TELSTRA GROUP LIMITED — AGM Information 2008

Nov 20, 2008

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21 November 2008

The Manager

Company Announcements Office Australian Stock Exchange 4[th] Floor, 20 Bridge Street SYDNEY NSW 2000

Office of the Company Secretary

Level 41 242 Exhibition Street MELBOURNE VIC 3000 AUSTRALIA

General Enquiries 08 8308 1721 Facsimile 03 9632 3215

ELECTRONIC LODGEMENT

Dear Sir or Madam

Chairman, Chief Executive Officer and Remuneration Chair presentations

In accordance with Listing Rule 3.13.3, I enclose the presentations of the Chairman, CEO and Remuneration Chair, which will be delivered today at the Telstra Corporation Limited 2008 Annual General Meeting.

Regards

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Carmel Mulhern Company Secretary

Telstra Corporation Limited ACN 051 775 556 ABN 33 051 775 556

TELSTRA ANNUAL GENERAL MEETING 21 November 2008

MR DONALD McGAUCHIE, CHAIRMAN, ADDRESS TO SHAREHOLDERS

Introduction

Good morning ladies and gentlemen, I'm Donald McGauchie, the Chairman of your company.

I welcome you to the 2008 Annual General Meeting.

I also welcome shareholders viewing today’s proceedings via webcast on our Investor Relations website.

A quorum is present and I declare this Meeting open.

Let me start by introducing the Board members, senior executives and the company’s auditor.

As with previous years our aim is less formality, so we have only four people on stage, with the rest of the directors in the front row.

Directors have been meeting with you earlier.

Joining me on the stage are:

John Stanhope, our Chief Financial Officer,

Sol Trujillo, our CEO, and

Carmel Mulhern, our Company Secretary.

In the front row, we have my fellow directors:

Geoffrey Cousins,

Catherine Livingstone,

Charles Macek, who as Chairman of our remuneration committee will shortly

address you,

John Mullen, John Stewart, John Stocker, and

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Peter Willcox.

John Zeglis is an apology, unavoidably detained on another matter.

I would like to take this opportunity to welcome John Mullen and John Stewart as non-executive directors. Both men are standing for formal election today. In the relatively short time they have been on the board, they have made significant contributions – and we have valued their experience and insight.

I would also like to mention and welcome Telstra’s Executive Leadership Team seated in the front rows. I would like to thank them for their extraordinary efforts in the last year. Sol, his team, and all Telstra employees have been doing a remarkable job – and Sol has set an extraordinary leadership standard for everyone.

Welcome also to Craig Boyhan and Sean Van Gorp from Ernst & Young, our external auditors.

I’ll now outline the procedure for today’s meeting. There are five items of business on today’s agenda:

1. Chairman and CEO’s presentations,

2. Remuneration Report,

3. Discussion of Financial Statements and reports,

4. Adoption of the new constitution, a copy of which I now table, and

5. Election and re-election of directors

Following Charles’s address on executive remuneration, I will move to answer questions submitted by shareholders in advance of the meeting. We will then consider the remaining items on the agenda and will take questions from the floor. As I am standing for re-election today, Dr John Stocker, who is chair of the Audit Committee, will take the chair of the meeting for this item, and will take questions from the floor on this item at that time.

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So that we can represent the views of all shareholders, including those who have lodged proxies, I will call a poll in relation to Items 2, 4 and 5.

No resolution is required in relation to Item 3.

I will open the poll now, so that shareholders who need to leave the meeting early have the opportunity to vote on these items. Please complete the voting section on the reverse of your yellow shareholder card and place it in one of the ballot boxes near the exits to this room.

This annual meeting is your forum - the shareholders’ forum - to discuss the performance and future of your company. We welcome the opportunity to brief you first hand on the performance of your company and to answer any questions you may have.

In the interests of the comfort of shareholders, we will have light refreshments available in the foyer around 12.30pm. The meeting will continue, but you are very welcome to enjoy these light refreshments being served in the foyer during this period.

Board Overview

We are gathered here today at an extraordinary time. As everyone in this room knows, the current global financial crisis impacts everyone. In our lives, and in the known history of the markets, there have been only a few occasions when a pause – to stop, and review exactly where we stand – has been required. We are at one of those points now. How we respond as a community, nation, and an economy – as part of the global economy – will dictate the lives of all of us, and our families, in the years ahead. Careful stewardship is paramount.

We are very aware that many of our shareholders are particularly impacted through their superannuation investments; many shareholders who rely on us to deliver in these difficult times.

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We are determined to do everything we can to ensure your company continues to perform to the peak of its ability. We are committed to protecting and driving the creation of shareholder value.

It is in this context that I am particularly pleased to be here before you, once again, and tell you your Company has performed very well in the last financial year. Telstra has meaningfully out-performed all of our Australian competitors and equalled or bettered the very best of our peers internationally.

Your management has delivered on their commitments. I would like to extend the Board’s congratulations to the management team led by Sol – and to all employees. They have worked hard – they have worked smart.

And, as we stand today – during these unprecedented times – the company is in very good shape. Unarguably we have:

• the right strategy;

• made the right investments;

• got the execution right; and

• protected the strength of the company.

And it is important that we are in such good shape.

As you are aware, Telstra plays a critical role in the Australian economy. You, as representatives of our 1.4 million shareholders, own – and the company operates – the communications backbone of the nation. We, and our competitors, provide the various competing communications platforms that underpin the functioning of our economy and our communities.

We are working to ensure that we stay ahead of the needs of the country. Enabling business and government, connecting people, building infrastructure, creating jobs – we are committed to providing returns for all our shareholders.

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Three years in and the transformation strategy is delivering results for shareholders.

• Telstra continues to win in the marketplace, win market share and achieve real growth for our shareholders.

Sol will address operational issues in more detail, but some of the highlights of a busy year include:

• World leading results (set Telstra apart from its global peers)

• Outperforming the share market (both in Australia and internationally)

• IT - more than six million customers migrated to the new platforms

• Launching the T-life stores, with 20 stores now fully converted, including our Melbourne flagship store on the corner of Bourke and Swanston Streets.

• Migration of CDMA customers to the Next G network prior to the shutdown of the CDMA network

• ADSL 2+ rollout for 1 million homes and small businesses.

• Expanded our China operations with new acquisitions

Telstra needs to continue to focus on the transformation to achieve real growth. And we are.

We firmly believe that ensuring your company performs to the peak of its capabilities, delivering the products and services that customers want and need, will not only ensure the best returns for our 1.4 million shareholders – it is in the best interests of the national economy.

Telstra has a very clear strategy to be a world-class media comms company, both in Australia and overseas. We are committed to achieving this goal – and we are well on our way.

Telstra takes responsibility for its own performance and we are happy to be judged against it. We also work and argue strongly to encourage the existence of a

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regulatory environment that recognises risk, provides certainty and encourages investment and innovation that generates returns in Australia for Australians. And we will stay true to our belief and stay committed to arguing the case against regulation that adversely affects our country, our business and, in turn, your shareholder value.

Just last week, the ACCC brought down three significant decisions – the final Telstra HFC exemption rejection, the draft Telstra ULLS undertaking rejection, and MTAS indicative prices.

These decisions were contradictory and lacking commercial rationality. The decisions were anti-Telstra and pro-Singtel. All were anti-investment, antiinnovation, and pro-free riders.

If anyone wants to know what is wrong with telecommunications regulation in this country and why it is in need of urgent reform, they need look no further than these atrocious decisions. In a country crying out for infrastructure investment, the regulator has sent a clear message to Telstra's competitors – ‘don't bother investing, just continue sponging off Telstra’.

The ACCC’s decisions seem even more inexplicable given there seems to be no argument that Australia’s economy desperately needs upgraded infrastructure. And from what you read, everyone seems to agree that we need smart, enabling broadband infrastructure that will drive GDP growth, productivity and competitiveness – as we have already done with our Next G network and HFC cable – both now at world standard with Next G world leading technology.

And we would now like to upgrade our fixed line network to world best standard. I am of course talking about the NBN – a new broadband network for Australia.

I would like to take a few minutes of our time together today to cover this very important matter and make sure there is no misunderstanding about where we stand.

Telstra first put our willingness to upgrade our fixed line network on the map in 2005 – just after Sol was appointed CEO. We went to the then Federal Government and

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said we wanted and were ready to build the upgrade – we called it the FTTN – fibre to the node. We recognised then that Australia needed high-speed broadband – and put a plan to the government to build it. As history shows, now, more than three years later, not one shovel of dirt has been shifted on it, not one kilometre of fibre has been laid – and not one of the several thousand jobs has been created.

The new Federal Government has a process underway that is meant to deliver this new network for Australia. The rules governing this process prevent me from going into too much detail, but what I can say – and what you may be aware of from press reports – is that there remain some critical unresolved issues – that are directly pertinent to our participation in the process.

These are the availability of a competitive return for Telstra’s shareholders – and the threat of further separation of your company.

First, to the competitive return question. Telstra wants to build the NBN – but we must have the right economics in place. And those conditions are set globally – not by us. The financial performance of a company of our size - and as a participant in the global market for capital – means that we are judged according to global best practice in capital efficiency. If we don’t get the economics right, the global markets will judge us harshly – that will impact on the company’s capacity to invest, and, ultimately, on you, our shareholders.

As I said earlier in my comments today – we firmly believe that ensuring the company performs to international standards – which ensures the best returns to you, our 1.4 million shareholders, is in the best interest of the national economy.

Now, to the separation question. Telstra has been very clear in its position that, unless we can have clarity from the relevant Federal Government Minister that we will not be subjected to further separation, we are not in a position to lodge an RFP bid, nor to build, the NBN. Our reasons are straight-forward – separation, or splitting Telstra up, means:

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• there would be no business case for Telstra to build the NBN. The economics aren’t there – it simply doesn’t add up. No separated company has, or will, build a fibre network;

• Telstra cannot build and operate a world-class NBN that provides reliable services to customers if we are separated:

• separation will wipe out jobs (the jobs of Telstra workers);

• separation will increase costs and severely impact productivity;

• separation will weaken our financial capacity.

We are willing to make a considerable investment in vital infrastructure – however, the threat of separation will stop it dead in its tracks, as it has everywhere else.

Telstra’s strong results to date – and the fact that we have been so resilient in the current market turmoil – are because we are a fully integrated communications company. Split us up and you would likely see the same mess that other telco companies forced down that damaging and costly path are now in. Just look at BT and Telecom NZ if anyone has any doubt.

This chart shows Telstra’s performance against the performance of Telecom NZ and BT since T3. You will notice that we clearly and markedly outperform both companies. The difference is that we have been in a position to, and have made the decision to invest in our business.

Both companies have been subject to value impacting regulations to separate them. In each case the policy decisions have added costs, stifled investment, and led to inferior services.

Separation has meant that both companies are so badly damaged they are no longer capable of a major investment – certainly not the sort of investment required to build next generation networks. The damage is not just to the shareholders, but to strategically important companies and, therefore, their countries.

Our ability to complete the $20 billion transformation is because we are integrated.

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Our ability to deliver the NBN more cost effectively for Australia than anyone else – is because we are integrated. It’s that simple.

The Board has not made a final decision on whether the company will lodge a bid for the NBN by the due date of 26 November 2008.

Make no mistake, we are giving this decision extraordinary consideration – and are doing so with the greatest rigor and a mountain of relevant information.

Our final decision whether to lodge an RFP bid will be based on:

• a thorough examination of the business case;

• the nature of that processp; and

• our shareholders’ best interests, which we, as a Board, are required to do by law.

Telstra has the proven record, financial capacity, skilled workforce. In effect, we would be doing a sophisticated upgrade of our existing network. And we have demonstrated our capabilities – most recently with the Next G roll-out. We do what we say we will do.

Telstra has a constructive relationship with the Federal Government and, while we are materially restricted from discussing the NBN with them during this process, we remain of the view that we want to build it – if we can make it work for you, our shareholders.

One thing that you can be sure of is that we understand our duties to shareholders, and will continue to act in the best interests of all shareholders – the mums and dads and our large institutional shareholders – who themselves represent many more mums and dads.

Telstra has other options – whether we lodge an RFP bid or not. The company is now stronger and more agile to deal with the challenges ahead.

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Let me return to the performance of your company over the past year – and, in particular, talk about our people.

Each AGM, we talk about the strength of our team. The performance of your company is delivered by 46,000 women and men. The board would like to thank them and recognise their performance.

We talk to our employees, seeking their views as to their levels of engagement in the business. From the 2008 Telstra Employee Engagement Survey, with an 84 per cent response rate, we achieved 74 per cent employee engagement, indicating the extent to which employees value, enjoy and believe in Telstra and what they do. That is a great result for the management team and the best that has been recorded since we introduced this measurement format. We are working to get even better results in the years ahead.

It is also worth noting that, in November 2007, Telstra conducted an AWA re-offer to employees. Following allegations by the ACTU and unions of duress and coercion, the Federal Workplace Ombudsman commenced an investigation into the re-offer. The investigation was the largest ever undertaken by the Workplace Ombudsman and involved direct contact with over 15,000 Telstra employees.

On 18 July this year, the Workplace Ombudsman cleared Telstra of any wrongdoing, finding that there was no evidence that Telstra applied duress or coercion in its AWA re-offer. This was an important finding, demonstrating Telstra’s commitment to assisting employees make an informed choice about their employment conditions. Indeed, the vast majority of employees took up Telstra’s offer, choosing to renew their contracts and maintain their industry-leading arrangements.

Employee engagement is not automatic. Amongst other initiatives, we invested over $75 million in learning and development for our employees, representing an investment of around $1,600 per employee.

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Employees completed over half a million online learning courses through Learn.Achieve, and 6,500 employees participated in Frontline Leadership programs.

We also developed 252 new job-specific training courses available through the Telstra Learning Academy.

We will continue to work with our employees to ensure that we continue to provide an environment that allows them to be the best that they can be.

Telstra has been actively engaged in our community for decades. Only rarely in the history of the company has it been more important. To give you an idea on just a few of our initiatives, in the last year:

• We assisted more than one million low-income customers to connect or maintain their communications services. The total benefit provided was in excess of $200 million.

• We provided domestic disaster relief services to customers affected by: bush fires in Willunga in SA, and in Parkerville and Stoneville in WA; floods in the central and north coast of NSW; floods in Emerald, Rockhampton, Mackay, Charleville, Gold Coast, Beenleigh, Jimboomba, Beaudesert, Rathdowney, Boonah, Clifton, Allora, Warwick and Killarney in Queensland; and the very recent Brisbane storms. Our staff in Queensland are working round the clock. Interestingly, the ACCC says that these costs don’t exist.

• In August 2007, we launched Telstra Connected Seniors® with over $750,000 of grant funding provided to 110 community organisations to help older Australians learn to use mobile and internet technology – and stay connected.

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• We also launched the Telstra Foundation’s Spotlight on Cyber Safety program with a commitment of $3 million over three years to help children develop the skills to be safe when online and using mobile phones.

On environmental matters we saved 25,332 tonnes of CO2 equivalent, thanks to projects targeting energy efficiency and recycling of paper, cardboard and wood. This is comparable to the greenhouse gas emissions from 1,800 average Australian households for a year.

We reduced the consumption of office paper by 35,900 reams, a 14 per cent reduction from 2006/07. This represents a decrease from 7.2 to 6.5 reams per employee. It sounds small, but when you think about the number of trees and the landfill – it makes a difference.

We reduced the number of vehicles in our fleet by 17 per cent with a corresponding reduction in fleet energy use.

We operate 10,265 solar powered sites, including exchanges, radio terminals, small repeater stations and pay phones. Telstra is one of Australia’s largest users of solar power.

And now a final word on corporate governance .

Good corporate governance is the hallmark of successful companies – it adds value to the Company through efficient oversight and risk management, while encouraging innovation and entrepreneurship within the Company.

As one of Australia’s largest companies, with one of the largest diversified shareholder bases, your Board firmly believes that striving for excellence in corporate governance plays a major part in the Company’s continuing success. Indeed, in these

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challenging economic times, the governance practices we have put in place have stood us in good stead.

Governance at Telstra is an unwavering commitment to protecting the interests of all shareholders and the creation of long term shareholder value. It means doing the right thing, in the right way.

In summary, your management have delivered a world leading result in the last financial year and are on track, in these difficult times, to deliver on our transformation strategy and meet market guidance. Both are outstanding outcomes given the times.

I will now hand over to your chief executive officer. Sol will take you through the management report on the full year results.

Thank you.

VIDEO PLAYS AS SOL TAKES TO THE LECTURN

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Disclaimer

• These presentations include certain forward-looking statements that are based on information and assumptions known to date and are subject to various risks and uncertainties. Actual results, performance or achievements could be significantly different from those expressed in, or implied by, these forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of Telstra, which may cause actual results to differ materially from those expressed in the statements contained in these presentations. For example, the factors that are likely to affect the results of Telstra include general economic conditions in Australia; exchange rates; competition in the markets in which Telstra will operate; the inherent regulatory risks in the businesses of Telstra; the substantial technological changes taking place in the telecommunications industry; and the continuing growth in the data, internet, mobile and other telecommunications markets where Telstra will operate. A number of these factors are described in Telstra’s 2008 Annual Debt Issuance Prospectus lodged with the ASX.

• Soufun revenues amd expenses are unaudited management converted from local currency to $US based on US GAAP and then translated to A-IFRS.

• All forward-looking figures in this presentation are unaudited and based on A-IFRS. Certain figures may be subject to rounding differences. All market share information in this presentation is based on management estimates based on internally available information unless otherwise indicated.

• All amounts are in Australian Dollars unless otherwise stated.

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YTD Share Price Performance
130
120
110 Telstra
ASX200
100
ASX 200 Financials
90
BHP
80 US Telco Index
70 Euro Telco Index
Asia Telco Index
60
50
40
31-Dec-07 30-Mar-08 30-Jun-08 30-Sep-08 20-Nov-08
TLS outperforming 32% vs ASX 200
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Share Price Performance since T3
200
190
180
170
Telstra
160
ASX200
150
ASX 200 Financials
140
130 BHP
120
US Telco Index
110
100 Euro Telco Index
90
Asia Telco Index
80
70
60
50
20-Nov-06 20-May-07 20-Nov-07 20-May-08 20-Nov-08
TLS outperforming 46% vs ASX 200
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Financial Results

Financial Results	Financial Results	Financial Results
	$ billions (reported) FY08 Growth % Sales Revenue 24.7 4.2% Total Revenue 24.8 4.7% EBITDA 10.4 5.6% EBITDA Margin (%) 42.2% +0.5pp
	Sales Revenue	24.7
	Total Revenue	24.8
	EBITDA	10.4
	EBITDA Margin (%)	42.2%
	EBIT	6.2
	PAT (post minorities)	3.7
	Accrued Capex	4.9
	Free Cash Flow	3.9

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World-class mobile performance
12.3% Mobile Services Revenue Growth
8.5%
8.2%
5.6%
4.6%
4.5%
-1.0%
-2.1%
-2.5%
-4.2%
Telstra Vodafone Optus Orange Orange Telenor KPN Telefonica T-Mobile Telecom
Aust UK France Germany Italia
Source: Company reports
Sept 08 quarter for global peers; Telstra 12 months to June 08
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3G subscribers greater than 50% of mobile
80
60
%
40
2G SIOs
20 3G SIOs
0
2H06 1H07 2H07 1H08 2H08 1Q09
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Mobiles revenues now exceed PSTN revenues
$m
Cross over in
4,000
August 08
3,500
3,000
2,500
2,000
2H05 1H06 2H06 1H07 2H07 1H08 2H08
PSTN Mobiles
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Strong retail performance
TC&C +6.1%
TB +8.6%
TE&G +3.6%
Total Retail (excl Sensis) +5.9%
Sensis +8.1%
Wholesale -4.5%
$m
-100 250 500 1,000
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12 month revenue growth to June 08
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Constant Performance Improvement – ARPU
42%
June 2003 Today
ARPU = Average Revenue Per User
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Redefining the business

• Mobile data > SMS

• • IP > legacy

• Broadband growth > PSTN losses

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IT Transformation
Services
Customers on
on new
new systems
systems
12 August 3.3m 4.3m
30 September 5.3m 8.6m
21 November 6.7m 12.0m
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Exceptional growth opportunities in China
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China Sales Revenue
All things home
~50%
US$108m
All things auto
US$47m
FY07 FY08 FY09E
All things digital
New Acqn (consolidated in FY09) SouFun
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A real win for buyers and sellers

• Long term, complementary agreement, bringing together: • Sensis’ local and multi-channel strength • Google’s global search technologies

• • Yellow™listings power Google Maps • Users can see Yellow™listings and links • Google results available on sensis.com.au More potential reach for our Yellow™advertisers at no extra cost

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Telstra’s world class Next G™network

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Device evolution
Devices
2009
3.6Mbps 7.2Mbps 21Mbps
Network
Peak rated 21Mbps downlink
end of 2008
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Getting it together
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Integration of Telstra’s hosted telephony
with Microsoft OCS desktop
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Unified Communications: point of differentiation
1-click to all your comms
Integration of comms
services Access from multiple devices
SIMPLE
SEAMLESS
EVERYWHERE
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Microsoft Online Business Applications from Telstra
+
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World-class partners for business UC
Integration of Telstra’s hosted
Hosted telephony with Microsoft OCS
desktop
Managed Managed solution for leading
IP Tel PBX
Small business Large enterprise & government
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Remuneration Speech

Telstra Annual General Meeting 2008

Mr Charles Macek, Chairman – Remuneration Committee

Good morning ladies and gentlemen,

My name is Charles Macek and I am the Chairman of the Board’s Remuneration Committee.

This Committee is responsible for reviewing and recommending to the Board the remuneration policy, strategy, and structure for Telstra’s Board, the CEO, and senior executives. In carrying out its functions, the Remuneration Committee seeks external, independent advice and information regarding market practice, remuneration structure and competitive analysis of the executive market.

Each year the Committee prepares the detailed Remuneration Report that you can find in your Annual Report and online. Today I am pleased to have the opportunity to take you through a summary of the Remuneration Report for fiscal 2008.

At the outset I would like to acknowledge shareholder and community concern and interest in executive remuneration – particularly in these troubled times.

Recognising these concerns Telstra ensures that the ‘at-risk’ elements of executive remuneration are subject to achieving challenging hurdles and, there are no rewards for failure.

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We do need to construct a framework that allows us to attract, motivate, and retain the best global talent – but we do it in a manner that rewards for achieving Telstra’s short- and long-term objectives, as well as the sustained creation of shareholder value.

There has been some commentary on executive remuneration by a number of individuals and organisations who may not understand the complexity and importance of disciplined and well structured remuneration plans appropriate to the dynamic needs of companies which will vary over time. Clarity of strategy and achievement of goals are of the utmost importance for companies and shareholders alike.

Accordingly, in my comments today I would like to give you as much assistance as possible to allow a ready understanding of our remuneration plan.

We are very aware that we must do everything possible to fully explain our strategy and plan.

As part of this goal, in the past year we have engaged directly with a significant number of shareholders and taken their feedback into consideration in the design of this year’s plan and the Report.

In response to that feedback, Telstra and its Remuneration Committee have made a special effort to ensure our executive remuneration strategy is clearly laid out and explained in our Annual Report. It is important to us that the remuneration framework and strategy, and how they are connected to Telstra’s business objectives and our commitment to creating shareholder value, is easy to access and understandable for our shareholders.

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Accountability to shareholders is very important to Telstra and we are committed to simple and transparent reporting while protecting commercially-sensitive information when it is necessary.

Before I begin on this year’s Report it is worth noting that much of the data in the report you have before you captures pay and performance for last year, Financial Year 2007/08. As we are only approaching half way through this current financial year, the final remuneration outcomes for this year are yet to be determined. Having said that our remuneration philosophy and strategy continues to:

• be designed to attract and retain world-class Board and executive talent;

• create a high-performance culture by driving and rewarding executives for the achievement of the company’s strategy and business objectives; and

• link incentive, at-risk remuneration to the creation of shareholder value.

Simply put Telstra’s Remuneration Plan is directly aligned with shareholders’ interests – as it should be.

Our remuneration structure is tied to the achievement of transformational objectives and how they translate into financial success. The transformational objectives have been driven by measures the Board considers essential to increasing shareholder value and delivering earnings growth over the long term.

I believe it is worthwhile commenting on why we use options as part of our Plan. Are they the best instrument? After a great deal of investigation and discussion we believe they are the best instrument to ensure that overall executive remuneration and payments are linked to the creation of shareholder value.

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Options are a riskier remuneration component due to share market volatility and the value to the executives is directly dependent upon the share price. Moreover, the value of an option only represents the difference between the current market share price and the grant price an executive must pay to exercise the option.

Options are also more complicated to value than share-based plans because we need to forecast a future share price based on various financial assumptions. For this reason different series of options will have a different price attributed to them – even though they have been calculated using the same methodology.

Turning to our total remuneration plan, the balance between the various remuneration components continues to provide significant focus on delivery of the transformation plan and the creation of longer-term shareholder value. This year’s plan retains a combination of fixed remuneration and short and long-term incentives ensuring executive performance is measured against defined objectives and that senior executives are appropriately rewarded when desired results are achieved.

Both the short and long-term incentives are “at-risk” – they do not produce gains for executives unless certain individual or corporate milestones are reached. Short-term incentives (STI), including individual performance requirements, are based on stretch targets that ensure executives remuneration is linked directly to the business strategy.

The long-term incentive (LTI) will only rewards executives if performance measures for Total Shareholder Return (TSR) or Return on Investment (ROI) are met. Even when these hurdles are met, the vesting schedule is designed to deliver the rewards at the end of the transformation period. Therefore, executives must consistently meet or exceed expectations to fully benefit from the plan.

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ROI is used as it measures the level of return from the significant investment that has been made in the transformation strategy. Executives will be rewarded on successfully generating value from these investments.

TSR is used as it measures Telstra’s value creation for shareholders.

The Board believes that absolute TSR rather than relative TSR is suitable due to the absence of an appropriate benchmark domestically – and in the recognition that while there are appropriate international benchmarks, for most of our investors, an investment in Telstra is only considered for inclusion in their Australian portfolio. Further, an absolute TSR measure requires delivery of positive returns to shareholders, removing the potential for executives to be rewarded for negative returns. In a volatile or declining market an absolute TSR measure locks in the minimum returns that must be delivered to shareholders in future years before executives can be rewarded on this measure.

I would like to underline the “at-risk” comments – particularly given the current global market conditions. From your own reading of the Report you will be aware that senior executives did not receive the maximum awards potentially available despite exceptional

performance in many areas. Furthermore, management should not expect the upside in the good times, with no risk in the downturns. Shareholders do not get that option.

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I have also received some feedback questioning why a number of executives achieved the identical percentage of fixed remuneration as their STI bonus. The reason is that the majority of the senior executives have 80 % of their STI at-risk payment directly linked to company performance measures – and only 20% to their individual performance measures. As a result we see a number of executives achieving similar STI outcomes.

The achievement of the most critical performance measures in both fiscal 2007 and fiscal 2008 has demonstrated the essential role the remuneration structure plays in driving management’s focus on delivering the transformation strategy, improving the customer experience, and most importantly, driving real and sustained increases in shareholder value.

Since linking executive reward to delivery of the company’s transformation strategy, we are pleased to report that Telstra has exceeded expectations financially, operationally, and as measured against our competitors. The effectiveness of the remuneration plan is also evidenced by the retention of our senior executive team.

The plans help drive Telstra executives to perform above expectations, achieving growth and implementing our ambitious transformation to an integrated, fully-converged business centered on the customer with leading next generation networks and systems.

I will now turn to the Chief Executive Officer’s remuneration.

In a year that Telstra outperformed the ASX 200 by 11.8 percentage points and delivered on or ahead of financial guidance on all measures, Chief Executive Officer Sol Trujillo’s total reportable remuneration for 2008 was $13,394,523.

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However, it is important to note that “reportable” remuneration is not the same as “take home pay” or value to the executive.

Reportable Remuneration takes into consideration accounting valuations for current and historical equity grants that may or may not create value for the CEO. As an example given the current financial turmoil the “take home pay” can and does vary significantly. In Telstra’s case, because there are no easy performance hurdles, this has consistently been substantially below the reportable figure.

The CEO’s package for fiscal 2008 includes fixed remuneration of $3,000,000 – which has remained at this level since July 2005 - a potential maximum short-term incentive of $3,000,000 in cash and $3,000,000 in deferred shares, and a potential maximum allocation of 5,172,414 long-term incentive options.

Mr Trujillo is rewarded for operational excellence, and for the role he plays in guiding and driving specified outcomes in one of the most ambitious transformation projects attempted by any

telecommunications company. The Board structured the package to reflect the role he plays in guiding and driving the transformation strategy. The majority of the package is “at-risk” and directly linked to the delivery of transformation milestones, financial performance and increasing shareholder value.

As mentioned above, the reportable remuneration and the actual “take home pay” can vary. Although the majority of the LTI performance measures tested on 30 June 2008 were achieved, under the terms of Mr Trujillo’s fiscal 2007 long-term incentive plan, all options are subject to a gateway TSR hurdle being achieved before they can vest.

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The gateway TSR hurdle of 11.5% compound annual growth for the period 1 July 2006 to 30 June 2008 was achieved for options granted in fiscal 2007 and a portion of those options have vested. However, the gateway TSR hurdle of 11.5% annual growth for the year ended 30 June 2008 was not achieved and the entire grant of 5,172,414 options allocated in fiscal 2008 has lapsed even though, based on the achievement of other performance metrics, a significant part of this grant would have vested.

I now turn to other members of the senior executive team.

In keeping with our stated philosophy - in the constant challenge to attract and retain talented executives in a competitive global market - Telstra’s senior executive remuneration links executive rewards with building shareholder value.

The remuneration for all senior executives is based on performance measures strongly aligned to achieving stated business objectives. In fiscal 2006 and fiscal 2007 the performance measures were heavily weighted towards driving transformation. In fiscal 2008 the weighting has shifted:

• For the short term incentive (STI) we continue to focus on a mix of operational and transformation measures; and

• For the long-term incentive (LTI) we have moved to a more traditional position of using shareholder and investment return measures.

Both the STI and the LTI are at risk and no reward is received by the executives unless the threshold performance levels are achieved.

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The fixed component of remuneration for senior executives is influenced by the scope of the role and the knowledge, skills and experience required of the executive. It is reviewed annually as part of the company’s overall remuneration review process by reference to market salaries and is assessed against the company’s and the individual’s performance.

The remuneration plan continues to require senior executives to maintain a direct stake in Telstra. The minimum holding for the senior executive team, other than the CEO and COO, is shares equivalent to 100 per cent of their fixed remuneration. These shares must be acquired over no more than five years and the minimum holding requirement first applies from 2012.

The senior executive team are restricted from entering into arrangements that effectively operate to limit the economic risk of their security holdings in instruments allocated under STI and LTI plans during the period the instruments remain unvested. Senior executives are required to confirm that they comply with this policy restriction on an annual basis which enables the company to monitor and enforce the policy. In addition, the Company has decided to implement a policy which will prohibit the senior executive team, all Directors and other designated people from using Telstra shares as collateral in any financial transaction, including margin loan arrangements.

I will now turn to the remuneration of the non-executive directors.

Telstra’s non-executive directors will continue to be remunerated with set fees.

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Non-executive directors must take a minimum of 30 per cent of their remuneration as cash, and a minimum of 20 per cent as Telstra shares which are held in trust. This creates an alignment between director and shareholder interests, without compromising independence and objectivity when making decisions about the future direction of the company.

All Board and Committee fees, including superannuation, paid to nonexecutive directors in fiscal 2008 remain within the approved fee pool. Board fees were increased in fiscal 2008 effective from 1 July 2007. During fiscal 2008 the Board approved an increase in Directors’ fees effective from 1 July 2008. The increase is within the overall annual limit of $3,000,000 approved by shareholders in November 2007. As you are aware no further increase is being sought this year.

In closing I would like to reiterate the Board is committed to ensuring that shareholder interests, such as generating returns and attracting and retaining first-class global talent, are served by our performancedriven remuneration structure. We believe our Remuneration Plan achieves this by linking executive rewards to the financial and operational achievements of the transformation strategy – a strategy that is demonstrably delivering the performance we all expect of Telstra.

I commend the report to you.

Thank you.

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