CHALLENGER LIMITED — Regulatory Filings 2021

Aug 9, 2021

==> picture [63 x 43] intentionally omitted <==

2021 Corporate Governance Statement

financial security for a better retirement

==> picture [142 x 35] intentionally omitted <==

challenger.com.au

Challenger Limited ACN 106 842 371

2

Challenger Limited 2021 Corporate Governance Statement

Contents Contents

==> picture [63 x 43] intentionally omitted <==

Contents

Challenger’s approach to 03 corporate governance Corporate Governance 04 Principles and Recommendations Principle 1 – Lay solid 04 foundations for management Key dates and oversight 22 September 2021 Principle 2 – Structure the 07 Final dividend payment date Board to be effective and add value 28 October 2021 2021 Annual General Meeting Principle 3 – Instil a culture of 10 acting lawfully, ethically and 17 February 2022 responsibly Half-year financial results Principle 4 – Safeguard the 12 22 March 2022 integrity of corporate reports Interim dividend payment date Principle 5 – Make timely and 13 16 August 2022 balanced disclosure Full-year financial results Principle 6 – Respect the rights 14 21 September 2022 of security holders Final dividend payment date Principle 7 – Recognise and 15 27 October 2022 manage risk 2022 Annual General Meeting Principle 8 – Remunerate fairly 16 and responsibly Dates may be subject to change. Any change in dates will be advised to the Australian Securities Exchange.

Corporate Governance 2021 Sustainability Report Report

Challenger’s approach

The 2021 Corporate Governance Report is available online at:

The 2021 Sustainability Report outlines Challenger’s key initiatives and achievements, and approach to addressing its most material ESG matters. The 2021 Sustainability Principle 1 Report is available online at: › challenger.com.au/ sustainabilityreport2021 Principle 2

• › challenger.com.au/ corporategovernance2021

2021 Annual Review

The 2021 Annual Review provides useful information about Challenger and its financial performance in an easy-to-read format. The Annual Review includes a performance update, a report from the Independent Chair and the Chief Executive Officer, and information on Challenger’s approach to

2021 Annual General Meeting

Principle 3 Principle 4

Date

28 October 2021

Time

environmental, social and governance (ESG) matters.

environmental, social and governance 9.30am (Sydney time) (ESG) matters. Full details of the meeting will be The Annual Review is available included in the Notice of Annual online at: General Meeting, which will be sent Principle 5 to shareholders in September 2021. › challenger.com.au/ annualreview2021 Principle 6 2021 Annual Report The 2021 Annual Report, including the financial report for the year ended Principle 7 30 June 2021, is available online at: › challenger.com.au/ annualreport2021 Principle 8

3

Challenger Limited 2021 Corporate Governance Statement

Challenger’s Challenger’s approach approach

==> picture [63 x 43] intentionally omitted <==

Challenger’s approach to corporate governance

The Board of Directors (Board) and Challenger Limited (Challenger) are committed to implementing and maintaining a robust corporate governance system. Challenger believes that corporate governance adds value to its business and enhances stakeholder confidence.

The Board determines the most appropriate corporate governance practices for Challenger and its controlled entities (Group), taking into consideration Australian and international standards and the prudential requirements of regulators such as the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).

Group Audit Committee Oversight of reporting requirements

This Corporate Governance Report reports against the Corporate Governance Principles and Recommendations (4th edition) published by the Australian Securities Exchange’s (ASX) Corporate Governance Council in 2019 (Principles).

Shareholders

Challenger Limited Board

Acts on behalf of shareholders and oversees the overall direction, management and corporate governance of Challenger

Group Risk Committee Oversight of risk management framework

Nomination Committee Assists the Board achieve effective composition and size

Group Remuneration Committee Oversight of remuneration policies and practices

Responsible for the day-to-day management of Challenger and the implementation of its strategic objectives

Contents

Principle 1

Principle 2

Principle 3

Principle 4

Challenger’s Corporate Governance Report has been approved by the Board and is current as at 30 June 2021.

Leadership Team

Delivery of strategic objectives

Principle 5

Employees

Principle 6

Principle 7

Principle 8

4 Challenger Limited 2021 Corporate Governance Statement

Principle 1 Principle 1

==> picture [63 x 43] intentionally omitted <==

Corporate Governance Principles and Recommendations

Contents

Principle 1 – Lay solid foundations for management and oversight

The role of the Board and delegations

The Board is accountable to shareholders for the activities and performance of Challenger by overseeing the creation of sustainable shareholder value within an appropriate risk framework and having regard for stakeholder interests and community expectations.

The Board is responsible for setting Challenger’s corporate strategy and strategic priorities. Challenger’s purpose is to provide its customers with financial security for a better retirement. This is a long-term purpose and the Board sets strategic priorities each year to work towards fulfilling Challenger’s purpose.

Directors are actively involved in setting, approving and regularly monitoring Challenger’s strategic priorities and holding management accountable for progress.

This process includes an annual Board strategy offsite, regular Board reporting and meetings, and discussion and review with management. Similarly, the Board ensures that rigorous governance processes operate effectively to guide decision-making across the business.

The Board’s role and responsibilities are set out in the Board Charter, which is available at challenger.com.au.

The Board’s responsibilities include:

• establishing, promoting and maintaining Challenger’s strategic direction;

• approving business plans, budgets and financial policies;

• considering management recommendations on strategic business matters;

• establishing, promoting and maintaining proper processes and controls to maintain the integrity of accounting and financial records and reporting;

• fairly and responsibly rewarding executives, having regard to the performance of executives, Challenger’s risk management framework and culture, the interests of shareholders, market conditions and Challenger’s overall performance;

• adopting and overseeing implementation of corporate governance practices;

• overseeing the establishment, promotion and maintenance of effective risk management policies and processes;

• determining and adopting Challenger’s dividend policy;

• reviewing Board composition and performance;

• appointing, evaluating and remunerating the Chief Executive Officer (CEO) and approving the appointment of the Chief Financial Officer (CFO), Chief Risk Officer (CRO), General Counsel and Company Secretary; and

• determining CEO’s delegated authority.

The Board has established committees to assist in carrying out its responsibilities and to consider certain issues and functions in detail. The Board committees are discussed under Principle 2.

Management responsibility

The Board has delegated to the CEO the authority and powers necessary to implement the strategies approved by the Board and to manage Challenger’s business affairs within the policies and delegation limits specified by the Board from time to time. The CEO may delegate authority to management, but remains accountable for all authorities delegated to management.

Nominations and appointment of new Directors

The Board has established a Nomination Committee comprised of a majority of Independent Non-Executive Directors, and has at least three members and is chaired by an Independent Non-Executive Director. The Nomination Committee currently comprises all members of the Board, other than the CEO, and is chaired by the Chair of the Board, who is an Independent Non-Executive Director.

Appropriate checks are undertaken before recommending a person for election as a Director and being appointed. These include checks as to the person’s character, fitness and propriety, experience, education, criminal record and bankruptcy history.

Similar checks are also undertaken for newly appointed senior executives.

==> picture [165 x 439] intentionally omitted <==

Challenger’s approach

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

5 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

a formal review of its performance, individual Directors and Board committees at least annually. The Nomination Committee conducted an internal review of the performance of the Board, its committees and individual directors during the year ended 30 June 2021.

General Meeting (AGM). Shareholders are provided with all material information known to Challenger that is relevant to a decision about whether or not to elect a Director.

The Nomination Committee conducts periodic assessments of the Board’s competencies to assist in determining the appropriate composition of the Board and to consider the desirable breadth and range of skills required when selecting new Board members.

Succession planning

In conjunction with the Nomination Committee, the Board considers the succession of its members, the CEO, CFO, CRO, General Counsel, Company Secretary, and Chief Executives of each of the business divisions.

On behalf of Challenger, the Chair provides a letter to each new Director, setting out the terms of their appointment, including their roles and responsibilities. All current Directors have received a letter confirming the terms of their appointment.

The Nomination Committee, where appropriate, engages specialist external consultants to assist with identifying and selecting a diverse range of candidates who meet the Nomination Committee’s desired competencies. The Nomination Committee also considers other factors, including independence, commercial capability, cultural fit and time availability to meet the commitment required.

The Board continues to review its composition having regard to the knowledge, skills and experience of each Director.

Regular reviews of the Board’s performance are conducted by the Chair with all Board members, and this involves consideration of the effectiveness of the Board and its committees having regard to the attributes, knowledge, skills and experience of each Director.

In January 2021, the Board further diversified the Board’s range of knowledge, skills and experience with the appointment of Dr Heather Smith. Dr Smith, as an Independent Non-Executive Director, brings extensive government experience having served as Secretary to a number of Australian Government departments, including as Secretary of each of the Department of Communications and the Arts, and the Department of Industry, Innovation and Science.

Retirement and re-election of Directors

The Board last conducted an external review in the 2020 financial year, with the results incorporated into the Board’s operations and planning processes.

Challenger’s Constitution requires that, excluding the CEO and any Director appointed during the year, one-third of the remaining Directors must retire each year.

The Nomination Committee assesses potential new Directors using these competencies and factors, and makes recommendations to the Board for consideration and approval.

Company Secretary

Any Director who is appointed during the year must stand for election at the next AGM. In addition, any Director who has been in office for three or more years, or for three or more AGMs, must retire and stand for re-election at the third AGM.

The Company Secretary is accountable directly to the Board, through the Chair, on matters to do with the proper functioning of the Board.

A copy of the Nomination Committee Charter is available at challenger.com.au.

Review of Board performance

If a new Director is appointed during the year, that person must stand for election by shareholders at the next Annual

The Board seeks to ensure that it is operating effectively and undertakes

==> picture [718 x 161] intentionally omitted <==

Contents

Challenger’s approach

Principle 1 Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

6 Challenger Limited 2021 Corporate Governance Statement

Contents

Challenger’s approach

Principle 1 Principle 1

Principle 2

==> picture [63 x 43] intentionally omitted <==

Diversity

The Board is committed to promoting a diverse and inclusive culture at Challenger. This commitment is reflected in a range of policies and practices, and these are assessed using measurable targets, including a target of at least 30% female representation at Board level. This target was achieved in 2021 following the appointment of Dr Heather Smith to the Challenger Board.

Challenger’s approach to diversity and inclusion is set out in our Diversity Policy, which is available at challenger.com.au.

Challenger has a Diversity and Inclusion strategy, which focuses on three key areas:

• diverse and inclusive workplace;

• gender equality; and

• employment opportunities for people aged over 50.

To drive continued focus and implementation, Challenger has established a Diversity Committee which is sponsored by the Chair of the Board.

The Diversity Committee’s objectives include designing, implementing and maintaining programs and initiatives to help achieve measurable objectives set by the Board each year. The effectiveness of the Group’s diversity programs and initiatives and the Group’s progress towards achieving those objectives are reviewed regularly by management and at least annually by the Remuneration Committee. The objectives and progress for the year ended 30 June 2021 are set out in the 2021 Sustainability Report, which is available at challenger. com.au/sustainabilityreport2021.

Challenger’s most recent annual report to the Workplace Gender Equality Agency (WGEA), which reports on the ‘Gender

Equality Indicators’ under the Workplace Gender Equality Act 2012 , is available at challenger.com.au. Challenger maintains its citation as an WGEA Employer of Choice, following its initial recognition in 2019.

Executive performance assessment

Challenger has written employment agreements with each senior executive, and the performance of senior executives is reviewed at least annually against agreed performance objectives and measures, consistent with Challenger’s performance management framework, which applies to all Challenger employees.

Detailed information about these performance measures and outcomes is included in the Remuneration Report in Challenger’s 2021 Annual Report, which is available at challenger.com.au/ annualreport2021.

All employees at Challenger are also assessed at least annually against Challenger’s values (refer to Principle 3).

The Group Remuneration Committee is responsible for reviewing the performance of the CEO at least annually, including setting the CEO’s objectives for the year, reviewing progress and making remuneration recommendations to the Board.

The CEO and the Group Remuneration Committee set performance objectives and review performance of the CEO’s direct reports (Leadership Team).

Performance evaluations for the CEO and Leadership Team have been undertaken in respect of the 2021 financial year in accordance with the above process.

Current Board members

	Name	Position	Independent	Appointed
	Peter Polson	Chair	Yes	2003
	Richard Howes	Managing Director & CEO	No	2019
	John M Green	Non-Executive Director	Yes	2017
	Steven Gregg	Non-Executive Director	Yes	2012
	Masahiko Kobayashi1	Non-Executive Director	No	2019
	Heather Smith2	Non-Executive Director	Yes	2021
	JoAnne Stephenson	Non-Executive Director	Yes	2012
	Duncan West	Non-Executive Director	Yes	2018
	Melanie Willis	Non-Executive Director	Yes	2017
	Hiroyuki Iioka	Alternate Director	No	2019

• 1 Mr Kobayashi is a representative director of MS&AD Insurance Group Holdings Inc and Mr Iioka acts as his alternate director.

2 Dr Smith was appointed to the Board on 20 January 2021.

==> picture [350 x 273] intentionally omitted <==

Principle 3 Principle 4

Principle 5

Principle 6

Principle 7 Principle 8

7 Challenger Limited 2021 Corporate Governance Statement

Challenger’s approach

Principle 1

Principle 2 Principle 2

==> picture [63 x 43] intentionally omitted <==

Principle 2 – Structure the Board to be effective and add value

Membership of the Board

Directors’ skills matrix

The Board recognises that the needs of our diverse range of customers are constantly evolving. The Board receives frequent customer updates and undertakes educational sessions to enhance its understanding of customer needs.

The Board has a majority of Independent Non-Executive Directors, and an Independent Chair who is appointed by the Board. The roles of Chair and CEO are not held by the same person.

Leadership & Strategy Leadership, effective communication and influencing skills. Strategic thinking capability and transactional expertise. 1

Corporate Governance Public company corporate governance literacy. 1 Financial Acumen Financial reporting literacy, including exposure to Accounting Standards. 1 Risk & Compliance Financial services and fiduciary regulatory awareness. Relevant compliance and risk experience, including legal and 1 tax risk management. Sectoral Exposure Exposure to funds management and life insurance sectors, and market experience in jurisdictions in which Challenger 8 operates. Investment & Credit Expertise Credit risk management and investment expertise, including asset class literacy and exposure (e.g. property, fixed income, 1 equities, etc). Customer Experience in distribution, marketing and fostering key institutional customer relationships. 6 Public Policy Experience in relevant public policy areas and key Government and regulator relationships. 7 IT and Digital Understanding of IT strategy, the application of technology in large organisations, and innovation. 7 People & Remuneration Experience in building capable and highly engaged teams and understanding of current remuneration regulation, 7 structuring and sectoral conditions.

A list of Board members as at 30 June 2021 is set out on page 6. Details of Board members, including their skills, experience and tenure, are set out in the Directors’ Report in the 2021 Annual Report, which is available at challenger.com.au/ annualreport2021.

Director induction and education

All new Challenger Directors participate in an induction program detailing Challenger’s business, with a focus on the Group’s financial, strategic, operational and risk management position and processes.

The Board is committed to ensuring that it has an effective composition, size and commitment to discharge its responsibilities and duties.

Challenger supports and encourages continuous education. Ongoing Director education is provided through regular management presentations on key Challenger business functions or activities.

The Board has determined that its current members have an appropriate collective mix of skills, experience and expertise to:

• exercise independent judgement;

Regulatory developments are summarised and brought to the attention of the Board on a regular basis by the General Counsel and the CRO. Directors can access external education and professional development training, and are provided additional education sessions on topical issues presented by experts in relevant fields.

• have a proper understanding of, and competence to deal with, current and emerging issues of the business;

• encourage enhanced Challenger performance; and

• effectively review and challenge the performance of management.

Ernst & Young (EY), the Group’s external auditor, and KPMG, the Group’s internal auditor, as well as other industry experts, regularly present to Directors on matters relevant to the Group’s business and its operating environment.

The Board’s competencies are assessed annually and the results of the most recent assessment are shown in the table on this page.

The Board skills matrix shows that Board members have a high level of competency across the areas of expertise relevant to Challenger’s business.

Advanced competency 100%

Advanced competency 100%

Advanced competency 100%

Advanced competency 100%

Advanced competency 88.9% Average competency 11.1%

Advanced competency 100%

Advanced competency 66.7% Average competency 33.3%

Advanced competency 77.8% Average competency 22.2%

Advanced competency 77.8% Average competency 22.2%

Advanced competency 77.8% Average competency 22.2%

Contents

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

8 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

Director independence

The Board‘s approach to Director independence is set out in its Board Charter, which states that an Independent Non-Executive Director should be independent of management and free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of their judgement.

The Board has undertaken a review of all Directors in the 2021 financial year, taking into account relevant factors including tenure, and has determined that each Non-Executive Director (excluding the MS&AD representatives) remains independent. The Board noted the expertise, judgement, industry knowledge and understanding of Challenger’s business brought by each Director.

The Board regularly considers and assesses the independence of each Director in light of the interests and information that Directors disclose in accordance with the Corporations Act 2001 (Cth) (Corporations Act).

In assessing independence, the Board has regard to whether the Director has any of the following relationships with Challenger or any Group company:

1. is, represents or has been within the last three years an officer or employee of, or professional adviser to, a substantial shareholder of Challenger;

2. receives performance-based remuneration (including options or performance rights) from, or participates in an employee incentive scheme of, Challenger;

3. is employed, or has previously been employed, in an executive capacity by Challenger or any of the other members of the Group, and there has not been a period of at least three years between ceasing such employment and serving on the Board;

4. is, or has been within the last three years, in a material business relationship (e.g. as a supplier, professional adviser, consultant or customer of Challenger or the Group), or an officer of or otherwise associated with a material supplier, professional adviser, consultant or customer;

5. has close personal ties with any person who falls within any of the categories described in points 1 to 4 above; or

6. has been a Director of Challenger for such a period that his or her independence from management and substantial shareholders may have been compromised.

The Board will state its reasons if it considers a Director to be independent, notwithstanding the existence of a relationship of the kind referred to in points 1 to 6 above.

The Board has determined that the Chair is independent. While the Chair has served on the Board since 2003, the Board considers he is capable of exercising independent judgement and brings significant experience and business knowledge to the Board. The Board also considers the Chair’s ongoing tenure is critical for continuity and leadership given recent senior executive changes and organisational changes, including the integration of an Authorised Deposittaking Institution (ADI) business into the Challenger Group.

Determination of materiality in assessing independence

The materiality of a relationship is assessed on a case-by-case basis having regard to each Director’s individual circumstances.

Conflicts of interest

In accordance with the Board Charter and the Corporations Act, any Director with a material personal interest in a matter being considered by the Board must declare such an interest and may only be present when the matter is being considered at the Board’s discretion. Directors with a material interest may not vote on any matter in which they have declared a personal interest.

Meetings of the Board

The Board meets formally approximately eight times a year. Details of Directors’ meetings are set out in the table on page 9.

In addition, the Board may meet, in person or via electronic means, whenever necessary, to resolve specific matters needing attention between scheduled meetings.

The CEO, in consultation with the Independent Chair, establishes the meeting agendas to ensure adequate coverage of strategic, financial and material risk matters throughout the year. Senior executives regularly present at Board meetings and are available to be contacted by Independent Non-Executive Directors between scheduled Board meetings.

Board access to information and advice

Contents

All Directors have access to the necessary records and information to fulfil their responsibilities. The Company Secretary and General Counsel provide Directors with guidance on corporate governance issues and developments, and on other matters reasonably requested by the Directors.

Challenger’s approach

Principle 1

The Board, or each Director, has the right to seek independent professional advice to assist them in discharging their duties. Challenger will meet the cost of the advice provided the Chair’s prior approval, where Principle 2 Principle 2 appropriate, is obtained.

Board committees

To assist it in undertaking its duties, the Board has established the following standing committees:

Principle 3

• Group Risk Committee (GRC);

• Group Audit Committee (GAC);

Principle 4

• Group Remuneration Committee (GRemCo); and

• Nomination Committee (NomCo).

Principle 5

Each committee has its own charter, copies of which are available at challenger.com.au.

The charters specify the composition, responsibilities, duties, reporting obligations, Principle 6 meeting arrangements, authority and resources available to the committees and the provisions for review of the charter. Details of Directors’ membership of each Principle 7 committee and those eligible members’ attendance at meetings throughout the period from 1 July 2020 to 30 June 2021 are set out on page 9.

Principle 8

9 Challenger Limited 2021 Corporate Governance Statement

Challenger’s approach

Principle 1

Principle 2 Principle 2

==> picture [63 x 43] intentionally omitted <==

Directors’ meetings

Director	Board Group Risk Committee Group Audit Committee Group Remuneration Committee Nomination Committee
	Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended Eligible to attend Attended
P Polson	11 11 4 4 4 4 5 5 3 3
R Howes	11 11 - - - - - - - -
J M Green	11 10 4 3 4 3 5 4 3 3
S Gregg	11 10 4 4 4 4 5 5 3 3
M Kobayashi	11 11 - - - - - - 3 3
H Smith1	5 5 2 2 2 2 - - 1 1
J Stephenson	11 11 4 4 4 4 5 5 3 3
D West	11 11 4 4 4 4 - - 3 3
M Willis	11 11 4 4 4 4 - - 3 3

Contents

Principle 3

1 Dr Smith was appointed as a Director and a member of the Group Risk Committee, Group Audit Committee and Nomination Committee with effect from 20 January 2021.

==> picture [718 x 219] intentionally omitted <==

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

10 Challenger Limited 2021 Corporate Governance Statement

Principle 3 Principle 3

==> picture [63 x 43] intentionally omitted <==

Principle 3 – Instil a culture of acting lawfully, ethically and responsibly

Contents

executives and Directors from attending events, in their official capacity, where funds are raised for these purposes.

the GRC and the Board. Non-compliance with the Code of Conduct and supporting policies may result in disciplinary action, including impacts to reward or ultimately termination of employment.

The Board and Challenger’s commitment to ethical and responsible decision-making is reflected in the internal policies and procedures, underpinned by Challenger’s values. The values set out the employee behaviour needed to meet community expectations and to support Challenger to deliver on its corporate strategy and strategic priorities. Challenger’s values are:

Political Donations Policy

The Board has adopted a policy of not making political donations in any country or jurisdiction in which it operates. The policy prohibits Challenger from making donations, or contributing funds, to any political party, parliamentarian, elected official or candidate for political office, and prohibits Challenger employees,

Challenger’s approach

Challenger seeks to actively participate approach in effective policy development and will submit views to governments and other political stakeholders on matters that affect Challenger, its customers, shareholders and the wider community. Principle 1

Whistleblower Policy

Challenger is committed to an open culture in which concerns and issues about wrongdoing are disclosed in a supportive environment.

• Act with integrity – we do things the right way;

• Aim high – we deliver outstanding results;

The Challenger Whistleblower Policy outlines the framework and sets out avenues for disclosures to be made on an anonymous basis. Material incidents are included in the reports by the CRO to the Board and GRC.

==> picture [350 x 335] intentionally omitted <==

Principle 2

• Collaborate – we work together to achieve shared goals; and

• Think customer – we make decisions with our customers front of mind.

A copy of Challenger’s Whistleblower Policy is available at challenger.com.au.

Code of Conduct

Fraud and Corruption Policy

Challenger’s Code of Conduct, adopted by the Board, applies to all Directors, executives, employees, consultants and contractors of Challenger and the Group. It articulates the standards of honest, ethical and law-abiding behaviour expected by Challenger.

Challenger is committed to the highest level of integrity and ethical standards in the way it conducts business.

Principle 4

Challenger has a Fraud and Corruption Policy which is available at challenger.com.au. The policy applies to all Challenger employees, and the consultants, Directors, officers, agents and contractors who provide services to Challenger and the Group.

Employees are actively encouraged to bring any issues or concerns to the attention of management or the Board, including activities or behaviour that may not comply with the Code of Conduct, other Group policies and procedures, regulatory requirements or laws. They can also do this anonymously using Challenger’s whistleblower reporting process. A copy of the Code of Conduct is available at challenger.com.au.

Principle 5

Principle 6

Employees are encouraged to report suspected fraudulent or corrupt activities.

Incidents and breaches pertaining to bribery and corruption are part of the reporting by the CRO to the Board and GRC.

Principle 7

Consequence management procedures exist for breaches of the Code of Conduct and supporting policies. Material breaches of the Code of Conduct are reported to

Principle 8

11 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

Director and Employee Trading Policy

The Board has approved a trading policy which prescribes the manner in which Directors and employees can trade in Challenger’s securities.

Pre-trade approval is required for all trading in Challenger securities.

Directors and employees are prohibited from trading in Challenger securities at any time while in possession of nonpublic price-sensitive information. In addition, Directors and employees are prohibited from trading in Challenger securities at certain times prior to the release of Challenger’s half-year and fullyear financial results to the ASX. Other prohibited periods may also be imposed in accordance with the trading policy.

Challenger’s trading policy prohibits any employees from hedging any unvested performance rights which they received as part of their remuneration.

It is also Challenger policy to prohibit Directors and employees from taking margin loans over Challenger shares.

Sustainability

Challenger has a clear sustainability strategy that supports its business strategy.

Information about the Group’s strategy and progress are reported in accordance with the Global Reporting Initiative Standards in Challenger’s 2021 Sustainability Report, which is available at challenger.com.au/ sustainabilityreport2021.

Human rights

To demonstrate its commitment to human rights, Challenger published its first Human Rights Statement in 2021, outlining guiding principles on the way it approaches human rights considerations throughout its operations. A copy of Challenger’s Human Rights Statement is available at challenger.com.au.

Challenger also published its first Modern Slavery Statement, in accordance with the requirements of the Modern Slavery Act 2018 (Cth), in March 2021, in respect of the year ended 30 June 2020.

In accordance with the Modern Slavery Act, Challenger will continue to monitor and assess modern slavery risks across its operations, investments and supply chain and will lodge its 2021 Modern Slavery Statement with the Australian Border Force before the reporting deadline. This statement will also be available on Challenger’s website.

==> picture [350 x 490] intentionally omitted <==

Contents

Challenger’s approach

Principle 1

Principle 2

Principle 3 Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8

12 Challenger Limited 2021 Corporate Governance Statement

Principle 4 Principle 4

==> picture [63 x 43] intentionally omitted <==

Principle 4 – Safeguard the integrity of corporate reports

independence and the appropriateness of non-audit services that the external auditor may provide. A copy of the GAC Charter is available at challenger.com.au.

Integrity of corporate reports

The Board has the responsibility to ensure the truthful and factual presentation of Challenger’s financial position. The Board has established the Group Audit Committee (GAC) to assist the Board to focus on issues relevant to the integrity of Challenger and the Group’s financial reporting. In accordance with its Charter, the GAC comprises a majority of Independent NonExecutive Directors and has at least three members. The GAC must be chaired by an Independent Non-Executive Director, who is not Chair of the Board.

Declaration by the CEO and CFO

In respect of the financial report for the year ended 30 June 2021, the Board has received a written declaration from the CEO and the CFO that:

• in their opinion, the Group’s financial records have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the Group; and

Details of the qualifications and experience of the members of the GAC are described in the Directors’ Report in the 2021 Annual Report, a copy of which is available at challenger.com.au/ annualreport2021.

• the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

The GAC typically meets four times a year, and additional meetings are scheduled as required.

Independent external audit

Challenger requires its independent external auditor to:

The members of the GAC and attendance at meetings are set out in the table on page 9.

• provide stakeholders with assurance as to whether the Group’s financial reports are true and fair; and

The GAC is responsible for reviewing the half-yearly and annual financial reports, and all other financial information prepared for Challenger’s financial statements with management, advisers and auditors to ensure the reports and information provide a true and fair view of Challenger’s financial position and performance.

• ensure that Group accounting policies comply with applicable accounting standards and guidance.

Challenger’s independent external auditor is Ernst & Young (EY). EY was first appointed in November 2003, and this appointment was ratified by shareholders at the AGM in November 2004. A competitive tender process was conducted in 2014, resulting in the re-appointment of EY.

The GAC makes recommendations to the Board in relation to the appointment, review and removal of an external auditor, assessment of the external auditor’s

The external auditor attends Challenger’s AGMs and is available to answer shareholder questions relating to the external audit.

is contained in the Sustainability Report available at challenger.com.au/ sustainabilityreport2021), a thorough internal review and verification process is undertaken to ensure accuracy of the reports. Working groups (comprising relevant internal stakeholders and other external subject matter experts) are established to review and verify material statements of facts and opinions in the periodic corporate reports. Before it approves the corporate reports, the Board receives confirmation from management that the reports are true and accurate.

Verification of non-audited periodic corporate reports

Where periodic corporate reports are not audited or reviewed by external auditors (such as this Corporate Governance Statement or Challenger’s Sustainability Report, other than the carbon disclosure, which is audited by an independent auditor whose verification

==> picture [350 x 295] intentionally omitted <==

Contents

Challenger’s approach

Principle 1

Principle 2

Principle 3

Principle 5

Principle 6

Principle 7

Principle 8

13 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

Principle 5 – Make timely and balanced disclosure

==> picture [534 x 469] intentionally omitted <==

Continuous Disclosure Policy

Challenger is committed to ensuring that all investors have equal and timely access to material information about Challenger and that its announcements are factual and presented in a clear and objective manner.

The Board has approved and implemented a Continuous Disclosure Policy. A copy of the policy is available at challenger. com.au. The policy is designed to ensure compliance with the Corporations Act and the ASX Listing Rules continuous disclosure requirements.

The Board has established a Continuous Disclosure Committee, which is responsible for:

• ensuring that full consideration is given to the appropriateness, quality and adequacy of the information that is released to the market;

• making decisions on what should be disclosed publicly under the Continuous Disclosure Policy; and

• ensuring that disclosure is made promptly and without delay.

The Board receives a copy of all material ASX announcements by Challenger, and the Continuous Disclosure Committee may, where appropriate, refer major disclosure decisions to the Board for its approval.

All materially price-sensitive announcements made by Challenger are lodged with the ASX and made publicly available via the ASX company announcements platform before being discussed with or disseminated to stakeholders. All shareholder and analyst presentations given by Challenger that contain new material information are lodged with the ASX ahead of the presentation.

==> picture [63 x 474] intentionally omitted <==

----- Start of picture text -----

Contents
Challenger’s
approach
Principle 1
Principle 2
Principle 3
Principle 4
Principle 5 Principle 5
Principle 6
Principle 7
Principle 8
----- End of picture text -----

14 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

Principle 6 – Respect the rights of security holders

Challenger also provides a facility to ask questions about its business via its website, which are answered directly. Interested parties can register via the website to receive updates regarding material Challenger market announcements.

Maintaining relationships with shareholders and noteholders

Challenger recognises the importance of enhancing its relationships with shareholders and noteholders by:

• communicating effectively;

Annual General Meeting (AGM)

• providing ready access to clear and balanced information about Challenger; and

Challenger believes that AGMs provide an important opportunity for shareholders to engage with the Board and management of their company.

• encouraging participation at AGMs.

Challenger’s Investor Relations Practice Note details its approach to facilitating effective two-way communication and is available at challenger.com.au.

A formal notice and AGM documents are sent to shareholders at least 28 days in advance of the meeting. The AGM documents include explanatory notes that clearly explain the nature of the AGM business and the resolutions to be put to shareholders.

Online and electronic communication with Challenger is encouraged

Subject to any Government-imposed restrictions on physical gatherings, the 2021 AGM will be held as a ‘hybrid’ meeting, which will enable shareholders to attend either physically or virtually. Challenger’s Board believes this method is the best way to engage with the broadest range of shareholders. Shareholders who are unable to attend the AGM, either in person or virtually via their electronic device, are encouraged to appoint a proxy in advance of the meeting.

As set out in Principle 5, it is Challenger’s policy to announce to the market material information about Challenger in a timely, clear, balanced and objective manner.

Following release to the ASX, Challenger publishes half-yearly and annual reports, major announcements and other relevant information, including corporate governance information, on its website.

Half and full-year financial results and Investor Days are webcast, enabling greater shareholder participation. Challenger also encourages shareholders to receive reports, communications and announcements electronically.

Generally, all resolutions being considered at Challenger’s AGMs are decided by a poll rather than a show of hands. The AGM voting result is lodged with the ASX as soon as practicable after the AGM and published on the Challenger website.

Shareholders are encouraged to, and do, regularly communicate electronically with Challenger’s registry, Computershare Investor Services, on all matters relating to their holdings.

==> picture [350 x 468] intentionally omitted <==

Contents

Challenger’s approach

Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6 Principle 6

Principle 7

Principle 8

15 Challenger Limited 2021 Corporate Governance Statement

Principle 7 Principle 7

==> picture [63 x 43] intentionally omitted <==

Principle 7 – Recognise and manage risk

Committee (ERMC), which is chaired by the CRO. The CRO is independent of the business units and accountable to the CEO, the Board and its committees.

Risk management and compliance

The management of risk is fundamental to the Group’s business, supporting better outcomes for our customers and building shareholder value. At Challenger, risk is everybody’s business.

An integral part of risk management for the Group is the maintenance of a strong risk culture among its employees. The Group’s expectations of its employees are encapsulated in the Challenger values.

The Board’s Risk Appetite Statement outlines the level of risk that is acceptable in striving to achieve the Group’s strategic goals and financial objectives. This is combined with an effective risk management framework, which monitors, mitigates and manages the risks to which the Group is exposed.

The Board has established the Group Risk Committee (GRC), which is comprised of a majority of Independent Non-Executive Directors and has at least three members.

The GRC is chaired by an Independent Non-Executive Director, who is not the Chair of the Board.

The Board recognises the broad range of risks the Group faces as a participant in the financial services industry, including funding and liquidity risk; investment and pricing risk; counterparty risk; strategic, business and reputation risk; operational risk; licence and regulatory risk; climate change risk; and conduct risk. The Board also maintains a focus on contemporary and emerging risks, monitoring key risks to Group strategy.

The GRC meets a minimum of four times a year, and additional meetings are scheduled as required.

The members’ names and details of attendance at meetings are set out on page 9.

On a day-to-day basis, the Risk division, which is separate from the operating segments of the business, has responsibility for monitoring the implementation of the risk management framework, including the monitoring, reporting and analysis of the various risks faced by the business, and providing effective challenge to activities and decisions that may materially affect Challenger’s risk profile. Internal processes have been put in place to confirm that material transactions undertaken by the Group are in line with the Board’s risk appetite.

The Leadership Team is accountable for managing the risks within their divisions and is required to manage risk as part of business objectives, with risk management integrated across business processes. There are clear accountabilities for risk management for all Challenger employees and these are measured through Challenger’s annual performance management process.

Oversight, analysis, monitoring and reporting of these risks is conducted by the Executive Risk Management

The GRC reports to the Board on the effectiveness of the risk framework and

internal controls. Challenger undertakes a detailed review of the Group’s risk management strategy on an annual basis, including the financial year ended 30 June 2021, to satisfy the GRC and the Board that it continues to be sound.

While Challenger’s risk management framework remains robust and continues to operate efficiently, Challenger seeks continual improvements to enhance the framework. In addition, the risk management framework is reviewed on an ongoing basis against the external environment and internal reporting.

A summary of Challenger’s risk management framework and a copy of the GRC Charter can be found at challenger.com.au.

Internal audit

Internal audit services for the Group were provided by KPMG during the financial year ended 30 June 2021. The GRC oversees the scope of internal audit and monitors the progress of the internal audit work program, which must include (at least annually) an evaluation of compliance with and effectiveness of the Group’s risk management framework.

The GRC receives reports from internal audit at each meeting and monitors management’s responsiveness to internal audit findings and recommendations.

The internal audit function is independent of the external auditor and reports directly to the GRC.

Material exposure to environmental or social risks

There are a number of material business risks that could adversely affect the Group and the achievement of the Group’s financial performance objectives. Those risks and how those risks are managed by the Group are described in Note 19 to the financial statements in the 2021 Annual Report, a copy of which is available at challenger.com.au.

Challenger considers climate change risk both in terms of its investment decisionmaking and ownership practices, and how it manages the environmental impact from its direct operations.

Challenger’s approach to climate change is outlined in its Climate change statement, which is available at challenger.com.au/ annualreport2021.

ESG risks and how they are managed by the Group are described in Challenger’s Sustainability Report, which is available at challenger.com.au/sustainabilityreport2021.

Contents

Challenger’s approach

Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 8

16 Challenger Limited 2021 Corporate Governance Statement

==> picture [63 x 43] intentionally omitted <==

Principle 8 – Remunerate fairly and responsibly

• the design of any incentive plan; and

The Group Remuneration Committee (GRemCo)

• the design of any equity-based plan, including any performance hurdles.

The Board has established the GRemCo, which is comprised of a majority of Independent Non-Executive Directors and has at least three members. The GRemCo is chaired by an Independent NonExecutive Director.

Remuneration

Setting and overseeing remuneration policies and practices is a key responsibility of the Board. The policies and practices are aligned with the Group’s vision, Challenger’s values and overall business objectives, and take into account Challenger’s long-term financial soundness and risk management framework.

Details of the qualifications and experience of the members of the GRemCo are described in the Directors’ Report contained in the 2021 Annual Report, which is available at challenger.com.au/ annualreport2021.

The remuneration details for key management personnel and NonExecutive Directors are included in the Remuneration Report, which is contained in the Directors’ Report in the 2021 Annual Report, available at challenger.com.au/annualreport2021.

The GRemCo usually meets at least five times during the year, and additional meetings are scheduled as required. A copy of the GRemCo Charter can be found at challenger.com.au.

The members’ names and details of attendance at meetings are set out on page 9.

Non-Executive Directors are not entitled to participate in Challenger incentive plans.

There are no termination payments to Non-Executive Directors on their retirement from office other than payments accruing from superannuation contributions comprising part of their remuneration.

The GRemCo is responsible for reviewing and making recommendations to the Board on:

• Challenger’s remuneration, recruitment, retention and termination policies and procedures for senior executives;

• senior executives’ remuneration and incentives;

• superannuation arrangements;

• the remuneration framework, including the reimbursement of expenses for Directors;

• remuneration by gender;

• the performance of the CEO, at least annually, including setting with the CEO goals for the coming year and reviewing progress in achieving those goals;

==> picture [350 x 468] intentionally omitted <==

Contents

Challenger’s approach

Principle 1

Principle 2

Principle 3

Principle 4

Principle 5

Principle 6

Principle 7

Principle 8 Principle 8