Aristocrat Leisure : 2018 Corporate Governance Statement

CORPORATE GOVERNANCE STATEMENT

FOR THE 12 MONTHS ENDED 30 SEPTEMBER 2018

ARISTOCRAT LEISURE LIMITED ABN 44 002 818 368

CORPORATE GOVERNANCE STATEMENT

Our approach to Corporate Governance

The Board of Aristocrat Leisure Limited (Company) is committed to maintaining high standards of effective corporate governance arrangements to help create, protect and enhance shareholder value and ensure the future sustainability of the Company.

The Company's strong governance framework provides a solid structure for effective and responsible decision making and setting a culture of integrity, transparency and accountability that flows throughout the Company.

Corporate governance framework

Committees

Compliance with ASX Corporate Governance Principles

The Company confirms it has followed the ASX Corporate Governance Council Principles and Recommendations 3rd

Edition (ASX Principles) during the 2018 financial year. This Corporate Governance Statement sets out key features of our governance framework and compliance with the ASX Principles are set out below.

The Company is also actively reviewing the implications and application of the consultation draft of the 4th edition ASX Principles recently released.

The information in this statement is current as at 29 November 2018 and has been approved by the Board.

Aristocrat's 2018 Areas of Governance Focus

During the year, the Board and its Committees undertook key governance initiatives. These included:

• • A review covering Board effectiveness and director performance.

• • A targeted corporate governance review to benchmark Aristocrat's corporate governance processes and practices in a range of areas against market practice and emerging best practice.

• • Reviewing and implementing enhanced processes to protect Aristocrat's business from cyber-threats and cyber-attacks, and to comply with newly enacted data protection legislation.

• • Implementing updated best practice crisis management frameworks and policies.

The outcomes of these initiatives will assist in ensuring that the Company (as a large, global organisation listed on the ASX) has strong corporate governance arrangements in place, while at the same time maintaining the Board's strong strategic focus.

1. THE BOARD

1.1. The role of the Board

The Board's primary role is to oversee management of the business operations of the Company on behalf of the shareholders.

The primary responsibilities reserved for the Board include the:

• • Review, monitor and approval of Group strategy;

• • Management of performance, with specific responsibility for the monitoring of Group performance and overall conduct;

• • Selection, appointment, remuneration and performance evaluation of the Chief Executive Officer (CEO), as well as succession planning;

• • Evaluation of the principal risks of the Group and continued monitoring of appropriate risk management and reporting systems;

• • Establishment and monitoring of policies to ensure compliance with the legal and regulatory regimes to which the Group is subject and to ensure the highest standards of corporate conduct; and

• • Promotion of open and proper communication between the Group and stakeholders.

The roles and responsibilities of the Board are set out in the Board Charter.

A copy of the Board Charter is available

in the Governance section of the Company's

websitewww.aristocrat.com

1.2 CEO and delegation to management

The Board has authorised the CEO to oversee the day-to- day business and operations, within the limits of specific authorities set out in the delegations approved by the Board. The CEO has, in turn, approved sub-delegations of authority that apply to management.

delegated by the Board. The Board monitors the decisions 3

The CEO is accountable to the Board for the authority that isand actions of the CEO and the Group's progress on achieving the short, medium and long-term objectives as set by the Board.

1.3. Board composition and skills set

As at 30 September 2018, the Board comprised seven

The names of the Directors and their respective qualifications, experience and responsibilities are set out in the Directors' Report within the Annual Report.

The Board's approach to its composition and renewal is determined using the following principles:

• • Skills and experience: A relevant blend of skills, expertise and experience to enable it to deal with current and emerging opportunities and issues, and to effectively review and challenge the performance of management. As an organisation with diverse global operations, the Board considers it important that it has members with experience in the major jurisdictions in which the Group operates, as well as having members with global business experience.

• • Independence: The Board considers that all of its Non-Executive Directors, including the Chair, were independent during the year and continues to be independent.

• • Diversity: The Board has a diversity objective that includes geographical, gender and skill diversity to effectively discharge its responsibilities.

• • Tenure profile: The Board balances the length of service of each of its Non-Executive Directors so that it is appropriately balanced and Board succession and renewal planning is managed over the medium to longer term.

Independence

Gender

• independent Non-Executive Directors and the CEO/ 2 2

Managing Director.

Tenure

IndependentCEO

MaleFemale

0-2 Years2-4 Years4-6 Years6-10 Years

1.4. Board skills and experience	•	Execution of strategic priorities, including developing
and delivering on a sustainable strategic framework for
	The Board seeks to have an appropriate and diverse mix
the business.
	of skills, experience, expertise and diversity (including
geographical, gender and skills diversity) to effectively	•	Driving and improving cost efficiency as a proportion
discharge its responsibilities, appropriately monitor risk	of revenue.
management and add value to the Group.
	•	Product quality and delivery, product innovation, great
The Board has identified the following areas as strategic	game content and customer satisfaction.
priorities for the Group to drive sustained shareholder value:
	•	Driving a high performing culture through
development, retention and succession planning across
all management levels and for key creative talent.

• • Financial performance and sustainable profitability by continued growth of the Group's recurring revenue base and driving continued momentum in various markets.

Having regard to these strategic priorities, the following table sets out the mix of skills and experience the Board considers necessary or desirable and the extent to which they are represented on the current Board:

Skills and experience	Number of the 8 Directors with that skill
Executive leadership Significant experience at a senior executive level	7
Capital management and corporate Senior experience in capital management strategies and corporate finance	4
Global business experience International business experience	6
Risk management Senior experience in risk management	4
Financial reporting and management Senior experience in financial management, reporting and audit	3
Corporate governance, legal and regulatory Commitment to the highest standards of corporate governance and legal compliance, including experience with an organisation that is subject torigorous governance and regulatory standards	8
Digital technology Senior experience in technology, especially in digital, software or computer industries and oversight of implementation of major technology projects	5	*
Gaming Senior executive or Board level experience in the gaming industry, including an in-depth knowledge of product and markets	4
Remuneration and people Board remuneration committee membership or management experience in people management and remuneration policy	8

*Other Directors on the Board have broader technology experience which is also valuable.

Any skills that are not directly represented are augmented through management and external advisors.

1.5. Director Independence

All Directors, whether independent or not, are expected to bring an impartial judgement to bear on Board decisions and are subject to the Board's policy regarding management of conflicts of interest, as well as common law and Corporations Act requirements.

Each year, the Board assesses whether each of the Non-Executive Directors are independent. In making such an assessment, consideration is given to whether the Non-Executive Director satisfies Aristocrat's criteria for independence. Those criteria are set out in the Board Charter.

During the 2018 financial year, the Board reviewed each Non-Executive Director's independence and concluded that each Non-Executive Director is independent.

The Board considers Pat Ramsey to be an independent Non-Executive Director, notwithstanding his previous employment with Aristocrat. Mr Ramsey was employed by Aristocrat for approximately 9 months in the role of Chief Digital Officer prior to his appointment as a Non-Executive Director effective 1 October 2016. The Board considers that the short length of his employment, the position he held within Aristocrat, and the fact that it has been over 2 years since Mr Ramsey held his executive role, means that his independence is not compromised, and the Board is confident that he brings objective and independent judgement to the Board's deliberations.

Details, including the term of office, qualifications, experience and information on other directorships held by each member of the Board can be found in the Directors' Report within the Annual Report.

1.6. Non-Executive Director selection and succession planning

The Board adopts a structured and rigorous approach to Board succession planning. This process is continuous and the Board regularly evaluates and reviews its succession planning process to ensure the progressive and orderly renewal of Board membership.

Before a candidate is nominated by the Board, the candidate must confirm that they will have sufficient time to meet their obligations to the Company and that they expect to meet all gaming regulatory approval conditions.

The Company undertakes comprehensive background and reference checks on candidates including employment, character reference, criminal history, bankruptcy and disqualified company director and officer checks. In addition, gaming regulators conduct detailed suitability investigations on Non-Executive Director candidates and their families, requiring them to disclose historical and current personal and financial information and submit to interviews. Non- Executive Directors are required to be licenced in over 50 gaming jurisdictions.

An election of directors is held each year. Any new Non-Executive Director nominated during the year is known as a Director (Elect) and will stand for election by shareholders at the subsequent AGM. Shareholders are asked to approve the appointment of the Director (Elect) subject to the receipt of all necessary regulatory pre-approvals. Until the receipt of all necessary regulatory pre-approvals, a Director (Elect) may attend all meetings of the Company but will have no entitlement to vote on any resolutions proposed at any meeting of the Board or any committee.

The Company has appropriate procedures in place to ensure that material information relevant to a decision to elect or re-elect a Non-Executive Director (including whether Directors support the election or re-election), is disclosed in the notice of meeting provided to shareholders. Non-Executive Director candidates are also invited to address the meeting and provide details of the relevant qualifications, experience and skills they bring to the Board.

The Board has continued to implement and deliver on its renewal plan by nominating Mr Neil Chatfield to the Board on 12 December 2017.

1.7. Appointment terms

New Non-Executive Directors receive a letter of appointment and a deed of access and indemnity. The letter of appointment outlines the Company's expectations of Non-Executive Directors with respect to their participation, time commitment and compliance with the Company's policies and regulatory requirements.

Each senior executive enters into a service contract which sets out the material terms of employment, including a description of position and duties, reporting lines, remuneration arrangements and termination rights and entitlements. Key contract details of those senior executives who are KMP1 are summarised in the Remuneration Report within the Annual Report.

1.8. Induction and ongoing professional development opportunities

New Non-Executive Directors joining the Board participate in a comprehensive induction program (which includes meeting with the Chair and senior executives) and are provided with the Director's Handbook. Given the geographic diversity of the Board and Group operations, induction for US based Non-Executive Directors include specific sessions targeted to Australian corporate governance and where appropriate, the program also includes site visits to some of the Group's key jurisdictions.

Recognising the importance of providing continuing education, Non-Executive Directors take part in a range of training and continuing education programs which are conducted by internal and external experts. Topics covered include cyber security, risk appetite and management, digital disruption and technology.

1"KMP" means Key Management Personnel, being those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the relevant reporting period.