The board applied all of the main principles and provisions of the Code throughout the year ended 31 March 2016, except in the following respects:
1. Our audit committee did not consist solely of independent directors. Under our relationship agreement with Altria, as approved by the shareholders in 2002 and 2005, Altria has the right to nominate a director to the audit committee, and has nominated Dinyar Devitre, who the board does not consider to be an independent director for the purposes of the Code. The board nevertheless considers that the composition of the audit committee remains appropriate, given Altria’s interest as the company’s largest shareholder. Dinyar Devitre is a former Chief Financial Officer of Altria and the board considers that his experience and background in financial matters and his independence from management mean that the effectiveness of our audit committee in discharging its functions is considerably enhanced and not compromised by his membership.
2. The Code recommends that the performance evaluation of the boards of FTSE 350 companies should be externally facilitated at least every three years. In our 2015 annual report, we communicated that an externally facilitated performance evaluation would be undertaken early in the tenure of our new Chairman, Jan du Plessis. In light of the expected transaction timetable for the takeover offer by AB InBev, the board considered that it would have limited time to benefit from the findings of an externally facilitated effectiveness evaluation during its tenure. In addition, an extensive external evaluation would have absorbed time and significant resources at precisely the time that the board needed to focus its attention on the demands of the takeover offer. After careful consideration, the board took the decision not to conduct an external effectiveness evaluation in the year under review, and instead to conduct such an evaluation internally. If for any reason the takeover offer does not proceed to completion, the board intends then to undertake an externally facilitated effectiveness evaluation. A report on the assessment of the effectiveness of the board and its committees led by our Deputy Chairman Guy Elliott is set out on page 66 of the 2016 annual report.
3. Under the Code, the company is required to put its external audit contract out to tender at least every 10 years. The company has not tendered its external audit contract within the last 10 years. In the ordinary course, we would have conducted an audit tender during the 2016 calendar year as communicated in our 2015 annual report. In light of the exceptional circumstances of the takeover offer by AB InBev, the audit committee decided to defer the audit tender. The audit committee noted that an audit tender during the offer period would be inappropriate. If for any reason the takeover offer were not to proceed to completion, the audit committee intends then to conduct a tender process.
4. The Code recommends that a majority of members of the nomination committee should be independent non-executive directors. Following his appointment as Chairman of the company in July, Jan du Plessis, a member of the nomination committee and an independent non-executive director on his appointment to the board on 1 September 2014, was required to be disregarded in the determination of whether the majority of members of the committee were independent. Between 23 July 2015 and 24 September 2015 the nomination committee comprised Jan du Plessis, two non-executives directors considered to be independent and two non-executives not considered to be independent, and was therefore not compliant (although the committee did not meet during this period). On 24 September 2015 Lesley Knox, an independent non-executive director, was appointed to the committee, at which point the committee met the membership recommendations of the Code.
5. One director, Mark Armour, was unable to attend the 2015 annual general meeting as he was attending a family funeral.