Use the links below to view the report:

Contents

Executive statement

Sustainability performance

1. Deliver value

2. Invest for the long term

3. Attract, develop and retain great people

4. Maintain sound governance and accountability

5. Continue financial stability and growth

6. Minimise our environmental impact

7. Foster effective partnerships

Perspectives on sustainability and superannuation

1. Member

2. Investment adviser

3. Employee

4. Director

5. Supplier

Download the full or summary report as a PDF

Contact us

Sustainability
Report

2009

Contents

Contents

Chairperson and Chief Executive’s
statement 3

About VicSuper

VicSuper at a glance 4

Building a sustainable super fund 7

Stakeholder engagement 8

Awards, recognition and
memberships 12

About this report 13

Scope of this report 14

Performance summary

Our performance: a summary 15

Meeting our 2008/09 commitments 18

Our key commitments for 2009/10 23

Strategy 1: Deliver value 24

Sustainability and superannuation –
a member’s perspective 25

A simple and low fee structure 26

Advice and education 27

Outstanding service 31

Relevant superannuation plans and
benefits 32

Strategy 2: Invest for the long term 33

Sustainability and superannuation –
an investment adviser’s perspective 35

Long-term, low-cost investing 36

Member investment choice 43

Sustainability investing 46

Exercising our rights of ownership
and share knowledge 49

Strategy 3: Attract, develop and retain
great people 53

Sustainability and superannuation –
an employee’s perspective 54

Workplace profile and culture 55

Learning and development 60

Employee engagement 62

Competitive benefits and remuneration 63

Strategy 4: Maintain sound governance
and accountability 65

Sustainability and superannuation –
a director’s perspective 66

Who runs VicSuper, what do they do
and how are they accountable? 67

How is members’ money safeguarded? 78

How can we ensure that the rights of
all stakeholders are respected? 80

Strategy 5: Continue financial stability
and growth 82

Income and growth 83

Liabilities and expenditure 86

Audit information and summary
financial statements 87

Strategy 6: Minimise our environmental impact 89

Policy, processes and training 90

Resource usage 91

Energy use and greenhouse gas
emissions 97

Strategy 7: Foster effective partnerships 103

Sustainability and superannuation –
a supplier’s perspective 104

Suppliers 105

Professional associates 106

Glossary 108

Assurance statement 110

GRI/PRI tables 113

Contact us 134

About the front cover:
Our advisers travel throughout Victoria. One way we reduce our energy consumption is by purchasing efficient vehicles (hybrid electric-petrol cars).

Executive statement

About VicSuper

Chairperson and Chief Executive’s statement

GRI 1.1

As the 2008/09 financial year concluded,
we celebrated our first 10 years as the Trustee of VicSuper Fund. Over the years we’ve become more and more certain that sustainability in every part of our business is not only relevant but fundamental to our performance and responsibility as a superannuation fund trustee.

As a superannuation fund we rely on the positive long-term economic, social and environmental performance of companies and other assets to generate wealth and thus grow our members’ savings via returns on our investments. And just as we believe sustainability is an important principle for the companies and other assets we invest in, it follows that we should run our own business with sustainability central to everything we do. Even during the rough times, we are convinced our operating model is a robust one, so we’re staying the course.

This year has been a significant test for businesses and investors. On the back of the failure of sub-prime mortgage loans in the United States in 2007/08, the global financial crisis developed. Credit markets virtually closed down and equities were sold off in fear of a collapse in earnings growth. The effect of the crisis has been a rapid deterioration in economic conditions which has flowed through to the pricing of assets in the Australian and global financial markets. In 2008 the value of the world’s equity markets reduced by more than 40% before partially recovering in value during 2009. During this time, VicSuper’s position remained relatively strong and stable.

This year the performance of our investments compared favourably with other superannuation funds. Our members continued to build their retirement savings voluntarily, adding a collective $383 million in salary sacrifice and personal contributions to the VicSuper Fund. This helped net assets in the Fund to remain steady at $6.1 billion despite negative returns for investment options with allocations to equities.

Looking ahead, we’ll continue to closely monitor how global markets perform. In the long term, we’ll continue to seek to earn the returns provided by the global financial markets and enhance returns by actively pursuing investment in sustainability leaders. As we learn more about how companies perform when sustainability objectives drive them, we will seek to understand more about the environmental and social impacts of our investment portfolio. We’ve made inroads in this area by allocating $150 million for investments in more than 700 companies around the globe which collectively provide the returns of the global equity market
while releasing 50% less greenhouse gas emissions into the atmosphere. In the
future we will pursue opportunities to also understand the water use and biodiversity impacts of our investments.

VicSuper’s strategy to improve its social performance will focus, in the short term,
on the service we provide to our members and employers. We’ll continue to make our expertise available to our members by providing superannuation advice and education services throughout Victoria. Our account consultants and online access will make joining and all other superannuation processes easier for employers.

In the longer term, we’re keen to track the social impact of our investments and their contribution to cohesive societies.

As the global community addresses climate change, we expect to see greater attention to reducing the greenhouse gas emissions
of all aspects of life as we know it. We recognise that VicSuper has an important role to play. The horror of the Black Saturday bushfires in Victoria this year brought the issue of adapting to our changing climate into sharp focus and highlighted the urgent need for us to implement a transition plan
to a safe climate.

We hope you find in this report the information you need to assess VicSuper’s contribution to sustainability, our challenges, commitments to meet those challenges,
and our performance to date. A high level summary of our performance and commitments is available on our website or we can send a printed version to you. Feel free to email your queries and comments
to us at sustainability@vicsuper.com.au

Barbra Norris
Chairperson

Bob Welsh
Chief Executive

Executive statement

About VicSuper

VicSuper at a glance

GRI 2.1

GRI 2.2

GRI 2.4

GRI 2.5

GRI 2.7

VicSuper Fund is a Victorian-based public offer superannuation fund. We offer superannuation plans to cater for people from the start of their working lives through to and throughout their retirement years.
We also provide superannuation advice
and comprehensive education programs
at no charge.

Any individual in Australia can become
a member of VicSuper Fund. Any employer in Australia can also choose to pay superannuation contributions into VicSuper Fund on behalf of their employees.

Headquartered in Melbourne’s central business district, we also have advice
centres in Bendigo, Blackburn, Geelong
and Traralgon.

VicSuper Pty Ltd (VicSuper) is the trustee and administrator of VicSuper Fund. VicSuper owns the assets of VicSuper Fund on behalf of VicSuper Fund members.

More information on our superannuation plans, advice and education programs can be found on the VicSuper website.

VicSuper at a glance 30 June 2009

GRI 2.7

GRI 2.8

Number of VicSuper Fund members	249,504
Number of VicSuper Fund contributing employers	14,367
Net assets	$6.124 billion
Advice centres	Bendigo Blackburn Geelong Melbourne Traralgon
Number of VicSuper employees	194

More information on the scale of our organisation can be found in the summary financial statements in Strategy 5: Continue financial stability & growth.

A brief history

GRI 2.6

VicSuper Fund was originally a Victorian public sector superannuation fund. It opened in 1994 and was administered by the Victorian Superannuation Board (VSB).

On 1 July 1999 VicSuper Pty Ltd replaced the VSB as trustee and administrator of VicSuper Fund and became open to all employers in Australia.

In July 2000, VicSuper Fund became a public offer fund. This means that people do not have to be employed by a VicSuper Fund participating employer to join. Any eligible person in Australia can join VicSuper’s public offer benefit plans: VicSuper Beneficiary Account, VicSuper Commutable Pension,
or VicSuper Non-Commutable Pension.

More information about how VicSuper is managed can be found in Strategy 4: Maintain sound governance and accountability.

VicSuper’s organisational chart (30 June 2009)

GRI 2.3

VicSuper’s vision and operating plan reporting framework

GRI 4.8

Building a sustainable super fund

GRI 1.2

VicSuper’s central operating principle is
to create value for VicSuper stakeholders by building a sustainable super fund through integration of economic, social and environmental considerations into
all VicSuper’s decision support systems.

In essence, a sustainable super fund
seeks to create value for members and all stakeholders through sustainably improving the quality of life for all people while assisting the effective functioning of the earth’s ecosystems.

For VicSuper, sustainability is a way of operating and investing that recognises that long-term economic growth depends on maintaining and restoring the environment and maintaining cohesive societies.

The environment provides natural resources for industry and ecosystem services including the air that we breathe and the water that we drink. The economy provides people with jobs and the means to invest in health, education and environmental repair. Cohesive societies supply the skills, knowledge, wellbeing, social networks and institutions that are needed to support economic growth and environmental protection and restoration.

Without this long-term approach to operating and investing, we may not have economies that can provide investment returns for our members, or that can support a healthy society and a healthy environment. These are things that our members need in order to ensure quality of life during retirement.

We have identified seven key strategies in our quest to build a sustainable super fund:

1. Deliver value

2. Invest for the long term

3. Attract, develop and retain great people

4. Maintain sound governance and accountability

5. Continue financial stability and growth

6. Minimise our environmental impact

7. Foster effective partnerships

These strategies are further defined throughout this report. You can explore our approach and performance in each section of this report.

The precautionary principle

GRI 4.11

VicSuper subscribes to the precautionary principle in our approach to sustainability. Adoption of the precautionary principle is outlined in our sustainability and environment policies. An example of this is our recognition and treatment of climate change as an investment risk through our sustainability investments and our foundation membership of the Investor Group on Climate Change Australia/New Zealand.

More information on the precautionary principle can be found in the United Nations Rio Declaration on Environment and Development (principle 15).

Stakeholder engagement

GRI 4.14

GRI 4.15

GRI 4.16

VicSuper provides formal and informal opportunities for stakeholders to provide feedback and influence our operations. We share responsibility for maintaining our relationship with stakeholders and responding to their feedback throughout VicSuper.

Stakeholder groups	VicSuper connected with stakeholder groups in 2008/09 by:
Members and employers: People who have a superannuation account with VicSuper Fund are our members. Employers are those who pay their employees’ Superannuation Guarantee contributions to VicSuper Fund. This includes large Victorian Government agencies and more than 12,000 private sector employers.	• conducting monthly phone surveys with our members • seeking feedback from participants in member and employer seminars and personal interviews • meeting with individual employers and partnering with employer associations • conducting telephone interviews and seeking responses about our 2008 sustainability report via a questionnaire.
Employees and their families: VicSuper employees are integral to the everyday running of VicSuper. We recognise that a healthy balance between work and outside life is essential in maintaining healthy, happy and productive employees.	• seeking input from employees to manage and minimise VicSuper’s operating costs during this period of lower fund income • conducting an employee engagement survey, facilitated by Hewitt Associates • involving employees in VicSuper’s ‘Biggest Carbon Loser’ competition and other events • seeking responses about our 2008 sustainability report via a questionnaire and face to face interviews.
Fund managers, asset consultants and investment advisers: Fund managers, asset consultants and investment advisers provide investment advice to VicSuper and/or invest and manage assets on behalf of VicSuper Fund.	• attending regular business meetings with representatives from the superannuation and investment industries • actively participating in industry initiatives • seeking responses about our 2008 sustainability report via a questionnaire.
Industrial representatives: Industrial representatives are elected officers and employees of unions that represent the employment interests of many of VicSuper Fund’s members.	• attending union forums and meetings • involving the Community and Public Sector Union (CPSU) in the negotiation of VicSuper’s 2009 Collective Agreement and the CPSU is a party to the agreement.
Governments: Victorian Government ministries are currently the largest employers of VicSuper Fund’s members. State and Federal legislators influence regulations that set the rules by which society operates. Federal Government regulators such as the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), Australian Taxation Office (ATO) and Australian Transaction Reports and Analysis Centre (AUSTRAC) monitor VicSuper Pty Ltd’s compliance with legislation.	• making submissions on relevant issues to governments • meeting with government representatives about superannuation, finance, investment and sustainability matters • being a member of ASFA and AIST and attending various forums • seeking responses about our 2008 sustainability report via a questionnaire.
Suppliers and professional associates: VicSuper’s suppliers are mainly companies that provide products and/or services to VicSuper. Professional associates include industry peers and other professional organisations with which VicSuper has a relationship.	• surveying and discussing new suppliers’ and partners’ approaches to sustainability when we purchase goods and services • surveying existing suppliers about their approach to sustainability • holding an annual relationship building event for our major suppliers in recognition of their importance in VicSuper’s service delivery chain.
The broader community: The broader community consists of the national and global populations that are both directly and indirectly affected by VicSuper’s activities.	• sharing our knowledge on sustainability initiatives by undertaking a number of public presentations throughout the year • discussions with non-government organisations about carbon management.

Stakeholder feedback

GRI 3.5

GRI 4.17

We sought feedback about our 2008 sustainability report from representatives
of each of the stakeholder groups on the previous page. In order to receive more feedback from members, we surveyed 500 randomly selected members about their expectations for VicSuper’s sustainability reports. We received survey responses from 27 members, and 12 other responses from employers, suppliers, investment managers and employees. All stakeholders were able
to provide feedback about the sustainability report throughout the year via an online form or via a dedicated email address.

Feedback from stakeholders about the format and content of our 2008 report was very positive. Three key initiatives have been put in place in response to feedback:

1. Stakeholders suggested we compare VicSuper’s sustainability performance to industry benchmarks to help readers to interpret VicSuper’s results.

We benchmark this year’s results against previous years’ performance, and will work to further research and champion the development of appropriate industry benchmarks in future.

2. 64% of respondents thought VicSuper’s report was unbiased. We have included details about the challenges we face in our business to be transparent and unbiased in the way we present information about our operations. We continue to seek independent assurance of our report to ensure we align with accountability principles: inclusivity, materiality and responsiveness.

3. In response to suggestions to summarise our concise report, we have prepared a summary report. The summary report presents our commitment to building a sustainable super fund and tracks our progress against key performance indicators. Readers are referred to the full report for more details.

Stakeholder feedback continued

Stakeholders also identified the issues they expect to be addressed in VicSuper’s sustainability reports. These are summarised below, and we indicate where they are considered in this year’s report:

Issues that our stakeholders expect to see in VicSuper’s sustainability report	Where to find more information about these issues in this report
• the effect of the current economic situation and projections for economic growth and investment returns in the future	Chairperson and Chief Executive’s statement and throughout this report
• why members should be actively interested in superannuation and sustainability in superannuation	Member’s perspective, Strategy 1: Deliver value
• investment returns • members’ average account balances • VicSuper’s investment principles, and VicSuper’s role as a universal investor • the environmental impacts of investments – energy and water conservation, carbon intensity	Strategy 2: Invest for the long term
• information about our employment practices and workplace conditions • communities and charities we support • employee retention	Strategy 3: Attract, develop and retain great people
• evidence that VicSuper has rigorous corporate governance in place • details about Board structure and qualifications • information about how decisions are made and their justification • assessment of management to ensure they are delivering on environmental strategy	Strategy 4: Maintain sound governance and accountability
• VicSuper Pty Ltd’s financial performance	Strategy 5: Continue financial stability and growth
• how VicSuper minimises its environmental impact (carbon footprint, electricity, paper use, transport emissions) • VicSuper’s overall carbon footprint • ways VicSuper aims to minimise energy use in future	Strategy 6: Minimise our environmental impact
• how other organisations we deal with are handling their sustainability issues	Strategy 7: Foster effective partnerships and stakeholder perspectives throughout this report

Feedback about the VicSuper 2008 sustainability report was received from the Association of Chartered Certified Accountants (ACCA) in the Australia & New Zealand Awards for Sustainability Reporting 2008. VicSuper received three awards for our 2008 sustainability report, including ‘best report’ (see Awards, Recommendations and Memberships for more details). The judging panel provided recommendations to improve VicSuper’s future reports. This feedback, along with how we are addressing it, is outlined in the table below.

ACCA recommendations for improving sustainability reporting	Action taken
Disclose details of the board members responsible for sustainable development issues.	Discussed in Strategy 4: Maintain sound governance and accountability.
Disclose more information on how stakeholders’ feedback improves or guides reporting.	Discussed on previous page.
Reduce the length of the full report.	The 2009 report directs readers to other sources of information for more detail, such as the VicSuper Member Report 2009 and the VicSuper website.

The other significant source of report feedback we get each year is from our assurance provider. Here is a summary of how we responded to recommendations made by Net Balance Management Group Pty Ltd in their assurance of last year’s report.

Assurance observations and recommendations	Action taken
Whilst a high proportion of systems rated well procedures for key performance indicators should be documented and made easily available, and alternative systems be considered for otherwise manual data processes.	Some data that was previously collated manually is now tracked via spreadsheets.
Percentage change values should be reported to the same number of significant figures as the data used to calculate the change.	Percentage change values are now reported to the same number of significant figures as the data used to calculate the change.
In line with global responsible investment leaders, VicSuper could provide more detail about its responsible investment practices.	We aim to provide more detail each year in this area as our practices become more sophisticated. Full information about our proxy voting practices, shareholdings and response to the PRI annual assessment survey can be found separately on our website, via links provided in the report.
It is evident that VicSuper is engaging with a range of stakeholders on issues that are material. A broader range of stakeholders should be engaged, and stakeholders’ material issues should be detailed along with VicSuper’s response to these.	VicSuper has developed a Stakeholder Engagement Plan for implementation in 2009/10 with the aim of engaging a broad range of stakeholders and determining their material issues.
Some performance indicator related terms may not be clear to stakeholders reading the report.	The glossary has been expanded to include industry terminology and jargon and we have reduced this throughout the report where possible.
A review of the methods used to calculate greenhouse gas emissions related to paper use and air travel indicated that the factors used could be more accurate.	We have undertaken a review of our carbon neutral strategy. Suggested improvements have been made to paper use and air travel calculations for 2008/09.

Stakeholder feedback continued

Awards, recognition and memberships

Awards and recognition

GRI 2.10

In August 2009, VicSuper was awarded three Association of Chartered Certified Accountants (ACCA) sustainability reporting awards for our 2008 Sustainability Report, being judged as best entrant in the following categories:

• Best report

• Best SME (small to medium enterprise) report

• Best report in the financial services sector.

These awards recognise excellence in Australian and New Zealand sustainability reporting, with entrants judged on their reporting transparency and the way in
which corporate performance has been communicated to stakeholders. Reports were received from 77 entrants, up 54% from last year, including entries from more than 50% of the Australian ASX Top-50 companies.

In 2008/09 VicSuper also maintained its citation from the Equal Opportunity for women in the Workplace Agency (EOWA). This means we are categorised as an EOWA Employer of Choice for Women.

In November 2008, VicSuper’s Chief Executive Bob Welsh was awarded the Business Sustainability Leader of the Year award 2008 by the Centre for Sustainability Leadership.

Memberships

GRI 4.13

PRI 5

VicSuper is a member of the:

• Association of Superannuation Funds of Australia (ASFA)

• Australian Council of Superannuation Investors (ACSI)

• Australian Institute of Superannuation Trustees (AIST)

• Enhanced Analytics Initiative (EAI) (which subsequently merged with the UN PRI in December 2008)

• ESG Research Australia (ESG RA)

• Financial Ombudsman Service (FOS)

• International Corporate Governance Network (ICGN)

• Investor Group on Climate Change (IGCC) Australia/New Zealand

• Responsible Investment Association Australasia (RIAA).

GRI 4.12

VicSuper is a signatory to the:

• Carbon Disclosure Project (CDP) since 2004

• United Nations Environment Programme Finance Initiative (UNEP FI) since 2002

• United Nations Principles for Responsible Investment (UN PRI) since June 2006.

About this report

VicSuper’s aim for our sustainability reports has remained consistent since we released our first report back in 2004.

We aim to:

• stimulate awareness and discussion about the impact that superannuation funds can have on people, communities and the environment

• explain to our stakeholders why we have adopted sustainability as our central operating principle and how it is relevant to superannuation

• report on our performance in each of
our key strategy areas for building a sustainable superannuation fund

• identify our commitments for the
coming years.

This report provides a complete picture of our sustainability performance for the year covering all areas of our operations and investments that have a significant impact
on stakeholders. We report our performance against a comprehensive range of indicators and the full list of commitments made in the previous year. We also list all the commitments we’ve made for the coming year. We outline our aims, approach and challenges to building a sustainable super fund according to the seven strategies of our Sustainability Policy.

Throughout the document, readers can link to specific areas of interest via hyperlinks and three key ‘portals’:

• the Contents page

• the summary of stakeholder interests

• the GRI and PRI index at the end of the report.

Report structure

GRI 3.5

This report has applied the Global Reporting Initiative (GRI) G3 Guidelines. The GRI provides a framework of economic,
social and environmental indicators for organisations to report against.

Our report applies the GRI reporting framework to an A+ level (the highest level available), which means that we have reported against all G3 standard disclosures and relevant indicators. We have also used indicators from the GRI Financial Services Sector Supplement (2008) and the United Nations Principles for Responsible Investment
(PRI) to develop this report.

GRI application level table

		2002 In Accordance	C	C+	B	B+	A	A+
Mandatory	Self declared
Optional	Third party checked
	GRI checked

Our responses to the GRI indicators are
listed in the GRI index. An index of PRI principles and our reporting status can
also be found here.

GRI 3.13

FS 9

The data and information in the report have been independently assured by Net Balance Management Group (NBMG) Australia and the financial information has been independently audited by Deloitte Touche Tohmatsu. Please refer to the Assurance and Financial stability sections of this report for details about the scope and outcomes of their assurance.

GRI 3.9

GRI 3.10

Where assumptions are used about the data presented, they are explained in the text or in the GRI Index. Similarly, any restatements of information are indicated within the body of the report.

The VicSuper Sustainability Report 2009 was written and compiled by VicSuper’s in-house sustainability team, with input and support from many other teams within VicSuper.

Previous reports

This is our sixth sustainability report.
All previous reports are available from
the VicSuper website.

GRI 3.2

GRI 3.3

VicSuper’s previous sustainability report
was released in October 2008, covering
the 2007/08 financial year. We plan to
retain the sustainability report as part of
our annual year-end reporting, which means that the next report is due to be released
in October 2010.

Scope of this report

VicSuper and VicSuper Fund

GRI 3.1

GRI 3.6

This report covers the activities of VicSuper Pty Ltd for the financial year ending 30 June 2009. Initiatives and activities undertaken prior to this period have been covered where relevant or where data exists. All data relates to the 2008/09 financial year unless otherwise stated.

VicSuper Pty Ltd ABN 69 087 619 412 is the trustee and administrator of VicSuper Fund ABN 85 977 964 496 and holds an Australian Financial Services Licence issued by ASIC under the Corporations Act 2001 (Cwlth), and a RSE Licence issued by APRA under the Superannuation Industry (Supervision) Act 1993.

VicSuper Fund has also been registered by APRA as a registrable superannuation entity.

In this report we refer to VicSuper Pty Ltd as VicSuper, and VicSuper Fund as VicSuper Fund. More information on VicSuper’s structure can be found in VicSuper at a glance and Strategy 4: Maintain sound governance and accountability.

VicSuper Ecosystem Services Pty Ltd

GRI 3.6

GRI 3.8

VicSuper Ecosystem Services Pty Ltd was incorporated on 3 January 2006 and is a wholly-owned subsidiary of VicSuper Pty Ltd. More information on VicSuper Ecosystem Services Pty Ltd can be found in Strategy 4: Maintain sound governance and accountability and Strategy 6: Minimise our environmental impact.

GRI 3.7

We have not separated the activities and costs of VicSuper Ecosystem Services Pty Ltd from those of VicSuper Pty Ltd in this report. All resources used to administer VicSuper Ecosystem Services Pty Ltd, such as paper and energy, are included in the total figures for VicSuper Pty Ltd. Additional resources used by VicSuper Ecosystem Services Pty Ltd’s external investment manager, Kilter Pty Ltd, are not reported here.

Contact us

GRI 3.4

To provide feedback or for further information about this report or any of VicSuper’s sustainability activities, email sustainability@vicsuper.com.au or call VicSuper’s Member Centre on toll free
1300 366 216 (Australia only).

Our performance: a summary

GRI 1.2

The major sustainability challenge we faced in 2008/09 was the global financial crisis. The subsequent significant fall in share and property valuations reduced the retirement savings of members invested in investment options with asset allocations to equities.

This reduction in share valuations also meant a drop in fee income to VicSuper as VicSuper’s only source of income to cover management and investment administration expenses is derived from VicSuper’s capped asset-based management fee.

In February 2009 we set out a strategy to “manage through” the global economic recession, based on five objectives:

• to protect and maintain VicSuper’s brand

• to maintain our member and employer service standards

• to retain our highly trained employees

• to encourage our members to stay on track with their retirement savings plan

• to retain our single management fee at 0.5% pa capped at $1,500 pa (for more detail see page 26).

We will continue to pursue these objectives as the 2009/10 year develops.

A summary of our 2008/09 performance
is outlined below according to the seven strategies we pursue to build a sustainable super fund.

Strategy 1: Deliver value

VicSuper’s superannuation advice service was kept busy helping members to ‘stay the course’ with their retirement savings plan during this difficult economic time.

More members and employers received assistance from our team than ever before. VicSuper’s superannuation advisers provided personalised advice to over 6,500 members in 2008/09, up 9% compared to last year.

We provided personalised advice to 59% more members at their workplaces than
last year.1 We visited more employers in 2008/09 than the previous year (up 12.6%). More people attended employer seminars this year (up 14.3%).

Strategy 2: Invest for the long term

Due to the impact of the global financial crisis, annual investment returns from company shares and property assets were negative. Negative returns are never welcome, and many of our members will have seen a reduction in their account balance over the past year.

Despite the worst global economic
downturn since the Great Depression over 70 years ago and four years of negative returns from equity markets in the past
ten years, the rates of return on VicSuper’s investment options with 10 year histories exceed CPI except for Equity Growth.
We saw the companies in our portfolio
that are independently rated as sustainability leaders demonstrate resilience in tough market conditions.

To further support our aim to integrate sustainability considerations into our investments, VicSuper allocated $150 million to a portfolio of 700 international companies that aim to meet world indices in terms of financial performance with half the carbon footprint.

Strategy 3: Attract, develop and retain great people

The total number of VicSuper employees grew by 6% to 194 in 2008/09 the
number of employees at the workplace on 30 June 2009 was 183. The remainder were on maternity leave or leave without pay at their request.

This year nearly 80% of our team participated in our employee engagement survey. VicSuper’s engagement score based on employee responses is 65%, placing VicSuper amongst the best employers in Australia and New Zealand.

Strategy 4: Maintain sound governance
and accountability

Audits of our governance processes by an external auditor confirmed that our high standards of governance comply with industry standards. We continue to enhance our systems and processes to minimise risks.

At the ACCA Australia and New Zealand Sustainability Reporting Awards 20082 our Sustainability Report 2008 won awards for ‘best report’ for the region, our sector and for companies of our size.

Complaints from members increased this year largely as a result of enhancements we made to levels of insurance coverage and the consequent increase in premiums if members did not choose to opt out. Overall complaints remain low and represent feedback from less than 0.02% of our total membership.

Strategy 5: Continue financial stability
and growth

While investment revenue (comprising realised and unrealised gains) dropped from -$417.0 million in 2007/08 to -$775.5 million in 2008/09, an increasing number of members and employers joined the Fund.

Steady contributions revenue and prudent expense management meant that VicSuper Fund net assets at 30 June 2009 remained stable at $6.124 billion, a decrease of 1.3% compared to the same time last year.

Our performance: a summary continued

Strategy 6: Minimise our environmental impact

VicSuper’s resource usage continued to
trend down during the year through the implementation of various business process improvements including changes to lighting systems. Our paper consumption, energy use and greenhouse gas emissions fell during 2008/09 despite the size of the company and our membership increasing.

Strategy 7: Foster effective partnerships

We continued to put our supplier engagement policy into place. We found out more about the sustainability policies of our suppliers and partners as we formed new business relationships. We continued to inform existing business partners about our commitment to sustainability and learnt more about their sustainability initiatives.

The following performance indicators summarise our progress in building a sustainable super fund over the long term. The data is analysed in more detail and for longer timeframes in relevant sections throughout the report. Data for each year is for the 12-month period ended 30 June.

1 Over 75% of participants rated our member seminars, member workshops and personal interviews as excellent.

2 See page 12 for more detail.

Note: see Graph 5.14 for the average member account balances of VicSuper Scheme, VicSuper Beneficiary Account and VicSuper Pensions.

Members and employers	2004/05	2005/06	2006/07	2007/08	2008/09	Prior year % change
Number of employers	5,261	7,152	8,776	13,143	14,367	▲ 9.3%
Number of member and workplace seminars	992	727	954	1,074	1,109	▲ 3.3%
Number of personal advice interviews	3,397	3,609	4,495	6,022	6,560	▲ 8.9%
Visits to employers	218	235	200	198	223	▲ 12.6%
VicSuper Scheme members with insurance	55.9%	56.7%	57.8%	55.9%	57.6%	▲ 3.0%

Investments	2004/05	2005/06	2006/07	2007/08	2008/09
Investment income ($’000)	329,368	528,495	755,706	-417,003	-755,504
Contribution revenue ($’000)	720,912	873,082	1,238,384	1,329,703	1,154,803
Growth Option (default investment option) net earning rate, VicSuper Scheme and VicSuper Beneficiary Account	12.69%	16.02%	17.18%	-7.83%	-16.99%

Note: Past performance is not a reliable indicator of future performance

Note: includes salary sacrifice, post-tax and self-employed member contributions, and transfers from other funds. See Graph 1.13 for more details.

Our performance: a summary continued

Note: The definition of employees includes all permanent, temporary and casual roles, including employees absent on leave with and without pay.

VicSuper people	2004/05	2005/06	2006/07	2007/08	2008/09	Prior year % change
Females in senior management roles	37%	42%	44%	48%	40%	▼ 8%
Sick days taken per employee	2.6	3.9	4.1	3.4	5.5	▲ 61.8%
Employee turnover rate	19.3%	11.5%	15.2%	12.3%	19.1%	▲ 62.6%
External training hours per staff member	17.8	26.0	19.3	10.1	13.3	▲ 31.7%

Governance	2004/05	2005/06	2006/07	2007/08	2008/09	Prior year % change
Complaints	44	41	21	24	45	▲ 87.5%

Environment	2004/05	2005/06	2006/07	2007/08	2008/09	Prior year % change
Electricity use per employee (kWh pa)*	2,761	2,755	3,013	3,018	2,551	▼ 15.5%
White A4 copy paper purchased per employee (sheets)	11,112	11,248	8,774	8,080	6,556	▼ 19.0%

* All results restated. Calculation of employee numbers for this indicator was revised in 2008/09 to be consistent with that used in copy paper calculations. Both indicators now use total monthly average employee numbers as the denominator.

Note: Total paper use figures were not available prior to 2005/06.

Note: 2007/08 figures restated according to revised emission factors. See Table 6.12 for a full inventory of VicSuper Pty Ltd’s greenhouse gas emissions

* Annual Benefit Statements are delivered in September so this commitment could only be flagged as ‘progress made’ at 30 June 2009, by the time this report was published online Annual Benefit Statements had been achieved.

Meeting our 2008/09 commitments

GRI 1.2

The table below shows our performance in 2008/09 against the commitments we made last year in each of our seven key strategies for building a sustainable superannuation fund.

Further detail is provided in relevant sections throughout this report.

4 Achieved 6 Not Achieved s Progress made

Commitment	Did we deliver?
Strategy 1: Deliver value
Education and advice
• Review the VicSuper superannuation education program	4
• Increase member understanding of the importance of insurance cover (particularly the benefits of age-based cover) through tailored communications	s
• Implement a process to confirm that members have relevant information to implement the advice they have received in interviews	4
• Improve education and advice services by conducting workshops and interviews at locations that are more accessible to members	s
• Confirm certain member transactions electronically instead of sending out paper based letters	s
• Initiate a superannuation education program for new employers	4
Outstanding service
• Introduce a scorecard system to measure service quality and efficiency of the Member Centre	s
• Introduce new mailroom technology that will enhance the processing of all mail	s
• Develop and launch calculators for pensions and interactive worksheets	s
• Make the 2008/09 Annual Benefit Statements available online*	s
• Increase the total number of members who consent to electronic communication to 15% of total membership	6
• Move business processes onto the imaging and workflow system to improve efficiency and reduce paper production and circulation	s
• Increase the number of employers signed up for electronic communication by 20%	6
Relevant superannuation plans and benefits
• Enhance death benefits payments to include anti-detriment benefits in relation to VicSuper Pensions	4
Strategy 2: Invest for the long term
Long-term, low-cost investing
• Undertake ongoing measurement of our progress against the UN Principles for Responsible Investment	4
• Seek opportunities to reduce VicSuper Fund’s carbon footprint	4
• Publicise how we progress against the UN Principles for Responsible Investment	4
• Increase the Fund’s exposure to international equities by seeking a suitable emerging markets index fund	4
• Review and update the VicSuper Investments Manual	s
Member investment choice
• Undertake carbon reporting on member benefit statements	4
Sustainability investing
• Investigate the appointment of a low carbon footprint listed equity fund provider	4
• Undertake engagement with fund managers on economic, environmental and social issues	s
• Draft a ‘Statement of Sustainability Investment Principles’	s
Over the next one to three years we commit to:
• Continue investigating the sustainability screening of fixed interest investments	s
• Investigate further opportunities for sustainability investment in equities	s
• Continue to work towards a full understanding of the sustainability profile of the companies in which VicSuper Fund is invested	s
• Develop an understanding of the water footprint for VicSuper Fund	s
Exercise our rights of ownership and share knowledge
• Assess the performance of Hermes EOS and Regnan in eliciting behavioural change / improved shareholder value	s
• Be a signatory to the CDP7 and assist with the survey of Australian and New Zealand companies in CDP7	4
Over the next one to three years we commit to:
• Explore ways to further engage VicSuper’s members and other stakeholders on investment related sustainability issues	s
• Develop metrics to measure the effectiveness of VicSuper Fund’s governance and engagement approach	s
Strategy 3: Attract, develop and retain great people
Workplace profile and culture
• Update the induction program for new starters to ensure the information it provides assists new employees to transition into VicSuper	4
• Revise employee role descriptions to ensure that they include VicSuper’s purpose, central operating principle and core values in order to attract employees that are aligned with VicSuper’s philosophy	s
• Revise our appraisal process to be more performance and development focused	4
Learning and development
• Continue to develop skills and competency criteria for Superannuation Advice, Member Benefits and Services and Employer Services teams	4
• Ensure all employees are trained in current EO legislative requirements	4
• Review and update the employee sustainability training module for existing employees	4
• Review and update VicSuper’s sustainability induction program for new employees	4
• Continue to train VicSuper’s employee sustainability group (FROGS) to meet ongoing learning and development needs	4
• Review and update FROGS induction training	4
• Develop and implement a relationship management program for the Superannuation Advice team	4
Employee engagement and satisfaction
• Implement actions in accordance with the employee engagement survey feedback	4
• Review the current employee performance management system to increase its usage and improve its effectiveness	4
Competitive benefits and remuneration
• Establish a Collective Agreement Working Group including employees representing all VicSuper teams, the CPSU and management in accordance with the release of revised industrial relations legislation	4
• Negotiate a new Collective Agreement to replace the current VicSuper Certified Agreement which expires in December 2008	4
• Revise and update the current Senior Managers’ employment contracts	s
Strategy 4: Maintain sound governance and accountability
Who runs VicSuper, what do they do and how are they accountable?
• Conduct a board self-assessment for 2008/09 and implement initiatives from the 2007/08 assessment	s
• Implement recommendations resulting from ‘Project Stepping Up’, an organisational change initiative for successfully managing VicSuper’s growth	s
• Establish a Business Efficiency Steering Committee to coordinate and oversee organisation wide efficiency, effectiveness and quality improvement program	4
• Review employee tools and training on how to apply VicSuper’s sustainability and supplier policies	s
How is members’ money safeguarded?
• Automate benefit payments process to increase efficiency	4
• Develop and implement an electronic incident and breach reporting database	4
• Implement the December 2008 provisions of the anti-money laundering (AML)/counter terrorism financing (CTF) legislation	4
• Review risk management and existing internal controls to ensure monies are safeguarded against possible losses through fraudulent behaviour	4
How can we ensure that the rights of members, employers and other stakeholders are respected?
• Monitor correspondence from stakeholders for positive and negative feedback and use this to make continuous improvement	s
• Where possible resolve any complaints without reference to external tribunals	s
• Complete a review of VicSuper’s stakeholders and determine opportunities for future relationships	s
• Develop an organisational stakeholder engagement approach	s
• Consider environmental risks in the 2008/09 biannual risk assessment reviews	4
• Establish a Risk Management Steering Committee and document risks and internal controls at a business unit level	4
• Establish an executive Crisis Management Committee in order to conduct a formal Business Impact Analysis on an annual basis.	s
Sustainability reporting
• Review sustainability report distribution process and recipient list	4
• Prepare and distribute VicSuper’s annual Sustainability Report 2008 to stakeholders	4
Strategy 5: Continue financial stability and growth
• Complete a review to improve the administration of the investment accounting function	4
• Obtain unqualified audit opinions with respect to our annual financial reports	4
• Meet operational performance targets with respect to contribution and fund growth	6
Strategy 6: Minimise our environmental impact
Policy, processes and training
• Develop a greenhouse gas inventory management plan for VicSuper	6
• Review and implement more efficient data collection practices for environmental management	s
• Ensure VicSuper’s environment and climate change policies are consistent with emerging government carbon pollution reduction policies and legislation	4
Resource usage
• Develop targets for VicSuper’s environmental impacts and communicate these targets and our progress to employees	6
• Use web based video conferencing for meetings and learning and development needs for regional employees to reduce travel required to Melbourne office	4
• Implement a new recycling and resource use program for employees	s
• Develop a water management plan for VicSuper	s
• Reduce the average number of pages of Statements of Advice in order to contribute to paper savings	s
• Install video and web conferencing for meetings between advice centres	4
• Establish environmental standards for Information Technology (IT) equipment purchasing	s
• Identify opportunities for future IT sustainability improvements, including estimates of savings	s
• Establish quarterly sustainability reporting for Information Technology including details of equipment brought in, used and disposed of	6
Energy and greenhouse gas emissions
• Finalise implementation of energy saving opportunities for Melbourne office	4
• Identify and implement other opportunities for greenhouse gas reductions in VicSuper Pty Ltd emissions inventory	4
• Maintain company operations as carbon neutral by first measuring, reducing and then offsetting all significant greenhouse gas emissions	4
• Incorporate the use of more sustainable materials into the fit out of our Melbourne office premises than what we have done in the past	6
Strategy 7: Foster effective partnerships
Suppliers
• Review the supplier engagement and purchasing program documentation and procedures	4
• Review the supplier engagement and purchasing first year results and determine priority areas for future engagement	s
Professional associates
• Complete implementation of supplier engagement and purchasing program for professional associates	s

4 Achieved 6 Not Achieved s Progress made

Meeting our 2008/09 commitments continued

Meeting our 2008/09 commitments continued

Meeting our 2008/09 commitments continued

Meeting our 2008/09 commitments continued

Our key commitments for 2009/10

GRI 1.2

For the year ahead, we have identified and will monitor a comprehensive list of commitments.

The following table summarises some of the new initiatives we will pursue to build a sustainable superannuation fund. Full detail about these and other commitments is provided in relevant sections of the full report. Our progress in meeting all of our commitments will be reported in next year’s sustainability report.

Commitment

Strategy 1: Deliver value

• Provide members with greater access to tailored superannuation advice by increasing the number of personal advice interviews by 8%

• Provide members with more opportunities to learn about superannuation by developing and producing a series of educational online videos for the VicSuper website

• Increase the total number of members who consent to electronic communication to 30% of total membership

• Increase the number of employers signed up for electronic communication to 90%

• Implement a quality scorecard system to measure service quality and efficiency of the Member Centre

Strategy 2: Invest for the long term

• Maintain ongoing measurement and annual reporting of our progress against the UN Principles for Responsible Investment

• Undertake trial carbon footprint reporting for property and private equity assets with an investment manager from each asset class

• Measure the effectiveness of VicSuper Fund's governance and engagement approach

Strategy 3: Attract, develop and retain great people

• Conduct a review and revise VicSuper policies according to best practice management of social performance indicators including human rights and diversity

• Calculate the value of VicSuper's community involvement program to better understand its contribution to VicSuper and the wider community

• 50% of employees to take community involvement leave

• Collate data, conduct focus groups then develop and implement an action plan in response to the 2008/09 employee engagement survey feedback

Strategy 4: Maintain sound governance and accountability

• Introduce an online system to increase the efficiency of sign-off process and procedures

• Provide quarterly reporting to the Trustee about the ongoing impacts of the global financial crisis on the superannuation retirement savings of VicSuper members

Strategy 5: Continue financial stability and growth

• Review the liquidity policy and liquidity management plan and update where appropriate

• Implement an investment back-office system to reduce associated paper use by 50%

Strategy 6: Minimise our environmental impact

• Review the implications of our office operations on forestry resources and recommend actions

• Review and document Information Technology (IT) equipment lifecycle management options to ensure that balanced sustainability outcomes are achieved

• Establish and provide quarterly sustainability reporting for IT including details of equipment brought in, used and disposed of

• Develop a greenhouse gas inventory management plan for VicSuper Pty Ltd

Strategy 7: Foster effective partnerships

• Develop an organisational stakeholder engagement approach

Strategy 1: Deliver value

Our purpose is to help people prepare
for and meet their income needs in later life. We aim to deliver value in achieving this purpose by providing the best possible service to our members and employers at the lowest possible cost.

Many issues affect our members’ ability
to save for a retirement income and our employers’ ability to meet their superannuation obligations. VicSuper’s influence includes the fees we charge, advice and education we provide in helping our members and employers to understand superannuation, the quality and accessibility of the services we provide, and the relevance of the superannuation plans we offer.

Our aim

Our aim is to help members understand their super so they can maximise the amount of savings they have at, and during, their retirement.

How does this contribute to a sustainable superannuation fund?

Improving our members’ economic wellbeing contributes to their ability to enjoy a better quality of life in retirement. They will be better able to access the services they need to support the retirement lifestyle they want, and more actively contribute to society,
the economy and the protection of the environment. By being better informed about their superannuation and exercising their choices, people will be able to make more appropriate decisions for their circumstances and share their experiences and knowledge to help others.

Our approach

We deliver value to our members and employers across a number of areas:

1. a simple and low fee structure

2. superannuation advice and education,
at no charge

3. outstanding service

4. relevant superannuation plans and benefits.

STRATEGY 1: DELIVER VALUE

Sustainability and superannuation
– a member’s perspective

Stefan Kaufman

VicSuper member

“I’m quite environmentally minded and fairly well behaved environmentally, but that is just me, the individual. To me sustainability is about broadening the horizon of concerns we factor into decisions we make as a society. It’s difficult to take account of uncertainty, but I know it’s better to have a plan than none at all.

“The future I face will be different to my parents’ experience. I believe that climate change is just the most obvious wave of a number of big challenges we will have to deal with. Things will be more uncertain and complicated.

“I see how powerful the markets are but I know I don’t own enough shares to make a difference on my own… at the same time, I see that there’s a lot of potential to have an impact, and super funds have that influence.

“We’ve all got to play a part in navigating an uncertain future and I want to see my super
fund take the opportunity to lead.”

Share your perspective with us by emailing sustainability@vicsuper.com.au

A simple and low fee structure

Fees have a significant impact on the superannuation savings people end up with – the higher the fees a member pays, the lower their retirement income.

The impact of fee capping on an account balance over the long term can be significant. Graph 1.10 is an example of the impact of two different fees on the same account balance. The graph demonstrates the cumulative impact that different fees
can have on the final value of investments over time.

VicSuper believes that everyone should
have access to high quality superannuation services for the lowest possible cost and we continue our commitment to keep our fee structure as low and simple as possible.

For further information on VicSuper’s management fee and other costs associated with operating VicSuper Fund, please refer
to the relevant VicSuper Combined Financial Services Guide and Product Disclosure Statement available from vicsuper.com.au

Our performance

Consistent with our ‘simple and low fee’ approach to covering the cost of our services, we did not increase our fee in 2008/09 despite the economic pressure of the global financial crisis.

Our management fee is the only source of income for VicSuper to cover our management and investment administration expenses incurred and paid for by VicSuper.

Our management fee is 0.5% pa of the average account balance over the year. The management fee is capped at $1,500 once an average account balance over the year reaches $300,000 or more.

Where VicSuper’s management fee is insufficient to recover management administration expenses incurred and paid for by the Fund during the year the shortfall is recovered from the Fund’s reserve account. This is called a common fund cost and was 0.1% for the 2008/09 financial year.

In addition, each investment option has an externally managed investment cost. VicSuper’s Cash Option has a Government guarantee charge deducted by banks where applicable. Externally managed investment costs are deducted by the managers of the unlisted trusts in which VicSuper invests from the investment return of the trust before it is received by VicSuper. These other costs vary depending on each investment option, may change from year to year and may include performance fees. In 2008/09 these other costs ranged from 0.16% to 1.17%. Other costs are not deducted from members’ account balances. See a VicSuper Combined Financial Services Guide and Product Disclosure Statement for more detail.

In keeping with our commitment to deliver value at the lowest possible cost, we have
a low fee structure that covers all VicSuper Fund benefit plans. For further information on VicSuper’s management fee and other costs associated with operating VicSuper Fund, please refer to the fee structure page at vicsuper.com.au

Advice and education

GRI 2.7

The economic climate in 2008/09 was
an unsettling one. Our advice and education services helped members to understand the impact of the global financial crisis and the economic impact on their superannuation savings.

One of our main challenges – and opportunities – is to encourage people to take an informed and active interest in their superannuation. The economic crisis has drawn people’s attention to their super account balances. We’ve encouraged members to take a long-term perspective when managing their super through this uncertain time and to take advantage of our advice and education options.

Members: our performance

Members are people who have a superannuation account with VicSuper Fund. Members’ needs vary according to their circumstances, so we have an advice team and Member Centre consultants who can assist depending on the help each member requires. A key issue that our pension members sought advice about this year were changes to pension payments made by the Federal Government (see the VicSuper website for more details).

Seminars and advice

Member seminars are generally held
at VicSuper’s Melbourne Advice Centre
or at public venues in metropolitan and regional Victoria.

Workplace seminars are held at the workplaces of VicSuper’s employers who request them. The implementation of a
new relationship management model and enhanced training for our advisers has resulted in an increase in the total number
of visits to employer worksites during the year (as shown in Table 1.10). This has
also provided the opportunity to tailor our services to meet the specific needs of members and potential members in
different workplaces.

VicSuper seminars focus on topical super issues. ‘Retirement options for ESSSuper members’ and ‘Transition to retirement’
were the most popular topics with
10 seminars each held during 2008/09.
The number of people attending seminars
in 2008/09 was less than in 2007/08
(see Graph 1.11) although the number of member and workplace seminars we held increased by 3.3%.

In 2008/09 we initiated a new system to communicate electronically with members, where possible. For example, the new system enables us to confirm attendance at VicSuper seminars via email or mobile phone messaging, rather than sending letters.

This allows members to receive information faster and reduces paper use.

FS 16

During 2008/09 we also presented four ‘Super for every superwoman’ member seminars and 18 ‘Super for every superwoman’ workplace seminars. These seminars aim to increase the attention females pay to their super savings and retirement planning and to assist in rectifying the anomaly of women having lower super balances compared with males in Australia.

Note: Calculations in this graph have been made using the fund fee calculator on the Association of Superannuation Funds of Australia’s website,
superannuation.asn.au

The calculator is intended to provide illustrative examples based on stated assumptions and is not intended as a substitute for professional advice. Actual outcomes will depend on a range of factors outside the control of ASFA, including future fund earnings and any changes in fees or charges.

The calculations do not take into account any
fees, other costs or insurance premiums. The calculations are based on an initial contribution of $10,000, with no additional contributions made. The calculator assumes that the amount contributed is not subject to taxation when received by the fund.

The net earning rate assumed is 7% after tax per year in nominal terms. It is assumed that the fees used in the calculations do not change for the periods illustrated (10 years and 30 years).

TABLE 1.10 location and number of vicsuper seminars

Advice Centre	Total		Bendigo		Blackburn		Geelong		Melbourne		Traralgon
	2007/08	2008/09	2007/08	2008/09	2007/08	2008/09	2007/08	2008/09	2007/08	2008/09	2007/08	2008/09
Workplace seminars	1,012	1,044	163	207	163	207	136	109	455	419	95	102
Member seminars	59	41	15	6	13	9	9	6	13	15	9	5
TOTAL	1,071	1,085	178	213	176	216	145	115	468	434	104	107

Advice and education continued

We also meet face-to-face with our members through personal advice interviews and general advice (or ‘walk-in’) interviews. Graph 1.12 shows that, as we increase accessibility and awareness of our services over time, face-to-face interviews increase. The increase in interviews for 2008/09 was partly due to our efforts to ensure that members were aware of the opportunity of consulting with an adviser about their superannuation during the global financial crisis.

The Superannuation Advice team simplified the way we present our statements of advice to make it easier to read and use less paper. Another new initiative in 2008/09 ensures our advisers confirm that members have the appropriate information available to them to implement the advice they receive.

An important part of our strategy for making our services more accessible is having advice centres available at a range of locations around Victoria. The table below shows that while our Melbourne Advice Centre conducted the largest number of personal superannuation advice interviews, 65.6% of our interviews were conducted from advice centres outside the Melbourne CBD.

Table 1.11 Number of VicSuper personal advice interviews by region

Advice Centre	2007/08	2008/09
Bendigo	1,164	1,314
Blackburn	1,076	1,602
Geelong	952	889
Melbourne	2,314	2,256
Traralgon	516	499
TOTAL	6,022	6,560

SO 1

FS 13

FS 14

The locations and responsibilities of our advice centres have been structured to enhance accessibility to Victorian communities. This includes careful planning in relation to the delivery of our services to ensure we maximise our positive contribution to the local community. We have a long term commitment to meet our members’ and prospective members’ superannuation needs in ways that are best for them.

Each advice centre is responsible for servicing the area surrounding it and each has plans in place to visit other suburbs and towns in their region. This ensures that members and prospective members have access to our services in their local area or
at their workplace. While our seminars and advice services are available and delivered to people from low-populated or economically disadvantaged areas, we do not have a specific strategy in place to provide additional services for these groups.

During 2008/09 our Super Advice team completed 1,356 personal advice interviews at sites external to our advice centres and
12 personal advice interviews via telephone/mail. The provision of these services allowed people unable to attend an advice centre due to illness, incapacity or distance to utilise VicSuper’s super advice service to receive tailored advice relevant to their needs and objectives.

To ensure our advice centres remain in
these communities for the long term, we have established the centres in large regional cities, have taken long term leases and employed local people. Prior to deciding where our regional advice centres would be located, we also assessed projected population growth, demographics and the location of VicSuper Fund members and employers throughout Victoria.

No new advice centres were established during the financial year as per our plan.
Our focus during the year has been to put
a new relationship management model in place to improve how we understand and serve our members at their workplace. The implementation of a new relationship management model and improved training has resulted in an increase in the number of visits to employer worksites during the year and the opportunity to improve the delivery of our services to their employees in their local area.

Member education

In 2008/09 we reviewed our member and employer education program. In future we will be developing a range of online learning tools and other publications to enhance understanding of the more complicated aspects of superannuation.

In order to further tailor education to our members’ needs, VicSuper continued with
its membership segmentation initiative which we began during 2007/08. This process segments our existing membership based on criteria, such as use of services, and account balance, allowing VicSuper to target our messages more effectively, providing greater value to our membership and reducing resource use.

Voluntary contributions

One of the indicators that we use to judge the effectiveness of our advice and education focus is the voluntary contributions made by our members. Despite the financial climate, in 2008/09 members continued to build their retirement savings voluntarily, adding a collective $662 million in salary sacrifice, personal contributions and transfers. Salary sacrifice contributions were only 0.5% below the amount contributed last year which indicates members maintained their regular savings plan during the global financial crisis. Post-tax contributions decreased by 48.7% this year compared to last year, suggesting members chose to channel funds elsewhere, such as reducing household debt.

Note: Voluntary contributions from self-employed members are from those who have not previously claimed a tax deduction.

In order to assist members in assessing
their own superannuation options, we continued to develop and add new calculators to VicSuper’s website. New calculators for 2008/09 were a commutable pension calculator, a salary sacrifice calculator and a super projection calculator. Visit vicsuper.com.au to view these calculators. The development of interactive worksheets is on hold pending budget and resource availability.

Advice and education continued

Advice and education continued

Employers: Our performance

Employers are those who pay their employees’ Superannuation Guarantee contributions to VicSuper Fund. VicSuper account consultants provide account management services to our employers.
We visited more employers in 2008/09
than the previous year (up 12.6%) and had increased levels of attendance at employer seminars (up 14.3%) throughout the year. This increase can be partly explained by the initiation of a superannuation education program for our employers’ new payroll and human resource employees during the year. We have run 10 sessions of this program
to date.

In order to make it more convenient for organisations to join VicSuper as participating employers, we continued to re-engineer the employer application process in 2008/09 and streamline the online sign-up process. The changes made this year have significantly reduced paper use and processing time for both VicSuper and our new employers.

Our commitments for 2009/10

In 2009/10 we commit to:

1. provide members with greater access
to advice and education services by conducting workshops and interviews
at an expanded range of locations

2. provide members with more opportunities to learn about superannuation by developing and producing a series of online educational videos for the VicSuper website.

Outstanding service

Providing outstanding service means being helpful, efficient and timely in all dealings with members and employers. This is something we take very seriously and is
a key indicator for our success.

Members: our performance

Member benefits and services

In 2008/09 we implemented initiatives to streamline assistance to members by making better use of electronic communications and our MembersOnline service.

In 2008/09, 12,833 new members registered to use MembersOnline and then subsequently logged on. The annual average number of members logging in to MembersOnline this year was 8.4% less than last year mainly due to the success of a promotion in March 2008 which resulted in 6,047 members logging in during one month.

This year we continued to encourage
more members to provide email addresses and consent for electronic communication. The number of members who consented to electronic communications was 14.3% of our total membership, up from just over 5% last year but slightly under our 15% target.

Electronic communications initiatives will continue to be a focus for 2009/10 as they improve service to members by using information technology more effectively, therefore increasing our efficiency.

Member Centre

In 2008/09, the number of calls into the VicSuper Member Centre decreased by 17% to 105,388, largely due to unusually high volumes of calls in 2007/08 in response to superannuation legislation reforms.

The number of calls answered within 60 seconds improved significantly (by 19.9%) compared to last year.

Member calls continue to cover a wide variety of superannuation-related queries including account balance enquiries, general fund information, rolling money into a VicSuper Fund account and making personal contributions.

Correspondence

We answered over 10,000 pieces of member correspondence in 2008/09, an increase of 67% compared to last year, with 90.9% of correspondence responded to within our service standard of 10 working days. This was a 20% improvement in our service level compared to last year.

Benefit payments

The number of benefits paid from VicSuper Scheme and VicSuper Beneficiary Account decreased by 10.2%. More members received payments in the previous year
due to legislative change in that period. Uncertainty associated with the global financial crisis may also have dissuaded members in 2008/09 from drawing on their superannuation. Our service standard of paying these benefits within 10 working days increased to 89.4%; a 6.5% improvement on 2007/08 due to less applications received and system enhancements that make processing times quicker.

Member satisfaction

PR 5

In the past VicSuper engaged an independent research firm to conduct research to determine members’ satisfaction with VicSuper. For several years the majority of members surveyed through this process rated their satisfaction with VicSuper as ‘High’ to ‘Very High’. Monthly phone surveys were completed for half of the 2008/09 financial year. We have subsequently halted this research pending a review to determine whether there is a more resource efficient way to track member satisfaction and receive more effective feedback.

Employers: our performance

A ‘contribution batch’ is the term used by VicSuper to describe an employer contribution payment and the accompanying member details. The number of members in a batch can vary from one up to 40,000. Each batch is received and processed in-house by our Employer Services team.

In 2008/09 the number of contribution batches received electronically (from employers on behalf of their employees) increased to 19,432 from 10,421 in 2007/08. This 86% increase was primarily due to the introduction of a data interface between state government schools and VicSuper and resulted in reduced turnaround times and resource use for VicSuper and our employers. To date we have 1,120 of 1,550 schools using this system and we expect this to rise to 100% in 2009/10.

Our commitments for 2009/10

In 2009/10 we commit to:

1. achieve paper and time savings by integrating new mailroom scanning technology with back office processes

2. implement a quality scorecard system to measure service quality and efficiency of the Member Centre

3. increase the number of employers signed up for electronic communication to 90%

4. increase proportion of new employers joining online (in preference to paper based applications) to 70%

5. open 200 VicSuper Beneficiary Accounts via the online process when implementing personal advice

6. increase the electronic processing of contribution batches by a further 10%
to 30%

7. increase the total number of members who consent to electronic communication to 30% of total membership.

Relevant superannuation plans and benefits

DMA

VicSuper Fund members can choose from four superannuation benefit plans to manage their superannuation savings. We have designed these plans to be flexible enough to meet differing needs, while being simple and transparent to help members understand what plans we offer and how they work. VicSuper’s benefit plans offer members:

• the ability to spread their savings across any combination of VicSuper’s seven investment options covering the varying degrees of investment risk

• a low fee structure

• access to manage their accounts online

• access to general and personal superannuation advice

• comprehensive insurance cover
(not applicable to VicSuper Pensions)

• flexible contribution options
(not applicable to VicSuper Pensions).

Further information about these benefit plans can be found at vicsuper.com.au

Insurance is one of the most undervalued, yet important, benefits offered to members. We think it is vital for a sustainable superannuation fund to give its members
the opportunity to have cover that is cost effective and appropriate to their needs – it helps protect their financial position, as well as that of their families, in the event of illness or death.

More information on VicSuper’s insurance offerings is available on the insurance section of our website.

Our performance

One of VicSuper’s ongoing commitments is to actively encourage members to consider their insurance options and ensure they have appropriate knowledge and information to make informed decisions. Having adequate income protection and death and disability insurance provides a safety net to help members support themselves and their families in the event of injury or illness. We continue to communicate the importance of insurance cover and the benefits of having insurance cover within the superannuation environment.

The number of members with insurance cover increased slightly to 57.6% of VicSuper Scheme members, compared with 55.9% for 2007/08. At 1 July 2008, VicSuper Scheme members’ death and disability insurance cover was automatically increased from one unit to three units. This was an important change to the level of automatic cover provided to our members as many Australians are underinsured when it comes to death and disability insurance. The provision of cover through a group life policy allows members to obtain adequate levels of cover at a competitive cost through their superannuation fund. During 2009/10 we will continue to educate members about their insurance cover, and the options available through their VicSuper account.

The insurance cover described here is provided under group life insurance and group salary continuance policies issued
by AXA Group Insurance and underwritten by the National Mutual Life Association
of Australasia Limited (‘the Insurer’)
ABN 72 004 020 437, AFS Licence No. 234649. All insurance cover, including the automatic cover, is provided subject to an individual meeting policy conditions.

Our commitments for 2009/10

In 2009/10 we commit to:

1. provide tailored communications to different member segments to increase understanding of the importance of insurance cover (particularly the benefits of age-based cover).

Strategy 2: Invest for the long term

PRI 6

A new member of VicSuper Fund joining
the workforce for the first time will have an investment timeframe of more than
70 years spanning their working life and retirement years. Other members of the Fund will have shorter investment timeframes but on average they will generally exceed 20 years. This is an important reason for VicSuper to invest for the long term.

The history of investing shows that company shares provided the highest investment returns of all asset classes over the long term. This history also shows that although returns from equities are generally more variable than the returns from other asset classes in the short term, this variability of returns, or risk, reduces the longer the period of investment.

This means that it makes sense for a superannuation fund to provide members with an opportunity to invest a high proportion of their retirement savings in company shares. It also makes sense to incorporate sustainability into this long-term approach to investing because long-term increases in shareholder value require sustainable global economic development.

Our aim

We aim to build our members’ retirement savings sustainably, providing a simple
range of investment strategies that cover
the varying levels of risk and expected
return that members seek for their superannuation savings.

Each investment strategy (investment option) has clearly defined risk and return objectives measured over a rolling ten year period which is generally enough time to take into account year-to-year market fluctuations for options with high allocations to equities.

Our investment policy acknowledges the potential for sustainability issues to materially impact investment returns over the medium to long term. We aim to implement this policy with minimum cost in order to maximise the returns that we pass on to members.

How does this contribute to a sustainable superannuation fund?

Our focus on the long term together with how we invest in equities and other asset classes will play a part in the journey to becoming a sustainable superannuation fund.

Listed equities

A company’s value, and therefore investment performance, is determined by its ability to generate cash over the long term. This means that the value of a company will be determined by its capacity to earn cash in excess of the amounts required to meet its liabilities, including external costs of business such as tax or the cost of carbon. This cash
is used to either reinvest in value-creating growth within the business or to pay dividends to its shareholders.

Historically company shares have provided higher long-term returns than other asset classes such as property, fixed interest securities and cash. While we expect this superior performance of shares to continue over the long term, only those companies which understand and address emerging sustainability challenges – and opportunities – in their business strategies are likely to succeed in increasing long-term shareholder-value.

The global financial crisis which emerged in late 2007 following poor lending practices of major financial services companies in the U.S.A, resulting in significant falls in company earnings and value in 2008/09, is one of many material sustainability issues facing VicSuper and other institutional investors.

The urgent need for a global agreement on climate change is another material sustainability issue which will impact long term investment returns of all asset classes.

EC 9

As a primarily passive universal investor
(the concept of a universal investor is described in the box on this page), VicSuper maintains investments in a broad selection
of companies around the world. A full list
of company holdings can be found on our website. VicSuper has an interest in these companies successfully developing sustainable business strategies that enable them to maximise their potential to generate long-term cash flow and create long-term shareholder value.

Other asset classes

In addition to investing in listed shares
or companies, VicSuper invests in unlisted companies (private equity), property (including traditional property, infrastructure and sustainable agriculture and ecosystem services), fixed interest (bonds), and cash. Sustainability risks and opportunities
impact all of these asset classes, and we
are gradually incorporating sustainability considerations into the selection and management of securities within these
asset classes.

What is a universal investor? EC 9 The concept of universal ownership refers to large institutional investors who, because of their significant holdings in a broad range of global companies and other assets, can be said to own a segment of the total investment market. Due to their extensive investments, these investors have a vested interest in the long-term health of the economy as a whole, not just individual companies, so cross-market, long term issues such as climate change or water scarcity are especially relevant for them. This is particularly true of funds like VicSuper Fund that primarily use passive investment strategies. Adapted from The Carbon Trust and IGCC publication A climate for change II: A trustee’s guide to addressing climate risk 2009.

Our approach

To achieve our aim, we focus our investment approach on:

1. long-term, low-cost investing

2. member investment choice

3. sustainability investing

4. exercising our rights of ownership and sharing our knowledge.

STRATEGY 2: invest for the long term

Sustainability and superannuation
– an investment adviser’s perspective

Susheela Peres da Costa

Manager, Investment Governance
Regnan Governance Research and Engagement

“Superannuation funds are vital contributors to global sustainability. Companies have historically been rewarded by short-term profits without care for long-term effects or impacts outside of themselves.

“Responsible investors are now starting to take into account the externalities that have traditionally been ignored. Superannuation investors understand long-term performance is critical.

“The exciting thing about superannuation funds is the enormous reach they have. It’s really interesting that contributions go towards investments such as water rights, reforestation and biodiversity credits – things you can’t readily access via the sharemarket. There is no doubt that when
I retire in 30 years or more the things that sustainability investors are involved with now will be important and valuable. It’s a comfort to me that super funds are looking that far ahead.”

Share your perspective with us by emailing sustainability@vicsuper.com.au

Long-term, low-cost investing

The long-term investment timeframe of most VicSuper Fund members allows us to put the most important element in any investment strategy to best use: time.

What is the ‘long term’? VicSuper discusses the ‘long term’ frequently in relation to investments, sustainability and our business continuity. But what is the long term? A person’s involvement in superannuation can last their entire life from the moment they take their first job in paid employment. A person with a life expectancy of 90 who begins working at 20 may be accumulating and drawing down from their super for 70 years. This is why VicSuper has a longer term strategic plan of 10 years, updated annually, instead of the traditional and often static three year timeframe. This time horizon allows VicSuper to conduct its business of managing retirement funds effectively by staying focused on economic, environmental and social developments which may add to or detract from investment performance over the long term. So, when we talk about the long term, we are talking about 10 years and beyond.

The history of investing and investment processes shows that it is very difficult (and can be expensive) for any investor with a long-term investment timeframe to actually ‘beat’ the return of equity markets by regularly trading securities or attempting to time variations in market sentiment which influence short-term swings in share prices. This is why VicSuper predominantly uses a passive investment management approach to invest in the major asset classes (equities and fixed interest).

What is ‘passive investment’? This style of investment management seeks to achieve investment returns equal to the return of the overall financial market, represented by a specific grouping of listed shares or fixed interest securities (known as an index). Investing in this way allows us to pay less attention to the ups and downs of market cycles (often driven by speculation), which lead to wide fluctuations in the prices of individual investments such as company shares.

The majority of VicSuper’s international and Australian equities portfolio, and our international and Australian fixed interest portfolios, are managed on an index basis. Vanguard Investments Australia Ltd manages our passive international equities portfolio. VicSuper’s internal investment managers manage our passive Australian equities, cash and Australian fixed interest portfolios.

Passive investment management is a low cost form of investing which means VicSuper can maximise the investment returns passed on to members. VicSuper’s investment strategy also allows for limited active investment management, which we use for our property portfolio, sustainability investing and private equity. Active investment managers aim to outperform index returns by investing in individual assets they believe will achieve higher returns on aggregate than the broad index.

Integrating economic, environmental and social considerations into investments

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PRI 1

Part of our strategy of long-term, low-cost investments is the integration of sustainability considerations into investment decisions.

When we refer to sustainability considerations, we are referring to integrating the following issues into our investment process:

• environmental issues such as climate change and environmental pollution

• social issues such as human rights and community interactions

• traditional corporate governance issues, such as executive remuneration and the independence of audit committees.

We believe that the long-term financial performance of companies and other assets that we invest in is shaped by business strategies incorporating these areas.

Long-term, low-cost investing continued

GRI 1.2

EC 2

SO 5

PRI 1

PRI 4

PRI 5

The financial implications of climate change

VicSuper’s commitment to assessing and managing the impact of climate change
on the Fund’s investments was further enhanced in 2008/09.

VicSuper invests over $6 billion in companies, property, infrastructure and other investments in Australia and around the world. Climate change is a material business issue for a significant proportion of these investments in terms of physical climate change impacts, regulatory risk and technological opportunities, amongst other impacts. In identifying climate change as both an investment risk and opportunity for VicSuper Fund our focus includes the direct and indirect opportunities around allocating capital, future regulations, fiduciary responsibility, risk of loss of assets or financial downgrades due to natural disaster, reputation risk and opportunity and competitiveness issues.

VicSuper has undertaken a variety of initiatives to address climate change to deliver value for members.

During 2008/09 VicSuper instigated and seeded the Carbon Aware International Shares Fund, an index fund developed and managed by Vanguard Investments Australia with research by Trucost.

VicSuper was again a signatory to the Carbon Disclosure Project, seeking company disclosure of investment relevant information about climate change management strategies.

We also continued our active involvement in the Investor Group on Climate Change Australia/New Zealand (IGCC). The IGCC conveyed its support to the Federal Government for a 25% to 40% cut in Australia’s greenhouse gas emissions by 2020 (against a baseline year of 1990).

VicSuper’s recognition of climate change as a significant business risk is encapsulated in the VicSuper Climate Change Policy.
This policy covers the operations and investments of VicSuper and VicSuper Fund.

We have started quantifying the financial implications of climate change on our investments by publishing The VicSuper Carbon Count for the last two years. This report examines the greenhouse gas emissions and risk exposure of companies in the S&P ASX200 as estimated by Trucost1. We also engaged Trucost to measure the carbon footprint of all VicSuper’s international and Australian listed equities. We used the results from this to estimate the carbon emissions of the listed equity portion (if applicable) of each member’s account balance in both 2007/08 and 2008/09 for inclusion on member’s annual benefit statements.

We started the assessment of the Fund’s carbon footprint with listed equities because it forms the biggest portion of VicSuper’s assets under management, and because listed companies are simpler to measure and compare due to the availability of publicly reported information. The other asset classes in which VicSuper invests also have carbon footprints, so we are beginning to expand the assessment into different asset classes. In 2008/09 we initiated discussions with one of our property managers and one of our private equity managers to pilot carbon footprinting for reporting in the 2009/10 financial year. Our aim is to estimate the carbon footprint for VicSuper Fund over
all asset classes in the future.

We again made our company operations carbon neutral for 2008/09, and have an action plan to look at reducing VicSuper Fund’s carbon footprint and communicating this to our stakeholders.

Long-term, low-cost investing continued

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PRI 1

VicSuper has Sustainability, Environment, Climate Change and Supplier Engagement policies. These are publicly available on the ‘policies’ section of the VicSuper website and apply to VicSuper’s direct operations and investments.

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We integrated economic, environmental and social considerations formally into 17.4% of the assets of the Fund in 2008/09. This is an increase from 14.7% in the previous year despite the further fall in share prices in equity markets around the world during 2008/09. The major reasons for a greater share of the equity portfolio allocated to sustainability were:

• an increase from 10% to 20% of
each investment option allocated to international equities adopting sustainability driven business strategies

• an increase in investment in Future Farming Landscapes.

This figure above does not include the companies covered by our engagement and proxy voting activities.

The majority of VicSuper’s investments (by dollar value) that integrate sustainability are listed equities. We also integrate sustainability considerations into investments in private equity and property. Details can be found in Table 2.10.

We further integrated sustainability considerations into our investment process through our use of Regnan Governance and Engagement Pty Ltd (Regnan)2 to engage Australian companies on their environmental, social, and corporate governance risks and opportunities. We use Hermes Equity Ownership Services to engage international companies on their governance risks and opportunities and in 2008/09 we began to use them to engage with companies in emerging markets. Details are found in table 2.10 and the Exercise our rights of ownership and share knowledge section of this strategy.

GRI 4.12

In addition to these activities, as a signatory to the United Nations Principles for Responsible Investment (UN PRI), we have publicly committed to systematically including sustainability in our investment policies and procedures. We are also a member of ESG Research Australia, a newly formed Australian collaboration between asset owners and asset managers aimed at encouraging investment research that takes account of the impact of environmental, social and governance issues on long-term investment.

Looking ahead we aim to:

• continue investigating the sustainability screening of fixed interest investments

• investigate further opportunities for sustainability investment in equities

• continue working towards a full understanding of the sustainability profile of the assets in which VicSuper invests. We may undertake further work with Trucost on carbon and environmental footprinting of listed equities and other asset classes

• develop an understanding of the water footprint for VicSuper Fund. Our involvement with the UNEP FI water and finance workstream is contributing to our knowledge in this area and research continues within the Future Farming Landscapes investment of VicSuper Fund to understand water impacts.

Long-term, low-cost investing continued

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PRI 1

Table 2.10 Sustainability assessment undertaken in each asset class

Asset class	Process for assessing and screening sustainability risks
Cash and fixed interest	No sustainability screening.
Listed equities	Internally-managed Australian equities: Regnan engages companies on VicSuper’s behalf on certain environmental, social and governance risks. Regnan estimates company exposure and engages with companies if the risk is material. Proxy voting on governance issues is undertaken for all Australian listed equities. Vanguard Sustainability Leaders Australian Shares Fund and the Vanguard Sustainability Leaders International Shares Fund: Both international and Australian portfolios have a best-of-sector sustainability screen based on economic, environmental, social, and governance issues which is reliant on the Sustainable Asset Management (SAM) proprietary process. Generation Investment Management Global Equity Fund: All companies in the Global Equities Fund are selected using deep bottom-up fundamental analysis based on material financial and long-term economic, environmental, social and governance risks and opportunities. Carbon Aware International Shares Fund: VicSuper instigated and seeded the Carbon Aware International Shares Fund with an allocation of $150 million to invest in a portfolio of 700 international companies which seeks the investment returns of the MSCI World Developed ex-Australia index, with a collective target of a 50% reduction in greenhouse gas emissions compared to the broad index. Vanguard international passive equities: Hermes Equity Ownership Services conducts proxy voting and engages companies and regulators on sustainability issues on VicSuper’s behalf including those companies in emerging markets. Other assessment: All listed equites were assessed for their carbon footprint by Trucost as at 30 June 2009.
Private equity	Cleantech Australia Fund: The fund VicSuper invests in is a clean technology venture capital fund seeking environmentally efficient outcomes. Emerald Cleantech Fund II LP: VicSuper invests in a clean technology venture capital fund seeking environmentally efficient outcomes. Climate Solutions Fund: Invests in companies and products focusing on renewable energy generation and distribution, energy efficiency and demand destruction, carbon markets and climate-related financial services. Macquarie Private Equity (VicSuper) Trust: No formal process is undertaken, however we have an allocation to clean technology investments through Starfish Ventures and we are aware of one investment manager who has undertaken a carbon footprint of their portfolio companies.
Property	Commercial property: Sustainability practices are integrated into property management for traditional property investments such as office, retail and industrial assets. This includes reporting the building energy ratings of the buildings we part own. Agriculture and ecosystem services: VicSuper’s investments in farming and ecosystem services through the Future Farming Landscapes investment managed by Kilter Pty Ltd take into consideration many environmental and social issues around water, biodiversity, sustainable agriculture and local employment.

Long-term, low-cost investing continued

Our performance

The global financial crisis resulted in another turbulent year for Australian and global equities in 2008/09.

The aftermath of the crisis has been a rapid deterioration in economic conditions which has flowed through to the pricing of assets in the Australian and global financial markets. In the 2008 calendar year over 40% of the value of the world’s equity markets was lost. In the first half of 2009 about half of this loss has been recovered through share price increases. All super funds have again experienced significantly reduced returns compared to previous years and most reported negative returns for investment options with allocations to equities and property for the financial year ending
30 June 2009. This short term volatility is one of the important reasons that members and super funds need to focus on the long term, and members should invest according to their tolerance to risk.

VicSuper has a well established investment policy in place, which we maintained throughout the last 12 months. VicSuper follows a primarily passive investment management approach which means for most investments we seek to achieve investment returns equal to the return of a relevant financial market. In 2008/09 VicSuper Fund’s net earning rates were close to these financial market benchmarks. We plan to carry over our commitment to refresh the VicSuper Investment Manual to 2009/10 and will also look to finalise a Statement of Sustainability Investment Principles in this period.

Graphs 2.10 and 2.11 show the annual net earning rate for each of VicSuper’s investment options for VicSuper Scheme, VicSuper Beneficiary Account and VicSuper Pensions. They demonstrate how returns can vary significantly from year-to-year, especially in options with a higher allocation to growth assets (listed equities or company shares) such as the Balanced, Growth, Equity Growth and Equity Growth Sustainability investment options.

Net earning rates are calculated by using
the gross annual investment return less tax (up to 15%) on the return. There is no tax payable on the returns of VicSuper Pensions.

Long-term, low-cost investing continued

Graphs 2.12 and 2.13 show the five-year compound average net earning rates for investment options in VicSuper Scheme, VicSuper Beneficiary Account, and VicSuper Pensions superannuation benefit plans.

Graph 2.14 shows 10 year compound average net earning rates for VicSuper Scheme and VicSuper Beneficiary Account for the Cash, Capital Stable, Balanced, Growth and Equity Growth options. VicSuper Allocated Pension started in April 2000 so 10-year data is not available. As long term investors this is the most important time horizon over which to measure performance.

On 1 July 2004 VicSuper changed from crediting rates (from which VicSuper’s management fee of 0.5% had already been deducted) to net earning rates, which do not include the deduction of VicSuper’s management fee. VicSuper’s management fee is now deducted directly from member accounts as at 30 June each year or on closure of an account.

For the purposes of graphs 2.10 to 2.14, crediting rates for the financial years from 1998/99 to 2003/04 have been recalculated to be consistent with the methodology
for calculating net earning rates used from
1 July 2004.

Long-term, low-cost investing continued

Please note that past performance is not a reliable indicator of future performance.

Further information about how we manage the financial assets of VicSuper Fund can be found in Strategy 5: Continue financial stability and growth.

Our commitments for 2009/10

In 2009/10 we commit to:

1. seek and assess opportunities to further reduce VicSuper Fund’s carbon footprint

2. continue to measure and publicly report our progress against the UN PRI

3. publicise how we progress against the
UN PRI on an annual basis

4. review and update the VicSuper Investment Manual.

Member investment choice

While most of our members have a long investment-timeframe, for some it is relatively short. Members with a shorter timeframe may, for example, be approaching retirement and intend using some of their superannuation savings to reduce household debt. For these members it is important to have an investment option more likely to provide annual returns that are fairly consistent from year-to-year and less likely
to produce negative returns in any one year compared with other investment options.

Accordingly, VicSuper offers members a range of investment strategies, or investment options, designed to cater for members’ different needs.

VicSuper offers seven investment options, and members can choose to invest their savings in one or more of these options. Members can therefore select an appropriate mix of asset classes to build their savings over the long term, based on their risk and return profile. Beginning with an investment option that has no allocation to the high risk/high-return equity asset class, the options have a graduated increase in allocation to equities, thereby catering for the different risk preferences and circumstances of members. VicSuper’s investment options are listed in the table below.

We seek advice from asset consultants Frontier Investment Consulting Pty Ltd (Frontier) to assist us in determining the strategic asset allocations for each investment option. The investment return objectives are based on modelling by Frontier. For further information please contact VicSuper or visit our website for a Combined Financial Services Guide and Product Disclosure Statement.

Our performance

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One of our challenges is to get more people to take more notice of their superannuation savings. Ironically, the events of 2008/09 have assisted us in this. As discussed in Strategy 1: Deliver value, our aim is to help people prepare for and meet their income needs in later life by making sense of their superannuation. This includes educating and empowering our members to understand the investment options that are available
to them.

Due to the impact of the global financial crisis, annual investment returns from company shares and property were negative for the 2008/09 financial year. This was reflected in the annual investment return for those VicSuper investment options that have an allocation to these asset classes.

The majority of our members in VicSuper Scheme, who generally have long-term investment horizons, either chose to leave their savings in our default option – the Growth Option – or did not make a choice and hence their savings remained in the default option. With a view to the time they may have until retirement, staying the course in this option is likely to have been the best approach. The alternative of changing to an option or mix of options with a lower exposure to equities may mean missing the benefits of a potential global economic recovery. For example, members who changed to VicSuper’s Cash Option near the bottom of the equity valuation decline in March 2009 and have not switched back to an option with an exposure to equities may have missed the benefit of the rebound on global sharemarkets commencing in March 2009.

Member investment choice continued

Graph 2.15 shows that 44% of members’ savings combining all benefit plans are invested in the Growth Option, with the next biggest percentage in Cash (21%). In the last 12 months a greater than usual number of members have switched from options with higher allocations to equities into the Cash Option.

Members in VicSuper Beneficiary Account and VicSuper Pensions predominantly exercise investment choice. VicSuper Beneficiary Account members are generally people in the last decade of their full-time working life and are increasing their superannuation by salary sacrificing and making rollovers from other funds. VicSuper Pension members may be in transition to full retirement or retired from the workforce and usually invest some of their retirement savings in low risk options as they have a lower tolerance and capacity (due to age) to accept risk or volatility in returns.

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Graph 2.16 shows the net market value of investments by asset class, including allocations to sustainability leaders.

Member investment choice continued

EC 2

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To inform members about the potential impact of climate change on their retirement savings, we included a new section in members’ 2007/08 Annual Benefit Statements. This section reported the estimated carbon emissions generated by the publicly listed shares portion of a member’s average VicSuper Fund account balance. We have repeated the process in 2008/09.

Our objective is to understand and manage the carbon emissions footprint of VicSuper Fund and to identify potential risk to
future returns. This process will assist us
to continue to address the investment risks and opportunities that climate change and other sustainability challenges present to member assets.

We began publicly reporting carbon emissions for listed shares as they comprise the largest proportion of VicSuper Fund assets. In addition, the carbon footprint of listed shares is the easiest to estimate due
to the greater availability of publicly reported emissions information.

Table 2.12 Change in carbon efficiency for VicSuper Fund listed equities

Fund	Carbon footprint (tCO2-e/$ million)		Year-on-year change (improvement in carbon efficiency)
	2008	2009
Generation Investment Management Global Equity Fund	150.50	136.39	▲ 9.4%
Vanguard Sustainability Leaders International Shares Fund	286.29	236.64	▲ 17.3%
Vanguard international passive equities	348.45	293.39	▲ 15.8%
VicSuper Australian listed equities	405.02	347.98	▲ 14.1%
Vanguard Sustainability Leaders Australia Shares Fund	411.60	366.67	▲ 10.9%
Total VicSuper Fund – listed equities	355.11	312.62	▲ 12.0%

The data in table 2.12 shows the year-on-year change in carbon efficiency per $1 invested per investment option between 2008 and 2009.

The carbon footprint is the total amount of greenhouse gas emissions that a company emits both directly (for example from operating and manufacturing) and indirectly (for example from preparing and transporting raw materials), expressed as a carbon dioxide equivalent (CO2-e) per million dollars of turnover.

The table shows that each of VicSuper’s listed equity funds have improved their performance in terms of carbon efficiency from 2008 to 2009. The improvement
was due to both a 6.4% reduction in carbon emissions attributable to the funds and
an 11.7% increase in turnover generated by the underlying companies. One result that
may be surprising is that the Vanguard Sustainability Leaders Australia Shares Fund, which is a concentrated portfolio of companies, has a higher carbon footprint than the VicSuper Australian listed equities fund. This is because the companies included in the Vanguard Sustainability Leaders Australia Shares Fund are selected based on their leadership across a range of economic, environmental and social factors with carbon management being just one of these factors. The Carbon Aware International Shares Fund and the Vanguard Emerging Markets Shares Index Fund do not yet have
a full financial year track record so are not included in the table.

In 2009/10 we aim to expand our carbon footprint calculations to include asset classes such as property and private equity.

Trucost previously calculated the environmental footprint of VicSuper’s listed equity investments and we expect to review and report this performance in 2009/10.

For more information on how the account balance emissions are calculated, please visit vicsuper.com.au/carbonfootprint.

Our commitments for 2009/10

In 2009/10 we commit to:

1. continue carbon reporting on member benefit statements

2. trial carbon footprint reporting for property and private equity assets with an investment manager from each asset class.

Sustainability investing

DMA

FSSS

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PRI 3

At VicSuper, sustainability investing is an approach that, when applied to investments in company shares and other assets such
as property and infrastructure, considers
the implications of economic, environmental and social challenges and opportunities for long-term profitability and shareholder value.

All companies within their particular industries face sustainability challenges. For example, the food production industry needs to be sensitive to the water intensity of its activities due to water availability concerns and potential costs related to increasing water prices. The ways in which food companies respond to this challenge will determine their ability to remain competitive, innovative and maximise shareholder value.

Over the long term, companies that best address their material sustainability risks and invest in related opportunities are more likely to increase long-term shareholder value, thereby providing a better outcome for the environment and society through sustainable economic development. This is particularly relevant to VicSuper as a universal investor.

International and Australian equities

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For the year ending 30 June 2009, VicSuper allocated 10% of the Fund’s Australian equities portfolio and 20% of the international equities portfolio to public and private companies that are considered leaders in integrating sustainability into their business strategy. In addition, members can choose to invest up to 100% of their savings in such companies by selecting the Equity Growth Sustainability Option.

VicSuper also engages with companies on a range of sustainability risks and opportunities with the intent to raise company management’s awareness of these risks and their importance to VicSuper as a share owner. Refer to section 4 of this strategy: Exercise our rights of ownership and share knowledge for more information.

Of the 9.2% of total assets invested in sustainability listed equity investments, 6.7% are screened on economic, environmental and social issues such as corporate governance and employment practices, environmental performance and human rights. The Carbon Aware International Shares Fund accounts for the remaining 2.5% of assets screened on environmental criteria.

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All managers regularly report their progress
to us.

Vanguard Sustainability Leaders Australian and International Shares Fund

Through two Vanguard Investments Australia Ltd (Vanguard) share funds, VicSuper invests in a selection of large Australian and international listed companies that are rated by Sustainable Asset Management (SAM) as sustainability leaders in their industry sector.

SAM selects sustainability leaders that are doing better than their industry peers at managing their economic, environmental, social and corporate governance risks and opportunities.

Areas assessed include:

• labour practice and management

• supply chain management

• environmental management

• human rights.

These companies are considered ‘best of sector’ in terms of sustainability, and are expected to generate returns in excess of market benchmark indices over the long term.

SAM assesses its list of companies every
12 months, with the potential to remove
a company from the list in an intervening period if that company materially shifts
its business strategy away from being sustainability-oriented.

As at 30 June 2009 the value of our investment in the Vanguard Sustainability Leaders Australian Shares Fund was
$138.9 million and the Vanguard Sustainability Leaders International Shares Fund was $164.5 million.

More information on SAM and its screening process can be found at sam-group.com

Generation Investment Management

VicSuper has an allocation to the Generation Investment Management Global Equity Fund, managed by Generation Investment Management LLP (Generation).

The fund is a concentrated portfolio of 30 to 50 companies. Generation research indicates that sustainability issues will impact a company’s enduring ability to generate cashflows, therefore sustainability must be fully integrated with traditional equity analysis to achieve the best long-term investment results. This is why sustainability research plays an important role in Generation’s selection of companies included in the portfolio. Generation conducts extensive thematic research into issues such as poverty, migration, climate change, public policy and ecosystem services and their impact directly or indirectly on long-term shareholder value.

Generation was formed by the Hon. Al Gore, the Nobel Prize laureate and former Vice-president of the United States of America, and David Blood, the former CEO of Goldman Sachs Asset Management. Al Gore is the Chairman of Generation, and David Blood is the Senior Partner.

As at 30 June 2009 the value of our investment in the Global Equity Fund was $111.18 million. This is almost $50 million more than in 2008 due to an additional investment in the Fund by VicSuper.

More information on Generation Investment Management and its research process can be found at generationim.com

Sustainability investing continued

Our performance

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HR 1

In 2008/09 VicSuper invested $585 million (9.7% of total assets) into sustainability-rated investments in the equities asset class, comprising predominantly listed companies. This includes an investment of $28.4 million (up from $19.4 million in 2007/08) in sustainability-oriented private equity.

The majority of the sustainability listed investments were managed by Vanguard with companies selected for inclusion independently assessed by Swiss-based Sustainable Asset Management (SAM). Generation Investment Management also managed an international equity portfolio.

In addition, in 2008/09, VicSuper commenced a new investment when Vanguard Investments Australia and Trucost, a UK-based environmental research specialist, developed at VicSuper’s request the Carbon Aware International Shares Fund (see Table 2.10 for more details). The portfolio’s emissions are measured by Trucost.

Private equity

PRI 1

$10 million has been committed through Emerald Technology Ventures’ Emerald Cleantech Fund II, and US$50 million has been committed to an investment in the Generation Investment Management Climate Solutions Fund.

We have committed our international sustainability private equity allocation to ‘early-stage’ and ‘expansion stage’ companies whose products or services contribute towards and/or assist in using resources more efficiently, and reduce the ecological impact of economic development.

We have also allocated funds to two Australian private equity managers that invest in sustainability-related investments. This occurred in 2006/07 when we committed $30 million to the Cleantech Ventures Cleantech Australia Fund and $20 million to the Starfish VicSuper Cleantech Companion Fund. All sustainability private equity investments focus on early-stage and expansion-stage investments in the ‘cleantech’ sectors, namely, energy, materials, water and agricultural technologies.

The Generation Investment Management Climate Solutions Fund seeks to invest in companies and products focusing on renewable energy generation and distribution, energy efficiency and demand reduction, carbon markets and climate-related financial services. At 30 June 2009, the value of our investment in this fund was $19.7 million.

Our performance

PRI 6

VicSuper has been working to understand more fully the contribution our clean technology investments make to sustainable economic development. We had initial discussions with TruCost on how to establish processes to measure the environmental footprint of private equity funds. We have made no new cleantech private equity investments in 2008/09.

Property

PRI 1

PRI 2

PRI 3

VicSuper invests in four property funds.

VicSuper invests in the Colonial First State Global Asset Management (CFSGAM) Direct Property Investment Fund (DPIF), an unlisted unit trust. We have engaged with CFSGAM on the inclusion of sustainability measures in the management and operation of properties in the DPIF. In turn, CFSGAM is engaging its asset managers to further integrate sustainability through the supply chain. The performance of each property in the portfolio is measured against sustainability criteria. As at 30 June 2009, 67% of the office portfolio was rated with a resultant weighted average NABERS4 rating of 3.6.

VicSuper also invests in property through the Investa Commercial Property Fund (ICPF), an unlisted property fund. The fund invests in office buildings in Australia, and incorporates sustainability considerations into the management of all of its buildings. As at
30 June 2009, ICPF has a weighted average NABERS energy rating of 3.7.

Other property managers VicSuper uses are Eureka Funds Management and Diversified NZ Property Group. Both of these fund managers integrate environmental, social and governance criteria into the selection and management of properties, but hold hotel and industrial assets which are not rated by NABERS.

Our performance

FS 3

FS 10

PRI 6

We have made no new property investments in 2008/09. All managers continue to regularly report their progress to us.

Sustainability investing continued

Future Farming Landscapes

EN 14

PRI 1

PRI 2

PRI 6

From July 2006, VicSuper began investing
in landscape change in northern Victoria. Through this innovative investment we seek to profit from land use redesign including the provision of ecosystem services, and attain economies and efficiencies of scale in traditional farming enterprise. We have committed around $165 million to this investment. $50.7 million has been invested so far.

VicSuper invests in the VicSuper Future Farming Landscapes Trust and the VicSuper Future Farming Landscapes Land Holdings Trust, both of which are managed by independent specialist fund manager Kilter Pty Ltd. The Future Farming Landscapes investments have a 25 year timeframe, and are only in their early stages. In the three years since Kilter began to purchase land on behalf of VicSuper, 5,403 hectares of land and over 17,000 megalitres of high-reliability water shares5 have been purchased. This is up from the 3,479 hectares of land and over 5,000 megalitres of water that had been purchased in 2007/08.

The land has been managed mainly for cropping and grazing, with research being undertaken on biodiversity and ecosystems services with the view to maximising opportunities in these areas.

Other initiatives that Kilter has undertaken on behalf of VicSuper in the past 12 months include:

• participating in the North-West Indigenous Natural Resource Management Program,
a multi-agency indigenous job training initiative being co-ordinated by the Victorian Department of Sustainability and Environment

• piloting a more water efficient irrigation management system

• planning for possible irrigation re-configuration works, which would result
in water efficiency gains and decommissioning payments from irrigation authorities

• commencing works to conserve and revegetate land to obtain payments for ecosystem services and biodiversity protection.

What are ecosystem services? An ecosystem (ecological system) is a unit containing relationships between organisms such as birds, plants and humans, and their physical environments such as water, rocks, air and soil. An ecosystem could be as small as a tree or as big as a forest, or indeed the entire planet. Everything that lives in an ecosystem is dependant on the other species and elements in that ecosystem6. Humans depend on services from ecosystems for our survival and prosperity. Ecosystem services can be classified into four categories: 1. Provisioning – goods such as food, water, medicines and fibre 2. Regulating – biophysical processes controlling natural processes such as air quality regulation and pollination 3. Cultural – providing recreational, aesthetic or spiritual values 4. Supporting – underlying processes such as soil formation, photosynthesis and nutrient cycling7. It is clear that we rely on ecosystems to support us in all aspects of our lives, from breathing to operating multinational businesses. Without ecosystems we simply would not exist. Yet many of the world’s ecosystems are threatened by the very thing that needs them – us. Over the past 50 years human activity has altered ecosystems faster and more extensively than ever before8.

Our commitments for 2009/10

In 2009/10 we commit to:

1. undertake engagement with fund managers on economic, environmental and social issues

2. develop and finalise a ‘Statement of Sustainability Investment Principles’

3. continue to work towards a full understanding profile of the companies
in which VicSuper invests

4. participate in the UNEP FI Water and Finance Workstream to gain a greater understanding of the water footprint for VicSuper Fund.

Exercise our rights of ownership and share knowledge

PRI 2

Company engagement is about exercising our rights and responsibilities as a part-owner of the companies in which we invest. This means that through Regnan and Hermes EOS we seek active dialogue with these companies to ensure that they are well managed and aiming for sustainable long-term growth in shareholder value.

As a part-owner of companies we also have the opportunity to collaborate and share knowledge with other institutional investors on major investment related risks and opportunities such as climate change, corporate governance and business ethics.

Active ownership is not restricted to listed shares. VicSuper has fund and asset managers in each asset class that manage assets on behalf of VicSuper members. We have begun to engage with a number of these managers on environmental, social and governance issues.

Governance engagement

FS 2

PRI 2

PRI 4

PRI 5

VicSuper is a founding owner of Regnan Governance Research and Engagement Pty Ltd (Regnan), a company providing a governance research and company engagement service that is dedicated to long-term investment risk management.

More information on Regnan can be found on VicSuper’s website, or at regnan.com.au.

Since March 2008 we have used Hermes Equity Ownership Services (EOS) to provide governance engagement and proxy voting for our international listed shares.

On behalf of VicSuper, Hermes EOS engages with listed companies held in our Vanguard international equities portfolio and, commencing in the 2008/09 financial year, companies held in the Vanguard Emerging Market Shares Index Fund, as well as engaging with regulators and other market intermediaries to ensure social and public policy is consistent with shareholder value and smooth functioning of the market.

More information on Hermes EOS can be found on VicSuper’s website, or at
hermes.co.uk.

Our performance

FS 2

FS 3

FS 5

FS 10

PRI 6

VicSuper used Regnan and Hermes EOS
to engage with listed Australian and international companies in which we invest. These two organisations also engaged in public policy work on VicSuper’s behalf.

During 2008/09 Regnan engaged 54 companies on 8 different ‘head-line’ issues. Some engagements covered more than one issue, and some companies were engaged on more than one occasion. In a number of instances the engagements involved positive reinforcement and separate discussions regarding ways for companies to demonstrate improvement.

Table 2.13 Regnan company engagement issues

Issues raised	Number of engagement occasions	% of total
Share trading	28	42
Human capital management	6	9
Internal audit	5	8
ESG disclosure	9	13
ESG performance	2	3
Remuneration	8	12
Supply chain management	1	2
Other	7	11
	66	100

Note:

1. It is not valid to sum these for total number of engagements because some meetings cover more than one issue, some issues took more than one meeting with the same company and some meetings covered more than one entity.

2. Issues covered by ‘other’ include: stakeholder management, ethics and culture, governance of climate change risk, comprehensive ESG strategy and board constitution.

Exercise our rights of ownership and share knowledge continued

Table 2.14 Regnan engagement issues split by topic

Issue	% of engagements
Environmental	16
Social	29
Governance	55
	100

Note: Some engagement topics such as stakeholder management can cover all three (environmental, social and governance) topics so the relative split between the three rather than the absolute number must be considered.

Table 2.15 Regnan methods of engagement

Method	% of engagements
Letter	9
Meetings with management/executives	69
Board/Director meetings	22
	100

During 2008/09 Hermes EOS undertook engagement activities across a broad range of companies and geographic locations. Engagement activities covered issues such as board structure, executive remuneration, risk management, operations in troubled regions such as Sudan, munitions manufacture, shareholder returns, carbon intensity and bribery. A total of 354 companies were engaged on issues that fall within the following seven categories.

Table 2.16 Hermes company engagement issues

Issues	% of engagements per quarter (period ended)
	30 Sep 08	31 Dec 08	31 Mar 09	30 Jun 09
Social (including ethical)	30	23	18	19
Environment	11	14	14	11
Governance	24	29	28	28
Business strategy	17	19	24	24
Risk management	10	10	5	8
Remuneration	7	5	9	12
Shareholder communication	1		2

Note: Due to rounding the % of engagements per quarter listed above do not always sum to 100%.

Note: Hermes’ public reporting provides more detail about their engagement activities on behalf of all their clients. Visit their website for more details.

We have an ongoing commitment to develop metrics to assist in measuring the long-term performance and effectiveness of the engagements undertaken by Regnan and Hermes EOS.

During the year, VicSuper held regular meetings with its investment managers to remain up-to-date on investment matters and to discuss sustainability issues. VicSuper participates in collaborative engagement through the UN PRI, IGCC, CDP and UNEP FI.

Proxy voting

FS 12

PRI 2

To act or vote on issues surrounding the management of a particular company at shareholder meetings, VicSuper is advised by
CGI Glass Lewis Pty Ltd and the Australian Council of Superannuation Investors for VicSuper’s Australian equities portfolio.
There is formal provision within our proxy voting policy for environmental and social issues. Hermes EOS undertakes proxy
voting for international listed equities on VicSuper’s behalf.

More information on VicSuper’s proxy voting practices can be found on our website.

Our performance

FS 12

PRI 6

In 2008/09 VicSuper voted all internally managed Australian listed equities and Hermes EOS voted VicSuper’s international equities portfolio managed by Vanguard Investments Australia Ltd. On VicSuper’s behalf Hermes EOS voted at 1,516 meetings on 16,596 resolutions. There were no specific instances of which VicSuper is
aware where we were required to vote on
an environmental or social resolution in 2008/09.

We hold the right to vote shares or advise
on voting for all of our listed equities, which represented 48.3% of total assets in VicSuper Fund in 2008/09. VicSuper’s proxy voting register sets out how we exercised our voting entitlements at recent company meetings. The register details the company resolutions, how VicSuper voted, and the final outcome of the vote (where that information is available).

Exercise our rights of ownership and share knowledge continued

Carbon Disclosure Project

FS 2

FS 5

PRI 2

PRI 5

The Carbon Disclosure Project (CDP) provides the secretariat for the world’s largest collaboration of institutional investors on the investment-related risks of climate change. Launched in the year 2000, the CDP distributes a single global request on behalf of a large group of institutional investors to the largest 3,000 companies in the world asking for disclosure of their greenhouse gas emissions and details of strategies to reduce emissions. The CDP annual analyst reports provide detailed analysis of how the largest companies around the globe are responding to climate change.

Our performance

PRI 6

VicSuper continued as a signatory to the latest CDP request (CDP7). The request for information was sent in early 2009 on behalf of 475 institutional investors representing US$55 trillion funds under management. While the fall in global markets has seen the funds under management figure decrease compared to US$57 trillion in 2008, the number of institutional investors signing the request for information has increased from 385 signatories.

The information request was sent to 3,700 of the largest listed companies in the world by market capitalisation, asking for the disclosure of investment-relevant information concerning their greenhouse gas emissions. This includes the largest 200 Australian companies and the largest 50 New Zealand companies. In October 2008, the IGCC on behalf of its members hosted the Australian launch of the results of the sixth CDP information request. Almost three quarters of ASX100 companies, or 72%, answered the CDP questionnaire, representing an increase of 26% compared to the previous year. This response rate compares favourably with the global average of 61%.

While this was the third year that ASX 100 companies have been included in the CDP information request, it was the first time the CDP information request was expanded to the ASX200. The percentage of the smaller 100 companies in the ASX200, referred to
as the ASX200 (ex100), that answered the CDP questionnaire in 2008 was relatively
low at 23%.

VicSuper has been a signatory to the CDP request for information since 2004 and will participate again in next year’s request (CDP8) in 2010. For more information visit the Carbon Disclosure Project website.

Investor Group on Climate Change Australia/New Zealand

PRI 5

We consider that climate change risk is likely to be a significant challenge to long-term shareholder value and the retirement savings of superannuation fund members. VicSuper facilitated the development of the Investor Group on Climate Change Australia/New Zealand (IGCC) in 2005 to provide a forum for institutional investors to consider climate change risk, undertake research into the impact of climate change risk on company valuations and develop appropriate responses.

Our performance

GRI 4.12

GRI 4.13

SO 5

PRI 6

At 30 June 2009 the IGCC had 38 members, representing assets under management of more than $500 billion, invested on behalf of individual investors
and beneficiaries. This compares to 31 members with assets under management
of $496 billion in 2007/08.

The IGCC was involved in the following major initiatives in 2008/09:

• Submissions to:

– the Department of Climate Change

– Green Paper Submission

– Senate Economics committee – Exposure draft of the legislation to implement the Carbon Pollution Reduction Scheme

– Senate Select Inquiry into Climate Policy

– Senate Economics committee – Carbon Pollution Reduction Scheme and related Bills

• The CDP6 information request to all Australian and New Zealand companies listed in the S&P/ASX200 and the NZ50.

The United Nations Principles for Responsible Investment

GRI 4.12

GRI 4.13

PRI 4

The United Nations Principles for Responsible Investment are a set of six principles (the Principles) that provide a framework for institutional investors to integrate environmental, social and governance (ESG) considerations into their investment processes. The Principles are voluntary and aspirational, providing flexibility in adoption.

Before signing the Principles in 2006, VicSuper was already integrating ESG considerations into our investment processes. Beginning with the development of our Equity Growth Sustainability investment option in 2001, and continuing with activities such as governance engagement through Regnan and Hermes EOS, developing the Investor Group on Climate Change, and investing in ecosystem services, VicSuper has been committed to integrating ESG in investing for a number of years. Signing up to the Principles is just another way that we are cementing our commitment to sustainability, and joining in the global movement towards sustainability investing.

Exercise our rights of ownership and share knowledge continued

Our performance

PRI 6

Our performance against the six Principles can be found on the VicSuper website.

More information on the Principles and activities undertaken by the group of signatories can be found on the PRI website.

Enhanced Analytics Initiative

GRI 4.12

GRI 4.13

PRI 5

In May 2007 we became an associate member of the Enhanced Analytics Initiative (EAI). The EAI was an international collaboration between asset owners and asset managers aimed at encouraging better investment research, in particular research that takes account of the impact of environmental, social and governance issues on long-term investment.

In October 2008, the EAI announced it would join forces with the UN PRI to internationalise the call for better investment research and to make the research available to a far wider audience than the EAI membership.

More information on the Enhanced Analytics initiative can be found on the EAI website.

ESG Research Australia

GRI 4.12

GRI 4.13

PRI 5

In February 2009, VicSuper joined with HESTA super fund to launch ESG Research Australia, a new initiative designed to encourage and promote Australian research that takes into account the impact of environmental, social and governance (ESG) issues on investment returns. The program has made five commitments, which focus on championing and tracking local ESG-inclusive research as a means to draw ESG issues into mainstream investment review processes.

For more information about ESG Research Australia contact the ESG RA secretariat,

Other activities

SO 5

PRI 2

PRI 4

PRI 5

In 2008/09 VicSuper was involved in other activities in exercising our rights of ownership and sharing knowledge.

This included VicSuper being invited to participate in a round table discussion hosted by the Victorian government’s Land and Biodiversity White Paper team on private investment in the environment in February 2009.

VicSuper’s Chief Executive Bob Welsh continued as:

• a member of the Woolworths Sustainability Advisory Committee

• a member of the Victorian Premier’s Climate Change Reference Group

• the Chair of the IGCC (until December 2008)

• member of the culture, conservation and economy project of the EcoTrust project steering committee

• President of the Environment Protection Authority Victoria board.

Trustee director Christine Forster AM, is a member of the Ministerial Reference Council for Climate Change Adaptation and Chair of the Victorian Water Trust Advisory Council.

Our commitments for 2009/10

In 2009/10 we commit to:

1. assess the performance of Hermes EOS and Regnan in achieving behavioural change and for improved shareholder value

2. be a signatory to the CDP8 and assist with the survey of Australian and New Zealand companies in CDP8

3. be a signatory to the Forest Footprint Disclosure (FFD) Project

4. develop metrics to measure the effectiveness of VicSuper Fund’s governance and engagement approach.

A team of highly trained and motivated people is essential to meeting the needs of our members and employers. After all, our benefit plans and services are only as good as the people who develop, manage and deliver them.

To attract, develop and retain great people, VicSuper needs to have a working environment that enables people to achieve their potential, while encouraging innovation and continuous improvement in their work. In addition, the working environment must be personally, professionally and financially rewarding.

Our aim

Our aim is to provide a positive working environment that is safe, productive and rewarding. We encourage innovation and seek to make VicSuper a preferred place
to work.

How does this contribute to a sustainable superannuation fund?

It makes sense to invest in our employees as it is our people who deliver our services to members and employers.

We offer a range of personal and professional development opportunities, including accredited learning. This results in positive outcomes for both our employees, their families and VicSuper, providing increased job satisfaction, ongoing employment and alignment with VicSuper’s central operating principle, core purpose and values.

Strong employee engagement helps to increase attraction and retention of employees and contributes to a high performance culture and overall job satisfaction. A high level of employee retention provides an economic benefit to VicSuper by contributing to lower employment costs, as well as retaining corporate knowledge within the organisation.

All of this is then reflected in our ability to develop and deliver appropriate benefit plans and service to our members and employers.

Our approach

To achieve our aim, we focus on the following key areas:

1. workplace profile and culture

2. learning and development

3. employee engagement

4. competitive benefits and remuneration.

Workplace profile and culture

At VicSuper, we are striving to develop a positive, high-performance culture which is personally and professionally rewarding and ensures that the service we provide is of value to our members. We work to maintain an awareness of sustainability issues throughout VicSuper’s culture. We promote and practice fair and equitable employment practices and aim to achieve a highly accomplished, diverse and inclusive workforce.

Employees

Our performance

LA 1

Ten new positions were added to the VicSuper employee team in 2008/09, an increase of 5.4% compared to an average increase of 10.8% per annum over the
past eight years. Of the 10 positions, four were added to our superannuation advice area to meet the increasing demand for services from VicSuper Fund members
and employers.

The proportion of employees employed on a permanent basis, either full-time or part-time remains high at 89.7%.

Note: The definition of employees includes all permanent, temporary and casual roles, including employees absent on leave with and without pay.

Workplace profile and culture continued

EC 7

We continue to encourage employees to take on new roles within VicSuper.

During 2008/09, 74 positions were filled. Forty-three positions were advertised internally and 32 of these were filled by internal applicants. Forty-one positions
were advertised externally using job search websites, local papers and recruitment agencies. In 2008/09 we introduced an Employee Referral Program to encourage employees to refer people to VicSuper who share our values and commitment to sustainability.

In 2008/09, two managers and one executive manager were appointed. The two manager appointments were made to internal candidates, and the executive manager vacancy was filled by an external candidate. All managers reside locally to their office. For VicSuper, local means people living in the same region as their place of work. For example, the Manager Bendigo Advice Centre resides in the Bendigo region.

LA 13

Women made up 57% of executive positions and 40% of senior management roles. Gender balance fluctuated within +/-10% of last years’ figures throughout all salary levels in VicSuper’s workforce.

Workplace profile and culture continued

GRI 2.10

For the third year in a row, VicSuper maintained its citation from the Equal Opportunity for Women in the Workplace Agency (EOWA). This means we are categorised as an EOWA Employer of Choice for Women, amongst 111 organisations Australia-wide.

In 2008/09, just over 50% of our employees were aged between 30 and 50 years old, a slight increase compared with last year. One third of our team were in the under-30 age group, slightly down compared to last year.

From 1 July 2008 to 18 April 2009 VicSuper’s Board consisted of four males and four females. One of the female directors subsequently stepped down when her term of office was completed. Barbra Norris was appointed Chairperson in January 2009, becoming the first female to hold this role.

LA 2

Thirty-seven people or 19.1% of our workforce left VicSuper in 2008/09 up from 12.3% (33 people) last year. Of those people who left in 2008/09, nine people left at the completion of fixed term contracts,
24 people left for reasons of career change, travel, family commitments, and four people left as the result of termination or redundancy. Over the last eight years, an average of 16.6% of our workforce has left VicSuper each year.

Workplace profile and culture continued

Occupational health and safety

Our performance

LA 6

VicSuper’s OH&S team has ten employees
representing all VicSuper sites and employees at all salary levels. As well as recording all OH&S incidents, VicSuper keeps a register of injuries and has procedures for dealing with occupational accidents and diseases. We also have safety systems in place for members and other visitors to VicSuper.

The OH&S team receives annual training
in hazard identification and management processes. In addition, VicSuper provides training for employees with OH&S responsibilities to meet specific OH&S requirements. We conduct regular emergency and evacuation exercises with VicSuper’s dedicated Response Alert Team.

LA 7

There was one OH&S injury during 2008/09. There were no occupational diseases or work-related fatalities. Minor first-aid level injuries are not reported.

The average number of sick leave days taken per employee was 5.5 days in 2008/09, which is 61.8% higher than the previous year’s average at 3.4 days. VicSuper’s sick leave figure includes all lost working hours as a result of illness, stress, accidents or injuries.

LA 8

We continue to provide quarterly health seminars to our employees on a range of topics including healthy diets, lifestyle and exercise. We promoted health and safety during OH&S week in October by engaging employees through relevant activities such
as massage, a clean desk competition, lunchtime walks and a health quiz.

LA 9

The Community and Public Sector Union (CPSU) is a party to VicSuper’s Collective Agreement. VicSuper’s commitment to health and safety and to the requirements
of the Occupational Health and Safety Act 2004 and relevant regulations is covered under VicSuper’s Collective Agreement. Provisions also cover leave entitlements for union members and OH&S representatives to attend external OH&S and other training courses, and notification requirements for major changes to OH&S practices and procedures.

Workplace culture

Our performance

We undertook a number of activities in 2008/09 that contributed to maintaining a positive workplace culture and a safe working environment.

We introduced a new performance development plan (PDP) process this year. VicSuper’s PDP system provides an opportunity for employees and managers
to give and receive feedback and reach agreement regarding role requirements
and expectations. It also provides the opportunity to formally measure success, recognise achievements, align individual and team performance with organisational goals and objectives and formalise individual development plans. We have updated role descriptions to reflect employees’ roles in relation to VicSuper’s purpose, central operating principle and core values as part
of the new PDP system.

We revised our induction program and now provide a more comprehensive organisational overview to new employees by introducing them to a variety of people from across VicSuper and providing them with a broad perspective on VicSuper’s history, brand and culture.

Other employee benefits we provide include:

• optional free flu vaccinations for employees

• ergonomic assessments for all new employees, employees transferring internally to a new role and employees returning from maternity leave

• subsidisation of independent financial planning assistance

• professional counselling and support services for employees and their families

• defensive driving courses for superannuation advisers and other employees who drive regularly for work purposes.

Workplace profile and culture continued

Equal opportunity and diversity

Our performance

LA 13

VicSuper recruits, retains and promotes on the basis of merit and open competition, regardless of gender, marital status, parental status, race, religion, political affiliation or sexual preference. We do not currently measure racial diversity, although in the coming year we will review how other organisations address measurement and targets in workplace diversity to seek opportunities to improve.

HR 3

VicSuper has a workplace culture that sets out clear standards and behaviours expected from all employees. In 2008/09, 104 employees completed EO training delivered by external experts. Thirty-nine managers and team leaders participated in workshops focused on EO aspects of their role, their responsibilities and potential workplace scenarios. We support equal opportunity through various mechanisms. We have Equal Opportunity (EO) representatives from across the business who vary in age, gender, hierarchy and geographic location.

We have a comprehensive EO policy and procedures that are reviewed on a regular basis. In addition, all employees involved in the recruitment and selection process are given coaching and mentoring on equal employment opportunity considerations in recruitment.

Community involvement

SO 1

DMA

VicSuper is an integral part of the community
in which it provides superannuation and related advice and education services. Our operational services and the investments of VicSuper Fund impact directly and indirectly on communities. We seek to optimise the positive impacts and minimise the negative impacts of our activities in so far as it is reasonable to do so.

VicSuper is visible in its community involvement, and our contribution is making a difference to the community organisations that we are committed to partnering over the long term. At the same time, community involvement plays an important role in VicSuper’s learning and development.

Our performance

Our employees are encouraged to participate in volunteering days run by our community partner Conservation Volunteers. As at
30 June 2009, 51 employees had taken at least one day of Community Involvement leave, compared to 13 employees who were involved last year.

In our second year of membership of Club Red, 20 VicSuper employees gave blood during the 2008/09 financial year compared to 14 people last year.

Over the year, nearly all VicSuper employees helped to raise funds and awareness for a range of charities through events such as The Smith Family Christmas Appeal, Movember, the World’s Greatest Shave, Australia’s Biggest Morning Tea and Heartbeat Victoria’s annual raffle.

Twenty-eight VicSuper employees rode their bikes or walked to work for Ride to Work and Walk to Work Day 2008. Employees attended a lunch and presentation by speakers from Wheelchair Sports Victoria.

In 2008/09 VicSuper offered two Sustainability Scholarships to employees. The winners participated in research expeditions with Earthwatch Institute to improve their understanding of environmental and sustainable development issues and the relationship between these issues and superannuation. VicSuper and its stakeholders benefited from scholars sharing their experiences and knowledge on their return. Scholars implement an action plan
of sustainability initiatives in relation to their role, their team or VicSuper as a whole.

Our commitments for 2009/10

In 2009/10 we commit to:

1. review how other organisations address measurement and targets in workplace diversity

2. review and revise policies according to best practice management of social performance indicators including human rights and diversity

3. review and update how VicSuper’s Central Operating Principle is profiled in information to job candidates, recruitment agencies and in recruitment interviews

4. 50% of employees taking community involvement leave.

Learning and development

Learning is one of VicSuper’s core values.
Ongoing learning and development is vital
for us to keep up with the legislative requirements of the superannuation industry. We aim to equip our people with the necessary skills and knowledge to contribute toward the achievement of VicSuper’s vision and for their individual development. We offer comprehensive training using a variety of internal and external expertise to meet the development needs of all employees.

One of VicSuper’s employees is a dedicated learning and development specialist who develops specific learning and development initiatives that cater to the needs of VicSuper and the stakeholders we service. VicSuper also has three technical training committees that plan and implement training programs
to meet:

• professional development requirements
of our employees

• technical training needs of Superannuation Advisers who provide personal superannuation advice

• technical training needs of Member Centre consultants and employer services account consultants who provide general superannuation advice.

We provide comprehensive on-the-job training to keep our people up-to-date
with changes to legislation governing the superannuation industry, as well as to
equip them with the necessary skills and knowledge to contribute to individual and team development. All employees actively identify their learning and development needs through our performance development plan (PDP) process.

On an annual basis employees and their managers plan which formal skills and development needs to focus on to help employees meet their career aspirations. These plans are reviewed during the
half-yearly review of employees’ PDPs.

We provide a range of ongoing support for employees’ training needs including:

• internal and external training programs as part of a structured organisational training calendar

• time and financial support for employees to complete relevant certificate, diploma or tertiary studies.

VicSuper has a comprehensive learning policy and documented procedures which are accessible to all employees.

Employee training

LA 10

LA 11

LA 12

HR 3

Our performance

A highlight in our training calendar this year was the delivery of a comprehensive leadership and management development program. The program consisted of seven modules to further develop leadership and management competencies of our team leaders and senior managers. The program will be offered annually for new team leaders and managers and refresher modules will be delivered to existing team leaders and senior managers to meet ongoing learning needs.

On average, employees accessed just over 40 hours of training per person in 2008/09, up by 29% compared to last year. Training delivered by internal experts made up 67% of all training in 2008/09 and included:

• VicSuper’s leadership and management development program

• PDP training for all employees and managers to provide an understanding and awareness of our new performance and development process

• sustainability refresher training for all existing employees to provide an update on current issues and guidance on embedding sustainability into their role.

The number of external training hours per employee is also slightly higher than 2007/08 as we engaged external expertise to conduct equal opportunity and fraud awareness training with our employees.

Learning and development continued

Sustainability training and
awareness-raising

Our performance

FS 4

PRI 1

Sustainability is VicSuper’s central operating principle, so it is important that employees understand sustainability principles. In 2008/09 VicSuper:

• provided sustainability induction training to 43 new starters to VicSuper

• developed and implemented a sustainability training ‘refresher course’ for all employees during the first half of 2009, which was completed by 139 employees as at 30 June 2009

• commenced induction training delivered by members of our employee sustainability committee (FROGS: Focused Recruits of Global Sustainability) to introduce all new starters to VicSuper’s recycling systems, sustainable transport and energy conservation initiatives.

• posted regular sustainability tips and articles on VicSuper’s intranet with over 30 tips posted in 2008/09

• continued to provide updates on VicSuper’s sustainability progress at monthly all-employee meetings and in monthly performance reports

• conducted ‘influence and persuade’ training for FROGS members to assist them in the behavioural change aspects of their role

• organised for a group of FROGS to
attend a tour of the Banyule City Council material recycling facility to improve their understanding of recycling processes

• enabled information and ideas sharing from all FROGS at quarterly meetings and through monthly newsletter updates.

Voluntary refresher training and team briefings also took place in 2008/09 for employees who manage relationships with VicSuper suppliers. The purpose of the training was to help employees implement VicSuper’s supplier engagement and purchasing program. See Strategy 7: Foster effective partnerships for more information on the supplier engagement program.

More information on sustainability training and awareness-raising can be found in Strategy 6: Minimise our environmental impact.

Our commitments for 2009/10

In 2009/10 we commit to:

1. develop training materials to assist superannuation advisers to enhance members’ understanding about sustainability as it relates to sustainability investing and our operations

2. develop and implement modules to build the personal development skills and capabilities of VicSuper’s employees

3. evaluate and improve VicSuper’s FROGS induction training initiative

4. identify and integrate relevant sustainability related content in the leadership and development program.

Employee engagement

GRI 4.4

Employee engagement is the connection between our employees and their roles and the strength of their relationship with the vision of VicSuper. We know that if our employees are positive about working at VicSuper that this has a flow-on effect to the services we provide to our members and employers. It also helps us to develop a high performance culture and retain our people. Measuring engagement involves measuring factors such as role satisfaction, leadership, communication, career opportunities and the cultural climate of the organisation.

Our performance

The global financial crisis was at the front of our employees’ minds this year. Employees were encouraged to suggest ways to improve our business efficiency and effectiveness. Their comments and ideas were considered in February 2009 when we conducted a half-year revision of our operating plan to consider the implications of the dramatic change in economic conditions.

VicSuper employees made active contributions to the renewal of VicSuper’s Collective Agreement in 2008/09. Representatives from all areas of the business were involved in a Collective Agreement working group to shape the new Collective Agreement. At the conclusion of the process, a staff ballot was held and the new agreement was voted in with a 96% ‘yes’ vote. The period of the new Collective Agreement is March 2009 to March 2012.

During 2008/09 VicSuper conducted its second employee engagement survey, in partnership with human resources consultants Hewitt Associates. This year our completion rate was 78% (52% completion in 2007/08) with an overall engagement score of 65% (58% engagement in 2007/08) which places VicSuper in the “Best Employers” range for Australia and New Zealand companies according to Hewitt Associate’s annual Best Employer Research.

Employees’ satisfaction ratings for managing performance (32% in 2007/08 and 46% in 2008/09) and career opportunities (45% in 2007/08 and 50% in 2008/09) indicate a need for improvement despite an increase year on year. This year employees’ responses to the survey indicated opportunities to improve recognition (48% in 2007/08 and 51% in 2008/09) and work processes (45% in 2007/08 and 46% in 2008/09).

Other forms of measuring employee engagement throughout the year include:

• six-week ‘catch ups’ for new employees

• learning and development evaluations

• exit interviews

• formal performance review meetings held
half yearly.

Employees participated in decision making and provided input through various forums such as:

• employee sustainability committee (FROGS: Focused Recruits of Global Sustainability) and specific project teams that progress action in areas such as employee sustainability education, resource efficiency improvements and community involvement

• monthly senior manager meetings and
an annual senior managers’ retreat

• internal training committees

• EO and OH&S teams

• team meetings and professional development sessions

• new employees meet with the Chief Executive in small groups to discuss their early impressions and experiences working at VicSuper, the origins of VicSuper and the strategic direction of the company and VicSuper Fund

• monthly all-employee breakfast meetings hosted by the Chief Executive.

Our commitments for 2009/10

In 2009/10 we commit to:

1. collate data, conduct focus groups, then develop and implement an action plan in accordance with the 2008/09 employee engagement survey feedback

2. calculate the value of VicSuper’s community involvement program to better understand its contribution to VicSuper and the wider community.

Competitive benefits and remuneration

We seek to reward our employees
by providing attractive benefits and remuneration that are fair and competitive when compared to industry standards.
We also aim to promote flexibility in the workplace and support employees in their working and personal lives. We determine the salaries for all roles using advice from independent remuneration consultants and review salaries annually to ensure they are competitive.

Performance reviews

Our performance

FS 4

LA 12

Employees complete half-yearly and annual performance reviews under the PDP system introduced this year. PDPs for all employees now include specific sustainability-focused goals, an enhancement of the existing performance management system. In 2008/09, we had a 90.6% completion rate for mid-year PDPs and anticipate 100% completion in October at the end of the annual PDP cycle. Performance-based remuneration reviews are determined by the assessment of employees’ performance documented in their PDP.

Salaries

Our performance

EC 5

At 30 June 2009 the starting total employment cost (TEC) for VicSuper’s Collective Agreement 2009 Classification Level 1 was $38,101. The TEC includes a standard base salary, employer cost of superannuation and the cost of any other allowances or salary sacrifice components, but excludes any performance and loyalty bonuses. This minimum wage level is determined through advice from external remuneration specialists based around the market median for roles at this level in the financial services sector.

LA 14

Graph 3.16 shows the full time equivalent remuneration of men and women in each employee category. VicSuper’s remuneration policy allocates salary based on the merit of the individual in the role regardless of gender. Average remuneration for senior managers is higher for males due to the position of Chief Executive being occupied by a male in 2008/09.

Competitive benefits and remuneration continued

VicSuper Collective Agreement

Our performance

LA 4

All full-time, part-time and temporary employees bound by the Collective Agreement are covered by the same set of terms and conditions of employment. As at 30 June 2009, 86% of VicSuper’s workforce is covered under VicSuper’s Collective Agreement 2009 and 14% are classified as Senior or Executive Managers employed on Common Law contracts. In line with our equal opportunity policy and legislative requirements, VicSuper does not request employees to indicate whether they are represented by trade union organisations. The parties bound by the Collective Agreement include the Community and Public Sector Union (CPSU) which represented at least one of the employees covered by the Collective Agreement 2009 during 2008/09. The Senior Managers’ employment contract conditions have been reviewed to incorporate most of the elements of the new Collective Agreement and will be implemented in 2009/10 to increase the alignment of manager and non-manager benefits.

LA 5

Under the Collective Agreement, where VicSuper has made a decision to implement a major restructure of the workplace, introduce a significant new technology or substantial change to existing work practices, VicSuper will advise the affected employees and the CPSU of the likely effects on the employee’s responsibilities and working conditions. VicSuper will regularly consult with the affected VicSuper employee and, where relevant, provide suitable training and development. Minimum notice periods for termination of employment by either VicSuper or the employee are detailed in
the Collective Agreement.

Employee benefits under the VicSuper Collective Agreement

LA 3

EC 3

GRI 4.5

Employee benefits covered by our Collective Agreement apply to all VicSuper employees and most provisions flow onto our Senior Managers. A full list of employee benefits is available from vicsuper.com.au. Employees receive employer superannuation contributions of 15%, 6% higher than the compulsory 9% Superannuation Guarantee required under legislation. All employees are members of VicSuper Fund.

Our performance

The main changes to employee benefits
in our 2009 Collective Agreement are improvements in certified remuneration increases and leave entitlements such as
the allowance for employees to purchase
an extra four weeks of annual leave.

No performance bonuses were paid in 2008/09 as part of VicSuper’s decision to reduce annual operating expenses due to the global financial crisis.

Managing career endings

LA 11

VicSuper provides outplacement services in all cases for redundancies and, depending on the circumstances, for employees terminated by VicSuper. If an employee covered by the Collective Agreement is made redundant, they will receive severance pay including notice periods according to age and years of service.

Our commitments in 2009/10

In 2009/10 we commit to:

1. formalise and communicate the value of working at VicSuper to employees.

Our members and employers place a lot of trust in us. For employers to retain their confidence in VicSuper and members
to trust us with their superannuation throughout their working lives and beyond, it is important that we maintain appropriate standards of governance and accountability.

To achieve this, we need to have appropriate risk management structures in place. These structures protect our members’ savings, and give all stakeholders the confidence that they will be treated in an equitable, transparent and honest manner.

Our aim

We aim to have a corporate governance structure that:

• protects the savings and privacy of our members, employers and other stakeholders

• ensures we operate in a fair and transparent manner in compliance with legislation, our RSE Licence and Australian Financial Services Licence, constitution and trust deed

• respects the rights of members, employers, employees and other stakeholders

• allows members, employers and other stakeholders to have input into our decision-making

• ensures a robust and effective system of internal controls and management of operational and investment risks.

How does this contribute to a sustainable superannuation fund?

With proper attention to risk management and processes that respect the rights of stakeholders, organisations can prosper over the long term. An organisation that fails due to poor governance affects not only its immediate stakeholders but also the broader community through a range of factors, such as financial losses, loss of employment and loss of confidence.

Our approach

Our approach can be summarised by answering the following three questions:

1 Who runs VicSuper, what do they do and how are they accountable?

2 How is members’ money safeguarded?

3 How can we ensure that the rights of all stakeholders are respected?

Who runs VicSuper, what do they do and how are they accountable?

GRI 2.6

GRI 4.1

LA 13

VicSuper Pty Ltd (‘VicSuper’) is a proprietary company which is the Trustee of VicSuper Fund. As a public offer fund, VicSuper Fund is subject to Federal Government regulations.

At VicSuper, we do not seek to make a profit from our operations. We are responsible for managing VicSuper Fund in a way that helps members build financial assets for their retirement and we are bound to act in the best interests of members at all times.

Board of directors

GRI 4.1

GRI 4.2

GRI 4.3

VicSuper has a board of eight directors; four member-elected directors and four directors nominated by representative employer associations determined by the Trustee.
All decisions made by VicSuper’s directors require at least a two-thirds majority. Directors are appointed for a term of five years, after which they are eligible for re-appointment or re-election. The Chairperson is one of the eight directors and is not an executive officer of the organisation.

The board of directors meets throughout the year to set the direction of VicSuper Fund and is responsible for monitoring and controlling its administration, service delivery and investment management.

VicSuper’s annual planning cycle requires the Trustee to approve:

• an annual risk assessment review

• a rolling 10-year strategic plan, reviewed and updated annually

• priority commitments within the annual operating plan.

Table 4.10 VicSuper’s directors and deputy directors during 2008/09

Director	Representation	Appointment	Deputy director
Jennifer Cassidy	Member representative	to 30 June 2009	Dean Glare
Bill Lyons	Member representative	to 30 June 2009	Alex Gagachef
Barbra Norris (Deputy Chairperson until 31 December 2008 and Chairperson from 1 January 2009)	Member representative	to 30 June 2009	Paul Kennelly
Bill Watton	Member representative	to 30 June 2009	Graeme McNeil
David Craig (Chairperson until 31 December 2008)	Employer representative	to 31 December 2013 (re-appointed on 1 January 2009)	Jack O’Connell, AO from 19 November 2008 (position previously vacant)
Angela Emslie	Employer representative	to 18 April 2009	John Henderson until March 2009
Christine Forster, AM	Employer representative	to 13 July 2013 (re-appointed on 14 July 2008)	Peter Salway until 13 July 2008 and Craig Cook from 19 November 2008
Bruce Hartnett (Deputy Chairperson from 1 January 2009)	Employer representative	to 31 December 2013 (re-appointed on 1 January 2009)	Ron Beazley until 31 December 2008 and Fiona McNabb from 1 January 2009

VicSuper’s Member Report 2009 contains more details about Director and Deputy Director appointments effective from 1 July 2009.

Our performance

The board of directors held 11 Trustee meetings and two extraordinary meetings
for the purpose of considering VicSuper’s Strategic Plan. The agenda papers included monthly operating plan performance reports, monthly financial performance and statements of financial position for VicSuper Fund. At each monthly Trustee meeting directors receive a “director’s update” of investment returns compared to benchmark indices.

Trustee training during 2008/09 consisted of:

• state and federal budget updates

• legislative updates

• briefings by VicSuper’s actuary, investment manager and investment adviser

• induction training for new directors and deputy directors

• unlisted investments and deferred tax assets

• liquidity management.

Four meetings of the Audit, Compliance & Risk Management Committee were held during the year. VicSuper’s quarterly compliance and risk management report and reports from VicSuper’s internal auditors were considered by the Committee at these meetings.

Who runs VicSuper, what do they do and how are they accountable? continued

GRI 4.10

The Board and Audit, Compliance and Risk Management Committee performance self-assessments planned for 2008/09 were deferred to the 2009/10 financial year because of changes to the composition of the board. All initiatives from the 2007/08 self-assessments have been implemented.

Director shareholding and remuneration

GRI 2.6

GRI 2.8

GRI 4.5

VicSuper’s only shareholders are its eight directors, who each hold a single $1.00 share in the company. Under the provisions of the company’s constitution, if there are any profits from VicSuper’s activities, they cannot be distributed to the shareholders.

For the financial year ending 30 June 2009, the chairperson was paid a salary of $48,000 p.a., the deputy chairperson $36,000 p.a. and each director $30,000 p.a. These salaries include Superannuation Guarantee.
Deputy directors were paid $1,200 plus Superannuation Guarantee to attend a meeting (as required) and any direct expenses such as travel.

The chairperson and members of the
Audit, Compliance and Risk Management Committee each receive $3,000 p.a. and $2,000 p.a. including Superannuation Guarantee respectively.

There are no bonuses or termination payments for VicSuper directors.

Directors’ salaries will be reviewed in the
first quarter of 2009/10 after seeking independent remuneration advice.

Decision making and planning

A trust deed sets out the rights and entitlements of VicSuper Fund members. VicSuper’s eight directors are responsible
for all decision-making on VicSuper Fund matters including member benefits, investments, compliance, risk management and audit.

Any decision made requires at least a two-thirds majority agreement by directors. Day-to-day matters are delegated to qualified employees.

GRI 4.1

VicSuper has an Audit, Compliance and
Risk Management Committee which is a committee of the Trustee. The purpose
of this committee is to assist the directors with the financial, compliance and risk management of VicSuper Pty Ltd and VicSuper Fund. VicSuper also has a Senior Managers’ Executive Remuneration Committee. This committee consists of the chairperson and deputy chairperson and provides advice to the Trustee.

GRI 4.9

PRI 1

Each month the Chief Executive and senior management team report on the performance of all matters of VicSuper Fund. All decision papers submitted to the Trustee take into consideration the social, environmental and economic impacts of the issue under consideration.

Similarly, the monthly performance report submitted to the Trustee is structured to highlight the social, environmental and economic dimensions of VicSuper’s performance.

As sustainability is part of all decisions made by the board, we do not have a separate committee for sustainable development issues.

Our performance

FS 1

DMA

PRI 1

VicSuper’s strategic planning process remained on a 10-year rolling plan to reflect the long-term nature of VicSuper’s operations and to ensure we address both short- and long-term risks, trends and opportunities.

During 2008/09, we continued the implementation of VicSuper’s Sustainability Policy, Climate Change Policy and Environment Policy.

These policies formalise existing decision making and planning practices and publicly stated commitments across the organisation. They are reviewed each year to ensure they remain current and reflect where VicSuper is heading. During the year, we reviewed employee tools and training on how to apply VicSuper’s sustainability and supplier engagement policies and included information about these policies as part of induction training for new employees.

VicSuper’s Sustainability Policy defines sustainability as “a way of operating and investing that recognises the dependence of the overall health of the economy on the long-term availability of natural resources, a healthy environment, a productive workforce and cohesive societies”.

The policy and related documents set out the structure and responsibilities for sustainability. In brief, all employees have sustainability as part of their performance criteria with the Chief Executive having overall responsibility. The Executive Manager Sustainability and Education has executive responsibility for corporate issues and the Executive Manager Investments has responsibility for sustainability as it relates to investing.

The social elements of our policy include delivering value for our members and employers, contributing positively to society, providing a positive working environment that is safe, productive and rewarding for our employees and fostering fair, effective and long-term partnerships.

Who runs VicSuper, what do they do and how are they accountable? continued

VicSuper reports its sustainability performance publicly each year through its sustainability report. It is also reported to the trustee each month and to employees at monthly employee meetings and in the monthly operating plan report.

VicSuper’s Climate Change Policy identifies VicSuper’s approach to managing and mitigating our climate change impact, reducing our climate change risk, adapting to climate change, and identifying climate change related opportunities.

Our Environment Policy presents and defines VicSuper’s approach to managing our environmental impacts, and outlines how we incorporate environmental sustainability into VicSuper’s operations and investment activities.

During 2008/09 we continued to implement the VicSuper Supplier Engagement Policy. This policy aims to bring about indirect environmental benefits as our partners implement more sustainable practices.
For more information about this policy see Strategy 7: Foster effective partnerships.

All of VicSuper’s internal and external commitments, as evidenced in these policies, mean that our sustainability performance is reflected in our day-to-day operations, in decisions made by the VicSuper Trustee, and in our investment processes.

Indemnity and insurance

GRI 4.6

GRI 4.7

VicSuper has a fit and proper policy in place that includes a procedure for dealing with directors’ conflicts of interest.

All directors complete a statement of their pecuniary interests upon their appointment. VicSuper directors and officers are covered by professional indemnity insurance which, subject to limited exceptions, indemnifies VicSuper Fund, trustee directors and employees against financial loss resulting from claims made against them. As required by the Superannuation Industry (Supervision) Act 1993 (Cwlth), no director or responsible officer is a disqualified person.

Directors have to provide copies of qualifications and must meet VicSuper’s Fit and Proper Policy. Compliance with the Fit and Proper Policy is assessed by management and confirmed by the Trustee.

VicSuper Ecosystem Services Pty Ltd

GRI 3.8

EN 14

VicSuper Ecosystem Services Pty Ltd was incorporated on 3 January 2006 and is a wholly-owned subsidiary of VicSuper Pty Ltd. The directors of VicSuper Ecosystem Services Pty Ltd are Christine Forster AM (Chairperson) and William (Bill) Lyons both of whom are VicSuper Pty Ltd directors, and Bob Welsh, Chief Executive VicSuper Pty Ltd. Directors remuneration is $5,000 p.a. including superannuation guarantee, however no remuneration is payable to the Chief Executive of VicSuper Pty Ltd in his role as a director of VicSuper Ecosystem Services Pty Ltd.

Henriette Strain, General Counsel and Company Secretary VicSuper Pty Ltd is the Company Secretary, and Michael Geraghty, Chief Operating Officer VicSuper Pty Ltd is the Public Officer. VicSuper Ecosystem Services Pty Ltd does not employ any employees.

The purposes of the company are to:

• facilitate investment decisions by VicSuper Pty Ltd for investment in forestry or ecosystem services within the property asset class by acting as the corporate trustee of the VicSuper Forests Trust, VicSuper Forests Land Holdings Trust, VicSuper Future Farming Landscapes Trust, VicSuper Future Farming Landscapes Land Holdings Trust and any other unit trusts formed by VicSuper Pty Ltd as a result of recommendations by VicSuper Ecosystem Services Pty Ltd

• review and consider investment proposals for individual investments in forestry/ecosystem services and make recommendations to VicSuper Pty Ltd

• implement and monitor investments approved by VicSuper Pty Ltd in the unit trust/s and report to VicSuper Pty Ltd on progress

• undertake any other purposes determined by VicSuper Ecosystem Services Pty Ltd and approved by VicSuper Pty Ltd.

VicSuper executive management team

GRI 4.9

The VicSuper executive management team meets every two weeks, and under the leadership of the Chief Executive is responsible for:

• developing policies and strategies for consideration by the board of directors

• implementing policies approved by the Trustee

• building organisational capacity.

Who runs VicSuper, what do they do and how are they accountable? continued

Table 4.11 VicSuper’s executive managers, their roles and responsibilities

Name	Responsibilities	Years at VicSuper	Years in super/finance industry	Qualifications
Helen Bloustein	Executive Manager Sustainability and Education • Sustainability policy, partnerships and implementation • Superannuation education	3	13	• Bachelor of Commerce (Actuarial studies) • RG 146 compliant*
Michael Geraghty	Chief Operating Officer • Finance • Member Benefits and Services • Employer Services • Member and Employer Relationships (superannuation advice)	10	20	• Graduate Diploma in Accounting • Chartered Accountant • Diploma of Financial Services (Financial Planning)
Helen Hovenga	Executive Manager People and Culture • Human resources	1	1	• Bachelor of Arts (Psychology) • Graduate Diploma of Human Resource Management and Industrial Relations • Masters of Business (Human Resources)
Peter Lunt	Executive Manager Investments • Investment strategy and operations	4	7	• Bachelor of Science (Forestry) • Bachelor of Economics • Graduate Diploma in Applied Finance and Investment • Masters of Environment • RG 146 compliant*
Henriette Strain	General Counsel and Company Secretary • Legal, compliance and risk management • Company Secretary • IT Services	10	19	• Bachelor of Laws (Hons) • Bachelor of Arts • Diploma of Education • Diploma of Financial Services (Financial Planning) • Barrister and Solicitor of the Supreme Court of Victoria
Elise van der Heyde	Executive Manager Member Benefits and Services • Member benefits • Member services	9	12	• RG 146 compliant*
Bob Welsh	Chief Executive • Overall leadership, management and operations of VicSuper Pty Ltd and VicSuper Fund • Superannuation Marketing and Communications • Member and employer growth	10	20	• Bachelor of Economics • Chartered Accountant • Diploma of Financial Planning

*RG 146 is the ASIC standard for training financial product advisers

Who runs VicSuper, what do they do and how are they accountable? continued

Our management approach

In order to develop and implement policies and strategies while building organisational capacity, VicSuper’s executive and senior management teams take an integrated approach to sustainability and consider environmental, social (labour practices, human rights, society, and product responsibility), and economic aspects in decision making.

Investments and service impact management approach

DMA

FS 1

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the Investments section of this report and on the ‘Exercising our shareholder rights’ section of the VicSuper website.
Policy	To exercise our rights and responsibilities as a part owner of the listed companies in which we invest, VicSuper uses both company engagement services and undertakes proxy voting. We also engage with investment managers in non-equities related assets classes VicSuper’s policies relating to these areas are outlined on the VicSuper website under Exercising our shareholder rights. VicSuper’s commitments to managing the impacts of our investments are formalised in the following policies: • Sustainability policy • Environment policy • Climate change policy. These are all publicly available on the policies section of the VicSuper website. They are relevant for both our direct operations and our investments.
Organisational responsibility	Responsibility for implementing the investments sections of these policies lies with VicSuper’s Executive Manager Investments. Implementation of the VicSuper Sustainability Policy is the responsibility of the Chief Executive and the Executive Manager Sustainability and Education. The overall responsibility for implementing the environment and climate change policies lies with VicSuper’s Executive Manager Sustainability and Education.
Training and awareness	VicSuper conducts sustainability training for all employees. Technical training is completed by all employees who provide superannuation advice.
Monitoring and follow up	VicSuper’s investment outcomes and performance are monitored and reported to: • the Trustee on a monthly basis • regulators as required • members through the annual Member Report and Sustainability Report While we do not have a formal audit system in place in relation to proxy voting and engagement processes, we receive regular performance reports from our investment and company engagement managers. VicSuper’s ‘Proxy voting register’ sets out how VicSuper exercised its voting entitlements at company meetings. It is updated monthly (or as voting takes place) and published on the VicSuper website. VicSuper’s policies are regularly reviewed by the Trustee and management to assess whether: • the objective and strategies of the policy is being achieved • shortcomings have been identified • new principles need to be articulated.

Who runs VicSuper, what do they do and how are they accountable? continued

Environmental management approach

DMA

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the Minimise our environmental impact section of this report.
Policy	VicSuper’s overall management approach to the environment is encompassed within our central operating principle and set out in the VicSuper Sustainability Covenant with epa victoria. The central operating principle and covenant can be found on the VicSuper website and the covenant is also available on epa victoria’s website. VicSuper’s sustainability, environment and climate change policies are communicated to all new employees and are published on VicSuper’s intranet and vicsuper.com.au
Organisational responsibility	The Executive Manager Sustainability and education has operational responsibility for environment areas. This position reports to the Chief Executive.
Training and awareness	VicSuper conducts sustainability training for all new employees. We also run training updates for all employees on sustainability issues every two years. This training incorporates environmental aspects.
Monitoring and follow up	VicSuper does not use a formal environmental management certification system. However, the annual sustainability report is independently assured based on the Accountability Assurance Standard, aa1000as (2008).
Additional contextual information	From an environmental perspective, VicSuper’s biggest impacts are through its investment portfolio. We are addressing these impacts and associated risks in a range of initiatives which are outlined in the Invest for the long term section of this report. Operationally, we have strategies in place to address VicSuper’s major impacts which are through our use of paper and energy. Further information on our approach to all environmental management aspects can be found throughout this report.

Who runs VicSuper, what do they do and how are they accountable? continued

Social management approach: labour practices and decent work

DMA

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the People section of this report.
Policy	Policies and procedures include: • VicSuper Code of Conduct • VicSuper Collective Agreement 2009 • VicSuper Disciplinary policy • VicSuper Dress Code policy • VicSuper Employee Assistance Program policy • VicSuper Equal Opportunity policy & procedures • VicSuper Grievance & Appeals policy & procedures • VicSuper Learning & Development policy & procedures • VicSuper Leave without Pay policy • VicSuper Occupational Health & Safety policy & procedures • VicSuper Parental Leave policy • VicSuper’s Performance Development Plan (PDP) • VicSuper Recruitment & Selection policy We also look for organisations that demonstrate a commitment to good labour practices through our supplier engagement policy. See the Partnerships section of this report for further information on this policy.
Organisational responsibility	The Executive Manager People & Culture has operational responsibility for any labour practices and decent work areas where they relate to VicSuper employees. This position reports to the Chief Executive.
Training and awareness	All the above policies and procedures are available to all employees on VicSuper’s internal intranet. In addition, specific training is provided on the key policies, for example, Equal Opportunity and Occupational Health & Safety.
Monitoring and follow up	VicSuper’s key labour practice and decent work policies are updated on a regular basis and approved by the Executive Manager People & Culture. Information about the effectiveness of our labour practices and work conditions is assessed via employee engagement surveys and through exit interviews with departing employees.

Who runs VicSuper, what do they do and how are they accountable? continued

Social management approach: human rights

DMA

FS 1

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the People, Invest for the long term and Partnerships sections of this report. We have not developed specific investment-related goals. However, the overall sustainability policy covers human rights in investments. Human rights is covered in the Vanguard (formerly SAM) and Generation funds, as well as (to a small extent) VicSuper’s property investments. Regnan and Hermes also address some human rights topics in their engagement activities. Similarly, we have not developed specific supply-chain related goals. However, the supplier engagement policy and questionnaire covers human rights issues in our suppliers’ operations.
Policy	VicSuper’s human rights commitments are included in the following policies and procedures: • VicSuper Code of Conduct • VicSuper Collective Agreement 2009 • VicSuper Disciplinary policy • VicSuper Employee Assistance Program policy • VicSuper Equal Opportunity policy & procedures • VicSuper Grievance & Appeals policy & procedures • VicSuper Occupational Health & Safety policy & procedures • VicSuper Recruitment & Selection policy • VicSuper Supplier Engagement policy. We also look for organisations that demonstrate a commitment to human rights through our sustainability and supplier engagement policies. See the Partnerships section of this report for further information on these policies.
Organisational responsibility	The Executive Manager People & Culture has operational responsibility for any human rights areas where they relate to VicSuper employees. The Executive Manager Investments has overall responsibility for investments. The Executive Manager Sustainability & Education has operational responsibility for the supplier engagement policy.
Training and awareness	The human rights aspects of equal opportunity, safe and healthy work environment and freedom of association and collective bargaining are covered in training sessions undertaken by all employees.
Monitoring and follow up	With regard to all policies and procedures mentioned above they are reviewed where necessary to ensure we meet legislative requirements in these and other employment related pieces of legislation. For investments, we monitor our fund managers through the supplier engagement program. Our fund managers use their own systems of monitoring and evaluating performance.
Additional contextual information	VicSuper’s management approach to human rights does not extend to aspects such as war crimes, forced and compulsory or child labour and consumer protection. Further information on our approach to human rights aspects can be found in the People section of this report.

Who runs VicSuper, what do they do and how are they accountable? continued

Social management approach: society

DMA

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set throughout this Governance and accountability section of this report.
Policy	VicSuper’s commitments relating to society are included in the following policies and procedures: • Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF) policy • Fraud control plan • Compliance plan • Compliance and Risk Management procedures manual • Community Involvement policy and procedures. We also look for organisations that demonstrate a commitment to society via our supplier engagement policy. See the Partnerships section of this report for further information on this policy.
Organisational responsibility	The Manager Compliance & Risk Management has operational responsibility for the above areas. This position reports to the General Counsel & Company Secretary. The Executive Manager Sustainability & Education has operational responsibility for the community involvement policy and procedures and the supplier engagement policy.
Training and awareness	Employees are provided with fraud awareness training on a regular basis.
Monitoring and follow up	All compliance policies and procedures are updated on a regular basis and approved by the Trustee. Any breaches reported are investigated by the Manager Compliance & Risk Management and the General Counsel & Company Secretary and are reported to the Trustee.

Social management approach: product responsibility

DMA

FS 15

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the Governance and accountability section of this report.
Policy	VicSuper’s product responsibility commitments are included in the following policies and procedures: • Publication Sign off and Approval Process policy • Compliance plan • Compliance and Risk Management procedures manual • Privacy policy. We also look for organisations that demonstrate a commitment to product responsibility via our supplier engagement policy. See the Partnerships section of this report for further information on this policy.
Organisational responsibility	The Manager Compliance & Risk Management and the Manager Legal have operational responsibility for any product responsibility areas. These positions report to the General Counsel & Company Secretary. The Executive Manager Sustainability & Education has operational responsibility for the supplier engagement policy. The Manager Marketing & Communications is responsible for any matters regarding marketing communications. This position reports to the Chief Executive.
Training and awareness	All employees are provided with training about privacy requirements when joining VicSuper or when legislation changes. All VicSuper employees have access to The VicSuper Style Guide, which outlines the principles of business communication, and how to achieve VicSuper’s particular language style.
Monitoring and follow up	All compliance policies and procedures are updated on a regular basis and approved by the Trustee. Any breaches reported are investigated by the Manager Compliance & Risk Management and the General Counsel & Company Secretary and are reported to the Trustee. With respect to marketing communications, The VicSuper Style Guide is reviewed annually to ensure continued relevance.
Additional contextual information	We do not address customer health and safety in our product responsibilities as we are a financial services provider.

Economic management approach

DMA

Indicator	Status
Goals and performance	VicSuper’s goals and performance are set out in the Deliver value, Investments and Financial stability sections of this report.
Policy	VicSuper’s economic commitments are included in the following policies and procedures: • risk assessment reviews • strategic plan • priority commitments for key strategies within the annual operating plan. Our sustainability and climate change policies and investment policy make reference to our indirect economic impacts including those with respect to climate change.
Organisational responsibility	The Chief Operating Officer and Chief Executive have operational responsibility for economic areas.
Additional contextual information	Further information on our successes and major organisational risks and opportunities can be found throughout this report.

Who runs VicSuper, what do they do and how are they accountable? continued

Our commitments for 2009/10

In 2009/10 we commit to:

1. conduct a board self-assessment and complete identified training

2. prepare a skills matrix for Directors and Deputy Directors

3. using the business impact analysis, conduct a gap analysis identifying new Business Continuity Plans or updates to existing plans as required.

4. determine options for joint tracking of operating plan and sustainability report commitments

5. introduce an online sign-off system to increase efficiency

6. provide quarterly reporting to the Trustee about the ongoing impacts of the global financial crises on the superannuation retirement savings of VicSuper members.

How is members’ money safeguarded?

SO 2

SO 3

In addition to the responsibilities of the Trustee and executive management, VicSuper complies with all relevant legislation in order to safeguard members’ money.

External regulation

SO 2

VicSuper is regulated by the:

• Australian Prudential Regulation Authority (APRA)

• Australian Securities and Investment Commission (ASIC)

• Australian Taxation Office (ATO)

• Australian Transaction Reports and Analysis Centre (AUSTRAC).

Licensing

SO 2

SO 3

VicSuper is licensed under the Corporations Act 2001 (Cwlth). Under the terms and conditions of our Australian Financial Services Licence (No. 237333), VicSuper may deal in, and advise on, superannuation products.

At present, VicSuper limits its representatives to recommending VicSuper Fund benefit plans and providing financial product advice on VicSuper Fund benefit plans; the Emergency Services & State Super (ESSSuper) – Revised, New, SERB and Transport Schemes; and general superannuation matters. VicSuper does
not provide advice about any other superannuation funds.

Before a VicSuper employee can be authorised to provide general or personal advice, the nominated employee must be approved by two delegates of the Trustee and meet minimum qualifications, training and experience criteria to become a VicSuper representative.

VicSuper is not a member of any financial group nor do we have any ownership links or affiliations that would have any effect on the advice provided by our representatives under VicSuper’s AFSL.

All superannuation trustees must be issued with a RSE (Registrable Superannuation Entity) Licence by APRA to act as a trustee, and the super fund must be registered with APRA to accept contributions. VicSuper Pty Ltd’s APRA RSE Licence number is L0000468. To obtain its RSE Licence, VicSuper had to demonstrate it has policies and procedures to deal with responsibilities such as risk management and resource adequacy. VicSuper Fund’s APRA registration number is R1000580.

Internal controls

SO 2

SO 3

VicSuper has a comprehensive system of internal controls, including:

• compliance plan, compliance calendar, compliance self assessment questionnaires and compliance and risk management procedures manual

• risk management plan and risk management strategy

• regular compliance and risk management reports to the Trustee

• AFSL implementation framework, procedures manual, training plan and training registers for VicSuper representatives acting under VicSuper’s Australian Financial Services Licence

• regular legislative and technical updates
to all employees and directors

• fraud control processes and fraud awareness training for all employees

• internal audit function

• bribery and corruption prevention processes

• Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF) Policy and program.

Risk management

Business continuity, disaster recovery and emergency plans are in place for all business units and are regularly reviewed and tested.

Risk assessment reviews are conducted at least annually.

Financial controls

VicSuper uses independent auditor Deloitte Touche Tohmatsu to conduct an external audit of VicSuper’s and VicSuper Fund’s financial statements. The audit for a financial year is completed in September of the following financial year. KPMG is responsible for VicSuper’s internal audit function.

Custodian

VicSuper’s custodians (National Australia Bank and Westpac Banking Corporation) hold title to VicSuper Fund’s assets (including our bank account), undertake registration of securities, hold investments in safekeeping and maintain accounting and taxation records on behalf of VicSuper Fund.

How is members’ money safeguarded? continued

Reserve account

VicSuper maintains a general reserve
account in VicSuper Fund which includes an administration reserve amount of $250,000 required under VicSuper’s RSE Licence. The general reserve account may be used to adjust for any fluctuations in VicSuper Fund’s management and investment administration expenses. It is not our intent to use the reserve account to smooth investment returns from year to year apart from minor rounding adjustments.

Our performance

VicSuper provided the following information to external regulators in 2008/09:

• reports to the ATO covering surcharge
and Government co-contributions, lost members and unclaimed monies

• VicSuper Fund’s tax return, fringe benefits tax annual return and quarterly Business Activity Statements (BAS) to the ATO

• VicSuper Pty Ltd’s tax return and quarterly BAS to the ATO

• confirmation of ASIC annual statement details

• quarterly and annual returns to APRA

• Australian Financial Services Licence reporting obligations to ASIC

• Registrable Superannuation Entity (RSE) reporting obligations to APRA

• AML/CTF compliance report to AUSTRAC

• ABS Quarterly Survey of International Investments

• Quarterly BAS for:

– VicSuper Future Farming Landscapes Trust

– VicSuper Future Farming Landscapes Landholdings Trust

– VicSuper Forests Trust

– VicSuper Forests Landholdings Trust

– Annual BAS for VicSuper Ecosystem Services Pty Ltd

• Annual Tax Returns for:

– VicSuper Ecosystem Services Pty Ltd

– VicSuper Future Farming Landscapes Trust

– VicSuper Future Farming Landscapes Landholdings Trust

– VicSuper Forests Trust

– VicSuper Forests Landholdings Trust

– VicSuper International Private Equity Trust.

All governance policies and the overall governance framework have been reviewed to ensure continued compliance with RSE and AFSL licensing requirements.

During 2008/09 we implemented a range
of initiatives to improve the efficiency and effectiveness of the way we safeguard members’ money. This included:

• updating VicSuper’s AML/CTF program and policy and introducing an electronic monitoring system

• implementing VicSuper’s fraud prevention program and enhancing controls

• developing an electronic incident and breach reporting database

• establishing an executive Crisis Management Committee to conduct a Business Impact Analysis

• scheduling an 18 month project to review crisis management plans.

Our commitments for 2009/10

In 2009/10 we commit to:

1. review internal controls and, if necessary, develop further risk management controls to ensure monies are safeguarded against possible losses through fraudulent behaviour

2. expand our transaction monitoring program (KOLA) to improve detection of possible losses through fraudulent behaviour.

How can we ensure that the rights of stakeholders are respected?

Decision making and involvement

GRI 4.3

GRI 4.14

GRI 4.16

VicSuper’s board is made up of equal numbers of member and employer representatives to ensure that all decisions affecting VicSuper Fund are made with equal and fair representation. Members, employers and other stakeholders can become involved in VicSuper by either nominating to be elected as a director of VicSuper (during the director election period) or communicating with the incumbent directors. Members and employers can also liaise directly with management and employees to provide suggestions and feedback on the direction and activities of the organisation.

For information about VicSuper’s stakeholder engagement activities in 2008/09, see the About VicSuper section of this report. In 2008/09, VicSuper developed a proposal for expanding and formalising its stakeholder engagement activities. For more information about stakeholder engagement and our commitments for 2009/10 and future years, see the Partnerships section of this report.

PR 8

VicSuper complies with the Privacy Act 1988 (Cwlth). This legislation regulates the appropriate collection, holding, use, correction, disclosure and transfer of personal information by private sector organisations like VicSuper. Statistics relating to privacy issues are recorded separately and do not require a formal complaint to be lodged.

PR 3

PR 6

FS 15

We comply with the relevant Federal Government legislation in all our product labelling. We also discuss the economic, social and environmental impacts of our products and services in our annual member reports and our Combined Financial Services Guides and Product Disclosure Statements.

For more information about how VicSuper respects the privacy of our members and employers, please see the relevant VicSuper Combined Financial Services Guides and Product Disclosure Statements, which are available from VicSuper or on our website at vicsuper.com.au

Complaints and compliments

FS 15

We take all complaints seriously and aim
to resolve any issues compassionately and provide a meaningful response as quickly
as possible.

Members and employers can contact our Complaints Coordinator to raise any concern and if they are not satisfied with that outcome, the matter can be determined by the Trustee. If the member is still not satisfied, they can contact the Superannuation Complaints Tribunal, an independent body set up by the Federal Government to review trustee decisions relating to members.

Employers are able to escalate complaints that relate to the provision of financial services under our Australian Financial Services Licence to the Financial Ombudsman Service.

Privacy complaints are dealt with by the VicSuper Privacy Officer. Members who are dissatisfied with this outcome can contact the Office of the Federal Privacy Commissioner.

How can we ensure that the rights of stakeholders are respected? continued

Our performance

PR 4

In 2008/09 we received 40 written complaints and five verbal complaints with respect to administration matters. This increase over last year (23 written complaints and one verbal complaint) is largely as a result of enhancements to levels of insurance coverage and the consequent automatic increase in premiums. The insurance premium was automatically increased if members did not opt out. For more information about insurance see Strategy 1: Deliver value.

Complaints remain low considering the size of the Fund and represent less than 0.02% of our total membership.

Four complaints were made to the Superannuation Complaints Tribunal (SCT). Two were treated by the SCT as lacking in substance and withdrawn and two are ongoing as at 30 June 2009. One disablement claim taken to the County Court last financial year was settled by our insurer.

It took us an average of 15.4 days to respond to complaints compared to 11.4 days last year. Legally we are required to have arrangements in place to deal with complaints within 90 days. We responded to 47% of complaints within 10 days.

For 2009/10, we have made a commitment to improve our processes for measuring and responding to positive feedback from stakeholders, as we do for complaints.

PR 8

Statistics relating to privacy issues are recorded separately and do not require a formal complaint to be lodged. We had 12 privacy breaches in 2008/09 compared with 24 privacy breaches in 2007/08.

Our commitments for 2009/10

In 2009/10 we commit to:

1. improve processes to measure and acknowledge positive feedback from stakeholders.

Through the prudent financial management and continued growth
of VicSuper Fund, we can continue
to offer and expand our services over
the long term, allowing our members
to take full advantage of our benefit
plans and services.

Our aim

We aim to build the financial assets of VicSuper Fund for the benefit of our members and to manage our organisation in a financially prudent manner.

How does this contribute to a sustainable superannuation fund?

Building the financial assets of VicSuper Fund brings with it greater economies of scale, enabling us to expand our services to members and employers while keeping our management fee low. Responsible and enduring financial stability and growth means that we will contribute positively to society by increasing the economic wellbeing of our members, providing continuous employment and by purchasing goods and services.

Our approach

We aim to achieve financial stability and growth by:

• increasing the account balances of our existing members. We do this by maximising our investment revenue over the long term at a given level of risk, and educating and advising members about making additional superannuation contributions to their accounts

• providing outstanding services for members and employers, retaining them over a long period

• attracting new members and employers through our advice and education programs, partnerships and promotional activities

• continuously monitoring and reviewing our management and investment administration expenses compared to
our plan.

• taking a 10-year strategic outlook to ensure we are prepared for any industry and societal changes that will impact our members and our business

• meeting all relevant financial controls and mandatory reporting requirements

• regularly reporting to the Trustee and our employees, members, employers and other stakeholders.

Members receive a summary operating
and financial position statement of the performance of VicSuper Fund in their member report each year. They can also request a full set of audited financial statements or can view the summary statements here.

Income and growth

EC 1

Our performance

VicSuper Fund net assets at 30 June 2009 were $6.124 billion having grown on average by 26% per annum over the first eight years of VicSuper Fund’s status as a regulated superannuation fund and by 2.4% per annum over the last 2 years. The fall in sharemarket returns experienced in 2007/08 deteriorated further in 2008/09 in response to the global financial crisis. This meant that with the exception of the Cash option, all of VicSuper’s investment options produced a negative annual return in 2008/09.

Despite this fall, VicSuper Fund’s net earning rates at 30 June 2009 are close to the return provided by the financial markets which provides comfort to members and prospective members that VicSuper does
not take excessive risk with the investment
of their superannuation savings. VicSuper’s share of total superannuation assets, in Australia, continued to increase during the year to reach 0.55%7 as at 31 March 2009, compared to 0.54% at the same time
last year.

The following graphs provide an indication of the financial stability and growth in VicSuper’s business.

Income and growth continued

Income and growth continued

The average account balances for our members were impacted by the fall in investment revenue for a second year in 2008/09. Voluntary contributions decreased by 26.2%. This compares with an annualised increase of 14.5% per year over the past ten years. Graph 5.14 shows the average account balances for members broken down by benefit plan. Contributions albeit below trend in 2008/09 indicate that members are aware of the benefits that accrue when saving for their retirement, and are able to do so even in difficult economic conditions.

The widespread fall in companies’ earnings across the global economy and drop in investor confidence all contributed to a second year of decreases in investment returns for VicSuper Fund members in 2008/09. Investment revenue (comprising realised and unrealised gains) dropped from -$417.0 million in 2007/08 to -$775.5 million in 2008/09.

EC 1

Table 5.10 shows how VicSuper’s value to members was generated in 2008/09. Despite a decrease in value generated from investments, member contributions remained stable.

Table 5.10 Value generation for members ($’000)

	2007/08	2008/09
Investment income	-$417,003	-$775,504
Contribution revenue	$1,329,703	$1,154,803
Other revenue	$5,973	$11,084
Gross value added	$918, 673	$390,383

Table 5.11 shows the changes in the key areas in which we measure our financial stability and growth from the previous financial year. Over the past ten years our annualised increase per annum for:

• number of members was 8.0%,

• net market value of investments was 23.0%

• number of active employers was 23.1%.

Table 5.11 Key financial and non-financial indicators of stability and growth

	30 June 2008	30 June 2009	Prior year % change
Members	237,852	249,504	▲ 4.9%
Employers	13,143	14,367	▲ 9.3%
Net market value of investments	$6.13 billion	$6.05 billion	▼ 1.3%
Investment income	-$417.0 million	-$775.5 million	▼ 85.97%
Contributions revenue	$1.330 billion	$1.155 billion	▼ 13.2%

Liabilities and expenditure

Our performance

Due to the decline in valuation of fund assets as a result of the global financial crisis our fee revenue decreased. In our mid-year review of our financial plan we revised and reduced our management and administration expenditure forecast.

During the year, VicSuper’s management
and investment administration expenses increased by 9.5% compared to a 14.9% increase in 2007/08. Our percentage average annual increase over the past ten years was 13.4% for management and investment administration expenses. This increase is directly correlated with the growth in the Fund’s membership and employers. Management expenses include costs such as salaries, premises and office administration.

We expect a similar increase in management and investment administration expenditure in 2009/10 to this year. The Trustee has a comprehensive plan in place to carefully manage our growth and expenditure in the short and long term.

Table 5.12 Liabilities and expenditure

	30 June 2009	Prior year % change
Liability for accrued benefits	$6.124 billion	▼ 0.9%
Management and investment administration expenses	$36.6 million	▲ 9.5%

EC 1

Graph 5.16 gives the breakdown of the distribution of the value generated for members in 2008/09.

Put another way, in 2008/09, for every $100 of value generated for members:

• $81.51 was credited to member accounts

• $5.90 was applied to meet the insurance cost for members where applicable

• $4.60 was paid to staff in salaries and associated expenses

• $4.29 was paid to external service providers

• $3.22 was applied to meet tax liabilities

• $0.48 was charged for depreciation of assets.

VicSuper maintains a general reserve account in VicSuper Fund. This account may be used to adjust for any fluctuations in VicSuper Fund’s management and investment administration expenses. It is not our intent to use the reserve account to smooth investment returns from year to year apart from minor rounding adjustments.

The money in the reserve account is spread across the investment options and managed using VicSuper Fund’s investment strategy. The balance of the general reserve account at 30 June 2009 was $17.5 million, down from $19.8 million at 30 June 2008. The balance includes an administration reserve amount of $250,000 required under VicSuper’s RSE Licence.

Audit information and summary financial statements

Our performance

The audit of VicSuper Fund for the year ended 30 June 2009 was completed by VicSuper’s auditor, Deloitte Touche Tohmatsu. An extract from VicSuper Fund’s audited accounts is presented on pages 87 and 88. VicSuper’s Funds audited accounts are available to members and beneficiaries
on written request.

This year we sought detailed investigation of valuations underlying our deferred tax assets and unlisted investments.

The auditors were of the opinion that VicSuper’s financial statements presented fairly in accordance with applicable accounting standards and other mandatory professional reporting requirements in Australia for VicSuper’s financial position as at 30 June 2009, results of operations for the year ended 30 June 2009 and cash flows for the year ended 30 June 2009.

Summary statement of financial position as at 30 June 2009
	2008 (audited) $000	2009 (audited) $000
Assets
Investments	6,130,409	6,049,572
Other assets	118,502	110,953
	6,248,911	6,160,525
Less liabilities
Income tax liabilities	53,886	19,515
Other liabilities	12,554	16,753
	66,440	36,268
Equals net assets available to pay benefits	6,182,471	6,124,257
Represented by liability for accrued benefits	6,182,471	6,124,257
Movement in liability for accrued benefits
Opening balance	5,838,591	6,182,471
Increase in accrued benefits	841,528	320,545
Benefits paid	(495,382)	(376,434)
Transfer to/(from) reserve	(2,266)	(2,325)
Closing balance	6,182,471	6,124,257
Movement in reserve
Opening balance	22,108	19,842
Transfer to/(from) reserve	(2,266)	(2,325)
Closing balance*	19,842	17,517

* The reserve includes an administration reserve amount of $250,000 required under VicSuper’s RSE Licence.

Audit information and summary financial statements continued

What it all means

Benefits accrued after transfer from reserve

This is the total increase in member benefits from net investment revenue, member contributions and transfer of member balances from other funds, less the expenses in running VicSuper Fund and transfers from reserve.

Liability for accrued benefits

This amount represents the total amount of all members’ and the reserve account.

Our commitments for 2009/10

In addition to our ongoing commitments to continue the stability and viability of VicSuper Pty Ltd and VicSuper Fund, in 2009/10 we commit to:

1. increase EFT for outgoing payments rather than cheques

2. modify systems to better capture details about supplier engagement

3. implement an investment back-office system to reduce associated paper use
by 50%

4. obtain unqualified audit opinions with respect to our annual financial reports

5. meet operational performance targets with respect to contribution and fund growth

6. implement an automated investment deal slip system

7. review the liquidity policy and liquidity management plan and update where appropriate

8. implement a new benefit payment accounting system to reduce manual operations and streamline reporting.

EN 26

The environment provides us with resources to carry out our day-today operations. By minimising the natural resources that we use and reducing the environmental impact of our activities,
we will help to ensure there are resources left for the future, protect the functioning of ecosystems and at the same time reduce our operating costs.

Our aim

DMA

We aim to reduce the environmental impact of:

• our operations: by using resources more efficiently and managing and seeking to reduce our greenhouse gas emissions

• our investments: by encouraging the directors and managers of companies and other assets in which we invest to minimise their impact on the environment and by proactively directing an increasing proportion of the Fund’s investment towards companies and asset managers that actively manage environmental impacts, risks and opportunities in their business strategies, and in so doing increasing value over the long term.

This section of the report looks predominantly at the environmental impact of our operations, and also includes the environmental footprint of our Future Farming Landscapes investment. The environmental impact of our investments in general is discussed in Strategy 2: Invest for the long term.

How does this contribute to a sustainable superannuation fund?

All the operational activities that are necessary to run a super fund have an impact on the environment. For example,
our office spaces require lighting and air-conditioning. The use of equipment such as telephones and computers are essential for the provision of superannuation services.
All of these require resources and generate wastes and emissions through their production, use and disposal.

By addressing our environmental impacts we can help to conserve resources. This benefits VicSuper by protecting the ecosystems that we need to operate successfully in the long term. It also benefits our stakeholders and the broader community, who rely on the availability of natural resources to live and maintain their lifestyles, and rely on the preservation of the natural environment for
a range of recreational activities.

Conserving natural resources also makes economic sense. For example printing double-sided and conserving energy saves us money. These savings, along with productivity improvements enable us to do more while reducing our operating costs and maintaining our low fee structure for members.

Our superannuation plans and services are designed to benefit our members and to help them achieve financial security in retirement. Our philosophy is that to do this successfully over the long term, we need to respect the environment and the communities which we impact.

Ultimately, the more we understand our own environmental impact and the measures that we can undertake to reduce it, the more effectively we can take action to influence the impacts of the companies we invest in. See Strategy 2: Invest for the long term for more information on the environmental impact of our investments.

Our environmental management approach and policies are described in Strategy 4: Maintain sound governance and accountability.

Our approach

To achieve our aim, we are attempting to reduce our environmental impact by addressing three key areas:

1. policy, processes and training

2. resource usage

3. energy use and greenhouse gas emissions.

Policy, processes and training

FS 1

FS 4

To reduce our environmental impact we need to ensure that we have the appropriate internal processes in place. We regularly review and modify our policies and processes, train our employees in operational and investment-related environmental issues and ensure general information about environmental impacts retains a high profile within the organisation.

Our approach

VicSuper has an Executive Manager Sustainability and Education and an Executive Manager Investments who have ultimate responsibility for the integration of sustainability into our operations and investment portfolio respectively. VicSuper also has three specialist sustainability employees working in a variety of roles to integrate sustainability into VicSuper’s decision making. These employees keep abreast of the latest sustainability developments through a mixture of part-time tertiary studies, conference attendance and participation in industry seminars. Our team participate in sustainability working groups, research, and maintain partnerships with organisations such as EPA Victoria (for more information about this partnership see Strategy 7: Foster effective partnerships).

We are signatories to both the United Nations Environment Programme Finance Initiative and the United Nations Principles for Responsible Investment. For more information about these initiatives see Strategy 2: Invest for the long term.

Our performance

We are progressing a 2008/09 commitment to review and implement more efficient data collection practices for environmental management. As a result, minor amendments have been made to automate data entry and transport emissions calculations.

We also committed to develop targets for VicSuper’s environmental impacts. An internal review found targets are in place for most environmental impacts, but we still need to test the adequacy of these targets in 2009/10.

VicSuper’s internal employee sustainability group (known as our ‘FROGS’ group: Focused Recruits of Global Sustainability) is essential to the development and implementation of new initiatives and for keeping other employees informed about sustainability at VicSuper. At 30 June 2009, this team consisted of 25 employees from across VicSuper.

The training needs of sustainability employees are regularly reviewed by both manager and employee, with any required training incorporated into the employee’s annual performance review and development plan.

The training needs of FROGS representatives are also identified and addressed through opportunities such as attendance at seminars and conferences, mentoring from VicSuper’s sustainability employees and other training as required. In 2008/09 eight FROGS attended a specially designed course on ‘influencing and persuading’ to better equip them for their role as a FROGS representative.

PRI 1

Sustainability is VicSuper’s central operating principle, so it is important that all employees understand what this means. To ensure employees continue to receive ongoing and relevant information about sustainability, a compulsory all staff ‘refresher course’ was developed and delivered during the first half of 2009. As at 30 June 2009, 139 employees had participated in this training. A sustainability training module also forms part of the induction program for all new employees. More information about our sustainability training and awareness-raising is available in Strategy 3: Attract, develop and retain great people.

FS 1

PRI 1

During 2008/09, we maintained our annual review of VicSuper’s Sustainability Policy, Climate Change Policy and Environment Policy as part of a regular check of our governance processes. We made a commitment in 2008/09 to ensure our environment and climate change policies are consistent with emerging government carbon pollution reduction policies and legislation. The review found our policies to be in line with proposed federal government legislation and strategy. We will continue to monitor future developments. For more information on these policies, see Strategy 4: Maintain sound governance and accountability or view the policies on our website.

Our commitments for 2009/10

During 2009/10 we commit to:

1. review and implement more efficient data collection practices for environmental management

2. review the use and enhance the effectiveness of existing collaboration tools such as the VicSuper Wiki, web conferencing and video conferencing

3. review and update VicSuper’s environment and climate change policies consistent with government carbon pollution reduction policies and legislation, or leading practice.

Resource usage

VicSuper provides superannuation investment and advice services to nearly twice as many members now than when we first commenced operations as a regulated fund in 1999. We now assist close to six times as many employers with their superannuation obligations as we did in 1999. Our operations have grown too, with more offices, employees and suppliers required to serve our growing market.

This growth presents us with a major and ongoing challenge to reduce our resource consumption in an absolute sense as well
as relative to our membership. We look to reduce our resource use in a way that also adds to the value we provide to our members, employers, employees and other relevant stakeholders.

Like similar office and service-based organisations, the majority of our resource usage relates to paper, computer-related goods and electricity. As such, these aspects of our operations are where we focus the majority of our efforts to achieve improvements. This increasingly includes working with our suppliers to understand the resource consumption of the goods we purchase. See our Partnership section for more information about working with our suppliers.

Paper

As VicSuper is an office and service-based organisation, the amount of paper we use
is considerable and readily apparent to employees and our other stakeholders.

DMA

Eco-footprint calculations undertaken in previous years along with our annual greenhouse gas emissions calculations have confirmed that printed materials and publications are one of our major office-based impacts. As such, we ensure that we continue to seek the most environmentally appropriate papers to use, seek ways to reduce our overall usage while monitoring and reporting our usage internally each month.

Our performance

Our employees have been looking closely
at our work processes and have made some major improvements in our systems to improve efficiency and reduce unnecessary paper usage. Compared to last year, we achieved a 12% reduction in the amount
of white A4 copy paper we used.

We also measure the total amount of paper consumed by VicSuper in publications, brochures and corporate stationery. All of these resources are used by VicSuper in conducting its operations.

Overall our total use of paper decreased by 20.5% during 2008/09 despite an increase of 22.1% in corporate stationery use. This year we notified approximately 170,000 members about the availability of our Member Report online, and sent letters to 230,000 members inviting them to register for online communications. Doing so increased our corporate stationery use, however generated significant time, cost and resource savings by reducing the quantity of corporate publications produced.

Resource usage continued

Table 6.10 and Graph 6.11 show a breakdown of the types of paper used and comparisons with previous years.

EN 1

Table 6.10 Total sheets of paper use by type, A4 equivalent

Paper type	2005/06	2006/07	2007/08	2008/09	Prior year % change
All office copy paper	1,842,000	1,648,000	1,619,000	1,296,500	▼ 19.9%
Publications, brochures and forms	11,611,691	10,880,010	11,634,319	8,373,850	▼ 28.0%
Letterhead, envelopes and other stationery	1,570,032	3,098,478	2,046,552	2,499,212	▲ 22.1%
Total	15,023,723	15,626,488	15,299,871	12,169,562	▼ 20.5%
Approximate total weight*	84.28 tonnes	87.66 tonnes	85.83 tonnes	68.27 tonnes	▼ 20.5%

* Weight calculation assumes all paper is 90gsm.

Note: total weight figures for previous years have been restated.

Note: Total paper use data not available prior to 2004/05 as this was a new indicator in 2005/06.

Total paper usage is influenced by member numbers, so we also measure our paper usage per member. Our paper usage per member continued to decrease in 2008/09, from 64.3 sheets in 2007/08 to 48.9 sheets in 2008/09 which is a decrease of 24.1%. This is demonstrated in Graph 6.12.

Note: Total paper use per member data not available prior to 2004/05 as this was a new indicator in 2005/06.

Resource usage continued

Our members play a major role in helping
us achieve our objective to reduce paper
use when they sign up for electronic communications. In 2008/09 14% of members made this choice. During 2007/08 we commenced the implementation of our electronic communication project for members and employers. This ongoing project is already delivering significant paper savings as it focuses on increasing the number of members and employers who will receive communication via electronic means rather than paper based through the mail. This includes the use of email, SMS and greater use of MembersOnline and EmployersOnline.

EN 2

In 2008/09, all of our paper (with the exception of 0.03%) contained stock that was either recycled content or sourced from sustainably harvested forests. Despite this, there are still significant environmental impacts from the paper we use, which is why reducing our total use is still a key priority.

Computer-related goods

Our use of information technology is another critical area of VicSuper’s business and one that is increasingly important as our employee numbers grow and the level and breadth of our services expands.

Our performance

During 2008/09 a number of information technology (IT) related projects were initiated to reduce energy or paper usage while also enabling employees to more efficiently complete their work.

The use of virtual servers is a key project that commenced in 2007/08 and was completed this year. We moved the function of 11 servers onto web-based or ’virtual’ servers, cutting the energy consumption and cooling requirements of our Melbourne server room.

The effort we put into implementing a new imaging and workflow system started to pay off towards the end of 2008/09. We are now starting to move business processes onto this new system and are reducing the manual processing of documentation thanks to enhanced scanning and data extraction capabilities.

A key project during 2008/09 was the implementation of video and web conferencing in all VicSuper offices to reduce the need for travel to meetings and conferences, reducing the environmental impact of our travel. We will continue to train and encourage employees to make the best use of this technology as an effective way for people from our offices across the state to keep in contact and work together.

In addition, we are looking to further consolidate existing equipment and purchase new PCs that use less energy. We made some progress towards a commitment to clarify environmental requirements in hardware specifications, and to calculate resource savings as a result of IT decisions. This commitment will carry over to 2009/10.

Waste

DMA

The resources we use and services that
we purchase have significant impacts on members, the community and the environment through all phases of their production, use and disposal. As such, continually improving our waste management and the responsible disposal of goods remains a key focus of VicSuper.

We have a comprehensive recycling system in place for all offices covering cardboard, paper, toner cartridges, computer equipment, organics and aluminium/glass/plastic co-mingled recycling. We use the results from quarterly audits in each office to estimate how much landfill, plastic/glass/aluminium recycling and organic waste we generate each year, and opportunities for improvement.

Our performance

EN 1

EN 22

Our waste management initiatives were recognised within Sustainability Victoria’s Waste Wise program when we received recertification at ‘silver’ grade. Silver certification acknowledges VicSuper’s achievements in reducing, quantifying and reporting significant improvements in waste minimisation and resource efficiency.

We continued to improve waste management facilities and raise awareness about waste management in our offices amongst employees. We refreshed bin signage and promoted correct recycling choices to employees during an internal ‘Waste Wise Week’.

Table 6.11 shows VicSuper disposed of
6,559 kg less waste in 2008/09 than the previous year, mainly due to a reduction in paper use and therefore less paper waste for recycling. The weight of computer equipment recycled has decreased compared to last year as we re-evaluate appropriate recycling and reuse methods.

A clean out of used toner cartridges stored from previous years and sent for recycling this year influenced the increase in figures in 2008/09.

Table 6.11 Waste disposed and methods,
(kg/annum)

Waste Type	Disposal method	2007/08	2008/09
Glass, plastic, aluminium	Recycling	1,250	1,332
Organic waste	Recycling	2,075	2,210
Computer equipment	Recycling and reuse	1,038	520
Toner cartridges	Recycling	75	260
Paper and cardboard*	Recycling	21,747*	15,268
Other waste	Landfill	1,875	1,910
Total		28,060	21,501

*2007/08 paper and cardboard recycling figure recalculated and restated in 2008/09 to correct a calculation error

Note: This data is calculated based on 250 work days per annum

Resource usage continued

Graph 6.13 shows an improvement in rates of disposal of organic and recyclable material in 2008/09. The proportion of material disposed to landfill that could have been composted or recycled remained stable at 28% compared to 26% last year.

Note: Waste data collected prior to 2007/08 was recorded in cubic metres rather than kilograms and is not comparable.

In 2009/10 we have made a commitment to provide location-specific information about the results of quarterly waste audits.

Graph 6.14 shows that the majority of our waste is either paper or recyclable and compostable, with 9% of our total waste ending up in landfill.

In the past we have worked to ensure IT equipment no longer required is refurbished and passed on to individuals or groups in the community who may not otherwise be able to afford it. Where it cannot be reused, the equipment is stripped down to individual components and recycled where possible, thus reducing the amount of waste ending up in landfill. In future we’re keen to ensure this is still the best way to make the most of our used IT equipment. We will be reviewing what other organisations do with used IT equipment to ensure we’re up to date with best practice.

Resource usage continued

Water

DMA

In 2008/09 we developed a draft water management plan with the long-term aims of:

• measuring and reducing direct water use in VicSuper’s office operations and encouraging VicSuper employees to reduce unnecessary water use at work

• finding out more about the water intensity of products used by VicSuper and how to choose water-efficient products

• finding out more and making information available to members about the water intensity of VicSuper Fund’s investments.

The draft plan outlines steps to analyse and respond to employees water use at work, and promote water conservation in general.

Our performance

EN 8

We are gaining increasing access to data about water use in our office operations (shown in Graph 6.15 below). The pattern
in Traralgon is unusual given the steady employee numbers and office facilities there. Steps will be taken in 2009/10 to investigate the increase in water use recorded by the local water utility. In Melbourne, the building manager of our premises associates lower water usage with the installation of low flow facilities in taps and toilets. In 2009/10, we will continue to work with the building manager to look for opportunities to further reduce water use.

In 2009/10 our employee water project group (part of our FROGS group) plan to assist other employees to reduce their out-of-work water consumption by gauging employee interest in purchasing and installing rain water tanks.

Our commitments for 2009/10

During 2009/10 we commit to:

1. reduce the average number of pages of Statements of Advice in order to contribute to paper savings

2. collect baseline information about the energy efficiency of our equipment and develop energy efficiency specifications for future purchases

3. establish and provide quarterly sustainability reporting for Information Technology including details of equipment brought in, used and disposed of

4. provide improved organic recycling facilities in regional offices

5. modify waste sort procedures to collect more accurate data about the nature of waste to landfill

6. review other organisations’ IT equipment reuse and recycling strategies

7. investigate Traralgon advice centre’s trend of increased water use and take appropriate action

8. review the impacts of our operations on forestry resources and recommend actions.

Resource usage continued

Future Farming Landscapes

Future Farming Landscapes (FFL) is a long-term investment in land and water in northern Victoria, managed on behalf of VicSuper Ecosystem Services Pty Ltd by Kilter Pty Ltd. The value of our investment in FFL, $50.7 million to date, represents 0.83% of the overall value of VicSuper Fund’s investment portfolio.

EN 14

FFL is in the early stages of a 25-year investment to reconfigure land to its most suitable and sustainable use. The objective for the investment is to change the land use to high-value agriculture and horticulture alongside environmental restoration, preservation and profit from monetising ecosystem services. FFL is in alignment with the Victorian Native Vegetation Framework and the Environmental Protection and Biodiversity Conservation Act 2001 (Cwlth). Refer to Strategy 2: Invest for the long term for more information about this investment.

VicSuper Ecosystem Services Pty Ltd is a wholly owned subsidiary of VicSuper, so we are able to monitor and influence environmental impacts of this investment to a greater extent than other investments in our portfolio.

The water and biodiversity impacts of the FFL investment are provided below:

Water

EN 8

EN 9

EN 10

Water used in the FFL investment is withdrawn from the southern Murray Darling Basin. FFL holds substantial water rights and is considered a ‘medium level’ water owner in this area. This catchment is recognised to be under pressure from high-demand agricultural practices and drought conditions exacerbated by climate change. This region is in the ‘foodbowl’ of Australia with a large number of communities and industries reliant on water for irrigation and survival. FFL is seeking ways to provide water for efficient agriculture and environmental outcomes.

In 2008/09 388.6 ML of water was withdrawn by FFL for irrigation of paddock-based food production. FFL was able to materially reduce water losses between the Little Murray River and the paddock through substantially shortening the distance that water was pumped in open earth channels. Although all FFL irrigation paddocks are fitted with reuse systems, the better option in 2008/09 was to manage water flows such that overflow in irrigation channels was minimised. As such there has been no formal recycling or reuse of water.

The challenge in future is to move away from flooding techniques to irrigate the land, and install sub-surface drip technology, for example. The project aims to reduce:

• total water extraction

• water extraction per hectare

• water extraction per dollar-value of goods and services.

FFL has not withdrawn any water from RAMSAR-listed wetlands within the property and does not withdraw water from any water bodies where withdrawals would account for an average of 5% or more of the annual average volume of the water body. In future, the lower levels of water extracted and less water being applied to the land for irrigation is expected to result in lower water tables and reduced risk of local salinisation and export of salt to local river systems.

Biodiversity

DMA

EN 11

EN 12

EN 13

EN 15

VicSuper Ecosystem Services Pty Ltd owns 5,403 hectares of land made up of 28 farms across northern Victoria. In some sub-catchments, we are a major land holder.
FFL lands adjoin the Loddon River, the Little Murray and significant wetlands and therefore consider them to be areas of high biodiversity and ecosystem value. Within our land holding, 500 hectares of remnant shrub and grassland is considered rare at the statewide scale. Protection of these areas and restoration of riparian zones forms part of the overall management strategy for the land. Detailed management plans are in place to address specific pest plants and animals, especially rabbits and boxthorn.

In 2008/09, soils and vegetation classes considered the most fragile have been ‘rested’. This has already contributed to a substantial environmental gain in seed production amongst the native shrubs and grasses. This seed was collected and is being progressively sown along with the planting of seedlings.

There have been no areas of negative habitat conversion on VicSuper Ecosystem Services Pty Ltd lands in the reporting period. In fact, areas of land with residual biodiversity values have been protected and the process of rejuvenation initiated.

Energy and greenhouse gas emissions

Climate change presents a significant and unprecedented challenge to the world’s ecosystems, societies and economies. VicSuper is committed to a range of actions to reduce our direct and indirect climate change impacts and to address climate change risks and opportunities. To enable this, we are implementing a carbon management strategy that includes, among other things, measuring, reducing and then offsetting our climate change impacts for operational aspects of the business.

This is an important part of our efforts to build a sustainable super fund: helping to ensure that we are well-placed to create value for our members.

As an office-based organisation, VicSuper’s main operational greenhouse gas emissions come from the energy consumption used in running our five advice centres and our use of paper and employee transport. As discussed in the resource usage section, as our members become more involved and interested in their superannuation (which we want them to be), their level of interaction with us increases and our energy use, other resource use and greenhouse gas emissions increase accordingly.

DMA

VicSuper’s policy is to reduce energy consumption through improved processes, operations and behaviour. We monitor and report our energy usage each month with
an overall target to reduce absolute usage.

In addition, we recognise that while our direct operations have a significant impact, the greenhouse gas emissions that we are indirectly responsible for through the companies that we invest in far outweigh our operational emissions. More information on our investment-related indirect emissions can be found in Strategy 2: Invest for the long term. The information that follows in this section relates to our operational energy use and greenhouse gas emissions.

Energy consumption

EN 3

EN 4

EN 5

EN 18

Our performance

VicSuper’s total electricity consumption for 2008/09 was 485.40MWh (or 1,747 gigajoules), which is a reduction of 8.9% from the previous year. As shown in the graph below, this reduction in our energy use is a significant change from the upwards trend previously experienced.

The graph below shows that our electricity use per employee has also decreased in the past year.

Energy and greenhouse gas emissions continued

We know that our major use of energy is from lighting and the use of servers and other IT equipment. More detail about our projects to improve the energy efficiency of lighting in the office can be found in the Energy efficiency section on this page. IT related initiatives are described in the Computer-related goods section.

We also consume energy through the use of gas at our Bendigo Advice Centre. As this makes up a relatively insignificant proportion of our energy usage (less than 1% of our total greenhouse gas emissions) our usage and emissions are only reported as part of VicSuper’s greenhouse gas inventory in Table 6.12.

DMA

Transport for work purposes is another key area that involves the consumption of energy. We review carefully the need to take flights and offset all emissions from flights as well as for our car fleet. We encourage and provide incentives for employees to take public transport to work and to ride or walk where possible.

As the provision of our advice and education services occurs in various locations, petrol is a key source of transport energy consumed by VicSuper. Petrol usage for all business-related driving can be viewed in our greenhouse gas emissions inventory in Table 6.12. We have a number of ongoing initiatives that we undertake to reduce our energy consumption from transport:

• purchasing efficient vehicles (hybrid electric-petrol cars) when new ones are needed

• making public transport tickets available for employees to use for travel to out of office meetings instead of a fleet vehicle or taxi

• coordinating and promoting VicSuper’s Bicycle Users Group (BUG), an informal group for bicycle users at VicSuper, and a sustainable transport project group (as part of the FROGS group)

• participating in annual sustainable transport events such as Ride to Work Day

• making alternative transport options a feature of employee sustainability communications and engagement throughout the year.

Energy efficiency

Our performance

EN 5

EN 7

EN 18

To better understand and improve energy use at our largest office, a detailed facility study of the Melbourne office was undertaken in 2007/08. A number of lighting efficiency improvements were recommended and implementation commenced in June 2008. Final implementation of these initiatives took place as planned in early 2008/09.

The scope of works for this energy project included:

• installation of dimming and non-dimming lighting sensors

• replacement of halogen downlights with more energy efficient lamps

• removal of lamps from fluorescent fittings in areas which are considered over-lit under current Australian standards.

In addition to physical changes to our offices, we continue to focus attention on behaviour change to improve energy efficiency.

In February 2009, we ran a company-wide competition titled ‘VicSuper’s Biggest Carbon Loser’ for the second year. Employees could win points by undertaking actions that reduce greenhouse gas emissions at work and by coming up with ideas for team-based reductions.

While this competition encouraged employees to reduce their carbon footprint, it also assisted in engaging them on VicSuper’s approach to managing its carbon impact. Similar events to further encourage employee engagement and behaviour change are planned for future years.

Energy and greenhouse gas emissions continued

Greenhouse gas emissions

Our performance

EN 3

EN 4

EN 16

EN 17

EN 18

EC 29

DMA

Our approach to managing the carbon impact of VicSuper’s operations is outlined in our Carbon Management Strategy on the VicSuper website. Our approach follows best practice in the measurement, reduction and offset of our greenhouse gas emissions.

Our intention is to improve our business processes and behaviour by reducing our carbon emissions in the first instance and then purchasing offsets for any remaining emissions.

On an ongoing basis, our performance will be reviewed by an independent assurance provider and will be publicly reported in this section of the VicSuper Sustainability Report.

We are committed to review and adhere to emerging Australian and internationally accepted standards in regards to our Carbon Management Strategy, data inclusion and measurement and the purchase of offsets. Relevant standards include the Greenhouse Gas Protocol published by the World Business Council for Sustainable Development (WBCSD) and the World Resources Institute (WRI) and the AA1000 (2008) Assurance Standard to ensure materiality, completeness and responsiveness.

One change that we have made to our Carbon Management Strategy this year is purchasing less GreenPower than in 2007/08. Last year we purchased 100% accredited renewable energy (GreenPower) to cover all of our operations and reported this as abatement activity that reduced our emissions from electricity use. In 2008/09, we have made a decision not to count our GreenPower purchases as abatement activities.

With the Australian Government’s approach to emissions trading yet to be finalised there is some uncertainty around the ‘additionality’ of voluntary actions, such as the purchase of GreenPower. As as result, we will be purchasing high-quality offsets to cover our electricity purchases this year.

While it has not been included as an abatement activity, we did purchase a small amount of GreenPower at our smaller sites in 2008/09. These sites were supplied with GreenPower through a ‘bundled’ energy product. At 30 June 2009, all of these sites were on 25% GreenPower, making up around 8.9% of our total electricity use. More detailed information about our Carbon Management Strategy can be found at vicsuper.com.au

Table 6.12 outlines our emissions for 2008/09. In this table, emissions are reported in units of either kilograms of carbon dioxide equivalents (kg CO2-e) or tonnes of carbon dioxide equivalents
(t CO2-e).

Greenhouse gas emissions are categorised as:

• Scope 1: direct consumption of fuel and energy

• Scope 2: indirect emissions associated with electricity use. These emissions come from the generation of electricity such as the burning of fuels at power stations.

• Scope 3: other indirect emissions that are a consequence of our activities, but are not controlled by us. This includes emissions associated with fuel extraction, waste disposal, travel and use of paper.

Emissions associated with fuel and electricity use are shown in multiple sections of Table 6.12 to ensure we calculate the full extent of direct and indirect emissions associated with their use and production.

Energy and greenhouse gas emissions continued

Table 6.12 VicSuper PTY LTD greenhouse gas emissions

Scope 1 Direct emissions	Data used	Data Unit	Value	Emission 2008/09 (t CO2-e)	% of total inventory 2008/09	Emission 2007/08 (t CO2-e)	% of total inventory 2007/08
Vehicle fleet	Petrol consumption	Litres	31,996.89	76.2	5.7%	89.8	6.3%
	Diesel consumption	Litres	74.37	0.2	0.0%	0.1	0.0%
Non-company cars	Petrol consumption	Litres	2,334.93	5.6	0.4%	3.4	0.2%
Gas	Gas consumption	Gigajoules	105.10	5.4	0.4%	8.1	0.6%
Scope 2 Indirect emissions
Electricity	Electricity Consumption	Kilowatt hours	485,403.27	592.2	44.2%	649.6	45.2%
Scope 3 Other indirect emissions
Vehicle fleet	Petrol consumption	Litres	31,996.89	5.8	0.4%	7.8	0.5%
	Diesel consumption	Litres	74.37	0.0	0.0%	0.0	0.0%
Gas fuel extraction	Gas extraction	Gigajoules	105.10	0.5	0.0%	0.9	0.1%
Electricity losses	Electricity losses	Kilowatt hours	485,403.27	58.2	4.3%	42.6	3.0%
Electricity where not sole tenant	Electricity consumption	Kilowatt hours	231,473.90	312.5	23.3%	336.3	23.4%
Gas where not sole tenant	Gas consumption	Gigajoules	470.10	26.2	2.0%	28.7	2.0%
Paper	Paper weight	Tonnes	68.27	92.8	6.9%	116.7	8.1%
Mailing	Mail expenditure	Dollars	630,917.44	48.8	3.6%	66.0	4.6%
Couriers	Petrol consumption	Litres	777.96	2.0	0.1%	1.6	0.1%
	LPG Consumption	Litres	430.59	0.7	0.1%	1.0	0.1%
	Diesel	Litres	503.93	1.5	0.1%	–	–
Non-company cars	Petrol consumption	Litres	2,334.93	0.4	0.0%	0.3	0.0%
Scope 3 Other indirect emissions continued	Data used	Data Unit	Value	Emission 2008/09 (t CO2-e)	% of total inventory 2008/09	Emission 2007/08 (t CO2-e)	% of total inventory 2007/08
Air travel	Short haul flights	Kilometres	4,764	1.9	0.1%	1.9	0.1%
	Medium haul flights	Kilometres	60,961	19.8	1.5%	17.3	1.2%
	Long haul flights	Kilometres	233,610	69.4	5.2%	44.5	3.1%
Taxis	Taxi expenditure	Dollars	73,439.75	16.2	1.2%	16.3	1.1%
Public transport	Urban train or tram	Kilometres	6,352.00	0.8	0.1%	0.4	0.0%
	Non-urban train	Kilometres	3,377.00	0.4	0.0%	1.7	0.0%
Waste	Paper and paper board waste to landfill	Tonnes	0.18	0.5	0.0%	0.5	0.1%
	Co-mingled waste to landfill	Tonnes	0.07	0.0	0.0%	0.1	0.0%
	Food waste to landfill	Tonnes	0.19	0.2	0.0%	0.2	0.0%
	Waste of unknown composition to landfill	Tonnes	1.56	1.6	0.1%	1.6	0.1%

As shown in Table 6.12, our greenhouse gas emissions for 2008/09 were 1,339.8 tonnes CO2-equivalent. This is a reduction of 6.79%
from 2007/08. A number of key initiatives in 2008/09 contributed to this reduction, including finalisation of energy efficiency improvements
and the replacement of a number of servers
in our Melbourne office with online or ‘virtual’ servers (together contributing to an 8.8% reduction in emissions from electricity) and
a significant reduction of paper use.

Energy and greenhouse gas emissions continued

As reported in the paper use section of this report, our paper usage for 2008/09 was significantly lower this year than in previous years. Table 6.12 shows that this led to
a 20.5% reduction in greenhouse gas emissions from that source. Emissions associated with postal services were also impacted by this change, reducing by 26%. Increasing our use of electronic communications will continue to be a focus for 2009/10 as this is an area that we have significant ability to reduce emissions by improving our processes, saving money,
and offering members more efficient access to information and our services.

We took more long haul (further than 1600km) flights in 2008/09. While our medium and short haul flights decreased, our overall emissions from air travel increased as a proportion of our total emissions from 4.4% in 2007/08 to 6.8%
in 2008/09.

Emissions from electricity losses increased
by 36.8% in 2008/09 due to a change
in the calculation factor provided in
the Australian Government’s National Greenhouse Accounts (used for determining our emissions from this source) rather than an increase in our use. Electricity use from shared building services reduced by 7.1% last year. This source of emissions constitutes more than 23% of our total emissions, so while it is not an area that we have direct control over, it is an area in which we will seek reductions in electricity use in 2009/10.

The following emission sources from 2007/08 have been restated this year to align them with updated calculation methods
or additional data:

• paper

• litres of petrol used for vehicle
fleet calculations

• couriers

• air travel

• public transport

• waste

We will continue to improve our calculation methods each year to ensure consistency with emerging Australian and internationally accepted standards. In 2009/10 we will continue to work on our commitment to develop a greenhouse gas inventory management plan for VicSuper Pty Ltd. This will involve the documentation of all processes and procedures for calculating emissions along with a review of current calculation methods and improvement where necessary.

More detailed information about our Carbon Management Strategy can be found on our website.

Our commitments for 2009/10

In 2009/10 we commit to:

1. develop a greenhouse gas inventory management plan for VicSuper Pty Ltd

2. review emissions inventory sources and calculations and update or expand where necessary.

VicSuper is part of society so how we operate and interact in our relationships with stakeholders has an impact that stretches further than just us. We must
be aware of how our business affects others while also assisting our partners and other stakeholders to contribute to the communities on which we depend.

Developing effective partnerships is essential to helping us improve what we do. Successful partnerships give us access to new opportunities and the ability to share expertise with our members and employers, suppliers and professional associates and the broader community. Ultimately this facilitates the development of beneficial relationships that assist us to deliver valued superannuation services.

Our aim

We aim to foster partnerships that are mutually beneficial by being innovative, transparent and fair in our dealings with suppliers, professional associates and the community. In particular, we aim to raise awareness of sustainability among our partners and in turn learn from their expertise. We seek suppliers and professional associate partners whose values align with our own, and ask suppliers to provide us with services and products that meet the agreed requirements effectively, efficiently and at a fair price.

How does this contribute to a sustainable superannuation fund?

The impact of our operations does not end with us. If our partners are also committed to sustainability we can be confident that they are looking after their employees, minimising their impact on the environment, and ensuring their businesses are financially sound – while making sure their partners are doing the same. This can lead to substantial flow-on benefits to society, the economy and the environment.

Our approach

We are increasingly incorporating sustainability considerations into our relationships with our partners. This applies to our:

1. suppliers

2. professional associates.

Suppliers

As an investor, service provider, purchaser and employer, VicSuper’s decisions have the potential to influence and improve the environmental and social awareness and performance of a broad range of stakeholders. We recognise that many of our sustainability impacts come as much from our supply chain as from our own activities. The resources that we use and services that we purchase have a significant impact on members, the community and the environment through all phases of their production, use and disposal.

Our suppliers include organisations that supply:

• physical products such as computers and motor vehicles

• services such as graphic design, legal advice and investment expertise

• fund management services.

Operations

EC 9

EN 26

HR 2

FS 3

FS 5

PRI 4

Our performance

During 2008/09 we continued to implement our Supplier engagement policy. We reviewed our supplier engagement questionnaire and documentation. As a result we expanded the questionnaire to request details about suppliers’ compliance and supply chain management systems. We continued to seek responses to our questionnaire from existing suppliers and partners.

When our suppliers and professional associates complete our questionnaire it assists us to gauge their understanding of sustainability in their businesses and the sustainable practices they are applying or planning. Suppliers’ sustainability processes were a key determinant when entering into two significant contracts in 2008/09. We also made progress in applying the same process to our professional associates.

The initial roll-out of our supplier engagement program focused on suppliers that account for over 95% of our total expenditure. At the end of 2008/09 we had contacted nearly 80% of those. Out of the top 100 suppliers by value, suppliers representing 79.4% of our supply chain expenses have now completed the questionnaire, compared to 67.4% last year.

The response of our suppliers has been positive and shows that a range of companies now consider sustainability to be an important part of their business.

Even as our sample size of responses grows, over 90% of the companies that respond to the questionnaire have a commitment to improving sustainability performance. 67% stated that management of their organisation’s environmental, social and governance risks is being integrated into their operations. This gives us confidence that our supply chain is applying the same analysis of sustainability opportunities and risk to their own business as we are to ours.

Over the next 12 months we will analyse the results received from questionnaire responses to date and look to formalise sustainability considerations in new contracts.

EN 7

EN 18

Our main direct (operational) environmental impacts are from the use of paper, electricity, computers and printer equipment, catering, and business travel. We have made progress on purchasing in many of these areas over the last few years such as buying accredited renewable electricity for all of our sites, purchasing hybrid vehicles and purchasing recycled or sustainably-produced paper stock for publications and office paper. We have also progressed discussions with our stationery supplier and as of 2008/09 are receiving regular reports detailing which of the products we purchase are environmentally preferable. We will continue to work with them to refine this reporting and to increase our purchase of more sustainable stationery alternatives.

These and other key areas will be addressed as part of the ongoing implementation of our supplier engagement program.

Investments

Our performance

FS 5

In 2008/09, VicSuper extended the contract of Hermes Equity Ownership Services to undertake environmental, social and governance engagement on VicSuper’s behalf with listed companies’ part owned by VicSuper through our international listed equity portfolio to include our emerging markets portfolio.

This complements the governance, research and company engagement service provided by Regnan in our Australian listed equity portfolio.

See Strategy 2: Invest for the long term for further information on our investment-related partnerships.

Our commitments for 2009/10

During 2009/10 we commit to:

1. track negotiations and inclusion of sustainability clauses in supplier contracts

2. review the supplier engagement and purchasing results to date and initiate actions in priority areas to engage our supply chain in future

3. provide Supplier Engagement Policy
and request responses to our Supplier Engagement Questionnaire from all suppliers that make up the top 95% of our supply chain expenditure and all professional associations

4. document how sustainability considerations have been implemented in the selection or engagement of all new suppliers

5. review employee tools and training on how to apply VicSuper’s sustainability and supplier policies.

Professional associates

We enter into partnerships with professional associates to:

• explore new opportunities for our stakeholders

• understand existing and emerging issues

• contribute to the learning and development of our employees

• provide information to the broader community about our initiatives.

A summary of our activities for 2008/09 with the following professional associates is provided on the following pages:

• EPA Victoria

• VECCI

• VASSP and VPA

• ABMVSS

• Community partners

• Other partnership activities.

EPA Victoria

We continued our close working partnership with EPA (Environment Protection Authority) Victoria throughout 2008/09. We completed the fourth year of our second sustainability covenant, which is a voluntary agreement between EPA Victoria and VicSuper to undertake joint activities to protect the environment and to contribute to a more sustainable Victoria.

Under the current 10 year agreement, VicSuper and EPA Victoria have continued to work together to further the resource use efficiency of VicSuper’s operations and to encourage sustainability in the financial services sector.

In November 2008, VicSuper held a focus group workshop with EPA Victoria to gather feedback on our recent carbon footprint reporting on member benefit statements. Suggestions and feedback received from this session have been forwarded to the project group working on 2008/09 benefit statements.

PRI 5

EPA Victoria also manages the United Nations Environment Programme Finance Initiative (UNEP FI) in Australia. In 2008/09 we continued our membership of the UNEP FI Australasian working group and the UNEP FI Asia Pacific Task Force.

More information on VicSuper and EPA Victoria’s covenant including detailed commitments and reporting can be found on the VicSuper website.

VECCI

During 2008/09, VicSuper renegotiated its business partnership contract with the Victorian Employers’ Chamber of Commerce and Industry (VECCI). Through this partnership, VicSuper assists Victorian businesses with their superannuation needs and in turn receives brand recognition among the VECCI membership. Attendance at VECCI business networking and sales events has provided some opportunities to attract new business. VicSuper’s VECCI direct phone line recorded 74 calls for the 2008/09 financial year. In future we will offer this phone service to other employer groups in addition to VECCI.

VASSP and VPA

VicSuper continued its strategic alliance with the Victorian Association of State Secondary Principals (VASSP) and the Victorian Principals Association (VPA) during 2008/09. These two associations represent the principals sector within primary and secondary schools and have a combined membership of over 2,000. The partnerships assist VicSuper in providing valued superannuation services to schools while building VicSuper’s brand in the Victorian schools community.

During 2008/09 VicSuper attended the annual conferences and annual general meetings of VASSP and VPA where we provided information to attendees about VicSuper. In addition, VicSuper attended VASSP regional principal meetings throughout Victoria.

In the 2008/09 financial year VicSuper conducted 1,412 visits to schools (an increase from 791 visits in 2007/08) to provide information and advice during workplace seminars, relationship-building events and member advice interviews.

Professional associates continued

Table 7.1 Breakdown of visits under VASSP and VPA partnerships

Advice Centre	Employer workplace seminars	Employer visits	Interviews at workplaces
Melbourne	160	103	3
Blackburn	175	130	187
Bendigo	99	122	211
Geelong	68	68	119
Traralgon	58	211	89
Total	560	608	609

For further information about VicSuper’s relationship with employers, refer to
Strategy 1: Deliver value.

These important partnerships have allowed us closer contact with our employers and we have been able to establish new relationships with a number of schools. In turn, the Principals of many schools have been made aware of their opportunity to access VicSuper’s superannuation education and advice services for the benefit of their employees.

ABMVSS

The Association of Business Managers in Victorian State Schools (ABMVSS) is the peak body representing business managers in Victorian state schools and has a growing membership in excess of 600. Business managers have responsibility for managing
all aspects of school administration including their school’s superannuation obligations.
In 2008/09 VicSuper’s relationship with ABMVSS enabled us to promote best practice superannuation management to many employers. In future we’ll be looking
to offer ongoing improvements to the superannuation services we offer to schools.

Community partners

VicSuper has partnerships with Heartbeat Victoria and Conservation Volunteers. Through these partnerships, our employees are able to undertake community volunteering activities. These partnerships enable us to make a difference in the community while also providing learning and development opportunities for our employees.

See Strategy 3: Attract, develop and retain great people for further information on our employee volunteering program as well as other community involvement and fundraising activities we have been involved with.

Other partnership activities

PRI 4

Other partnership activities that VicSuper undertook in 2008/09 included:

• applying VicSuper’s supplier engagement program to professional associates by sharing our supplier engagement policy and seeking their response to our supplier engagement questionnaire

• regularly sharing information with a broad range of stakeholders on the topic of sustainability and its implications for superannuation and the finance sector. This included providing 16 external presentations at conferences, workshops, seminars and to groups such as universities, professional associates, other super funds, industry associations, VicSuper members and employers

• continuing our participation in the Waste Wise network, gaining recertification and remaining committed to our waste minimisation action plan. For waste and recycling performance data and more information on our Waste Wise recertification, see Strategy 6: Minimise our environmental impact

• beginning a stakeholder review with the aim of developing an organisational stakeholder engagement approach in the year ahead. VicSuper already undertakes engagement initiatives with various key stakeholders – a list of our key stakeholder groups and significant engagement activities is included in the About VicSuper section of this report.
Our aim for the future is to improve the coordination and formalisation of these engagement activities across the organisation.

Our commitments for 2009/10

During 2009/10 we commit to:

1. develop an organisational stakeholder engagement approach.

We use a range of terms and acronyms throughout our sustainability report. We have defined them in the relevant chapters the first time we use them as well as providing them here as a separate section of the report.

Term	What it stands for
ABCG	Australian Business and Climate Group
ABMVSS	Association of Business Managers in Victorian State Schools
ACCA	Association of Chartered Certified Accountants
ACSI	Australian Council of Super Investors
AIST	Australian Institute of Superannuation Trustees
APRA	Australian Prudential Regulation Authority: The Commonwealth agency responsible for prudential regulation of banks, life insurance companies, general insurance companies, superannuation funds, building societies, credit unions and friendly societies
ARIA	Australian Reward Investment Alliance
ASFA	Association of Superannuation Funds of Australia
ASIC	Australian Securities and Investments Commission
Asset	An item owned by an individual or organisation, often for the purpose of generating income or capital gain
ATO	Australian Taxation Office
AUSTRAC	Australian Transaction Reports and Analysis Centre
Biodiversity	The variation of life forms within a given ecosystem, often used as a measure of the health of ecosystems
CDP	Carbon Disclosure Project
Clean technology or ‘cleantech’	Products, services, and processes, all intended to provide superior performance at lower costs, while reducing or eliminating negative ecological impact, at the same time as improving the productive and responsible use of natural resources. For more information see cleantech.com
CPI	Consumer Price Index: a measurement of the increase in the cost of living (inflation) over time
CFSGAM	Colonial First State Global Asset Management
CPSU	Community and Public Sector Union
DEECD	The Department of Education and Early Childhood Development
EAI	Enhanced Analytics Initiative
EO	Equal opportunity
EOWA	Employer of Choice for Women in the Workplace Agency
EPA	Environment Protection Authority Victoria
ESG	Environmental, social and governance
ESG RA	ESG Research Australia
ESSSuper	Emergency Services & State Super
Equity	Ownership interest in a corporation in the form of common stock or preferred stock
FOS	Financial Ombudsman Service
FROGS	FROGS (Focused Recruits of Global Sustainability) is VicSuper’s employee sustainability committee
Footprint	Carbon, water and forest footprints refer to a measure of a demand on resources
Fiduciary duties	The trustee of a superannuation fund has a duty of trust to act in good faith and in the best interests of all the members and other beneficiaries of the fund
GreenPower	GreenPower is government accredited renewable energy sourced from the sun, the wind, water and waste
GRI	Global Reporting Initiative
GSO	Government Superannuation Office
IGCC	Investor Group on Climate Change Australia/New Zealand
Liquidity	The ability of an asset to be bought or sold with minimum loss of value
MER	Management expense ratio
MSCI World Developed ex-Australia Index	The MSCI World is a stock market index of 1500 ‘world’ stocks. It is maintained by MSCI Inc., formerly Morgan Stanley Capital International and is often used as a common benchmark for ‘world’ or ‘global’ stock funds
NABERS	The National Australian Built Environment Rating System is a performance-based system for rating the environmental impacts of existing buildings
NBMG	Net Balance Management Group
OH&S	Occupational health and safety
RAMSAR	The RAMSAR Convention is an intergovernmental treaty that provides the framework for national action and international cooperation for the conservation and wise use of wetlands and their resources. See ramsar.org
RAT	Response Alert Team
RIAA	The Responsible Investment Association of Australasia
RSE	Registrable Superannuation Entity
Salinisation	The build up of salts which can become poisonous to life on land and in water
SCT	Superannuation Complaints Tribunal
Trustee	An individual or company appointed under the terms of a trust deed to hold assets for the beneficiaries of the trust. The trustee of a superannuation fund holds the assets of the fund on behalf of the members and beneficiaries
UN PRI	United Nations Principles for Responsible Investment
UNEP FI	United Nations Environment Programme Finance Initiative
VASSP	Victorian Association of State Secondary Principals
VECCI	Victorian Employers’ Chamber of Commerce and Industry
VPA	Victorian Principals Association
VSB	Victorian Superannuation Board

1 Trucost is an environmental research organisation working with companies, investors and government agencies to understand the impacts companies have on the environment.

2 Regnan Governance Research and Engagement Pty Ltd (Regnan) was launched in May 2007 following an initiative by VicSuper, Vanguard, ARIA and BT Investment Management. It is a service wholly owned by the following institutional investors: VicSuper, ARIA, BT Investment Management, Hermes (UK), HESTA, LGSS, Vanguard and VFMC and represented funds under management invested in S&P/ASX200 companies of more than $39 billion at 31 December 2008. Peter Lunt, VicSuper’s Executive Manager Investments, was acting chair of Regnan until 1 March 2009. From that date, Directors appointed Mr. Ken Boundy as independent Chairperson of the Board.

Note: Past performance is not a reliable indicator of future performance.

Note: Past performance is not a reliable indicator of future performance.

No tax is payable on investment earnings for VicSuper Pensions.

The net earnings rates shown for June 2001 and 2002 are for VicSuper Allocated Pension.

VicSuper Pensions benefit plans are:

• VicSuper Commutable Pension (introduced on 1 April 2000 and called VicSuper Allocated Pension until 20 September 2007)

• VicSuper Non-Commutable Pension (introduced on 1 December 2005 and called VicSuper Non-Commutable Allocated Pension until 20 September 2007)

• VicSuper Term Allocated Pension (introduced on 1 July 2005 and closed to new members on 20 September 2007)

• VicSuper Transition to Retirement Term Allocated Pension (introduced on 1 December 2005 and closed to new members on 20 September 2007).

Note: Past performance is not a reliable indicator of future performance.

Note: Past performance is not a reliable indicator of future performance

No tax is payable on investment earnings.

Net earning rates shown are for VicSuper Allocated Pension

Note: Past performance is not a reliable indicator of future performance.

The Capital Secure and Equity Growth Sustainability investment options do not have a 10 year return history.

Table 2.11 VicSuper’s investment options

Investment option	Growth assets %*	10-year investment objective^ #
Cash	0	1% pa above the rate of inflation
Capital Secure	20	2% pa above the rate of inflation
Capital Stable	40	3% pa above the rate of inflation
Balanced	60	4% pa above the rate of inflation
Growth	80	5% pa above the rate of inflation
Equity Growth	100	6% pa above the rate of inflation
Equity Growth Sustainability	100	6% pa above the rate of inflation

* Growth assets are equities that provide investment returns primarily in the form of capital growth (an increase in the dollar value of the asset over time
due to growth in long-term cash flows).

^ All investment return objectives are after tax and above the rate of inflation over rolling 10-year periods.

# Investment option earnings for VicSuper Pensions benefit plans are not taxed and accordingly the investment return objectives will be higher. The investment return objectives for VicSuper Pensions can be found at vicsuper.com.au.

4 NABERS (National Australian Built Environment Rating System) rates a building on the basis of its measured operational impacts on the environment, and provides
a simple indication of how well building owners and managers are managing these environmental impacts compared with peers and neighbours. See nabers.com.au for more information.

5 High-reliability water shares are those water shares against which seasonal allocations are made as a first priority. High-reliability water shares are expected to reach 100% allocation in 95 years out ot 100.

6 http://forest.mtu.edu/kidscorner/ecosystems/definition.html

7 Earthwatch Institute, The World Conservation Union, World Business Council for Sustainable Development, and the World Resources Institute Business and Ecosystems: Issue brief; Ecosystem Challenges and Business Implications. November 2006, Switzerland.

8 Earthwatch Institute, The World Conservation Union, World Business Council for Sustainable Development, and the World Resources Institute, Business and Ecosystems: Issue brief; Ecosystem Challenges and Business Implications, November 2006, Switzerland.

Strategy 3: Attract, develop and retain great people

STRATEGY 3: ATTRACT, DEVELOP AND RETAIN GREAT PEOPLE

Sustainability and superannuation
– an employee’s perspective

Matthew Grapsas,

Senior Compliance Consultant, VicSuper

“They’re the perfect match. Superannuation
is a long-term investment, and sustainability is a long-term project. It’s going to take a long time to turn around pollution and the use of resources – but there’s no point worrying about your super unless we’ve got a healthy environment and a sustainable economy.

“Climate change has a big implication for investments. It also brings opportunities
for us to create new industries, and that’s
where super funds can exercise influence
and make sound investments.

“As a super fund, we’ve got more to do to help our members to see the link between their super savings and sustainability. We’ve seen more members asking questions about investments in the current climate. People are aware of sustainability issues now more than ever and we’ll keep trying to point out the massive part investments have to play in achieving sustainable outcomes.”

Share your perspective with us by emailing sustainability@vicsuper.com.au

About VicSuper

Strategy 4: Maintain sound governance and accountability

STRATEGY 4: MAINTAIN SOUND GOVERNANCE AND ACCOUNTABILITY

Sustainability and superannuation
– a director’s perspective

Jennifer Cassidy

VicSuper Trustee Deputy Director

“VicSuper creates value for its stakeholders by building a sustainable fund through integrating economic, social and environmental considerations into all decisions.

“During my eight year involvement with VicSuper, we have focused strongly on the needs of our members. Our unique advice and education service assists members
to make sense of superannuation and prepares them to meet their income needs in later life.

“Superannuation requires careful long term planning and integrating sustainability practices across VicSuper allows us to care for our members in a rounded, holistic way.

“It concerns me that young people don’t appear to be thinking about superannuation or their long-term financial health, but they are interested in sustainability and that’s where integrating sustainability and superannuation is a big plus.”

Share your perspective with us by emailing sustainability@vicsuper.com.au

Who runs VicSuper, what do they do and how are they accountable? continued

Social management approach: product responsibility continued

Strategy 5: Continue financial stability and growth

7 31 March 2009 APRA quarterly statistic report

7 31 March 2009 APRA quarterly statistic report

Note: Figures prior to 2007/08 represent numbers of active employers, those that have made a Superannuation Guarantee contribution on behalf of their employees to VicSuper Fund and have signed a participating employer declaration. Due to legislative changes, the 2007/08 year onwards now include provisional (or non-participating) employers. These employers have not signed a participating employer agreement with VicSuper and are generally paying contributions as a result of their employees’ fund choice.

Summary operating statement for the year ended 30 June 2009
	2008 (audited) $000	2009 (audited) $000
Revenue
Gross investment income	(417,003)	(775,504)
Contributions and transfers from other funds	1,329,703	1,154,803
Other revenue	5,973	11,084
	918,673	390,383
Less expenses
Management and investment administration	33,413	36,573
Term insurance	8,134	23,030
Superannuation contributions surcharge	203	(113)
Income tax	37,661	12,673
	79,411	72,163
Equals benefits accrued as a result of operations	839,262	318,220
Transfer (to)/from reserve	2,266	2,325
Benefits accrued after transfer (to)/from reserve	841,528	320,545

The Commonwealth prudential framework for superannuation savings is contained in the Superannuation Industry (Supervision) Act 1993 (Cwlth).

Since 1 July 1999, VicSuper Fund has been a complying superannuation fund directly regulated under the Superannuation Industry (Supervision) Act 1993 (Cwlth), which governs the majority of superannuation funds in Australia. This means, among other things, that fund earnings are eligible to be taxed at the reduced rate of up to 15%.

Strategy 6: Minimise our environmental impact

Energy and greenhouse gas emissions continued

VicSuper Pty Ltd Greenhouse gas emissions summary	Emission 2008/09 (t CO2-e)	% of total inventory 2008/09	Emission 2007/08 (t CO2-e)	% of total inventory 2007/08
Scope 1	87.3	7%	101.4	7%
Scope 2	592.2	44%	649.6	45%
Scope 3	660.3	49%	686.4	48%
Total emissions (Scope 1 + 2 + 3)	1,339.8	100%	1,437.4	100%
Offsets Purchased	-1,450		-1,550.08
Net Emissions 2008/09	-110.2		-112.99

Strategy 7: Foster effective partnerships

STRATEGY 7: FOSTER EFFECTIVE PARTNERSHIPS

Sustainability and superannuation
– a supplier’s perspective

Anna Starczewski

Group Insurance Product Manager, AXA Australia

“Both AXA and VicSuper offer services and benefits to the community. VicSuper’s members rely on both our organisations to be there when they need it most, so it’s crucial for us to be reliable, trustworthy and sustainable. We’ve got to provide continuity of service throughout the different stages of people’s lives - while they are working, when they retire, and beyond.

“Every company that supplies a service has to think about risks in the future. Providing benefits for our customers in a responsible way means considering those risks and including sustainability in what we do. This business philosophy trickles down to the companies we invest in or use in our supply chain.

“As part of VicSuper’s supply chain, we recognise that working together is important for achieving positive outcomes. When VicSuper upgraded insurance cover for its members, we worked together to find the best way to provide appropriate cover for members, and communicate to members how the changes would benefit them.”

Share your perspective with us by emailing sustainability@vicsuper.com.au

Glossary

Assurance statement

GRI 3.13

FS 9

To the Board of Directors, management and stakeholders of VicSuper Pty Ltd:

VicSuper Pty Ltd (VicSuper) commissioned Net Balance Management Group Pty Ltd (Net Balance) to provide independent assurance of its Sustainability Report 2009 (the ‘Report’). The Report presents VicSuper’s sustainability performance over the period 1 July 2008 to 30 June 2009. VicSuper was responsible for the preparation of the Report and this statement represents the assurance provider’s independent opinion. Net Balance’s responsibility in performing its assurance activities is to the Board and management of VicSuper alone and in accordance with the terms of reference agreed with them. Other stakeholders should perform their own due diligence before taking any action as a result of this statement.

Assurance Standard and Objectives

The assurance was undertaken in accordance with the AA1000 Assurance Standard (AA1000AS (2008)). Assurance undertaken using this standard provides a comprehensive assessment of an organisation’s management of, performance and reporting on sustainability issues. This is achieved through evaluation of the organisation’s adherence to the AA1000 AccountAbility Principles (2008) and by reviewing the accuracy and quality of disclosed sustainability performance information.

The AA1000 Accountability Principles (2008) against which the organisation’s processes are assessed include:

Inclusivity: An assessment is made as to whether the organisation has included stakeholders in developing and achieving an accountable and strategic response to sustainability.

Materiality: An assessment is made as to whether the organisation has included in its Report the material information and data required by its stakeholders to make informed judgements, decisions and actions.

Responsiveness: An assessment is made as to whether the organisation has responded to stakeholder concerns in its Report. An assessment is also made as to whether the organisation has in place policies and relevant standards to address material sustainability issues and concerns.

Assurance Type and Scope

Net Balance provided Type 2 assurance in accordance with the AA1000AS (2008). This involved an assessment of VicSuper’s adherence to the AA1000 AccountAbility Principles (2008), and an assessment of the accuracy and quality of the reported sustainability performance information.

The review of adherence to the principles was undertaken using the criteria outlined in the AA1000 Assurance Principles Standard (2008), while assessment of the accuracy and quality of sustainability performance information was undertaken using the Global Reporting Initiative’s (GRI) G3 Reporting Principles for Defining Quality.

Assurance Level and Limitations

The level of assurance provided is moderate, with the exception of greenhouse gas emission information, for which a high level of assurance is provided. The levels of assurance are defined by the scope and methodology described in this assurance statement. The assurance covered the whole Report with the following exceptions:

The scope of work did not involve verification of financial data, other than that relating to environmental, social or broader economic performance.

• The assurance provider’s involvement
with stakeholder engagement was
limited to reviewing external and internal stakeholder engagement processes
and outcomes.

• Only the corporate office in the Melbourne Central Business District
was visited as part of this assurance engagement. Information and data generated from all other sites was reviewed remotely.

Assurance Methodology

The assurance engagement was undertaken in September 2009, and the process involved:

• Development of a materiality register using the five-part materiality test, including a comparison of VicSuper against its peers, a risk review, a review of selected Australian media, a policy review and review of stakeholder feedback.

• Chief Executive and senior management interviews to assess adherence to the AS1000AS (2008) Principles.

• A review of the processes used by VicSuper to engage with its stakeholders and the outcomes of the external and internal stakeholder engagement undertaken during the reporting period in order to understand the nature of material issues raised by stakeholders and responsiveness by VicSuper.

• A review of VicSuper’s key sustainability strategies, policies, objectives, management systems, measurement and reporting procedures, background documentation and data collection and reporting procedures.

• A series of interviews with key
personnel responsible for collating and writing various parts of the Report in
order to substantiate the veracity of selected claims.

• A review of the Report for any significant anomalies, particularly in relation to significant claims as well as trends in data.

• Examination of the aggregation and/or derivation of, and underlying evidence for 87 selected data points and statements made in the Report and evaluation of these against the GRI G3 Reporting Principles for Defining Quality.

• Detailed sampling of greenhouse gas data to provide a high level of confidence in the quality of the data reported.

• Collecting and evaluating evidence to support the assurance work undertaken.

• A GRI G3 application level check.

Our Independence

Net Balance was not responsible for preparation of any part of the Report. Net Balance is not aware of any issue that could impair our objectivity in relation to this assurance engagement.

Our Competency

The VicSuper assurance engagement was carried out by an experienced team of professionals led by a Lead Sustainability Assurance Practitioner (Lead CSAP), accredited by the International Register of Certified Auditors UK (IRCA UK). The assurance team included consultants with expertise in environmental, social and economic performance measurement across a range of industry sectors. Net Balance is a global leader in the use of AccountAbility’s AA1000AS, having undertaken over 50 assurance engagements in Australia in 2007 and 2008.

Findings and Conclusions

Adherence to AA1000 Principles

Inclusivity: VicSuper has demonstrated a commitment to be accountable to its stakeholders and has effective systems in place for stakeholders to participate in the development of the organisation’s response to sustainable development issues. VicSuper has a comprehensive and continuous process in place for communicating with stakeholders, as well as actively seeking and incorporating stakeholder feedback into strategic planning. Members are engaged through a Member Centre and Regional Advice Centres, whilst VicSuper’s supply chain is engaged through its Supplier Engagement Policy. Various Government departments and agencies are effectively engaged. Other stakeholders such as Fund Managers, Asset Consultants, Investment Advisors and Industrial Representatives are also engaged by various means. A periodic Employee Engagement Survey has maintained active communication with internal stakeholders.

Materiality: VicSuper has multiple processes in place to determine material issues. The Report was found to be in alignment with the outcomes of these processes and, as such, appropriately addressed VicSuper’s environmental, social and economic material issues. In addition, the Report was found to provide balanced information about VicSuper’s sustainability management and performance particularly through the clear documentation of commitments, targets achieved, targets not delivered and challenges for the seven strategies of VicSuper’s Sustainability Policy.

Responsiveness: VicSuper was found to be responsive to stakeholders’ concerns and expectations. This was clearly demonstrated through the engagement and communication systems established with various types of stakeholders. VicSuper has in place appropriate management systems and policies that govern the way that it responds to stakeholders. These systems, together with the strong emphasis which VicSuper management places on stakeholder engagement, ensure that VicSuper is able to provide timely and accessible responses to its stakeholders through a range of communication channels.

Reliability of Performance Information and Data

Based on the scope of the assurance process, the following was observed with regard to performance information and data:

• The findings of the assurance engagement provide confidence in the systems used for managing sustainability performance information and data.

• The level of accuracy of sustainability performance information, including the greenhouse gas emission data, was found to be within acceptable limits.

• Data trails selected were generally identifiable and traceable, and the personnel responsible were able to reliably demonstrate the origin(s) and interpretation of data.

• The sustainability performance disclosures presented within the Report appropriately reflect environmental, social and economic performance achieved during the period.

• The GRI application level check found that the Report was classified as A+.

Overall, it is Net Balance’s opinion that the information and data presented within the Report is fair and accurate; and that the Report provides a reliable account of VicSuper’s sustainability performance during the reporting period.

The Way Forward

VicSuper has been a leader in sustainability reporting in Australia for a number of years. Over the past two years VicSuper has focussed on quantifying the greenhouse gas emissions associated with its corporate operations. In addition, VicSuper became the first superannuation provider to supply information to its members on the carbon footprint of their superannuation investments as part of their annual member statement. These initiatives have been significant in raising member awareness of the issue of climate change, however, some members remain unaware of VicSuper’s broader commitment to sustainability principles.
Over the next 12 months, Net Balance recommends that VicSuper further reinforces its commitment to sustainability by including its central operating principle of sustainability in members’ annual statements and other member communications. These steps, together with a focus on using all employees to engage members on sustainability issues, should further contribute to members’ understanding of the sustainability impacts
of their superannuation investments and
thus a stronger level of engagement with their superannuation.

In order to continue its strong drive to galvanise the industry towards sustainability and combating climate change, Net Balance recommends that VicSuper uses its leadership position to influence peers and investment partners in the industry to understand their role as universal investors and how companies they invest in might be affected by the introduction of a price on carbon. Further, VicSuper should encourage its peers to embed sustainability principles
in their investments (eg. Principles for Responsible Investment), within their operations, and support them in reporting on their progress. In this respect, VicSuper’s report could be used as one of a range of communication and educational tools for the benefit of the industry.

In terms of defining the report content, VicSuper has in place strong processes for stakeholder engagement, and well developed systems to respond to issues raised by stakeholders. To ensure that these processes remain best practice, VicSuper should continue its current stakeholder mapping project. Net Balance also recommends that VicSuper puts in place a more formal process for determining material issues that is based on ranking the relevance and significance of each issue both to VicSuper and its stakeholders. This should ensure that in addition to providing comprehensive information on VicSuper’s sustainability performance, the report focuses on VicSuper’s most material issues. Finally, Net Balance recommends that VicSuper continues to align its reporting to the seven strategies within its Sustainability Policy. This framework for reporting ensures that the report is clear and demonstrates the strong link between VicSuper’s strategy and its actions.

Net Balance has provided additional suggestions for reporting improvement in some areas such as aligning the data generation and reporting processes, and documenting data collection procedures for those indicators that are reported annually. These have been outlined in a more detailed report presented to VicSuper management.

On behalf of the assurance team
29 September 2009
Melbourne, Australia

Terence Jeyaretnam
Director, Net Balance & Lead CSAP
(IRCA UK)

ASSURANCE STATEMENT

Assurance statement continued

ASSURANCE STATEMENT

Assurance statement continued

GRI/PRI Tables

GRI 3.12

The Global Reporting initiative

The Global Reporting Initiative (GRI) provides
a framework that sets out economic, environmental and social indicators for organisations to report against.

This report has been prepared using the GRI G3 Guidelines. We have also used the GRI Financial Services Sector Supplement (2008) to develop this report.

All core GRI indicators, as well as additional indicators that we have reported on, can be located through the GRI index tables. Page numbers link to the relevant section where
the indicator is addressed. If an indicator is
not reported, an explanation is provided.

For more information about the GRI and the indicators, please visit globalreporting.org

Principles for Responsible Investment

The United Nations Principles for Responsible Investment (PRI) are a set of six principles (Principles) that provide a framework for institutional investors to integrate environmental, social and governance (ESG) considerations into their investment processes.

In this report we have reported our activities and progress towards implementing the Principles.

All principles can be located through the PRI progress table. Page numbers link to the relevant section where the principle is addressed.

For more information about the PRI, please visit unpri.org

Standard disclosures

1: Strategy and analysis

Indicator	Reporting status	Page
1.1 CEO and chair statement	About VicSuper > Executive statement	3
1.2 Description of key risks and opportunities	About VicSuper > Building a sustainable super fund Our Performance: a summary Performance Summary > Meeting our 2008/09 commitments Performance Summary > Our key commitments for 2009/10 Strategy 2: Invest for the long term > Long-term, low cost investments Partially reported We have not included a concise description of governance mechanisms to specifically manage substainability risks and opportunities.	7 15 18 23 37

2: Organisational profile

Indicator	Reporting status	Page
2.1 Name of reporting organisation	About VicSuper > VicSuper at a glance	4
2.2 Primary brands, products and/or services	About VicSuper > VicSuper at a glance	4
2.3 Operational structure	About VicSuper > VicSuper at a glance	5
2.4 Location of headquarters	About VicSuper > VicSuper at a glance	4
2.5 Countries of operation	About VicSuper > VicSuper at a glance	4
2.6 Nature of ownership	About VicSuper > VicSuper at a glance Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	4 67, 68
2.7 Markets served	About VicSuper > VicSuper at a glance Strategy 1: Deliver Value > Advice and education	4 27
2.8 Scale of organisation	About VicSuper > VicSuper at a glance Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	4 68
2.9 Significant changes during the reporting period regarding size, structure, or ownership	Reported in GRI index only. There were no significant changes during the reporting period regarding size, structure or ownership.	–
2.10 Awards received in the reporting period	About VicSuper > Awards, recognition and memberships Strategy 3: Attract, develop and retain great people > Workplace profile and culture	12 57

3: Report parameters

Indicator	Reporting status	Page
Report profile
3.1 Reporting period	About this report > Scope of this report	14
3.2 Date of most recent previous report	About this report > Scope of this report	13
3.3 Reporting cycle	About this report > Scope of this report	13
3.4 Contact point	About this report > Scope of this report Contact us	14 134
Report scope and boundary
3.5 Process for defining report content	About VicSuper > Stakeholder feedback This refers to stakeholder feedback and how we have incorporated their suggestions About this report > Report structure Partially reported We have not formally applied the ‘Guidance on Defining Report Content’ and the associated Principles.	9 13
3.6 Boundary of report	About this report > Scope of this report	14
3.7 Limitations on scope of report	About this report > Scope of this report	14
3.8 Basis for reporting on joint ventures, subsidiaries and other entities	About this report > Scope of this report Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	14 69
3.9 Data measurement and basis of calculations	About this report > Report structure Where assumptions are used in data used in this report they are explained in the text or in the GRI index.	13
3.10 Explanation of the effect of any re-statement of information	About this report > Report structure Any re-statements to information are indicated within the body of the report.	13
3.11 Significant changes in scope, boundary or measurement methods	Any changes to the measurement methods applied to issues and indicators are marked throughout the report.	–
GRI content index
3.12 Table identifying location of the standard disclosures in the report	About this report > GRI index This table functions as the GRI content index.	113
Assurance
3.13 Policy and current practice for independent assurance	About this report > Report structure Assurance statement	13 110

4: Governance, commitments and engagement

Indicator	Reporting status	Page
Governance
4.1 Governance structure of the organisation	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	67, 68
4.2 Indicate if chair of the highest governance body is also an executive officer	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	67
4.3 For organisations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	67, 80
4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body	Strategy 3: Attract, develop and retain great people > Employee engagement Partially reported. VicSuper does not have shareholders outside of the board of directors or employee involvement in the highest governance body.	62
4.5 Linkage between governance body, management and executive compensation and the organisation’s performance	Strategy 3: Attract, develop and retain great people > Competitive benefits and remuneration Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	64 68
4.6 Processes of the highest governance body to ensure conflicts of interest are avoided	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	69
4.7 Process for determining qualifications and expertise of the members of the highest governance body	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable? Partially reported. We have not discussed the required qualifications and expertise of the board of directors.	69
4.8 Internally developed mission and values statements, codes of conduct, and principles relevant to economic, environmental and social performance	About VicSuper > VicSuper at a glance	6
4.9 Procedures of the highest governance body for overseeing the organisation’s identification and management of economic, environmental and social performance.	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	68, 69
4.10 Processes for evaluating the performance of the highest governance body	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	68
Commitments to external initiatives
4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organisation	About VicSuper > Building a sustainable super fund	7
4.12 Externally developed, voluntary economic, environmental and social charters, sets of principles, or other initiatives to which the organisation subscribes or endorses	About VicSuper > Awards, recognition and memberships Strategy 2: Invest for the long term > Long-term, low cost investing Strategy 2: Invest for the long term > Exercise our rights of ownership and share knowledge	12 38 51, 52
4.13 Significant memberships in associations (such as industry associations)	About VicSuper > Awards, recognition and memberships Strategy 2: Invest for the long term > Exercise our rights of ownership and share knowledge	12 51, 52
Stakeholder engagement
4.14 List of stakeholder groups engaged by the organisation	About VicSuper > Stakeholder engagement Strategy 4: Maintain sound governance and accountability > How can we ensure that the rights of members, employers and other stakeholders are respected?	8 80
4.15 Basis for identification and selection of stakeholders to engage	About VicSuper > Stakeholder engagement	8
4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group	About VicSuper > Stakeholder engagement Strategy 4: Maintain sound governance and accountability > How can we ensure that the rights of members, employers and other stakeholders are respected?	8 80
4.17 Key issues and concerns that have been raised through stakeholder engagement and how the organisation has responded	About VicSuper >Stakeholder feedback	9

Key

Blue	Fully reported
Green	Partially reported
Orange	Reported in GRI index only
Grey	Not reported

Economic performance indicators

Key

Blue	Fully reported
Green	Partially reported
Orange	Reported in GRI index only
Grey	Not reported

Disclosure on management approach (DMA)

Indicator	Reporting status	Page
Goals and performance	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	76
Policy	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	76
Organisational Responsibility	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable	76
Additional contextual information	Strategy 4: Maintain sound governance and accountability > Who runs VicSuper, what do they do and how are they accountable?	76

Indicator	Reporting status	Page
EC1: Economic value generated and distributed	Strategy 5: Continue financial stability and growth > Income and growth Strategy 5: Continue financial stability and growth > Liabilities and expenditure	83, 85 86
EC2: Financial implications of climate change	Strategy 2: Invest for the long term > Long-term, low cost investments Strategy 2: Invest for the long term > Member investment choice	37 45
EC3: Coverage of the organisation’s defined benefit pension plan obligations	Strategy 3: Attract, develop and retain great people > Competitive benefits and remuneration All employees are members of VicSuper Fund, an accumulation fund. This is what we have reported.	64
EC4: Financial assistance received from government	Not applicable. VicSuper does not receive any financial assistance from government.	–

Aspect: market presence

Indicator	Reporting status	Page
EC5: Entry level wage compared to local minimum wage for significant locations of operation (additional)	Strategy 3: Attract, develop and retain great people > Competitive benefits and remuneration	63
EC6: Policy, practices and proportion of spending on locally-based suppliers at significant locations of operation	Data not available. We do not collect data about where goods and services come from.	–
EC7: Procedures for local hiring, and proportion of senior management in locations of significant operation from the local community	Strategy 3: Attract, develop and keep great people > Workplace profile and culture	56

Aspect: indirect economic impacts

Indicator	Reporting status	Page
EC8: Description of infrastructure investments and services supported that provide public benefit	Data not available. We do not maintain detailed information about the extent of infrastructure we are invested in.	–
EC9: Understanding and describing significant indirect economic impacts, including the extent of impacts (additional)	Strategy 2: Invest for the long term > How does this contribute to a sustainable superannuation fund? Strategy 7: Foster effective partnerships > Suppliers	34 105