. Jana Pawla II 19 was appointed.The Management Board of Mondi Swiecie S.A. declares that Deloitte AudytSp. z o.o., the entity authorised to audit the financial statements that willaudit the separate financial statements and the consolidated financialstatements for 2011 was appointed in compliance with the legal provisions inforce. Further, this company and expert auditors who are involved in auditingthe financial statements fulfil the conditions for issuing an impartial andindependent opinion on the audit, in pursuance with relevant national law.
Modification of comparative data
In the reporting period, no changes were made to the presentation of financial statements.
2. ACCOUNTING PRINCIPLES APPLIED BY THE GROUP
Accounting principles
The consolidated financial statements were prepared in compliance with the International Financial Reporting Standards (IFRS) in the form approved by the European Union.
The International Financial Reporting Standards in the form approved by theEuropean Union do not differ significantly from the regulations adopted by theInternational Accounting Standards Board, excluding the standards, amendmentsto standards and interpretations specified below, which have not been adoptedfor application yet as per 13 February 2012:
IFRS 9 "Financial Instruments" (effective for annual periods beginning on or after 1 January 2015),
IFRS 10 "Consolidated Financial Statements" (effective for annual periods beginning on or after 1 January 2013),
IFRS 11 "Joint Arrangements" (effective for annual periods beginning on or after 1 January 2013),
IFRS 12 "Disclosures of Involvement with Other Entities" (effective for annual periods beginning on or after 1 January 2013)
IFRS 13 "Fair Value Measurement" (effective for annual periods beginning on or after 1 January 2013),
IAS 27 (revised in 2011) "Separate Financial Statements" (effective for annual periods beginning on or after 1 January 2013),
IAS 28 (revised in 2011) "Investments in Associates and Joint Ventures" (effective for annual periods beginning on or after 1 January 2013),
Amendments to IFRS 1 "First-time Adoption of IFRS" - Severe Hyperinflation andRemoval of Fixed Dates for First-time Adopters (effective for annual periodsbeginning on or after 1 July 2011),
Amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial Instruments: Disclosures" - Mandatory Effective Date and Transition Disclosures,
Amendments to IAS 1 "Presentation of financial statements" -Presentation of Items of Other Comprehensive Income (effective for annual periods beginning on or after 1 July 2012),
Amendments to IAS 12 "Income Taxes" - Deferred Tax: Recovery of Underlying Assets (effective for annual periods beginning on or after 1 January 2012),
Amendments to IAS 19 "Employee Benefits" - Improvements to the Accounting forPost-employment Benefits (effective for annual periods beginning on or after 1January 2013),
IFRIC 20 "Stripping Costs in the Production Phase of a Surface Mine" (effective for annual periods beginning on or after 1 January 2013).
As estimated by the Company, the above-mentioned standards, interpretations andamendments to standards would not have any significant impacts on the financialstatements if they were used by the entity as at the balance-sheet date. Hedge accounting for financial assets and liabilities the rules of which havenot been approved for use by the European Union is still beyond the regulationsadopted by the European Union.As estimated by the Company, the application of hedge accounting for financialassets or liabilities according to IAS 39 "Financial Instruments: Recognitionand Measurement" would not have any significant impacts of the financialstatements if they were adopted for use as at the balance-sheet date.
When preparing these financial statements the Company did not apply the following standards, amendments to standards and interpretations, which had been published and approved for use in the European Union, but which have not become effective yet:
Amendments to IFRS 7 "Financial Instruments: Disclosures" - Transfers of Financial Assets, adopted by the EU on 22 November 2011 (effective for annual periods beginning on or after 1 July 2011).
The Company decided not to apply these standards, amendments to standards andinterpretations earlier. As estimated by the entity, the above-mentionedstandards, amendments to standards and interpretations would not have anysignificant impacts on the financial statements if they were used by the entityas at the balance-sheet date. When preparing these financial statements the Company applied the followingamendments to the existing standards published by the International AccountingStandards Committee and approved by the European Union which became effectivein 2011:Amendments to IAS 24 "Related Party Disclosures" - Simplifying the disclosurerequirements for government-related entities and clarifying the definition of arelated party, adopted by the EU on 19 July 2010 (effective for annual periodsbeginning on or after 1 January 2011),
Amendments to IAS 32 "Financial Instruments: Presentation" - Accounting for rights issues, adopted by the EU on 23 December 2009 (effective for annual periods beginning on or after 1 February 2010),
Amendments to IFRS 1 "First-time Adoption of IFRS"- Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters, adopted by the EU on 30 June 2010 (effective for annual periods beginning on or after 1 July 2010),
Amendments to various standards and interpretations "Improvements to IFRSs(2010)" resulting from the annual improvement project of IFRS published on 6May 2010 (IFRS 1, IFRS 3, IFRS 7, IAS 1, IAS 27, IAS 34, IFRIC 13) primarilywith a view to removing inconsistencies and clarifying wording,adopted by theEU on 18 February 2011 (amendments are to be applied for annual periodsbeginning on or after 1 July 2010 or 1 January 2011 depending on standard/interpretation),Amendments to IFRIC 14 "IAS 19 - The Limit on a defined benefit Asset, MinimumFunding Requirements and their Interaction" - Prepayments of a Minimum FundingRequirement, adopted by the EU on 19 July 2010(effective for annual periodsbeginning on or after 1 January 2011),IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments", adoptedby the EU on 23 July 2010 (effective for annual periods beginning on or after 1July 2010).
Main accounting principles used by the Group are presented below.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the parent company and financial statements of its controlled companies (or subsidiaries) as at the balance sheet date.
An entity is controlled when the parent company has a possibility of impactingfinancial and operating policies of the controlled entity to benefit from itsbusiness. As at the date of acquisition assets and liabilities of the acquired unit arevalued according to their fair value. In case the acquisition price exceeds thefair value of identifiable net assets acquired, such an excess of price isshown as the goodwill. In case the acquisition price is lower than the fairvalue of identifiable net assets of the acquired company, such a difference isshown as a profit in the profit and loss account for the period of time whenacquisition was finalised. Financial results of acquired or sold companies in the year under review areshown in the consolidated financial statements from/ until their acquisition orsale respectively. Investments in associates
An associate is an entity over which the Company has significant influence. The Company participates in the financial and operating policy decisions of the associate but does not control those policies. Associates that compose the Group are Polski System Recyklingu - Organizacja Odzysku S.A. Financial participation in associates is valued with equity method, except for the situation where investment is classified as for sale.
Reporting periods of associates and the Group are identical and all entities use the same accounting principles.
Investments in associates are presented in note no. 17.
Non-current assets held for sale
Non-current assets classified as held for sale are measured at the lower of carried values (purchase price) and fair value less sale costs. Non-current assets are classified as held for sale if it is expected that such sale will be completed within one year after the date of classification change.
Shares in associates classified as held for sale, pursuant to IFRS 5, are not recognised in the consolidated financial statements according to equity method.
Revenue recognition
Revenues from sales of products, goods and services are included in the fair value of receivables or outstanding payments and they represent liabilities under normal business operations, less discounts, VAT and other sales taxes.
Revenues from sales of products and goods are shown after all conditions below have been fulfilled:
Significant risk and benefits from products and goods' property rights are transferred from the Group to a purchaser;
Managerial functions are ceded by the Group to the extent related to the property right and effective control over products and goods sold;
It is possible to reliably valuate the revenues amount;
There is a likelihood that the Company is granted economic benefits related to the transaction;
It is possible to reliably valuate incurred or expected costs of transaction.
Interest income is accrued on a time basis, in relation to the amount due, according to the effective interest rate method.
Dividend income is recognised when the shareholders' rights to receive payment have been established.
Subsidies Governmental subsidies are recognised as revenue if it is reasonably certainthat such subsidy will be received and all subsidy related conditions will befulfilled. If a subsidy concerns a specific cost item, then it is recognised asrevenue that is commensurate / proportional to costs the subsidy is intended tooffset. If a subsidy relates to the asset item, then the subsidy fair value isrecognised on the account of future periods' revenues and then it is graduallywritten off, by way of equal annual write-offs, to the statement ofcomprehensive income for the estimated service life of a related asset item. Foreign currencies Transactions made in a currency other than the Polish zloty (PLN) are valued atthe average National Bank of Poland exchange rate as at the last business dayprior to the date of transaction. Payments to and from foreign currency bankaccounts are recorded using purchasing or selling exchange rates used by thebank where the transaction is made. As at the balance sheet date, monetaryassets and liabilities that are denominated in foreign currencies are convertedusing the average National Bank of Poland exchange rate as per the same day.
In order to hedge its exposure to certain foreign exchange risks, the Group enters into foreign currency forward contracts. See below for details of the Group's accounting policies in respect of such derivative financial instruments.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs that do not meet the above-mentioned criteria are recognised in profit or loss in the period in which they are incurred.
Retirement benefit costs
Retirement benefit costs provision is recorded equal to the valuation beingcarried out using actuarial method. The basis for the provision calculation isthe Company's collective employment agreement. Unregulated issues are solvedbased on the Polish Labour Code.
Division into long and short-term provisions is made according to the proportion established using statistic methods used by an actuarial.
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable (CIT) is based on the taxable profit for the yearestablished in accordance to corporate income tax law. The taxable profit iscalculated based on a gross result that is next adjusted by non-taxablerevenues, expenses that are taxable or deductible in other years and it furtherexcludes items that are never taxable or deductible. The liability for currenttax is calculated using tax rates that are valid in a specific tax year. Deferred tax is recognised on differences between the carrying amounts ofassets and liabilities in the financial statements and the corresponding taxbases used in the computation of taxable profit, and is accounted for using thebalance sheet liability method. Deferred tax provision is generally recognised for all positive taxabletemporary differences and deferred tax assets are recognised with regard to allnegative taxable temporary differences in such an amount that it is probablethat taxable profits will be available against which deductible temporarydifferences can be utilised.Value of deferred tax assets is verified as at each balance sheet day and isreduced appropriately if future tax profits sufficient to realise a portion orall of a given deferred tax asset cease to be expected.
Deferred tax is calculated using the tax rates that are expected to be in force in the period where the constituent of assets will be completed or the provision will be consumed, disregarding tax exemptions the application of which is not certain.
Deferred tax is recognised in the statement of comprehensive income, exceptwhen it relates to deferred tax provision from hedged deals that are charged orcredited directly to equity. Assets and deferred tax provisions are separatelypresented in the statement of financial position and are not offset.
Presentation of the corporate income tax exemption due to running economic activities in Special Economic Zone
Due to the execution of the investment project (PM7 machine), Mondi SwiecieS.A. was granted, on 20 December 2007, a permit to run economic activities inthe Pomorska Special Economic Zone. Thus, the Company was granted theentitlement to be exempt from income tax for some part of its income. Theexisting enterprise of Mondi Swiecie S.A., as well as the areas acquired fromState Forest Enterprise were included into the area of the Pomorska SpecialEconomic Zone in pursuance with the Regulation of the Council of Ministers of 2November 2007 amending the Regulation regarding the Pomorska Special EconomicZone (Journal of Laws 2007 no. 211 item 1545). The above-mentioned permit authorised Mondi Swiecie S.A. to obtain public aid,which comprises the exemption from corporate income tax starting from thefollowing month after the month when conditions of bearing capital expendituresand reaching the specific employment level have been fulfilled. Mondi SwiecieS.A. fulfilled the above-mentioned conditions in July 2009 and was granted theentitlement to be exempt from the tax for the part of its income since August2009 till the time for which the Pomorska Special Economic Zone wasestablished, which is till 30 November 2017. Thus, the incomes from basicactivities, i.e. sale of finished products were exempt. The permit is now beingexamined by the European Commission for compliance of the public aid grantedwith the common market under Regulation (EC) No. 659/1999 laying down detailedrules for the application of Article 93 of the EC Treaty. The Group expectsthat this process will end in 2012. In the event the process prolongs beyond 2012, the total domestic limit forpublic aid (EUR 37.5 million) that may be granted to the Group with nonecessity of obtaining the consent of the European Commission will be exhaustedthis year. Then, the entitlement of Mondi Swiecie S.A. to be exempt fromcorporate income tax under the permit as referred above, would be suspendedtill the European Commission procedure is closed. In this situation, the Groupwould pay monthly advance payments for corporate income tax in the amount thatdisregards the exemption, starting from the month when the allowed domesticlimit was exceeded. Since the Group does not expect that the EuropeanCommission procedure will extend beyond 2012, the full amount of corporateincome tax as covered by the exemption under the permit to run businessactivities in the Pomorska Special Economic Zone should be settled within thecorporate income tax for 2012. New investment project related expenditures are the basis for calculating thepublic aid pursuant to the rules specified in s 4 Clause 3 of the Regulation ofthe Council of Ministers of 5 December 2006 on the Pomorska Special EconomicZone (Journal of Laws 2006, no. 228 item 1667). Based on discountedexpenditures incurred until 31 December 2011, Mondi Swiecie S.A. was authorisedto receive public aid that is not higher than PLN 247 853 thousand. The publicaid comprising the exemption of the part of income from the corporate incometax may be consumed in the period of time over which Mondi Swiecie S.A. showsthe income from the activities covered by the exemption, which is that thetotal income of Mondi Swiecie S.A. less taxed income, not covered by theexemption, is positive. The calculated amount of public aid consumed till 31December 2011 was PLN 91 802 thousand (this includes discounted amounts ofcorporate income tax exemption, real property tax exemption and the amounts ofrefunding the costs of equipment and providing equipment to workplaces). Out ofthis amount, the discounted value of exemption from corporate income tax wasPLN 83 928 thousand (nominal value of exemption was PLN 104 119 thousand).
Tangible assets
Fixed assets used for production, delivery of goods and services as well as foradministrative purposes are shown in the statement of financial positionaccording to their purchasing prices or manufacturing costs, less depreciationdeduction in future periods and deduction due to a permanent loss of value.
Depreciation of fixed assets is presented in the statement of comprehensive income.
Fixed assets under construction are measured in the statement of financial position at manufactured costs less impairment write-offs. The manufactured cost is increased by fees and for a specific group of assets - borrowing cost capitalised according to principles described in the accounting principles. Depreciation of these fixed assets starts in the month following their commissioning.
Depreciation is calculated for all fixed assets, excluding land and fixed assets under construction, using the straight-line method over the estimated duration of their economic usefulness.
For particular groups of fixed assets, the following operation life periods were used:
Buildings and structures - from 20 to 60 yearsMachines and technical equipment - from 5 to 20 yearsMeans of transport - from 4 to 6 yearsOther fixed assets - from 3 to 10 years
Depreciation rates are established based on assets and intangible assets' estimated economic useful life. The Company verifies, on an annual basis, the economic useful life periods based on current estimations.
All incomes or losses resulting from sale/liquidation or discontinued use offixed assets are determined as the difference between revenues from the sale offixed assets and the net value of those fixed assets, and are shown in thestatement of comprehensive income in the period, when a specific item of fixedassets was removed from the statement of financial position. Intangible assets
Intangible assets were measured at the purchase cost, or the cost of manufacture if they were manufactured by the Company.
Intangible assets are amortised on a straight-line basis over their estimated useful lives.
Licences
Licences are measured in the statement of financial position at the purchase cost less depreciation on a straight-line basis over their estimated useful lives.
Impairment of assets At each balance sheet date, the Group reviews the net amounts of its assets todetermine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairmentwrite-off. If the item of fixed assets does not generate cash flows that to agreat extent are independent from flows generated by other assets, the analysisis made for a group of assets generating cash flows to which the item of assetsbelongs. The recoverable amount is the higher of fair value less costs to sell and valuein use. In assessing value in use, the estimated future cash flows arediscounted to their present value using a discount rate that reflects currentmarket assessments of the value of money in time and the risks specific to theasset.If the recoverable amount of an asset (or group of assets) is estimated to beless than its assets net book value, the value is reduced to its recoverableamount. An impairment loss is recognised immediately in cost of the period whenit occurred, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.Where an impairment loss subsequently reverses, the net value of asset (orgroup of assets) is increased to the revised estimate of its recoverableamount, but so that the increased net value does not exceed the net value thatwould have been determined if no impairment loss had been recognised for theasset in prior years. A reversal of an impairment loss is recognised inrevenues, unless the relevant asset is carried at a revalued amount, in whichcase the reversal of the impairment loss is treated as a revaluation reserve. Inventory
Inventories of finished goods, semi-products are measured at actual cost of manufacture, not higher than their net sale prices. Manufacturing costs comprise direct materials and direct labour costs and those overheads that correspond to the level of such costs under normal use of production capacities.
The Group adopts a principle of accounting of underutilisation costs ofdepartments manufacturing finished and semi-finished goods. Underutilisationcost affects the financial result of the period and is not taken intoconsideration in finished and semi-finished goods inventories valuation. In thecase of semi-finished and finished products, the period of underutilisation ofproduction capacities is a shutdown of a manufacturing department due to a lackof raw material, lack of orders or other events for longer than 30 calendardays, irrespective of the cause. If such situations occur, shutdown costs arecalculated as the product of hours of shutdown and unit machine-hour cost of ashutdown department. In the months of annual maintenance shutdown, finished andsemi-finished products are valued at the manufacturing cost of the previousmonth.
The net sale price corresponds to the estimated sale prices minus all necessary costs to complete the production and necessary costs to effect a sale.
Stocks of materials and goods are shown according to the purchasing prices that are not higher than the net sale price.
Certificates of green energy origin as goods are valued according to the fairvalue, which shall mean the market price at the property market less costs
ofsales. Financial instruments
Financial assets and financial liabilities are recognised in the statement offinancial position when the Group becomes a party to the contractual provisionsof the instrument.
Trade receivables and other receivables
Trade receivables as of the date of origin are measured at the current expectedamount due, and are recognised in later periods according to the depreciatedcost fixed using the effective interest rate. Default interest is accounted inthe amount resulting from agreements and is covered by a 100% write off.
Also, prepaid expenses - mainly insurances costs are presented as trade receivables.
Trade receivables, excluding insured receivables and inter-company receivables, are adjusted by write offs in the amount of 2% of receivables.
Further,
Overdue receivables > 1 month: 10% of the value less VAT,
Overdue receivables > 3 months: 50% of the value less VAT,
Overdue receivables > 4 months: 100% of the value less VAT.
Additionally, not overdue receivables falling due more than 90 days are discounted.
Bad receivables are charged to cost when their irrecoverability is stated.
Receivables denominated in the foreign currencies are revaluated using the average exchange rate of the National Bank of Poland as at the balance sheet day.
Investments in securities
All investments are initially measured at the purchased value equal to fair value of amounts paid less transaction costs. All standard transactions like purchase and sale of financial assets are booked as at the purchase or sale day.
After the initial measurement, the investments are classified as held for trading, available for sale and measured at the fair value as at balance sheet date.
If securities were classified as held for trading, gains and losses resultingfrom the change of fair values are presented in the statement of comprehensiveincome for a given period. In the case of available for sale assets, gains andlosses resulted from the change of their fair value affect directly the equitytill the sale of the assets or impairment identification. Then the accumulatedgains or losses, that previously affected the equity, are moved to thestatement of comprehensive income for the given period. Bank borrowings
Interest-bearing bank loans (also overdrafts) are accounted at the amount of received withdrawn less the direct costs incurred in connection with the borrowing of funds.
Financial costs, including provisions paid at a moment of repayment or creditwrite-off and direct costs of incurring the credit, are shown in the statementof comprehensive income using the nominal interest rate method and theyincrease the book value of a financial instrument with respect to payments madein the current period.Non-current liabilities in books are valuated at nominal value, i.e. includingdefault interest or valorisation of the payables - at the value regulated inthe agreement.
Trade liabilities and other liabilities
Liabilities denominated in foreign currencies are valuated at the average rate of exchange applicable set by the National Bank of Poland as at the balance sheet day.
Financial risk management Business and financial activities of the Group are exposed to a number offinancial risks. If these risks were not managed, they could adversely impactcurrent and future results of the Group. The Group distinguishes the followingkinds of financial risks: market risk (interest rate risk and foreign currencyrisk), credit risk, liquidity risk and capital risk. The principles and procedures used by the Group are presented in "the financialrisk management policy" approved by the Management Board, in compliance withthe policy that is binding in the entire Mondi plc Group.Based on powers of attorney granted by the Management Board, chosen specialistsfrom the Group contract hedge transactions. The risk identification, evaluationand hedging in the Group is strictly supervised by the Group Finance Directorand Treasury Director of Mondi plc Group. The main purpose of derivatives used by the Group is to hedge against financialrisks arising from the Company's business operations. The Group's instrumentsinclude foreign currency forward contracts (in case of foreign currency riskhedging).
The main risks arising from the Group's operations are:
Market risk The Group's activities are primarily exposed to interest rate risk and foreigncurrency risk. Both risks are actively monitored on a continuous basis and maybe hedged by hedging (currency forward contracts and interest rate swaps).Although cash flows of the Group are exposed to a risk for changes in prices ofkey raw materials and finished products, such changes reflect rather economicalrisk than financial. Therefore, the Group is of the opinion that it is notsignificantly exposed to another price risk as specified in IFRS 7. a)Foreign currency risk
Due to the fact that approximately 67% of sales transactions are performed inforeign currency, while the most of the costs are borne in the reportingcurrency, the Group is exposed to the currency exchange risk. The foreigncurrency transactional exposure comprises mainly denominated transactions inEUR, USD and GBP.
The Group may separately hedge future probable sales transactions and future probable significant capital expenditures as well as resulting balance exposure.
The forward contracts that hedge probable future sales transactions and probable future significant capital expenditures are classified as the cash flow hedging and hedging accounting rules are used for them. In accordance with the Mondi Group Policy, in 2011 the Company did not hedge probable sales (excluding CO2) transactions.
The hedge accounting rules are not used for forward contracts hedging the balance exposure.
b)Interest rate risk The Group's exposure to the interest rate risk is primarily related tofinancial liabilities on interest. According to Group's policy, interest costsmay be managed through the use of fixed and variable interest rates as well asinterest rate hedging using instruments that replace variable rates with fixedones (interest rate swaps). However, as decided by the Management Board of theGroup, all available credit facilities as at the balance sheet date were basedon variable interest rate (WIBOR). Furthermore, in the reporting period theGroup did not use any interest rate hedging instruments. Credit risk
The Group contracts hedging and located deposits only in recognised, creditworthy financial institutions. The list of such entities is up-dated on an annual basis by the Director of the Treasury of the Mondi plc Group.
Credit risk related to receivables is significantly limited thanks to the fact that the only trade receivables from exports include receivables from Mondi Packaging Paper Sales GmbH - a distributor being a member of the Mondi plc Group.
In turn, domestic receivables related to paper sales (excluding receivables inrelation to Polish entities of Mondi plc Group) are hedged. Customers that arenot members of Mondi plc Group are subject to the credit rating verificationprocedure using reports from business intelligence agencies. Each limit has amaximum credit limit and open receivables are monitored on a current basis
inthe Group. Liquidity risk
The Group's objective is to maintain flexibility of funding through the use of bank credits and bank overdrafts. The Group's policy is to reduce liquidity risk through maintaining the floating assets provision which constitutes minimum 5% of annual turn-over of the Group. The floating assets provision comprises cash and cash equivalents, financial investments that can be liquidated within 7 days and not used credit facilities.
The derivatives used by the Group are valued according to the fair value. Thefair value of currency forward contracts is determined in relation to thecurrent forward rates for the contracts with a similar effective date. Thevalue of contracts for changing interest rates is determined in relation to thefair value of similar instruments. In the case of cash flow hedge for the future probable sales contracts orfuture probable significant capital expenditures that fulfil the criteria ofhedging accounting, a portion of the profit or loss on the hedging instrumentwhich is found to be an effective hedging is shown directly in the equity. Theportion that is found to be an ineffective hedge is shown in financial costs orrevenues of the current period. In the case of cash flow hedge for futureprobable sales transactions hedging, profits or losses shown in the equity aretransferred to the profit and loss statement in the same period of time whenthe hedged probable future sales contract impacts the financial result. In the case of cash flow hedge for future probable significant capitalexpenditures, profits or losses from the valuation are initially shown in theequity. When the transaction is settled they will be referred to the statementof financial position thus adjusting the investment project commenced or theinitial value of fixed assets.
Profits and losses resulting from changes in the fair values of the transactions, for which the hedge accounting is not used, are directly shown in financial incomes or costs of the current period.
The Group discontinues to use the hedge accounting rules when the hedginginstrument expired or was sold, completed or realised or when hedge does notfulfill the conditions that allow using the hedging accounting rules for suchan instrument. In such a case, the total profit or loss on the hedginginstrument, which has been shown in the equity to date, is still shown in theequity until the expected transaction is performed. If such a transaction isunlikely to occur, then the total net profit or loss as shown in the equity istransferred to the financial result of the current period.Derivatives embedded in other financial instruments or contracts that are notfinancial instruments are considered to be separate derivatives if the natureof the embedded instrument and instrument related risks are not directlyrelated to the nature of the basic contract and contract resulting risks. Ifthe basic contracts are not valuated according to the fair value, the changesto them are reflected in the statement of comprehensive income. - Capital risk
The Group manages the capital to ensure that the Group's companies will be ableto continue their business with maximising profitability for shareholdersthanks to optimisation of the debt to equity ratio. The Group's capitalstructure includes debt that comprises credits, cash and cash equivalents andcapital for parent company shareholders, including issued shares, reservecapitals and retained profit. Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event, and when it is probable that due to fulfilment of such an obligation the Group will be required to outflow the funds representing economical benefits and if the amount of obligation may be reliably valued.
The value of the provisions is determined based on the estimations, excluding the provisions for the retirement benefits to which the actuarial method is applied.
Emission rights
Granted emission rights are shown off balance.
The Group creates provisions for pollution cost, when the amount of possessedemission allowances does not cover the actual pollution emission. The provisionis calculated based on the current market price plus expected penalty fee andis presented in the statement of comprehensive income.
Sale of excessive emission allowances is recognised in the financial period, when the sale of the emission allowances was performed.
Net profit per share
The net profit per share for each period is calculated by dividing the net profit for a specific period of time by the average weighted number of shares in the reporting period.
The diluted profit per one share is calculated by dividing the net profit for aspecific period for Shareholders by the average weighted number of shares in aspecific period.
In the reporting period and in 2010 no factors occurred that would result in profit dilution.
Conditional liabilities and receivables
Conditional liabilities mean the obligation to provide performance/ benefitsthe occurrence of which depends on defined events. Conditional liabilities arenot shown in the statement of financial position; however, information on theconditional liability is disclosed unless the likelihood of outflow of meansrepresenting economic benefits is minor. Conditional receivables are not shown in the statement of financial position;however, information on the conditional receivables is disclosed if inflow ofmeans representing economic benefits is probable to occur. Management Board estimation Preparing the financial statements in accordance to IFRS requires someassumptions and estimates to be made. They impact the amounts shown in thefinancial statements and in the notes to the financial statements. Assumptionsand estimations are based on the best knowledge of the Management Board ofpresent and future events and actions; however, the actual results may differfrom the forecasted performance. The areas where the Management Board madeestimations are provisions. The assumptions used for estimation are describedin the accounting policy and relevant notes.
3. REVENUES FROM OPERATING ACTIVITIES
Revenues from sales are as follows:
Continued activities 2011 2010 PLN' 000 PLN' 000 Revenues from sales of products 2 725 784 2 251 013
Revenues from sales of goods and materials 45 938 12 661
2 771 722 2 263 674 Discontinued activities - -
Other revenues from operating activities 2 626 1 078
Total 2 774 348 2 264 752
Revenues from sales of products - by type
2011 2010 PLN' 000 PLN' 000 Products, including: 2 570 938 2 092 006 Paper 2 556 955 2 080 952 Others 13 983 11 054 Services 154 846 159 007
Net revenues from sales of products 2 725 784 2 251 013
Revenues from sales of products - by territorial structure
2011 2010 PLN' 000 PLN' 000 Domestic 948 873 813 816 Export 1 776 911 1 437 197
Net revenues from sales of products 2 725 784 2 251 013
Revenues from sales of goods and materials - by territorial structure
2011 2010 PLN' 000 PLN' 000 Domestic 4 652 2 248 Export 41 286 10 413
Net revenues from sales of goods and materials 45 938 12 661
Due to the fact that the Group's activity, as far as types of goods and products and geography sectors are concerned, is uniform; financial data concerning business segments are not presented in the consolidated statements.
4. OPERATING COSTS
Profit on operating activities resulted excluding following costs:
2011 2010 PLN'000 PLN'000 Depreciation 153 084 157 324
Consumption of materials and energy 1 534 581 1 252 142
External services 446 215 374 943 Taxes and charges 27 184 25 793 Excise 326 988 Payroll 76 176 69 885
Social security and other benefits 16 052 14 689
Other costs by type 75 045 48 343 Goods and materials sold 4 712 3 206
Exchange rates gains/losses net (1 637) (1 823)
2 331 412 1 944 502
Change in the balance of products (16 450) (12 796) Manufacturing cost of products for internal purposes - - Selling and distribution costs (249 026) (222 242) General and administrative costs (142 514) (113 653) Manufacturing cost of products sold 1 923 422 1 595 811
Other operating costs (2 043) (2 322) 5.EMPLOYMENT COSTS
Below information presents average employment (including management):
2011 2010 Number of Number of employees employees Production employment 697 703
Administration and general employment 326
319 Management 5 4 Supervisory 3 3 Total employment 1 023 1 022 2011 2010 PLN'000 PLN'000
The Group's employment costs are
following: Payroll 76 176 69 885
Social security and other benefits 12 288 11
303 Other employees benefits 3 764 3 385 Total 92 228 84 573 6. OTHER OPERATING REVENUES 2011 2010 PLN'000 PLN'000
Profit from liquidation of non-financial fixed assets 219 172
Compensation 67 340 Other 2 340 566 Total 2 626 1 078 7. OTHER OPERATING COSTS 2011 2010 PLN'000 PLN'000
Loss due to disposal of non-financial fixed assets 1 026 2 207
Donations 296 115 Other 721 - Total 2 043 2 322 8. FINANCIAL REVENUES 2011 2010 PLN'000 PLN'000
Revenue from interest on bank loans 9 391 501
Revenue from other interest 227 337 Dividends 105 140
Valuation of forward currency contracts - 1 211
Positive differences on exchange 3 805 -
Other 101 5 Total 13 629 2 194 9. FINANCIAL EXPENSES 2011 2010 PLN'000 PLN'000
Interest costs - credits and loans 28 886 57
016 Other 192 254
Total of external costs of financing the activity 29 078 57
270
Valuation of forward currency contracts (765)
-
Costs on transactions of derivatives 21 581 2
410 Other - 10 967
Recalculation of last year's valuation of derivative
instruments 1 211 (1 383) Total 51 105 69 264 10. INCOME TAX 2011 2010 PLN'000 PLN'000
Income tax for the current year: 45 230 29 152
Corporate income tax for current year 45 123 29 189
Corporate income tax for last year 98 (37)
Tax on dividends 9 15 Deferred tax: (21 256) (14 794) Total 23 974 14 373
Changes in assets and reserves due to deferred tax are presented in notes no. 19 and 24.
Corporate income tax was calculated by the rate of 19%.
Income tax calculation in the statement of comprehensive income in correspondence with the financial result:
2011 2010 PLN'000 PLN'000 Gross profit (loss) 419 968 263 690 Differences between gross profit (loss) and the taxable (182426) (109 874)income Prepayments and accruals 11 480 10 315 Receivables write-offs 324 (108)
Depreciation of fixed assets under tax allowance 524
524
Costs that are not income costs applicable to prior years 5 010 5 205 Assets revaluation 5 489 2 880
Valuation of financial instruments 446 (2
594)
Difference between balance-sheet amortization and tax 79 004 80 136amortization Valuation of property rights - certificates of origin of 17 521 (25 963)green energy Provisions for discounts (2 197) 10 541 Other fixed differences 6 275 5 185
Other temporary differences (619) 2
229
Income exempt from corporate income tax due to (305 683) (198
336)
running business activities in Special Economic Zone
Income tax base 237 542 153 704
Income tax calculated by the rate 19% 45 132 29
204
Increases, allowances, deductions and decreases of income (9) (15)tax
Income tax declared to the tax authorities 45 123 29
189
Corporate income tax for last year 98
(37) Tax on dividends 9 15
Change in the status of assets and deferred tax provision (21 256) (14 794)
Income tax shown in the profit and loss account 45 230 14
373 The table below shows the calculation of effective interest rate for corporateincome tax: 2011 2010 PLN'000 PLN'000 Gross profit (loss) 419 968 263 690
Corporate income tax calculated in 2010 and 2009 respectively 79 794 50 101 according to interest rate of 19% in Poland
Tax from fixed difference 2 153 1
956
- Costs that are not income costs applicable to prior years 952 990 - Dividends received (26) (27) - National Disabled Persons Rehabilitation Fund contribution 161 146 - Representation 22 121 - Consumption 67 47
- Depreciation write-offs for cars 29
21 - Subsidies received (2) 170 - Donations 50 15
- Provision for environmental fees (259)
259 - Other 1 159 219 Tax on dividends 9 15
Corporate income tax for last year 98
(20) Corporate income tax 82 054 52 057 Effective tax rate 19.54% 19.74%
Tax exemption due to running business activities in Special (58 080) (37 684) Economic Zone
Corporate income tax after taking into account the exempted 23 974 14 373income Effective tax rate including the exempted tax 5.71% 5.45% 11. DIVIDENDS
The Parent company's net profit for 2010 amounting to PLN 249 317 thousand was wholly distributed to the supplementary capital.
The decision on distribution of net profit for 2011 will be taken by the General Meeting of the Shareholders during the meeting held after the date of preparation of these financial statements.
12. PROFIT PER SHARE
The calculation of the profit per share and of the diluted profit per share was based on the following information:
Profits 2011 2010 PLN'000 PLN'000 Profit calculated as the base of value per share 395 994 249 317 Profit per share 7.92 4.99 Number of shares issued 2011 2010 pieces in pieces in thousand thousand
Weighted average number of shares to calculate
the value 50 000 50 000of profit per share
In the reporting period there were no financial instruments the Group that would result in profit dilution.
13. OPERATING LEASE AGREEMENTS
The Group as a leaseholder 2011 2010 PLN'000 PLN'000 Operating leasing charges presented at the current profit 75 023 60 690and loss account
The operating leasing is a lease of electric power and heat (steam) generating fixed assets, including electric energy from renewable sources to Saturn Management ("SM"). The signed contracts will remain in force till the year 2022.
The General Agreement signed with Polish Energy Partners (PEP - 100% SM shareholder) provides that in the event specified conditions occur, each Party shall be entitled to use the option to purchase or sell all rights and obligations of PEP, being SM limited partner and to purchase 100% shares in Saturn Management Sp. z o.o.
In current report no. 3/2011 as of 4 February 2011, the Management Board of theGroup notified about the intention of exercising the Voluntary Call Optiontoward Saturn Management provided that the Arbitration Court of the PolishChamber of Commerce in Warsaw renders a favourable award for the Company in theproceedings initiated by the suit brought by the Company against PEP(information about the dispute is provided in Note no 31 of these financialstatements and Note no. 4.15 to the Report on Business Activities of the Groupfor the year 2011). As at the balance sheet date the current Group's operating leasing liabilitieswith the use of the discount rate of 4.99% and the EUR exchange rate of 4.4168EUR/ PLN amounted to (by date of payment): 2011 2010 PLN'000 PLN'000
Leasing fees due to operating leasing
up to one year 79 642 68 993 from 2-5 years 312 579 306 657 above 5 years 93 067 93 695 Total 485 288 469 345 14. INTANGIBLE ASSETS Intangible assets PLN'000 GROSS VALUE As at 31 December 2010 20 302 Increases 816 Decreases due to liquidation 250 As at 31 December 2011 20 868 DEPRECIATION As at 31 December 2010 17 398 Depreciation for the year 2011 1 386 Decreases due to liquidation 250 As at 31 December 2011 18 534 NET VALUE As at 31 December 2010 2 904 As at 31 December 2011 2 334
Patents, licenses and trademarks are depreciated by their useful life which is approximately from 3 to 4 years.
* "Fixed assets under construction" include also advance payments for fixed assets under construction.
As at the date of implementation of the IFRS standards the Group decided to useIFRS 1 points 16-19 to valuation of fixed assets. The fixed assets are valuedat the fair-value and it is settled as the cost value from this moment. Therevaluation of fair-value was performed as at 1 January 2004.
In 2011, the net value of fixed assets was reviewed and no prerequisites were found for executing the value loss test.
As at the balance sheet date, the Group did not hold any liabilities to acquirefixed assets. 15. TANGIBLE ASSETS Machinery, Land, Fixed assets equipment buildings and under and other Total structures construction* fixed assets PLN'000 PLN'000 PLN'000 PLN'000 OPENING BALANCE OR VALUATION As at 31 December 2010 716 088 34 578 1 732 228 2 482 894 Increases due to settlements of fixed assets 3 210 33 818 37 347 74 375under construction Decreases 959 41 549 5 073 47 581 As at 31 December 2011 718 339 26 847 1 764 502 2 509 688 DEPRECIATION As at 31 December 2010 82 204 - 692 251 774 455 Depreciation for the year 22 429 - 129 236 151 6652011 Decreases due to 892 - 4 323 5 215liquidation and sales As at 31 December 2011 103 741 - 817 164 920 905 NET VALUE As at 31 December 2010 633 884 34 578 1 039 977 1 708 439 As at 31 December 2011 614 598 26 847 947 338 1 588 783 16. EMISSION RIGHTS Pursuant to Article 57 item 2 and 3 of the Law of 22 December 2004 ongreenhouse gas and other substance emissions trading and pursuant to theRegulation of the Council of Ministers of 1 July 2008 on adoption of the CarbonDioxide National Allocation Plan for 2008-2012 for the European Union EmissionTrading Scheme in the period of time from 1 January 2008 till 31 December 2012Mondi Swiecie S.A. received emission allowances that is equivalent to CO2emissions amount of 318 335 tonnes per year. In January 2011, the additional allocation of allowances of 604 608 tonnes for2009-2010 (additional CO2 emission allowance of 83 213 for 2009 and 83 213 for2010 from the national reserve - due to modernisations and changes to theplants completed in 2007-2008 and of 89 662 for 2009 and 348 520 for 2010 dueto paper machine erection - PM7) were booked on the Mondi Swiecie account.
CO2 emission allowances, the use, and surplus of allowances for the last two years are presented in the table below:
Year Average annual number of Estimated use of Surplus (+)/ emission allowances emission allowances Deficiency (-) 2010 750 068 365 582 384 486 2011 750 068 365 618 384 450
The 2011 annual report will be reviewed in the first quarter 2012.
17. INVESTMENTS IN ASSOCIATES VALUED WITH EQUITY METHOD
Associated entities Name of the % of % at The value Consolidation associated company Location ownership voting of shares/ method stocks % % PLN'000 Polski System Recyklingu - Warsaw 24.88 24.88 1 126 Equity methodOrganizacja Odzysku S.A. Name of the related Equity Net profit Liabilities Assets Revenue company (loss) from sales PLN'000 PLN'000 PLN'000 PLN'000 PLN'000 Polski System Recyklingu - 4 527 524 1 410 5 937 9 108Organizacja Odzysku S.A. 18. OTHER FINANCIAL ASSETS Balance as at 31.12.2011 Balance as at 31.12.2010 PLN'000 PLN'000 Other financial assets 168 495 168 495 19. DEFERRED TAX ASSETS Write-offs Write-offs Write-offs Prepay- Provisions Valuation of Write-downs to update to update to update for Other forward of Total the shares' receivables interests ments and discounts provisions financial inventory value accruals instru-ments Balance as at 108 121 26 6 481 998 391 263 2 316 10 7041.01.2010 Increase - - 5 1 904 2 002 473 - 535 4 919 Decrease - 12 - - - - 263 - 275 Balance as at 108 109 31 8 385 3 000 864 - 2 851 15 34831.12.2010, including: Shown in the result - (12) 5 1 904 2 002 473 (263) 535 4 644for the period Shown in - - - - - - - - -the equity Balance as at 108 109 31 8 385 3 000 864 - 2 851 15 3481.01.2011 Increase - 70 - 2 181 - 285 - 1 035 3 571 Decrease - - 10 - 417 - - - 427 Balance as at 108 179 21 10 566 2 583 1 149 - 3 886 18 49231.12.2011, including: Shown in the result - 70 (10) 2 181 (417) 285 - 1 035 3 144for the period Shown in the equity - - - - - - - - - The Group did not identify any interim differences that should be included indeferred tax assets.20. INVENTORY Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Materials 117 369 79 030 Semi-products and production in 24 616 16 491progress Finished goods 95 474 86 334 by production costs 95 474 86 334 Certificates of ecological energy* 28 220 45 741 Total 265 679 227 596
*Certificates of origin of green energy were valuated according to fair value. The fair value shall mean the market price for such assets at the right to assets market reduced by costs of transaction.
Costs of materials consumption as recognized in the statement of comprehensive income in the reporting period amounted to PLN 1 429 882 thousand.
Costs of consumption were increased by inventory write-offs amounting to PLN 3516 thousand. 21. OTHER FINANCIAL ASSETS Short-term receivables Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 1. Receivables from related parties 255 278 263
978
a) trade receivables, due less than 12 months 255 278 263 978 b) other - - 2. Receivables from other entities 105 068 75
025
a) trade receivables, due less than 12 months 59 434 37 856
b) due to taxes, subsidies, customs duties, 45 597 37
121
social security charges and other obligations
c) other 37 48 Short-term trade receivables and other 360 346 339 003receivables Income tax 25 - Net short-term receivables, total 360 371 339 003 Receivables write-offs 1 052 724 Gross short-term receivables, total 361 423 339 727
Average period of due dates for trade customers was 45 days. The Group calculated the penalty interest after the due dates.
The Management Board assumes that the net receivables book value is close to the fair-value of receivables.
Changes in receivables write-offs
Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000
Receivables write-offs opening balance 724 1 146
Increase 658 388 Creation of write-offs 658 388 Decrease 330 810 Closing write-offs 260 384
Use of write-offs (connecting 70 426receivables and write-off) Receivables write-offs closing balance 1 052 724
Foreign currency forward contracts
Although all forward contracts have been bought by the Group to hedge againstforeign exchange risk, the Group does not apply hedge accounting, required byIAS 39, to all transactions. Hedge accounting principles do not apply to fairvalue hedge (non-hedge) for assets and liabilities denominated in foreigncurrency. Hedge accounting principles are applied to some transactions qualified ashedging transactions according to IAS 39. These transactions are used by theGroup to hedge cash flow arising from confirmed planned sales transactions
inforeign currency. Details of marketable contracts are presented below ("cash flow hedge" and"non- hedge"): Balance as at Balance at 31.12.2011 31.12.2010 PLN'000 PLN'000 Forward contracts (positive 2 130 1 410valuation) Forward contracts (negative (1 365) (199)valuation) Total 765 1 211
The fair-value of foreign currency derivatives owned by the Group amounts approximately to PLN 1 211 thousand /2010: PLN 765 thousand/ as at 31 December 2011. The value has been estimated based on the marketable value of similar financial instruments valued as at the balance sheet date.
As at 31 December 2011, the Group did not hold any open currency forward contracts to hedge future sales transactions or future significant capital expenditures.
The table below presents fair values and settlement dates as well asinformation on amounts used as a basis for calculation of future payments andrealisation price of forward contracts hedging the change of balance sheetmeasurement of assets and liabilities denominated in foreign currencies (non-hedge). Contract Contract value in Forward fair
Nr Contract foreign Bid/ Date of Date of exchange rate value in
currency currency Offer beginning completion for contract
PLN 1 EUR 5 000 000 Bid 2011-11-17 2012-01-25 4,4555 142 2 EUR 5 000 000 Bid 2011-11-23 2012-01-25 4,4978 354 3 EUR 6 000 000 Bid 2011-12-07 2012-01-25 4,4886 369 4 EUR 1 800 000 Bid 2011-12-14 2012-01-25 4,5835 281 5 USD 250 000 Bid 2011-12-14 2012-01-25 3,5212 24 6 EUR 3 000 000 Bid 2011-12-14 2012-02-24 4,5948 460 7 USD 2 000 000 Bid 2011-12-14 2012-02-24 3,5376 157 8 EUR 1 200 000 Bid 2011-12-19 2012-02-24 4,5187 92 9 EUR 3 000 000 Bid 2011-12-19 2012-02-24 4,5152 220 10 USD 1 000 000 Bid 2011-12-19 2012-02-24 3,4664 31 Total 2 130 Contract Contract value in Forward fair
Nr Contract foreign Bid/ Date of Date of exchange rate value in
currency currency Offer beginning completion for contract
PLN 1 USD 1 500 000 Bid 2011-11-23 2012-01-25 3,3548 -104 2 EUR 1 500 000 Bid 2011-12-07 2012-01-25 3,3545 -106 3 USD 650 000 Bid 2011-12-21 2012-01-25 3,4042 -13 4 EUR 800 000 Bid 2011-12-27 2012-01-25 4,4219 -4 5 USD 1 000 000 Bid 2011-12-27 2012-01-25 3,3826 -42 6 EUR 4 484 200 Offer 2011-12-14 2012-01-25 4,5792 -680 7 EUR 13 125 000 Offer 2011-12-21 2012-01-25 4,4587 -416 Total -1 365 The following risks are related to currency forward contracts: interest raterisk, exchange rate risk and risk of insolvency of the other party to atransaction. However, credit risk is limited due to the fact that the otherparty to the transaction is usually a first class bank. In addition, in orderto minimize risk concentration, the transaction portfolio is diversified. Result on "cash flow hedge" "cash flow hedge" 2011 2010
Valuation of transactions shown in opening balance of equity: * - currency sales transactions ("Bid") -
-
- currency purchase transactions ("Offer") -
-
Profit on purchase transactions ("Offer") adjusting the value -
-
of investment began in the balance sheet Profit (loss) on sales transactions ("Bid") / ("Offer")
increasing(decreasing) revenues from sales in the income 379
110statement
Valuation of transactions in the closing balance of equity: - currency sales transactions ("Bid") -
-
- currency purchase transactions ("Offer") -
-
Fair values of open hedges are valued at the balance sheet date based on their valuations from banks with that such hedge was contracted.
As per the reporting date, there are no planned hedges to which hedge accounting was earlier applied; however they are not expected to be realised.
Cash, cash equivalents and bank deposits
Cash at bank, cash and cash equivalents comprise of cash on current bank accounts and bank deposits with their maturity of up to 3 months. A book value of such assets is equal to their fair value.
Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Cash in hand and at bank 50 5 839 Other short-term financial 489 283 17 464assets Total 489 333 23 303 The balance of short-term deposits as at 31 December 2011 comprised deposits atMondi Finance plc for the total amount of PLN 488 940 thousand with thematurity dates from 3 January to 26 January 2012. The balance of deposits wasincreased with the interests charged for December 2011 of PLN 323 thousand. Theaverage interest rate for the opened short-term deposits was 5.52%.
Financial assets available for sale
Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Shares at non-public 175 175companies Total 175 175 Credit risk
Main financial assets held by Mondi Swiecie Group: cash on bank accounts, short-term deposit, trade receivables and other receivables, representing the maximum credit risk of the Group due to financial assets.
Amounts presented in the statement of financial position are net amounts decreased by revaluation write-offs, estimated by the Company's management based on past experience and assessment of current economic conditions.
Credit risk related to liquid financial assets and derivative instruments islimited due to the fact that the other party to the transaction is representedby banks of high credit rating assigned by international rating agencies.Credit risk related to receivables is limited due to the fact that adistribution company of Mondi group is the major customer dealing with exportsales. Further, domestic receivables from customers that are not members ofMondi are insured. The value of trade receivables insured amounted to PLN 24.5million as per 31 December 2011.In the opinion of the Management Board of the Group, the maximum amount exposedto the credit risk as per 31 December 2011 amounts to PLN 3.5 million andapplies to trade receivables in relation to non-related entities that are notcovered by the receivables insurance. Security
In accordance with current report no. 4/2011 as of 11 February 2011, the Company signed a new Three-Year Guarantee Facility Agreement that covers the nine-year credit from the European Investment Bank.
At the time the afore-said Facility Agreement became effective, the existingThree-Year Guarantee Facility Agreement as of 30 June 2008 (annexed on 30October 2009, 30 June 2010 and 30 September 2010) was terminated. As aconsequence of the above changes, the security of the bank guarantee comprisingthe corporate guarantee that was issued by Mondi Group plc, a major shareholderof the Company, for the benefit of financing banks expired. The CorporateGuarantee Agreement entered into and between the Company and Mondi plc was
terminated accordingly. Overdue financial assets
As per the reporting date, the Group owned neither overdue financial assets nor items for which the loss of value has been recognised.
22. BANK CREDITS AND LOANS Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000
Debt under the cash pooling agreement to - 19
302related companies Overdrafts 990 - Long-term bank credits 418 247 472 617 Loans - 25 000 Total 419 237 516 919 Maturity:
Payable on demand or less than 1 year 77 707 100
553
More than 12 months - up to 2 years 75 896 75
360 Between 3 - 5 years 227 686 227 017 More than 5 years 37 948 113 989
Minus: due amounts in 12 months 77 707 100
553
(presented at short-term payables)
Amounts due more than 12 months 341 530 416
366
Bank credits and loans by currency:
Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Debt under the cash pooling - 19 302
agreement to related companies
Overdrafts 990 - Bank credits 418 247 472 617 Loans - 25 000 419 237 516 919
As at the balance sheet date, the Company owned neither credits nor loans denominated in foreign currencies.
Weighted average interest on bank credits and loans of Mondi Swiecie Group:
Balance as at Balance as at 31.12.2011 31.12.2010 % %
Overdrafts, bank credits and 5.48 8.31
loans
Valuation of the balance value of credits and loans drawn by Mondi Swiecie Group
The interest on current account credits is classified as floating rate. The value of flows related to such credits may change depending on interest rates. The remaining credits are launched based on fixed interest tranches for a specific drawing period.
As of 31 December 2011, the Group valued the credit from the European Investment Bank at the nominal value (increased by the reserve for interests) to be PLN 418 247 thousand (including charged interests of PLN 822 thousand).
As of 31 December 2011, the Group had unused credit facilities of PLN 259 million.
In the reporting period, no events took place that resulted in the Group's non-performance of loan liabilities. Furthermore, no violations took place in the period till the date of the financial statements approval.
% + Balance as Balance as BANK Currency bank's at31.12.2011 at31.12.2010 Due dates margin The Debt under the cash agreement pooling agreement to PLN WIBID - 19 098 was associated companies terminated in 2011. Overdraft facility in RBS Bank (Polska) S.A. BANK PEKAO S.A. PLN WIBOR 990 - 2010-09-30RAIFFEISEN BANK POLSKA S.A. Mondi Finance plc PLN WIBOR - 25 000 2011-11-01 European Investment PLN WIBOR 418 247 472 617 2017-06-30 Bank Total 419 237 516 715 23. FINANCIAL INSTRUMENTS
Evaluation of exchange risk and interest rates
For risk assessment purposes, the analysis of impacts of interest rates and changes in exchange rates of foreign currencies on the statement of comprehensive income and equity (revaluation reserve) was presented. The analysis covers financial components of the Group's balance sheet (table below).
Comments on methodology and assumptions
The Group owns assets and liabilities nominated in foreign currencies.
The present significant variability of exchange rates as well as marketexpectations and forecasts indicate that fluctuations of +/- 10% in PLNexchange rate to foreign currencies and a change of interest rate by +/-50 pbis possible. Balance Interest rate risk Exchange risk sheet value +/-50 pb SP PLN/EUR +10% (PLN -10% (PLN weakening) strengthening) Profit/ Profit/
Profit/ Changes in Profit/ Changes in
(Loss) (Loss)
(Loss) equity (Loss) equity
Financial assetsCash and cash equivalents 489 333 2 447 (2 447) (3) - 3 -Trade receivables and other receivables 360 346 - - (22 844) - 22 844 -Derivatives classified for valuation in 2 130 - - 13 877 - 4 569 -the fair value by the profit and loss accountDerivatives to remain in hedging - - - - - - -Financial assets available for sale 516 - - - - - -Other financial assets 168 1 (1) - - - -Impact on financial assets before taxation - 2 448 (2 448) (8 970) - 27 416 -Tax (19%) - (465) 465 1 704 - (5 209) -Impact on financial assets after taxation - 1 983 (1 983) (7 266) - 22 207 -Financial liabilitiesCredits and loans (419 237) (2 096) 2 096 - - - -Trade liabilities and other liabilities (418 514) - - 16 420 - (16 420) -Derivatives classified for valuation (1 365) - - (7 527) - (10 920) -in the fair value by the profit and loss accountDerivatives to remain in hedging - - - - - - -Impact on financial liabilities before taxation - (2 096) 2 096 8 893 - (27 340) -Tax (19%) - 398 (398) (1 689) - 5 195 -Impact on financial liabilities after taxation - (1 698) 1 698
7 204 - (22 145) -Total - 285 (285) (62) - 62 -Interest rate risk As at 31 December 2011 the Group's net profit would increase by PLN 285thousand if interest rates in PLN and EUR were higher by 50 base points,assuming that all other parameters remained unchanged. This is due to the factthat loans significantly exceed financial assets (cash and cash equivalents)owned. Loans are nominated primarily in PLN, so the impact of Polish interestrates is a determining factor. Exchange rate risk As at 31 December 2011 the Group's net profit would be lower by PLN 62 thousandif PLN strengthened by 10% in relation to foreign currencies (mainly EUR) andother factors remained unchanged. Such a minor influence (when compared to theGroup's overall business) is related to our consistent hedging policy - lossescaused by lower valuation of receivables would be compensated by valuation offorward transactions and liabilities nominated in foreign currencies and beinga component of the balance sheet.
Management of foreign currency risk
The Group performs defined transactions nominated in foreign currencies(approx. 65% of total revenues from sales are in EUR and USD). For this reason,there is a risk of fluctuations in exchange rates for the above-mentionedcurrencies. The management of foreign currency risk is effected according tothe Mondi Group Rules, using foreign currency forward contracts. The balance value of the Group's forward contracts as well credits and depositsdenominated in foreign currencies as per the balance sheet date is as follows: Liabilities Assets Balance as Balance as Balance as Balance as at at at at 31.12.2011 31.12.2010 31.12.2011 31.12.2010 PLN'000 PLN'000 PLN'000 PLN'000 Forward transaction 1 206 154 1 917 1 046 EUR Loans and deposits - - 5 2 Total 1 206 154 1 922 1 048 Forward transactions - - - - GBP Loans and deposits - - 10 - Total - - 10 - Forward transactions 159 45 213 364 USD Loans and deposits - - 14 - Total 159 45 227 364
Liquidity of foreign currency instruments
The table below shows the volumes of all transactions in foreign currenciesowned by the Group in maturity dates. The figures are shown in currencies offorward contracts. These are total amounts (excluding "bid/ offer" of thecontract). Forward below 1 1-3 3-6 6 months - 1 contracts month months months year In thou. EUR 37 709 7 200 - - In thou. USD 3 400 3 000 - - In thou. GBP - - - -
Balance foreign currency exposure
The tables below show the levels of receivables and liabilities as of the balance sheet date structured by their maturity dates. The statement covers only the values nominated in EUR and USD and GBP, because only these have an actual impact on the Group's risk.
Receivables in foreign below 1 1-3 3-6 6 months - 1 currencies month months months year In thou. EUR 29 969 15 980 - - In thou. USD 4 242 3 144 - - In thou. GBP 47 - - - Liabilities in foreign below 1 1-3 3-6 6 months - 1 currencies month months months year In thou. EUR 29 962 3 856 158 178 In thou. USD 1 948 - - - In thou. GBP 2 - - - In thou. CHF 9 - - - In thou. SEK 2 - - -
Financial instruments by categories (balance values)
Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Financial assets valued at the fair values 2 130 1 410through financial results: For trade, of which: 2 130 1 410 - positive value of derivatives to which hedge 2 130 1 410accounting was not applied
- other financial assets valued at fair value - - Positive value of derivatives to which hedge -
-accounting is applied Financial assets available for sale (shares 516
516
and stocks not listed at the stock exchange) Financial investments maintained until 168 495maturity Receivables 360 371 339 003 Cash and cash equivalents 489 333 23 303 Financial liabilities valued at fair value 1 365 199through financial result For trade, of which: 1 365 199 - negative value of derivatives to which hedge 1 365 199accounting was not applied
Negative value of derivatives to which hedge -
-accounting is applied Financial liabilities (credit and loans) 419 237 516 919
The presented values of financial instruments do not differ or differ insignificantly from their fair values. Therefore, the values presented above may be deemed to be equal to fair values.
Revenues, costs, profits and losses as presented in the statement of comprehensive income by categories of financial instruments
Balance as Balance as at at 31.12.2011 31.12.2010 PLN'000 PLN'000
Financial assets valued at fair value through financial -
-result
Financial assets available for sale -
-
Financial investment maintained until maturity -
- Receivables 1 700 (418) - Receivables write-offs 368 (54) - Currency valuation 1 332 (364) Positive value of 720 392derivatives
Financial liabilities valued at depreciated cost (647)
(988) Negative value of derivatives (1 165) 2 202 Total 608 1 188
FINANCIAL DERIVATIVES - HEDGING
As at 31 December 2010, the Group did not hold any foreign currency forward contracts to hedge future sales transactions ("Bid") and future significant capital expenditures ("Offer"), for which the Company would apply the hedge accounting (cash flow hedge).
24. DEFERRED TAX PROVISION Differences in fixed Valuation assets Valuation of Valuation value of property associated Investment Unpaid of acc. to rights - companies tax interests forward IFRS certificates using the on financial and tax of origin of equity credit liabilities instruments value green energy method Other Total
Balance as at 1.01.2010 1 262 88 - 61
951 3 758 133 - 67 192 Increase - 5 230 - 4 933 6 - 5 174 Decrease 100 - - 15 225 - - - 15 325
Balance as at 31.12.2010,
including: 1 162 93 230 46 726 8 691 139 - 57 041
Shown in the result for the
period (100) 5 230 (15 225) 4 933 6 - (10 151) Shown in the equity - - - - - - -
Balance as at 1.01.2011 1 262 88 230 46
726 8 691 139 - 57 041 Increase - 5 - - - 19 401 420 Decrease 100 - 85 15 011 3 328 - - 18 532
Balance as at 31.12.2011,
including: 1 162 93 145 31 715 5 363 158 401 38 929
Shown in the result for the
period (100) 5 (85) (15 011) (3 328) 19 401 (18 112) Shown in the equity - - - - - - -
The Group has not identified any temporary differences that should be included in the deferred tax provision.
25. LIABILITIES The balance of trade liabilities and other liabilities is primarily composedof: investment liabilities, trade liabilities and other current liabilities aswell as accruals for trade discounts and commissions, social security andecological energy deliveries. The average rotation period of trade liabilitiesis 87 days. In the Management Board's opinion the book value of financial liabilities issimilar to its fair-value. Balance as Balance as at at 31.12.2011 31.12.2010 PLN'000 PLN'000 Trade liabilities with payment term of up to 12 311 020 186 732months Accruals 63 691 56 413 Investment liabilities 29 968 34 405
Taxes, subsidies, customs duties, social and health insurance and other benefits excluding corporate 10 359 10 859income tax Remuneration liabilities 3 991 3 391 Other 85 104
Trade liabilities and other liabilities 418 514 291
904
26. REMUNERATION IN THE GROUP'S CAPITAL INSTRUMENTS
Other capital instrument payment programmes
In 2007, following the demerger, the Mondi Group established the new bonusprogramme (Mondi Bonus Share Plan- BSP and Mondi Long Term Incentive Plan -MLTIP) for selected Mondi Group employees, including Mondi Swiecie S.A.Management Board Members. Under such programmes, employees are granted bonus -shares. The bonus amount depends on performance by the Group and individualobjectives (BS). In addition, for ensuring a continuous Group growth additionalshares are given, that may be cashed after specified conditions, in particularthose related to the EPS growth over next 3 years after their receipt arefulfilled (MLTIP).In connection to the above-mentioned programmes, the amount of PLN 691 thousandwas charged to Mondi Swiecie S.A. in 2011. In case the right to shares expiresor is lost by individual members of the programme, Mondi Swiecie S.A. will beentitled to have the costs incurred reimbursed partially or wholly. Once theright to have shares available is received, the relevant income will beseparately shown for each Member of the Management Board. 27. PROVISIONS Personal Restructurisation Total provisions provision PLN'000 PLN'000 PLN'000 Balance as at 31 15 900 136 16 036December 2010 Increases 965 - 965 Decreases - - Balance as at 31 16 865 136 17 001December 2011 Provisions less than 1 12 874 136 13 010year Provisions over 1 year 3 991 - 3 991 Personal provisions
Personal provisions comprise disability and retirement allowances of PLN 4 512thousand and provisions for salaries and bonuses of PLN 10 827 thousand, aswell as provisions for equivalent payment for not taken vacation of PLN 1 526thousand.
Provision for disability and retirement allowances was calculated by the actuary based on the Company's Collective Labour Agreement for the Group's employees and in matters not regulated by the Agreement, the Labour Code applies.
Assumptions regarding death and illness rates were based on the CentralStatistical Office publications (death data PTTZ 2010, Statistical yearbook andother publications on status and changes to employment in the economy). Thefollowing assumptions were made: the future increase in salaries and wages of3.0%, average inflation rate of 2.5%, and the discount rate for futureliabilities of 5.75%. 28. EQUITY
The equity is established in accordance with the law, adequate acts and the statute. The equity consists of: share capital, supplementary capital, revaluation reserve and undistributed profits.
Share capital
The authorised share capital is presented in the amount of statute settlements and court registration in face value.
SHARE CAPITAL 1 share value = PLN 1 Value of Right to Series/ Type Type series/ Capital the issuance of of Type of No. of issue coverage Registration dividend of shares shares prefe- limitations shares based on method date (after rences nominal the value date) Transformation A from state After the bearer 50 000 000 50 000 000 entity 8.04.1997 year 1997 Total no. of shares 50 000 000 SHARE CAPITAL 50 000 000
All shares issued by the parent company are ordinary shares with no preference as to the participation in profit distribution.
Pursuant to clause 25 of IAS 29 "Financial reporting in hyperinflationaryeconomies", equity components (except for undivided profit from previous yearsand surplus due to asset revaluation) were restated based on general priceindex starting from the equity contribution date, while the economy washyperinflationary. The revaluation was made as per the day when the Companystarted to use the International Financial Reporting Standards, i.e. 1 January2004. Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Share capital: - authorised share 50 000 50 000capital - hyperinflation 283 734 283 734adjustment Total 333 734 333 734 Supplementary capital The supplementary capital is cumulated from distribution of profits inaccordance with regulations. Balance as at Balance as at 31.12.2011 31.12.2010 PLN'000 PLN'000 Established by law 16 667 16 667 Established by the statute, over the 1 082 153 831 981law (minimum) value 1 098 820 848 648 29. EXPLANATORY NOTE TO THE CONSOLIDATED STATEMENT OF CASH FLOWS 2011 2010 PLN'000 PLN'000 Balance sheet amortisation 153 118 157 360 Amortisation not planned - - Amortisation 153 118 157 360
Balance sheet's change of short-term liabilities 105 920 58
547
Elimination of the change of the balance of investments 5 053 62 504liabilities
Change in income tax liabilities 149
164
Change of the balance of credits and loans 22 846 (67
564)
Valuation of forward contracts as at balance sheet date (1 165) 2 202
Unrealised differences on exchange related to investment 749 2 497activities
Interest charged on credit activated for fixed assets under
construction - -
Interest charged on long-term credits Change of the balance of short-term provisions (1 038) (7
395)
Change of the balance of short-term liabilities 132 514 50
955 Balance sheet's change of receivables (21 343) (104
368)
Compensation of receivables due to income tax (45 302) (29
112)
Change in receivables related to financial activities (89) (178)
Change in receivables related to investment activities 12
1
Change of the balance of receivables (66 722) (133 657)
Change of the balance of short-term provisions 1 037 7
396
Change of the balance of long-term provisions (73)
252
Change of the balance of provisions 964 7
648 Differences on exchange related to investment activities (529) (1 801) Valuation of cash - 549
Non-realised exchange rate gains on credits and loans - (1
414) Exchange rate gains/losses/ (529) (2 666)
Dividends and shares in profits 105
140 Credits interest 23 964 20 Interest on loans granted 5 53
Interest on investment activities 37 53
452 Other interest (92) -
Interest and shares in profits 24 019 53
665
Profit on sales of fixed assets (178)
415
Profit on sales of investments 20 978 5
255
Net value of liquidated intangible and tangible assets 816 1 168
Profit/loss/ on investment activity 21 616 6
838
Valuation of forward contracts as at balance sheet date 436 (2 609)
Commission on overdraft credit -
- Other adjustments 436 (2 609)
Information on inflows and outflows of investment activities
2011 2010 PLN'000 PLN'000
Exchange rates gains - hedging 22 460 24
670 Interest 37 52 Other investment inflows 22 497 24 722
Outflows for fixed assets purchase 33 719 46
227
Change of the balance of investment liabilities 5 053 62
504 Interest - -
Realised differences on exchange related to investment 219
696activities
Outflows on intangible and tangible fixed assets 38 991 109
427
Exchange rates losses - hedging 43 438 29
924 Other investment outflows 43 438 29 924
Information on the structure of a change in cash
2011 2010 PLN'000 PLN'000 Balance sheet's change in cash 483 474 1
725
Change in other short-term financial assets (17 443) (8
907)
Change in overdraft liabilities 112 Change in cash 466 031 (7 070) Information on cash structure 2011 2010 PLN'000 PLN'000 Cash 70 5 839 Other short-term financial assets 489 263 17 464 Overdraft credit liabilities - 10 Cash at the end of the period 489 333 23 313 30. CONTINGENT LIABILITIES
Contingent liabilities as at 31 December 2011 accounted for PLN 17 780 thousand. A guarantee facility was granted as a security for liabilities of Saturn Management z ograniczona odpowiedzialnoScia i Wspolnicy, Spolka Komandytowa for the benefit of BRE Bank S.A. and Bank Polska Kasa Opieki S.A.
31. POST BALANCE SHEET EVENTS
On 13 February 2012 the Company received a favourable ruling from theArbitration Court of the Polish Chamber of Commerce, dated 10 February 2012,that the offer for sales of 100% shares of Saturn Management Sp. z o.o. withits registered office in Warsaw and of all rights and obligations of PEP as alimited partner in SM sp.k., which was submitted by PEP on 29 April 2002 inexecution of the General Agreement, is binding for PEP on conditions laid downin the Company's suit that is the sales price is to be fixed on the formulaprovided in the General Agreement. Consequently, PEP's counter-claim wasdismissed by the court. The court decision is final, however it may be appealedin the civil court, based on the Civil Procedure Code. The decision fulfils oneof the conditions for realization of the Voluntary Call Option of 100% sharesof Saturn Management Sp. z o.o. with its registered office in Warsaw and of allrights and obligations of PEP as a limited partner in SM sp.k., on which theManagement Board informed in its current report issued 4 February 2011.
32. FINANCIAL INFORMATION COMPARABILITY
The Group did not make any changes to the presentation of figures.
33. TRANSACTIONS WITH RELATED PARTIES
The structure of the Capital Group is presented in General Information.
Transactions concluded between the parent company and its subsidiary were eliminated at the moment of consolidation and are not presented in this note. Transactions concluded between the Group and associates are shown below.
Revenues Costs Liabilities to Receivables from related parties related parties 2011 2010 2011 2010 2011 2010 2011 2010 PLN'000 Associated entities Polski System Recyklingu - - - 16 16 - - - -Organizacja Odzysku S.A.
Transactions with related companies in the Mondi Group(in PLN thousand)
Revenues Costs Liabilities Receivables Mondi Packaging Paper Sales GmbH 1 745 357 - -
223 908
Mondi Corrugated Swiecie Sp. z o.o. 93 039 106 056 -
10 231 Mondi Warszawa Sp. z o.o. 75 918 - - 6 167 Mondi BZWP Sp. z o.o. 45 113 - - 4 094
Mondi Packaging Szczecin S.A. 44 097 - -
4 907 Mondi plc 39 425 3 574 - - Mondi Dorohusk Sp. z o.o. 31 525 - - 2 636
Mondi Bags Swiecie Sp. z o.o. 29 900 - -
4 555
Mondi Bags Mielec Sp. z o.o. 14 028 - -
29
Mondi Wierzbica Sp. z o. o. 7 167 - -
537
Slovwood Ruzomberok, a.s. 1 349 - -
- Mondi AG 468 83 337 78 573 180 Mondi Coating GmbH 259 - - 47
Mondi Packaging Solec Sp. z o. o 33 - -
10 Mondi Coating Steti A.S. 17 30 - -
Mondi Uncoated Fine & Kraft Paper GmbH 15 4 325 946
-
Mondi Corrugated Services GmbH 10 8 094 -
- Mondi Gruenburg GmbH 10 - - - Total 2 127 730 205 416 79 519 257 301
The above amounts do not include exchange differences.
Transactions with related parties are based on market value prices less quantity bonuses.
34. MANAGEMENT BOARD AND SUPERVISORY BOARD REMUNERATION
Remuneration Bonuses Remuneration Benefits, paid or due depending gained from income Total Management Employment for the on subsidiaries from remuneration Board period employment realisation and other in 2011 position of expected associated sources duties companies Maciej 01.01-31.12.11 983 339 - - 1 322 Kunda Jan 01.01-31.12.11 743 202 - - 945 Zukowski Florian 01.01-31.12.10 545 193 - - 738 Stockert Tomasz 01.01-31.12.11 743 209 - - 952 Katewicz Boguslaw 01.01-31.12.11 480 60 - - 540 Bielecki
The table presents the remuneration paid in 2011 for months from January to December and bonuses for the year 2009 paid in 2011.
Remuneration Bonuses paid or due depending Remuneration Total Supervisory Employment for the on from remuneration Board period employment realisation employment in 2010 position of expected contracts duties Karol 01.01-31.12.11 49 30 115 194 Mergler Ryszard 01.01-31.12.11 49 7 105 161 Gackowski Jaroslaw 01.01-31.12.11 49 7 87 143 Kurznik
No remuneration is paid to other Supervisory Board Members.
The table presents the remuneration paid in 2011 for months from January to December and bonuses for the year 2010 paid in 2011.
Management Board Transactions
In the reporting period, no loans or credits were granted or other transactions entered into with the Management Board Members (and other managerial staff).
35. REMUNERATION OF AN AUDITOR OR ENTITY AUTHORISED TO AUDIT FINANCIAL STATEMENTS PAID OR DUE FOR THE FISCAL YEAR
2011 2010 PLN'000 PLN'000
Audit of financial statements 521 544
Tax consulting - - Other services - - Total 521 544
The consolidated financial statements consist of:
1.Statement of comprehensive income, page 3-4
2.Statement of financial position, page 5
3.Statement of changes in equity, page 6
4.Statement of cash flows, page 7-8
5. Explanatory notes to the financial statements, page 9-48
The consolidated financial statements were accepted by the Company's ManagementBoard on 13 February 2012. President of the Board Maciej Kunda
..........................................
Member of the Board Jan Zukowski
..........................................
Member of the Board Florian Stockert
..........................................
Member of the Board Tomasz Katewicz
..........................................
Member of the Board Boguslaw Bielecki
..........................................
The person who has been assigned to keep the accounts.
Teresa Czurylo
..........................................
Swiecie, 13 February 2012END
PINXRelated Shares:
Mondi