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* Home
* About this Report
* Our Business
* Key Highlights
* Chairman and CEO Message
* NBN Renegotiation
* Strategy and Performance
* Improve customer advocacy
* Drive value from the core
* Build new growth businesses
* Outlook
* Managing our risks
* Full Year Results and Operations Review
* Sustainability
* Our approach
* Customer experience
* Responsible business
* Our people
* Community impact
* Environmental stewardship
* Board of Directors
* Senior Management Team
* Governance at Telstra
* Directors' Report
* Remuneration Report
* Financial Report
* Financial Statements
* Notes to the Financial Statements
* Directors’ Declaration
* Independent Auditor's Report
* View Full Report
* Shareholder Information
* Reference Tables
* Glossary
* Contact Details

* Home
* About this Report
* Our Business
* Key Highlights
* Chairman and CEO Message
* NBN Renegotiation

* Strategy and Performance
* Improve customer advocacy
* Drive value from the core
* Build new growth businesses
* Outlook
* Managing our risks

* Full Year Results and Operations Review
* Sustainability
* Our approach
* Customer experience
* Responsible business
* Our people
* Community impact
* Environmental stewardship

* Board of Directors
* Senior Management Team
* Governance at Telstra
* Directors' Report
* Remuneration Report

* Financial Report
* Financial Statements
* Notes to the Financial Statements
* Directors’ Declaration
* Independent Auditor's Report
* View Full Report

* Shareholder Information
* Reference Tables
* Glossary
* Contact Details

TELSTRA
ANNUAL
REPORT
2014

Watch the CEO's address to Shareholders

ABOUT THIS REPORT

The sections of our Annual Report titled Our Business, Key Highlights, Chairman
and CEO Message, Strategy and Performance and Full Year Results and Operations
Review comprise our operating and financial review (OFR) and form part of the
Directors’ Report. Information about governance at Telstra is also provided in
this Annual Report and a copy of our full corporate governance statement is
available on our website at www.telstra.com/governance.

Telstra Corporation Limited ABN 33 051 775 556

ONLINE SHAREHOLDER SERVICES

Telstra’s Investor Centre at www.telstra.com/investor has all the latest news
and information available for shareholders.

Shareholders can also easily manage their shareholding online at
www.linkmarketservices.com.au/telstra.

To access your information, you will need your SRN/HIN and postcode. Follow the
prompts to log in and select from the following menu options:

Holdings – transaction history, holding balance and value and latest closing
share price.

Payment and Tax – dividend payment history, payment instructions and TFN
details. You can update your bank details here.

Communication – become an e-Shareholder and update postal/email addresses and
communication elections here.

KEEPING INFORMED

You can keep up to date with the latest news about Telstra by:

* following us on Twitter@Telstra_news
* subscribing to our media releases on our website at
www.telstra.com.au/aboutus/media/rss-feeds/.

ANNUAL REPORT

Telstra’s 2014 Annual Report is available to all shareholders on our Investor
Website at www.telstra.com.au/annualreports.

To receive a hardcopy of the Annual Report (free of charge), you can call our
Share Registry on 1300 88 66 77 and request that the Report be sent to you.

You may also update your communication preferences online to change the way you
receive future copies of the Annual Report. Please refer to the Online
Shareholder Services for instructions on how to do this at
www.linkmarketservices.com.au/telstra.

SUSTAINABILITY REPORTING

Selected graphs and data presented in this Report are included in the Bigger
Picture 2014 Sustainability Report, which is available online at
www.telstra.com/sustainability/report. This Report provides more detailed
information and analysis for our stakeholders on Telstra’s sustainability
approach and performance. You can also subscribe to our sustainability
newsletter at www.telstra.com/sustainability/subscribe.

We develop our sustainability reporting with reference to industry and
sustainability standards including the United Nations Global Compact
Communication on Progress and the Global Reporting Initiative G3.1
Sustainability Reporting Guidelines and Telecommunications Sector Supplement
(pilot). This financial year we have applied the GRI framework to application
level B+. The full GRI Index can be found online at
www.telstra.com/sustainability/report.

®Registered trademark of Telstra Corporation Limited.
™Trademark of Telstra Corporation Limited.
*Registered trademark of Sensis Pty Ltd.
Foxtel marks are used under licence by Foxtel Management Pty Ltd.
All amounts are expressed in Australian Dollars ($A) unless otherwise stated.

OUR BUSINESS

WHO WE ARE

Every Day We Help Millions of Customers Connect to the People and Things That
Matter Most to Them

Telstra is Australia’s leading telecommunications and information services
company, offering a full range of communications services and competing in all
telecommunications markets. We employ close to 32,000 people directly(i),
facilitate access to more than 1,900 points of presence across the globe and
have one of Australia’s largest shareholder bases, with 1.4 million
shareholders.

We have a diverse range of customers, including consumers, small business, large
enterprises and government organisations, and we strive to put them at the
centre of everything we do. In Australia, our services are offered through 362
Telstra-branded retail stores, 90 Telstra Business Centres, 127 Telstra business
and enterprise partners and are distributed by over 15,000 retail points of
presence managed by our partners.

In Australia, we provide 16 million domestic retail mobile services, 7.5 million
fixed voice services and 3.7 million fixed data services. Telstra’s
international businesses include Telstra’s global networks and managed services
business and Telstra’s China-based search and advertising business, Autohome
Inc.

We understand our customers want technology and content solutions that are
simple and easy to use – that’s why we have built networks like Australia’s
largest fully integrated internet protocol (IP) network and Australia’s largest
and most reliable national mobile network.

INDUSTRY CONTEXT

Our Industry is Experiencing Rapid Change

The telecommunications industry is experiencing enormous growth in demand for
services. In Australia, IP traffic grew by 38 per cent and mobile data traffic
by 41 per cent in 2013.(ii)

Digital technology is changing our world. Telstra is at the heart of this change
– our ambition is to help make it happen by connecting everything to everyone.

OUR PURPOSE

To Create a Brilliant Connected Future for Everyone

To create is our responsibility. The brilliant connected future won't happen on
its own, it has to be delivered and Telstra can bring together all the parts to
create it.

A brilliant connected future is our aspiration. It's what we need to build for
every one of our customers. It's our responsibility to the nation and to every
market we work in.

For everyone is crucial. We serve everyone. Change doesn't happen if only a
chosen few benefit. Transformation happens when the technologies that create
social, economic and cultural change reach enough people.

This all adds up to why we do what we do.

OUR VALUES

Express What We Stand For and Guide the Way We Do Things

Here at Telstra, we have five core values:

1. Show you care
2. Better together
3. Trust each other to deliver
4. Make the complex simple
5. Find your courage

(i) Full Time Equivalent employees
(ii) Cisco Visual Networking Index – Australia – 2013 Year in Review –
www.cisco.com.

(i) Figures on a continuing and discontinued operations basis. For more detail,
refer to page 15 of the Full Year Results and Operations Review.

(ii) Total income figures are on a continuing operations basis and exclude
finance income. For more detail see the Full Year Results and Operations Review.

CHAIRMAN AND CEO MESSAGE

CATHERINE LIVINGSTONE AO, CHAIRMAN, DAVID THODEY, CHIEF EXECUTIVE OFFICER

DEAR SHAREHOLDERS,

We are pleased to present this review of Telstra’s progress in the 2014
financial year where consistent earnings growth delivered increased shareholder
returns.

This was a year of accelerating momentum for our company, one in which we saw
continued growth in revenue, profit and customer numbers, and demonstrated the
value being created by our focus on improving customer advocacy, while investing
in our core and growth businesses.

Our customers remain our highest priority. Throughout the year, and right across
the company, we worked to find ways to build advocacy, by improving how we
interact with our customers every day, and to have a positive impact on their
lives with our products and services.

Telstra operates in a dynamic and competitive environment; ongoing changes in
mobile, broadband and other technologies are transforming the communications
industry and the world we all live in. Competing in this environment requires a
commitment to customer service excellence and innovation, areas where we
continuously strive to improve.

We are pleased to have again delivered on our financial commitments and to have
delivered a 29.5 cent fully franked dividend for the 2014 financial year,
distributing $3.7 billion to shareholders. After considering our capital
management options, we have also announced an off-market share buy-back of up to
approximately $1 billion of Telstra shares. A buy-back was considered the most
effective and appropriate way to deploy surplus capital from ongoing performance
and key divestitures. Shareholders will receive detailed information about this
offer shortly.

Our 2014 results reflect the fundamental financial strength of our business.
Total income (excluding finance income) totalled $26.3 billion, up 6.1 per cent;
EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) totalled
$11.1 billion, up 9.5 per cent; and our Net Profit after Tax was $4.3 billion,
up 14.6 per cent.(i)

(i) Total income and EBITDA figures are on a continuing operations basis and net
profit figure is on a 4 Telstra Annual Report continuing and discontinued
operations basis.

OUR STRATEGY

During the year we announced refinements to our long-term strategy supported by
business unit changes aligning senior leaders to growth opportunities in
Australia and overseas. Our strategy focuses Telstra on the three pillars of
improving customer advocacy, driving value from the core and building new growth
businesses. It makes our ambitions clear and also shows where you can expect us
to continue building value.

Improve Customer Advocacy

Throughout the year we remained committed to improving the services, products
and experiences we provide to our customers. Much of this work is informed by
our Net Promoter System (NPS) program where we actively seek feedback and
measure our progress. Through the year we introduced many initiatives to improve
the customer experience.

Our overall NPS score improved by three points over the 2014 financial year,
building on the improvements we saw last year, but we still have a lot of work
to do to consistently deliver our customers a great service experience.

Drive value from the core

Our products and services mix continues to change, illustrating how
fundamentally our business has been redefined by mobility, connectivity and data
demand. Fixed voice revenue now accounts for only 16 per cent of total sales
revenue, whereas, mobiles now account for 38 per cent of sales revenue.

Much of Telstra’s reputation and core strength is built on the foundation of
providing customers with outstanding mobile service in cities and in regional
and remote Australia. We are committed to maintaining our network leadership and
this year we invested $1.1 billion in our mobile network, including significant
expansion of our 4G mobile coverage, to now reach 87 per cent of the Australian
population – with four times the geographical coverage area of any other 4G
network. Our 3G service provides coverage to 99.3 per cent of the population.

During the year we added 937,000 new domestic retail mobile customer services.
We now have 16 million domestic mobile customer services. As a part of our
strategy to provide customers with flexibility and choice in connection, we
recently started designing Australia’s largest national public Wi-Fi access
network, in a five-year $100 million project which will deliver 13 million Wi-Fi
hot spots around the world within five years.

Throughout the year we continued to transform our internal business processes to
streamline how we work and remove internal barriers that impede productivity,
collaboration, innovation and better customer service. The total value of
benefits from our FY14 productivity program, which includes $550 million of
expense benefits as well as revenue, capital expenditure and avoided costs is $1
billion. We have reinvested these benefits in the business to support our
customer advocacy initiatives, growth in our customer base and building new
growth businesses.

Build New Growth Businesses

We continue to execute our growth strategy in Network Applications and Services,
extending our application service offerings into Asia, and launching Global
Managed Network Services and Global Infrastructure as a Service. Our strategy is
supported by the establishment of a new business unit, Global Enterprise and
Services. This is an industry-based services and solutions business operating at
a global scale to deliver innovation, integration and service for our customers
locally and around the globe.

Growth in Asia continues to be a key focus. Our international team offers
customers connectivity solutions, including managed network services,
international data, voice and satellite solutions and they also manage our
submarine cable networks and assets. We continue to leverage these assets for
growth. We also made further changes to our international business, creating
Country Managers in each market.

In China, we have a 63.2 per cent stake in Autohome Inc., the country’s leading
online destination for car buyers, which was listed on the New York Stock
Exchange on 11 December 2013.

Other emerging opportunities include Telstra Health, which continued to work
towards its objective of establishing a connected health IT ecosystem capable of
creating transformative change in the healthcare sector. We also announced we
would increase our stake in Ooyala to 98 per cent. Ooyala is a leader in video
streaming and analytics, and this is the first investment for our Global
Applications & Platforms (GAP) group.

We are pleased to have met our full year guidance and to have delivered a 29.5
cent fully franked dividend for the 2014 financial year.

PORTFOLIO MANAGEMENT

We continued to be active and disciplined in our approach to portfolio
management this year, with announcements of the sale of our 76.4 per cent stake
in the Hong Kong mobile business CSL New World Mobility Limited (“CSL”), and the
sale of a 70 per cent interest in our Sensis directories business.

We understand the need to be innovative in our investments for the future as we
explore new opportunities. This thinking was reflected in the investments we
made during the year in new growth areas for the business, as well as our
proposed joint venture with Telkom Indonesia, a proposed arrangement for the
provision of network applications and services, primarily in Indonesia.

NATIONAL BROADBAND NETWORK (NBN)

We have provided a separate update on our renegotiation of the NBN Definitive
Agreements below (which forms part of this Chairman & CEO Message).

PART OF THE COMMUNITY

Telstra is committed to helping build better communities and showing that we
care in the way we respond to important economic, social and environmental
challenges. Our sustainability strategy details how we believe we can create the
most value. Part of this strategy lies in providing opportunities for our
employees to be involved in the community and in issues that matter to them.

We believe that all Australians should enjoy the benefits of being connected to
modern communications technologies, regardless of age, income, ability or
location. We want everyone to have the confidence and skills to participate
safely in the digital world and we partner with experts in the field to offer
wide-ranging training courses and information. As a company, we also remain
committed to reducing our environmental impact and to helping our customers and
suppliers to do the same. These initiatives are not just the right thing to do;
they are part of who we are.

We continue to place the highest priority on the safety of our employees and the
wider community. During the year, we implemented improvements to our asbestos
management procedures after a number of incidents involving subcontractors
carrying out pit remediation work in our network. This included requiring all
contractors to complete new training before they can work on our network, the
appointment of additional supervisors to monitor worksites and co-operating with
Comcare in its investigation into the matter, which investigation is now closed.

LOOKING AHEAD

We have a clear strategy and our focus for the year ahead will be on improving
our customer service, investing to maintain our network advantage and investing
in future capability to build a foundation for sustainable long-term growth.

Our network advantage is significant. As more and more devices are connected to
networks our investment in spectrum, greater network intelligence and machine to
machine technologies will help maintain this leadership position.

Just as importantly, as software solutions dramatically change how other
industries operate, we will continue to build our capability in software
solutions and platforms that run over our networks, building on the good
progress made in the areas of eHealth, media and Global Enterprise and Services
(including Network Applications and Services).

We will also continue to pursue opportunities to expand our business in Asia.

In 2015 Telstra expects continued low single-digit income and EBITDA growth to
offset the absence of CSL 2014 operating revenue and EBITDA. As a result, and
after excluding the $561 million profit on sale of CSL in 2014, Telstra’s income
and EBITDA guidance for 2015 is broadly flat.

Telstra expects 2015 free cashflow of between $4.6 billion and $5.1 billion and
capital expenditure to be around 14 per cent of sales.

This guidance assumes wholesale product price stability and no impairments to
investments, and excludes any proceeds on the sale of businesses, the cost of
acquisitions and spectrum purchases.

We also thank you for your loyalty as a shareholder and we welcome your comments
and feedback via investor.relations@team.telstra.com.

Catherine Livingstone AO
Chairman

David Thodey
Chief Executive Officer

NBN RENEGOTIATION UPDATE

UPDATE ON NBN RENEGOTIATION

On 23 June 2011 Telstra entered into agreements with NBN Co and the Commonwealth
(referred to as the “Definitive Agreements”) for Telstra’s participation in the
rollout of the National Broadband Network (NBN). The Definitive Agreements
became unconditional following Telstra shareholder approval gained at the Annual
General Meeting in November 2011 and ACCC acceptance of Telstra’s structural
separation undertaking in March 2012. The Definitive Agreements, together with
the regulatory undertakings given to the ACCC and associated Government policy
commitments, established the framework for Telstra’s participation in the
rollout of the NBN.

Under the Definitive Agreements Telstra agreed to progressively decommission its
copper network and voice services on its HFC network in NBN fibre areas as the
new network was rolled out. Following the Federal Election in September 2013,
the newly elected Government determined the design of the NBN would be modified
to use a range of technologies, including a copper-based fibre to the node
network and HFC, instead of the previous Government’s predominantly fibre to the
premises approach. As a result, the Government is currently engaged with Telstra
and NBN Co in a renegotiation of some aspects of the Definitive Agreements to
enable this multi-technology model.

The renegotiation of the Definitive Agreements is progressing well within an
agreed commercial framework, but the complexity of the arrangements and the need
to consider all of the elements of the Definitive Agreements means the
renegotiations are still incomplete. Telstra continues to work with the
Government in the best interests of Telstra shareholders, and shares the
Government’s aim of finalising the revised arrangements as soon as possible.

In participating in the renegotiations, Telstra’s objective is that it must be
“kept whole” – meaning that Telstra should not be materially worse off under any
renegotiated arrangements than under the current Definitive Agreements. The
agreed commercial framework within which the parties are negotiating
acknowledges this objective, but final agreement is yet to be reached so there
is no guarantee that this objective will be realised.

This agreed commercial framework anticipates a change in the approach taken in
respect of the copper and HFC network assets, from staged decommissioning, to
NBN Co owning some or all of such assets progressively as the NBN is rolled out.
As the current arrangements already provide that Telstra is progressively
restricted in its ability to use the copper and HFC network assets, the agreed
commercial framework does not contemplate any incremental value to be received
by Telstra for the transfer of ownership.

Telstra’s continued ownership of these assets did provide Telstra with some
protection in respect of future changes in the NBN project. As part of the
current renegotiations, Telstra is seeking to agree other contractual mechanisms
which are designed to protect Telstra against future changes in the project.
These matters will be part of Telstra’s assessment as to whether it is kept
whole. If ownership of the assets is transferred from Telstra to NBN Co, Telstra
does not expect there will be any impact on its continued access to the HFC
network to supply Foxtel services, consistent with the current Definitive
Agreements.

Telstra and NBN Co are also negotiating in respect of the provision of design,
construction and maintenance services by Telstra to NBN Co on commercial terms,
which may potentially deliver additional revenues to Telstra.

It should be noted that any renegotiated arrangements between Telstra, NBN Co
and the Government will need to be reviewed by relevant regulators (including
the ACCC) who may seek to impose further regulatory measures. These would be
taken into account in assessing the extent to which Telstra’s objective to be
kept whole, has been met.

We will keep shareholders informed of the renegotiation process.

STRATEGY AND PERFORMANCE

We refined our long-term strategy to drive our growth towards 2020 and beyond.

Our strategy makes our ambitions clear. It shows where you can expect us to
focus our efforts towards building value. The strategy now has been consolidated
into three pillars.

OUR STRATEGIC PRIORITIES

our strategic priorities logo has interted below with white color

IMPROVE CUSTOMER ADVOCACY

MAYA TIZZARD
TELSTRA RETAIL

Our NPS score improved by three points over FY14.

Improving customer advocacy is our number one priority. Over the past 12 months,
Telstra has worked hard to transform the experience for our customers from one
of service, to one with a higher level of customer care. We have also continued
our cultural change program, which puts the customer at the centre of everything
we do.

While we have made many changes, we still have more to do on our journey to move
from satisfying and retaining customers to creating customer advocates.
Advocates stay with us longer, spend more and recommend us more often.

NET PROMOTER SYSTEM (NPS)

We have been listening closely to what our customers are telling us and track
and monitor a number of different NPS metrics.

We measure NPS at two levels - our customers’ overall perception of Telstra,
measured through an external third party and our customers’ experience in
dealing with Telstra directly, measured through internal surveys.

Our overall NPS score has improved by three points over the last twelve months.
We have also seen consistent improvement in our internal measures of our
customers’ experience in dealing with us across all areas. We remain committed
to focusing on improving the customer experience in the coming year.

PRODUCT DIFFERENTIATION

Customers have told us that while technology is an essential part of their lives
keeping track of usage levels can be complicated. To address this and to give
customers greater peace of mind over data usage, we introduced a number of
improvements during the year including:

* reduced excess data charges with our current Mobile Accelerate mobile plans
from 10 cents per megabyte to just 3 cents per megabyte

* reduced our international roaming pay-as-you-go data prices by 80 per cent,
introduced SMS usage alerts for roaming data and increased the data allowance
in our international roaming data packs five-fold at no extra cost

* implemented a $130 excess voice safety net, which ensures that customers on
Mobile Accelerate plans will pay no more than $130 per month in domestic
voice and MMS charges to standard Australian numbers

* introduced Telstra Broadband Assistant, a software application that provides
customers with immediate online help with common connectivity, email and
password issues

* launched the free Telstra Wi-Fi Maximiser™ App which enables customers to
better understand the performance of the wireless network in their home and
measure the signal strength on devices connected to their gateway.

Our commitment to caring for our customers is also focused on providing them
with a better experience with our world-class products on Australia’s leading
mobile network. During the year we launched New Phone Feeling, which gives
participating customers the option, after the first 12 months of their plan, to
purchase a new smartphone as an add-on with selected handsets across our new
24-month consumer plans. Telstra was the first carrier in Australia to make this
offer available to consumers across a range of plans.

We also launched Telstra Platinum, a premium service that offers customers
end-to-end technical support across access, devices and applications.

To help customers get back online quickly if anything happens to their mobile
device, we launched our “swap, replace and restore” service called Telstra
StayConnected. Since the launch, over 305,000 customers have taken up this
service. StayConnected is a market-leading service available only to Telstra
customers.

PROCESS FOCUS

One of our key commitments to improving customer advocacy is to provide our
customers with a more personalised service. In our contact centres, we now give
customers the name and contact details of the person they spoke to after each
call. This means that if customers need to get back in touch with us they can
contact the person they last spoke with.

In our stores, new post-paid mobile customers receive, within 48 hours of their
purchase, a call from the consultant who served them to check that they are
satisfied. We also give every store customer personalised business cards with
direct staff phone numbers. When installing new services or fixing existing
services, our communications technicians now provide customers with cards
listing their name and contact number so customers can follow up directly with
the technician.

Our Philippines-based operations continue to demonstrate their growing
capability at delivering positive experiences for our customers. During the year
we opened, in conjunction with our partners, our second customer operations
centre in the Philippines, providing our team with an environment designed from
the ground up to foster customer advocacy. We also made significant improvements
to the training, tools and processes provided to our people. Providing more
personalised service is also about making sure customers can choose how they
engage with Telstra. For a growing number of customers, this is about connecting
with us online. Customers are choosing to do business with us online more than
ever, as evidenced by the following statistics:

* 46 per cent of our service transactions, across all segments, are now
performed online, up from 40 per cent in FY13

* over six million unique visitors to telstra.com and 200,000 Live Chat
sessions each month

* 1.4 million customers regularly use our Telstra 24x7® App, which enables
customers to access accounts and services on the go at any time of day.

We are increasing our investment in our digital service for customers through
our multi-year Digital First program. This will give our customers even greater
control of their accounts and services, technical appointments and support
options.

We are aligning our online and social media activities and opportunities under a
single strategy that aims to consolidate and grow Telstra’s social identity to a
position of leadership where we are truly social in everything we do, inside and
outside the business. Telstra’s first Chief Social Officer, who was appointed in
April 2014, is focused on ensuring all social media activity across the company
is aligned to our business strategy of building customer advocacy.

46 per cent of our service transactions are now performed online.

UNIQUE CUSTOMER SERVICE EXPERIENCE

Our commitment to personalised service is also about personally rewarding
customers for their loyalty with Telstra. In March 2013 we launched our Telstra
Thanks loyalty program to help customers enjoy a number of unique experiences.
Since then, over one million customers have taken up our movie, sports and music
offers featuring One Direction, Michael Bublé, Jessica Mauboy and Katy Perry. We
will continue to improve our loyalty program so we truly recognise our
customers.

Our Thanks a Million program has also seen more than one million customers
receive personal phone calls and a further 3.5 million receive emails simply
thanking them for being a Telstra customer. These phone calls and emails are a
simple way to recognise the loyalty of our customers.

DRIVE VALUE FROM THE CORE

GARY TANG
TELSTRA OPERATIONS

Driving value from the core concentrates on customer and revenue growth, network
leadership and driving productivity through simplifying the business.

CUSTOMER AND REVENUE GROWTH

Our mobiles portfolio had another strong year, with continued growth in revenue
and customer services.

Extended 4G coverage helped us increase the penetration of 4G devices. We now
have more than 5.2 million 4G devices on our network, comprising 3.8 million
handsets, 500,000 tablets, 400,000 dongles and 550,000 Wi-Fi hotspots.

While in our fixed business there was a decline in the number of households with
a fixed voice service, this is consistent with global trends. Nevertheless the
revenue decline for fixed voice services was the lowest in four years. Our fixed
data business continued to grow, driven by customers choosing bundled plans,
such as our popular Entertainer bundles, which include Foxtel through T-Box®. We
now have 1.9 million retail customers on a bundled plan. You can read more
detail on this topic in the Full Year Results and Operations Review.

NETWORK LEADERSHIP

Telstra has delivered world-class mobile networks for Australia since 1987 and
today we have Australia’s leading mobile network based on a range of coverage,
performance and reliability measures.

The Telstra mobile network is the nation’s largest, covering more than 2.3
million square kilometres of the Australian landmass and 99.3 per cent of the
population. This reflects our commitment to providing customers with outstanding
mobile service in cities and in regional and remote Australia.

We have invested more than $5.5 billion in our mobile network since the launch
of our 3G service in 2006, including $1.1 billion this past financial year.

Mobile data on our network continues to grow at a rapid rate. We will continue
to meet this demand by exploring new capacity and broadcast technologies,
including spectrum aggregation techniques, LTE-Broadcast and use of small
network cells.

Additionally, in September 2014 we will pay the $1.3 billion we committed in the
2013 financial year to secure an important holding of 700MHz and 2.5GHz spectrum
in Australia. This spectrum will provide additional mobile coverage and capacity
in the future. The 2.5GHz licence will commence on 1 October 2014 (except for
parts of Western Australia which commence from 2016), while the 700MHz licence
will commence 1 January 2015.

We recently started designing Australia’s largest national public Wi-Fi access
network as part of a five-year $100 million project. It is anticipated that this
Wi-Finetwork, as part of an Australian exclusive agreement with global Wi-Fi
provider Fon, will give Australians access to two million hotspots across
Australia and a further 13 million hotspots around the world within five years.

We recently started designing Australia’s largest national public Wi-Fi access
network as part of a five year $100 million project.

DRIVE PRODUCTIVITY THROUGH SIMPLIFYING THE BUSINESS

We rebalanced our portfolio to reflect the changing nature of Telstra’s business
as well as promoting innovation through investments in emerging businesses. We
also realigned our structure to provide increased focus and resources to growth
areas.

Simplifying the business remains a critical part of our strategy. The total
value of benefits from our FY14 productivity program, which includes $550
million of expense benefits as well as revenue, capital expenditure and avoided
costs is $1 billion. These benefits were reinvested in the business to support
growth in our customer base, customer service initiatives and the development of
new growth businesses.

During the year we introduced a range of initiatives and improved feedback
channels between our frontline staff and senior management that helped improve
processes, reduce complexity and improve customer service.

Our approach to process and service improvement is to:

* review the performance of each process using agreed metrics, then prioritise
improvement areas

* analyse data to understand factors behind poor performance

* simplify the process to remove problem root causes, while providing customers
with a more seamless experience

* use technology to automate processes, so employees can help customers more
effectively.

BUILD NEW GROWTH BUSINESSES

Build new growth businesses focuses on Network Applications and Services (NAS),
Asian expansion and longer term growth opportunities such as Telstra Health,
Telstra Media and Global Applications and Platforms (GAP).

We have a clear strategy in place designed to realise the opportunities that
exist in these portfolios and pursue growth opportunities that focus on
leveraging our current strengths.

NETWORK APPLICATIONS AND SERVICES

The NAS portfolio provides business and government customers of all sizes with
an extensive range of network based information and communication technologies
products and services.

Telstra made two acquisitions during the year – NSC Group and O2 Networks – to
expand our capabilities in contact centre services and consulting domestically.
A major contract win was a 15-year $457 million managed services partnership to
build and manage a new wireless network for the Queensland Government.

We signed a 15 year $457 million managed services partnership to build and
manage a new wireless network for the Queensland Government.

ASIA

In Asia, we offer connectivity solutions, including managed network services,
international data, voice and satellite solutions, and manage our submarine
cable networks and assets.

During the year we continued to strengthen our business operations in the
region. We are licensed to operate in 19 countries worldwide, including 12 in
Asia and facilitate access to over 1,900 points of presence across the globe.
Together with our offshore subsidiaries, we now have a total of seven data
centres operated directly, plus partnership arrangements for a further 11 data
centres operating outside Australia, as well as interests in over 20 cable
systems.

We have extended our applications service offerings into Asia, including signing
a non-binding Memorandum of Understanding with Telkom Indonesia to form a new
joint venture for the proposed provision of network applications and services,
primarily in Indonesia.

We also have a presence in China, where we have a 63.2 per cent stake in
Autohome Inc., the country’s leading online destination for car buyers, which
was listed on the New York Stock Exchange on 11 December 2013. Another key event
in Asia during the year was the sale of our 76.4 per cent interest in Hong
Kong-based mobile business CSL New World Mobility Limited to HKT Limited, which
was completed on 14 May 2014. We made this decision as there were a number of
dynamics in the Hong Kong mobiles market that meant this was the right
opportunity for Telstra to maximise our return on this successful asset.

EMERGING OPPORTUNITIES

Telstra Health

Throughout the year Telstra Health continued to work towards its objective of
establishing a connected health IT ecosystem capable of creating transformative
change in the healthcare sector. Growth to date has been through strategic
acquisition and investments, partnership and commercial relationships. Key
events this year include the acquisition of DCA eHealth Solutions Pty Ltd, a 50
per cent interest in Fred IT Group Pty Ltd, further investment in HealthEngine
Pty Ltd and licensing agreements for iScheduler, InstantPHR and Dr Foster
Intelligence’s Quality Investigator and Global Comparators products. These
investments enable us to play a role in eHealth solutions via means such as
connectivity of health services, electronic health records and electronic
prescriptions.

Global Applications and Platforms (GAP)

Telstra’s GAP strategy is to build new growth businesses and take advantage of
the considerable growth in the software-driven business applications and
integrated services.

Fostering local technology innovation is another key strategic pillar of this
group, with the launch this year of muru-D®, Telstra’s start-up accelerator. The
name muru-D combines "muru", an indigenous word meaning "road to" and "D" for
"Digital". muru-D promotes local technology innovation and helps grow and retain
entrepreneurial talent in Australia, by identifying and supporting start-ups to
develop their products and services through a six-month acceleration program.
muru-D also invests approximately $40,000 in each start-up for an equity stake
of approximately six per cent. The inaugural round attracted more than 300
applications, with the selected top nine starting their six month program in
February 2014.

Telstra Media

Telstra Media is Australia’s largest IPTV service provider and through the award
winning Telstra T-Box, a close partnership with Foxtel and other premium content
partners delivers premium movies, music, live sport and entertainment across a
full range of devices.

This year, more than fifty new mobile and tablet apps were launched for the AFL
and NRL Club Network and we also introduced the AFL Live Pass and NRL Digital
Pass, which provide live AFL and NRL on smartphones and tablets.

During the year, we also completed the sale of a 70 per cent stake in our Sensis
directories business to Platinum Equity on 28 February 2014. We believe our
partnership with Platinum Equity will maximise the value of the Sensis asset for
Telstra shareholders.

OUTLOOK

We have a clear and consistent strategy to improve customer advocacy, drive
value from the core and build new growth businesses.

We will continue to focus on delivering a differentiated and quality customer
service experience for all of our customers to build advocacy. While we are
seeing promising results in this area there is more to do in the year ahead.

In our core businesses, we will continue to drive innovation and maintain our
network leadership. Our fixed data network differentiation will be enhanced by
the implementation of Australia’s largest national public Wi-Fi access network.
As the NBN rolls out to more communities around Australia, we will be focused on
bringing customers the benefits of Telstra services on the NBN. We will continue
our negotiations with NBN Co and the Federal Government on potential changes to
the current agreements that may result from the government’s intention to move
to a multi-technology NBN roll out.

Our network leadership in mobiles will be enhanced in 2015 through the roll out
of 4G services on 700MHz and 2.5GHz. This will enable our customers to have
access to higher speeds and better capacity in more places when using mobile
phones, tablets and mobile broadband devices.

We will also continue to drive for efficiency in our core business, simplifying
both the way we operate and the way we interact with our customers, making it
easier for our customers to do business with us.

Like other Australian companies, Telstra has aspirations to grow our business in
Asia. For us, this means leveraging our core network capabilities in the region,
building our Global Enterprise and Services business and looking for other
growth opportunities.

Additional information on our outlook can be found in the Chairman and CEO
Message.

MANAGING OUR RISKS

Identifying and managing risks with the potential to affect our objectives is an
essential part of our governance framework.

OUR RISK MANAGEMENT APPROACH

Our risk management approach facilitates appropriate identification, assessment
and control of risks to our operations and corporate strategy. It provides the
framework for various activities to enhance our ability to achieve our
financial, customer and people goals and meet our legal and compliance
responsibilities so as to protect and enhance value for our shareholders.

Throughout the year we continued to mature and refine our risk management
approach. Recent activities included the continued clarification and enhancement
of our risk accountabilities. This was facilitated through our Three Lines of
Defence model and the formation of the Management Risk Committee – management’s
peak governance committee for risk management across the Telstra Group.

Risks are regularly reviewed and monitored, especially those internal and
external risks that could have a material impact on our objectives. These
Material Business Risks are also regularly reported to the Board, along with
their controls and mitigation treatments. We conduct an Enterprise Risk Maturity
Assessment on a regular basis to track and focus on the development of the Risk
Management Framework. We report the results of this assessment to the Audit &
Risk Committee. The Audit & Risk Committee has reviewed Telstra’s risk
management framework and satisfied itself that the Framework continues to be
sound.

THREE LINES OF DEFENSE

MATERIAL BUSINESS RISKS

There are a number of risks, both specific to Telstra and of a more general
nature, that individually or together could have an adverse effect on achieving
our objectives.

The following section summarises those material business risks that could
adversely affect our financial performance and growth potential for future
years, including any material exposure to economic, environmental or social
sustainability risks and how we seek to mitigate or manage them.

Business disruption

A high dependency on technology and increased integration of customer services
means outages can significantly impact the continuity of our business operations
and delivery of services to our customers. We also have a vast geographical
spread, which increases our exposure to natural disasters that can disrupt our
operations. We have a response capability to address business disruption events,
with incident management and emergency management capability. We continually
review and improve this capability, via assessments that consider our business’
core activities while taking into account relevant external factors, such as
supplier impacts and customer expectations.

Information security

Protecting the security and privacy of our customer data and company data is a
critical focus for us and remains a key driver of customer advocacy. In order to
counter cyber security risks and improve the protection of our networks and
information from external threats, we have developed numerous security controls
for our networks that are based on our understanding of known threats and best
practice industry knowledge. We continually reassess these controls to verify
that they are appropriate given the evolving nature of such threats. We also
have programs in place to raise awareness, and support employee and vendor
compliance with our information security and privacy standards.

Third parties

Third party contractors, suppliers and strategic partners are critical to our
capability to derive value from our core businesses and deliver on our growth
strategy. Support and delivery of core business functions and customer service
by these third parties mean that supply chain incidents, issues and single
points of failure can also cause significant impacts to our customers. We manage
this risk centrally through our Procurement and Enterprise Services Group by
undertaking a due diligence process for new third parties, assessing their
compliance with our business continuity requirements, and conducting training on
key Telstra policies, while the day-to-day relationship is conducted and managed
within the relevant business units. We have also introduced a Supplier Code of
Conduct outlining our expectations of suppliers in terms of labour and human
rights, environment, ethical practices and diversity, and have engaged with
suppliers to help them understand how to meet our requirements.

Innovation and agility

Effective innovation is fundamental in securing revenue streams and withstanding
challenges from a changing competitor and industry landscape. Our capacity and
ability to respond to the innovation challenge are related to the agility of our
internal process and the capability and flexibility of our people. To manage
this risk we are focused on enhancing the skills of our people and engaging with
strategic partners to identify innovative products and services that could
deliver long-term, predictable earnings growth. We are also actively simplifying
our processes, IT and network infrastructure as we aim to deliver them
profitably and can respond quickly to disruptive innovations on a global scale.

Regulatory environment

We operate in a highly regulated environment. The Australian Government and its
regulatory agencies have broad powers to impose obligations on certain parts of
our business. This regulation includes the Australian Competition and Consumer
Commission’s (ACCC’s) powers to regulate the price and non-price terms on which
we provide access to our infrastructure and core services on our network to our
Australian competitors. As we consider investment opportunities in offshore
markets we also face exposure to regulation and regulatory bodies in those
jurisdictions.

We work actively with government, regulators, industry and the communityto
minimise and mitigate the risk of inefficient or poorly targeted regulation, and
to proactively seek to have removed unnecessary regulation that affects our cost
of doing business. In terms of new and emerging risks domestically and
internationally, we are monitoring proposed changes in relevant laws or
regulations and responding to various policy and regulatory reviews where
appropriate. In an Australian context these include a review of competition
policy, the NBN, ACCC pricing reviews for core network services and a review of
the regulatory framework for spectrum.

NBN execution

Our Chairman and CEO’s message in this report includes an update on our
negotiations on potential changes to our agreements with NBN Co and the
Commonwealth to adapt to the current Australian Government’s multitechnology
policy for the NBN. In our day-to-day operations, the introduction of the NBN
and the change to the industry structure is likely to expose us to increased
fixed line competition, and also presents operational challenges as we migrate
our customers off our copper and HFC networks. We are focused on developing
efficient processes and systems within Telstra to support the transition of our
customers to the NBN, while also improving customer advocacy. This also
necessitates establishing an effective access seeker relationship with NBN Co to
support delivery of a quality service experience for our customers. We closely
monitor customer experience, operational performance, costs and competitor
activity so we can identify improvement opportunities. We will also continue to
evolve our offerings as the NBN roll out grows, including adapting to NBN Co’s
multi-technology approach to its network roll out.

People

The skills and experience of our people have an influence on our ability to
deliver against our growth strategy. One factor that influences our exposure to
this risk is our high demand for a limited number of technical, sales and
leadership capability skills within key growth and international areas. Key
mitigation strategies intended to further enhance our people capability and
competitive advantage include: succession planning, recruitment processes and
capability frameworks focused on building expertise in our growth areas, and
targeted learning and development programs and retention strategies. We are
building a strategic workforce planning practice that looks five to ten years
out for critical skills. We are also looking at more flexible and diverse
practices in reward and recognition.

Reputation and communication

We focus on protecting and promoting Telstra’s reputation and being a good
corporate citizen in the countries in which we operate. There are clear
connections between how Telstra is perceived in the community and customer
advocacy and, ultimately, the financial performance of the business. Every risk
giving rise to an incident can harm our reputation and customer advocacy. While
the short-term negative impact from such events cannot be fully protected
against, such incidents are managed through scenario analysis, planning and
preparation, and stakeholder management. Reputational robustness and stakeholder
support helps improve recovery times from any such impacts. Social media plays
an ever-increasing part in representing the organisation and engaging openly
with issues that can impact our reputation. It also assists, as does our
sustainability approach, with engaging customers, investors, key influencers,
government, business, employees and the broader public.

FULL YEAR RESULTS AND OPERATIONS REVIEW

SUMMARY FINANCIAL RESULTS

FY14
$m Restated(i) FY13 $m Change % Sales revenue

25,119

24,298

3.4

Total income (excluding finance income)

26,296

24,776

6.1

Operating expenses

15,185

14,607

4.0

EBITDA

11,135

10,168

9.5

Share of net profit/(loss) from joint ventures and associated entities

(1)

n/m

Depreciation and amortisation

3,950

4,078

(3.1)

EBIT

7,185

6,090

18.0

Net finance costs

957

933

2.6

Tax

1,679

1,517

10.7

Profit for the period from continuing operations

4,549

3,640

25.0

(Loss)/profit for the period from discontinued operation

(204)

151

(235.1)

Profit for the period from continuing and discontinued operations

4,345

3,791

14.6

Profit attributable to equity holders of Telstra

4,275

3,739

14.3

Capex(ii)

3,661

3,689

(0.8)

Free cashflow from continuing and discontinued operations

7,483

5,024

48.9

Earnings per share (cents)

34.4

30.1

14.3

(i) Restatements due to the retrospective adoption of AASB 119: Employee
Entitlements (refer note 2.1(e) of the Financial Report for details).
(ii) Capex is defined as additions to property, equipment and intangible assets
including capital lease additions, measured on an accrued basis.

GUIDANCE VERSUS REPORTED RESULTS(II)

FY14 FY14 FY14 FY13

Reported results $m

Adjustments $m

Guidance basis $m

Total income(iii)

26,296

(662)

25,634

24,776

EBITDA

11,135

(491)

10,644

10,168

Free cashflow

7,483

(2,356)

5,127

5,024

RESULTS ON A GUIDANCE BASIS(II)

FY14 FY14 guidance

Total income growth(iii)

3.5%

Low single digit growth

EBITDA growth

4.7%

Low single digit growth

Capex/sales ratio

14.6%

~ 15% of sales

Free cashflow

$5.1 billion

$4.6 - $5.1 billion

(ii) Adjusted for the sales proceeds from CSL and 70 per cent of our Sensis
directories business, M&A activity, Octave foreign currency reserve loss, Sequel
Media impairment and 30% equity share of Sensis directories business. Please
refer to the guidance versus reported results reconciliation. This
reconciliation forms part of the Full Year Results and Operations Review, and
has been reviewed by our auditors.
(iii) Excludes finance income.

REPORTED RESULTS

During financial year 2014 there were two significant divestments. In February
we completed the sale of a 70 per cent stake in our Sensis directories business
and in May we completed the sale of our 76.4 per cent shareholding in the Hong
Kong-based mobiles business, CSL New World Mobility Limited (“CSL”). In
accordance with accounting standards, the Sensis directories business is
disclosed as a discontinued operation. CSL does not meet the criteria to be
classified as a discontinued operation as we continue to operate a mobiles
business in Australia.

The numbers and commentary in the product and expense performance sections have
been prepared on a continuing operations basis and aligns with the statutory
financial statements. The segment performance and financial position sections
have been prepared on a continuing and discontinued operations basis (that is,
includes the results of the Sensis directories business) unless otherwise noted.

Our results highlight consistent earnings growth and increased shareholder
returns while investment in innovation, networks and improving the customer
experience has set the foundation for future growth. Our strategy is to improve
customer advocacy, drive value from the core and build new growth businesses.

On 14 August 2014, the Directors of Telstra resolved to pay a fully franked
final dividend of 15 cents per share. Shares will trade excluding entitlement to
the dividend on 27 August 2014, with payment on 26 September 2014. We have also
announced an off-market share buy-back of up to approximately $1 billion of
Telstra shares. Detailed process information regarding the buy-back will be
released to shareholders on 27 August 2014.

KEY PRODUCT REVENUE

FY14
$m FY13
$m Change
% Fixed 7,245

7,305

(0.8)

Mobile 9,668

9,200

5.1

Data and IP 2,968

3,041

(2.4)

NAS 1,896

1,484

27.8

PRODUCT PROFITABILITY EBITDA MARGINS(I)

FY14

FY13

2H14

1H14

2H13

Mobile 40%

38%

41%

39%

Fixed voice(ii) 60%

62%

59%

61%

63%

Fixed data(ii) 44%

41%

46%

42%

43%

Data and IP 65%

65%

66%

65%

64%

Telstra Group 42%(iii)

42%

42%(iii)

42%

43%

(i) The data in this table includes minor adjustments to historic numbers to
reflect changes in product hierarchy
(ii) Margins exclude NBN voice and data products
(iii) Profit on the sale of CSL has been excluded from these figures

PRODUCT SALES REVENUE BREAKDOWN

PRODUCT PERFORMANCE

Fixed

Telstra’s fixed portfolio comprises fixed voice, fixed data and other fixed
revenue (which includes inter-carrier services, customer premises equipment and
infrastructure access revenue from the NBN agreements).

Revenue from our fixed business decreased by 0.8 per cent to $7,245 million,
although there was growth in fixed data and increased infrastructure access
revenue from the NBN agreements. Customers moving onto bundled plans and
retention strategies led to the lowest rate of decline in our fixed voice
business for five years, with a revenue decrease of 7.5 per cent to $4,034
million and a loss of 232,000 customer services. Retail customer services
declined by 278,000 and wholesale customer services increased by 46,000. There
are now 7.5 million fixed voice services.

Fixed data revenue increased by 6.3 per cent to $2,218 million. We again saw
strong growth in retail fixed data, with revenue increasing by 7.5 per cent to
$1,889 million. This was driven by growth in bundled plans with 259,000 new
bundled customers. The total number of customers on a bundled plan is 1.9
million, or 63 per cent of the retail fixed data customer base. Retail fixed
data average revenue per user (ARPU) increased by 0.8 per cent to $54.98.

Other fixed revenue increased by 15.6 per cent to $993 million, driven by
increased infrastructure access revenue from the NBN agreements.

Fixed voice EBITDA margins decreased to 60 per cent driven by revenue decline,
while fixed data EBITDA margins increased to 44 per cent due to revenue growth
and reduced service delivery costs.

Mobile

Our strong performance in mobiles continued with revenue growth of 5.1 per cent,
or $468 million to $9,668 million.

Retail mobile services revenue grew 6.7 per cent with growth across mjajor
product categories. Domestic retail customer services increased by 937,000,
bringing the total number to 16.0 million. EBITDA margins increased to 40 per
cent.

Post-paid handheld revenue grew 4.2 per cent to $5,006 million. ARPU, excluding
the impact of mobile repayment options (MRO), increased 0.7 per cent to $65.80
as customers used more data. The annual post-paid handheld deactivation rate
improved 0.5 percentage points to 10.3 per cent, and remains at world leading
levels.

Pre-paid handheld revenue increased 20.9 per cent to $879 million with an
increase of 249,000 unique pre-paid handheld users. Growth was driven by a full
year’s contribution from the Boost retail partnership and the continuing
popularity of our Cap Encore plans. ARPU grew by 11.4 per cent due to increased
data usage.

We added 109,000 customer services in the mobile broadband category. Revenue
grew by 7.6 per cent to $1,287 million. ARPU declined slightly to $29.59.
Machine to machine (M2M) services experienced revenue growth of 12.2 per cent to
$101 million, adding 291,000 services.

We continue to invest in our 4G network, which is four times the geographical
coverage area of any other 4G network in Australia. This has helped us grow
penetration of 4G devices with 34 per cent of our handheld customers on 4G. We
have more than 5.2 million 4G devices on our network, comprising 3.8 million
handsets, 500,000 tablets, 400,000 dongles and 550,000 Wi-Fi hotspots.

DOMESTIC RETAIL CUSTOMER SERVICES
(MILLIONS)

MOBILE REVENUE GROWTH ($B)

Data and IP

Data and IP includes revenue from IP access, ISDN services and other data and
calling products. There was growth in IP Access revenue which grew by 3.3 per
cent to $1,166 million. IP MAN services growth continued, with a 6.8 per cent
increase bringing the total number of services to 32,679. However, overall
revenue in this portfolio declined by 2.4 per cent or $73 million to $2,968
million resulting from the continued decline in ISDN and other legacy products.
Data and IP EBITDA margins remained steady at 65 per cent.

Network Applications and Services (NAS)

We continue to build momentum in the domestic NAS portfolio. NAS builds on the
value which our IP network delivers to enterprise, government and business
customers by providing unified communications, cloud, managed networks and
security services. During the year we made acquisitions to complement our
capability. NSC Group is a leading provider of unified communications solutions
in Australia and has strengthened our contact centre technology services, while
O2 Networks is a leader in network and security consultation and integration
services.

There was revenue growth in the domestic portfolio of 27.8 per cent to $1,896
million. This growth was driven by revenue from contracts signed in previous
years, such as the six year Department of Defence contract.

Major NAS categories had strong revenue growth, with managed network services
increasing by 55.7 per cent with a significant portion of this increase
attributable to the Department of Defence contract, unified communications
increasing by 21.1 per cent and cloud services increasing by 32.2 per cent.

NAS REVENUE ($B)

Media

Media product portfolio revenue declined by 0.5 per cent or $5 million to $982
million. This portfolio previously included our Sensis directories business, of
which 70 per cent was sold in February for $454 million. TV revenue increased by
5.0 per cent to $699 million with growth in both Premium Pay TV and Foxtel on
T-Box® ‘paylite’ services. This was offset by a decline in Sensis voice and
advertising services of 22.0 per cent.

CSL New World Mobility

In May 2014 we announced the sale of our 76.4 per cent stake in CSL to HKT
Limited, and received US$1.99 billion in proceeds (A$2.11 billion gross cash
proceeds which are subject to completion audit). Our results include ten months
of CSL’s results. In that period revenue grew by 3.4 per cent to $1,045 million
driven by strong post-paid handheld revenue and favourable foreign exchange
movements.

Other

Global Connectivity and NAS offshore revenue grew by 19.8 per cent to $678
million. In our China digital media portfolio, revenue increased by 71.6 per
cent. This includes Autohome which holds a strong position in digital marketing
in the rapidly growing Chinese auto market. On 11 December 2013, Autohome Inc.
was listed on the New York Stock Exchange. Our ownership interest in Autohome
Inc. is 63.2 per cent.

OPERATING EXPENSES

FY14 $m FY13 $m Change % Fixed 7,245

7,305

(0.8)

Mobile 9,668

9,200

5.1

Data and IP 2,968

3,041

(2.4)

NAS 1,896

1,484

27.8

FY14

FY13

2H14

1H14

2H13

Mobile 40%

38%

41%

39%

Fixed voice(ii) 60%

62%

59%

61%

63%

Fixed data(ii) 44%

41%

46%

42%

43%

Data and IP 65%

65%

66%

65%

64%

Telstra Group 42%(iii)

42%

42%(iii)

42%

43%

FY14 $m

FY13 $m

Change %

Labour

4,732

4,527

4.5%

Goods and services purchased

6,465

6,247

3.5%

Other expenses

3,988

3,833

4.0%

Total operating expenses

15,185

14,607

4.0%

EXPENSE PERFORMANCE

Labour Performance

Total labour expenses increased by 4.5 per cent or $205 million to $4,732
million. Full time staff and equivalents decreased by 107 to 31,931. This
decrease was driven by the acceleration of restructuring programs across Telstra
Operations and the divestment of CSL, offset in part by expenses supporting NAS
and NBN-related activity. Salary and associated costs increased by 3.2 per cent
or $106 million to $3,399 million. This included the impact of salary and wage
increases and unfavourable bond rate movements impacting long service leave and
workers compensation provisions which contributed $58 million. Redundancy
expenses increased by 32.8 per cent or $62 million to $251 million due to
continued restructuring to support a changing product and service mix, and
simplification of our business.

Goods and services purchased

Goods and services purchased increased by 3.5 per cent or $218 million to $6,465
million. Cost of goods sold (COGS) increased marginally by 0.9 per cent or $25
million to $2,906 million. The main driver was an increase in NAS COGS
supporting revenue growth and CSL mobile COGS impacted by higher smartphone unit
rates and the translation of a weaker Australian Dollar, offset by lower
domestic post-paid mobile COGS. Other goods and services purchased increased by
7.7 per cent or $130 million to $1,828 million to support growth in some large
NAS contracts. Network outpayments increased by 3.8 per cent or $63 million to
$1,731 million, driven by increased voice usage in line with revenue growth in
CSL. A reduction in the mobile terminating access (MTA) rate resulted in
continued savings. This was offset by increased SMS/ MMS costs due to higher
volumes, however this also had a favourable revenue impact.

Other Expenses

Total other expenses increased by 4.0 per cent or $155 million to $3,988
million. Service contracts and agreements increased 7.4 per cent or $101 million
to $1,468 million, driven mainly in support of GES revenue growth. The remaining
other expenses increased $78 million to $2,260 million, driven by an increase in
light and power costs resulting from our 4G roll out, higher property rental
costs across our network and data sites and a write off of $98 million from the
foreign currency translation reserve for our Octave investment in China. The
prior year also included a loss recognised on the sale of TelstraClear of $127
million.

Finance costs

Net finance costs increased year on year by 2.6 per cent or $24 million, which
comprised a reduction in net borrowing costs of $54 million offset by a
reduction in capitalised interest of $38 million, and an increase in other
finance costs of $40 million.

The reduction in net borrowing costs was predominantly due to a reduction in the
net average interest cost. The average net interest yield for the year was 6.2
per cent compared to 6.4 per cent in the prior year. The reduction in yield
arose through a combination of a reduction in market base rates (resulting in
lower costs on the floating rate debt component of our debt portfolio), and from
re-financing at lower rates.

The primary driver for the increase of $40 million in other finance costs was a
decrease in other interest revenue of $61 million relating to interest on tax
refunds (prior year included $64 million interest on tax refunds). This increase
was partially offset by a reduction in the net interest charge relating to
defined benefit plans and a reduction in valuation impacts.

SEGMENT PERFORMANCE

We report segment information on the same basis as our internal management
reporting structure as at reporting date. Segment comparatives reflect
organisational changes that have occurred since the prior reporting period to
present a like for like view. Commentary on the performance of our business
segments follows.

Telstra Retail

Telstra Retail brings together our key retail facing businesses including
Telstra Consumer, Telstra Business, Telstra Media Group and Telstra Health.
Telstra Retail provides the full range of telecommunications products, services
and solutions to consumer customers and to Australia’s small to medium sized
enterprises, as well as the provision of Foxtel and digital content services.
Income in this segment grew by 3.6 per cent to $16,350 million and EBITDA
increased by 3.8 per cent to $9,307 million. Income in our Consumer business
unit grew by 4.6 per cent, with strong growth in mobiles of 10.6 per cent driven
by increased data usage, as well as a 7.2 per cent increase in fixed data
revenue offset by an 8.2 per cent decline in fixed voice revenue. Telstra
Business income grew by 0.8 per cent, with continued strong growth in the NAS
portfolio, which increased 44.2 per cent. A 6.3 per cent growth in fixed data
was offset by an 8.5 per cent decline in fixed voice revenue. Telstra Health
contributed income of $40 million in its first year. Commentary on the
performance of Telstra Media Group is provided within the Media product
performance section.

Global Enterprise and Services

Global Enterprise and Services (GES) is responsible for sales and contract
management support for business and government customers in Australia and
globally. It also provides product management for advanced technology solutions
including Data and IP networks, and NAS products such as managed network,
unified communications, cloud, industry solutions and integrated services.
Technical delivery for NAS customers in Australia and globally is also provided
by GES. Income for GES increased by 4.1 per cent to $5,284 million, driven by
NAS domestic and global connectivity, offset by declines from Australian
enterprise and government customers for fixed telephony, mobiles and data
connectivity. Investment to support growth in NAS contracts and GES global
customers resulted in an increase in operating expenses of 21.9 per cent,
leading to an EBITDA decline of 9.1 per cent. This decline moderated in the
second half.

Telstra Wholesale

Wholesale income grew by 10.1 per cent to $2,328 million. This was largely
driven by revenue growth from the NBN Infrastructure Service Agreement, partly
offset by one off reductions to fixed and mobile roaming revenues from customer
exits during FY13. We also saw an increase in unconditioned local loop (ULL)
services of 160,000. External expenses increased by 16.8 per cent largely due to
higher bad debts from customer insolvencies and increased network outpayments
from Telstra International. EBITDA contribution increased by 9.5 per cent to
$2,127 million.

SEGMENT INCOME

FY14
$m

FY13
$m

Change
%

Telstra Retail

16,350

15,784

3.6

Global Enterprise and
Services

5,284

5,074

4.1

Telstra Wholesale

2,328

2,115

10.1

Telstra
International Group

1,887

1,163

62.3

Telstra Operations

161

156

3.2

Other

838

1,688

(50.4)

Total Telstra segments

26,848

25,980

3.3

Telstra International Group

The Telstra International Group income grew by 62.3 per cent to $1,887 million
and EBITDA contribution grew by 156.9 per cent to $817 million. This segment
comprises our China digital media portfolio and CSL . During the year Telstra
ceased operations in the Octave investment in China and commenced liquidation of
the legal entities in the Octave Group. A write-off of $98 million from the
foreign currency translation reserve associated with this investment was
recorded during the year. CSL was also sold in May 2014 and we recognised $561
million profit on sale. Refer to note 20 in the financial statements for further
details.

Further commentary on the performance of these businesses is provided within the
product performance section.

Telstra Operations Group

Telstra Operations is primarily a service delivery centre supporting the revenue
generating activities of other segments. The underlying EBITDA contribution
improved 1.6 per cent on the prior year with reductions in labour expenses,
partially offset by higher network accommodation costs.

Other

Our Other category includes the costs of corporate centre functions, payments
received under certain NBN agreements, impairments, adjustments to employee
provisions for bond rate movements and short term incentives, and redundancy
expenses for the parent entity. The results of our New Zealand subsidiary
TelstraClear, sold in October 2012, and the 70 per cent stake of our Sensis
directories business, sold in February 2014, are also included in this category.
The declining revenues in the Sensis directories business and the associated
impairment charges represent the major movement for the year in this segment
compared with the prior period.

FINANCIAL POSITION

Capital expenditure and cash flow

Capital expenditure decreased by 0.8 per cent to $3,661 million (excluding
expenditure in relation to the Sensis directories business) and is in line with
our capex to sales guidance of around 15 per cent. This investment has enabled
us to meet ongoing customer demand from the growth in our customer base, support
the accelerated roll out of 4G and internet and content delivery infrastructure
platforms, as well as meet ongoing NBN commitments.

Free cashflow generated from operating and investing activities was $7,483
million, which increased 48.9 per cent. Included in free cashflow were gross
cash proceeds from the sale of CSL of $2,107 million (subject to completion
audit) and $454 million from the sale of our 70 per cent shareholding in the
Sensis directories business. The prior year included cash proceeds from the sale
of TelstraClear of $669 million. Cash from operating activities increased by
$254 million or 3.0 per cent due to the continued strong performance of our
mobility products combined with a program to reduce inventory levels. This was
partially offset by an increase in income taxes paid due to legislative changes
requiring income tax instalments be remitted monthly rather than quarterly,
resulting in additional instalments being paid in the current year. Cash
outflows from investing activities decreased as a result of lower payments for
spectrum licence purchases, offset partially by an increase in mergers and
acquisitions activities.

SUMMARY STATEMENT OF CASH FLOWS

FY14 $m

FY13 $m

Change %

Net cash provided by operating activities

8,613

8,359

3.0

Total capital expenditure (including investments)

(4,018)

(4,545)

(11.6)

Sale of shares in controlled entities
(net of cash disposed)

2,397

693

245.9

Other investing activities cash flows

491

517

(5.0)

Net cash used in investing activities

(1,130)

(3,335)

(66.1)

Free cashflow

7,483

5,024

48.9

Net cash used in financing activities

(4,430)

(6,526)

(32.1)

Net increase in cash and cash equivalents

3,053

(1,502)

303.3

FINANCIAL SETTINGS

FY14
Actual

Target
zone

Debt servicing(i) 0.9x

1.3 – 1.8x

Gearing(ii) 43%

50% to 70%

Interest cover(iii) 13.8x

>7x

(i) Debt servicing ratio equals net debt to EBITDA.
(ii) Gearing ratio equals net debt to net debt plus total equity.
(iii) Interest cover equals EBITDA to net interest.

Debt position

Our gross debt position increased by $420 million to $16,048 million. This
increase included short term debt issuance of $252 million, finance lease
additions of $121 million and revaluation impacts on our debt portfolio of $204
million, partially offset by finance lease repayments of $91 million and a net
reduction in long term debt of $67 million. The reduction in long term debt
comprised debt maturities of $565 million offset by a domestic bond issue with
net proceeds of $498 million. The domestic bond issue was used to refinance
maturing domestic debt.

Net debt decreased by $2,628 million to $10,521 million. This movement comprises
the increase in gross debt of $420 million offset by an increase in cash and
cash equivalents of $3,048 million. The higher liquidity reflects proceeds from
divestments of our shareholding in the Sensis directories business and CSL. The
impact of the higher liquidity is reflected in the reduction in our net debt
gearing ratio (net debt to capitalisation) from 50.5 per cent at 30 June 2013 to
43.0 per cent at 30 June 2014 and also our debt servicing ratio. Liquidity will
be reduced in the first quarter of financial year 2015 to fund planned cash
outflows such as spectrum licence payments and dividend payments.

FINANCIAL POSITION

SUMMARY STATEMENT OF FINANCIAL POSITION

FY14 $m

FY13 $m

Change %

Current assets

10,438

7,903

32.1

Non current assets

28,922

30,624

(5.6)

Total assets

39,360

38,527

2.2

Current liabilities

8,684

7,522

15.4

Non current liabilities

16,716

18,130

(7.8)

Total liabilities

25,400

25,652

(1.0)

Net assets

13,960

12,875

8.4

Total equity

13,960

12,875

8.4

Return on average assets (%)

20.4

17.9

2.5pp

Return on average equity (%)

32.3

31.0

1.3pp

Statement of Financial Position

Our balance sheet remains in a strong position with net assets of $13,960
million.

Current assets increased by 32.1 per cent to $10,438 million. An increase in
cash and cash equivalents and a decline in trade and other receivables was
mainly due to divestments of CSL and 70 per cent of our Sensis directories
business. Tax receivables decreased due to the receipt of tax amendment refunds.

Non current assets decreased by 5.6 per cent to $28,922 million. Property, plant
and equipment declined as ongoing depreciation and retirements exceeded the
level of additions. Intangible assets decreased largely due to the Sensis and
CSL divestments and a portion of Sensis goodwill recognised as an impairment
loss. This was partially offset by acquisitions made during the period. The
increase in derivative assets is primarily attributable to net foreign currency
and other valuation impacts arising from measuring to fair value.

Current liabilities increased by 15.4 per cent to $8,684 million. There was an
increase in current borrowings and derivative liabilities reflecting
transactions that will mature within the next 12 months and higher refinancing
demands during the financial year 2015. Trade and other payables decreased
primarily as a result of lower capital and labour accruals due to the Sensis
divestment. It also includes a decline in trade creditors driven by payments in
June to a large volume of vendors with a July clearing date. Current tax
payables decreased largely due to increased tax instalments paid on transition
from a quarterly to monthly instalment regime.

Non current liabilities decreased by 7.8 per cent to $16,716 million. The
decrease in non current borrowings was due to a reclassification of debt into
current borrowings, partially offset by a domestic bond issue during the year,
foreign currency movements and other valuation impacts. The decrease in
derivative liabilities was due to reclassification to current for maturities
within the next 12 months, and included foreign currency and other valuation
impacts arising from measuring to fair value.

Return on average assets and return on average equity improved primarily due to
the increase in profit. The return on average equity was partly offset by a
favourable movement in the foreign currency translation reserve, with the
translation differences transferred to the income statement.

SUSTAINABILITY

Our goal is to embed social and environmental considerations into the heart of
our business in ways that create value.

OUR APPROACH

At Telstra, our purpose is to create a brilliant connected future for everyone.
The success of our business relies on it, and our sustainability agenda is key
to achieving it.

GOVERNANCE

Our CEO chairs the Telstra Sustainability Council, which governs Telstra’s
sustainability strategy and performance. Membership comprises Telstra’s
Executive Committee. Regular reports on sustainability progress and key
developments are provided to the CEO and the Telstra Board. Telstra’s Chief
Sustainability Officer provides strategic leadership for sustainability and is
responsible for the implementation of our approach and programs.

KEY ISSUES

We seek to identify the ways in which we can use our core telecommunications
capabilities, assets and expertise to make a genuine contribution to the
communities in which we operate.

To support this ambition we identify and respond to the key sustainability
issues and opportunities that are important to our business and our
stakeholders. We consider issues, risks and opportunities from a wide variety of
sources. These include regular stakeholder consultation, participation in
industry and crosssector initiatives, customer research, benchmarking and future
trends analysis. We prioritise issues according to their impact on our business
and on stakeholders. The key issues identified through this process during the
2014 financial year are outlined in the diagram below. Please refer to our
Bigger Picture 2014 Sustainability Report for a more detailed overview of these
issues and our performance.

SUSTAINABILITY PRIORITIES

Our sustainability priorities focus on the areas where we believe we can make
the most difference, based on our assessment of key issues and opportunities.
Our three strategic sustainability priorities are:

Employee involvement

We aim to make Telstra a great place to work, enhance our reputation and
strengthen the communities in which we operate by providing opportunities for
our people to get involved with their local communities and addressing the
issues that matter.

Everyone Connected

We believe that the more connected people are, the more opportunities they have.
We want everyone to enjoy the benefits that new communication technologies can
bring - regardless of age, income, ability or location. Our Everyone Connected
programs focus on making our products and services more accessible, enhancing
digital literacy and cyber safety as well as supporting technological innovation
for social good.

Environmental leadership

We are seeking to be more proactive and strategic in our approach to the
environment. We’re doing this by identifying and minimising the material
environmental impacts of our operations, working with our suppliers to reduce
the impacts of the products and services they provide to us, and considering the
environment when developing our own products and services.

KEY SUSTAINABILITY ISSUES

CUSTOMER EXPERIENCE

We want to ensure that everyone enjoys the benefits of being connected to modern
communications technologies.

CUSTOMERS EXPERIENCING DISADVANTAGE

Our Access for Everyone program is designed to help people on low incomes or
facing hardship stay connected. Since 2002, this program has provided benefits
to the value of more than $2 billion. We work with over 2,000 community agencies
across Australia to deliver the program that includes benefits such as discounts
on fixed line home phone services for around 980,000 pensioners, home phone line
rental relief for 76,000 households and distribution of around 113,000 calling
cards.

CUSTOMERS WITH DISABILITY

For more than 25 years we have been committed to ensuring our products are
accessible for customers with communication challenges. Telstra’s sixth
Disability Action Plan (2013–2016) recognises the benefits that modern
communications technologies bring to people with disability and extends
Telstra’s commitment to improving the accessibility and affordability of our
products and services.

PRIVACY AND DATA PROTECTION

Millions of people trust us with their personal information and we continue to
work diligently every day to honour this trust. We take customer privacy and
data security very seriously. Our priority is making sure we keep personal
information safe and secure at all times.

We continue to invest in controls to protect the privacy of our customers and to
be transparent in the way we manage this information. In March 2014, we
published our new Privacy Statement in response to the introduction of the new
Australian Privacy Principles. This statement reaffirms our commitment to
protecting the personal information of our customers.

In March 2014, the Privacy Commissioner and the Australian Communications and
Media Authority found us in breach for an incident that was identified in May
2013, where some of our customer details were available online. As soon as
possible after we learnt about the issue, we disabled all public access to the
data and apologised to the people affected. We have since made significant
investments into more stringent controls around our systems.

MEET THE CREEPS
A CYBER SAFETY INITIATIVE OF TELSTRA
AND THE QUEENSLAND GOVERNMENT

CYBER SAFETY

Cyber safety is an important social issue. We play an active role as a member of
the Australian Government’s Online Safety Consultative Working Group and as
cochair of the Technology and Wellbeing Roundtable with ReachOut.com by Inspire
Foundation. Telstra is the only Australasian member of the Family Online Safety
Institute (FOSI), an international, non-profit organisation that convenes
industry, government and the non-profit sectors to collaborate and innovate in
the area of cyber safety.

This year, we partnered with the Queensland Department of Education, Training
and Employment to develop "Meet the Creeps", a cyber safety quiz designed to
help students make the most of their digital opportunities while remaining safe
online. We also distributed around 65,000 cyber safety kits across Australia
during the year, providing practical information on areas such as protecting
personal information, cyberbullying and protecting against scams and phishing.

RESPONSIBLE BUSINESS

We are committed to responsible business practice, wherever we operate.

UNITED NATIONS GLOBAL COMPACT

We have been a signatory to the United Nations Global Compact since 2011 and are
committed to supporting its principles – on human rights, labour rights,
environment and anti-corruption – wherever we operate. We implement our
commitment through a range of policies, strategies, management systems and
initiatives that reflect the diverse range of conditions in which our businesses
operate.

SUPPLY CHAIN

This year, the Telstra Group purchased $6.5 billion in goods and services from
around 4,800 suppliers. Our spend can be leveraged to positively influence the
behaviour and actions of our suppliers and, in turn, benefit the environment and
communities. To help realise this we developed a three-year sustainable
procurement strategy, with a focus on identifying key social and environmental
risks, embedding consideration of these risks into our processes and working to
monitor compliance. We also refined our Supplier Code of Conduct to clarify the
expectations we have of our suppliers. As part of the process, we held a forum
for key suppliers, representing around $3 billion in annual spend, on the
proposed changes and to obtain consensus on our implementation approach.

A more thoughtful approach to supply chain management has resulted in
initiatives such as our Supported Workforce program which contracts non-profit
groups to conduct grounds maintenance at around 4,000 of our network sites.
These groups currently employ 413 people with disability or who are experiencing
disadvantage. This year, we established a similar pilot program for Indigenous
people in remote locations.

MOBILE PHONES, TOWERS AND HEALTH

We acknowledge that some people are genuinely concerned about possible health
effects from electromagnetic energy (EME), and we are committed to addressing
these concerns responsibly. We are proactive, transparent and fact based in our
communication regarding EME and comply with the standards set by regulators. We
rely on the expert advice of national and international health authorities
including the Australian Radiation Protection and Nuclear Safety Agency
(ARPANSA) and the World Health Organisation (WHO) and actively contribute to
scientific research in EME and health.

Helping our customers and the community keep abreast of the latest information
is important to us. We provide information on EME on our website at
www.telstra.com/eme and invite customers to go directly to the WHO, ARPANSA and
EMF Explained websites for further information. We have a dedicated EME help
desk and team that proactively reviews new site proposals, develops community
consultation plans and works with the community to determine acceptable sites
for new base stations. This year, we continued our mobile safety SMS campaign,
sending out more than eleven million messages referring customers to
www.telstra.com/mobiletips, our information site for safe and responsible phone
use. In addition, all new mobile customers receive information on EME in their
welcome pack.

TRANSPARENCY REPORT

This year we released our first Transparency Report to keep our customers
informed of the requests we receive for access to information from national
security and law enforcement agencies in Australia and overseas. The aim of the
report is to raise awareness about the various reasons an agency may request
assistance, such as enforcing criminal law, protecting public revenue and
safeguarding national security. We also provide assistance to emergency services
agencies in response to life threatening situations and Triple Zero emergency
calls.

OUR PEOPLE

We are working to attract and retain employees with the skills and passion to
best serve our markets.

EMPLOYEE ENGAGEMENT

We are committed to making Telstra a great place to work and seeking employee
feedback is an important part of the process. Over April and May 2014, we
conducted a pulse employee engagement survey, with an 84 per cent response rate.
We achieved an engagement score of 82 per cent, putting us five percentage
points above the Australian National Norm and within two percentage points of
the Global High Performing Norm.

The largest improvements were seen in the areas of ethics and integrity (four
per cent improvement on 2013 survey), health and wellbeing (two per cent
improvement) and diversity and inclusion (two per cent improvement).

EMPLOYEE ENGAGEMENT(I)

(i) Telstra Group. 2013 results adjusted to exclude CSL and Sensis Group (79%
was previously reported).

HEALTH AND SAFETY

The health and safety of our people is paramount to us and is critical to the
success of our business. We have governance structures at Board and executive
levels to guide and monitor health and safety performance and have continued to
focus on identifying and controlling workplace health and safety hazards and
risks. This year, Telstra categorised its workforce into 12 main workgroups that
cover our main work activities and the risks likely to face our employees. This
approach allows us to implement risk management programs that address risks and
reduce the incidence and severity of workplace injuries and illness with a
particular focus in FY14 on driver safety, contractor management, the management
of asbestos, employee wellbeing and musculoskeletal injuries.

We have managed the risk of asbestos in our network for many years and place the
highest priority on the health and safety of employees, contractors and members
of the public. This financial year we introduced a number of stringent measures
to improve asbestos handling practices within Telstra after several incidents in
FY13 involving contractors failing to meet our minimum standards. We also
implemented stronger community engagement guidelines to better inform the
community about work in their neighbourhoods, including longer notification
periods and improved signage at worksites alerting residents to asbestos-related
works.

LOST TIME INJURY FREQUENCY RATE (LTIFR)(II)

(ii) LTIFR is the reported number of accepted workers’ compensation claims for
work-related injury or disease that incur lost time for each million hours
worked. This data relates to Telstra Corporation Limited only and does not
include subsidiaries or contractors.

DIVERSITY AND INCLUSION

Diversity and inclusion help us improve business results, enhance our
reputation, and attract, engage and retain talented people. Our people value
working in an organisation where differences are respected. In addition, having
a diverse range of employees better enables us to provide the best service to
our customers.

At Telstra, the focus on diversity and inclusion relates to differences in
gender, age, ethnicity, race, cultural background, disability, religion and
sexual orientation. It also includes differences in background and life
experience, communication styles, interpersonal skills, education, functional
expertise and problem solving skills.

Employee diversity and inclusion is led by our Diversity Council, which is
chaired by the CEO and comprises the entire CEO Leadership Team. Through this
forum, as well as performance planning and development processes, we reinforce
our expectations of all leaders to lead in an inclusive way and to value
difference.

Our diversity policies provide the framework for the Board to set our measurable
objectives for achieving diversity and to assess annually our progress in
achieving them. The table below summarises, as at the end of the 2014 financial
year, our measurable objectives for achieving gender diversity set by the Board
and our progress towards achieving them.

DIVERSITY TARGETS AND PERFORMANCE

Measure Objective and Progress/Result
in respect of FY14
(or as otherwise stated) Objective in respect of FY15
(or as otherwise stated) Women on
the Board Objective - There will be 3 women on the Board, representing a female
gender representation among non-executive Directors of at least 30%
Progress - As at 30 June 2014, there were 3 female Directors on the
Board (including the Chairman of the Board), representing a female
gender representation among non-executive Directors of 33.3% There will be at
least 3 women
on the Board, representing a
female gender representation
among non-executive Directors
of at least 30% Female
representation
in graduate
intake Objective - 45% female representation in graduate intake selected in
2015, with an aspiration of 50% female representation by 2020
Progress - 41% female representation in graduate intake selected in
2014 45% female representation
in graduate intake selected in
2015, with an aspiration of 50%
female representation by 2020 Promotion rates
for women Objective - To exceed their representation at Business Unit level
Result – Achieved in Telstra overall and in 6 out of 9 business units. To exceed
their representation at
Business Unit level Engagement
of identified
groups(i) Objective - Equal to or greater than Telstra-wide engagement score,
with any negative differences not statistically significant
Result - Engagement of all identified groups exceeded Telstra-wide
engagement score, except for Indigenous employees and employees
with a disability. The negative difference for employees with a disability
was statistically significant, but the score for this group was stable
compared to 2013. All other groups were more engaged than in 2013. Equal to or
greater than Telstra-
wide engagement score, with
any negative differences not
statistically significant Female
representation(ii)
at 30 June Objective - FY15 - 32% (Telstra Total) and 30% (Executive
Management)
Progress - 30.1% (Telstra Total) and 25.9% (Executive Management) FY15 - 32%
(Telstra Total) and
30% (Executive Management)
FY20 - 35% (Telstra Total) and
40% (Executive Management)

(i) Identified groups are female employees, Indigenous employees, culturally and
linguistically diverse employees, employees with a disability, and, gay,
lesbian, bisexual, transgender and intersex (GLBTI) employees. FY14 result does
not include Chief Entertainment Pty Ltd, 02 Networks Pty Ltd and DCA Direct
Health Pty Ltd, as they did not participate in the 2014 Employee Engagement
Survey.

(ii) Full time and part time staff in Telstra Corporation Limited and its wholly
owned subsidiaries, excluding casual and agency staff.

Telstra is required by the Workplace Gender Equality Act 2012 to report our
workforce gender profile as at 31 March each year. Our 2014 report was lodged
with the Workplace Gender Equality Agency on 27 May 2014 and is provided in the
corporate governance section of our website at www.telstra.com/diversity.

REPRESENTATION OF WOMEN IN TELSTRA AS AT 30 JUNE 2014

Role Number Percentage Board(i) 3 33.3% Executive management*(ii)
CEO
CEO-1 (Band A)
CEO-2 (Band B)
CEO-3 (Band C) 68
0
3
14
51 25.9%
0%
23.1%
19.7%
28.7% Middle management*(iii) 2,567 27.2% Operational*(iv) 6,970 31.4% Telstra
Total* 9,605 30.1% Telstra Group Total** 10,302 30.2%

* Includes full time, part time and casual staff in Telstra Corporation Limited
and its wholly owned subsidiaries, excluding contractors. It does not include
staff in any other controlled entities within the Telstra Group.

** Includes full time, part time and casual staff in controlled entities within
the Telstra Group, excluding contractors and agency staff.

For a list of the entities in the Telstra Group, please refer to Note 25 to the
Financial Statements.

Notes:

(i) Number and percentage relate to non-executive Directors.

(ii) Executive management comprises persons holding roles within Telstra
designated as Band A, B or C, or equivalent.

(iii)Middle management comprises persons holding roles within Telstra designated
as Band 1 or 2, or equivalent.

(iv)Operational comprises persons holding roles within Telstra designated as
Bands 3 or 4, or equivalent.

GENDER EQUALITY

Overall female representation across the Telstra Group remained flat this year
at 30.2 per cent. While we made good progress in the first half, the result was
adversely affected by the sale of our Sensis directories business which saw a
reduction of 1,320 women. Last year, we reported an over representation of women
among departures from Telstra. We took local action to retain women in our
business with a focus on flexibility and career development. We have started to
see a closing of the gap with female commencements now exceeding female
departures.

We know that diversity and inclusion helps us to improve business results,
enhance our reputation, and attract, engage and retain talented people.

BOARD DIVERSITY

Information on the initiatives the Board has in place to meet its strategic
imperative of ensuring the Company has a diverse Board and to achieve its Board
diversity measurable objective can be found in the Board Composition and
Director Appointment section of our Corporate Governance Statement, which is
available on our website.

EMPLOYEE DIVERSITY AND INCLUSION

During the year our initiatives to enhance diversity and inclusion at Telstra
included:

* Gender equality - our CEO continued his involvement in the Male Champions of
Change group which models effective leadership by male executives in relation
to gender equality. Key initiatives this year included the "panel pledge" to
increase female representation in conference panels and speaking
opportunities and the Plus One initiative, which encourages managers to add
at least one woman to their teams as roles arise.

* All Roles Flex - this is a companywide approach whereby flexibility is now
considered the starting point for all roles. We are the first large company
in Australia to implement such an initiative, and are committed to ensuring
our employees are able to balance work with other responsibilities.

* Pay equity - the Board reviewed Telstra’s remuneration philosophy and
principles to ensure they remained aligned to our strategy and values. A new
principle was added that specifically highlights diversity and acknowledges
Telstra’s commitment to providing equitable and fair pay.

* White Ribbon - we received formal accreditation as a White Ribbon Workplace
recognising our work, since 2009, in helping to stop violence against women.

At Telstra, flexibility is the starting point for all roles.

EMPLOYEE VOLUNTEERING AND GIVING

Our employees want the opportunity to contribute to the communities in which
they live and work. This year Telstra people contributed more than 5,000 days
volunteering their time and expertise to a range of community organisations
across Australia and beyond. This year our dollar for dollar matched payroll
giving resulted in a total contribution of more than $1.4 million in donations
to over 300 charities.

COMMUNITY IMPACT

We use our technology, expertise, scale and presence to make a positive
contribution to the community.

Sev and Shirl, Ambassadors for the ILC NSW's Everyone Connects Workshops

TELSTRA FOUNDATION

The Telstra Foundation’s social innovation program works in partnership with
community organisations. We invest in "tech for good" collaborations across
Australia and look to the power of smart devices, social media, platforms and
apps to champion social change and community connection.

This year we committed $1.1 million to four new social innovation grants,
including the Independent Living Centre NSW (pictured) where we explored how
mobile and tablet technologies can be used to improve connectedness for people
with severe or profound communication disability. According to census data this
affects 280,000 people in Australia. The project was delivered across
metropolitan, regionaland rural New South Wales in early 2014. It involved hands
on workshops for people with communication challenges and the development of
online resources to increase awareness of assistive technologies, including
mainstream mobile and tablet technologies, accessories and accessibility
options. Young people (aged 12 to 25) and adults who attended the workshops were
able to trial a range of technologies including tablets, smart phones, software
and apps – many for the first time.

This year our Executive Committee approved a new framework to guide our
community investment approach in our international operations. Consistent with
this, we established Telstra Foundation Philippines to deliver on Telstra’s
local community relations responsibilities. This is an important signal of our
commitment to expand and maintain our market presence long term.

DIGITAL LITERACY

Being confident and literate with technology is an essential skill in the
digital age. This year, our Everyone Connected digital literacy programs reached
more than 143,000 people.

Our most significant digital literacy program this year, the Tech Savvy Seniors
partnership with the New South Wales (NSW) Government, delivered training to
around 17,000 seniors through 92 community colleges and local libraries,
particularly in regional and remote areas of NSW. To extend the program’s reach
to as many seniors as possible, self-help DVDs were distributed to libraries and
key community agencies. They cover subjects such as getting started with
smartphones and tablets, social networking, and online banking and shopping.

ESMART LIBRARIES

In August 2012, we launched eSmart Libraries, a multi-year, $8 million
partnership between the Telstra Foundation and The Alannah and Madeline
Foundation. This world-leading cyber safety program is designed to better equip
Australia’s 1,500 public libraries to support library users with the skills they
need for smart, safe and responsible use of technology. To date, more than a
third of public libraries across Australia (approximately 500 libraries) have
started the eSmart journey, exceeding our FY14 target of 260.

INDIGENOUS COMMUNITIES

This year, we announced a new $5 million, multi-year partnership with the
National Centre of Indigenous Excellence (NCIE) to create an Indigenous Digital
Excellence Initiative to develop platforms, apps, programs and events to improve
community wellbeing. The partnership will support Aboriginal and Torres Strait
Islander peoples to take their next digital step – whether it’s enjoying the
strength of connections through purpose-built online networks and apps or
running an online business.

DISASTER RELIEF AND RECOVERY

In times of natural disaster, our technicians are often among the first to enter
affected areas. Our priorities include assisting emergency and essential
services organisations with their telecommunications requirements and restoring
services to our customers. Along with technical support, we provide
telecommunications services such as temporary internet access and loan handsets
to evacuation centres. We also support affected residential and small business
customers through relief assistance packages.

In FY14, Telstra provided assistance following four natural disasters across
Australia. We also improved the Emergency Alert System, the first of its kind in
the world, to enable disaster warning messages to be sent to Telstra 4G handsets
in areas covered by our 4G network. Since its introduction, location-based
emergency alerts have been used almost 320 times, and the system has
successfully issued more than 1.3 million messages.

This year we also assisted almost 17,000 customers wishing to check on family
and friends affected by Typhoon Haiyan in the Philippines. For two weeks, voice
calls and SMS were provided free to the Philippines for Telstra fixed line and
post-paid mobile customers and pre-paid customers were reimbursed. Telstra was
the first telco worldwide to respond with an offer of this kind.

We invested $217 million in the community in FY14.

BREAKDOWN OF SOCIAL AND COMMUNITY INVESTMENT IN FY14

ENVIRONMENTAL STEWARDSHIP

Telstra’s new Environment Strategy signals an important step change in our
approach to environmental management.

ENVIRONMENT STRATEGY

Telstra’s new Environment Strategy signals an important step change in our
approach to environmental management. It builds on and extends our existing
programs to manage and minimise the environmental impacts across our value
chain. It is focused on addressing the environmental issues that matter most to
our stakeholders, and is aligned to Telstra’s purpose and values. Specifically
it focuses on:

* Operational Excellence - actively identifying and minimising material
environmental impacts and operating costs.

* Sustainable Supply Chain - working with and influencing suppliers to manage
and reduce the environmental and social impacts of their operations and of
the products and services they provide to Telstra.

* Environmental Customer Value Proposition (ECVP) - embedding environmental
considerations into the development of products and services.

The strategy was informed by a detailed identification and assessment of the
material environmental risks and impacts of our operations, our products and
services, and our supply chain.

ENERGY EFFICIENCY AND CARBON EMISSIONS

Energy use in our networks is our most material environmental impact, accounting
for around 86 per cent of our total carbon emissions (Scope 1, 2 and 3) in FY14.
Large amounts of energy are required to power our network equipment and keep it
at an optimum operating temperature. In FY14, Telstra used almost six million
gigajoules of energy.

As data volumes continue to increase - 39 per cent in the 2014 financial year -
we are improving the utilisation and efficiency of our network equipment. This
year we achieved a 30 per cent decrease in carbon emissions intensity (tCO2e per
terabyte of data) from the previous year, surpassing our 15 per cent reduction
target.

Consistent with our aspiration to become an Australian environmental leader, we
have set a longer term target to reduce our carbon emissions intensity by 55 per
cent over the three year period from FY15 to FY17, from a baseline year of FY14.

Total emissions (Scope 1, 2 and 3) have decreased 2.5 per cent over the
reporting period as a result of a program of works to improve our carbon and
energy efficiency as well as reduced emission factors published by the Federal
Government. Emission factors were reduced due to changes in Australia’s
electricity generation mix, such as increased generation from renewable energy
sources. The change in emission factors between FY13 and FY14 led to a decrease
in our reported emissions of approximately 36,000 tCO2e.

We are three years into a five year, $41.3 million capital investment program
aimed at improving energy efficiency and reducing the carbon intensity of our
network and data centre facilities. We have spent $29 million to date, including
$6 million in FY14, on initiatives that will deliver positive net present value
outcomes. Projects are focused on delivering energy efficient air conditioning
solutions, decommissioning old and redundant equipment and integrating energy
efficiency measures into existing capital work projects. A further $6 million is
committed for next financial year. Collectively, the initiatives completed in
FY14 have reduced carbon emissions by 36,824 tCO2e and saved over 35,000MWh of
electricity consumption in FY14.

TOTAL CARBON EMISSIONS(I)
(SCOPE 1, 2 & 3)

TONNES OF CARBON DIOXIDE
EQUIVALENT (TCO2E)

(i) Australian operations for Telstra Corporation Limited. This includes
relevant Australian subsidiaries, joint ventures and partnerships. Sensis Group
has been included from 1 July 2013 until 28 February 2014.

CARBON EMISSIONS INTENSITY (II)

TONNES OF CARBON DIOXIDE EQUIVALENT
PER TERABYTE (TCO2E/TB)

(ii) Australian operations for Telstra Corporation Limited. This includes
relevant Australian subsidiaries, joint ventures and partnerships. Sensis Group
has been included from 1 July 2013 until 28 February 2014.

We are committed to minimising our environmental impacts and working with our
customers to achieve better environmental outcomes.

THOUGHT LEADERSHIP

We believe that the information and communications technology (ICT) sector is in
an ideal position to support government, businesses and consumers to reduce
their energy consumption, leading to considerable cost savings and reduced
greenhouse gas emissions. To explore this potential, this year we released a
report, Connecting with a Low Carbon Future, that examines the role of
technology in unlocking the benefits of a low-carbon economy.

Building on the findings from our 2007 Climate Risk report, Connecting with a
Low Carbon Future found that if ICT opportunities such as remote appliance power
management, decentralised working and real time fleet management are realised,
they could help Australians to achieve cost savings of almost $8.1 billion per
year while cutting national carbon emissions by 4.7 per cent.

PAPER USE – DIRECTORIES

Yellow Pages* and White Pages* (print and online) have received carbon neutral
certification through Low Carbon Australia since February 2010. We offset our
FY13 emissions by purchasing, in December 2013, 54,009 tonnes of offsets from
three carbon reduction projects located in India and China.

In February 2014, we sold a 70 per cent stake in our Sensis directories
business. Sensis will continue to produce and distribute the White Pages for
Telstra.

GAVIN KNIGHT AND ANTHONY QUAYLE, TELSTRA OPERATIONS, GREENSBOROUGH EXCHANGE,
MELBOURNE

OFFICE, BILLING AND PRINTING PAPER

We reduced our total paper usage by more than 15 per cent this year due to our
focus on producing online and digital content. Paper used to print bills
continues to reduce as more customers opt for online billing and a greater
proportion of online advertising has reduced our need to print information
flyers and brochures. Our "follow-me" printing initiative continues to be rolled
out across our largest corporate offices. This initiative enables employees to
print from almost any device, using their building access cards to activate
printing and has led to a 12 per cent reduction in office paper use.

E-WASTE

E-waste is an important element of Telstra’s Environment Strategy. We collected
1,978 tonnes of e-waste this year, including 15 tonnes from a waste management
initiative in our commercial offices and buildings. We also assist our customers
to deal more effectively with e-waste. Throughout FY14 we collected 15.3 tonnes
of mobile phones and accessories from Telstra retail stores, offices and repair
centres through the MobileMuster program, a nine per cent increase in
collections for the year.

BOARD OF DIRECTORS

Catherine B Livingstone AO
BA (Hons), Hon DBus
(Macquarie),Hon DSc
(Murdoch),FCA, FTSE,
FAICD, FAA

Ms Livingstone has been a non-executive Director since November 2000, was
appointed as Chairman in May 2009 and was last re-elected in 2011. She is
Chairman of the Nomination Committee and a member of the Audit & Risk Committee
and the Remuneration Committee. Ms Livingstone is a Chartered Accountant and has
held several finance and general management roles primarily in the medical
devices sector. Ms Livingstone was the Chief Executive of Cochlear Limited from
1994 to 2000. She was Chairman of CSIRO from 2001 to 2006 and has also served on
the boards of Goodman Fielder Limited and Rural Press Limited. In 2008, Ms
Livingstone was appointed an Officer of the Order of Australia for service to
the development of Australian science, technology and innovation policies to the
business sector. In 2014, Ms Livingstone was appointed President of the Business
Council of Australia.

Other listed company directorships in the past three years:
Director, WorleyParsons Limited (from 2007), Macquarie Bank Limited (2003-2013)
and Macquarie Group Limited (2007-2013).

Other directorships/appointments:
President, Business Council of Australia (from 2014) and President, Australian
Museum Trust (from 2012); Member, Advisory Board for the John Grill Centre for
Project Leadership at University of Sydney (from 2013); Director, The George
Institute for Global Health (from 2012) and Saluda Medical Pty Ltd (from 2013).

David I Thodey
BA, FAICD
Mr Thodey became Chief Executive Officer and an executive Director in May 2009.
Mr Thodey joined Telstra in April 2001 as Group Managing Director of Telstra
Mobiles and in December 2002 was appointed as Group Managing Director Telstra
Enterprise and Government where he was responsible for the Company's corporate,
government and large business customers in Australia, TelstraClear in New
Zealand and Telstra's International sales division. Before joining Telstra, Mr
Thodey was Chief Executive Officer of IBM Australia/New Zealand and previously
held several senior executive positions in marketing and sales with IBM across
the Asia Pacific. Mr Thodey holds a Bachelor of Arts in Anthropology and English
from Victoria University in New Zealand and attended the Kellogg Post-Graduate
School General Management Program at Northwestern University in Chicago.
In January 2013, Mr Thodey joined the Board of the GSM Association, the global
body made up of carriers and related companies that supports the standardisation
and deployment of mobile technology around the world. He is also co-chair of the
Infrastructure and Investment Taskforce of the Australian B20 leadership group –
the business advisory forum of the G20.

Geoffrey A Cousins AM
Mr Cousins has been a non-executive Director since November 2006 and was last
re-elected in 2012. He is a member of the Nomination Committee and the
Remuneration Committee. Mr Cousins has more than 26 years’ experience as a
company director. Previously Chairman of George Patterson Australia, he is also
a former Director of Publishing and Broadcasting Limited, the Seven Network,
Hoyts Cinemas group and NM Rothschild & Sons Limited. He was the first Chief
Executive of Optus Vision and before that held a number of executive positions
at George Patterson, including Chief Executive of George Patterson Australia. In
2014, Mr Cousins was appointed a Member of the Order of Australia for
significant services to the community and to the visual and performing arts.
Mr Cousins was previously a consultant to the Prime Minister. He was also
Chairman of Cure Cancer Australia and has served on the boards of the Insurance
Australia Group Ltd, Globe International Limited and a number of cultural
institutions and not for profit foundations.

Other directorships/appointments:
Chairman, St James Ethics Foundation (from 2010).

John D Zeglis
BSc Finance, JD Law
Mr Zeglis has been a non-executive Director since May 2006 and was last
re-elected in 2012. Mr Zeglis has had a long and distinguished career in the US
telecommunications sector. He joined AT&T in 1984, and was elected its President
in 1998 and Chairman and Chief Executive Officer of the AT&T Wireless Group in
1999. He continued as CEO of AT&T Wireless until retiring in November 2004
following the company’s sale to Cingular Wireless. He has also served on the
boards of Georgia Pacific Corporation, Illinois Power Company and Sara Lee
Corporation. Mr Zeglis has a legal background and became partner with the law
firm Sidley & Austin in 1978. He was General Counsel of AT&T from 1986 to 1998.
His qualifications include a BSc in Finance from the University of Illinois, and
a JD in Law from Harvard.

Other listed company directorships in the past three years:
Director, Helmerich & Payne Corporation (from 1989)

Other directorships/appointments:
Director, The Duchossois Group (from 2011) and State Farm Automobile Insurance
(from 2004).

Russell A Higgins AO
BEc, FAICD
Mr Higgins has been a non-executive Director since September 2009 and was last
re-elected in 2012. He is a member of the Audit & Risk Committee. Mr Higgins is
an experienced company director who has worked at very senior levels of both
government and private sectors. He has served on the boards of a wide range of
listed companies, private companies, government business enterprises and
international organisations, including as Chairman of the Snowy Mountains Hydro
Electric Scheme and the Global Carbon Capture and Storage Institute. From 2003
to 2004, he was Chairman of the then Prime Minister’s Energy Task Force and
prior to that he was Secretary of the Department of Industry, Science and
Resources.

Other listed company directorships in the past three years:
Director, APA Group (from 2004), Argo Investments Limited (from 2011), Leighton
Holdings Limited (2013-2014) and Ricegrowers Limited (SunRice) (2005-2012).

Other directorships/appointments:
Director, St. James Ethics Foundation (from 2010).

Chin Hu Lim
B Applied Science, Dip EEE
Mr Lim was appointed as a non-executive Director on 9 August 2013 and elected in
October 2013. Mr Lim is an experienced company director and has almost 30 years
of experience in the technology sector across the Asia Pacific Region. He is the
Managing Partner of Stream Global Pte Ltd, a venture fund providing seed funding
for technology start ups. He was CEO of Frontline Technologies Corp Inc., a
Singapore Exchange-listed company, from 2000 to 2008 and BT South East Asia from
2010 to 2011. Previously he was Managing Director for Sun Microsystems in
Singapore and country director for Sun in Thailand, Indonesia, the Philippines
and Vietnam during the 1990s, after a career in Hewlett Packard in the 1980s.

Other listed company directorships in the past three years:
Kulicke & Soffa Industries Inc (NASDAQ: KLIC) (from 2011).

Other directorships/appointments:
Director, Heliconia Capital Management Pte Ltd (from 2014), Citibank Singapore
Ltd (from 2013), G-Able (Thailand) Ltd (from 2011) and Changi General Hospital &
Integrated Health Information Systems (from 2009); Fellow and Council member of
Singapore Institute of Directors (from 2012) and Infocomm Development Authority
– Personal Data Protection Advisory Committee (from 2013).

John P Mullen
Mr Mullen has been a non-executive Director since July 2008 and was last
re-elected in 2011. He is Chairman of the Remuneration Committee and a member of
the Nomination Committee.
Mr Mullen is the Managing Director and Chief Executive Officer of Asciano Ltd
and has served in that role since 2011. He has worked for over two decades in a
multitude of senior positions with different multinationals including 10 years
with the TNT Group - two years of those as its Chief Operating Officer. From
1991 to 1994, he held the position of Chief Executive Officer of TNT Express
Worldwide. Mr Mullen joined Deutsche Post World Net (DPWN) as an Advisor in
1994, becoming Chief Executive Officer of DHL Express Asia-Pacific in 2002 and
Joint Chief Executive Officer, DHL Express, in 2005. Mr Mullen was Global Chief
Executive Officer, DHL Express, from 2006 to 2009.

Other listed company directorships in the past three years:
Director, Asciano Ltd (from 2011), Brambles Limited (2009-2011), Embarq
Corporation USA (2006-2009) and MAp Airports Limited (2010-2011).

Other directorships/appointments:
Member, Australian Graduate School of Management (from 2005).

Nora L Scheinkestel
LLB(Hons), PhD, FAICD
Dr Scheinkestel has been a non-executive Director since August 2010 and was last
re-elected in 2013. She is Chairman of the Audit & Risk Committee.
Dr Scheinkestel is an experienced company director with a background as a senior
banking executive in international and project financing. She currently consults
to government, corporate and institutional clients in areas such as corporate
governance, strategy and finance. She is also an Associate Professor in the
Melbourne Business School at Melbourne University and is a member of the
Takeovers Panel. Dr Scheinkestel has held a number of roles in the utility
sector, including Chairman and non-executive director of Victorian and national
water and energy companies. She has also served on a range of public and private
sector boards including, more recently, AMP Limited and its funds management and
banking subsidiaries, Mayne Group Limited and Mayne Pharma Limited, Medical
Benefits Fund of Australia Ltd, Newcrest Mining Limited and North Limited. In
2003, Dr Scheinkestel was awarded a centenary medal for services to Australian
society in business leadership.

Other listed company directorships in the past three years:
Director, Insurance Australia Group Limited (from 2013), Orica Limited (from
2006), Pacific Brands Limited (2009- 2013) and AMP Limited (2003-2013).

Margaret L Seale
BA, FAICD
Ms Seale was appointed as a non-executive Director in May 2012 and subsequently
elected in October 2012. She is a member of the Audit & Risk Committee.
Ms Seale has over 20 years experience in senior executive roles in Australia and
overseas, including in global publishing and the transition of traditional
business models to adapt and thrive in a digital environment, as well as sales
and marketing. Most recently she was Managing Director of Random House,
Australia (with managerial responsibility for Random House New Zealand) and
President, Asia Development for Random House Inc, the global company.
Previously, she was Chief Executive Officer for The Macquarie Dictionary and
Lansdowne Publishing, from 1997 to 1999. Ms Seale was the Chief Executive
Officer of the Juvenile Diabetes Research Foundation from 1994 to 1997. She also
served on the boards of the Australian Publishers Association and the Powerhouse
Museum, and on the Council of Chief Executive Women, chairing its Scholarship
Committee from 2011 to 2012.

Other listed company directorships in the past three years:
Director, Bank of Queensland Limited (from 2014).

Other directorships/appointments:
Director, Random House Australia, New Zealand (from 2001) .

Steven M Vamos
BEng (Hons)
Mr Vamos joined the Telstra Board as a non-executive Director in September 2009
and was last re-elected in 2012. He is a member of the Nomination Committee and
the Remuneration Committee.
Mr Vamos has over 30 years experience in the information technology, internet
and online media industry. He led Microsoft Australia and New Zealand from 2003
to January 2007 before moving to the United States to become the company’s
online business head of worldwide sales and international operations.
Previously, he was Chief Executive Officer of ninemsn. Mr Vamos also worked for
Apple Computer in the 1990s after spending 14 years in senior management roles
at IBM Australia. He is the founding President of the Society for Knowledge
Economics (SKE), a notfor- profit think tank that encourages new and better
practices in leadership and management.

Other listed company directorships in the past three years:
Director, David Jones (2012-2014).

Other directorships/appointments:
President, Society for Knowledge Economics (from 2005); Director, Reading Room,
Inc (from 2013), BDB Soti Pty Ltd (from 2012) and eGeneration Investments Pty
Limited (from 1999).

SENIOR MANAGEMENT TEAM

DAVID I THODEY
CHIEF EXECUTIVE OFFICER

Mr Thodey became Chief Executive Officer in May 2009.

GORDON BALLANTYNE
GROUP EXECUTIVE,
TELSTRA RETAIL

Telstra Retail brings together Telstra’s core domestic activities, covering
consumer, business, sales and marketing, fixed and mobiles, our National
Broadband Network and media products, and our eHealth function.

TIMOTHY CHEN
PRESIDENT,
TELSTRA INTERNATIONAL

Mr Chen’s role is focussed on key relationships and identifying significant
growth opportunities throughout Asia, with a particular emphasis on Greater
China.

TRACEY GAVEGAN
GROUP EXECUTIVE,
HUMAN RESOURCES

Human Resources is responsible for organisational effectiveness and capability;
talent, leadership and succession management; people and culture initiatives;
health, safety and environment, workplace relations and all employment and
remuneration policies and practices that work towards making Telstra a great
place to work and its people a source of competitive advantage.

STUART LEE
GROUP EXECUTIVE,
TELSTRA WHOLESALE

Telstra Wholesale is responsible for the provision of a wide range of products
and services delivered over Telstra networks to non Telstra branded service
providers and NBN Co. Telstra Wholesale also buys services from NBN Co and other
carriers on behalf of the company.

KATE MCKENZIE
CHIEF OPERATIONS OFFICER,
TELSTRA OPERATIONS

Telstra Operations is responsible for the planning, design, engineering,
construction, operation, maintenance and restoration of Telstra’s networks. The
group is also responsible for information technology and the company’s
innovation portfolio.

CARMEL MULHERN
GROUP GENERAL COUNSEL,
TELSTRA LEGAL SERVICES

Telstra Legal Services provides operational and strategic legal support and
advice to the Board and across the company, including on corporate governance
and compliance, contracts, consumer law, mergers and acquisitions, regulatory
issues and dispute resolution.

ROBERT NASON
GROUP EXECUTIVE,
BUSINESS SUPPORT AND IMPROVEMENT

Business Support and Improvement is responsible for driving change that improves
the customer experience and delivering Telstra-wide productivity improvements,
as well as for credit management, billing and procurement.

ANDREW PENN
CHIEF FINANCIAL OFFICER
AND GROUP EXECUTIVE, INTERNATIONAL

Finance and Strategy is responsible for corporate planning and strategy,
accounting and administration, treasury, risk management and assurance,
corporate security, investor relations, and mergers and acquisitions.
International is responsible for development of Telstra operations and
activities outside of Australia.

BRENDON RILEY
GROUP EXECUTIVE,
GLOBAL ENTERPRISE AND SERVICES

Global Enterprise and Services brings together a number of rapidly growing
portfolio areas and operates as a global-scale, industry-based services and
solutions business.

TONY WARREN
GROUP EXECUTIVE,
CORPORATE AFFAIRS

Corporate Affairs is responsible for Telstra’s communications, government
relations, regulatory affairs, sustainability (including the Telstra Foundation)
and negotiating changes to Telstra’s agreements with NBN Co and the Commonwealth
as a result of changes to government policy.

GOVERNANCE AT TELSTRA

We are committed to excellence in corporate governance, transparency and
accountability. This is essential for the long-term performance and
sustainability of our Company, and to protect and enhance the interests of our
shareholders and other stakeholders.

Our governance framework plays an integral role in supporting our business and
helping us deliver on our strategy. It provides the structure through which our
strategy and business objectives are set, our performance is monitored, and the
risks we face are managed. It includes a clear framework for decision making and
accountability across our business and provides guidance on the standards of
behaviour we expect of our people.

We regularly review our governance arrangements as well as developments in
market practice, expectations and regulation. We have decided to early-adopt the
third edition of the ASX Corporate Governance Principles and Recommendations and
have reviewed and updated our governance and reporting practices to reflect
this.

This section outlines some of the more significant aspects of governance at
Telstra. Our full corporate governance statement is available on our website at
www.telstra.com/governance. We discuss our approach to risk management and
assurance at Telstra in the Strategy and Performance (Managing our risks)
section of this Annual Report, and diversity and inclusion in the Sustainability
(Our people) section.

OUR GOVERNANCE FRAMEWORK INCLUDES:

* Open, clear and timely communications with our shareholders

* A skilled, experienced, diverse and independent Board, with a Board Committee
structure suited to our needs

* Clear delegation, decision making and accountability frameworks

* Robust systems of risk management and assurance

* Telstra Values, Code of Conduct and policy framework providing guidance on
the standards of behaviour we expect of our people, to help us deliver on our
purpose and achieve our strategy

ENGAGING WITH OUR SHAREHOLDERS

We are committed to open, clear and timely communications with our shareholders
and investors about matters affecting the value of their investment in Telstra.
We also recognise the importance of meeting our continuous disclosure and other
legal obligations to the market.

We value a direct, two-way dialogue with shareholders and investors. We believe
it is important not only to provide relevant information as quickly and
efficiently as possible, but also to listen to and understand their perspectives
and respond to their feedback.

We have implemented a program to promote effective communication with our
shareholders and investors, and to encourage participation at our shareholder
meetings. We webcast important events such as our financial results briefings,
our annual general meeting and other investor events discussing the performance
and strategy for different parts of our business. We also host, around
Australia, a series of retail shareholder information briefings with the CEO
and/or CFO prior to our AGM.

THE BOARD

The Board is responsible for managing Telstra’s business, and is accountable to
shareholders in performing that role. The Board’s key responsibilities include
approving our strategy and corporate plan and monitoring the implementation of
our strategy and performance against the corporate plan. The Board also monitors
and influences our culture, reputation, ethical standards and legal compliance.

Decision making authority on a number of significant matters is reserved to the
Board. Outside of those areas, the CEO is responsible for the day today
management of Telstra. The CEO, together with the senior management team, is
responsible to the Board for the development and implementation of our strategy
and the overall management and performance of our Company.

The Board actively seeks to ensure that it has an appropriate mix of diversity
(including gender diversity), skills, experience and expertise to enable it to
discharge its responsibilities effectively and to be well equipped to help our
Company navigate the range of opportunities and challenges we face.

Our process for the selection, nomination and appointment of Directors involves
a formal selection process undertaken by the Board, and an executive search firm
is generally engaged to assist in the process. As part of this process, the
Board establishes criteria about the general qualifications and experience, as
well as the specific qualifications, that a candidate should possess. We also
undertake appropriate checks on any potential candidates before a person is
appointed by the Board or put forward to shareholders as a candidate for
election as a Director.

A recommendation to re-elect a Director at the end of their term is not
automatic. Before each AGM, the Board determines if it will recommend that
shareholders vote in favour of the re-election of the Directors standing for
re-election. This decision is made by the Board, having regard to the outcome of
the annual Board performance review and any other matters it considers relevant.

The Board also recognises the important contribution that independent Directors
make to good corporate governance. The Board intends that the CEO is the only
executive Director and that all non-executive Directors should also be
independent Directors. All Directors, whether independent or not, are required
to act in the best interests of Telstra and to exercise unfettered and
independent judgement.

There are currently ten Directors on the Board, comprising nine non-executive
Directors and the CEO. With the exception of the CEO, all Directors are
non-executive Directors and have been determined by the Board to be independent.
Details of the Directors can be found in the Board of Directors section of this
report.

During FY14, one new non-executive Director, Mr Chin Hu Lim, was appointed to
the Board. The Board determined that it would benefit from additional deep
experience in Asia, and in network applications. Following an extensive formal
search process, Mr Lim was identified as a candidate with the required skills
and experience. He was appointed to the Board in August 2013 and was elected by
shareholders at our 2013 AGM.

BOARD COMMITTEES

There are three standing Committees that assist the Board in carrying out its
responsibilities:

Audit & Risk Committee Remuneration Committee Nomination Committee
* Monitors and advises on matters relating to financial reporting, risk
management, compliance, external audit, internal control, internal audit,
corporate governance and matters that may significantly impact the financial
condition or affairs of the business
* Oversees Telstra’s compliance with its Structural Separation Undertaking
(SSU) and the activities of the Director of Equivalence
* Oversees our relationship with our external auditor, Ernst & Young, including
reviewing and assessing their performance, independence and objectivity
* Provides a forum for communication between the Board, management and both the
internal and external auditors
* Provides a conduit to the Board for external advice on audit, risk management
and compliance matters.

Monitors and advises on matters relating to:
* remuneration of the Board, CEO and Company Secretary
* performance and remuneration of senior management
* remuneration strategies, practices and disclosures generally (including
non-routine remuneration arrangements)
* work health and safety
* diversity (excluding Board diversity)
* employee equity plans
* management succession, capability and talent development.

Exercises the administrative powers delegated to it by the Board under Telstra’s
equity plans. Monitors and advises on matters relating to:
* composition and performance of the Board, including Board diversity
* Director independence
* appointment of the CEO and succession planning for this role
* CEO and Company Secretary performance
* outside directorship requests from executives in relation to publicly listed
companies or managers of listed managed investment schemes.

* Only independent, non-executive Directors can serve on these Committees.
* The Board appoints the members and the Chairman of each Committee.
* Following each Committee meeting, the Board receives a report from that
Committee on its deliberations,
conclusions and recommendations.

Membership as at 30 June 2014

Nora Scheinkestel (Chairman)
Catherine Livingstone
Russell Higgins
Margaret Seale

John Mullen (Chairman)
Catherine Livingstone
Geoffrey Cousins
Steven Vamos

Catherine Livingstone (Chairman)
Geoffrey Cousins
John Mullen
Steven Vamos

--------------------------------------------------------------------------------

ACTING ETHICALLY AND RESPONSIBLY

Our purpose is to create a brilliant connected future for everyone. Our Telstra
Values, together with our Telstra Group Code of Conduct and policy framework,
define the standards of behaviour we expect of our people and will help us
deliver on our purpose and achieve our strategy.

Our Telstra Values

At Telstra, we have five core values.

1. Show you care
2. Better together
3. Trust each other to deliver
4. Make the complex simple
5. Find your courage

Our values express what we stand for and guide the way we do things. Our values
are core to our business and we align everything we do with them.

Our Code of Conduct and Policy Framework

Our Code of Conduct and policy framework underpin our Telstra Values. Together
they set out, in more detail, the standards of behaviour we expect of our
people. They define our commitment to good corporate governance, responsible
business practice, our customers, our workforce, the communities in which we
operate and the environment. They also provide the structure through which we
maintain compliance with our legal obligations.

Our governance framework includes elements that address the following key areas,
which are central to how we promote ethical and responsible behaviour:

Our People and Our Community

Health and Safety – recognising our commitment to the health, safety and
wellbeing of our staff, contractors and community. This highlights the
importance of workplace health and safety and sets out the priority,
accountability, measurement, and our commitment to compliance for health and
safety at Telstra.

Diversity – setting out our strategy and principles in relation to diversity.
This provides the framework for the establishment of our diversity measurable
objectives, and monitoring and reporting on diversity matters across Telstra.

Discrimination and Bullying – aiming to ensure that we have a workplace free of
all forms of unlawful discrimination, harassment, bullying and victimisation.

Sustainability – seeking to manage our business to produce an overall positive
impact on our customers, employees, shareholders, the wider community and other
stakeholders, while minimising our environmental impacts.

Our Customers

Privacy - setting out our commitment to the protection of our customers’
personal information. This outlines how we protect customer personal
information, how and why we collect it, how we may use and disclose it, how we
keep it secure and accurate, and how customers may access their personal
information.

Good corporate governance and responsible business practice

Anti-Bribery and Anti-Corruption – aiming to ensure we comply with applicable
anti-bribery and anti-corruption laws. We also seek to ensure that gifts, prizes
and hospitality are not accepted in inappropriate circumstances, including where
acceptance may (or may be perceived to) compromise independence or be construed
as a bribe.

Conflicts of Interest and Outside Activities - assisting our employees and
contractors to understand what we consider to be a conflict of interest and how
to avoid actual, potential or apparent conflicts of interest.

Whistleblowing – providing an avenue for anyone to report suspected unethical,
illegal or improper behaviour. Our whistleblowing process is supported by an
independent service provider and all disclosures are treated confidentially and
can be made anonymously.

Securities Trading – setting out the rules and restrictions relating to buying,
selling and otherwise dealing in Telstra securities by our Directors, CEO,
senior management, specified other employees and their closely related parties,
through a trading windows approach.

Market Disclosure - outlining responsibilities and the process for the approval
of our ASX announcements, including where Board approval is required, as well as
the role of our CEO, CFO and Continuous Disclosure Committee in relation to
disclosure matters. We aim to ensure that we provide our shareholders, investors
and the financial community with appropriate and timely information while
ensuring that we fulfil our statutory reporting obligations under the
Corporations Act and the ASX Listing Rules.

Telstra's 3Rs of Social Media Engagement (Representation, Responsibility and
Respect) – providing guidance to employees and contractors who use social media,
either as part of their job or in a personal capacity, about our expectations
when they talk online about us, our products and services, our people, our
competitors and/or other business related individuals or organisations.

DIRECTORS' REPORT

In accordance with a resolution of the Board, the Directors present their report
on the consolidated entity (Telstra Group) consisting of Telstra Corporation
Limited (Telstra) and the entities it controlled at the end of, or during the
year ended, 30 June 2014. Financial comparisons used in this report are of
results for the year ended 30 June 2014 compared with the year ended 30 June
2013.

The historical financial information included in this Directors’ Report has been
extracted from the audited Financial Report of the Annual Report accompanying
this Directors’ Report.

PRINCIPAL ACTIVITY

Our principal activity during the financial year was to provide
telecommunications and information services for domestic and international
customers. There has been no significant change in the nature of this activity
during the year.

REVIEW AND RESULTS OF OPERATIONS

Information on the operations and financial position for the Telstra Group is
set out in our Operating and Financial Review (OFR), consisting of Our Business,
Key Highlights, Chairman and CEO Message, Strategy and Performance and Full Year
Results and Operations Review.

DIVIDENDS

On 14 August 2014, the Directors resolved to pay a final fully franked dividend
of 15.0 cents per ordinary share ($1,866 million), bringing dividends per share
for financial year 2014 to 29.5 cents per share. The record date for the final
dividend will be 29 August 2014, with payment being made on 26 September 2014.
Shares will trade excluding entitlement to the dividend on 27 August 2014.

Dividends paid during the year were as follows:

Dividend Date
resolved Date
paid Fully
franked
dividend
per share Total
dividend
($ million) Final dividend for
the year ended
30 June 2013 8 Aug
2013 20 Sep
2013 14 cents 1,742 Interim dividend
for the year ended
30 June 2014 13 Feb
2014 28 Mar
2014 14.5 cents 1,803

CAPITAL MANAGEMENT

On 14 August 2014, our Board resolved to undertake an off market share buy-back
of up to approximately $1 billion. The share buy-back will be available to
eligible shareholders and implemented by way of a tender process and at a
discount to market price. The shares bought back will be cancelled by the
Company, reducing the number of shares the Company has on issue. The buy-back
will be funded by accumulated cash surplus in the Company and will be made up of
a capital and a dividend component. The dividend component will be fully franked
and our estimate of the decrease in franking credits is $243 million, based on
the assumption of Testra’s ASX listed share price of $5.30, buy-back discount of
10% and a non-resident shareholding of 21.8%.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of our company during
the financial year ended 30 June 2014.

BUSINESS STRATEGIES, PROSPECTS AND LIKELY DEVELOPMENTS

The OFR sets out information on the business strategies and prospects for future
financial years, and refers to likely developments in Telstra's operations and
the expected results of those operations in future financial years (see Our
Business, Key Highlights, Chairman and CEO Message, Strategy and Performance and
Full Year Results and Operations Review). Information in the OFR is provided to
enable shareholders to make informed assessment about the business strategies
and prospects for future financial years of the Telstra Group. Detail that could
give rise to likely material detriment to Telstra (for example, information that
is commercially sensitive, is confidential or could give a third party a
commercial advantage) has not been included. Other than the information set out
in the OFR, information about other likely developments in Telstra's operations
and the expected results of these operations in future financial years has not
been included.

EVENTS OCCURRING AFTER THE END OF THE FINANCIAL YEAR

Apart from the final dividend for financial year 2014 and the share buy-back,
the Directors are not aware of any matter or circumstance that has arisen since
the end of the financial year, that, in their opinion, has significantly
affected, or may significantly affect in future years, Telstra’s operations, the
results of those operations or the state of Telstra’s affairs.

DETAILS OF DIRECTORS AND EXECUTIVES

The only change to the Directors of Telstra Corporation Limited during the
financial year and up to the date of this report was:

* Chin Hu Lim was appointed as a non-executive Director effective 9 August
2013.

With effect from 15 August 2014 Peter Hearl will be appointed as a non-executive
Director. Mr Hearl will stand for election at Telstra’s Annual General Meeting
in Brisbane on 14 October 2014.

Information about our Directors and senior executives is provided as follows:

* names of our current Directors and details of their qualifications,
experience, special responsibilities and directorships of other listed
companies are given in Board of Directors of this Annual Report
* details of Director and senior executive remuneration are set out in the
Remuneration Report and forms part of this Directors’ Report.

Details of Directors’ shareholdings in Telstra are shown in the table below.

Directors’ shareholdings in Telstra

As at 14 August 2014:

Director Number of shares held(1) Catherine B Livingstone 160,000 David I Thodey
3,318,603 Geoffrey A Cousins 101,765 Russell A Higgins 88,404 Chin Hu Lim - John
P Mullen 26,159 Nora L Scheinkestel 71,765 Margaret L Seale 30,000 Steven M
Vamos 40,000 John D Zeglis 103,993

(1) The number of shares held refers to shares held either directly or
indirectly by Directors as at 14 August 2014. Shares in which the Director does
not have a relevant interest, including shares held by the Directors’ related
parties (including relatives), are excluded. Refer to the Remuneration Report
(Table 5.8) for total shares held by Directors, representing those shares held
directly, indirectly and beneficially as at 30 June 2014.

BOARD AND COMMITTEE MEETING ATTENDANCE

Details of the number of meetings held by the Board and its Committees during
financial year 2014, and attendance by Board members, are set out below:

Board Committees (1) a
b
Audit and Risk Nomination Remuneration a b a b a b C B
Livingstone................................................... 14 14 6 6 7 7 6 6
D I Thodey........................................................... 14 14 -
(6) - - - (6) G A
Cousins........................................................ 14 14 - - 7 7 6
6 R A Higgins......................................................... 14 14 6 6
- (6) - - C H Lim (2)
............................................................ 12 11 - - - (4) -
- J P Mullen........................................................... 14 14 -
- 7 7 6 6 N L Scheinkestel................................................. 14
14 6 6 - (6) - - M L
Seale............................................................ 14 14 6 6 -
(6) - - S M Vamos.......................................................... 14
14 - (1) 7 6 6 5 J D
Zeglis............................................................ 14 14 - (1) -
(6) - - Total number of meetings held during the year 14 6 7 6

Column a: number of meetings held while a member.
Column b: number of meetings attended.
(1) Committee meetings are open to all Directors to attend. Where a Director has
attended a meeting of a Committee of which he or she was not a member, this is
indicated by ( ).
(2) Appointed as non-executive Director effective 9 August 2013.

COMPANY SECRETARY

Damien Coleman B Ec, LLB (Hons), FCIS

Damien Coleman was appointed Company Secretary of Telstra Corporation Limited
effective 1 January 2012.

Mr Coleman joined Telstra in 1998 and has served in senior legal roles across
the company, including in Sensis, Mergers and Acquisitions and Telstra
Operations. Most recently, he was General Counsel, Finance and Administration,
Office of the Company Secretary and National Broadband Network (NBN). In that
role he was responsible for Telstra’s continuous disclosure compliance and all
legal aspects of the Annual Report preparation and Annual General Meeting, as
well as annual financial results announcements. Mr Coleman also played a key
role in the negotiation of the Definitive Agreements for Telstra’s participation
in the roll out of the NBN. Before joining Telstra, Mr Coleman was a senior
lawyer at a leading Australian law firm. He holds a Bachelor of Economics and a
Bachelor of Laws (Hons) from the Australian National University.

DIRECTORS’ AND OFFICERS’ INDEMNITY

Constitution

Telstra’s constitution provides for it to indemnify each officer, to the maximum
extent permitted by law, for any liability and legal costs incurred as an
officer of Telstra or a related body corporate. If one of Telstra’s officers or
employees is asked by Telstra to be a director or other officer of a company
which is not related to it, Telstra’s constitution provides for it to indemnify
the officer or employee for any liability he or she incurs. This indemnity
applies only if the liability was incurred in the officer’s or employee’s
capacity as an officer of that other company. This indemnity is to the maximum
extent permitted by law, as if that liability had been incurred in the capacity
as an officer of Telstra. Telstra’s constitution also allows it to indemnify
employees and outside officers in some circumstances. The terms "officer",
"employee" and "outside officer" are defined in Telstra’s constitution.

Deeds of indemnity in favour of directors, officers and employees

Telstra has also executed deeds of indemnity in favour of (amongst others):

* Directors of Telstra (including past Directors)
* secretaries and senior managers of Telstra, secretaries and senior managers
of Telstra’s wholly owned subsidiaries (other than Telstra Super Pty Ltd)
* directors, secretaries and senior managers of a related body corporate of
Telstra (other than a wholly owned subsidiary) while the director, secretary
or senior manager was also an employee of Telstra or a director or employee
of a wholly owned subsidiary of Telstra (other than Telstra Super Pty Ltd)
* the officers listed above (other than Telstra Directors) and certain
employees of Telstra or a related body corporate of Telstra who are appointed
as directors or secretaries of a company which is not a related body
corporate of Telstra, at the request of Telstra
* certain employees of non-wholly owned subsidiaries of Telstra who are
appointed as directors of such non-wholly owned subsidiaries at the request
of Telstra.

Each of these deeds provides an indemnity as permitted under Telstra’s
constitution and the Corporations Act 2001. The term “senior manager” is defined
in the Corporations Act 2001. The deeds in favour of Directors of Telstra also
give Directors certain rights of access to Telstra’s books and require it to
maintain insurance cover for the Directors.

Additionally, Telstra has executed an indemnity in favour of employees
(including officers other than Directors) in respect of certain liabilities
incurred in the formulation of, or entering into or carrying out, of a Telstra
Sale Scheme (as defined in the Telstra Corporation Act 1991 (Cth)). This
indemnity is provided as permitted under Telstra’s constitution and the
Corporations Act 2001. Although all Telstra Sale Schemes conducted by the
Commonwealth Government have been completed, the indemnity will remain in place
while it is possible for claims to arise under a Telstra Sale Scheme.

Telstra has also executed a deed of indemnity in favour of certain employees
(including certain officers) in respect of liabilities and legal costs that may
be incurred as part of the NBN transaction. The indemnity is to the maximum
extent permitted by law and is subject to the employee performing his or her
duties, such as acting in good faith and complying with all applicable laws.

Directors’ and officers’ insurance

Telstra maintains directors' and officers' insurance policies that, subject to
some exceptions, provide worldwide insurance cover to past, present and future
directors, secretaries and officers and certain employees of Telstra and its
subsidiaries. Telstra has paid the premiums for the policies. The directors' and
officers' insurance policies prohibit disclosure of the premiums payable under
the policies and the nature of the liabilities insured.

ENVIRONMENTAL REGULATION AND PERFORMANCE

Information on Telstra's environmental and sustainability performance is
included in the Sustainability section of this Annual Report and on the Telstra
website.

Telstra, as a minimum, seeks to be compliant with all applicable environmental
laws and regulatory permissions relevant to its operations. Where instances of
non-compliance may occur, Telstra has procedures requiring that internal
investigations are conducted to determine the cause of the non-compliance and to
ensure that any risk of recurrence is minimised. Telstra procedures further
require that the relevant governmental authorities are notified of any
environmental incidents (where applicable) in compliance with statutory
requirements.

Telstra has not been prosecuted for, or convicted of, any significant breaches
of environmental regulation during the financial year. During 2013, Telstra
received several prohibition and improvement notices from Comcare in relation to
issues arising from Telstra's management of asbestos after a number of incidents
involving subcontractors failing to meet Telstra's minimum standards. In
response, we implemented improvements to our asbestos management procedures,
including requiring all contractors to complete new training before they can
work on our network, the appointment of additional supervisors to monitor
worksites, and co-operating with Comcare in its investigation into the matter,
which investigation is now closed.

In Australia, Telstra is subject to the reporting requirements of both the
Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy
Reporting Act 2007.

The National Greenhouse and Energy Reporting Act 2007 requires Telstra to report
its annual Australian greenhouse gas emissions, energy consumption and energy
production. Telstra has implemented systems and processes for the collection and
reporting of data and has, in accordance with our obligations, reported to the
Clean Energy Regulator on an annual basis. The next report is due on 31 October
2014 and will again be supported with an independent assurance audit to a
reasonable assurance standard.

The Energy Efficiency Opportunities Act 2006 requires Telstra to assess its
energy usage in Australia, including the identification, investigation and
evaluation of energy-saving opportunities, and to report publicly the outcomes
of all implementation decisions. Telstra completed its first five year cycle in
2011, and has transitioned into the second five year cycle with the Assessment
and Reporting Schedule approved in June 2013. Telstra's 2013 Energy Efficiency
Opportunities Report was made available to the public in December 2013 and is
available on our website.

NON-AUDIT SERVICES

During financial year 2014, Telstra’s auditor, Ernst & Young (EY), has been
employed on assignments additional to its statutory audit duties. Details of the
amounts paid or payable to EY for audit and non-audit services provided during
the year are detailed in note 8 to the financial statements.

The Directors are satisfied that the provision of non-audit services during
financial year 2014 is consistent with the general standard of independence for
auditors imposed by the Corporations Act 2001 (the Act) and that the nature and
scope of each type of non-audit service provided did not compromise the auditor
independence requirements of the Act for the following reasons:

* all recurring audit engagements are approved by the Audit and Risk Committee
each year through the Audit and Risk Committee’s approval of the annual audit
plan
* additional audit and non-audit services up to $100,000 require approval from
the Chief Financial Officer
* additional audit and non-audit services between $100,000 and $250,000 require
approval from the Chairman of the Audit and Risk Committee and services
greater than $250,000 require approval from the Audit and Risk Committee
* where the nature or scope of an external engagement changes such that the
prior approval obtained is insufficient, subsequent approval from the Chief
Financial Officer must be obtained for the revised engagement as shown in the
table below. Where the change is not covered in the following table, approval
of the revised engagement must be obtained in accordance with the approval
levels described above.

Type of Service Type of Change Additional audit work related
to the half-year review and full
year audit Scope and / or fee variations Other audit services Scope increases of
up to 10 per
cent in total of the pre-approved
fee Other assurance services Scope increases of up to 10 per
cent in total of the pre-approved
fee

* all additional engagements approved as per the above points are reported to
the Audit and Risk Committee at the next meeting
* fees earned from non-audit work undertaken by EY are capped at 1.0 times the
total audit and audit related fees
* the provision of non-audit services by EY is monitored by the Audit and Risk
Committee via periodic reporting to the Audit and Risk Committee.

EY is specifically prohibited from performing any of the following services:

* bookkeeping services and other services related to preparing our accounting
records or financial statements
* financial information system design and implementation services
* operation or supervision of IT systems
* appraisal or valuation services, fairness opinions or contribution in kind
reports
* actuarial services
* internal audit services
* management or human resources functions, including the provision of advice
and benchmarking services in relation to executive remuneration
* temporary staff assignments
* broker or dealer, investment advisor or investment banking services
* legal services or expert services unrelated to the audit
* tax planning and strategy services
* receiver/liquidation services.

A copy of the auditor’s independence declaration is set out in the Auditor’s
Independence Declaration to the Directors of Telstra Corporation Limited and
forms part of this report.

REMUNERATION REPORT

This report sets out the remuneration arrangements for Directors and other Key
Management Personnel (KMP) of the Telstra Group for the year ended 30 June 2014
(FY14), and is prepared in accordance with section 300A of the Corporations Act
2001(Corporations Act). The information in this report has been audited as
required by section 308(3C) of the Corporations Act.

The report is presented in five sections:

Section What it covers 1. Remuneration Snapshot 1.1 Key points
Provides a summary of the remuneration outcomes for FY14. 1.2 Changes in FY14
Details the key remuneration changes in FY14. 1.3 Key Management Personnel
Lists the names and roles of the KMP whose remuneration details are
disclosed in this report. 1.4 Actual pay and benefits which crystallised in FY14
Lists the actual crystallised pay and benefits received by Senior
Executives in FY14. 1.5 Looking forward
Provides an overview of remuneration changes proposed for FY15.
2. Setting Senior Executive Remuneration 2.1
Remuneration policy, strategy and governance
Explains Telstra’s remuneration policy and strategy, and how the Board
and Remuneration Committee make decisions, including the use of
external consultants. 2.2 Remuneration components
Shows how executive remuneration is structured to support business
objectives and how it aligns with company performance, and explains
the FY14 Short Term Incentive (STI) Plan and Long Term Incentive (LTI)
grants made in FY14. 2.3 Policy and practice
Provides examples of how we implement our policy in practice,
explaining the executive remuneration mix as well as our shareholding,
trading and hedging policies. 3. Executive Remuneration Outcomes 3.1
Financial performance Provides a breakdown of our performance, share price,
and dividends over the past five years. 3.2 Short Term incentive outcomes
Details the STI outcomes, including payments as a percentage of the
maximum opportunity, achievement by key performance indicators
(KPI) and a comparison of payments to the previous year. 3.3
Long Term incentive outcomes Details the LTI
outcomes for plans with a performance test at 30 June 2014 3.4
Senior Executive contract details
Lists the key contract terms governing the employment of Senior
Executives (including termination entitlements where relevant).
4. Non-executive Director Remuneration 4.1 Remuneration structure
Provides details of the fee structure for Board and Committee roles. 4.2
Remuneration policy and strategy
Provides a summary of our approach to non-executive Director fees,
together with a summary of our shareholding guidelines for non-executive Directors.
4.3 Remuneration components
Describes how non-executive Directors can allocate their remuneration
between cash and superannuation components. 5. Remuneration Tables and
Glossary 5.1 – 5.8 Remuneration Tables Provides the remuneration disclosures
required by the Corporations Act and the relevant Australian Accounting
Standards. 5.9 Glossary Explains abbreviations and key terms used in the Report.

1. REMUNERATION SNAPSHOT

1.1 Key points

Telstra performed strongly again in FY14, delivering growth in financial results
and achieving a Total Shareholder Return (TSR) of approximately 15.2 per cent,
following two consecutive years with TSR growth of approximately 37%. These
results were underpinned by progress against our key strategic priorities,
including continued growth in customer numbers and improvements in customer
service and productivity, and serve to reinforce Telstra’s position as a leading
telecommunications and technology company.

Remuneration outcomes in FY14 were consistent with the company’s positive
performance against financial objectives and although we did not achieve the
customer advocacy targets we set, we still improved in a number of areas. The
governance of these outcomes remains a key focus of the Board and Remuneration
Committee, and we regularly review our policies to ensure that remuneration for
our executives continues to be aligned with company performance.

The structure and layout of this year’s report is similar to the FY13 report.

Highlights for the FY14 year include:

Total Shareholder Return of 15.2% Telstra’s share price continued to rise in
FY14, and with a full year dividend payment of 28.5c we delivered a total
shareholder return of 15.2 per cent over the financial year. Chief Executive
Officer (CEO)
Remuneration The CEO’s Fixed Remuneration (FR) was not increased during FY14 as
his Fixed Remuneration of $2,650,000 is close to the median of the ASX20 CEO
positions. Total reported remuneration for the CEO in Table 5.1 decreased from
$8.8m to $8.2m, primarily due to a lower STI outcome in FY14. Short Term
Incentive Outcomes The STI outcome for Senior Executives was an average of 53.6
per cent of the maximum opportunity based on the assessment of financial,
customer and individual performance. This outcome reflects Telstra’s strong
financial performance but also that we did not achieve our customer advocacy
targets. Long Term Incentive Outcomes For the FY12 LTI Plan, 78.15 per cent of
Performance Rights vested in the form of Restricted shares as a result of top
quartile performance in TSR relative to a peer group of global competitors and
above target performance on Free Cashflow Return On Investment (FCF ROI)
measured over the three year performance period. These shares are subject to a
further Restriction Period ending August 2015. Non-executive Director
Remuneration There was no increase in Board or Committee fees in FY14.

1.2 Changes during FY14

The overall structure and philosophy of Telstra’s approach to remuneration
remained consistent throughout FY14, however there were some changes to the
organisation structure and Senior Executive roles. We made some position title
changes during the year, a number of roles that were previously referred to as
Group Managing Directors (GMD) are now Group Executives (GE). We have also made
some adjustments to aspects of our remuneration framework and practices to
further align with company strategy and enhance remuneration governance. These
changes were:

Structural changes

GE Global Enterprise & Services (GES): Brendon Riley was appointed as GE on 28
October 2013 of a newly created business unit that operates a global,
industry-based services and solutions business to support the rapid growth in
key portfolio areas in the global market that is part of Telstra’s strategy.
This business unit incorporates Network Applications and Services (NAS), Telstra
Enterprise and Government (TEG) and Telstra Global (TG).

Chief Operations Officer (COO): Kate McKenzie was appointed as COO on 28 October
2013. The COO portfolio now includes the Chief Technology Office and innovation
portfolios to better integrate technology development and implementation.
Telstra Operations will lead Telstra’s ongoing technical excellence across fixed
and mobile networks. As a result of Ms McKenzie’s appointment, her fixed
remuneration was increased from $1,040,000 to $1,200,000 effective 1 March 2014
to reflect the increase in scope.

GE Telstra Retail: Gordon Ballantyne’s position of Chief Customer Officer (CCO)
changed to GE Telstra Retail effective 28 October 2013. His portfolio no longer
contains TEG but incorporates the Products, Marketing and Media portfolios.

Chief Financial Officer (CFO) and GE International: Andrew Penn’s portfolio was
expanded effective 7 May 2014 to assume responsibility for our International
operations to further support Telstra’s strategy for growth in Asia.

Sale of the Sensis advertising and directories business: following the
completion of the sale of our 70 per cent interest in the Sensis advertising and
directories business to Platinum Equity Group, the responsibilities of the GE
Telstra Media were significantly reduced and the role is no longer part of our
structure. Rick Ellis left Telstra on completion of the sale as the role became
redundant.

Remuneration Policy enhancements

Diversity and values: the Board reviewed Telstra’s remuneration philosophy and
principles to ensure they remained aligned to our strategy and our values. We
decided to include a principle that specifically highlights diversity and
acknowledges Telstra’s commitment to providing equitable and fair pay. Section
2.1 provides detail on Telstra’s Remuneration Policy, Strategy and Governance.

Clawback mechanisms: clawback provisions have been included in the terms for LTI
grants with effect from FY14 to provide the Board with discretion to clawback
Performance Rights or Restricted Shares if a clawback event occurs. These
mechanisms are now consistent with the STI Deferral Plan. The scenarios in which
the Board could consider applying a clawback mechanism have also been broadened
to include where the behaviour of a Senior Executive brings Telstra into
disrepute or may impact on Telstra’s long term financial strength.

LTI and STI Restricted Shares: grants are now structured so that the Restriction
Periods end on 30 June to better align with disclosure of executive remuneration
outcomes for the relevant performance periods.

CEO LTI allocation: we sought and obtained shareholder approval for David
Thodey’s FY14 LTI allocation at our 2013 AGM and intend to continue this
practice.

1.3 Key Management Personnel

KMP comprise the Directors of the company and Senior Executives. The term
“Senior Executives” refers to the CEO and those executives with authority and
responsibility for planning, directing and controlling the activities of the
Company and the Group, directly or indirectly. Our Senior Executive KMP group
has not changed from FY13, but during the year some of their respective
portfolios were reallocated as discussed in section 1.2.

The Senior Executives disclosed in this report are:

Name and Most Recent KMP title Prior positions held in FY14 David Thodey,
CEO -

Gordon Ballantyne
GE Telstra Retail
from 28 October 2013

CCO until 27 Oct 2013

Stuart Lee
GE Telstra Wholesale - Kate McKenzie
COO from 28 October 2013 GMD TIPM until 27 Oct 2013 Robert Nason
GE Business Support and
Improvement - Andrew Penn
CFO and from 7 May 2014, CFO and
GE International

Brendon Riley
GE Global Enterprise and Services
from 28 October 2013 COO until 27 Oct 2013 Rick Ellis
GE Telstra Media (to 31 March
2014) -

1.4 Actual pay and benefits which crystallised in FY14

The table in this section details actual pay and benefits for Senior Executives
who were employed as at 30 June 2014. This is a voluntary disclosure and we have
continued to include this table in our Remuneration Report. We believe it is
helpful to assist shareholders in understanding the cash and other benefits
actually received by Senior Executives (from the various components of their
remuneration) during FY14.

As a general principle, the Australian Accounting Standards require the value of
share based payments to be calculated at the time of grant and accrued over the
performance period and Restriction Period. This may not reflect what Senior
Executives actually receive or become entitled to during FY14.

Some of the figures in this table have not been prepared in accordance with the
Australian Accounting Standards. Those figures are indicated by an asterisk (*)
in the table header. They provide additional and different disclosures to Table
5.1 (which provides a breakdown of Senior Executive remuneration in accordance
with statutory obligations and the Australian Accounting Standards).

The amounts shown in this table include Fixed Remuneration, STI payable as cash
under the FY14 STI Plan, as well as any restricted STI or LTI that has been
earned as a result of performance in previous financial years but was subject to
a Restriction Period during FY14 ending June 2014 or August 2014.

We believe that including amounts in this table, even though they may not be
paid (or the relevant Restriction Period for equity may not end) until early
FY15, is an effective way of showing the link between executive remuneration
outcomes and the relevant performance year. It is also consistent with changes
we have made to the structure of STI Deferral and LTI plans from FY14 so that
the Restriction Period ends on 30 June to better align disclosure of executive
remuneration outcomes with the relevant performance periods.

Our sustained share price growth over the past three years has driven much of
the value in the table below. Telstra uses the volume weighted average share
price (VWAP) of Telstra shares for the five days following the annual results
announcements for calculating the number of Performance Rights and Restricted
Shares to be allocated. The VWAP value for the FY11 LTI Plan was $2.95 and the
Telstra share price as at 30 June 2014 was $5.21. This increase of 76.6 per cent
is reflected in the value of the equity that became unrestricted, demonstrating
the link between executive remuneration and shareholder returns.

Name Fixed
Remuneration
($) (1) Non-monetary
benefits ($)
(2) Short Term Incentive
payable as cash ($)
(3) Value of STI
Restricted Shares
that became
unrestricted ($)
(4) * $ Value of LTI that
became
unrestricted($)
(5) (6) (7) (8) * FY14 Total ($) * David Thodey 2,650,000 8,286 2,112,713
1,000,432 7,064,406 12,835,837 Gordon Ballantyne 1,324,795 57,754 1,005,413
490,756 4,579,548 7,458,266 Stuart Lee 1,029,918 12,452 930,150 305,230
1,621,289 3,899,039 Kate McKenzie 1,083,397 11,557 956,700 381,145 1,576,254
4,009,053 Robert Nason 1,072,438 17,544 804,330 407,495 1,531,219 3,833,026
Andrew Penn 1,437,397 6,480 1,156,013 372,442 251,383 3,223,715 Brendon Riley
1,337,397 8,172 754,059 498,930 - 2,598,558

(1) The sum of Salary and Fees and Superannuation as detailed in Table 5.1.

(2) Includes the value of personal home security services provided by Telstra,
provision of car parking and in the case of Gordon Ballantyne, return flight
benefits to the United Kingdom as per the terms of his service agreement.

(3) Amount relates to the cash component (75 per cent) of STI earned for FY14,
which will be paid in September 2014. The remaining 25 per cent will be provided
as Restricted Shares. The Restriction Period for half of the shares will end on
30 June 2015 and the other half on 30 June 2016.

(4) Amount relates to the value of STI earned in prior financial years which was
provided as Restricted Shares and the Restriction Period in respect of which
ends on 30 June 2014 (in relation to FY13 awards) or in August 2014 (in relation
to FY12 awards). These represent 50 per cent of the Restricted Shares relating
to the FY12 and FY13 performance periods respectively. Equity has been valued
based on the Telstra closing share price on 30 June 2014 of $5.21.

(5) Amount relates to Performance Rights with a final test date of 30 June 2013
which vested as Restricted Shares under the FY11 LTI Plan and the Restriction
Period in respect of which ends in August 2014. Equity has been valued based on
the Telstra closing share price on 30 June 2014 of $5.21. Table 5.1 displays the
value of Equity Settled Share-based Payments in accordance with the Australian
Accounting Standards.

(6) As disclosed in the 2013 Remuneration Report, the LTI cash value of
$4,579,548 for Gordon Ballantyne was for the FY11 LTI Plan where stretch levels
of FCF ROI and RTSR were achieved in FY13. Payment was made on 30 June 2014. Due
to Gordon Ballantyne’s original engagement on a fixed term contract, his maximum
opportunity for the FY11 LTI Plan included amounts representing the pro rata
value of the maximum opportunity under the FY12 and FY13 LTI Plans. He received
no Performance Rights under the FY12 and FY13 LTI Plans.

(7) The LTI value for Andrew Penn represents 48,250 shares vesting on 14
December 2013 from his total allocation of 96,500 Performance Shares. Equity has
been valued based on theTelstra closing share price on 30 June 2014 of $5.21.
Andrew Penn did not participate in the FY11 LTI Plan as he had not commenced at
Telstra at the date of allocation.

(8) Brendon Riley did not participate in the FY11 LTI Plan as he had not
commenced with Telstra at the date of allocation.

1.5 Looking forward

For FY15, no changes are anticipated in our approach to Senior Executive
remuneration. There will be no changes to the STI and LTI opportunities as a
percentage of Fixed Remuneration for the CEO and Senior Executives.

The Board also determined that there will be no Fixed Remuneration increase for
the CEO as he is appropriately positioned against the market and performance is
being rewarded through the STI and LTI plans.

2. SETTING SENIOR EXECUTIVE REMUNERATION

2.1 Remuneration policy, strategy and governance

Our remuneration policy is designed to:

* support the business strategy and reinforce our culture and values
* link financial rewards directly to employee contributions and company
performance
* provide market competitive remuneration to attract, motivate and retain
highly skilled employees
* achieve remuneration outcomes of internal consistency to ensure employees
performing at similar levels in similar roles are remunerated within a
broadly similar range
* ensure that all reward decisions are made free from bias and support
diversity within Telstra
* obtain outcomes that reflect commercially responsible pay decisions.

Our governance framework for determining Senior Executive remuneration includes
the aspects outlined below.

The Remuneration Committee

The Remuneration Committee monitors and advises the Board on remuneration
matters, and consists only of independent non-executive Directors. It assists
the Board in its responsibilities by monitoring and advising on Board, CEO and
Senior Executive remuneration, giving due consideration to the law and corporate
governance principles.

The Remuneration Committee also reviews and makes recommendations to the Board
on Telstra’s overall remuneration strategy, policies and practices, and monitors
the effectiveness of Telstra’s overall remuneration framework in achieving
Telstra’s remuneration strategy.

Annual remuneration review

The Remuneration Committee reviews CEO and Senior Executive remuneration
packages annually to ensure there is a balance between fixed and at risk pay,
and that they reflect both short and long-term performance objectives aligned to
Telstra’s strategy.

The Board reviews the CEO’s remuneration based on market practice, performance
against agreed measures and other relevant factors, while the CEO undertakes a
similar exercise in relation to Senior Executives. The results of the CEO's
annual review of Senior Executives performance and remuneration are reviewed and
subject to Board approval.

Incentive design and performance assessment

The Remuneration Committee oversees the process of setting robust performance
measures and targets that encourage strong Senior Executive performance and
ethical behaviour. STI and LTI performance measures are set at the beginning of
each year. If performance targets are achieved we pay 50 per cent of the total
maximum potential. The maximum level is only paid if there is significant over
achievement of annual targets. There will be no payment unless a threshold level
of performance is achieved. At the end of each financial year, the Board reviews
the company’s audited financial results and the results of the other
non-financial measures. The Board then assesses performance against each measure
to determine the percentage outcome of the STI and LTI plans. The Board
considers that it is best positioned to assess whether the applicable measures
have been met.

Each performance measure in the STI Plan, and over the longer term, LTI plan,
has been selected in the context of achieving our business strategy and
increasing shareholder value.

Engagement with consultants

External consultants are required to engage directly with the Remuneration
Committee Chairman as the first point of contact whenever market data for Senior
Executive positions is supplied to Telstra. To assess market competitiveness in
FY14, the Committee engaged Guerdon Associates for the provision of ASX20 market
data but did not require a remuneration recommendation. As a result, no
disclosures are required under the Corporations Act.

2.2 Remuneration components

Our remuneration structure (detailed below) is designed to support our
remuneration strategy and is consistent between the CEO and other Senior
Executives in the KMP group. Some tailoring may occur to take into account
unique circumstances of an individual role. Where this has occurred, we have
specifically disclosed it in this Report.

Attract, motivate and retain highly skilled people Reinforce values and cultural
priorities Reward achievement of financial and strategic objectives Align to
long term shareholder value creation FIXED

AT RISK

Fixed Remuneration Short Term Incentive Long Term Incentive CASH EQUITY
* Base salary plus superannuation.
* Set based on market and internal relativities, performance, qualifications
and experience.

* 75% of STI outcome paid in September after the financial year end.
* STI outcome based on Telstra's financial, customer and individual
performance.

* 25% of the STI outcome is deferred as Restricted Shares.
* Half of the shares are restricted for 1 year and the other half for 2 years.
* The shares are subject to clawback at the Board's discretion. The shares are
forfeited if employment ends unless for a Permitted Reason (STI).

* Performance Rights subject to performance conditions.
* 50% subject to RTSR.
* 50% subject to FCF ROI.
* Performance is measured over 3 years with an additional 1 year Restriction
Period.
* Performance Rights are subject to clawback at the Board's discretion and
lapse if employment ends unless for a Permitted Reason (LTI).

Base reward market competitive Encourages sustainable performance in the medium
to longer term and provides a retention element.

Section 2.2 provides a summary of the STI plan and LTI plan structures including
clawback provisions. Section 2.3 summarises the percentage mix of fixed and
at-risk components.

2.2.1 FY14 STI Plan

For FY14, all of our Senior Executives participated in the same STI Plan with
the exception of the GE Telstra Wholesale (for regulatory reasons as explained
below). The performance measures of this Plan were Free Cashflow, EBITDA, Total
Income, Net Promoter Score (NPS) and individual performance objectives. The
Board selected these performance measures as it believes they are a critical
link between achieving the outcomes of Telstra’s business strategy and
increasing shareholder value. In relation to these performance measures:

* the financial measures were set in accordance with our FY14 financial plan
and strategy
* the NPS supports the shift in Telstra’s strategy from the goal of delivering
outstanding customer satisfaction to creating customer advocates. An
explanation of the way in which NPS is calculated is included in section
3.2.2
* the individual performance objectives were set at the beginning of FY14 and
were based on each Senior Executive’s expected individual contribution to the
achievement of our strategy.

The performance measures of the STI plan operate independently of each other.
Each measure has a threshold, target and stretch level of performance. Where
threshold performance is not achieved, there is no payment for that component of
the incentive. Depending on the role they perform, each Senior Executive has a
maximum STI opportunity ranging from 150 per cent to 200 per cent of their Fixed
Remuneration where stretch targets are met.

A Senior Executive will earn an STI payment of 50 per cent of the maximum
opportunity if performance targets are achieved but not exceeded.

The FY14 STI Plan for the GE Telstra Wholesale must comply with the Structural
Separation Undertaking (SSU) as part of the NBN Transaction. This provides that
the GE Telstra Wholesale may only participate in incentive plans that reflect
solely the objectives and performance of the Wholesale business unit. As a
result, the performance measures applicable to his FY14 STI Plan were different.
The performance measures for the FY14 STI Plan applicable to the GE Telstra
Wholesale were Wholesale Total Income, Wholesale EBITDA, Wholesale NPS and
individual performance.

Details of the STI outcomes for Senior Executives for FY14 are provided in
section 3.2.

2.2.2 STI deferral

Twenty five per cent of Senior Executives’ actual STI payment is provided as
Restricted Shares. Half of the shares are restricted for one year and the other
half are restricted for two years.

During the Restriction Period, Senior Executives are entitled to earn dividends
on and vote on their Restricted Shares as all performance hurdles of the STI
Plan have been met. They are, however, restricted from dealing with the shares
during this period.

If a Senior Executive leaves Telstra for any reason, other than a Permitted
Reason (STI), before the end of the relevant Restriction Period, the Restricted
Shares are forfeited.

Restricted Shares may also be forfeited if a clawback event occurs during the
Restriction Period. A clawback event includes circumstances where a Senior
Executive has engaged in fraud, dishonesty or gross misconduct, or where the
financial results that led to the Restricted Shares being granted are
subsequently shown to be materially misstated, and also situations where the
behaviour of a Senior Executive brings Telstra into disrepute or may impact on
Telstra’s long term financial strength.

2.2.3 FY14 LTI Plan

Participation

All of our Senior Executives participated in the same FY14 LTI Plan, with the
exception of the GE Telstra Wholesale (as explained below).

Performance Rights form the basis of the reward under the LTI plan. Senior
Executives are not required to pay for the Performance Rights. However, for any
Performance Rights to vest as Restricted Shares, a minimum threshold performance
against the relevant measure must be satisfied.

The LTI plan has two separate performance measures, being Relative Total
Shareholder Return (RTSR) and Free Cashflow Return On Investment (FCF ROI).

Details of the Performance Rights granted to Senior Executives in relation to
the FY14 LTI Plan are provided in section 5.

Plan structure

Plan component Detail Performance Measure
Weighting 50% to RTSR
50% to FCF ROI Performance Period 1 July 2013 to
30 June 2016 RestrictionPeriod End Date 30 June 2017 Minimum Threshold for RTSR
Vesting 50th percentile of peer group RTSR Vesting Schedule
25% vests at 50th percentile,
straight-line vesting to 75th
percentile where 100% vests Minimum Threshold for FCF
ROI Vesting 15.10% FCF ROI Vesting Schedule 50% vests at target of 15.1%,
straight line vesting to stretch of
16.7% where 100% vests Retesting No

Relative Total Shareholder Return

RTSR measures the performance of an ordinary Telstra share (including the value
of any cash dividends and other shareholder benefits paid during the period)
relative to the other companies in the comparator group over the same period.

The Board believes that RTSR is an appropriate performance hurdle because it
links executive reward to Telstra’s share price performance relative to its
global peers.

The comparator group for the FY14 LTI Plan included the following large market
capitalisation telecommunication firms: AT&T Inc; Belgacom Group; Bell Canada
Enterprises Inc; BT Group plc; Deutsche Telekom AG; Orange SA; Koninklijke KPN
N.V.; KT Corporation; Nippon Telegraph & Telephone Corp; NTT DoCoMo Inc;
Portugal Telecom SGPS SA; Singapore Telecommunications Ltd; SK Telecom Co Ltd;
Sprint Nextel Corporation; Swisscom AG; Telekom Austria AG; Telecom Italia
Sp.A.; Telecom Corporation of New Zealand Ltd; Telefonica S.A.; Telenor ASA;
TeliaSonera AB; Verizon Communications Inc and Vodafone Group Plc.

The Board has discretion to change members of the comparator group under the LTI
plan terms.

No amendments were made to the comparator group in FY14.

Free Cashflow Return On Investment

FCF ROI as determined by the Board is calculated by dividing the average annual
Free Cashflow (less finance costs) over the three year performance period by
Telstra’s average investment over the same period.

The Board selected the FCF ROI measure as an absolute LTI target on the basis
that cash generation by the business is central to the creation of shareholder
value.

Vesting of Performance Rights as Restricted Shares

At the end of FY16, the Board will review Telstra’s audited financial results
for FCF ROI and RTSR to determine the percentage of Performance Rights that vest
as Restricted Shares under the FY14 LTI Plan.

Until the Performance Rights vest as Restricted Shares, a Senior Executive has
no legal or beneficial interest in Telstra shares, no entitlement to receive
dividends and no voting rights in relation to any securities granted under the
FY14 LTI Plan.

If a Senior Executive leaves Telstra for any reason other than a Permitted
Reason (LTI), any unvested Performance Rights lapse. If they leave Telstra for a
Permitted Reason (LTI), a pro rata number of Performance Rights will lapse based
on the proportion of time remaining until 30 June 2017. The pro rata portion
relating to the Senior Executive’s completed service may still vest as
Restricted Shares subject to achieving the performance measures of the FY14 LTI
Plan at the end of the applicable performance period. The Board has a discretion
to determine that any unvested Performance Rights do not lapse on cessation of
employment and continue to be eligible to vest in accordance with their terms.

In certain limited circumstances, such as a takeover event where 50 per cent or
more of all issued fully paid shares are acquired, the Board may exercise
discretion to vest Performance Rights that have not lapsed as Restricted Shares.

Any Restricted Shares that are allocated based on the vesting of Performance
Rights are subject to a Restriction Period expiring on 30 June 2017. If a Senior
Executive leaves Telstra for any reason other than a Permitted Reason (LTI)
before the end of the Restriction Period, the Restricted Shares are forfeited,
unless the Board exercises its discretion to determine otherwise.

The Performance Rights may lapse and Restricted Shares may be forfeited if a
clawback event occurs during the performance period or Restriction Period. A
clawback event includes circumstances where a Senior Executive has engaged in
fraud, dishonesty or gross misconduct, or where the financial results that led
to the equity being awarded are subsequently shown to be materially misstated
and also where the behaviour of a Senior Executive brings Telstra into disrepute
or may impact on Telstra’s long term financial strength.

The Restricted Shares are transferred to the Senior Executive on the first day
after the end of the Restriction Period that the Senior Executive is able to
deal in shares under Telstra’s Securities Trading Policy.

Group Executive Telstra Wholesale

Due to SSU requirements the GE Telstra Wholesale participated in a separate
equity plan in lieu of the FY13 LTI Plan for other Senior Executives.

In FY14, the GE Telstra Wholesale was allocated 133,595 Restricted Shares based
on performance against the FY13 STI measures. They are subject to a Restriction
Period that will end on 30 June 2016, during which time the GE Telstra Wholesale
is entitled to earn dividends on, and exercise votes attached to, the Restricted
Shares.

If the GE Telstra Wholesale leaves Telstra before the end of the three year
Restriction Period for any reason, other than a Permitted Reason (STI), the
Restricted Shares will be forfeited. If he leaves for a Permitted Reason (STI)
he will retain the Restricted Shares.

This Plan contains the same clawback provisions as the FY14 STI Deferral Plan
for other Senior Executives.

In lieu of participation in the Senior Executive FY14 LTI Plan the GE Telstra
Wholesale will be allocated Restricted Shares based on his performance against
his FY14 STI Plan measures, namely Wholesale Total Income, Wholesale EBITDA,
Wholesale NPS and individual performance. Clawback provisions relating to these
Restricted Shares will be aligned with the STI Deferral Plan for other Senior
Executives.

2.3 POLICY AND PRACTICE

2.3.1 Remuneration mix of senior executives

The graph below shows the FY14 remuneration mix for Senior Executives as at 30
June 2014. The variable components of STI (including any potential Restricted
Shares) and LTI are expressed at 50 per cent of the maximum opportunity which is
representative of the outcome if we achieve our target performance measures. The
variable components would only pay at maximum if targets are significantly
exceeded. The STI and LTI plans will only provide a reward to a Senior Executive
if the threshold performance measures of the relevant plans are met.

2.3.2 Plan variation guidelines

The Board may, in its absolute discretion, amend the terms of the STI and LTI
plan or the targets of the STI plan where an event occurs that means the targets
of the relevant plan are no longer appropriate. Situations where this discretion
can be applied include:

* material change of the strategic business plan
* material regulatory or legislative change
* significant out of plan business development such as acquisitions and
divestments.

In these circumstances the Board may also exercise its discretion in determining
the outcomes under the STI plan and LTI plan for similar reasons.

During FY14 no plan terms were amended, however the Board did exercise its
discretion in determining outcomes under each of the plans as outlined below.

2.3.3 NBN and remuneration

From FY13 the NBN Transaction was incorporated into Telstra’s established
corporate planning processes and Senior Executives continue to be accountable
for achieving planned outcomes, including NBN cash flows. The value of the NBN
Transaction to be received over the next 30 years is subject to a range of
dependencies and assumptions.

Performance measures for future STI and LTI plans will continue to be developed
using the most up to date forecasts for the financial impacts of the NBN
Transaction.

The Board may use its discretion as outlined in 2.3.2 if, due to external
factors, the NBN roll-out does not proceed according to NBN Co’s published
business plan at the time the measures are developed to avoid windfall gains and
losses. NBN adjustments made in determining the outcomes for the STI plan and
the LTI plan are outlined in 3.2.2 and 3.3 respectively.

2.3.4 Executive share ownership policy

The intent of Telstra’s Executive Share Ownership Policy is to align a
significant portion of executive remuneration to the creation of longer term
shareholder value. Under the policy, Senior Executives are required to hold
Telstra shares to the value of 100 per cent of their Fixed Remuneration by the
later of 30 June 2015, or within five years of first appointment to Senior
Executive level.

Any Restricted Shares held by Senior Executives are included in calculating
their shareholding for the purposes of this policy. Senior Executives must
obtain Board, or, in certain circumstances CEO or Chairman approval before they
sell shares if they have not yet met their share ownership requirements under
the policy.

Progress is monitored by the Board on an ongoing basis and Senior Executives are
tracking well against this requirement.

2.3.5 Restrictions and governance

All KMP must comply with Telstra’s Securities Trading Policy and shares can only
be traded during specified trading windows.

KMP are prohibited from using Telstra shares as collateral in any financial
transaction (including margin loan arrangements) or any stock lending
arrangement.

They are also prohibited from entering into arrangements which limit the
economic risk of their security holdings allocated under Telstra’s equity plans
prior to vesting or exercise of those securities or during the Restriction
Period. This ensures that KMP are not permitted to hedge against participation
in Telstra’s equity plans.

KMP are also required to confirm on an annual basis that they comply with these
policy restrictions, which enables Telstra to monitor and enforce our policy.

3. EXECUTIVE REMUNERATION OUTCOMES

The table in section 3.1 provides a summary of the key financial results for
Telstra over the past five financial years. The tables in sections 3.2 and 3.3
provide a summary of how those results have been reflected in the remuneration
outcomes for Senior Executives.

3.1 Financial performance

Details of Telstra’s performance, share price, and dividends over the past five
years are summarised in the table below:

Performance Measures

FY14
$m

FY13 (1)
$m FY12
$m FY11
$m FY10
$m Earnings Total Income 26,296 24,776 25,503 25,304 25,029 EBITDA 11,135 10,168
10,234 10,151 10,847 Net Profit(2) 4,275 3,739 3,405 3,231 3,883
Shareholder value Share price ($) (3) 5.21 4.77 3.69 2.89 3.25 Total dividends
paid per share (cents) 28.5 28 28 28 28

(1) For FY13 Total Income, EBITDA and Net Profit were restated due to the Sensis
divestiture (i.e. now we are reporting continuing operations only for FY13 and
FY14, Sensis is excluded from these amounts, refer to note 12 to the financial
statements). Also contributing to the EBITDA and Net Profit adjustments was a
change in the Australian Accounting Standards (AASB 119) which required
retrospective application, therefore FY13 expenses were restated which resulted
in the additional adjustments to EBITDA and Net Profit. Refer to note 12 to the
financial statements for further details.

(2) Net profit attributable to equity holders of the Telstra entity.

(3) Share prices are as at 30 June for the respective year. The closing share
price for FY09 was $3.39.

3.2 SHORT TERM INCENTIVE OUTCOMES

3.2.1 Average STI payment as a percentage of STI opportunity

The average STI payment for Senior Executives as a percentage of the maximum
potential payout is shown in the following table:

Performance year FY14 FY13 FY12 FY11 FY10 STI received as %
of maximum 53.6% 66.0% 65.6% 48.4% 22.7%

3.2.2 Overall FY14 STI Plan outcomes

At the end of FY14, the Board reviewed Telstra’s audited financial results and
the results of other performance measures. The Board has assessed performance
against each measure and determined the percentage of STI that was payable, of
which 25 per cent will be provided through Restricted Shares.

The Board determined the outcomes of the financial measures to ensure there were
no windfall gains or losses due to the timing of the NBN roll out, spectrum
purchases as well as acquisitions and divestments including CSL and the Sensis
advertising and directories business.

For the calculation of the NPS measure, NPS is based on asking Telstra’s
customers to rate their likelihood of recommending Telstra, out of a score of
10. The overall NPS result for Telstra is the weighted average of the surveys
from Telstra’s Consumer (50 per cent), Business (25 per cent), and Enterprise
and Government (25 per cent) customers. The surveys are undertaken by third
party research companies. The measurement period for the FY14 results is based
on the three month average across 1 April 2014 to 30 June 2014 for Consumer and
Business, and the six month consolidated result from 1 January 2014 to 30 June
2014 for Enterprise and Government. The final result was audited by Telstra’s
Group Internal Audit team.

For determining the Wholesale NPS measure that applies to the GE Telstra
Wholesale, its calculation is based on a survey of Wholesale customers only,
undertaken by a third party research company undertaken from 28 April 2014
through to 16 May 2014.

The Board believes the methods of calculating the financial and NPS outcomes are
appropriate and provided a rigorous assessment of Telstra’s performance.

Senior Executive STI (excluding Group Executive Telstra Wholesale)

Measure Outcome
(% of maximum) Total Income 100.0% EBITDA 98.3% Free Cashflow 100.0% NPS 0.0%

Group Executive Telstra Wholesale STI

Measure Outcome
(% of maximum) Wholesale Total Income 100.0% Wholesale EBITDA 100.0%
Wholesale NPS 75.0%

Section 3.2.3 provides a summary of STI payments as a percentage of the maximum
opportunity for each Senior Executive.

Definitions for the STI financial measures of Total Income, EBITDA and Free
Cashflow are provided in the Glossary at the end of the Remuneration Report.

3.2.3 FY14 STI Plan payment results

The table below displays FY14 STI payments as a percentage of Fixed Remuneration
and also as a percentage of the maximum opportunity for both FY14 and FY13 STI
plans for current Senior Executives:

Name FY14 %
of FR FY14 %
of max FY13 %
of max David Thodey 106.3% 53.2% 66.4% Gordon Ballantyne 99.3% 49.7% 63.9%
Stuart Lee 119.3% 79.5% 85.0% Kate McKenzie 106.3% 53.2% 63.9% Robert Nason
99.3% 49.7% 66.4% Andrew Penn 106.3% 53.2% 66.4% Brendon Riley 74.5% 37.2% 63.9%
KMP Average: 101.6% 53.6% 66.0%

The graph below shows how STI payments as a percentage of the maximum
opportunity have tracked closely to Total Revenue growth over four of the past
five years. Telstra’s incentive plans measure performance against a range of
financial and non-financial metrics with varied weightings. Accordingly, the pay
for performance relationship is based on the performance against these metrics
as a whole and may not always align with revenue growth, as is the case for
FY14,where the lower STI payment reflects that we did not achieve our customer
advocacy target.

3.3 LONG TERM INCENTIVE OUTCOMES

The performance period for the FY12 LTI Plan concluded on 30 June 2014.

The results of Telstra’s RTSR was calculated by an external provider and audited
by Telstra’s Group Internal Audit team. The RTSR vesting result was based on
Telstra ranking at the 95th percentile of the global peer group.

Consistent with prior years the Board determined the FCF ROI outcome to ensure
there are no windfall gains or losses due to the timing of the NBN roll out. The
Board also excluded spectrum purchases as well as acquisitions and divestments
including CSL, the Sensis advertising and directories business and TelstraClear.
The result was reviewed by Telstra’s Group Internal Audit team and our external
auditor Ernst & Young.

The Board has determined that the vesting outcomes are in accordance with the
results and the LTI plan rules. Vesting outcomes for both the RTSR and the FCF
ROI performance measures for the FY12 LTI Plan can be found in 3.3.1.

3.3.1 FY12 LTI Plan testing as at 30 June 2014

The vesting table for the FY12 LTI Plan is detailed below, reflecting
performance up to 30 June 2014 against the two performance measures of RTSR and
FCF ROI.

Test Date Performance measure % of total plan
vested 30 June 2014 Relative Total Shareholder
Return (100% vesting) 50.00% Free Cashflow ROI (56.3%
vesting) 28.15% Total: 78.15%

Upon vesting, each participant was allocated Restricted Shares which are subject
to a Restriction Period (concluding August 2015), during which Senior Executives
are not permitted to trade those shares.

3.3.2 Historical LTI plan performance relative to Telstra share price

The following chart compares Telstra’s LTI plan vesting results for the past
five LTI plans as a percentage of plan maximum opportunity to the share price
history during the same performance period:

In FY12 Telstra had two LTI plans with a final performance test as the FY09 LTI
was the last LTI plan format where performance testing was done in years 2, 3
and 4. This was different to the current format of a 3 year performance period
plus 1 year Restriction Period.

3.4 SENIOR EXECUTIVE CONTRACT DETAILS

The key terms and conditions of service contracts for current Senior Executives
are summarised in the table below.

The service contracts for current Senior Executives are ongoing subject to their
individual terms and conditions.

Upon notice being given, Telstra can require a Senior Executive to work through
the notice period or may terminate employment immediately by providing payment
in lieu of notice. Any termination payment is calculated based on the Senior
Executive’s Fixed Remuneration as at the date of termination.

There will be no payment if termination is a result of serious misconduct, or
redundancy in those cases where Telstra’s redundancy policy overrides the
termination provisions of a Senior Executive’s service contract.

Separation payments for Mr Rick Ellis are detailed in Table 5.1 and have been
paid in accordance with his employment contract and Part 2.D of the Corporations
Act 2001.

Name Fixed
Remuneration
at the end of
FY14 Notice
Period Termination
Payment David Thodey 2,650,000 6 months 12 months (1) Gordon Ballantyne
1,350,000 6 months 6 months Stuart Lee 1,040,000 6 months 12 months
Kate McKenzie 1,200,000 6 months 6 months Robert Nason 1,080,000 6 months
6 months Andrew Penn 1,450,000 6 months 6 months Brendon Riley 1,350,000
6 months 12 months

(1) In relation to David Thodey’s contract, if the Board forms the view that the
CEO is not performing to the standard required of a CEO, Telstra may terminate
him by providing four months’ written notice.

4. NON-EXECUTIVE DIRECTOR REMUNERATION

4.1 Remuneration structure

The Telstra Board and Committee fee structure (inclusive of superannuation)
during FY14 was:

Board fees Chairman Non-executive
Director Board 705,000 235,000 Committee fees Committee
Chair Committee
Member Audit and Risk Committee 70,000 35,000 Remuneration Committee 50,000
25,000 Nomination Committee - 7,000

The Chairman of the Board does not receive Committee fees in respect of her role
as a Chair or a member of any Board Committee.

There was no increase in Board or Committee fees in FY14.

Telstra’s non-executive Directors are remunerated in accordance with Telstra’s
Constitution, which provides for an aggregate fee pool which is set and varied
only by approval of a resolution of shareholders at the annual general meeting
(AGM). The current annual fee pool of $3.5 million was approved by shareholders
at Telstra’s 2012 AGM.

The total of Board and Committee fees, including superannuation, paid to
non-executive Directors in FY14 remained within the approved fee pool.

4.2 Remuneration policy and strategy

Telstra’s non-executive Directors are remunerated with set fees and do not
receive any performance based pay. This enables non-executive Directors to
maintain independence and impartiality when making decisions affecting the
future direction of the company.

To align the non-executive Directors’ interests with the interests of our
shareholders, the Board has established guidelines to encourage non-executive
Directors to hold Telstra shares equivalent to at least 50 per cent of their
annual fees. Such shares are to be acquired over a five year period from the
later of 1 July 2009 or the date of appointment.

Progress is monitored on an ongoing basis and non-executive Directors are
tracking well against the guidelines. Details of non-executive Directors’ (and
their related parties) interests in Telstra shares as at 30 June 2014 are set
out in Table 5.8 of this report.

4.3 Remuneration components

Superannuation contributions, in accordance with the ASX Listing Rules and
Telstra policy, are included within each non-executive Director’s Total
Remuneration. Non-executive Directors may choose to increase the proportion of
their remuneration taken as superannuation, subject to legislative requirements.

Telstra does not provide retirement benefits for non-executive Directors other
than the superannuation contributions noted above.

Table 5.7 provides full details of non-executive Director remuneration for FY14.

Section 2.3.5 of this Report provides details on the Telstra securities trading
restrictions which apply to all KMP, including non-executive Directors.

5. REMUNERATION TABLES AND GLOSSARY

5.1 Senior executives remuneration (main table)

This table below has been prepared in accordance with the requirements of the
Corporations Act and the relevant Australian Accounting Standards. The figures
provided under the equity settled share based payments columns are based on
accounting values and do not reflect actual payments received by Senior
Executives in FY14.

Short Term Employee Benefits Post-
Employment
Benefits Termination
Benefits Other Long Term
Benefits Equity Settled
Share-based Payments Name and title Year Salary and
fees
($) (1) Short term
incentives
(cash)
($) (2) Non-monetary
benefits
($) (3) Superannuation
($)(4) Termination
benefits
($) (5) Accrued
leave
benefits
($) Other
($) (6) Accounting value
(at risk) (7) Total
($) Short term
incentive
shares
($) (8) Other
equity
($) (9) David Thodey
Chief Executive
Officer 2014
2013 2,620,224
2,580,094 2,112,713
2,637,413 8,286
9,568 29,776
16,470 -
- 66,250
64,914 -
- 793,931
701,786 2,580,070
2,793,368 8,211,250
8,803,613 Gordon Ballantyne
GE Telstra Retail 2014
2013 1,287,051
1,213,562 1,005,413
1,197,188 57,754
80,585 37,744
36,438 -
- 33,120
31,250 4,579,548
- 377,843
346,094 323,575
- 7,702,048
2,905,117 Stuart Lee
GE Telstra
Wholesale 2014
2013 1,012,142
971,603 930,150
956,250 12,452
14,090 17,776
46,642 -
- 25,748
24,715 -
- 296,639
219,409 510,601
339,704 2,805,508
2,572,413 Kate McKenzie
Chief Operations
Officer 2014
2013 1,039,194
925,427 956,700
957,750 11,557
14,297 44,203
61,970 -
- 27,085
24,685 -
- 318,977
265,724 744,371
793,401 3,142,087
3,043,254 Robert Nason
GE Business Support
and Improvement 2014
2013 1,054,662
1,020,927 804,330
1,045,013 17,544
19,747 17,776
16,470 -
- 26,811
25,935 -
- 312,728
284,828 768,547
735,634 3,002,398
3,148,554 Andrew Penn
Chief Financial
Officer and GE
International 2014
2013 1,419,621
1,383,530 1,156,013
1,393,350 6,480
4,357 17,776
16,470 -
- 35,935
35,000 -
- 386,923
275,633 820,089
506,078 3,842,837
3,614,418 Brendon Riley
GE Global
Enterperise
and Services 2014
2013 1,319,621
1,270,927 754,059
1,245,075 8,172
9,882 17,776
16,470 -
- 33,435
32,185 -
- 347,501
347,537 796,861
755,721 3,277,425
3,677,797 Rick Ellisformer
GE Telstra Media 2014
2013 676,323
889,644 -
729,825 17,812
21,265 18,061
22,753 1,020,456
- 17,360
22,810 -
- 123,340
156,303 (340,245)
398,224 1,533,107
2,240,824 TOTAL CURRENT
AND FORMER KMP 2014
2013 10,428,838
10,255,714 7,719,378
10,161,864 140,057
173,791 200,888
233,683 1,020,456
- 265,744
261,494 4,579,548
- 2,957,882
2,597,314 6,203,869
6,322,130 33,516,660
30,005,990

Footnotes to Table 5.1:

If the former GE Telstra Media Rick Ellis is removed from both the FY13 and FY14
totals, the FY14 total is $31,983,553 compared to FY13 of $27,765,166, an
increase of 15.2 per cent compared to FY13. This increase is due to the cash LTI
payment for Gordon Ballantyne outlined in footnote (6).

(1) Includes salary, salary sacrifice benefits (excluding salary sacrifice
superannuation which is included under Superannuation) and fringe benefits tax.

(2) Short term incentives (cash) relates to performance in FY13 and FY14
respectively and is based on actual performance for Telstra and the individual.

(3) Includes the value of personal home security services provided by Telstra,
provision of car parking and in the case of Gordon Ballantyne, return flight
benefits to the United Kingdom as per the terms of his service agreement. Also
includes the value of non recourse loans under TESOP 99 (which have not been
expensed as they were issued prior to 7 November 2002 and were therefore
included in the exemption permitted under AASB 1 “First-time Adoption of
Australian Equivalence to International Financial Reporting Standards”).

(4) Represents company contributions to superannuation as well as any additional
superannuation contributions made through salary sacrifice by Senior Executives.

(5) Termination Benefits for Rick Ellis of $1,020,456 is comprised of $462,500
payment in lieu of notice as per his service agreement plus $451,518 pro rata at
target FY14 STI as per Telstra STI Policy and $106,438 redundancy payment.

(6) Gordon Ballantyne did not participate in any LTI for FY12 and FY13 due to
the fixed term nature (four years) of his initial employment contract. He
participated in a cash based LTI beginning 7 March 2011 (details of which are
included in Telstra’s 2011 Remuneration Report) and his maximum opportunity for
the FY11 LTI Plan included amounts representing the pro rata value of the
maximum opportunity under the FY12 and FY13 LTI Plans. The stretch levels of FCF
ROI and RTSR were achieved in FY13 and the stretch amount of $4,579,548 was paid
to Gordon Ballantyne on 30 June 2014.

(7) In accordance with AASB 2, the accounting value represents a portion of the
fair value of Performance Rights, Restricted Shares and Performance Shares that
had not yet fully vested as at the commencement of the financial year. This
value includes an assumption that Performance Rights, Restricted Shares and
Performance Shares will vest at the end of the vesting period. The amount
included as remuneration is not related to, nor indicative of the benefit (if
any) that may ultimately be realised by each Senior Executive should the
Performance Rights, Restricted Shares and Performance Shares vest. Refer to
footnote (9) and Table 5.4 for further information.

(8) This includes the amortised value of Restricted Shares allocated under the
FY11 (only applicable to FY13 comparatives), FY12, FY13 and FY14 STI plans
whereby 25 per cent of the STI payment was provided as Restricted Shares which
are subject to a Restriction Period, half for one year and half for two years,
subject to the Senior Executive’s continued employment.

(9) As required under AASB 2, accounting expense that was previously recognised
as remuneration has been reversed in FY14. For FY14, this occurred for a portion
of the FY12 LTI Plan that failed to satisfy the FCF ROI performance target at 30
June 2014, a non-market (i.e. non-RTSR) measure, resulting in equity instruments
lapsing. For Rick Ellis, accounting expense that was previously recognised as
remuneration has been reversed in FY14 for the FY14, FY13 and FY12 LTI Plans due
to his departure. There was no accounting expense that was reversed in FY13.
Refer to section 3.3 on LTI outcomes for FY14 for further information.

5.2 Payments (cash and shares)

Name Year Maximum
potential STI
opportunity ($)
(1) Current year grant of STI ($)
(2) % of the
maximum
potential
opportunity % forfeited Total grant of
STI ($) 75% cash
component 25% deferred
shares component
(3) (4) David Thodey 2014
2013 5,300,000
5,300,000 2,112,713
2,637,413 704,237
879,137 53.2%
66.4% 46.8%
33.6% 2,816,950
3,516,550 Gordon Ballantyne 2014
2013 2,700,000
2,500,000 1,005,413
1,197,188 335,137
399,062 49.7%
63.9% 50.3%
36.1% 1,340,550
1,596,250 Stuart Lee 2014
2013 1,560,000
1,500,000 930,150
956,250 310,050
318,750 79.5%
85.0% 20.5%
15.0% 1,240,200
1,275,000 Kate McKenzie 2014
2013 2,400,000
2,000,000 956,700
957,750 318,900
319,250 53.2%
63.9% 46.8%
36.1% 1,275,600
1,277,000 Robert Nason 2014
2013 2,160,000
2,100,000 804,330
1,045,013 268,110
348,337 49.7%
66.4% 50.3%
33.6% 1,072,440
1,393,350 Andrew Penn 2014
2013 2,900,000
2,800,000 1,156,013
1,393,350 385,337
464,450 53.2%
66.4% 46.8%
33.6% 1,541,350
1,857,800 Brendon Riley 2014
2013 2,700,000
2,600,000 754,059
1,245,075 251,354
415,025 37.2%
63.9% 62.8%
36.1% 1,005,413
1,660,100 Rick Ellis (5) 2014
2013 1,850,000
1,850,000 n/a
729,825 n/a
243,275 n/a
52.6% n/a
47.4% n/a
973,100

(1) Represents the maximum potential STI specific to FY14 and FY13 respectively,
where the Senior Executive was a KMP, adjusted for any variation in Fixed
Remuneration throughout FY14 and FY13 that impacts the maximum potential STI
available. If the minimum threshold performance is not met, the minimum possible
STI payment is nil.

(2) The STI for FY14 and FY13 was approved by the Board on 13 August 2014 and 7
August 2013 respectively.

(3) The grant date for the equity component of the FY14 STI will be subsequent
to the date of this Remuneration Report.

(4) The Restricted Shares are subject to a Restriction Period, half for one
year, half for two years ending 30 June 2015 and 30 June 2016 respectively,
subject to the Senior Executive’s continued employment. Refer to section 2.2.2
for further details.

(5) Rick Ellis did not receive an STI payment for FY14 due to his position
becoming redundant on 31 March 2014. Refer to footnote (5) to Table 5.1 for a
breakdown of his termination payment.

5.3 Summary of LTI plans and other equity plans as at 30 June 2014 (*)

Name Plan Type of
instrument
granted Performance period End date
(1) % of total
plan tested
at 30 June
2014 % of grant
expired in
current year (2) Future
financial
dates in
which
grants may
Vest Accounting value
yet to Vest (3) Min ($) Max ($) David Thodey FY11 Performance
Rights 1/07/2010 - 30/06/2013 20/08/14 n/a - n/a nil - FY12 Performance
Rights 1/07/2011 - 30/06/2014 19/08/15 100 21.85% 30/06/15 nil 711,183 FY13
Performance
Rights 1/07/2012 - 30/06/2015 17/08/16 n/a n/a 30/06/16 nil 1,884,908 FY14
Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 2,381,873 Gordon
Ballantyne FY14 Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 970,724 Stuart Lee
(4) FY11 Performance
Rights 1/07/2010 - 30/06/2013 20/08/14 100 - n/a nil - FY13 Restricted
Shares n/a 17/08/15 n/a n/a 17/08/15 nil 148,179 FY14 Restricted
Shares n/a 01/07/16 n/a n/a 01/07/16 nil 453,332 Kate McKenzie FY11 Performance
Rights 1/07/2010 - 30/06/2013 20/08/14 n/a - n/a nil - FY12 Performance
Rights 1/07/2011 - 30/06/2014 19/08/15 100 21.85% 30/06/15 nil 221,698 FY13
Performance
Rights 1/07/2012 - 30/06/2015 17/08/16 n/a n/a 30/06/16 nil 569,030 FY14
Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 747,820 Robert Nason
FY11 Performance
Rights 1/07/2010 - 30/06/2013 20/08/14 n/a - n/a nil - FY12 Performance
Rights 1/07/2011 - 30/06/2014 19/08/15 100 21.85% 30/06/15 nil 233,365 FY13
Performance
Rights 1/07/2012 - 30/06/2015 17/08/16 n/a n/a 30/06/16 nil 597,479 FY14
Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 776,579 Andrew Penn
(5) FY12 Performance
Shares 14/12/2011 - 14/12/2014 14/12/14 n/a n/a 14/12/14 nil 20,345 FY13
Performance
Rights 1/07/2012 - 30/06/2015 17/08/16 n/a n/a 30/06/16 nil 796,640 FY14
Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 1,042,633 Brendon
Riley FY12 Performance
Rights 1/07/2011 - 30/06/2014 19/08/15 100 21.85% 30/06/15 nil 291,707 FY13
Performance
Rights 1/07/2012 - 30/06/2015 17/08/16 n/a n/a 30/06/16 nil 739,738 FY14
Performance
Rights 1/07/2013 - 30/06/2016 30/06/17 n/a n/a 30/06/17 nil 970,724 Total nil
13,557,957

(1) End Date refers to end of the Restriction Period for Performance Rights and
Restricted Shares and the date that Performance Shares vest.

(2) Represents the percentage of the grant that expired as performance criteria
was not satisfied in the financial year. Not applicable (n/a) reates to LTI and
other equity plans that either will be performance tested in future financial
years or have met the relevant performance hurdles but are subject to a
Restriction Period.

(3) The values included in the table above have been calculated by applying
valuation methodologies as described in note 27 to the financial statements.

(4) The FY14 Restricted Shares grant to Stuart Lee was made in lieu of
participation in the FY13 LTI Plan. See section 2.2.3 for more information.

(5) As part of his Service Agreement negotiated upon appointment, Andrew Penn
was allocated 96,500 Performance Shares in FY12. The first tranche of 48,250
vested on 14 December 2013.
The second tranche is scheduled to vest on 14 December 2014 subject to Andrew
Penn’s continued employment and satisfactory performance.

(*) As Rick Ellis ceased to be a KMP as at 31 March 2014, he has been excluded
from the table above.

5.4 Accounting value of all LTI and other equity instruments

Accounting value of LTI equity allocations
(1) (2) Total Accounting value as a
% of total
remuneration (3) Name Year Performance
Rights ($) Performance
Shares ($) Restricted shares
($) ($) (%) David Thodey 2014
2013 2,580,070
2,793,368 -
- -
- 2,580,070
2,793,368 31.40%
31.70% Gordon Ballantyne 2014
2013 323,575
- -
- -
- 323,575
- 4.20%
- Stuart Lee 2014
2013 135,756
191,525 -
- 374,845
148,179 510,601
339,704 18.20%
13.20% Kate McKenzie 2014
2013 744,371
793,401 -
- -
- 744,371
793,401 23.70%
26.10% Robert Nason 2014
2013 768,547
735,634 -
- -
- 768,547
735,634 25.60%
23.40% Andrew Penn 2014
2013 745,864
398,320 74,225
107,758 -
- 820,089
506,078 21.30%
14.00% Brendon Riley 2014
2013 796,861
755,721 -
- -
- 796,861
755,721 24.30%
20.50% Rick Ellis 2014
2013 (340,245)
398,224 -
- -
- (340,245)
398,224 -22.20%
17.80%

(1) The value of each equity instrument is calculated by applying valuation
methodologies as described in note 27 to the financial statements and is then
amortised, based on the maximum achievable allocation, over the relevant vesting
period. The values included in the table relate to the current year amortised
value of all LTI instruments detailed in the Equity Settled share based payments
section in the remuneration Table 5.1.

(2) As required under AASB 2, accounting expense that was previously recognised
as remuneration has been reversed in FY14. For FY14, this occurred for a portion
of the FY12 LTI Plan that failed to satisfy the FCF ROI performance target at 30
June 2014, a non-market (i.e. non-RTSR) measure, resulting in equity instruments
lapsing. There was no accounting expense that was reversed in FY13. Refer to
section 3.3 on LTI outcomes for FY14 for further information.

(3) Total remuneration is the sum of short term employee benefits, post
employment benefits, termination benefits, other long term benefits and equity
settled share based payments as detailed in Table 5.1.

5.5 Number of equity instruments granted, vested and exercised during FY14 (LTI
and other equity)

Equity Movements Equity Outcomes Name Instrument Total held at
30 June 2013 (^) Granted during
FY14 (1) Vested /
Exercised during
FY14 (2) Other changes
(3) Total held at 30
June 2014 (^)(*) Achieved
performance
target during
FY14
(4) Achieved
performance
target as at
30 June 2014
(5) David Thodey Options 389,547 - (389,547) - - - - Performance Rights
5,040,128 1,041,256 (725,274) (342,574) 5,013,536 1,225,272 2,581,204 Gordon
Ballantyne Performance Rights - 424,360 - - 424,360 - - Stuart Lee Options
81,555 - (81,555) - - - - Performance Rights 438,111 - (126,923) - 311,188 -
311,188 Restricted Shares 116,371 133,595 - 249,966 - - TESOP99 400 - - -
400 - - Kate McKenzie Options 148,720 - (148,720) - - - - Performance Rights
1,401,623 326,916 (190,385) (106,791) 1,431,363 381,955 684,499 Robert Nason
Performance Rights 1,341,785 339,488 (92,473) (112,411) 1,476,389 402,057
695,957 Andrew Penn Performance Rights 587,926 455,796 - - 1,043,722 - -
Performance Shares (6) 96,500 - (48,250) - 48,250 - - Brendon Riley
Performance Rights 1,189,018 424,360 - (140,514) 1,472,864 502,572 502,572
Rick Ellis Performance Rights 613,532 290,766 - (783,367) 120,931 120,931
120,931

In the table above, vest has the meaning defined in the Australian Accounting
Standards. A Performance Right vests when it has been performance tested and the
resultant Restricted Share has been released from restriction and provided to
the executive. Table 5.8 includes details of such Restricted Shares allocated
during FY14.

All service and performance conditions for each of the options or rights granted
in previous financial years and that have vested or been exercised in FY14 are
summarised in the Remuneration Report for each relevant year of grant. Each
equity instrument granted, vested or exercised in FY14 (where applicable) in the
table above was issued by Telstra and resulted or will result in one ordinary
Telstra share per equity instrument granted, vested or exercised.

(1) Performance Rights granted on 16 October 2013 relate to the FY14 LTI Plan.
The FY14 Restricted Shares grant to Stuart Lee on 15 August 2013 was made in
lieu of participation in the FY13 LTI Plan. See section 2.2.3 for more
information.

(2) Relates to options exercised during the year or Performance Rights coming
out of restriction or Performance Shares being provided as shares. Options
exercised during FY14 relate to the FY09 LTI Plan. Performance Rights vested
during FY14 relate to the FY10 LTI Plan. Performance Shares vested in FY14 are
the first tranche of the Performance Shares allocated in FY12 for Andrew Penn,
see footnote (5) in Table 5.3. For more information on our KMPs’ interests in
Telstra Shares refer to Table 5.8.

(3) Relates to Performance Rights lapsing or being forfeited due to the
specified performance hurdles not being achieved or KMP departing during the
year.

(4) Relates to instruments that have been performance tested for the performance
period ending on 30 June 2014 and met the specified performance hurdles.
Performance Rights in this column relate to the FY12 LTI Plan and will be
provided as Restricted Shares early in FY15.

(5) Relates to instruments that have met the specified performance hurdles as at
30 June 2014. Performance Rights in this column include the FY12 LTI Plan that
was performance tested at the end of FY14 as well as the FY11 LTI Plan that was
performance tested at the end of FY13 and have been provided as Restricted
Shares during FY14. The FY12 LTI Plan will be provided as Restricted Shares in
the next financial year. For more information on our KMPs’ interests in Telstra
Shares refer to Table 5.8.

(^) There are no Performance Rights or options held indirectly or beneficially
by our KMP or their related parties.

(*) As at 30 June 2014, there were no options or Performance Rights vested,
vested and exercisable or vested and unexercisable.

5.6 Value of LTI and other equity instruments granted, exercised and
expired/forfeited in FY14

Granted during period ($)
(1) (2) Vested/Exercised ($)
(3) Expired/Forfeited
($) (4) Name Performance
rights Restricted
shares Performance
rights Options Performance
shares Performance
rights David Thodey 3,175,831 - 3,568,348 296,056 - 1,658,202 Gordon Ballantyne
1,294,298 - - - - - Stuart Lee - 679,999 624,461 66,875 - - Kate McKenzie
997,094 - 936,694 135,335 - 516,910 Robert Nason 1,035,438 - 454,967 - - 544,117
Andrew Penn 1,390,178 - - - 239,803 - Brendon Riley 1,294,298 - - - - 680,145
Rick Ellis 886,836 - - - - 3,582,761

(1) The grant date of the FY14 LTI Plan was 16 October 2013. The fair value of
the RTSR and FCF ROI Performance Rights granted in FY14 at the grant date is
$1.97 and $4.13 respectively. The fair value reflects the valuation approach
required by AASB 2 using an option pricing model, as explained in note 27 to the
financial statements.

(2) The FY14 Restricted Share grant to Stuart Lee was made in lieu of
participation in the FY13 LTI Plan. See section 2.2.3 for more information. The
fair value of Restricted Shares granted on 15 August 2013 was $5.09 and is based
on the market value of Telstra shares on allocation.

(3) The value of the equity instruments exercised reflects the market value at
the date of exercise after deducting any exercise price paid. The exercise price
for options exercised was $4.36 for the FY09 LTI Plan.

(4) The value of equity instruments that have lapsed during the year represents
the value foregone and is calculated at the date the equity instruments lapsed
using valuation methodologies as described in note 27 to the financial
statements.

5.7 Non-executive Director remuneration

Short Term Employee Benefits Post-Employment Benefits Name Year Salary and
Fees ($) (1) Non-monetary
benefits ($) (2) Superannuation ($) Total ($) Catherine B Livingstone
Chairman 2014
2013 687,225
688,530 4,425
5,952 17,775
16,470 709,425
710,952 Geoffrey A Cousins (3)
Director 2014
2013 267,000
250,530 -
- 4,444
16,470 271,444
267,000 Russell A Higgins
Director 2014
2013 252,225
253,530 -
388 17,775
16,470 270,000
270,388 Chin Hu Lim (4) (7)
Director 2014
2013 199,033
- -
- 5,701
- 204,734
- John P Mullen
Director 2014
2013 274,225
275,530 -
1,013 17,775
16,470 292,000
293,013 Nora L Scheinkestel
Director 2014
2013 287,225
288,530 -
- 17,775
16,470 305,000
305,000 Margaret L Seale
Director 2014
2013 252,225
243,366 -
- 17,775
16,470 270,000
259,836 Steven M Vamos (5)
Director 2014
2013 249,225
251,153 -
1,902 17,775
19,491 267,000
272,546 John D Zeglis (7)
Director 2014
2013 230,672
225,204 -
1,590 4,328
16,470 235,000
243,264 Total (6) 2014
2013 2,699,055
2,476,373 4,425
10,845 121,123
134,781 2,824,603
2,621,999

(1) Includes fees for membership on Board Committees.

(2) For FY14, Telstra has applied the exemption for transactions with KMP that
are not remuneration and are trivial or domestic in nature (Corporations
Regulation 2M.3.03 (3B)) such as Foxtel or the provision of phones or computers.
The non monetary value of $4,425 for FY14 is the value of a car parking benefit.

(3) Due to an administrative error, we made insufficient superannuation
contributions for Geoffrey Cousins of $13,331. Salary and fees were overpaid by
$4,444 in FY14. The amounts actually paid are included in the table above. The
overpayment and the under contribution of superannuation will be rectified in
FY15.

(4) Chin Hu Lim was appointed as a non-executive Director on 9 August 2013 and
the amount included in the table above is for the period 9 August 2013 to 30
June 2014. Due to an administrative error, excess superannuation contributions
of $2,274 were made. The amounts actually paid are included in the table above,
The excess contribution will be rectified in FY15.

(5) In the 2013 Remuneration Report, Steven Vamos’ Superannuation Component was
overstated by $7,898 and his Salary and Fees was understated by the same amount.
However the overall total of $272,546 as disclosed in the 2013 Remuneration
Report is correct. These amounts have been restated in the table above.

(6) In the 2013 Remuneration Report the Total Remuneration for non-executive
Directors was $2,775,713. The above table show a 2013 total of $2,621,999. The
difference is represented by $71,753 for Timothy Y Chen and $81,961 for John W
Stocker who were not KMP for any part of FY14.

(7) As Chin Hu Lim and John Zeglis are overseas residents, their superannuation
contributions for FY14 are less than the contributions for Australian resident
non-executive Directors.

5.8 KMP interests in shares of the Telstra entity

Total shares held at
30 June 2013
(1) Equity instruments vested/
exercised STI Restricted shares granted (3) LTI Restricted shares received
during FY14 (3) Net shares
acquired or
disposed of
and other
changes (4) Total shares held at
30 June 2014
(1) Shares held
nominally at
30 June 2014
(5) Non-Executive Directors Catherine B Livingstone 175,816 - - - 10,000 185,816
181,922 Geoffrey A Cousins 81,765 - - - 20,000 101,765 21,765 Russell A Higgins
88,404 - - - - 88,404 83,084 Chin Hu Lim - - - - - - - John P Mullen 26,159 - -
- - 26,159 26,159 Nora L Scheinkestel 87,297 - - - (13,182) 74,115 74,115
Margaret L Seale 235,755 - - - 4,886 240,641 240,641 Steven M Vamos 40,000 - - -
- 40,000 40,000 John D Zeglis 103,993 - - - - 103,993 37,493 Total 839,189 - - -
21,704 860,893 705,179 Senior Executives David Thodey (*) 1,735,326
389,547 172,718 1,355,932 (334,520) 3,319,003 3,319,003 Gordon Ballantyne
196,558 - 78,400 - - 274,958 133,395 Stuart Lee (*) 563,276 81,555 62,622
444,783 (69,375) 1,082,861 746,118 Kate McKenzie (*) 441,676 148,720 62,720
302,544 (148,720) 806,940 407,061 Robert Nason (*) 259,251 - 68,436 293,900 -
621,587 431,332 Andrew Penn 138,909 48,250 91,248 - - 278,407 175,910 Brendon
Riley 293,407 - 81,537 - - 374,944 296,602 Rick Ellis (4) 56,607 - 47,794 - -
104,401 73,098 Total 3,685,010 668,072 665,475 2,397,159 (552,615) 6,863,101
5,582,519 4,524,199 668,072 665,475 2,397,159 (530,911) 7,723,994
6,287,698

Each equity instrument exercised or granted in FY14 (where applicable) in the
table above, was issued by Telstra and resulted or will result in one ordinary
Telstra share per equity instrument exercised or granted.

(1) Total shareholdings include shares held by our KMP and their related
parties. Unless related to our employee share plans, shares acquired or disposed
by our KMP during FY14 were on an arm’s length basis at market price.

(2) STI Restricted Shares granted during FY14 relate to the FY13 STI Plan which
were allocated on 1 July 2013. However, the allocation of Restricted Shares
under the FY14 STI Plan will be made subsequent to the reporting date of 30 June
2014, therefore they have not been included in the table above.

(3) This column relates to those equity instruments that have been performance
tested last financial year and have been provided as Restricted Shares during
this financial year. For FY14, this relates to the FY11 LTI Plan.

(4) For Nora Scheinkestel, refers to a shareholding in which she has no
beneficial interest and which no longer meets the requisite criteria for a
related party shareholding. For all others, refers to shares acquired or
disposed of by other means.

(5) Nominally refers to shares held either indirectly or beneficially, including
(for non-executive Directors) those aquired under Directshare, as well as (for
Senior Executives) certain Restricted Shares. These shares are subject to a
Restriction Period, such that the non-executive Director or Senior Executive is
restricted from dealing with the shares until the Restriction Period ends. Refer
to note 27 to the financial statements for further details.

(6) For Rick Ellis who left Telstra during the year, the quantity represents
shares held as at the date of cessation as aKMP.

(*) The opening balance has been adjusted to include those instruments that were
performance tested and became Restricted Shares during prior periods, due to
regulatory changes and a change in the way we have treated these instruments for
disclosure purposes. An additional adjustment was also made to Stuart Lee’s
opening balance due to a restatement of a related party’s opening balance.

5.9 Glossary

Average Investment for LTI Average investment over the period is the average of
the sum of net debt and shareholders’ funds over the entire three year
performance period EBITDA Earnings Before Interest, Tax, Depreciation and
Amortisation EBITDA for STI Earnings Before Interest, Tax, Depreciation and
Amortisation (excluding profit/loss on Land & Building
disposals) FCF for LTI FCF for these purposes is annual Free Cashflow less
interest paid and adjusting for non-recurring factors such as spectrum
purchases, acquisitions and gains on the sale of assets FCF ROI for LTI A ratio
of the average annual Free Cashflow over the entire three year performance
period by Telstra’s
average investment over the same period FCF for STI Free Cashflow (excluding
CAPEX for Investment and Spectrum; and proceeds from Land & Building
disposals) Fixed Remuneration Base salary plus company and private salary
sacrificed superannuation contributions. Specifically
defined as Total Fixed Remuneration in the CEO’s contract Free Cashflow (FCF)
Cashflow from operating and investing activities GE Group Executive GMD Group
Managing Director KMP Key Management Personnel LTI Long Term Incentive NBN
National Broadband Network NBN Transaction Agreements with NBN Co and the
Government in relation to Telstra’s participation in the rollout of the NBN NPS
Net Promoter Score. A non financial measure in Telstra’s STI Plan. Refer to
section 2.2.1 for further information Performance Right A right to a Restricted
Share at the end of a performance period, subject to the satisfaction of certain
performance measures Permitted Reason (LTI) Death, total and permanent
disablement, redundancy, separation by mutual agreement or retirement
where notice of retirement is given six months after the actual date of
allocation. Permitted Reason (STI) Death, total and permanent disablement or
redundancy or retirement or fixed-term contract expiry where that notice of
retirement is given, or fixed term contract expiry occurs, more than six months
after the actual allocation date Performance Share A right to a Telstra share at
the end of a performance period, subject to the satisfaction of certain
performance measures Restricted Share A Telstra share that is subject to a
Restriction Period Restriction Period A period during which a Telstra share is
subject to a service condition and cannot be traded. Once the Restriction Period
ends, the shares are still subject to the Telstra Securities Trading Policy.
RTSR Relative Total Shareholder Return Senior Executive Refers to the Chief
Executive Officer and those executives with authority and responsibility for
planning, directing and controlling the activities of the company and Group,
directly or indirectly Service Agreement A Senior Executive’s contract of
employment SSU Structural Separation Undertaking STI Short Term Incentive STI
Deferral Plan A plan under which Senior Executives are provided with a
percentage of their actual STI payment in the form of Restricted Shares
Straight-line Vesting Describes the vesting calculation between target and
stretch of an LTI plan, where the payout between two levels is based on equal
increments determined by performance Total Income Total Telstra Income excluding
profit/loss on Land & Building disposals Total Remuneration The sum of all the
fixed and variable components of remuneration as detailed in Table 5.1 for
Senior Executives, and all the remuneration components as detailed in Table 5.7
for non-executive Directors

Rounding of amounts

The Telstra Entity is a company of the kind referred to in the Australian
Securities and Investments Commission Class Order 98/100, dated 10 July 1998 and
issued pursuant to section 341(1) of the Corporations Act 2001. As a result,
amounts in this Directors’ Report and the accompanying financial report have
been rounded to the nearest million dollars ($m), except where otherwise
indicated.

This report is made on 14 August 2014 in accordance with a resolution of the
Directors.

Catherine B Livingstone AO
Chairman
14 August 2014

David I Thodey
Chief Executive Officer and Executive Director
14 August 2014

Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au

Auditor’s Independence Declaration to the Directors of Telstra Corporation
Limited

In relation to our audit of the financial report of Telstra Corporation Limited
for the financial year ended 30 June 2014, to the best of my knowledge and
belief, there have been no contraventions of the auditor independence
requirements of the Corporations Act 2001 or any applicable code of professional
conduct.

Ernst & Young

SJ Ferguson
Partner
Sydney
14 August 2014

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

FINANCIAL REPORT

INCOME STATEMENT

for the year ended 30 June 2014

Telstra Group Year ended 30 June Restated 2014 2013 Note $m
$m Continuing operations Income Revenue (excluding
finance income) 6 25,320 24,474 Other income 6 976 302 26,296 24,776
Expenses Labour 4,732 4,527 Goods and services purchased 6,465 6,247
Other expenses 7 3,988 3,833 15,185 14,607 Share of net
profit/(loss) from joint ventures and associated entities 26 24 (1) 15,161
14,608 Earnings before interest, income tax expense, depreciation and
amortisation (EBITDA) 11,135 10,168 Depreciation and amortisation 7 3,950
4,078 Earnings before interest and income tax expense (EBIT) 7,185 6,090
Finance income 6 156 219 Finance costs 7 1,113 1,152 Net finance costs 957
933 Profit before income tax expense 6,228 5,157 Income tax
expense 9 1,679 1,517 Profit for the year from continuing operations
4,549 3,640 Discontinued operation (Loss)/profit for the year from
discontinued operation 12 (204) 151 Profit for the year from continuing
and discontinued operations 4,345 3,791 Attributable to Equity
holders of Telstra Entity 4,275 3,739 Non-controlling interests 70 52
4,345 3,791 Earnings per share from continuing operations (cents per
share) cents cents Basic 3 36.1 28.9 Diluted 3 36.0 28.8 Earnings per
share (cents per share) Basic 3 34.4 30.1 Diluted 3 34.3 30.0

The notes following the financial statements form part of the financial report.

STATEMENT OF
COMPREHENSIVE INCOME

for the year ended 30 June 2014

Telstra Group Year ended 30 June Restated 2014 2013 Note $m
$m Profit for the year from continuing and discontinued operations
Attributable to equity holders of Telstra Entity 4,275 3,739 Attributable to
non-controlling interests 70 52 4,345 3,791 Items that will not be
reclassified to the income statement Retained profits: - actuarial
gain on defined benefit plans attributable to equity holders of Telstra Entity
24 116 782 - income tax on actuarial gain on defined benefit plans (34) (234)
- actuarial gain on defined benefit plans attributable to non-controlling
interests 24 1 2 Foreign currency translation reserve: - translation
differences of foreign operations attributable to non-controlling interests
(4) 23 79 573 Items that may be subsequently reclassified to the income
statement Foreign currency translation reserve: - translation
differences of foreign operations attributable to equity holders of Telstra
Entity 39 101 - income tax on movements in the foreign currency translation
reserve (13) 21 - translation differences transferred to the income statement
on disposal of controlled entities 239 112 - income tax on translation
differences transferred to the income statement on disposal of controlled
entities 48 18 - translation differences transferred to the income statement
for controlled entities deregistered or in liquidation 100 - Cash flow hedging
reserve: - changes in fair value of cash flow hedges (116) 365 - changes
in fair value transferred to other expenses (140) (617) - changes in fair
value transferred to goods and services purchased (17) 12 - changes in fair
value transferred to finance costs 228 236 - income tax on movements in the
cash flow hedging reserve 15 (1) 383 247 Total other comprehensive
income 462 820 Total comprehensive income for the year 4,807 4,611
Total comprehensive income attributable to equity holders of Telstra Entity
4,740 4,534 Total comprehensive income attributable to non-controlling interests
67 77

The notes following the financial statements form part of the financial report.

STATEMENT OF
FINANCIAL POSITION

As at 30 June 2014

Telstra Group As at 30 June 2014 2013 Note $m $m Current
assets Cash and cash equivalents 20 5,527 2,479 Trade and other
receivables 10 4,172 4,557 Inventories 11 362 431 Derivative financial assets
17(f) 23 43 Current tax receivables 2 79 Prepayments 329 314 Assets
classified as held for sale 12 23 - Total current assets 10,438 7,903 Non
current assets Trade and other receivables 10 973 943 Inventories 11 29 27
Investments - accounted for using the equity method 26 196 18 Investments -
other 127 38 Property, plant and equipment 13 19,842 20,326 Intangible assets
14 6,382 8,202 Derivative financial assets 17(f) 1,322 1,062 Deferred tax assets
9 7 5 Defined benefit asset 24 44 3 Total non current assets 28,922 30,624
Total assets 39,360 38,527 Current liabilities Trade and other
payables 15 3,834 4,241 Provisions 16 932 918 Borrowings 17(a) 2,277 751
Derivative financial liabilities 17(f) 400 44 Current tax payables 296 444
Revenue received in advance 926 1,124 Liabilities classified as held for sale
12 19 - Total current liabilities 8,684 7,522 Non current liabilities
Other payables 15 66 163 Provisions 16 261 276 Borrowings 17(a) 13,547 14,313
Derivative financial liabilities 17(f) 1,169 1,625 Deferred tax liabilities 9
1,286 1,330 Defined benefit liability 24 - 42 Revenue received in advance 387
381 Total non current liabilities 16,716 18,130 Total liabilities 25,400
25,652 Net assets 13,960 12,875 Equity Share capital 19 5,719
5,711 Reserves (228) (619) Retained profits 8,331 7,519 Equity available to
Telstra Entity shareholders 13,822 12,611 Non-controlling interests 138 264
Total equity 13,960 12,875

The notes following the financial statements form part of the financial report.

STATEMENT OF
CASH FLOWS

for the year ended 30 June 2014

Telstra Group Year ended 30 June 2014 2013 Note $m $m Cash
flows from operating activities Receipts from customers (inclusive of
goods and services tax (GST)) 28,950 28,585 Payments to suppliers and to
employees (inclusive of GST) (18,710) (18,803) Government grants received
147 77 Net cash generated by operations 10,387 9,859 Income taxes paid
(1,774) (1,500) Net cash provided by operating activities 20(a) 8,613 8,359
Cash flows from investing activities Payments for: - property,
plant and equipment (2,868) (2,818) - intangible assets (894) (1,691)
Capital expenditure (before investments) (3,762) (4,509) - shares in
controlled entities (net of cash acquired) 20(c) (165) (9) - payments for joint
ventures and associated entities 26(f) (3) (8) - payments for other investments
(88) (19) Total capital expenditure (including investments) (4,018) (4,545)
Proceeds from: - sale of property, plant and equipment 94 57 - sale of
intangible assets - 12 - sale of shares in controlled entities (net of cash
disposed) 20(d) 2,397 693 - sale of businesses (net of cash disposed) - 4
Proceeds from finance lease principal amounts 98 64 Loans to joint ventures
and associated entities - (1) Interest received 150 236 Settlement of hedges
in net investments (21) (11) Investments in financial instruments 4 -
Dividends received 1 1 Distributions received from Foxtel Partnership 6 165
155 Net cash used in investing activities (1,130) (3,335) Operating cash flows
less investing cash flows 7,483 5,024 Cash flows from financing
activities Proceeds from borrowings 1,572 2,074 Repayment of borrowings
(1,387) (4,042) Repayment of finance lease principal amounts (91) (97)
Proceeds from sale and finance lease back transactions - 52 Staff repayments
of share loans 3 4 Purchase of shares for employee share plans (61) -
Proceeds received from exercise of equity instruments 29 29 Finance costs paid
(947) (1,037) Issue of equity by controlled entities 20(c) 160 - Payment for
share buy-back of non-controlling interests 20(c) (149) (1) Proceeds from sale
of controlled entity shares on behalf of non-controlling interests 8 -
Dividends paid to equity holders of Telstra Entity 4 (3,545) (3,480) Dividends
paid to non-controlling interests (22) (28) Net cash used in financing
activities (4,430) (6,526) Net increase/(decrease) in cash and cash
equivalents 3,053 (1,502) Cash and cash equivalents at the beginning of the
year 2,479 3,945 Effects of exchange rate changes on cash and cash equivalents
(5) 36 Cash and cash equivalents at the end of the year 20(b) 5,527 2,479

The notes following the financial statements form part of the financial report.

STATEMENT OF
CHANGES IN EQUITY

For the year ended 30 June 2014

Telstra Group Reserves Share capital Foreign currency
translation (a) Cash flow hedging (b) General reserve (c) Retained profits Total
Non-controlling interests Total equity $m $m $m $m $m $m $m $m
Balance at 1 July 2012 5,635 (751) (87) (29) 6,712 11,480 209 11,689
Profit for the year (restated) - - - - 3,739 3,739 52 3,791 Other
comprehensive income (restated) - 252 (5) - 548 795 25 820 Total comprehensive
income for the year - 252 (5) - 4,287 4,534 77 4,611 Dividends - - - -
(3,480) (3,480) (28) (3,508) Transactions with non-controlling interests - - -
1 - 1 - 1 Amounts repaid on share loans provided to employees 47 - - - - 47 -
47 Additional shares purchased (42) - - - - (42) - (42) Exercise of employee
share options 29 - - - - 29 - 29 Share-based payments 42 - - - - 42 6 48
Balance at 30 June 2013 5,711 (499) (92) (28) 7,519 12,611 264 12,875
Profit for the year - - - - 4,275 4,275 70 4,345 Other
comprehensive income - 413 (30) - 82 465 (3) 462 Total comprehensive income
for the year - 413 (30) - 4,357 4,740 67 4,807 Dividends - - - - (3,545)
(3,545) (22) (3,567) Non-controlling interests on acqusitions - - - - - - 6 6
Non-controlling interests on disposals - - - - - - (198) (198) Transactions
with non-controlling interests (d) - - - 8 - 8 13 21 Amounts repaid on share
loans provided to employees 3 - - - - 3 - 3 Additional shares purchased (61)
- - - - (61) - (61) Exercise of employee share options 29 - - - - 29 - 29
Share-based payments 37 - - - - 37 8 45 Balance at 30 June 2014 5,719 (86)
(122) (20) 8,331 13,822 138 13,960

The notes following the financial statements form part of the financial report.

(a) The foreign currency translation reserve is used to record exchange
differences arising from the conversion of the non-Australian controlled
entities’ financial statements into Australian dollars. This reserve is also
used to record our percentage share of exchange differences arising from equity
accounting our non-Australian investments in joint ventures and associated
entities.

(b) The cash flow hedging reserve represents the effective portion of gains or
losses on remeasuring the fair value of the hedge instrument, where a hedge
qualifies for hedge accounting. These gains or losses are transferred to the
income statement when the hedged item affects income or, in the case of forecast
transactions, is included in the measurement of the initial cost of property,
plant and equipment or inventory.

(d) During the year we decreased our ownership of Autohome Inc. from 66.0 per
cent at 30 June 2013 to 63.2 per cent at 30 June 2014 via share buy-back,
subsequent initial public offering and employee share issues. We also acquired
the non-controlling interests of the Octave Group. Neither of these transactions
resulted in a change of control. Changes in valuation of non-controlling
interests resulting from these transactions are recorded in the general reserve.
Refer to note 20 for further details.

SHAREHOLDER INFORMATION

LISTING INFORMATION

MARKETS IN WHICH OUR SHARES ARE TRADED

We are listed, and all our issued shares are quoted on the Australian Securities
Exchange (ASX) and the New Zealand Stock Exchange (NZX).

MARKETS ON WHICH OUR DEBT SECURITIES ARE LISTED

We also have debt securities listed on the ASX, the London Stock Exchange, the
Singapore Stock Exchange and the Swiss Stock Exchange.

DISTRIBUTION OF SECURITIES AND SECURITY HOLDINGS

The following table shows the number of listed shares on issue at 14 July 2014:

Title of class Identity of
person or group Amount owned % Listed Shares Listed shareholders 12,443,074,357
100

DISTRIBUTION OF SHARES

The following table summarises the distribution of our listed shares as at 14
July 2014:

Size of Holding Number of Shareholders % Number of Shares % 1-1,000 663,984
47.46% 370,997,925 2.98% 1,001-5,000 507,059 36.25% 1,217,758,309 9.79%
5,001-10,000 122,814 8.78% 875,253,222 7.03% 10,001-100,000 101,333 7.24%
2,430,224,118 19.53% 100,001 and over 3,745 0.27% 7,548,840,783 60.67% Total
1,398,935 100.00% 12,443,074,357 100.00%

The number of shareholders holding less than a marketable parcel of shares was
15,014 holding 659,660 shares (based on the closing market price on 14 July
2014).

SUBSTANTIAL SHAREHOLDERS

As at 14 July 2014, we are not aware of any substantial shareholders

TWENTY LARGEST SHAREHOLDERS AS AT 14 JULY 2014

The following table sets out the Top 20 holders of our shares (when multiple
holdings are grouped together):.

Shareholders Number of Shares % of Issued Capital 1 HSBC CUSTODY NOMINEES
(AUSTRALIA) LIMITED 1,879,141,905 15.10% 2 J P MORGAN NOMINEES AUSTRALIA LTD
1,642,592,458 13.20% 3 NATIONAL NOMINEES LIMITED 1,488,764,721 11.96% 4 CITICORP
NOMINEES PTY LIMITED 574,279,904 4.62% 5 BNP PARIBAS NOMS PTY LTD 302,590,368
2.43% 6 RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LTD 120,399,393 0.97% 7 AMP
LIFE LIMITED 95,608,702 0.77% 8 UBS WEALTH MANAGEMENT AUSTRALIA NOMINEES PTY LTD
53,381,807 0.43% 9 AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED 52,445,000
0.42% 10 UBS NOMINEES PTY LTD 42,964,417 0.35% 11 ARGO INVESTMENTS LIMITED
41,504,800 0.33% 12 NEWECONOMY COM AU NOMINEES PTY LIMITED 36,418,851 0.29% 13
QUESTOR FINANCIAL SERVICES LIMITED 31,236,364 0.25% 14 TELSTRA GROWTHSHARE PTY
LTD 28,546,744 0.23% 15 NAVIGATOR AUSTRALIA LTD 25,868,444 0.21% 16 NULIS
NOMINEES (AUSTRALIA) LIMITED 23,579,363 0.19% 17 SHARE DIRECT NOMINEES PTY LTD
19,461,553 0.16% 18 NETWORK INVESTMENT HOLDINGS PTY LTD 17,309,017 0.14% 19
EQUITAS NOMINEES PTY LTD 16,018,179 0.13% 20 MILTON CORPORATION LIMITED
13,610,253 0.11% Total for Top 20 6,505,722,243 52.28%

VOTING RIGHTS

Shareholders (whether residents or non-residents of Australia) may vote at a
meeting of shareholders in person, directly or by proxy, attorney or
representative, depending on whether the shareholder is an individual or a
company.

Subject to any rights or restrictions attaching to our shares, on a show of
hands each shareholder present in person or by proxy, attorney or representative
has one vote and, on a poll, has one vote for each fully paid share held.
Presently, we have only one class of fully paid ordinary shares and these do not
have any voting restrictions. If shares are not fully paid, on a poll the number
of votes attaching to the shares is pro-rated accordingly.

REFERENCE TABLES

Five-Year Summary - Financial Results

FY14
($m) FY13(iii)
($m) FY12
($m) FY11
($m) FY10
($m) Total income (excluding finance income) 26,296 24,776 25,503 25,304 25,029
EBITDA(i) 11,135 10,168 10234 10151 10847 EBIT(ii) 7,185 6,090 5822 5692 6501
Profit for the period from continuing operations 4,549 3,640 n/a n/a n/a
Gain/(loss) for the period from discontinued operations (204) 151 n/a n/a n/a
Profit for the period 4,345 3,791 3424 3250 3940 Dividends declared per share
(cents) 29.5 28.0 28 28 28 Total assets 39,360 38,527 39525 37913 39282 Gross
debt 16,048 15,628 17222 16232 16031 Net debt 10,521 13,149 13277 13595 13926
Total equity 13,960 12,875 11689 12292 13008 Capital expenditure 3,661 3,689
3591 3410 3471 Free cash flow 7,483 5,024 5197 5477 6225 Earnings per share
(cents) 34.4 30.1 27.5 26.1 31.4 Dividend payout ratio (%) 86 93 102 107 89

(i) Operating profit before interest, depreciation and amortisation and income
tax expense. EBITDA is used as a measure of financial performance by excluding
certain variables that affect operating profits but which may not be directly
related to all financial aspects of the operations of the company. EBITDA is not
a measure of operating income, operating performance or liquidity under A-IFRS.
Other companies may calculate EBITDA in a different manner to us.
(ii) EBITDA less depreciation and amortisation.
(iii) Restated for the retrospective adoption of AASB:119 "Employee
Entitlements".

Non-Financial Results

Key performance indicator FY14 FY13 FY12 Employee engagement(i)
Score (%) 82 80 77 Health and safety(ii)
Lost Time Injury Frequency Rate (LTIFR) 1.12 1.36 1.32 Gender equality(iii)
Women in executive management (%) 26 25 25 Volunteering during Telstra time(iv)
Total (days) 5,122 4,248 1,375 Payroll giving
Participation rate (%) 5.3 3.6 1.6 Social and community investment(iv)
Value ($m) 217 231 240 Everyone Connected
Targeted community programs (people impacted)(‘000s) 143 146 102 Carbon
emissions(v)
Tonnes of carbon dioxide equivalent (tCO2e)(‘000s) 1,592 1,634 1,677 Carbon
emissions intensity(v)
tCO2e per terabyte of data 0.58 0.83 1.24 E-waste
Mobile phones (tonnes collected) 15.3 14.0 14.3

(i) Telstra Group. 2013 results adjusted to exclude CSL and Sensis Group (79%
was previously reported).
(ii) This data relates to Telstra Corporation Limited only and does not include
subsidiaries or contractors.
(iii) Full time and part time staff in Telstra Corporation Limited and its
wholly owned subsidiaries, excluding casual and agency staff.
(iv) Sensis Group data included from 1 July 2013 until 28 February 2014.
(v) Australian operations for Telstra Corporation Limited. This includes
relevant Australian subsidiaries, joint ventures and partnerships. Sensis Group
has been included from 1 July 2013 until 28 February 2014.

Guidance versus Reported Results

This schedule details the adjustments made to the reported results for the
current year to reflect the performance of the busines on the basis which we
provided guidance to the market. Our guidance assumes wholesale product price
stability, no impairments to investments and excludes any proceeds or gain on
the sale, and purchase of businesses.

REPORTED ADJUSTMENTS FY14 GUIDANCE BASIS FY14
$m FY13
$m Growth
% Sensis(i)
$m M&A(ii)
$m CSL(iii)
$m Octave(iv)
$m Sequel(v)
$m FY14
$m FY13
$m Growth
% Sales revenue 25,119 24,298 3.4% 0 (101) 0 0 0 25,018 24,298 3.0% Total
revenue 25,320 24,474 3.5% 0 (101) 0 0 0 25,219 24,474 3.0% Total income (excl.
finance
income) 26,296 24,776 6.1% 0 (101) (561) 0 0 25,634 24,776 3.5%
Labour 4,732 4,527 4.5% 0 (32) 0 0 0 4,700 4,527 3.8% Goods and services
purchased 6,465 6,247 3.5% 0 (42) 0 0 0 6,423 6,247 2.8% Other expenses 3,988
3,833 4.0% 0 (11) 0 (98) (12) 3,867 3,833 0.9% Operating expenses 15,185 14,607
4.0% 0 (85) 0 (98) (12) 14,990 14,607 2.6% Share of net
profit/(loss) from joint
ventures and associated entities 24 (1) n/a (24) 0 0 0 0 0 (1) n/a EBITDA 11,135
10,168 9.5% (24) (16) (561) 98 12 10,644 10,168 4.7%
Depreciation and amortisation 3,950 4,078 (3.1%) 0 (10) 0 0 0 3,940 4,078 (3.4%)
EBIT 7,185 6,090 18.0% (24) (6) (561) 98 12 6,704 6,090 10.1%
Net finance costs 957 933 2.6% 0 0 0 0 0 957 933 2.6%
Profit before income tax expense 6,228 5,157 20.8% (24) (6) (561) 98 12
5,747 5,157 11.4% Income tax expense 1,679 1,517 10.7% 0 1 0 0 0 1,680 1,517
10.7% Profit for the year from continuing
operations 4,549 3,640 25.0% (24) (7) (561) 98 12 4,067 3,640 11.7%
(Loss)/profit for the year from
discontinued operation (204) 151 n/a 0 0 0 0 0 (204) 151 n/a Profit for the year
from continuing
and discontinued operations 4,345 3,791 14.6% (24) (7) (561) 98 12 3,863 3,791
1.9% Attributable to: Equity holders of the Telstra Entity
4,275 3,739 14.3% 0 (7) (561) 98 12 3,817 3,739 2.1% Non controlling interests
70 52 34.6% (24) 0 0 0 0 46 52 (11.5%) Free cashflow
7,483 5,024 48.9% (454) 205 (2,107) 0 0 5,127 5,024 2.1%

This table was subject to review by our auditors.

Note:

There are a number of factors that have impacted our results this year. In the
table, above, we have adjusted the results for:

(i) Sensis adjustments:

Adjustment for the equity share on the profit of our 30% interests in Project
Sunshine I Pty Ltd as an associated entity, the new holding company of the
Sensis Group from the reported Telstra Group results. Adjustment for the sale
proceeds from the divestment of 70% of our Sensis directories business from the
reported Telstra Group results.

(ii) Mergers & Acquisitions adjustments:

Adjustments for material mergers and acquisition activities from the reported
Telstra Group results. This includes DCA eHealth Solutions Pty Ltd, Fred IT
Group Pty Ltd, NSC Group Pty Ltd, O2 Networks Pty Ltd and Ooyala Inc.

(iii) CSL adjustment:

Adjustment for the net gain on disposal of the CSL Group from the reported
Telstra Group results.

(iv) Octave adjustment:

Adjustment for the write off from the foreign currency translation reserve
associated with the Octave investment from the reported Telstra Group results.
We have commenced liquidation of the legal entities in the Octave Group in FY14.

(v) Sequel Media adjustment:

Adjustment for the impairment of Sequel Media Group from the reported Telstra
Group results. The carrying value of Sequel Media Group goodwill was impaired by
$12m.

GLOSSARY

Technology Terms

4G (or 4G-LTE) - Fourth generation of wireless networks. It gives users faster
download and upload speeds and better response times than previous generations.
4G lets customers do things like downloading files, sending large attachments,
web browsing and online multi-tasking faster than previous generations. 4G-LTE
also provides more network capacity and thus delivers benefits for network
operators. The faster you can deliver data, the greater the capacity you make
available for other users on the network.

4G dongle - A small device that plugs into a computer and allows internet access
via a 4G wireless network.

ADSL - Asymmetric Digital Subscriber Line. A broadband technology that provides
access to the internet at fast speeds. Data is carried over the copper network
phone lines. These data speeds can enable the delivery of voice, data and video
services.

ADSL 2+ - Extends the capability of basic ADSL by increasing the potential
speeds that customers experience. Telstra’s ADSL 2+ service can deliver a
maximum download speed of 20Mbps. (The actual customer download speed can vary
depending on line conditions. Typical download speeds are 10Mbps).

Cloud - Provision of services, software, storage and security over the internet,
typically on a pay-for-use basis. In simple terms, it allows access to
information/programs etc on multiple devices in multiple locations.

Cyber safety - The safe use of information and telecommunications technology
(including mobile phones) and the internet.

eHealth - eHealth is the sharing of health resources and provision of health
care by electronic means. It encompasses three main areas:

* the delivery of health information, for health professionals and health
consumers, through the internet and telecommunications
* the use of IT and e-commerce to improve public health services (for example,
the delivery of training services for health workers)
* the use of e-commerce and e-business practices in health systems management.

FTTN - Fibre to the Node. A broadband access solution that delivers fibre from a
telco’s exchange facility to a street cabinet (the “node”), with the final
connections to a premises being the copper network phone lines.

FTTP - Fibre to the Premises. A broadband access solution that delivers fibre
from a telco’s exchange facility directly to the outside of a building. Because
fibre can deliver faster data transfer speeds than copper, FTTP solutions, which
do not depend on copper, offer potential internet speeds faster than FTTN
solutions (see definition of FTTN).

HFC - Hybrid Fibre Coax. A way of delivering video, voice and data using both
coaxial cables (like the ones used for connecting your television to an antenna)
and fibre optic cables. Optical fibre connects a telco’s facility (called a
headend) to hubs in suburban streets, and then coaxial cables connect the hubs
and customer premises. Telstra uses an HFC network to deliver Foxtel and Big
Pond Cable Internet services. Telstra customers using HFC networks can receive
download speeds of up to 100Mbps.

IPTV - Television, video signals or other multimedia services that are
distributed to subscribers or viewers using Internet Protocol over a broadband
connection. Examples include Telstra’s T-Box and Foxtel on T-Box services.

Mobile broadband - Wireless internet access delivered over the mobile phone
network to computers and other digital devices using portable modems.

NAS - Network Applications and Services. The NAS business has been identified as
an area of strategic growth for Telstra and includes unified communications,
video conferencing, cloud
services, managed networks and contact centresolutions.

NBN - National Broadband Network.

Next IP™ - Telstra's high-performance national data network with coverage to
over 95% of Australian businesses. It enjoys seamless integration with the
wireless Next G® network, making it easier for staff and offices around the
nation to work as one. It allows businesses access to the same networks and
services as large enterprises, but without the same level of investment.

PSTN - Public switched telephone network. Generic term for public telephone
networks. Often referred to as “fixed line”, it is the standard home telephone
service, delivered over copper wires.

Roaming - A service which allows customers to use their mobile phone while in a
service area of another carrier, for example overseas.

Spectrum - All wireless communications signals travel through the air via radio
frequency, known also as spectrum. The government grants telcos licences for
dedicated use of portions (bands) of the spectrum. As people increase their use
of wireless networks, more spectrum is required.

ULL – Unconditioned Local Loop. The local loop is the copper wire that connects
the Telstra exchange in your area to your house. Telstra is required to provide
access to this wire to other operators and they can use it to provide customers
with their own services such as broadband and voice telephone services.

Unified Communications - An integrated hardware and software offering that
combines enterprise communications on a single platform. It is any
communications system that encompasses a broad range of technologies and
applications that have been designed as a single communications platform. A
unified communications system generally enables companies to use integrated
data, video and voice from multiple locations in one supported product.

Wi-Fi hotspot - A device that other devices can connect to wirelessly in order
to access the Internet. (Wi-Fi refers to a set of wireless standards commonly
used by devices for short-distance wireless communication).

Financial Terms

EBITDA - Earnings before interest, income tax expense, depreciation and
amortisation. An indicator of a company’s operational profitability.

NPAT -Net profit after tax.

EPS - Earnings per share. A company’s profit divided by the number of shares on
issue.

DPS - Dividend per share.

Capex - Capital expenditure. This is expenditure on assets such as property,
equipment, intangible assets etc.

Free cashflow - Represents the cash that a company is able to generate from its
operations after spending money required to maintain or expand its asset base.

CONTACT DETAILS

REGISTERED OFFICE

Level 41, 242 Exhibition Street
Melbourne Victoria 3000 Australia
Damien Coleman
Company Secretary
email: companysecretary@team.telstra.com

GENERAL ENQUIRIES – REGISTERED OFFICE

Australia: 1300 368 387
All Other: +61 (8) 8308 1721

SHAREHOLDER ENQUIRIES
AUSTRALIAN SHARE REGISTER

Australia: 1300 88 66 77
All Other: +61 1300 88 66 77
Fax: +61 (2) 9287 0303
email: telstra@linkmarketservices.com.au
website: www.linkmarketservices.com.au/telstra
Link Market Services Limited
PO Box A942
Sydney South NSW 1234 Australia

NEW ZEALAND SHARE REGISTER

New Zealand: 0800 835 787
All Other: +64 9 375 5998
Fax: +64 (9) 375 5990
email: enquiries@linkmarketservices.co.nz
website: www.linkmarketservices.co.nz
Link Market Services Limited
PO Box 91976
Auckland 1142
New Zealand

INVESTOR RELATIONS

Level 32, 242 Exhibition Street
Melbourne Victoria 3000 Australia
Australia: 1800 880 679
All Other: +61 (3) 8647 4954
email: investor.relations@team.telstra.com

SUSTAINABILITY

Level 37, 242 Exhibition Street
Melbourne Victoria 3000 Australia
email: sustainability@team.telstra.com

TELSTRA CORPORATION LIMITED
ABN 33 051 775 556

Incorporated in the Australian Capital Territory
Telstra is listed on Stock Exchanges in
Australia and in New Zealand (Wellington)

WEBSITES

Telstra Investor Centre: www.telstra.com.au/investor
Telstra’s Sustainability home page: www.telstra.com.au/sustainability

INDICATIVE FINANCIAL CALENDAR (I)

Final dividend paid Friday 26 September 2014 Annual General Meeting Tuesday 14
October 2014 Half-Year Results announcement Thursday 12 February 2015
Ex-dividend share trading commences Wednesday 25 February 2015 Record date for
interim dividend Friday 27 February 2015 Interim dividend paid Friday 27 March
2015 Annual Results announcement Thursday 13 August 2015 Ex-dividend share
trading commences Wednesday 26 August 2015 Record date for final dividend Friday
28 August 2015 Final dividend paid Friday 25 September 2015 Annual General
Meeting Tuesday 13 October 2015

(i) Timing of events may be subject to change. Any change will be notified to
the Australian Securities Exchange (ASX).

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