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 noted that the Management team has been working throughout the year on a series of initiatives to improve the Fund’s products and services and maintain TelstraSuper’s position as a leading competitive fund. She also highlighted that during the year, the Fund had achieved some of its best ever investment returns.

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, addressing the following key areas:

• Broader industry context, including legislative and regulatory change across the superannuation sector throughout the year. This included the:
  • Increase to superannuation guarantee contributions to 10%
  • Annual performance test on MySuper products
  • Stapling legislation; and
  • Upcoming retirement income covenant.

• Strategic Plan for 2021-2024. This included the:
  • Strategic pivot to the post-retirement phase of superannuation, with a goal to position the Fund as a leader in providing products and solutions tailored for members during the decumulation or income phase of retirement savings
  • Launch of a retirement destination, an enhanced personalised online experience tailored to the needs of members with dashboards and tools to empower them in proactively managing their retirement savings
  • Introduction of new ways for members to manage their super online
  • Introduction of a retirement product suite, catering for different member needs in retirement. This included the launch of new Lifestyle Investment Options for RetireAccess members, which are designed to produce a sustainable level of income and help manage retirement specific risks; and
  • New advice offering by TelstraSuper Financial Planning, addressing a gap between simple phone advice and the current comprehensive advice offer.
• Supporting members through COVID-19. This included:
  • A purpose-built chatbot and dedicated COVID-19 microsite
  • Transforming face-to-face member education events and engagement to be 100% online; and
  • Providing access to super through the Government’s COVID early release scheme.
• Appointment of a new insurance partner, MLC, with new features including a self-service insurance portal, and innovative programs and support services such as Best Doctors and Mental Health Navigator.
• Fee changes including a 15% rebate for members who pay for their own insurance premiums, and a reduction of percentage-based administration fees for all members by 10% from 0.20% to 0.18% per annum.
• The Fund’s Net Promoter score, reflecting the likelihood that a member would recommend TelstraSuper, hit a record high of +51 in 2021.

The CEO introduced the CIO.

The CIO gave a presentation which:

• outlined investment performance over the 12 months to 30 June 2021
• provided an update on performance since this period and discussed the market outlook; and
• explained how the Fund’s portfolios are currently positioned.

Investment Performance over the 12 months to 30 June 2021

• The year was one of exceptional investment performance for members. The Balanced, Growth and International Equities investment options delivered their highest ever financial year returns in the Fund’s history, whilst the Australian Equities, Defensive Growth and Diversified Income options delivered their second highest ever financial year returns.
• Investment returns for RetireAccess account-based pension members were even higher because no tax is payable on investment earnings for these members.
• The key reason for the strong returns was the exceptional performance of equity markets.
• Governments and central banks around the world have taken unprecedented action to support and stimulate the economy.
• The availability of safe and effective COVID vaccines together with a clear result in the US presidential election has boosted investor confidence and investment markets.
• Investment performance for the year was highly competitive with other superannuation funds.
• Longer term investment performance has been solid and above the industry median.
• The Fund passed the new investment performance test, which was introduced by the Your Future, Your Super legislation.

Performance since 30 June 2021 and Market Outlook

• Performance has continued to be strong and driven by similar factors to those influencing the previous financial year’s returns. In recent months, there has been greater market volatility.
• Economies are likely to continue to reopen as COVID-19 vaccines are rolled out. Although there may be setbacks, central banks are likely to continue to act to stimulate economic growth, keep interest rates low and provide liquidity to markets. We expect that this will provide support to asset prices.

Current Portfolio Positioning

• The Fund has begun to reduce risk in the Fund’s investment portfolios from around June 2021, including changes to strategic asset allocations for diversified investment options.
• New investment objectives have been introduced for RetireAccess account-based pension options to reflect the fact that these options do not pay tax on investment earnings.
• Our view is that the current low interest rate environment is more likely to favour equity investment than investment in fixed interest securities and this is reflected in the Fund’s investment holdings.
• In February 2021, the Board approved the Fund’s Climate Change Action Plan for the Fund’s investment portfolios. The plan aims to ensure that the Fund’s portfolio is proactively positioned to achieve strong returns while avoiding the risks that climate change is expected to present. The Fund has set a long-term goal of having a carbon-neutral portfolio by 2050, together with shorter-term milestones.

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 $25 billion invested on behalf of members and several reserves. Member satisfaction and retention rates are extremely high and member account balances are well above industry averages.
• The Fund is placed in the top 25 funds in Australia measured by funds under management and in the top 300 funds globally.
• The Fund has maintained its Platinum rating by SuperRatings for a 16th consecutive year, being a finalist for the Momentum Award, Pension of the Year and Career Fund of the Year. The Fund won the Momentum Award, which is awarded to the fund that has demonstrated significant progress in executing key projects that will enhance its strategic positioning in future years.
• There has been a continued focus on environmental, social and governance considerations and as noted earlier, the Fund has launched its Climate Change Action Plan.
• The Fund has also joined a network of organisations that are certified as carbon neutral.
• The Fund has strong governance and policies in place around investment trading activities by directors, executives and staff, including a pre-trade approval policy. The Fund’s priority is to act in members’ best interests and uphold its fiduciary responsibilities.
• The Fund has undertaken advocacy work in partnership with Indigenous charity, First Nations Foundation, and will look to establish its first Reconciliation Action Plan in 2022.
• The Fund has adopted a refreshed vision, to excel at supporting members to grow and protect their super savings and optimise their income streams.

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: Proxy Voting

Peter: Does TelstraSuper vote our shares in the companies we hold through super at AGM’s etc?

Graeme Miller

• Yes, we vote on all resolutions for all of the shares we own, wherever it is possible to do that.
• The reason we do this is that we believe that voting is one of the most effective tools for holding boards accountable and for encouraging good governance in the companies that we own.

When voting how does TelstraSuper determine how to vote (For, Against, Abstain etc.)?

• We have a formal documented Proxy Voting Policy available on our website.
• We take each company’s unique circumstances into account, and we always vote in a manner that protects and enhances our members’ best interests
• We take advice from a proxy voting research company for the large Australian companies that we own. We get this advice from a group called ACSI which is the Australian Council of Superannuation Investors. We also get advice from time to time from other providers.

What are TelstraSuper’s policies with respect to a fair remuneration for key executives in the companies in which we hold shares?

• The Proxy Voting Policy provides the detail, and in particular Appendix A, which sets out in some detail the principles that we follow.
• In brief we believe that the remuneration of directors and executives should be designed to ensure long-term alignment with shareholder interests and that Remuneration reports should be clear and complete.

The sorts of things we consider are:

• The clarity and completeness of the disclosures.
• The quantum of pay and whether it is aligned with performance and shareholder outcomes.
• Remuneration comparisons to similar companies.
• The balance between fixed and variable pay.
• The structure of variable rewards and whether they incentivise appropriate behaviour and are challenging enough to earn the rewards.

What are TelstraSuper’s policies with respect to ESG in the companies in which we hold shares?

• We incorporate ESG (Environmental, Social and Governance) factors in all aspects of our investment process, and ESG factors are always at the forefront of our thinking when we exercise our votes.
• We believe that poor ESG practices are likely to give rise to unrewarded investment and reputational risks, whereas good ESG practices are likely to give rise to more sustainable and stronger investment returns.
• Our website includes comprehensive information about our sustainable investment policy and practice. We also issue a six-monthly bulletin to our members outlining our sustainable investment activities, including our proxy voting activity.

Does TelstraSuper use a proxy advisor and if so whom?

• Yes, our proxy advisor is the Australian Council of Superannuation Investors (ACSI).

Is there a policy document that TelstraSuper can share with members on the above issues?

• Yes, our Proxy Voting Policy is available on our website.
• Our website has a dashboard on it that allows our members to see every one of our proxy voting decisions for every vote that we’ve made over the last two or three years.

Topic 2: Contributions

Peter: What is the latest on legislation to allow a 72 year-old member to place money into Super without the work test?

Chris Davies

• Under current legislation, if you are aged between 67 to 74, you are generally required to satisfy the work test in order to make personal contributions and some types of employer contributions.
• However, if you’re aged 67 to 74, and have a total superannuation balance of less than $300,000 at the end of the previous financial year, you can also make personal contributions and some types of employer contributions, during the first financial year you don’t meet the work test. This is known as the work test exemption.
• There is a bill currently before parliament that would allow members under age 75 to make contributions without meeting the work tests.
• This legislation is still in its early stages and is currently in the House of Representatives. It is a proposal only and not currently law.
• The next Parliament sitting is on the 22 November where this legislation could pass. We will keep members informed when/if it does pass.
• We receive quite a few questions like this from our members who are moving into retirement as well as those who are retired. This is why we are focusing a lot of our work on supporting members transitioning to retirement and in retirement. We have built a comprehensive stack of resources online and TelstraSuper Financial Planning is here to help members navigate the changes around super.
• We encourage members to take advantage of the assistance that is available.

Peter: What will the process be, to add additional contributions of up to $330k after 1 July 2022 when the age requirements will be removed for 67–74-year-olds? Will these be added to the accumulation account and then transferred to a new pension on request?

Chris Davies

• The legislation around age requirements and work test has not been passed.
• If the legislation is passed, we’ll be sure to advise members on their eligibility and the process
• But generally speaking, you do have to make a contribution first into an accumulation account and then commence a new pension from there.

Topic 3: Direct Access and SuperOnline

Adrian: My question relates to the performance of the TelstraSuper website and its reliability to members as a channel to get information as to the status of accounts and use as a platform for managing our superannuation through Direct Access.

The banner on the homepage states “TelstraSuper’s secure member portal is a quick and easy way to manage your super account and membership details online”. That’s not always the case

Of most concern is the recent outage (Sat Nov 6 continuing until Tue Nov 9) that impacted the ability to have the Dashboard or Investments pages populated, switch funds (to Direct Access) or make trades using Direct Access – the latter showed a message “We are currently unable to retrieve your investment option balances. You may be restricted from buying shares until your balances are available”. The issues remained during the day. This is simply not good enough.

On a more regular basis there are periods on many weekends where the site is unavailable or has limited functionality. Doing site maintenance on weekends is reasonable, however I would appreciate the precise window for maintenance being published and adhered to. I would hope you agree that it is in the interest of members to be able to plan any interactions they want to have on the site over a weekend in the knowledge that the platform will be able to support their queries and execute their instructions. A minimum of 4 hours available to members on a Saturday or Sunday afternoon/evening is my suggestion.

TelstraSuper is competing in an ever more sophisticated financial and technical marketplace. The online channels (web and mobile) are becoming increasingly important.

What is being done to continually ensure improved reliability and performance?

(Note: The question has been edited so as not to disclose personal information regarding the member or their personal circumstances and interactions with the Fund.)

Chris Davies

• Our website as a whole is very reliable.
• Over the last 6 months the uptime for our home page has been 99.98% and 99.41% for the secure member portal.
• We know that a lot of our members access the secure website to get information about their account, as well as to access other 3rd party platforms such as Direct Access and insurance online. Therefore we put a lot of priority on ensuring that access to these platforms is available, and stable.
• While there have been some issues of late with the integration with the platform under-pinning Direct Access, and therefore its availability, we are actively working with our partner to uplift this platform to ensure the best experience for our members. In fact that is planned for the first half of next calendar year.
• Until such time we will review the opportunities with our partner to strengthen our monitoring around service availability of Direct Access to minimise member disruption as well as communicate outages more effectively in the future.
• In terms of the secure member portal, as a fund we are continually looking to improve and innovate our service offering, and from time to time, we need to have planned outages to the secure member portal to undertake upgrades.
• Where these need to occur, they are planned for times with minimal impact to members, such as at night and on weekends with prior notification to members of a specific timeframe.
• Occasionally there are unforeseen or unplanned technical issues that the team need to work through to resolve rapidly. Where these impact members we'll communicate the outage.
• We understand that the downtimes can be frustrating. We'll continue to monitor the performance of the website and the secure member portal.

Robert: Direct Access. Will Telstra Super Direct Access offer a Stop Loss option as do most Brokers in the modern investing worlds?

Chris Davies

• The whole product platform is under review and we plan to have a number of changes over the coming 12 months, but we haven’t considered that particular aspect.
• We will take the stop loss option into account as we review the product.
• We’re looking at everything from the underpinnings of that platform and the relationship with the third-party provider as well as the range of vendors who access Direct Access as a product and will have more to announce in the new year.

Topic 4: Investments and Fees

Brendan: Will Telstra Super be investing in Crypto?

Graeme Miller

• Thus far TelstraSuper has not made any material investments in cryptocurrencies. But it is something that we are looking at because we do have open minds.
• At the moment, cryptocurrencies are still very new, and they still are very volatile. It is an area that is as yet unregulated. And as far as we can tell, unlike most of our other investments, cryptocurrencies aren’t really backed by any tangible assets and nor do they deliver a predictable, or reliable, or any income. For all these reasons we are a bit cautious about crypto and we’ve chosen not to invest.
• Our fundamental role is as a fiduciary of our members and assets. Essentially, we’ve been entrusted with securing our members’ financial futures. What this means is we do need to be very risk aware and very prudent in the way that we approach any new type of investment.
• We will continue to watch and monitor crypto, but for the time being we have not yet reached the conclusion that it is an investment that we plan to make.
• What is more interesting than cryptocurrencies themselves is the blockchain technology that underpins cryptocurrencies.
• Within our venture capital portfolio, we do in fact have a number of investments in blockchain-like technologies and other technologies that facilitate better payment methods and more secure payment methods. Even though we’re not investing in the currencies themselves, we nonetheless are benefitting from this particular trend in technology.

Brendan: Why are TelstraSuper fees so high, do your fees compete with other Super funds?

Chris Davies

• Strategically the Board have asked management a lot about the fees and about our overall operations.
• We use a number of ratings agencies that monitor our industry and we look to those agencies to help us assess where we sit relatively as far as our fees go.
  We know from looking at those agencies and ratings reports that our fees are about the median of the industry.
• We’ve just recently reduced our fees at 1 July. It’s the second decrease over the last couple of years.
• We know that we need to remain competitive there, but we also know we’re a quality fund and provide quality services to our members. And that those fees are reflective really of the kind of fund we are.
• The fund constantly keeps fees front of mind and we’ll be coming back to members in terms of fee positioning over the next couple of years.

Topic 5: Cyber security

Robert: Cyber Security – are my investments with TelstraSuper safe?

Chris Davies

• This is a topic that’s absolutely top of mind for the fund. We have people on our staff who are expert on this subject, and we do work closely with Telstra, with their security team and they’ve helped us greatly in terms of responding to the cyber threat.
• Our industry as a whole is very focused on this subject. And we are involved in a number of industry working groups and similar kinds of groups who are really working together to make the whole industry stronger.
• And we know through those working groups that we are playing a leading role in that.
• Our association with Telstra is a strong one and has also made us very strong in this regard. While obviously it is a threat that we are concerned about, we feel we’re in a strong position.
• We need to be constantly aware, and we are constantly raising this with our Board. Our Board is regularly asking us questions about this, and we do spend a lot of time with all of our staff talking about the risks. In fact, only last week there was a specific training for all staff around cyber security.
• This is something at top of mind, especially given the fact that our regulator, APRA is also very focused on this area.

The Chair thanked members for their continued trust and support.

She thanked Directors for their continued commitment to the Fund and the diverse skills they bring to the Board. She thanked the outstanding work undertaken by the TelstraSuper team in providing excellent service during another challenging year.

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

Robert: How secure is Direct Access as a third party provider and UBS? Who owns the shares bought - the 3rd party?

• The Direct Access solution is offered by UBS and is accessible via TelstraSuper’s SuperOnline platform. UBS, as with TelstraSuper, is regulated by Australian Prudential Regulation Authority (APRA). APRA’s Prudential Standard 234: Information Security requires that regulated entities adhere to and continually demonstrate stringent, industry-wide recognised better practices pertaining to information security overall.
• As an additional measure, TelstraSuper has processes in place for Direct Access and other SuperOnline integrations to undergo regular penetration testing for any security flaws. These security penetration tests are conducted by independent and well regarded cyber-security professionals. Any observations and associated remedial actions are independently reported to TelstraSuper’s Board.
• UBS is also regulated by the Australian Securities and Investments Commission (ASIC) in terms of the security of its investments. ASIC has responsibility for market integrity and consumer protection and the regulation of investment banks and finance companies. APRA is responsible for the licensing and prudential supervision of Authorised Deposit-taking Institutions (ADIs), life and general insurance companies and superannuation funds.
• With regards to share ownership – a member does not own the shares directly as they are purchased by the Trustee on their behalf. The value of these shares and any income generated is then attributed to member accounts in Direct Access.
• Further details about Direct Access are available in the Product Guide.