January 19, 2006 Action Notes 1 of 13 Equity Research

TODAY'S HEADLINES

Adastra Minerals Inc. (AAA-T) C$2.59 ...... 2H HOLD↓ (Prior: SPEC. BUY);Target: C$3.25 (Unchanged) First Quantum announces take over bid

Bell Nordiq Income Fund (BNQ.UN-T) C$18.34 ...... 5H REDUCE↓ (Prior: HOLD);Target: C$16.00↑ (Prior: C$15.50) BNQ Passes on TBayTel Acquisition. Q4 Preview Included

TELUS Corp. (T.NV-T) C$43.67 ...... 8H BUY (Unchanged);Target: C$60.00 (Unchanged) Adding T.NV Shares to the Action List

SAMPLE

Please see the final pages of this document for important disclosure information. January 19, 2006 Action Notes 2 of 13 Equity Research

Metals & Minerals Cliff Hale-Sanders, CFA

↓Recommendation: HOLD Prior: SPEC. BUY  12-Month Target Price: C$3.25 Unchanged Inc. AAA-T) C$2.59) 12-Month Total Return: 25.5% Market Data (C$) Current Price $2.59 First Quantum announces take over bid 52-Wk Range $1.13-$2.69 Mkt Cap (f.d.)($mm) $231.5 Event Dividend per Share $0.00 Dividend Yield 0.0% Yesterday, First Quantum announced an all share takeover offer for Adastra Avg. Daily Trading Vol. (3mths) 89,283 based upon an exchange ratio of one First Quantum share for every 17.5 Financial Data (C$) Adastra shares. Fiscal Y-E December Shares O/S (f.d.)(mm) 89.4 Impact Float Shares (mm) 89.4 Mixed. While we view the bid as opportunistic and low we believe this should Estimates (US$) provide an opportunity for Adastra to highlight the value of the Kolwezi Year 2004E 2005E 2006E 2007E project. That said, given our view of the clear benefits of a combination with EPS (f.d.) (0.05) (0.03) (0.03) (0.07) CFPS (f.d.) (0.01) (0.03) (0.03) (0.04) First Quantum and limited potential for a white knight to emerge a significantly higher bid is not anticipated. As such we are lowering our Valuations Year 2004E 2005E 2006E 2007E recommendation to HOLD from Speculative BUY. P/E (f.d.) nmf nmf nmf nmf P/CFPS (f.d.) nmf nmf nmf nmf Details Yesterday, First Quantum Minerals (FM-T) announced a takeover offer for all  the outstanding shares of Adastra based upon the ratio of one First Quantum All figures in C$, unless otherwise specified. share for each 17.5 shares of Adastra. This would imply First Quantum would issue around 4.9 million shares to Adastra’s shareholders and implies a value for Adastra of around $189 million. The bid is to remain open for 35 days once the take over circulars have been mailed and as such is not a permitted bid under the terms of Adastra’s shareholders rights plan. The offer is subject to 2/3 of Adastra’s shareholders tendering to the offer and is expected to close in early march 2006.

Adastra is in the final phases of completing a bankable feasibility study for the proposed development of the Kolwezi copper-cobalt tailing reprocessing facility. The Kolwezi project consists of two large tailing dams from previous operations in the region that contain an estimated 112 million tonnes of material grading 1.49% copper and 0.32% cobalt. This represents an in-situ metal value of around US$173.00/tonne at today's prices (US$95.00/tonne at long-term prices). This is equivalent to a copper mine grading 4.8% copper, making it one of the richest undeveloped metal deposits in the world.

Current development plans call for annual metal production of around 30,000 tonnes of copper and 5,500 tonnes of cobalt as cathodes, which would provide SAMPLEfor an operating life of over 50 years based upon current resources. Operating margins are expected to be robust at around 50% given the extremely low mining costs based upon our metal price forecasts. Capital costs are estimated

Company Profile Adastra is a TSX-listed, junior mining company focused on the development its 67.5% Please see the final pages of interest in the Kolwezi copper-cobalt Tailings Reprocessing Project located in the DRC. The company is in the process of completing a bankable feasibility study, which should this document for important be completed during H1/06 and arranging financing. disclosure information. January 19, 2006 3 of 13 Action Notes Equity Research at US$300 million. A further doubling of capacity is currently envisaged in years 3-5 of the operation at an estimated capital cost of around US$200 million, which would be funded out of future cash flow.

Can Adastra expect a White Knight to emerge? While we think First Quantum’s offer is somewhat opportunistic given the pending release of the feasibility study scheduled for around the end of first quarter and the anticipated finalizing of cobalt off take agreements could have seen the market re-rate the shares as the overall risk level declines, we do recognize that First Quantum would bring significant value and credibility to the project if its bid is successful. First Quantum is the most logical candidate to acquire Adastra in our opinion. These benefits would come namely by leveraging off its operational, development and financial experience within Central . Further, as First Quantum is offering shares for Adastra, current shareholders would remain exposed to the ongoing Kolwezi project development while at the same time gaining a more diverse exposure through First Quantum’s current operating assets and development projects as well as receiving a dividend.

As such, the question remains, namely can Adastra expect First Quantum to raise its offer or is there any, even if somewhat remote, potential for a white knight for the company to turn to. Given the high quality of the project in terms of its economic potential we believe many companies could easily see the value in the project but would likely be prevented from making a bid due to issues related to country risk and a lack of experience operating in the region, something that cannot be overlooked. As such, in our mind any potential white is likely to be from mining company’s already operating in the region (such as Phelps Dodge and Vedanta) or from companies involved in the production and use of cobalt (OM Group, Umicore). In addition, one must also consider the current shareholding of Adastra such that close to 50% of the shares are held by 4 shareholders, which has resulted in extremely low liquidity. Further many of these shareholders are also holder of First Quantum. As such, we view First Quantum’s offer as more of a first initial bid to see if a reasonable deal can be structured to the satisfaction of the various parties. If these shareholders can be convinced to of the benefits of holding First Quantum shares over Adastra going it alone they may not demand a significant bump in the offer.

Still lots of Value From a valuation perspective, we believe the current offering price undervalues the potential value accretion offered by the development of the Kolwezi project and Adastra’s other assets. Our previous valuation and target price was based upon the operating assumptions outlined in the scooping study, capital costs of $300 million and our assumption that Adastra would need to raise approximately $75 million in new equity through a highly dilutive equity financing in 2006. Assuming that this equity is now provide by a third party (i.e. First Quantum), we estimate the value of the Kolwezi project at between C$3.42 to C$5.68 per current Adastra share using a 12% discount rate and long term copper and cobalt price of $0.95 and $12 per pound respectively. if one were to use metal prices closer to today levels the value would be significantly higher.

Valuation Based upon our revised valuation, Adastra is currently trading at 0.75X of our base case NAV which if the company were not the subject of a takeover bid would be viewed as a reasonable valuation for a project at its stage of development.

Justification of Target Price We are maintaining our target price of C$3.25. Our target price represents a slight discount to our revised base case valuation of C$3.42 per current Adastra share as outlined above. We have not included the upside value of the expanded case as we believe shareholders would continue to be exposed to the project through the shares ofSAMPLE First Quantum. The discount also reflects our view of the limited potential for a white knight to appear and as such our target could prove to be aggressive. We would note that this valuation does not attribute any value to Adastra other possible development projects at this point in time.

January 19, 2006 4 of 13 Action Notes Equity Research

Key Risks to Target Price The key risks to our target price are Adastra's ability to raise the necessary financing of the project, share liquidity risks, potential changes in capital or operating cost assumption, the country risk profile of the DRC and long-term commodity price risks, as well as the completion of the final feasibility study

Investment Conclusion Given the limited potential for a white knight to emerge, we believe Adastra is likely to be forced to try and negotiate a higher bid by First Quantum, which may or may not be forthcoming. As such, we are lowering our recommendation to HOLD from Speculative BUY, however we are leaving our target price unchanged at this time, as we believe it represents a more appropriate takeover valuation.

SAMPLE

January 19, 2006 Action Notes 5 of 13 Equity Research

Diversified Income Trusts Ian Chong, CA, CFA

↓Recommendation: REDUCE Prior: HOLD ↑12-Month Target Price: C$16.00 Prior: C$15.50 Bell Nordiq Income Fund BNQ.UN-T) C$18.34) 12-Month Total Return: -6.9% Market Data (C$) Current Price $18.34 BNQ Passes on TBayTel Acquisition. Q4 Preview Included 52-Wk Range $14.60-$19.85 Mkt Cap (f.d.)($mm) $1,634.1 EV ($mm) $1,786.4 Event Current Distribution per Unit $1.07 Late Tuesday evening, Bell Nordiq (BNQ) announced that it will not acquire Current Distribution Yield 5.8% Thunder Bay Telephone (TBayTel), but will instead pursue a strategic alliance Avg. Daily Trading Vol. (3mths) 75,899 involving distribution of services. Financial Data (C$) Fiscal Y-E December Impact Units O/S (f.d.)(mm) 89.1 Negative. Prior to the TBayTel announcement, BNQ’s unit price had closed Float Units (mm) 32.6 Net Debt ($mm) $152.3 at $18.77, just 5% below its 52-wk high when there was heavy speculation that BNQ could acquire a sizeable number of rural lines from Bell . Estimates (C$) Year 2004A 2005E 2006E 2007E Although we believe a transaction with is unlikely, we suspect Sales ($mm) 347.3 352.1 357.5 362.5 that BNQ’s valuation had factored in an accretive acquisition of TBayTel. EBITDA ($mm) 177.6 178.7 181.4 184.0 Thus, without an equity transaction, we believe that BNQ units are currently EBITDA Margin (%) 51.1% 50.8% 50.7% 50.8% overvalued at 10.0x EV/EBITDA and a yield of 5.8% versus its corporate DCPU 1.20 1.201.25 1.27 peers at 6.0x and the 10-yr Canada Bond at 3.9%, respectively. We are DPU 1.00 1.071.12 1.15 Valuations downgrading our recommendation to REDUCE from Hold, and Year 2004A 2005E 2006E 2007E increasing our 12-month target price to $16.00 from $15.50 as we roll EV/EBITDA 10.1x 10.0x 9.8x9.7x forward our valuation horizon. P/DCPU 15.3x 15.3x 14.7x 14.4x Yield 5.5% 5.8% 6.1%6.3% Detail Supplemental Data (C$) Year 2004A 2005E 2006E 2007E • Rural line transaction with Bell Canada unlikely. During BCE’s NAS Lines 251,470 250,630 249,739 248,793 Q3/05 conference call, Michael Sabia noted that “we were just at the NAS Net Adds -500 -840 -892 -946 point of launching a significant income trust for a relatively large number HSI Subs 25,220 32,580 39,572 46,214 of our rural lines when the government announced an apparent change in HSI Net Adds 4,720 7,360 6,992 6,642 Wireless Subs 63,780 68,564 73,363 77,031 its tax policy with respect to trusts.” We believe this statement infers that Wireless Adds 7,840 4,784 4,799 3,688 BCE was going to create a separate income trust for its rural lines instead

of selling them to BNQ. With the potential creation of a new sizable Bell  rural line income trust, we believe that there could be a flow of funds All figures in C$, unless otherwise specified. from BNQ.un holders looking to diversify their telecom trust holdings, which could further pressure BNQ's valuation. • Future acquisitions could be expensive. We believe that growth through acquisitions will continue to be integral to BNQ’s strategy. However, given the recent bidding war between Amtelecom and Exculink for People’s Communications, which saw its valuation multiple expand from 6.0x to 7.3x EBITDA, we believe that quality SILECs could be in limited supply and may be expensive to acquire. SAMPLE• Q4 results could be at the high end of guidance. BNQ is scheduled to report its Q4/05 results on Jan. 31, and host a conference call at 3:00 pm EST, dial (416) 340-2216. As seen in Exhibit 1, we have calculated the

Company Profile Bell Nordiq (BNQ) is a limited purpose income trust that holds 36.6% interest in the T l Please see the final pages of bec and NorthernTel partnership. Bell Canada indirectly holds the remaining 63.4% interest in the partnership. BNQ's services consist of 46% local and access, 22% data and this document for important cable, 13% long distance, 15% wireless, and 5% ISIT & Other. disclosure information. January 19, 2006 6 of 13 Action Notes Equity Research implied Q4 results based on the mid point of guidance less YTD results. Adjusting for the one-time items in Q4/04, the implied Q4/05 results for revenues and EBITDA shows a decrease of 2% and 1% y/y, which is inconsistent with the actual YTD growth of approx. 4% y/y; thus, we believe this trend could continue in the last quarter with results at the high end of guidance. Consistent with this rationale, we provide our forecast for Q4/05 in Exhibit 2.

Exhibit 1: Bell Nordiq Implied Q4/05 Results ($millions)

Implied Mid Point of Q4/04A 1 Q1/05A Q2/05A Q3/05A 2 Q4/05E 2005 Guidance 3 Total Revenues 95,699 84,132 88,616 91,980 85,772 350,500 Reported EBITDA 49,933 43,774 44,590 46,221 42,915 177,500 EBITDA Margin 52.2% 52.0% 50.3% 50.3% 50.0% 50.6% Capex 17,734 8,798 8,863 14,442 17,397 49,500 Intensity 18.5% 10.5% 10.0% 15.7% 20.3% 14.1%

(1) Revenues positively impacted by retroactive HCSA subsidy of $7.1mm and one-time SIP inclusion of $1.2mm. Retro HCSA subsidy also positively impacted EBITDA by $6.7mm. (2) Q3/05A revenues includes one-time positive impact of $2.2mm related to prior period settlement revenue. (3) Latest guidance we revised upwards by management on Oct. 31/05.

Source: Company Financials

Exhibit 2: Bell Nordiq Q4/05 Forecast ($millions)

Financial Summary Q4/05E Q4/04A 1 Q3/05A 2 Operating Metrics Q4/05E Q4/04A Q3/05A

Total Revenues 87,337 95,699 91,980 NAS Net Adds (Losses) (2,650) (2,620) (330) Reported EBITDA 3 44,105 49,933 46,221 Wireless Net Adds 1,444 2,050 870 EBITDA Margin 50.5% 52.2% 50.3% HS Internet Net Adds 1,500 1,490 1,900 Distributable Cash 20,490 24,893 26,433 Cumulative Cash Reserve 45,776 34,123 49,141

(1) Revenues positively impacted by retroactive HCSA subsidy of $7.1mm and one-time SIP inclusion of $1.2mm. Retro HCSA subsidy also positively impacted EBITDA by $6.7mm. (2) Q3/05A revenues includes one-time positive impact of $2.2mm related to prior period settlement revenue. (3) Reported EBITDA excludes net benefit plan expenses.

Source: Company Financials and TD Newcrest estimates

• 2006 guidance should be provided on Jan. 31/06. Concurrent with Q4/05 results, we expect management to provide guidance for 2006. For reference, we have included our ’06 and ’07 forecast in Exhibit 3.

SAMPLE

January 19, 2006 7 of 13 Action Notes Equity Research

Exhibit 3: TD Newcrest Forecast Versus Bell Nordiq Guidance ($millions)

2004 2005 1 2006 2007 Financial Results Actual Guidance TD Est. TD Est. TD Est. Local and Access 161.0 n.a 160.8 160.9 161.1 Data and Cable 70.6 n.a 76.8 82.3 86.3 Long Distance 50.8 n.a 44.1 38.1 32.4 Wireless 40.7 n.a 51.1 56.7 63.1 ISIT, Terminal and Directory 24.3 n.a 19.2 19.4 19.6 Total Revenue 2 347.3 349-352 352.1 357.5 362.5 Reported EBITDA 177.6 176-179 178.7 181.4 184.0 EBITDA margin 51.1% n.a 50.8% 50.8% 50.8% Capex 50.7 48-51 51.1 51.8 52.6 Capex Intensity 14.6% n.a 14.5% 14.5% 14.5% Distributable Cash Per Unit $1.20 n.a $1.20 $1.25 $1.27 Distribution Per Unit $1.00 $1.07 $1.07 $1.12 $1.15 Payout Ratio 83.2% n.a 89.5% 89.9% 90.2% Cumulative Cash Reserve 34.1 n.a 45.8 57.0 68.1 Operating Metrics HS Internet Subscribers (k) 25.2 30.0 32.6 39.6 46.2 Wireless Subscribers (k) 63.8 69.0 68.6 73.4 77.0 (1) Latest guidance provided on Oct. 31/05; adj. upward for one-time $2.2mm settlement revenues for wireless service. (2) 2004A includes positive impact of $7.1mm from HCSA subsidy (decision 2005-4), which will also impact 2005E by $4.3mm. 2004A was also positively impacted by $1.2mm SIP approval (decision 2004-77)

Source: Company Financials and TD Newcrest estimates

Valuation We believe that BNQ units are currently overvalued at 10.0x EV/EBITDA and a yield of 5.8% versus its corporate peers at 6.0x and the 10-yr Canada Bond at 3.9%, respectively.

Justification of Target Price Although BNQ has yet to report Q4/05 results or provide 2006 guidance, we have decided to roll forward our valuation horizon to 2007, which has increased our 12-mth-target price to $16.00 (was $15.50). We have taken a weighted average of our three valuation methodologies (target yield, DCF, and peer comparison) to derive our fundamental target, which equates to an ‘07e EV/EBITDA multiple of 8.5x. • Target Yield of 7.3% on 2007E distributions of $1.15 derives a value of $15.82/unit; 20% weighting. • 5-yr DCF using a 9.5% discount rate and terminal value based on a 1.5% perpetuity derives a value of $15.86/unit; 40% weighting. • Peer Comparison based on the average ILEC multiple of 6.0x, plus a rural telecom premium of 1.5x, plus a trust premium of 1.0x derives a value of $15.92/unit; 40% weighting.

Key Risks to Target Price The follow risks could negatively impact our target price: (1) adverse regulatory/legislative changes; (2) new technologies such as WiMax could open the doors for new competitors; (3) greater than anticipated capex could negatively impact distributions; and (4) a rising interest rate environment could result in valuation risk.

Investment Conclusion We believe that BNQ is expensive as the unit price continues to reflect a potential acquisition despite no equity deal withSAMPLE TBayTel, and our view that a deal to acquire Bell Canada’s rural lines is unlikely. Even when we roll forward our valuation horizon, we believe BNQ.un is overvalued. REDUCE.

January 19, 2006 Action Notes 8 of 13 Equity Research

Communications Vince Valentini, CFA Ian Chong, CA, CFA

 Recommendation: BUY Unchanged  12-Month Target Price: C$60.00 Unchanged Corp. T.NV-T) C$43.67) 12-Month Total Return: 39.9% Market Data (C$) Current Price $43.67 Adding T.NV Shares to the Action List 52-Wk Range $33.79-$48.84 Mkt Cap (f.d.)($mm) $16,441.8 Event EV ($mm) $22,965.8 Dividend per Share $1.10 TELUS (T.NV) shares have declined by $2, or 4.4%, in the past two days, so Dividend Yield 2.5% we are adding the name to our Action List. Avg. Daily Trading Vol. (3mths) 567493 Financial Data (C$) Impact Fiscal Y-E December Positive. We remain bullish on the outlook for this company, with our Buy Shares O/S (f.d.)(mm) 376.5 rating and $60.00 target price intact, so the recent dip has created an attractive Float Shares (mm) -- buying opportunity in our view. The total return to our target is now 40%, Net Debt ($mm) $5,759.9 and we see minimal downside risk given the 2.5% dividend yield, and given Estimates (C$) Year 2004A 2005E 2006E 2007E the low valuation of 6.0x 2006e EBITDA. EBITDA ($mm) 3,090.6 3,314.1 3,546.0 3,755.3 EPS (basic) 1.54 1.99 2.58 2.96 Details FCF ($mm) 1,032.2 1,226.0 1,383.5 1,681.4 Despite posting industry-leading consolidated results in the recent past, and FCF/Shr 2.87 3.48 4.13 5.29 despite expectations of industry-leading EBITDA growth of 7% in 2006, Valuations TELUS has seen its share price stagnate over the past several months. T.NV Year 2004A 2005E 2006E 2007E shares are basically at the same level now as they were five months ago in P/E (basic) 28.4x 21.9x 16.9x 14.8x Supplemental Data (C$) mid-August, and since the day before the strike started (July 20), the stock is Year 2004A 2005E 2006E 2007E up a mere 5%. Key financial results have improved over this timeframe, and Wireless Subs 3,936 4,496 5,046 5,542 the company continues to execute a shareholder-friendly FCF deployment Wireless Adds 512 559 550 496 strategy, with steady share buybacks and dividend increases. Consequently, DSL Subs 690 757 857 937 DSL Adds 128 67 100 80 with the passage of time we believe the valuation of the stock has become NAS Lines 4,808 4,655 4,460 4,216 compelling, so we are adding the name to our Action List, with no changes to NAS Line Loss 62 153 195 244 our forecasts or target price. Here are five key reasons why we would buy :T.NV shares today 

All figures in C$, unless otherwise specified. 1) Exposure to Wireless: Based on our forecasts (and management guidance), 45% of TELUS revenues will be derived from wireless in 2006, which is by far the highest amongst its ILEC peers in Canada. We continue to believe that wireless is the fastest-growing segment of the Canadian telecom market, and we see no material risk factors on the horizon. Subscriber penetration (likely 52% at year-end) remains low by global standards, and we have a rational three-player market where ARPU has been increasing and churn has been declining.

SAMPLE

Company Profile Telus Corp. (T.NV-T) is the second largest telecom company in Canada with annual Please see the final pages of revenues of $8.1 billion. Primarily active in B.C. and Alberta, Telus is a residential and facilities-based provider of telecom services, which includes voice, data, wireless, this document for important Internet, and multimedia and information management. disclosure information. January 19, 2006 9 of 13 Action Notes Equity Research

Exhibit 1: TD Newcrest Forecast Versus Management Guidance ($ millions, except EPS figures)

2004 2005E 2006E 2007E Revenue Actual Current Guidance TD Newcrest Guidance TD Newcrest TD Newcrest TELUS Communications 4,769.3 $4.825 to $4.85 bln 4,813.2 $4.825 to $4.875 bln 4,751.1 4,675.4 TELUS Mobility 2, 811.9 $3.275 to $3.3 bln 3,307.5 $3.775 to $3.825 bln 3,816.0 4,217.6 Total Revenue 7,581.2 $8.1 to $8.15 bln 8,120.7 $8.6 to $8.7 bln 8,567.2 8,893.0 EBITDA TELUS Communications 1,948.4 $1.84 to $1.865 bln 1,863.4 1 $1.8 to $1.85 bln 1,819.7 1,800.0 TELUS Mobility 1, 142.2 $1.425 to $1.45 bln 1,450.6 $1.7 to $1.75 bln 1,726.3 1,955.3 Total EBITDA 3,090.6 $3.275 to $3.325 bln 3,314.1 $3.5 to $3.6 bln 3,546.0 3,755.3 EPS (exlud. restructuring) $1.54 $1.90. to $2.00 $1.99 $2.40 to $2.60 $2.58 $2.96 Discretionary FCF 2 1,032.2 $1.4 to $1.5 bln 1,226.0 $1.55 to $1.65 bln 1,383.5 1,681.4 FCF/Share $2.87 not provided $3.48 not provided $4.13 $5.29 Non-ILEC Revenue 560.7 $625 to $635 mm 634.5 $650 to $700 mm 693.2 741.7 EBITDA (22.2) $15 to $20 mm 19.1 $25 to $40 mm 36.9 69.0 CAPEX Wireline Capex 964.3 Approx. $900 bln 900.0 $1.05 to $1.1 bln 1,100.0 1,050.0 Wireless Capex 354.7 Approx. $400 mm 365.3 Approx. $450 mm 438.3 506.1 Total Capex 1,319.0 Approx. $1.3 bln 1,265.3 $1.5 to $1.55 bln 1,538.3 1,556.1 As a % of Revenue 17.4% 15.6% 18.0% 17.5% Operating Stats Wireless Subs Net Adds (k) 512 > 550k 559 > 550k 550 496 ADSL Subs Net Adds (k) 128 > 65k 67 > 100k 100 80 NAS Line Net Adds (k) (62) not provided (153) not provided (195) (244)

1. 2005 Guidance incorporates $20-50mm in restructuring costs and over $65 mln in strike costs. TD forecast for 2005 incorporates $30mm restructuring costs and $90mm strike costs. 2. TELUS FCF calculation = EBITDA less capex, net cash interest, cash tax and restructuring cost in excess of expenses . TDN FCF definition is the same as TELUS except we adjust for working capital and we do not include one-time tax items. Source: Company reports and TD Newcrest estimates

2) Q4 Results Should Restore Confidence in the Canadian Wireless Sector: We expect strong Q4 results from Bell Mobility, Rogers Wireless and TELUS Mobility in February, which in aggregate should ease the investor fears regarding wireless that seem to have surfaced in the past few weeks. We are confident that Bell and TELUS achieved better market share of subscriber adds in Q4 than they did in Q3, so the perceived weakness in sub adds at Rogers will not be viewed as an industry slowdown, in our opinion. We also expect ARPU growth from all three carriers, which should reinforce our view that increased usage of voice and data services is more than offsetting declines in the price point per minute on voice calls. In addition, for TELUS specifically, we believe that management set low financial guidance for Q4, so we expect positive surprises when the company releases its results on February 17 (for more detail please refer to our Q4 preview report dated January 17).

3) Labour Flexibility: With the strike having ended on November 19, TELUS put behind it an almost five year period of uncertainty where it had no collective bargaining agreement with its unionized employees. We believe the new labour contract will provide management with more cost reduction flexibility than they have indicated publicly, so even as local lines come under pressure from VoIP competition, we believe TELUS will be able to sustain EBITDA in its ILEC segment via cost cutting.

4) Underlying Wireline Valuation Imbeds Too Much Risk: We acknowledge that incumbent wireline telecomSAMPLE assets face severe impediments to growth, but these assets still have considerable value based on their significant FCF generation. We note that largely wireline-based telecom assets that have converted into income trusts (Bell Nordiq and Amtelecom) are currently trading at 8-10x forward EBITDA. If we back TELUS Mobility out of the enterprise value at 9x 2006e EBITDA, then the wireline segment of TELUS is being valued at only 3.7x EBITDA (with no extra consideration for the immature CLEC operations, or the

January 19, 2006 10 of 13 Action Notes Equity Research

NOL position). We view this as a very low valuation, which implies that investors are attaching far too much risk to the future stream of cash flow from these assets. Alternatively, one could argue that the current valuation imbeds too much risk related to the departure of George Cope.

5) Share Buybacks Should Continue Post Q4 Results: Filings show that TELUS acted quickly on its new NCIB, buying 1.2 million shares out of the 24 million plan from December 20 to December 31. The company has a policy of not buying shares from the end of a quarter until two days after results are released, so one reason for the share price weakness of late is that the company has not been in the market. We strongly expect the company to be back buying shares the week of February 20, which should provide extra support to the share price.

Justification of Target Price Given that fiscal 2005 is over, we are now looking forward to 2007 forecasts to generate our target price. Our primary valuation methodology is based on segmented multiples of 9.0x 2007e EBITDA for wireless, and 5.0x 2007e EBITDA for wireline, which generates a mid-2007 target price of $64.00. We then discount this figure by 6% (implies a half year discount at an annual rate of 12%) to derive an end of 2006 target price of $60. Our $60 target price equates to 7.7x 2006e consolidated EBITDA, 23.3x 2006e EPS, and 14.5x 2006e FCF per share, which are all premiums to other North American telcos owing to our view of the superior asset mix and growth profile at TELUS.

Key Risks to Target Price The following factors could negatively influence the T.NV share price: • Increased competition among the three wireless carriers in Canada. • Adverse regulatory rulings, such as new 3G spectrum licenses, could increase competition among the existing wireless operators or encourage new entrants to the market. • Irrational capex spend on wireless infrastructure or TELUS’ IP network could compromise the company’s strong FCF. • Higher than expected line losses to Shaw’s VoIP service.

Investment Conclusion The recent weakness in T.NV shares has created an attractive opportunity to invest in the fastest-growing ILEC stock in Canada at a low valuation of 6.0x 2006e EBITDA. We are confident that the strength of wireless results will power TELUS to another year of strong EBITDA growth (+7%) in 2006. The combination of EBITDA growth and the generation of $4.13 in FCF per share should allow T.NV shares to appreciate nicely over the next year, even if the multiple stays at the current depressed level. In addition, as investor sentiment towards the Canadian wireless sector improves, we believe that the valuation of TELUS shares will expand, which could lead to a 12-month return of 40% on investment.

SAMPLE



January 19, 2006 11 of 13 Action Notes Equity Research

TD Newcrest Equity Research Disclosures

Company Ticker Disclosures

Adastra Minerals Inc. AAA-T 13 Bell Nordiq Income Fund BNQ.UN-T n/a TELUS Corp. T.NV-T 2, 13, 14, 18

1. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has managed or co-managed a public offering of securities within the last 12 months with respect to the subject company. 2. TD Securities Inc., TD Securities (USA) LLC or an affiliated company has received compensation for investment banking services within the last 12 months with respect to the subject company. 3. TD Securities Inc., TD Securities (USA) LLC or an affiliated company expects to receive compensation for investment banking services within the next three months with respect to the subject company. 4. TD Securities Inc. or TD Securities (USA) LLC has provided investment banking services within the last 12 months with respect to the subject company. 5. TD Securities Inc. or TD Securities (USA) LLC has provided non-investment banking securities-related services within the last 12 months with respect to the subject company. 6. TD Securities Inc. or TD Securities (USA) LLC has provided non-securities-related services within the last 12 months with respect to the subject company. 7. TD Securities Inc. or TD Securities (USA) LLC has received compensation for services other than investment banking within the last 12 months with respect to the subject company. 8. The research analyst knows that an affiliate to TD Securities Inc. or TD Securities (USA) LLC has received compensation for services other than investment banking within the last 12 months with respect to the subject company. 9. A long position in the securities of the subject company is held by the research analyst, by a member of the research analyst's household, or in an account over which the research analyst has discretion or control. 10. A short position in the securities of the subject company is held by the research analyst, by a member of the research analyst's household, or in an account over which the research analyst has discretion or control. 11. A long position in the derivative securities of the subject company is held by the research analyst, by a member of the research analyst's household, or in an account over which the research analyst has discretion or control. 12. A short position in the derivative securities of the subject company is held by the research analyst, by a member of the research analyst's household, or in an account over which the research analyst has discretion or control. 13. TD Securities Inc. and/or an affiliated company is a market maker, or is associated with the specialist that makes a market, in the securities of the subject company. 14. TD Securities Inc. and/or affiliated companies own 1% or more of the equity securities of the subject company. 15. A partner, director or officer of TD Securities Inc. or TD Securities (USA) LLC, or a research analyst involved in the preparation of this report has, during the preceding 12 months, provided services to the subject company for remuneration. 16. Subordinate voting shares. 17. Restricted voting shares. 18. Non-voting shares. 19. Common/variable voting shares. 20. Limited voting shares.

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January 19, 2006 12 of 13 Action Notes Equity Research

Price Graphs

Distribution of Research Ratings Buy: 43 %, Speculative Buy: 4 %, Hold: 48 %, Reduce: 5 % Of the subject companies, TD Securities Inc. has provided investment banking services within the last 12 months for the following percentages of companies within each of the four categories: Buy: 44 %, Speculative Buy: 45% ; Hold: 38 %, Reduce: 43 %.

Definition of Research Ratings BUY: The stock’s total return is expected to exceed a minimum of 15%, on a risk-adjusted basis, over the next 12 months. SPECULATIVE BUY: The stock's total return is expected to exceed 30% over the next 12 months; however, there is material event risk associated with the investment that could result in significant loss. HOLD: The stock’s total return is expected to be between 0% and 15%, on a risk-adjusted basis, over the next 12 months. REDUCE: The stock’s total return is expected to be negative over the next 12 months.

Research Dissemination Policy TD Newcrest makes its research products available in electronic and/or printed formats and simultaneously distributes them to its institutional clients who are entitled to receive them. The Action Notes are distributed by email, and are available in PDF and text form on First Call Notes, First Call Research Direct, Bloomberg and Reuters. Research Reports and Bulletins are distributed by email; they are also printed and distributed by courier to our entitled clients. PDFs of Reports and Bulletins are available on Reuters and First Call Research Direct. Summaries are available on First Call Notes and Bloomberg. All research SAMPLEis available by password to entitled institutional clients at www.tdsecurities.com

Directorships and Advisory Relationships Darren Entwistle, President and CEO of TELUS Corp., and Brian F. MacNeill, a Director of TELUS Corp., are members of the board of directors of The Toronto-Dominion Bank. TD Securities Inc. is a wholly owned subsidiary of The Toronto-Dominion Bank.

January 19, 2006 13 of 13 Action Notes Equity Research

Analyst Certification Each analyst of TD Securities Inc. whose name appears on page 1 of this research report hereby certifies that (i) the recommendations and opinions expressed in the research report accurately reflect the research analyst's personal views about any and all of the securities or issuers discussed herein that are within the analyst’s coverage universe and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the provision of specific recommendations or views expressed by the research analyst in the research report.

Disclaimer TD Newcrest, A Division of TD Securities Inc. "TD Newcrest" is the tradename that TD Securities Inc., TD Securities (USA) LLC and TD Securities Limited use to market their institutional equity services. Although the information contained in this report has been obtained from sources that TD Securities (USA) LLC, TD Securities Inc. and TD Securities Limited (collectively "TD Securities") believe to be reliable, we do not guarantee its accuracy, and as such, the information may be incomplete or condensed. All opinions, estimates and other information included in this report constitute our judgment as of the date hereof and are subject to change without notice. TD Securities will furnish upon request publicly available information on which this report is based. TD Securities Inc. has accepted responsibility for the contents of any TD Securities (USA) LLC research appearing in this document. TD Securities (USA) LLC has accepted responsibility for the contents of any TD Securities Inc. research appearing in this document. TD Securities Limited has accepted responsibility in Europe for the contents of any TD Securities Inc. research appearing in this document. Canadian clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of TD Securities Inc. Canadian retail investors are served by TD Waterhouse Canada Inc., a subsidiary of The Toronto-Dominion Bank. U.S. clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of TD Securities (USA) LLC. European clients wishing to effect transactions in any security discussed should do so through a qualified salesperson of TD Securities Limited. Insofar as the information on this report is issued in the U.K. and Europe, it has been issued with the prior approval of TD Securities Limited and only to persons falling within Articles 19 and 49 of the Financial Services & Markets Act 2000 (Financial Promotion) Order 2001, namely persons sufficiently expert to understand the risks involved. No recipient may pass on the information contained in this report to any other person without the prior written consent of TD Securities. TD Securities Inc., TD Securities (USA) LLC and TD Securities Limited are wholly owned subsidiaries of The Toronto-Dominion Bank. TD Securities Limited is authorized and regulated by the Financial Services Authority. The activities of The Toronto-Dominion Bank under its Financial Services License are regulated by the Australian Securities and Investment Commission in Australia. Copyright 2006 by TD Securities. All rights reserved.

Full disclosures for all companies covered by TD Newcrest can be viewed at www.tdsecurities.com/equityresearch/disclosures by TD Newcrest’s institutional equity clients.

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