Challenger Limited (CGF) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you for joining us today at our 2022 Annual General Meeting. On behalf of the Board, I'd like to acknowledge the traditional custodians of the land on which we are meeting, the Gadigal people of the Eora Nation, and pay my respects to their elders past, present and emerging. My name is Peter Polson, and I'm the Chair of your company, Challenger Limited, and the Chair of today's meeting. It is now 9:30 a.m. I'm advised by the Company Secretary that there is a quorum present, and I would like to declare this morning's meeting open. The minutes of the previous meeting of the shareholders of Challenger Limited, which was the Annual General Meeting held on the 28th of October 2021, were approved by the Board and signed by me as Chair of that meeting and are tabled today for the information of shareholders. Today's meeting is our first hybrid meeting, combining a traditional and a virtual AGM. Every effort has been made to ensure the meeting is as interactive as possible. Shareholders will have the opportunity to ask questions and vote both in the room and online. Today's meeting will be recorded, and the recording will be available to view shortly after the AGM. For those of you present in person, as a courtesy to your fellow attendees, please ensure that your mobile phone is turned to silent. Before we commence the formal aspect of today's meeting, I would like to introduce the Board members to you. To my right, Managing Director and Chief Executive Officer, Nick Hamilton; our nonexecutive Directors, JoAnne Stephenson, John Green and Steven Gregg. To my left, our nonexecutive directors, Duncan West, Masahiko Kobayashi, Melanie Willis and Heather Smith. We also have with us today, Graeme McKenzie, who is a partner at Ernst & Young, the company's auditor. In the front row are members of Challenger's executive team. They include Rachel Grimes, Challenger's Chief Financial Officer; Anton Kapel, Chief Executive of our Life business; Victor Rodriguez, Chief Executive Funds Management; Stuart Kingham, Chief Commercial Officer; Tony Bofinger, Chief Risk Officer; Louise Roche, Chief Human Resources Officer; Chris Plater, the Challenger and Apollo Joint Venture Chief Executive Officer; Kate Ingwersen, Chief Executive, Technology. We're also joined by Challenger's Company Secretary, Linda Matthews; General Counsel, Aron Rattew; and General Manager of Investor Relations, Mark Chen. There are 3 major components of this meeting. Firstly, I would like to provide an update on your company and our performance over the past year. Then I will hand over to Nick who will provide an overview of Challenger's, progress in its strategy and future plans. We will then move to the formal items of business for the meeting. You will have an opportunity to hear from the directors who are seeking reelection today. We will be opening the floor to questions on our business and the resolutions to be considered later in today's meeting. Voting on each resolution will be conducted for those of you in attendance in person by poll via your smartphones or the voting card you received when you entered the meeting. For those attending online, voting will take place via the online meeting portal. I will explain the question and voting procedures when we get to the formal items of business. However, I understand that shareholders may not be able to stay for the entire meeting, so I will declare the poll open now. This means you can vote on all items of business at any time until I declare the poll closed at the end of the meeting. The Board recommends that shareholders vote in favor of all items of business. Further details on the items are set out in the Notice of Meeting. For those joining us online, if you experience any technical difficulties, the help line number is displayed at the bottom of the page where you enter your log-in details. At the conclusion of the meeting, we would like to invite those attending in person to join the directors and the executive team for refreshments in the foyer. As previously announced, I will be retiring as your Chair at the conclusion of today's meeting. It has been an honor to serve as Chair and a member of the Board for the past 19 years. I'm incredibly proud of what Challenger has built and the outcomes we have achieved during that time. Since I joined the Board, Australia's super system has undergone substantial change and enormous growth. Today, it is the fifth largest superannuation savings system in the world. Successive governments have implemented significant regulatory reforms across the financial services sector, such as the Retirement Income Covenant. These reforms are expected to provide retirees with the confidence of a secure retirement and have also created tailwinds for our business. We are Australia's leading retirement income brand and our funds management business is one of the largest active managers in Australia. For me, though, what's even more important is that we are trusted by our customers and make a significant contribution to their financial security in retirement. Let me now turn to Challenger's performance. Challenger finished the '22 financial year in great shape, strongly capitalized and well positioned for future growth. It is important to reflect on the operating environment in which we delivered a positive performance against the year which brought significant challenges. The global pandemic has disrupted supply chains and livelihoods. Turbulence has been exacerbated by the Ukraine-Russia crisis with devastating human and economic consequences. Inflationary pressures are impacting households and businesses alike. There has been significant volatility in global investment markets. Despite this, Challenger's earnings were toward the upper end of our guidance range, and we drove stronger shareholder returns. Normalized net profit before tax was $472 million, an increase of 19% on the previous year. In the second half of the financial year, we saw wider credit spreads and increased volatility in global investment markets, resulting in unrealized mark-to-market impact on our investment portfolio. This can be seen in our statutory profit after tax which was $254 million for the year. Clearly, our business isn't immune from these external pressures. However, we've been able to navigate the challenges because the foundations of our business are very strong. We achieved strong Life sales, which were up an impressive 40% to $9.7 billion. The macroeconomic environment also presents significant opportunities, and we are starting to see the positive impact of higher interest rates on both sales and Life's margins. Despite the market volatility, toward the end of the financial year, we finished the year well capitalized and in excess of the minimum regulatory capital that we are required to hold. The strength and flexibility of our capital position will give shareholders further confidence in Challenger's future. Reflecting our confidence in the business, the Board declared a full year dividend of $0.23 per share fully franked, an increase of 15% on last year. Ensuring Challenger's, long-term success starts with strong corporate governance. We are fortunate to have a highly effective Board overseeing our business. Our talented and diverse group of directors brings a strong mix of skills, experience and tenure. Standing for reelection today are JoAnne Stephenson and Masahiko Kobayashi. Jo and Kobayashi-san have both served as valued and committed members of the Challenger Board, bringing their unique skills, experience and capability. As mentioned earlier, I will be standing down as Chair and a Director of Challenger Limited at the conclusion of today's meeting. It gives me great pleasure to hand over the position of Chair to Duncan West. Duncan has served as a valued member of the Challenger Board for the past 4 years. He brings over 30 years of experience and knowledge of Australian and the global insurance sector as both a director and a CEO. We will hear from Duncan a little later in the meeting. I'm confident I'm leaving the business in the most capable of hands. Duncan, along with our talented group of directors and senior executives, will continue to oversee Challenger's growth strategy, maintain our robust approach to corporate governance and risk management and strive towards delivering strong outcomes for all of our stakeholders. Sustainability are in the area of significant focus for the Board and the leadership team. It is important for the long-term success of the business and aligns with our purpose of providing financial security for a better retirement. It is reflected in our products that help our customers and communities to be financially resilient particularly in their retirement phase. This year, Challenger continued to have an active voice in important public policy discussions surrounding retirement and supporting reforms to Australia's financial advice system to help make financial advice more accessible and affordable. We recognize the importance of incorporating environmental, social and governance considerations into our decision-making. This year, we have been focused on understanding the impact of climate risks across our investment portfolio with a view to developing strategies to mitigate risk on current and future investments. Creating a diverse, inclusive and highly engaged workforce also remained a top priority. I'm pleased to report Challenger was once again recognized as an Employer of Choice for Gender Equality by the Workplace Gender Equality Agency. This certification acknowledges our work to improve gender quality, particularly in areas such as leadership, gender pay equity and flexible working arrangements. We also maintained a high employee engagement score of 81%, which is 3% above the Australian norm. This year, we have integrated our sustainability report within our annual report, bringing it into alignment with our financial and business reporting. Challenger is in great hands. Our highly capable and experienced leadership team led by CEO, Nick Hamilton, have worked hard this year to strengthen the business and drive better outcomes for our customers, our people and our shareholders. Stepping into the CEO role in January this year, Nick has moved quickly to execute his plans by refreshing strategy, renewing the leadership team and reorganizing the business as we execute our platform for growth. This is an exciting time for Challenger, and I'm confident we have the right team in place to capitalize on our opportunities. On behalf of the Board, I thank all of our Challenger colleagues for their hard work and commitment this year. I want to acknowledge the professionalism and commitment of the team who have continued to deliver for our customers and our shareholders, particularly given the challenges presented in the past year. Finally, thank you to our shareholders for your continued support. It has been an honor to serve you as Chair and a member of the Board for the past 19 years. Challenger has a bright future, and I look forward to following its continued success. I will now invite our CEO, Nick Hamilton, to provide further details on your company's strategy and performance. Thanks, Nick.

Thank you, Peter, and good morning. It is a privilege to be addressing you today in my first AGM as Challenger's CEO. I joined Challenger almost 8 years ago into our multi-affiliate business Fidante. Following that, I was Chief Executive of Funds Management. Over that time, much has changed. As the Chair highlighted earlier, we are now in the middle of once-in-a-generation changes brought on by the global pandemic, geopolitical challenges, inflationary pressures, rising interest rates, volatile investment markets and regulatory changes. Yet through all of this, Challenger has emerged a stronger, more resilient business strongly capitalized and well positioned for the future. This doesn't happen by accident. For many years, we've been recognized as market leaders in our respective businesses, the Life business is the country's leading retirement income brand and Funds Management is one of Australia's largest active fund managers. When I became CEO, it was clear to me we had a significant opportunity to leverage Challenger's core foundations and expand our offering by taking a broader stance in retirement. In May this year, we refreshed our corporate strategy with the desire to become a more customer-focused business. At the heart of our strategy is Challenger's purpose: to provide customers with financial security for a better retirement. Our customer-centric purpose drives how we think and act, the products we develop, the investment strategies we employ and, ultimately, the lives and futures we improve. I'm pleased to report our strategy is progressing well. Today, we provide customers with a broader suite of products to meet more of their needs and are focused on broadening our distribution channels. We're also building future earnings growth through newly established strategic partnerships. Nearly a year into my new role as CEO, I'm excited and motivated by the opportunity ahead of us. We have the right people and strategy in place and are well positioned to drive our next phase of growth while delivering on our purpose of providing our customers with financial security in their retirement. Challenger is a unique business with an extraordinary opportunity to improve the financial outcomes of Australians. Our Life business is Australia's leading retirement income brand and plays an important role, delivering customers with reliable and secure income streams and the financial peace of mind that comes with this. Funds Management combines one of Australia's leading credit origination capabilities with a contemporary multi-affiliate manager offering comprising fixed income, equities and alternative products. Together, they combine to form a unique and diverse business that is one of the largest active fund managers in the country. As mentioned earlier by the Chair, our refreshed strategy outlines our plans to better leverage the skills and capabilities of our people across the business. This has involved centralizing key functions such as product development, sales and marketing into a new customer division, placing the needs of our customers at the very center of our business. We recently appointed Mandy Mannix to the new role of Chief Executive customer. Mandy will start with Challenger next week. We also announced plans to further diversify our revenue streams via 2 new joint venture opportunities which I'll talk about more shortly. We also made some important strategic decisions around the bank, and last week announced the sale of the bank to Heartland. The announcement followed the completion of a strategic review, which found that a sale was the best option for Challenger. This decision will allow us to focus on our Life and Funds Management businesses and leverage the scale we can achieve through strategic partnerships. The bank will now be positioned for long-term success under Heartland's ownership and will benefit both the bank's employees and its customers. Importantly, our Life and Funds Management businesses are performing well and provides significant scope for growth. The decisions we have made this year are about setting our business up for long-term success. I'll now turn to our operating highlights. Challenger has delivered strong outcomes this year. Our financial performance reflects the underlying strength of the business and demonstrates our ability to capitalize on an improved macro environment. Rising interest rates, in particular, have improved the client proposition for annuity products and increased demand. For example, customers today can receive a 5% return on a 3-year annuity compared to 1.85% this time last year. We made a number of important strategic decisions this year to set our business up for long-term success. At our Investor Day in May, we announced a plan to expand our product reach and grow the role we play in our customers' lives. Defined by our One Challenger approach, this plan leverages our strong brand and unique capabilities from across the group to address more customer needs in more ways. We've progressed a number of initiatives to support this, starting with our brand. CIP Asset Management rebranded to Challenger Investment Management, bringing it back under the group brand. Our multi-affiliate platform, Fidante, has also undergone a brand and digital refresh that reflects the evolution of this business and the strong market position it maintains today. And we have launched new products, expanding what Challenger stands for to encompass a wider retirement offering. Our new market-linked lifetime annuity launched this year combines the benefits of a lifetime income stream with exposure to investment markets. We're working with a number of superannuation funds and developing long-term retirement income solutions for their members. This follows the introduction of the retirement income covenant, which came into effect on 1 July 2022. We are confident the covenant will, over time, lead to new and innovative retirement income solutions that address the risks retirees face and give them confidence to spend their retirement savings as intended. Key to our strategy is driving growth through strategic partnerships. Challenger has a strong track record partnering with key institutions, demonstrated through our relationship with the MS&AD Group, a leading player in Japan's general insurance market as well as our many Fidante affiliate relationships. Earlier this year, we announced 2 new joint venture opportunities. one, with global alternative asset manager, Apollo, and another with SimCorp, a global leader in investment administration technology. Our joint venture with Apollo will establish a lending business in Australia and New Zealand and provide finance solutions across a range of sectors in the SME market. The joint venture is equally owned by Challenger and Apollo, bringing together Challenger's operating platform and expertise and Apollo's extensive global scale and multi-asset credit investment capabilities. We recently announced that long-standing Challenger executive, Chris Plater has been appointed to lead the business as CEO. Our partnership with SimCorp will see us deliver a leading investment operations technology service, meeting an opportunity to deliver these critical services to asset owners and other financial services organizations. The partnership will leverage Challenger's existing investment operations teams and expertise and SimCorp's expertise in cloud-based technology. The venture will be majority-owned by Challenger and is now operational. These are exciting opportunities that, as we look forward, we'll grow new revenue streams and leverage our core strengths. We have reached an exciting point in Australia's retirement system with a definitive shift in industry focus towards the decumulation phase. And Challenger, as Australia's leading retirement income brand, is well positioned to benefit. Our unique competitive advantages, combined with supportive long-term tailwinds see us well placed to capture opportunities and drive strong business growth. We are leaders and innovators in our respective markets with a broad offering and a very strong distribution footprint. Australia's world-class superannuation system continues to grow rapidly. Assets are set to triple over the next 20 years. Today, there is around $3 trillion in super accounts of members aged over 65 years old, and intergenerational wealth transfer will push it to record levels with $175 billion expected to transfer each year by 2040. And in Funds Management, rising demand for differentiated investment strategies and contemporary products presents great opportunities for our active management platform. I'm incredibly proud of the progress we have achieved this year. Our business is in great shape. We remain strongly capitalized and well positioned to leverage and benefit from our unique competitive advantages. I'm confident the changes we made this year have set us up well for the future. Thank you to our very talented and committed team who have not missed a beat in supporting our customers and each other despite the challenges of the past year. I would also like to thank Peter, our outgoing Chair, for his incredible contribution and service to Challenger over almost 2 decades and for the wise counsel he has shown me as I've transitioned to the CEO role. In that time, our business has grown to the unique and successful business we are today. Peter, we wish you all the best for the future. Finally, I'd like to acknowledge Duncan West's appointment as the new Chair of Challenger, and I look forward to working with Duncan and benefiting from his experience. I will now hand back to Peter.

Thank you, Nick. I will now explain the procedure for asking questions during the meeting. For those of you who are attending in person to ask a question, please approach one of the microphones in the room. At the appropriate time, you will be invited to ask your question. For those of you attending online, you can submit questions at any time and you do not need to wait until the relevant item of business. We encourage you to submit your questions as soon as possible. After detailing all of the items of business to be considered at today's meeting, we will answer questions received from shareholders. For online participants to ask a question, shareholders and appointed proxies can submit questions either in writing or verbally. [Operator Instructions] To ask a verbal question, please follow the instructions on the virtual meeting platform. Please keep your questions to the relevant resolutions being considered today and please ensure your questions are relevant to the business of the meeting. Questions sent via the online meeting platform will be moderated to avoid repetition. And if questions are lengthy, we may need to summarize them in the interest of time. For those attending the meeting in person, you are eligible to vote and you can scan the QR code on your attendance card with your mobile device at any time. This will take you to a terms and conditions page and once you accept the terms and conditions to the online voting page. To cast your vote simply select one of the options for each item of business. There is no need to hit a submit or enter button as your vote is automatically recorded. You will receive a vote confirmation notification on your screen. If you do not have a mobile device, you may complete the voting items on the reverse side of the attendance card, and the Computershare team will collect these at the end of the meeting. For those participating online, if you are entitled to vote, you can select the vote icon, and voting options will display on the screen. To cast your vote, please select one of the options for each item of business. There is no need to hit the submit or enter button as your vote is automatically recorded. You will receive a vote confirmation notification on your screen. For any person voting using their mobile device or voting online, if you change your mind, simply select a new option by tapping it on the screen. Your original vote will be canceled and your new selection will be counted. As noted earlier, voting today will be counted by way of a poll on all items of business. Voting is open and will close towards the end of the meeting. I'll give you a warning before I close the voting and the results of all items of business will be notified to the Australian Securities Exchange as soon as practical after today's meeting. I would now like to take you to the formal items of business for the meeting. The Notice of Meeting and accompanying explanatory notes has been circulated to shareholders and I propose to take them as read. The items of business are shown on the screen. Where undirected proxies have been given in favor of the Chair for a resolution, I will vote these proxies in favor of each resolution as we've indicated in the notice convening this meeting. The first item of business relates to Challenger's financial reports, and there is no resolution for this item. As I mentioned earlier, we have Graeme McKenzie from our external auditor, Ernst & Young, present at today's meeting. He will be able to answer any questions relating to the conduct of the audit, preparation and content of the auditor's report and accounting policies adopted by the company in preparation of the financial statements. Ernst & Young did not receive any written questions from shareholders prior to this meeting. The second item relates to the election of Masahiko Kobayashi and JoAnne Stephenson as Non-Executive Directors of Challenger. You will have an opportunity to hear from Kobayashi-san and Jo fairly shortly. The third item relates to the adoption of Challenger's remuneration report, which is contained in the 2022 annual report. The fourth item relates to the grant of long-term hurdle performance share rights to the Chief Executive Officer and Managing Director, Nick Hamilton. I will now hand over to Kobayashi-san, who will briefly speak to you re his reappointment. Kobayashi-san.

Thank you, Peter. Good morning, and thank you for the opportunity to speak to you today. I am Masahiko Kobayashi, and it is a privilege to open myself for reelection as a nonexecutive director of Challenger Limited. I was appointed to the Challenger's Board in August 2019 as part of an expanded strategic relationship between the Challenger and MS&AD Insurance Group, a leading Japanese general and life insurer that currently has a 15% shareholding in Challenger. Challenger reinsures Australian dollar and U.S. dollar-denominated annuities issued by Mitsui Sumitomo Primary Life Insurance, which is a vital part of the MS&AD Group. This strategic relationship between us has created a significant opportunity for both companies to leverage each other's strengths and synergies, which commenced over 6 years ago, continued to grow. I bring to the Challenger Board more than 30 years' experience in general and life insurance. I am currently Director and senior Executive Officer of enterprise risk management and investment risk and operations management at Mitsui Sumitomo Primary Life Insurance. In addition to my extensive Japanese insurance experience, I also have a significant international experience, having held a number of the executive and the director roles within the MS&AD Insurance Group, including the Singapore and the United Kingdom. I am extremely honored to be standing here today as a representative of MS&AD Insurance Group. My standing here for reelection demonstrates the MS&AD's commitment and confidence in Challenger. And if reelected, I will endeavor to continue to contribute to Challenger's future prosperity and by further re-enhancing the successful partnership between our 2 companies, which will benefit all investors. Thank you for your considering of my reelection. I look forward to continuing to work with the Challenger Board and the leadership team if I am reelected.

Thanks, Kobayashi-san. I will now hand over to Jo, who will speak briefly to you about her reelection. Jo?

Thanks, Peter. Good morning, everyone, and it's a great pleasure to be here and have the opportunity to speak with you this morning about my reelection. I was originally elected to the Board in October 2012, and I currently chair the Remuneration Committee for the Board and a member of the Audit, Risk and Nomination Committees. I'm also the Chair and Director of Myer Holdings Limited and Qualitas Ltd, and I chair the Major Infrastructure Transport Infrastructure Board in Victoria and advisory board and government. During my executive career, I was a partner with KPMG. And to talk to you about a couple of the key areas I bring to the Challenger Board, the first of those is in the risk management area. So risk was one of my key practice areas at KPMG, working with large corporations to improve and implement the risk management frameworks. It's a key area of focus for me at Challenger, having been the Chair of the Risk Committee for some years and now continuing as a member of that committee. The other area of focus that I bring to the Board is really around orders and financial assurance processes currently serving as a member of the Audit Committee of Challenger. In my role as Chair of the Remuneration Committee, I've worked with that committee, the Board and management to improve the alignment of our reward framework with the outcomes for the organization, also looked at improving disclosure and reporting within our remuneration report. It's been a real privilege to serve on the Challenger Board. And during my time in the Board, the organization has grown significantly and firmly established itself as Australia's leading retirement income brand. With your support for my reelection to my last term on the Challenger Board, I'll really continue to focus on those key strategic areas for Challenger. Thank you for the opportunity today.

Thanks, Jo. Ladies and gentlemen, we have reached the end of today's items of business. So I will now ask for any questions. If you are asking a question in the room, it would be appreciated if you could state your name before asking your question. Are there any questions? I think yes, there's...

Chairman, Peter Graham, how do you do? Good to see.

Good to see.

I am a shareholder. What I want to say is something I didn't plan. I had the benefit of speaking to JoAnne earlier and to Mr. Hamilton. This is the first meeting I've attended in this season, if I may say so. I'd like to make some remarks to the benefit of Mr. West. I'm not being critical in any way. We've undergone a transformation in Australia of how company meetings are conducted. I hear the view they should be properly conducted, notwithstanding the amendments made to the Corporations Act 2001 earlier this year. One has to now suffer, putting a name in with the share registry to ensure that you receive a printed copy of the annual report posted to you. Why do companies not want to share with every shareholder full details of how the company has performed, what it has achieved? What has happened is that the government made amendments this year to allow meetings such as this, a hybrid meeting, to take place where the proper procedures get ditched. May I suggest that you pass on to your fellow directors of all listed public companies that they obtain from ASIC a copy of the notice for the guidance of company Chairman and the rights of shareholders at general meetings. It's a document with which I have some familiarity, having been asked to settle the predecessor document for the Australian Securities Commission perhaps 40 years ago. The purpose of the meeting is not to conduct to consider points items of business as they've been put on the screen this morning but rather to consider the business that's required under the Corporations Act, plus the motions that are before the chair. Now there's no ballot being taken to elect directors today. There are motions that are put individually. Shareholders aren't having the benefit on the screen of even seeing what the proposed resolution is. I move that so and so be reelected as a director. Members who are present have the right to speak for or against motions. There was a time, as you would perhaps know, when the annual accounts have to be approved, and they were the subject of a notion that was taken out of the statutes a long, long time ago. However, there is a statutory right of every shareholder attending a meeting to make comments on or discuss the annual report, best to say the directors' report, the auditor's report, the financial statements, which I like to call the balance sheet and profit and loss account. That opportunity is required by the Corporations Act and should be allowed. That should be the first item of business. And when it comes to the election of directors, there needs to be a motion that a particular person be elected. And the obligation of a Chair, and I'm not being personal to you, of course, or Mr. West, but I hope he takes note, the obligation is to invite people to speak for the motion or against the motion. There was a period of time when shareholders such as Mr. Tilburn, who's gone to God, would stand up and want to make -- ask a question. And some disrespectful chairman in my lifetime would say you have no right to ask a question. Your right is to speak for the motion or against the motion. Do you wish to speak for the motion or against the motion? The person would crawl back into their shell and that will be the end of it. The Corporations Act was then amended to add -- I forget the Section, 304 S or something, a section that empowers shareholders to ask questions of the directors and to ask questions of the Board. One would think, nowadays, when you get your notices of meeting, if you ever get them, you would think that there would be an offer made to shareholders to speak for the motions, to ask questions and not be confined to asking questions. I do propose just for the -- if I may, to say something and ask a question.

Certainly.

But might I just urge you, sir, to make sure that there is a transformation. I don't think the Institute of Company Directors has understanding of the obligations of directors in relation to meetings, and I think it would be timely for them to reconsider the approach they adopt, which seems to tie and confine shareholders to asking questions. And apart from that, you're not allowed to know anything about what the meeting is all about because we don't even have on the screen put up what the Notice of Meeting is. Items of business is meaningless, and it's quite inadequate. And in relation to Notice of Meeting, of course, the new statutory provisions do not require them to be sent out to the shareholders. This is disgraceful. What we've -- one gets in the post, if you're a shareholder of this company is a proxy form. But you're not told what the recommendation of the Board is in respect of the resolutions that are proposed. That's hidden in the back of the Notice of Meeting that you no longer send. I think the amendments that were made earlier this year were directed at seeing how it goes and perhaps you're reviewing it in a year or two's time to realize what mistakes have been made and to remedy them. I want you to take the lead in ensuring that shareholders are not treated with irreverence but are respected, and there should be a disclosure to shareholders of how well the company has gone, and they should be given the opportunity to speak against the election of directors. I remember one famous meeting in Sydney town hall, it concerned a business of Myer by another name. And there was a lot of conjecture as to whether or not a chairman should be reelected as a director. There were many, many speakers for and many, many speakers against. And one of the big suppliers to Myer were seeking to control the Board and that came to an end at that time. Okay. May I ask a question?

Certainly you can. Absolutely. Just before you asked the question, just to say, we take our obligations very seriously. And I mean that's a sort of standard phrase that everybody uses, but I can assure you at Challenger, whether it's through communications of results on a quarterly basis to the market or whether it's through the governance that surrounds meetings like this and any sort of communication with shareholders, we certainly take them very seriously. We operate to the letter of the law. But I take your points, and it has evolved as have these AGMs. I mean a lot of people do feel that AGMs are sort of coming towards their useful life. Having suffered at the sharp tongue of Jack Tilburn over many AGMs, I miss Jack, and I certainly think that the contribution he made as a shareholder activist was very valuable during the time he attended our meetings certainly. You have a question.

Thank you for your observations. The purpose of directors is that someone runs the business for the shareholders, but they are accountable to the shareholders. And the idea of doing away with annual general meetings and general meetings is horrendous. It would be an indication of a non-desire of boards to ever have to answer to the shareholders for the way they conduct the business. And there are times when companies go off the rail, and they need to be brought back on it.

Good comments. Thank you.

Okay. The question I wanted to ask is would you kindly go to Page 75 of the annual report and explain the notes that appear under the nonexecutive director shareholdings. I can see your shareholding and all the others totaling 393,799 shares. There are some interesting notes at the bottom. And for the benefit of probably everyone here except the company executive, can I read what they were? "Mr. Green, Mr. West, Ms. Smith, are within the 5-year transitional period in which to acquire the required shareholding," I don't know what that means. Maybe you can explain that. The second one is due to significant share price movement in recent years, Mr. Gregg's shareholding, as at 30 June 2022 did not satisfy the minimum shareholding requirements. Perhaps you can explain what that all means. And the third one was Mr. Kobayashi is exempt from the minimum shareholding requirements. His alternate director, [ Mr. Loca ] is also exempt. Why is he exempt? And what's the requirement? And why is Mr. Gregg especially doesn't have to comply?

Well, dealing with Kobayashi-san, first of all, his company has invested in Challenger substantially and own 15% of the stock. So I certainly believe that their obligation to have skin in the game, as people like to put it, is clearly there. They have a very substantial investment in Challenger. And also, we participate with them in business development, so they add a lot of value. In terms of Mr. Green, Duncan West and Heather Smith, there is a period that you have to build your shareholding to the required amount. I mean we would like to have all of the shareholders, all of the directors as investors in the company, but you're all given a period from when you joined the Board to when you satisfy that requirement. The second one is to do with market fluctuations. So you may purchase shares at a certain time when the share price is X. And if it moves to X minus whatever, then you may fall below the required amount. So it's actually -- it's always been thus, and we do monitor it on a regular basis.

Could you kindly tell us what the required amount is? I'm not familiar with any provision of the Corporations Act that says there's a minimum shareholding anymore. Is it a monetary amount?

It is 1x your annual fees.

And that's personal to Challenger?