The Chair welcomed members to TelstraSuper’s Annual Members’ Meeting and acknowledged the traditional owners of the land and paid her respects to the Elders - past, present and emerging.

The Chair provided an overview of the meeting including the presentations and the question and answer session.

She outlined some new initiatives that TelstraSuper would be introducing in 2021:

• A reduction in administration fees from 1 July
• Climate Change Action Plan
• The availability of more affordable financial advice to suit members at different points in their financial life cycle
• A specialised retirement offering; and
• Friends of members being able to join TelstraSuper.

She advised that:

• any information shared is general in nature and does not consider members’ personal circumstances and objectives. Therefore, members should consider obtaining advice before taking action and read any relevant product disclosure guides; and
• past performance figures are not an indicator of future performance.

The Chair introduced the CEO.

The CEO welcomed all members to the meeting. He also acknowledged the traditional owners.

The CEO gave a Fund update presentation. He explained that as a profit-to-member fund, TelstraSuper is only run to benefit members, so the Fund’s plans are always member focused and any profits are returned to members rather than paying shareholders.

The CEO’s presentation focused on the following key Fund activities over the last 18 months:

• Maintaining a strong framework to underpin the delivery of its six strategic priorities.
• Strong management of the impacts of COVID-19, including assisting members to understand what it meant for their super, addressing Government requirements around the COVID early release of super scheme, and introducing a new COVID-19 microsite and chatbot.
• Maintaining high levels of member satisfaction despite the increased demand for Fund services.
• Comprehensively reviewing the Fund’s insurance arrangements and appointing a new insurer, MLC Life Insurance, including extra services and benefits.
• Maintaining the Fund’s Platinum rating with SuperRatings both for 2020 and 2021 and receiving a 15-year Platinum performance award.
• Continuing to develop the Fund’s digital capability, noting that over 80% of members currently have their digital experience personalised. Members can access a wide range of information, functionality online as well as through the Melbourne based contact-centre, and access to advice from TelstraSuper Financial Planning.
• Developing a digital retirement destination to improve the ability of retired members to manage their super via online platforms and provide a targeted and personalised experience.
• Further enhancing the Fund’s retirement product suite, including new features and tools.
• Launching a retirement bonus of up to $8000 for members who open a RetireAccess Retirement Income Stream account.
• Transitioning to a new Melbourne office, which members will hopefully soon be able to access.
• The CEO also spoke to the reduction in administration fees to take effect from 1 July 2021.

The CEO introduced the CIO.

The CIO spoke of the privilege of being entrusted to invest members’ superannuation savings and the care taken to do this prudently.

The CIO gave a presentation which:

• outlined investment performance over the 12 months to 30 June 2020;
• provided an update on performance since this period and discussed the market outlook; and
• explained how the Fund’s portfolios are currently positioned and gave some examples of portfolio investments.

Investment Performance over the 12 months to 30 June 2020

• The year was one of the most volatile ever for investment markets, because of the COVID-19 pandemic.
• The investment management team has monitored markets closely, assessing the impact of the volatility on the Fund’s investments and making adjustments to maintain the Fund’s investment strategies.
• Member communication was very important, and this was undertaken through videos and written communications, emphasising the importance of keeping a long-term perspective and seeking advice before making changes to super investment choices.
• Liquidity was also managed very closely, both to manage member investment option switching and to implement the Government’s early release legislation.
• After initial losses, investment markets rose by large amounts in the final three months of the year. As a result, investment returns for the full financial year were better than had been expected early in the crisis.
• It is expected that financial year returns will occasionally be negative for diversified investment options. This is anticipated to be on average once every four or five years in the Balanced and Growth investment options.
• Prior to the most recent financial year, there has been a strong run of consistently positive returns. Longer-term investment performance remains strongly positive.

Performance since 30 June 2020 and Market Outlook

• Investment returns in the seven months between 1 July 2020 and 31 January 2021 have been strong. This has largely been a snapback from the sharp investment market falls seen when the COVID-19 pandemic first emerged.
• Financial markets have reacted favourably to news about successful vaccines for COVID-19 and the smooth transition to a new US president.
• A lesson from the last 18 months has been to remain focused on an appropriately long-term horizon when thinking about super investments.
• The COVID-19 pandemic is expected to continue to be the dominant driver of economic activity in 2021. Factors include the continued spread of the virus on one hand and the successful vaccine trials and advanced rollout in several major countries.
• There is a realistic prospect of economic activity beginning to return to normal once a sufficient proportion of the world’s population has been inoculated. Other considerations are the government and central banks continuing to provide support and interest rates remaining at low levels for some time into the future.
• The Fund has begun to increase exposure to shares in diversified investment options and reduce exposure to foreign currency.
• Risks to be aware of include the political situation in the US as well as ongoing tensions between China and major western economies. Current asset pricing includes optimism about the future, so negative political developments could cause markets to fall.

Current Portfolio Positioning and examples of portfolio investments

• The Fund runs highly diversified portfolios including tens of thousands of different investments across many different asset types, industries and countries. Diversification is very important from a risk management perspective.
• The Fund can be discerning with its investments, being big enough to have excellent diversification and scale to invest efficiently and cost-effectively, but not so big to have to make compromises in order to become fully invested.
• Examples of the Fund’s investments include:

• a portfolio of industrial warehouses and logistics facilities and 34 Bunnings stores across Australia; and
• investments in start-up technology companies, including Canva, SafetyCulture, Ultraleap and Oxford Nanopore.

• An environmental, social and governance lens is applied across the Fund’s investments in all portfolios. As super is a long-term investment, the Fund considers the long-term prospects of investments being made. The Fund has significant investments in renewable energy infrastructure assets and products.
• The Fund’s performance over the 10 year longer term has remained strong and consistently above the median of comparable super funds.

The CIO handed back to the Chair.

The Chair provided a Fund governance update and reflected on the year ahead, addressing the following key areas:

• The Fund is in a strong financial position with around $23 billion invested on behalf of members together with several Fund reserves.
• The Board has worked together with Management to ensure that the Fund has stayed on track to deliver great outcomes and strong governance for members.
• There has been a large amount of regulatory change through the year, including new Modern Slavery Act obligations and new rules about early release of super.
• The 2020 Federal Budget contained proposals about the super system and how it works, including changes to the default super system and an annual performance test. The Fund will advocate for a super system that is in the best interests of members.
• Advocacy work has been undertaken with the Indigenous charity, First Nations Foundation and the Fund has also advocated for women regarding their superannuation, including campaigns to educate and empower the community.
• Over the last year, a sustainable investment expert has been added to the investment team. The Fund has actively engaged with companies on climate change and other ESG issues and has launched a proxy voting dashboard. The Board has recently endorsed the Fund’s Climate Change Action Plan, including a goal to achieve net zero emissions by 2050. The Fund is also committed to operational emission reductions, including offsetting the Fund’s remaining footprint to become carbon neutral.
• The Fund’s member satisfaction score is consistently above the industry benchmark and members are twice as likely to recommend TelstraSuper compared to members of other funds, in relation to their fund.
• Most members choose to stay with TelstraSuper after they stop working at the Telstra Group. Member retention rates remain high despite recent redundancies. There is an industry-wide trend of declining membership numbers, which has been brought about by regulatory measures.
• From 1 March 2021, friends of TelstraSuper members will be able to join the Fund. This will add to the Fund’s scale and enable the Fund to enhance service offerings to all members.
• The Fund celebrated its 30th birthday in 2020. The Board is confident that it has the right people leading the Fund and it will continue to achieve great results for members for many years to come.
• In 2019, the Fund’s CEO was recognised as the Fund Executive of the Year, awarded by the Fund Executive Association Limited. This recognises his outstanding contribution to TelstraSuper and the broader super industry.
• In 2021, the Fund will continue to invest in capabilities to improve and enhance the offering to members. It will continue to provide members with leading products and services, supporting members through all stages of their financial lives.

The Chair opened the meeting to questions from Members.

She advised that answers to all questions, including those not able to be addressed at the meeting, will be made available on the Fund’s website within 30 days.

Topic 1: Fund demographics and scale

James: How have the TelstraSuper membership numbers changed over the last three years?

Anne-Marie Corboy:

• Our member accounts have reduced over the last three years by around 7,500.
• It’s an industry trend – partly due to Government changes that see smaller accounts automatically transferred to the ATO.
• The decrease hasn’t affected our ability to invest - member satisfaction and retention rates are high, and member balances are well above the averages held in most other funds.
• The Board and Management are very focused on the needs of our member base and, particularly, a large cohort who are moving into the post-work phase.

Robert: Has the reduction in Telstra staff during the last decade or so - and hence membership decline - caused a lack of funds to invest? Has this been the reason for the campaign to invite family members to join?

Chris Davies:

• Most of our members stay with TelstraSuper when they leave employment with Telstra or Foxtel or Sensis.
• The bulk of our membership now is in the Personal Plus division, which is the section of our Fund for members who are not employed by Telstra.
• We manage around $23 billion on behalf of our members; this gives us the scale we need for our members.
• The family join campaign is a longstanding activity that allows members to refer their loved ones to join TelstraSuper.
• Friends of members can now join the fund, because we’re often asked by members if they can refer a friend or colleague.

Robert: What total of TelstraSuper money was withdrawn by members after legislation by the Federal Government during COVID-19, and how did this affect TelstraSuper?

Anne-Marie Corboy:

• The Fund has weathered COVID-19 extremely well.
• Just 0.5% of all of our funds under management was paid out and we met all the deadlines within our control.
• More generally, our business operations quickly transitioned to support members during this difficult time.
• We moved rapidly to help our members understand what this would mean for their super, with initiatives including a new microsite, regular and timely updates, and launching our first chatbot to further support our in-house Contact Centre.

Topic 2: Investments

Teresa: What shares and infrastructure does Defensive Growth invest in, and will there be a bond bubble in 2021?

Graeme Miller:

• Defensive Growth option is one of our investment options, and its return objective is to outperform CPI inflation by 2 percentage points. We measure its performance over four to six years.
• About 23% of the Defensive Growth option is invested in international shares, and about 17% in Australian shares, with about 10% in infrastructure.
• Our share portfolios are very well diversified. The largest Australian shareholdings in the Defensive Growth option are the Commonwealth Bank, Wesfarmers, Woolworths and Transurban. The largest international shareholdings in the Defensive Growth option are Nestle, Medtronic and American Express.
• Infrastructure assets include investments such as toll roads, electricity generation and transmission assets, gas pipelines, storage, airports, and seaports.
• In terms of a bond bubble, we presume you're asking whether we expect to see a sharp fall in the value of bonds in 2021, no one can predict with any certainty.
• Relative to history, bond prices are high and interest rates are very low, and so for this reason, we’re holding less bonds in all of our portfolios than we normally would across all our portfolios.

Zeljko: How can we best protect our super from the next potential market crash that’s being predicted in 2021?

Graeme Miller:

• The right investment strategy depends on your personal situation.
• What’s right for one member is not necessarily right for the next, and that’s why we offer our members a suite of different investment options, with different levels of risk and different levels of investment return.
• Consider seeking professional financial advice related to your personal circumstances.

Helen: How is TelstraSuper ranked against other super funds for their returns to members in 2020? (Please note, an extended answer to this question including rankings table is located in section 7 below).

Anne-Marie Corboy:

• We aim to deliver competitive returns for members over the long term, and rankings will differ depending on investment option, the timeframe of the measurement and account balance.
• Returns data is shared with SuperRatings, a third-party ratings agency, and they publish a comparison where you can see that ranking. We will provide this table in the minutes of the meeting.
• 2020 was a difficult year due to the pandemic, but our longer-term returns have been much stronger, both in absolute and relative terms.

Mike: Is it possible to view earnings of the Fund assets versus the capital value of the Fund assets on my individual fund? During the collapse in share prices during COVID, was TelstraSuper able to exploit this by purchasing equity at opportunist prices?

Graeme Miller:

• TelstraSuper distributes investment earnings to members through changes in unit prices.
• Members own units in their chosen investment options, and when the value of the underlying assets in those investment options changes, or when you receive income, that results in a change in the value of the unit price.
• We don’t differentiate whether an investment return comes from a change in value or whether that investment return comes from income. Both are reflected in unit prices.
• On the second question about purchasing equities at opportunistic prices, the majority of TelstraSuper’s equities are actively managed, so our Managers are constantly assessing the outlook, both of the shares that we already own as well as the shares that we could potentially own.
• We trade shares actively - including during COVID - based on the outlook of those shares.
• We didn’t materially increase or decrease our exposure to shares during the crisis.

Thilak: What investment strategy is TelstraSuper adopting to optimise returns during the recovery period from the pandemic, and what are the risks involved?

Graeme Miller:

• We’ve been increasing our exposure to equities and decreasing our exposure to foreign currency since October 2020 because we believe that we’ll continue to see a recovery in the economy.
• We also think that interest rates will remain low and that Government policy will continue to support ongoing growth. This is good for economic growth and for investment markets.
• We’ve made a number of opportunistic investments in the last few months (eg. a portfolio of Australian listed property, a US mortgage fund and increased our exposure to private debt).
• We’ve sold some of our assets (eg. reduced our exposure to retail assets and office buildings in our property portfolio, and recently sold a large transport asset in Brisbane).
• There are two key risks that we’re keeping an eye on – any signs of failure in the vaccination program and the global political situation.

David: What is the optimal recovery path for the industry post the 2020 pandemic?

Graeme Miller:

• Ideally, we would like to see an extensive vaccination program which results in a rapid fall in infections and deaths. This would lead to increased confidence and a reopening of the economy and eventually borders opening.
• We need to keep an eye on interest rates remaining low and governments continuing to provide support through borrowing and spending. This combination of reduced infections, increased immunity, low interest rates, strong government and central bank support, could provide the ideal and optimal recovery path for the industry.

Chris Davies:

• From a fund operations perspective the TelstraSuper team did adjust well during the last year.
• We’re looking to return to the office in March on a split-team basis, which is required by the Victorian Government.
• Our interstate teams have already resumed working in the office on two-team basis across all states, and we’ll soon be able to see members by appointment in the office.
• Unfortunately, we won’t be able to receive visitors without an appointment for some time.

Topic 3: Insurance

Zeljko: If I have plenty of money in super, do I need to be paying insurances?

Chris Davies:

• It depends on your personal circumstances. How much insurance a person needs depends on personal factors like having children or other dependants, levels of debt, living expenses etc.
• TelstraSuper does not take commissions on insurance and try to keep the premiums as low as possible. We recently reviewed our insurances and moved to MLC Life, and this has improved our insurance benefits and lowered the premiums for death and permanent disability.
• To speak to someone about your personal insurance needs please call our Contact Centre who can help as part of your TelstraSuper membership.

Topic 4: Fees

David: The costs called deductions to manage your investment are not shown in the transactions listing. Why not? Also, I cannot see where these indirect and other fees have been deducted. Can you explain this, please?

Chris Davies:

• Fees are set out on our annual statements and in our product documents, and they’re heavily regulated, even down to what we call the fees.
• We have an administration fee that is currently $78 per annum, and 0.2% of the value of the members’ account balance (there is an upper limit on this fee for large accounts) and this is the fee that we intend to reduce from 1 July this year. There are also investment fees, and these depend upon which investment option or options you choose.
• “Indirect costs of your investment” are costs that are not paid by the trustee, things like brokerage and stamp duty and are often paid by investment managers that we appoint.
• “Other fees of your investments” are investment costs paid directly by the trustee, like fees paid to investment managers and custodians.
• Both these fees are taken out of your return - the declared return - and they’re reflected in the unit prices. They’re listed as a dollar amount on your super statement, but they’re not itemised as transactions on your transaction listing.
• For a full explanation of our fees please see the Additional Information About Your Super guide.
• TelstraSuper is a profit-to-member fund, and we’re always seeking ways to keep our fees as low as possible.

Simon: What changes, if any, are proposed in relation to TelstraSuper fees payable by members, for example, will there be a fee reduction applicable to fixed interest and cash investment options given historic low interest rates and, hence, returns?

Graeme Miller:

• TelstraSuper is a profit-to-members fund, and we aim to keep our fees low and competitive. Fees are set to simply cover the cost of running the fund.
• We have reduced our administration fees several times in the past as the Fund has grown and as we’ve introduced efficiencies, and plan to make further reductions to administration fees from 1 July this year.
• Specifically on investment fees, our objective is to keep our fees as low as possible whilst still implementing strategies that are expected to generate strong returns.
• We negotiate regularly and forcefully with our external fund managers and are constantly looking for ways to introduce efficiencies into our investment portfolios.
• Since September 2017, investment fees have reduced by about 15% in our Growth and Balanced options, and by more than 20% in our Conservative investment options as we’ve had these discussions and negotiations.
• Our fixed interest and cash options already have the lowest fees of all our investment options, but, once again, the same principles apply. We’ll continue to work hard to deliver the very best combination of low fees and high value in these particular options.

Topic 5: Environmental, Social and Governance (ESG)

Anthony: TelstraSuper has acknowledged the risks and opportunities posed by Climate Change however does not appear to be taking any real measurable action. When will TelstraSuper be: 1 - Making zero carbon emission investment options available to members. 2 - Announcing a target for net zero emissions across all investments with supporting strategy and action plan to achieve. 3 - Announce target and plan to achieve absolute zero emissions over the long term but no later than 2050.

David: How is Telstra Super responding to the current environmental crisis? Particularly through its investment strategy as well as its operation? If the whole portfolio is not encouraging climate action already, when will members have access to an investment option that prioritises climate action by investment in renewables and energy efficiency, while discouraging coal?

Please note: In the presentations at the AMM, the Chair did announce the Fund’s Climate Action Plan including a target for net zero emissions by 2050 – so the below answer followed on from that.

Anne-Marie Corboy:

• We have several projects in this space, including achieving net zero greenhouse gas emissions by 2050.
• We have immediate targets and actions across asset classes which will be in alignment with the Paris Agreement. And during this next 12 months, we’ll be proactively investing in opportunities that are expected to do well out of a transition to a net zero emissions world. We’re also looking to build a portfolio resilient to the physical impacts of climate change across our whole portfolio.
• In the immediate future, we’re going to be targeting specific investments in low-carbon opportunities, divesting from our single remaining (passive) pure place thermal coal asset, and measuring and disclosing the first quantitative report of our listed equities’ greenhouse gas emissions.
• Aim is to reduce greenhouse gas emissions by 10% in our listed equity assets in the first year, with further reductions pencilled for subsequent years.
• This transition must be in our members’ best financial interests. We will meet our usual risk-return parameters and won’t compromise our mix of investments.
• Operationally, the Fund has started measuring our greenhouse gas emissions and has been looking at ways to make reductions. We’re also purchasing offsets so we become carbon neutral.

Graeme Miller:

• We have many investments in renewables (eg. investment in the third-largest wind energy generator in the UK, a 1.6-gigawatt portfolio of wind and solar assets in the US, and our investment in a wind farm project at Cooranga, which is north of Brisbane).
• As we transition to net zero emissions, we expect to make more investments in this area.
• Regarding the introduction of a new investment option that is specifically targeted at climate change, it is our strong preference to incorporate environmental, social and governance factors in all of our investment options, because we believe that this approach will deliver better outcomes for all of our members rather than having a niche separate additional product.

Topic 6: Product

Gianni: In the foreseeable future, will members from the same family be able to consolidate their super into one holding or account so fees, et cetera, are not duplicated?

Anne-Marie Corboy:

• Under the current superannuation rules, family accounts are not possible, but the regulatory landscape is always changing.
• We do have a fee rebate for eligible couples that caps the total administration fees payable at a maximum of around $2700 each year for couples that have a combined account balance just over $1.28 million.
• Please get in touch with the Contact Centre for more information.

The Chair thanked members for attending the Fund’s first Annual Member Meeting and encouraged members to take advantage of the information and assistance available from the Fund.

The Chair thanked Board members and staff for their outstanding effort during 2020 and for continuing to provide the high-quality service expected by members.

The Chair also acknowledged Telstra Corporation and put on record the Fund’s appreciation for its engagement and support during the year.

Topic 1: Fund performance

Helen: How is TelstraSuper ranked against other super funds for their returns to members in 2020?
Michael: How does the fund’s performance compare to its peers for 1, 3 and 5 years?

• We aim to deliver competitive returns for members over the long term, and rankings will differ depending on investment option, the timeframe of the measurement and account balance.
• Returns data is shared with SuperRatings, a third-party ratings agency, and they publish a comparison where you can see that ranking. We will provide this table in the minutes of the meeting.*
• 2020 was a difficult year due to the pandemic, but our longer-term returns have been much stronger, both in absolute and relative terms.

*See comparison table below that is sourced from the SuperRatings Fund Crediting Rate Survey for the period ended 31 December 2020. For full details about the survey and assumptions used please visit the SuperRatings website.

Accumulation members:

Option	1 year	3 years	5 years	10 years
Growth	25/49	28/49	30/47	17/45
Balanced	40/50	34/50	36/50	19/49
Defensive growth	17/25	6/25	4/25	1/24
Diversified income	68/127	49/118	25/109	NA
Conservative	23/49	18/49	8/48	3/43
Australian shares	9/48	30/48	36/47	20/43
International shares	35/48	42/48	42/48	39/43
Property	1/25	2/25	2/25	4/23
Fixed interest	15/25	12/25	10/25	13/24
Cash	10/48	14/48	14/47	15/44

Pension members:

Option	1 year	3 years	5 years	10 years
Growth	23/49	28/48	29/46	15/43
Balanced	38/48	34/48	33/48	16/45
Defensive growth	18/24	3/24	5/24	3/22
Diversified income	56/78	34/75	16/69	NA
Conservative	28/49	19/49	9/48	2/44
Australian shares	11/48	33/47	33/47	23/43
International shares	37/47	42/47	37/46	37/42
Property	1/25	3/25	2/25	3/23
Fixed interest	13/25	11/25	11/25	15/25
Cash	12/47	10/47	12/46	16/42

Source: SuperRatings Fund Crediting Rate Surveys – for applicable index, December 2020. Performance is net of fees and taxes included in the unit price / crediting rate but exclusive of fees deducted directly from members’ accounts. Past performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a fund.

Frank: With flat stock markets and low interest rates is the fund able to invest in property gold and other assets that are seeing an increase in value? If it wasn't for my contributions this year I would be looking at a negative return [in the balanced option]. Why is that since markets are flat and interest rates are low but not negative? What is being done to restore a positive return to the balance fund? (note: question has been edited so as not to disclose the member’s personal information)

• The Balanced investment option earned negative 1.8% (net of all investment fees and taxes) in the twelve months to 30 June 2020.
• However in the seven months between 1 July 2020 and 31 January 2021, it has returned positive 9.3%, so assuming you have remained invested in the Balanced investment option during this time, you will have seen strong growth in your account balance over this period.
• You can get an up-to-date estimate of your account balance and information about investment returns by logging into your account on our website.
• Our team of investment professionals continues to actively manage all of our investment portfolios which, as you point out, are diversified across many different type of assets including shares, property, infrastructure, fixed interest and more.

Peter: With Telstra downsizing over the last few years, do you see this impacting the number of Telstra Super members or the investments?

• The good news is that once someone is a member of TelstraSuper they can remain a member for life, so people leaving employment at Telstra doesn’t necessarily mean a loss in membership numbers.
• The bulk of our membership are actually Personal Plus members – that’s our offering for non-Telstra employees.
• In terms of having sufficient funds to invest, we manage around $23 billion dollars on behalf of our members. This puts us among the 20 largest super funds in Australia and that includes all industry, public sector and retail super funds.

Topic 2: Security

Andrew: For enhanced security can TelstraSuper please enable 2FA for all members when logging into the member area of the TelstraSuper website to protect members confidential information?

• We take security very seriously and have a number of measures in place to keep your information safe.
• While we don’t publicly disclose the extent of our security measures for obvious reasons, we can confirm that two factor authentication is currently mandatory for the re-setting of passwords and changing of personal details within SuperOnline. There are also strict guidelines about the types of passwords you can use for logging in to your TelstraSuper account.
• Our security is reviewed and updated regularly, with two-factor authentication one of the many options considered.

Topic 3: Investment markets

Frank: Where do you see the most growth in the next 7 years? property? shares? fixed interest? derivatives? cyber currency?

• No-one can predict what the future holds, and we cannot say with certainty which asset class will see the most growth over the next seven years (or any other period). This is reason why we invest in a highly diversified portfolio of many different asset types.
• Diversification allows our members to have exposure to many different drivers of investment returns and protects them from being overly-reliant on a single asset class.
• Our investment professionals do make changes to our asset mix over time to reflect their expectations for medium term relative performance and risks of different asset classes.
• At the current time (February 2021), in our diversified investment options we are holding slightly more shares and property than our long-term targets, and less foreign currency and fixed interest. We monitor this regularly and make changes to reflect our views on the outlook for risks and returns.
• If you would like more personalised advice you can contact our member contact centre who can arrange for you to speak with TelstraSuper Financial Planning.

Gerard: What's your prediction about negative interest rates and its impacts on super and investments in general?

• One of the unusual features of the current economic environment is that interest rates are negative in several countries, e.g. Japan and much of Europe. The reason for this is that Central Banks want to stimulate these economies by making it very affordable for Governments, companies and households to borrow money and to encourage savers to invest in the economy instead of holding money in cash.
• Low interest rates generally result in increases in the value of assets such as property and shares because they make the future income streams of these assets more valuable when compared to the income stream available from cash. This is one of the reasons why we have seen such strong returns since 1 July 2020.
• However negative interest rates can also have undesirable consequences, such as causing problems for retirees who rely on income from fixed interest and cash for their living expenses.
• Negative interest rates can also result inefficient allocation of capital to projects that do not have strong financial characteristics, and they make the future returns on fixed interest investments unattractive. This is the reason we’re holding less fixed interest than our long-term targets in our diversified investment options.
• Given the impacts of the COVID-19 pandemic, we expect interest rates will remain well-below their long term averages for the foreseeable future, although we do believe that they may continue to rise slowly from currently levels, as the economy improves.
• We do not expect to see negative interest rates in Australia or the United States, but we cannot rule out that possibility if there is major economic downturn.

Topic 4: Direct Access

Shanmugaraj: Can you allow index ETF products including commodities and also reduce the member direct fees?

• We already offer a number of ETFs on our DirectAccess platform. We’re certainly open to looking into offering more if there is member demand. Any specific requests from members will be considered.
• Our Member Direct fees are regularly reviewed in line with the rest of our fees. As we have said tonight our administration fees are under review with a target date of 1 July this year; DirectAccess fees are included in this review.

Ernest: Why does the UBS platform for Telstra Direct prohibit participation in Share Purchase Plans, wherefore (sic) resulting in dilution of holdings?

• UBS do not explicitly prohibit participation in corporate actions although not all corporate actions are made available on the platform due to various reasons. These include the avoidance of conflict of interest within UBS and balancing the cost & benefits against demand to make these transactions available.

Ernest: Will Telstra Super consider changing the current policy which disallows shareholders buying shares via Telstra Direct participating in Share Purchase Plans (SPPs) even though they are allowed to participate in rights issues. Or is it merely that the UBS platform does not have a functionality to allow participation in SPPs?

• At this point in time we don’t intend on changing this policy. As with all decisions, we conduct cost/benefit analysis and don’t currently see enough demand from members to justify the costs of introducing this capability.

Ernest: Is the ability to sell covered calls via Telstra Direct on the horizon at all?

• At this point in time, it is not part of the product’s roadmap.
• The Trustee has a duty to ensure that investments made available to members are able to form part of an appropriate investment strategy. Therefore on the basis of the risk of these types of investments, the Trustee is unlikely to be able to meet that test, and therefore does not plan to make them available to all members.

Andrew: Can TelstraSuper to differentiate their market offerings make possible a Direct Access International platform for Super members to purchase directly the TOP 100 US companies by market cap via the NYSE and NASDAQ? The same safeguards currently in place be maintained to limit the amount of funds by percentage of a member’s fund can invest in the one company to ensure portfolio diversification. If this cannot be provided what are the reasons TelstraSuper cannot implement this valuable capability to its members?

• Members can gain exposure to US companies by investing in ETFs, which are available to Direct Access members.
• Allowing direct purchase of the Top 100 US companies is not part of the future development of the product at this stage.
• The Trustee has a duty to ensure that investments made available to members are able to form part of an appropriate investment strategy. Therefore on the basis of the risk of these types of investments, the Trustee is unlikely to be able to meet that test, and therefore not make them available to all members.

Topic 5: Fund demographics and scale

Peter: With Telstra downsizing over the last few years, do you see this impacting the number of Telstra Super members or the investments?

• Once someone is a member of TelstraSuper they can remain a member for life, so people leaving employment at Telstra doesn’t necessarily mean a loss in membership numbers.
• The bulk of our membership are actually Personal Plus members – that’s our offering for non-Telstra employees.
• In terms of having sufficient funds to invest, we manage around $23 billion dollars on behalf of our members. This puts us among the 20 largest super funds in Australia and that includes all industry, public sector and retail super funds.

Darren: How many members of the fund current work for a Telstra Group company vs how many in retirement and working for other non-associated companies? How many members are not actively contributing and therefore at risk of being lost?

• The bulk of the TelstraSuper membership currently sit in our Personal Plus division – that’s the division designed for members who don’t currently work for the Telstra Group.
• Our member satisfaction and retention rates are high, and member balances are well above the averages held in most other funds. This combination underpins a sustainable super fund.
• Government changes to super meant smaller and inactive accounts would be automatically transferred to the Australian Tax Office. This resulted in a number of small, inactive accounts leaving the fund, however it hasn’t affected our ability to invest and we currently have around $23 billion in funds under management.
• We are advised by external ratings agency SuperRatings that we have a much higher percentage of active members in the fund than most other super funds.
• We actively run education campaigns encouraging our members to keep their accounts active by updating their personal details, making contributions or nominating beneficiaries.
• We also encourage members to take TelstraSuper to a new employer to avoid the creation of multiple super accounts, and we make this as easy as possible by offering services like our Digital Member Card and the TelstraSuper mobile app – so the relevant details are always handy.

Topic 6: Fund operations and product

Gerard: I’ve been advised that payments from an SMSF pension into a TelstraSuper pension need to be made by cheque from an administrator. Is it not time we move to EFT for these transfers? (note: question has been rephrased to protect member information)

• At times, it is difficult to determine where funds come from when transferred by EFT. This is why a cheque from an SMSF is ‘preferred’ as the drawer of the cheque is the SMSF and it would be accompanied by a Rollover Benefit Statement (RBS).
• However the fund is able to accept EFT if notified in advance. This allows us to ensure the monies are allocated without delay. In this case, you’ll need to use your member number as a reference, and also contact us prior to making the transfer so we can ensure it’s correctly identified when received. We also require an RBS, preferably prior to the funds being received. You can notify us by calling the fund on 1300 033 166 between 8.30am and 5.00pm (Melbourne time) Monday to Friday or emailing [email protected]
• To transfer money to a TelstraSuper Pension account there is an additional step required. The money will need to be allocated to a Personal Plus account first then transferred to the pension account. If you don’t already have an existing Personal Plus account with TelstraSuper we can help you set this up so the transfer can be done.
• SMSF rollovers into TelstraSuper via Superstream (the validation service from the ATO) will come into effect from early October 2021. This means that from October onwards, cheques and EFTs will be eliminated altogether from this process and you’ll easily be able to roll money into your account via Superstream.

Martin: Financial wellbeing with Telstra Super Retire Access took a hit for these Members in 2020 and also into 2021 with diminished returns for Members in an older demographic who through necessity cannot take risk and therefore place their assets in cash and conservative returns and subsequently suffer very low returns . Can Telstra Super provide any ray of hope for Members in Retire Assess going forward and provide news of a new product for these members and the potential for better returns to at the least provide equity in the assets of members?

• The year to 30 June 2020 was one of the most volatile years ever for investment markets, and in the 2020 financial year, almost all super funds delivered their lowest returns for many years.
• In the Conservative investment option, returns were impacted by the adverse effects of the COVID-19 pandemic and were also suppressed by central banks slashing interest rates to record low levels across the world. For example, in Australia the official Reserve Bank cash rate is just 0.1% per annum – the lowest it has ever been.
• Our Conservative option returned 0.74% for the year to 30 June 2020 for RetireAccess members (net of all investment taxes and investment fees). And while this isn’t as high as we would have hoped, our performance to 30 June 2020 was still well-ahead of our objective of achieving annual returns of CPI+1.5% over periods of 3 to 10 years.
• We did see markets bounce back to some extent in the seven months between 1 July 2020 and 31 January 2021. This saw the Conservative option return 5.21% for RetireAccess members (net of all investment taxes and investment fees).
• Our long term returns remain strong. In fact, third party ratings agency SuperRatings ranks our Conservative option number 2 of 45 when looking at 10 year returns (as per the SuperRatings Fund Crediting Rate Survey for the period ended 31 January 2020).
• In terms of the new investment products, we can confirm that TelstraSuper is currently in the process of developing new options for our retiree members. This project is underway and we look forward to sharing further details with members in due course.