CHALLENGER LIMITED — Management Reports 2021

2021 Annual Review

financial security for a better retirement

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challenger.com.au Challenger Limited ACN 106 842 371

Challenger Limited 2021 Annual Review

Contents

2021 highlights	01
2021 fnancial performance	02
About us	03
Chair and CEO report	05
Life business	07
Funds Management business	09
Bank acquisition	12
Sustainability	13
Board of Directors	16
Leadership Team	17

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Key dates

22 September 2021 Final dividend payment date 28 October 2021 2021 Annual General Meeting 17 February 2022 Half-year financial results 22 March 2022 Interim dividend payment date 16 August 2022 Full-year financial results 21 September 2022 Final dividend payment date

27 October 2022 2022 Annual General Meeting

Full listing of key dates available at

›[challenger.com.au/share/keydates]

Dates may be subject to change. Any change in dates will be advised to the Australian Securities Exchange.

About this Review

This Annual Review provides information about your company in an easy-to-read document. Included in the Annual Review is a performance update, report from the Chair and Chief Executive Officer, and information on the environmental, social and governance matters that affect your company.

All numbers are as at 30 June 2021 unless otherwise stated.

The 2021 Annual Review can be viewed online at:

• ›[challenger.com.au/ ] annualreview2021

Annual Report

Can be viewed online at:

• ›[ challenger.com.au/ ] annualreport2021

Sustainability Report

Can be viewed online at:

• ›[challenger.com.au/] sustainabilityreport2021

Corporate Governance Statement

Can be viewed online at:

• ›[challenger.com.au/] corporategovernance2021

Annual General Meeting

Date

28 October 2021

Time

9.30 am (Sydney time)

Location

To be determined and subject to COVID-19 pandemic requirements.

Full details of the meeting will be included in your Notice of Annual General Meeting, which will be sent to shareholders in September 2021.

Board Nominations

The closing date for receipt of nominations for the Challenger Limited Board is 25 August 2021.

Challenger Limited 2021 Annual Review

2021 highlights

Strategic progress over 2021 has been measured against the core strategic pillars that have been in place for many years

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Increase the use of secure retirement income streams

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Lead the retirement Provide our customers Maintain leading incomes market and be with excellent funds operational and the partner of choice management solutions people practices

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35 [%]
Record Life sales
of $6.9bn
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85[%] Employee engagement[3]

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Annuity Provider Fidante Partners
of the Year [1] Distributor of the Year [2]
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81[[%]]

81[[%]] 35[%] Institutional Net Promotor Fidante Partners Recognised as a global guaranteed business Score[4] new boutique and top 100 employer for partnerships gender equality[[5]] Customers Shareholders Purpose Community Employees 91[%] Acquired Overall satisfaction Expanding offshore with Refreshed MyLife MyFinance Bank[6] with Challenger[4] new Singapore office corporate strategy b h in or

Fidante Partners Recognised as a global new boutique and top 100 employer for partnerships gender equality[[5]]

1 Challenger Life Company Limited won the 2020 Association of Financial Advisers Overall Annuity Provider of the Year and Long Term Income Stream of the Year.

• 2 Zenith Fund Awards 2020.

• 3 Willis Towers Watson March 2021.

• 4 Fifth Quadrant, February 2021.

• 5 Challenger was recognised as a top 100 employer in the Equileap Global Gender Equality rankings, 2021.

• 6 MyLifeMyFinance Limited ABN 54 087 651 750.

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Challenger Limited 2021 Annual Review

2021 financial performance

Statutory net profit/(loss) after tax ($m)

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592
308
Normalised net
profit after tax and
investment gains
on Life’s investment
portfolio
(416)
FY19 FY20 FY21
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Normalised net profit after tax ($m)[1]

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396
344
279 Reflects more
defensive portfolio
settings and higher
levels of capital
FY19 FY20 FY21
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Dividends (cps)

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35.5
20.0 cps fully franked
48% of normalised
20.0
17.5 earnings paid
FY19 FY20 FY21
 Interim  Final
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Group assets under management
($bn)
110
85
82
Strong growth across
both Life and Funds
Management
FY19 FY20 FY21
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Life sales ($bn)

Funds Management net flows ($bn)

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16.1
6.9
5.1
4.6 Sales up 35% Diversified client base
Strong contribution and product offering
from institutional Record net flows and
sales 2.5 FUM growth
(2.4)
FY19 FY20 FY21 FY19 FY20 FY21
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1 The normalised profit, which is not statutory profit, is not audited but subject to a review by Challenger’s auditor. Normalised profit framework and a reconciliation to statutory net profit after tax is disclosed in the 2021 Annual Report – Operating and Financial Review section.

2

Challenger Limited 2021 Annual Review

About us

Challenger was founded in 1985 and is Australia’s largest annuity provider[1] and one of the largest active fund managers[2]

In June 2021, we announced a refreshed corporate strategy that builds on the foundations of the core strategic pillars that have been in place for many years.

The refreshed corporate strategy will make Challenger stronger and more relevant for the future as we seek to further expand our offering for retirees.

Providing customers with financial security for a better retirement remains Challenger’s purpose, which will be

served by providing both guaranteed income products such as lifetime annuities and bank term deposits, as well as nonguaranteed funds management products that help people save for retirement.

Challenger has introduced explicit vision statements for each key stakeholder group: customers; shareholders; employees and the community to help clarify Challenger’s objectives and long-term ambitions.

Our purpose is to provide our customers with financial security for a better retirement

Vision statements

Strategic priorities

Customers Community By 2030 we will provide 1 in 5 Champion financial security for Australian retirees with improved retirement, providing financial financial outcomes as consumers help and education, advocating of Challenger products, and be for constructive public policies the partner of choice for and leading by example with institutions and advisers. responsible business practices. Employees Shareholders Bring together a diverse group Build resilient long-term of top talent, inspired by our shareholder value, leveraging purpose, with strong culture the capabilities of the group to and capabilities to deliver achieve compelling returns shared success. above our cost of capital.

Expand the Broaden range of financial customer access products and across multiple services for a channels better retirement Leverage the Strengthen combined resilience and capabilities of sustainability the group of Challenger

Values

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Act with Think
Aim high Collaborate
integrity customer
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2 Consolidated FUM for Australian Fund Managers – Rainmaker Roundup, March 2021.

1 Plan For Life – March 2021 – based on annuities under administration.

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Challenger Limited 2021 Annual Review

To fulfil our purpose, Challenger will leverage capabilities across three distinct businesses

Life

Australia’s largest annuity provider[1]

Life focuses on the retirement spending phase of superannuation, providing products that help customers convert retirement savings into safe and secure income in retirement.

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Funds Management

Australia’s 3rd largest[2] and one of the fastest growing active fund managers[3]

Focuses on building savings for retirement by providing investment strategies that seek to deliver superior investment returns.

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Bank

Australian-based consumer digital bank

Challenger completed the acquisition of MyLife MyFinance Bank in July 2021 and provides Challenger the opportunity to significantly expand its secure retirement income offering, including entering Australia’s term deposit market.

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1 Plan For Life – March 2021 – based on annuities under administration.

2 Consolidated FUM for Australian Fund Managers – Rainmaker Roundup, March 2021.

3 Plan For Life Wholesale Trust Data, September 2020, December 2020 and March 2021.

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Challenger Limited 2021 Annual Review

Chair and CEO report

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While Challenger has faced significant challenges over recent years, with major disruption in the wealth market followed by the impacts of COVID-19, we are pleased to report that your business has demonstrated its resilience and enters 2022 in a strong position.

The business is strongly capitalised, our strategy to diversify distribution channels and product offering is working, and our Funds Management business continues to deliver standout growth.

Challenger is a company with positive business momentum and a clear strategy to capture the growth opportunities created by long-term structural tailwinds. The superannuation system continues to grow, and an increasing focus on retirement solutions following the Retirement Income Review has highlighted the benefits of guaranteed products.

Challenger is uniquely placed to capture the benefits of these tailwinds, with both our Life and Funds Management businesses enjoying market-leading positions and, with the recent addition of a banking licence, we will extend our customer and product reach. Importantly, as the leader in retirement incomes, we can play a meaningful role in supporting older Australians through financial security that can last for life.

2021 financial performance

Underpinning future growth, the business achieved record assets under management of $110 billion, up 29% driven by strong contributions from both the Life and Funds Management businesses. Normalised net profit before tax of $396 million was within our guidance range and reflected the more defensive and enhanced risk settings maintained throughout the pandemic.

Statutory net profit after tax was $592 million, including positive investment experience of $319 million.

The more defensive portfolio and enhanced risk settings adopted by the Life business in response to the pandemic related market shock, along with the high levels of cash progressively deployed throughout the year, resulted in a lower return on equity, noting we will realise the full benefit of the deployment of these funds in FY22.

Reflecting confidence in the business and its capital position, the Board resumed paying dividends after pausing during the early stages of the pandemic. The Board declared a final dividend of 10.5 cents per share, bringing the full year dividend to 20.0 cents per share, up 14%, fully franked.

Life

Challenger’s strategy to diversify our product offering and distribution channels has seen us achieve record sales in FY21. Life sales increased 35% on last year with growth achieved across all key segments, driving a 14% increase in the size of Life’s business.

Sales benefited from improved stability in the advice market, a renewed focus on institutional sales, and Japan delivering sales above target.

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Challenger Limited 2021 Annual Review

Funds Management

Our Funds Management business has been a standout performer again this year. Challenger is now Australia’s third largest and one of the fastest growing active fund managers.

This success has been driven by our diversified client base and expanded product offering, and we are now looking to diversify globally. The business saw record net flows of $16 billion and funds under management increased by $24 billion to reach $106 billion.

Strong corporate governance

Our commitment to effective corporate governance is a key underpinning in our approach to building our strong and resilient business. This year we have continued to renew our Board to ensure it has the mix of skills, perspectives and tenure to fulfil its duties. Some of the critical work we’ve done this year has included overseeing the refinement of Challenger’s strategy and supportive executive changes, responding to shareholder feedback on our remuneration approach, and refining the sustainability strategy. This work is designed to ensure we create value for stakeholders over the short, medium and long term.

In January, we welcomed Dr Heather Smith as an independent Non-Executive Director. Dr Smith has over 20 years’ experience in senior government roles, most recently as Secretary of the Federal Department of Industry, Innovation and Science. Dr Smith will stand for election at this year’s Annual General Meeting.

Our Board now has an average tenure of six years and 33% are women. We have a strong mix of backgrounds and capabilities and a deep commitment to serving the interests of our shareholders.

Ensuring fair and appropriate remuneration outcomes for Key Management Personnel (KMP) remains an important focus for the Board. This year we have taken significant action in response to shareholder concerns following the first strike against our 2020 remuneration report. This includes extensive consultation with shareholders, changes to our reward framework, and ensuring remuneration outcomes for executives are clearly differentiated to reflect the performance of our different businesses.

Our leadership team includes a mix of new and long-standing members with a diverse range of skills and experience. In May, we welcomed Rachel Grimes as our new Chief Financial Officer (CFO). Rachel brings an outstanding track record as a leader in her field and we are excited to have her join our team. We have also made changes to our Leadership executive team to streamline our structure and better support delivery of our long-term strategy.

Corporate strategy

In June, we published our refreshed corporate strategy which sets a clear path forward to create long-term sustainable growth.

Providing our customers with financial security for a better retirement remains at the core of our strategy. This includes a customer vision to provide one in five Australian retirees with improved financial outcomes as customers of Challenger by 2030. We will achieve this through the expansion of our products and services and by broadening access via multiple channels right across our businesses.

The acquisition of MyLife MyFinance bank is an important part of this strategy and creates the opportunity to further diversify our product offering. It also accelerates our plans to build relationships directly with customers, complementing our other well-established distribution channels including financial advisers and a broad range of institutional clients.

As we embark on this ambitious plan for growth, we must ensure we continue to appropriately balance our risk settings to protect our growing brand and customer franchise.

With this in mind, we have enhanced our capital settings and this also aligns with our strategic priority to strengthen the resilience and sustainability of our business.

Finally, we would like to thank our Board and highly engaged and committed team who have contributed to the positive outcomes we have achieved this year.

As we look to 2022, our business is in a strong position. In an uncertain global economic environment, we have taken action to reposition our portfolio and strengthen our capital position. We will continue to pursue our growth strategy to deliver our purpose of financial security for a better retirement.

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Peter Polson Independent Chair

Richard Howes Chief Executive Officer

Sustainability

Ensuring a strong, sustainable business is integral to our purpose. Challenger evolved its sustainability strategy this year, reflecting our most material environmental, social and governance opportunities. Responsible investment is an increasing priority across our stakeholder groups, and Challenger’s updated sustainability strategy reflects our strengthened focus in this area.

We have made significant progress on a range of sustainability initiatives that support our business in the near term and position us well for the future, including our ongoing community partnership with the Council on the Ageing NSW; maintaining a high engagement score in our recent employee engagement survey; and recognition once again as an employer of choice for gender equality.

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Challenger Limited 2021 Annual Review

Life business

Life focuses on the retirement spending phase of superannuation, providing products that help customers convert retirement savings into safe and secure income in retirement

As Australia’s leading provider of annuities[1] , Challenger Life is expected to benefit from the longterm growth in Australia’s superannuation system and regulatory reforms designed to enhance the retirement phase.

The Life business includes Challenger Life Company Limited (CLC), an APRA-regulated life insurance company and Australia’s leading provider of annuities and guaranteed retirement income products.

Challenger has been recognised as a retirement income product innovator and has won the Association of Financial Advisers ‘Annuity Provider of the Year’ for the last 13 years and remains the dominant retirement income brand in Australia.

In Japan, Life has an annuity relationship with Mitsui Sumitomo Primary Life Insurance Company Limited, a leading provider of foreign currency annuities in Japan and a subsidiary of MS&AD Insurance Group Holdings Inc., to provide Australian dollar and US dollar annuities.

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Life
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Australia’s leading provider of annuities
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“Our strategy to diversify sales and revenue is working. The Life business delivered record sales and is in a solid position. We remain very strongly capitalised and have solid foundations in place to support our next phase of growth.”

Angela Murphy – Chief Executive, Life

Life’s 2021 financial performance

Average investment assets ($bn)

Normalised EBIT[2] ($m)

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19.7
19.2
18.5
Value of assets
managed by Life
Growth driven by
record sales
FY19 FY20 FY21
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564
525
399
Preferred measure
of business
performance
Reflects more
defensive investment
portfolio returns
FY19 FY20 FY21
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1 Plan for Life – March 2021 – based on annuities under administration.

2 Earnings before interest and tax (EBIT).

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Challenger Limited 2021 Annual Review

Record Life sales

Challenger is focused on diversifying its sales in order to build a more resilient business

Sales increased across all key product categories, including domestic annuities (up 19%), institutional guaranteed business (up 53%), and Japanese annuity sales (up 6%).

Total Life sales increased by 35%, benefiting from Challenger’s diversification strategy, which includes:

• Increasing focus on the institutional channel (refer below for more detail);

• Working with a wider range of independent financial advice networks following structural change in the domestic advice market; and

• Leveraging its MS Primary annuity relationship in Japan, including reinsuring US dollar denominated products.

Challenger has a reputation for providing an excellent customer experience, with a Net Promoter Score of 35%, and 91% of clients satisfied or very satisfied.[1]

Life sales ($m) FY21 sales up 35%

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+35%
+6%
+53%
+19%
FY17 FY18 FY19 FY20 FY21
 Retail  Institutional  Japan
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Institutional partnerships and collaboration

Challenger is focused on providing institutional investors with targeted retirement solutions and partnering with them to help provide their members with financial security in retirement

We support our partners by obtaining an understanding of the needs of their clients and take a solutions-based approach.

Life has four solution pillars to innovate creatively and assist clients. Our proposition is highly differentiated, and it is this differentiation that is driving strong growth.

We do this by offering innovative strategies catering to the needs of superannuation funds, insurance companies and multi-managers.

Life’s institutional business continues to grow strongly and increased by 81% over FY21, and has increased by an annual growth rate of 32% each year for the past five years.

Superannuation fund clients are increasing their focus on providing retirement income solutions for their members as they transition to retirement.

The focus on more comprehensive solutions, including using guaranteed income products, by profit-for-member clients represents a significant growth opportunity for Challenger.

Challenger Life Institutional offering has four solutions pillars

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We enable our clients to execute their commercial and investment goals
Investment Retirement
Beta Income Retirement Defined Benefit
solutions solutions solutions solutions
• Tailored index solutions • Return enhancement • Longevity hedging • Liability de-risking
• Contractual alpha • Bond alternative • Sequencing risk control • Successor fund transfer
• Zero management fees • Cash flow matching • Decumulation strategy • Defeasing pension liability
• Zero tracking error • Product development
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1 Fifth Quadrant, February 2021.

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Challenger Limited 2021 Annual Review

Funds Management business

Funds Management focuses on building savings for retirement by providing investment strategies that seek to deliver superior investment returns

Funds Management is Australia’s third largest active fund manager[1] and is diversifying globally, with operations in Europe, Japan and Singapore.

The Funds Management segment comprises two business divisions, Fidante Partners and CIP Asset Management (CIPAM).

The Fidante Partners’ business model involves taking minority equity interests in separately branded boutique funds management firms, with Challenger providing distribution, administration and business support, leaving investment managers to focus entirely on managing investment portfolios.

Fidante Partners’ business model has allowed it to attract and build successful active equity, active fixed income and alternative investment managers, while maintaining strong investment performance.

CIPAM principally originates and manages fixed income and commercial real estate, along with providing investment solutions for leading global and Australian institutions, including Challenger Life.

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Funds Management
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Australia’s 3rd largest[1] and one of the fastest growing active fund managers[2]

“Our Funds Management business is the third largest and one of the fastest growing active fund managers in the country. It’s a standout performer among its peers and has many avenues for ongoing growth.”

Nick Hamilton – Chief Executive, Funds Management

Funds Management’s 2021 financial performance

Funds Under Management (FUM) ($bn)

Funds Management EBIT[3] ($m)

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105.8
71
79.0 81.4
58
51
Value of assets managed Preferred measure of
Increased by 30% business performance
providing ongoing Earnings growth driven
earnings momentum by FUM growth
FY19 FY20 FY21 FY19 FY20 FY21
 Fidante Partners  CIP Asset Management
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• 1 Consolidated FUM for Australian Fund Managers – Rainmaker Roundup, March 2021.

• 2 Plan For Life Wholesale Trust Data, September 2020, December 2020 and March 2021.

• 3 Earnings before interest and tax (EBIT).

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Challenger Limited 2021 Annual Review

Expanding capability through partnerships with best-in-class investment managers

Fidante Partners is expanding its offering by developing new investment strategies for existing managers, adding new boutiques and forming partnerships with best-in-class investment managers

Over the last two years, Fidante Partners has evolved its business model with the formation of partnerships with best-in-class asset managers, providing clients with differentiated investment products.

In 2019, Fidante Partners and Ares Management Corporate (NYSE: ARES) formed a strategy joint venture, Ares Australia Management (AAM). Since then, AAM has designed and launched two new credit funds.

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In 2020, Fidante Partners’ European business partnered with Proterra Investment Partners, a leading private equity fund manager focused on the food and agribusiness sectors.

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Fidante Partners entered into a distribution partnership agreement with the number one Japanese investment trust manager, Nomura Asset Management. Fidante Partners has been selected to exclusively distribute the Nomura Global Dynamic Bond Fund and Nomura Global Multi-Theme Equity Fund products in Australia and New Zealand.

In 2021, Fidante Partners and global specialist asset manager Impax Asset Management Limited (Impax) entered into a new distribution agreement, with Fidante Partners becoming Impax’s exclusive distribution partner in Australia and New Zealand. Impax is a global leader dedicated to investing in the transition to a more sustainable economy.

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Challenger Limited 2021 Annual Review

CIP Asset Management fixed income product expansion and evolution

Challenger is Australia’s largest fixed income manager managing $57 billion across both Fidante Partners and CIP Asset Management (CIPAM).

Challenger Investment Partners was formed over 20 years ago, with the business evolving from servicing Challenger Life only to providing solutions to a broad range of third party clients.

CIPAM has significantly expanded its retail and high net worth fixed income offering. CIPAM now has three retail focused credit funds, providing investors with a range of return and risk options.

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Return targets range from cash plus three percent per annum to cash plus eight percent per annum.

CIPAM fixed income offering

CIPAM credit income	Targets cash plus three percent per annum
fund	A foating rate, multi-sector credit strategy investing in public and private debt markets. The Fund aims
	to provide high net worth investors with capital stability and income on a regular basis accompanied by
	lower levels of volatility than traditional fxed income strategies.
CIPAM multi-sector	Targets cash plus fve percent per annum
private lending fund	A multi-sector credit strategy investing in Australian and New Zealand private securitised, corporate and
	real estate lending.
CIPAM private lending	Targets cash plus eight percent per annum
opportunities fund	A higher returning fund open to institutional investors, focusing on foating rate investments
	in mezzanine private lending opportunities, primarily within Australia and New Zealand.

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Challenger Limited 2021 Annual Review

Bank acquisition

Challenger is diversifying its product offering and extending its customer reach to drive medium-term growth

In December 2020, Challenger announced the acquisition of MyLife MyFinance Limited (MLMF), an Australian-based customer digital bank, for $35 million[1] .

The acquisition received formal approval from the Treasurer of the Commonwealth of Australia and was completed in July 2021.

MyLife MyFinance is an Australian-based authorised deposittaking institution (ADI) and digital bank, offering a range of simple savings and loans products, including a term deposit offering.

The acquisition is highly strategic and provides Challenger the opportunity to significantly expand its secure retirement income offering, including entering Australia’s term deposit market.

Adding an ADI capability to sit alongside existing Life and Funds Management operations will broaden both Challenger’s product and distribution reach and help fulfil its purpose: to provide customers with financial security for a better retirement.

The bank provides Challenger the opportunity to attract and engage with customers at an earlier age, as they approach and enter the retirement phase, increasing Challenger’s brand recognition amongst pre-retirees.

Challenger will initially offer guaranteed retail term deposits, which are familiar banking products and represent a significant portion of both retiree and pre-retiree wealth.

The Bank will provide Challenger access to a wider range of customers through multiple distribution channels, including new intermediated channels such as the broker term deposit market and accelerate Challenger’s direct to customer capability.

To ensure speed to market, term deposits will initially be marketed under the MyLife MyFinance brand and will transition to the Challenger brand during FY22.

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Digital consumer savings and loans bank

MyLife MyFinance overview

• $133m[2] savings and term deposits

• $107m[2] mortgage book – low Loan to Value Ratio (LVR) exposed to east coast residential

• Average customer age 60 years

• Contemporary technology with recent upgrade to Temenos Transact

1 Acquisition price subject to completion adjustments.

2 As at 30 June 2021.

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Challenger Limited 2021 Annual Review

Sustainability

Through our updated sustainability strategy, we aim to create value for our customers, our shareholders, our employees and the community

Our sustainability strategy

Our sustainability strategy has evolved. It reflects our most material environmental, social and governance opportunities and is aligned to our purpose.

As the focus on responsible investment across stakeholder groups has increased, our updated strategy reflects a strengthened focus on this topic.

Doing things right

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Responsible investment

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Financial security for retirement

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Financially resilient customers and communities

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Constructive public policy settings

Progress implementing our strategy

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Financially resilient customers and communities

Helping our customers and communities to be strong and financially resilient.

• Made over $559 million in guaranteed payments to support more than 54,000 customers

• Upgraded our Investor Online platform, making it easier to use and strengthening its security

• Launched a detailed report examining the employment challenges facing people over 50 with COTA NSW

Constructive public policy settings

Taking action on issues affecting the ability of retirees to achieve financial security.

• Continued advocacy for the inclusion of a retirement income covenant within superannuation law[1]

• Engaged in research and published thought leadership on developing solutions for a better retirement

• Continued dialogue to advocate for outcomes that lead to financial security for older Australians

Doing things right

Designing business practices that focus on our customers, employees, shareholders and the environment.

• Continued to support employees and achieved a sustainable employee engagement score of 85%

• Improved sustainability governance by establishing a Challenger-wide ESG Steering Committee

• Published new public statements covering modern slavery, climate change and human rights

Responsible investment

Investing responsibly by incorporating environmental, social and governance (ESG) considerations.

• Established a Funds Management Responsible Investment Committee

• Became a signatory to the Investors Against Slavery and Trafficking Asia-Pacific initiative

• Joined the Pensions for Purpose initiative through Fidante UK

• Awarded an “A” rating by the UNPRI[2] for Fixed Income and Property strategies

2 UN Principles for Responsible Investment (PRI).

1 The covenant will ensure trustees consider the needs of members in retirement.

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Challenger Limited 2021 Annual Review

What matters most

Through our ongoing stakeholder engagement process, we identified our three most material matters . You can find detailed responses to these and other important sustainability matters in our 2021 Sustainability Report.

1. Trust and confidence

Operating ethically, with strong governance practices and high levels of trust are critical to our ability to operate and deliver for our customers, shareholders, employees and the broader community. We recognise the importance of maintaining a strong culture and high levels of conduct; providing open and transparent disclosures; and responsibly managing risks.

3. Economic, market and regulatory conditions

As an investment management company, Challenger is impacted by market volatility and uncertainty, and the low interest rate trend. The need for diversification and ensuring access to appropriate assets remains an important focus for our business and our stakeholders.

Other material matters

• Investing responsibly

• Climate risk

• Product and technology innovation

• Privacy and security

• Great place to work

• Education and community resilience

2. Better customer outcomes

Challenger is committed to providing better customer outcomes that lead to improved satisfaction and support our customers to achieve financial security for a better retirement. We do this by investing in research to understand more about our customers; designing products to meet customer needs; and continuing to provide a trusted brand.

Our material matters

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Most material
Economic, market and
regulatory conditions
Trust and
confidence
Material
Better customer
outcomes
Product & technology
innovation
Great place to work
Investing
responsibly
Important Privacy and security
Climate risk
Education and
community resilience
Importance to business
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----- Start of picture text -----

Importance to stakeholders
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Challenger Limited 2021 Annual Review

Our community partnership

Through our partnership with COTA NSW, we are developing a program focused on addressing the underemployment of people over 50.

This year, working alongside both COTA NSW and Newgate Research, we published our first piece of research on understanding the needs of older workers and how businesses can enhance their workplaces.

The report also looked at some common barriers to change, identifying that employers need support to both help understand existing issues and to plot a path to a more age-diverse workplace.

Based on the research insights, a program and toolkit are being developed for employers focused on:

• Education and advice for hiring managers;

• Support to promote age diversity and foster age diverse connections; and

• Developing training programs to deliver equal access to upskilling and training opportunities.

Key findings[1]

of employers recognise it is important for the economy to have older people 74% continue working

of older workers report experiencing age discrimination at work, of which 66% did 33% not report it to their employer

23% of employers offer phased retirement, despite 69% of older workers wanting it

of employers thought they were doing enough to support older employees, but only 50% a minority had any support measures

Key findings

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Older workers report being discriminated against in the workforce and say they don’t receive the same opportunities
provided to other workers. They are more likely to be made redundant and stigma remains around their competency
with technology and openness to change. Older women, working part-time or on a casual basis, are most likely to
report having experienced discrimination. Older workers are skilled and able and employers are missing out on the
benefits, which come from the experience, commitment and knowledge they bring to the workforce.
Why older workers matter By 2030, there will be 6 million Hiring
Australians over 65 . In NSW, that will
be more than 1.8 million people, almost
double the number in Ratio of workers to non-workers: 2011. [1] 27%
of older workers report
1976 7 : 1 ageism in hiring practices
2016 4 : 1
2056 2 : 1 47%
of older workers report
being told they were too
experienced
In the workplace
None of the employers
surveyed thought they were
of report 33%older workers experiencing of older workers Of those who say they have experienced age discrimination, 66% currently with regards to the treatment of older employees or job applicants workers report performing poorly - despite what older
age discrimination took no action
74%
Only workers experienced ageism made a formal complaint or spoke to HR10% of older who had Only arerelated discrimination happening in their organisation aware of age-4% of employers of employersimportant for the economy to have older peoplecontinue workingrecognise it is
Retirement
When an age-discrimination issue person in the workplace, 56% of employers did nothing against an older confronted with Half of employers the survey thought they were already enough to support older workersa minority had any support measures doing but in only 23%of businesses phased retirement report offering
49% 43% 69%
of employersno assistance or programs for older workersspecifically provide ofage discrimination policyemployers have an ofto use phased retirement where it is offered by employers older workers intend
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2021
Sustainability Report financial security customers with Providing our for a better retirement
challenger.com.au Challenger Limited ACN 106 842 371
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Read more about these topics and our other important sustainability matters in our 2021 Sustainability Report ›[challenger.com.au/sustainabilityreport2021]

1 Source: COTA NSW & Challenger report – “Experience, Knowledge and Commitment Valuing Older Workers” (https://www.cotansw.com.au/wp-content/uploads/ sites/5/2021/05/COTA005-MAE20_Report_v3.4_WEB-s.pdf)

15

Challenger Limited 2021 Annual Review

Board of Directors

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Peter Polson

Independent Non-Executive Director and Chair

Peter has been the independent Chair since 2004 and an independent Non-Executive Director since 2003. Peter is Chair of the Nomination Committee and a member of the Group Risk Committee, Group Audit Committee and Remuneration Committee.

Steven Gregg

Independent Non-Executive Director

Steven has been an independent Non-Executive Director since 2012 and is Chair of the Group Audit Committee and a member of the Group Risk Committee, Remuneration Committee and Nomination Committee.

Masahiko Kobayashi

Non-Executive Director

Masahiko became a Non-Executive Director in 2019 and is currently a director and managing executive officer (Corporate Planning, Risk Management and Finance) of Mitsui Sumitomo Primary Life Insurance (MSP), a subsidiary of MS&AD. Masahiko is a member of the Nomination Committee.

JoAnne Stephenson

Independent Non-Executive Director

JoAnne has been an independent Non-Executive Director since 2012 and is Chair of the Group Remuneration Committee and a member of the Group Risk Committee, Group Audit Committee and Nomination Committee.

Melanie Willis

Independent Non-Executive Director

Melanie has been an independent Non-Executive Director since 2017 and is Chair of the Group Risk Committee and a member of the Group Audit Committee and Nomination Committee.

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John M. Green

Independent Non-Executive Director

John has been an independent Non-Executive Director since 2017 and is a member of the Group Risk Committee, Group Audit Committee, Remuneration Committee and Nomination Committee.

Richard Howes

Managing Director and Chief Executive Officer

Richard was appointed Managing Director and CEO of Challenger Limited in January 2019 and has previously held a number of senior executive roles at Challenger since joining in 2003, including Chief Executive of Distribution, Product and Marketing, Chief Executive of Life and Chief Investment Officer.

Dr Heather Smith

Independent Non-Executive Director

Heather became an independent Non-Executive Director in 2021 and is a member of the Group Audit Committee, Group Risk Committee and the Nomination Committee.

Duncan West

Independent Non-Executive Director

Duncan became an independent Non-Executive Director in 2018 and is a member of the Group Risk Committee, Group Audit Committee and Nomination Committee.

16

Challenger Limited 2021 Annual Review

Leadership Team

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Tony Bofinger

Chief Risk Officer Tony joined Challenger in 2004 and was appointed Chief Risk Officer in 2018. Prior to this, Tony was Chief Financial Officer and Appointed Actuary for the Life business.

Nick Hamilton

Chief Executive, Funds Management

Nick joined Challenger in 2015 and was appointed Chief Executive, Funds Management in September 2019. Prior to this, Nick held senior leadership roles at top tier global equity and multi-asset businesses in Australia and the UK.

Angela Murphy

Chief Executive, Life

Angela was appointed Chief Executive, Life in March 2021, having previously held the role of Chief Executive, Distribution, Product and Marketing (DPM). Angela joined Challenger as the Executive General Manager, Human Resources in 2012.

Michelle Taylor

Chief Executive, People, Corporate Affairs and Sustainability Michelle joined Challenger in 2016 and was appointed Chief Executive, People, Corporate Affairs and Sustainability in December 2018. Prior to this, Michelle held senior roles in corporate affairs, sustainability and strategy.

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Rachel Grimes

Chief Financial Officer

Rachel joined Challenger in May 2021. Prior to this, Rachel was General Manager, Finance at Westpac Banking Corporation, having previously held several senior roles at the bank. Rachel was also President of the International Federation of Accountants until 2018 and is a Director on the Accounting Professional and Ethical Standards Board.

Richard Howes

Managing Director and Chief Executive Officer

Richard was appointed Managing Director and CEO of Challenger Limited in January 2019 and has previously held a number of senior executive roles at Challenger since joining in 2003, including Chief Executive of Distribution, Product and Marketing, Chief Executive of Life and Chief Investment Officer.

Chris Plater

Chief Executive, Operations and Technology Chris joined Challenger in 2003 and was appointed Chief Executive, Operations and Technology in December 2020. Prior to this, Chris was Chief Executive and Investment Officer for the Life business.

Michael Vardanega

Head of Bank Transition Michael joined Challenger in 2006 and was appointed Head of Bank Transition in January 2021. Prior to this, Michael held the role of General Counsel and Chief Executive Group Strategy.

17

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Our history
1985
Challenger International
Limited established
1987
Challenger International
Limited listed on the ASX
1992
Australia’s compulsory
superannuation system
began
1997
Challenger enters
annuities market 2003
following acquisition of
Equity Life Limited Merger between Challenger
International and CPH
Investment Corporation
Name changed to Challenger
Financial Services Group
Limited
2005
First Funds Management
boutique 2009
Strategy refocused
on retirement savings
(Funds Management
2010 business) and retirement
Name changed to spending (Life business)
Challenger Limited
Group Assets Under
Management of $24bn 2014
Equity raised and
Challenger Capital
Notes (CGFPA) issued
Group Assets Under
Management of $51bn
2015
Fidante Partners 2017
Europe established
Annuity relationship with
MS Primary established
Challenger Capital Notes 2
(CGFPB) issued
Tokyo office opened
2018
Strategic relationship 2019
established and equity
investment by MS&AD Expanded strategic
relationship with MS&AD
to commence reinsurance
of US dollar annuities
2020 1 July 2019
Equity raised to further
strengthen capital position 2021
Group assets under Acquired MyLife MyFinance
management $85bn Bank
Winner of Association
of Financial Advisers, Life
Annuity Provider of the Year
(2008 to 2020)
Singapore office opened
Group assets under
management $110bn
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Winner of Association of Financial Advisers, Life Annuity Provider of the Year (2008 to 2020) Singapore office opened Group assets under management $110bn

Additional information

Principal place of business and registered office in Australia Level 2 5 Martin Place Sydney NSW 2000 Telephone: 02 9994 7000 Facsimile: 02 9994 7777

›[challenger.com.au]

Company Secretaries

Linda Matthews

Manage your shareholding at Computershare Investor Services

Computershare Investor Services Pty Limited Level 3 60 Carrington Street Sydney NSW 2000 Telephone: 1800 780 782

Go electronic

Challenger can deliver all of your shareholder communications electronically; just update your details via Computershare Investor Services:

›[computershare.com.au]

Unless otherwise specified, all amounts are in Australian dollars.

The information, including all amounts, in this Annual Review are current as at 30 June 2021, and unless stated otherwise, any comparison is based on the prior corresponding period. This Annual Review is not financial product advice, investment advice or a recommendation to acquire Challenger’s securities and has been prepared without taking into account your objectives, financial situation or needs. This document is not, and should not be considered as, an offer or an invitation to acquire securities in Challenger or any other financial products.

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