**Exhibit99.3**

 

 

**TELUS Corporation**

**Annual Information Form**

**for the year ended December 31, 2007**

 

 

**March 14, 2008**

 

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| **CAUTION REGARDING FORWARD-LOOKING STATEMENTS**            | **3**  |
|-------------------------------------------------------------|--------|
| **TELUS**                                                   | **4**  |
| **OPERATIONS, ORGANIZATION AND CORPORATE DEVELOPMENTS**     | **6**  |
| **DESCRIPTION OF THE BUSINESS AND GENERAL DEVELOPMENTS**    | **7**  |
| **EMPLOYEE RELATIONS**                                      | **16** |
| **CAPITAL ASSETS AND GOODWILL**                             | **17** |
| **RISK FACTORS**                                            | **18** |
| **ALLIANCES**                                               | **19** |
| **LEGAL PROCEEDINGS AND REGULATORY ACTIONS**                | **20** |
| **FOREIGN OWNERSHIP RESTRICTIONS**                          | **21** |
| **REGULATION**                                              | **22** |
| **COMPETITION**                                             | **30** |
| **DIVIDENDS DECLARED**                                      | **33** |
| **CAPITAL  STRUCTURE OF TELUS**                             | **33** |
| **RATINGS**                                                 | **36** |
| **DIRECTORS  AND OFFICERS**                                 | **39** |
| **MARKET FOR  SECURITIES**                                  | **42** |
| **INTERESTS  OF EXPERTS**                                   | **42** |
| **AUDIT  COMMITTEE**                                        | **43** |
| **MATERIAL  CONTRACTS**                                     | **45** |
| **TRANSFER  AGENTS AND REGISTRARS**                         | **45** |
| **ADDITIONAL INFORMATION**                                  | **45** |
| **APPENDIX  A: TERMS OF REFERENCE FOR THE AUDIT COMMITTEE** | **46** |

 

**Exchange Rate Information**

 

**TELUS publishes its consolidatedfinancial statements in Canadian dollars. In this annual information form,except where otherwise indicated, all reference, to “dollars” or “$” are toCanadian dollars. The Bank of Canada noon spot exchange rate on March 10,2008 was Cdn. $0.9976= U.S. $1.00. The following table sets forth, for thefiscal years and dates indicated, certain exchange rate information based onthe noon spot rate:**

 

| **December 30,  2005** | ** ** | **1.1659** | ** ** |
|-----------------------------|------------|------------|------------|
| **December 29,  2006** | ** ** | **1.1653** | ** ** |
| **December 31,  2007** | ** ** | **0.9881** | ** ** |

 

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# **CAUTIONREGARDING FORWARD-LOOKING STATEMENTS**

 

This annual information form and management’s discussion andanalysis incorporated by reference hereto, contain statements about expectedfuture events and financial and operating results of TELUS Corporation (“TELUS”or the “Company”) that are forward-looking. By their nature, forward-lookingstatements require the Company to make assumptions and are subject to inherentrisks and uncertainties. There is significant risk that predictions and otherforward-looking statements will not prove to be accurate. Readers are cautionednot to place undue reliance on forward-looking statements as a number of factorscould cause actual future results, conditions, actions or events to differmaterially from the targets, expectations, estimates or intentions expressed inthe forward-looking statements. The Company disclaims any intention orobligation to update or revise any forward-looking statements, whether as aresult of new information, future events or otherwise, except as required bylaw. In the case of annual guidance, it is the current practice of the Companyto evaluate and, where it deems appropriate, provide updates. Subject to legalrequirements, this practice may be changed at any time at the Company’s solediscretion.

 

Factors that could cause actual results to differ materiallyinclude but are not limited to: competition (including more active price competitionand the possibility of new wireless competition after the 2008 spectrumauction); economic growth and fluctuations (including pension performance,funding and expenses); capital expenditure levels (including possible wirelessspectrum asset purchases); financing and debt requirements (including fundingacquisition purposes, share repurchases and debt financings); tax matters(including acceleration or deferral of required payments of significant amountsof cash taxes); human resource developments; business integrations and internalreorganizations (including post-acquisition integration of Emergis); technology(including reliance on systems and information technology, evolving wirelinebroadband and wireless next generation technology options and the possible needfor prospective wireless sharing arrangements to achieve cost efficiencies andreduce deployment risks); regulatory approvals and developments (including theessential services proceeding, spectrum auction, tower sharing and roamingrules, the new media proceeding, and possible changes to foreign ownershiprestrictions); process risks (including conversion of legacy systems andbilling system integrations); health, safety and environmental developments;litigation and legal matters; business continuity events (including manmade andnatural threats); any prospective acquisitions or divestitures; and other riskfactors discussed herein and listed from time to time in TELUS’ reports, publicdisclosure documents or other filings with securities commissions in Canada (atwww.sedar.com) and filings in the United States (onEDGAR at www.sec.gov). See “Management’s Discussion andAnalysis – Section 10 Risks and risk management” in TELUS’ 2007 Annual Report– Financial Review for further information.

 

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# **TELUS**

 

TELUS was incorporated under theCompany Act (British Columbia) (the “BC Company Act”) on October 26, 1998under the name BCT.TELUS Communications Inc. (“BCT”). On January 31, 1999,pursuant to a court-approved plan of arrangement under the Canada BusinessCorporations Act among BCT, BC TELECOM Inc. (“BC TELECOM”) and the formerAlberta-based TELUS Corporation (“TC”), BCT acquired all of the shares of BCTELECOM and TC in exchange for Common Shares and Non-Voting Shares of BCT, andBC TELECOM was dissolved. On May 3, 2000, BCT changed its name to TELUSCorporation and in February 2005, the Company transitioned under the BusinessCorporations Act (British Columbia), successor to the BC Company Act. TELUSmaintains its registered office at Floor 21, 3777 Kingsway, Burnaby, BritishColumbia (“B.C.”) and its executive office at Floor 8, 555 Robson, Vancouver,B.C.

 

***Subsidiaries of TELUS***

 

As of December 31, 2007, theonly material subsidiary of TELUS was TELUS Communications Inc. (“TCI”), beingthe only subsidiary which owned assets that constitute more than 10 per cent ofthe consolidated assets of TELUS as at December 31, 2007 and generatedsales and operating revenues that exceed 10 per cent of the consolidated salesand operating revenues of TELUS for the year ended December 31, 2007.

 

TELUS’ wireline and wirelessbusinesses were formerly located in TCI and TELE-MOBILE Company (“TELE-MOBILE”)respectively. On November 24, 2005, TELUS announced the merger of thosesegments into a single operating structure (the “wireline-wireless merger”). Thiswas partly effected by way of a legal entity restructure on March 1, 2006 (the “2006legal entity restructure”), at which time TELUS combined its wireline andwireless businesses into TELUS Communications Company (“TCC”).

 

TCC is a partnership organizedunder the laws of B.C. whose partners are TCI and TELE-MOBILE. Immediatelyprior to the 2006 legal entity restructure, 3817873 Canada Inc., a partner inTELE-MOBILE, was continued into Alberta as 1219723 Alberta ULC. TELUS owns 100per cent of the voting shares in TCI directly, and 100 per cent of thepartnership interests in TELE-MOBILE and TCC indirectly.

 

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The following organization chartsets forth the material TELUS subsidiaries and partnerships, as well as theirrespective jurisdictions of incorporation or establishment and TELUS ownershipas at December 31, 2007:

 

 

In this annual information form,references to “TELUS” are to TELUS Corporation and all of its subsidiaries andpartnerships as a whole, except where it is clear that these terms mean onlyTELUS Corporation. Unless the context otherwise requires, “TELUS wireline”refers to the wireline businesses carried on primarily through TCC presentlyand primarily through TCI prior to the wireline-wireless merger, and “TELUSMobility” or “TELUS wireless” refers to the wireless businesses carried onthrough TCC presently and through TELE-MOBILE prior to the wireline-wirelessmerger.

 

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# **OPERATIONS,ORGANIZATION AND CORPORATE DEVELOPMENTS**

 

***Operations***

 

TELUS is a leading nationaltelecommunications company in Canada, offering a wide range of wireline andwireless communications products and services including data, voice andentertainment. In 2007, TELUS**generated $9.1billion in annual revenue and had 11.1 million customer connections including5.6 million wireless subscribers, 4.4 million wireline network access lines and1.2 million Internet subscribers. As a result of TELUS’ national growthstrategy, revenue grew by 4.5 per cent in 2007 and total customer connectionsincreased by 432,000.

 

***Organization***

 

TELUS is organized into fourcustomer facing business units:

 

•                  ConsumerSolutions, which provides wireline and wireless Internet Protocol (“IP”) dataservices, voice and entertainment services to households and individuals acrossCanada;

 

•                  BusinessSolutions, which delivers innovative wireline and wireless data, IP, voice andbusiness process in-sourcing solutions to small and medium-sized businesses andentrepreneurs, and brings customized wireline and wireless voice and data, IP,Information Technology (“IT”) and e.business solutions to large multinational,corporate and public sector customers;

 

•                  TELUSQuébec, which focuses on the unique needs of the Québec marketplace by offeringbusinesses and consumers comprehensive and integrated wireless and wirelinetelecommunications solutions, including data, Internet and voice; and

 

•                  PartnerSolutions, which provides services to wholesale customers, includingtelecommunications carriers, resellers, Internet service providers (“ISPs”),wireless communications companies, competitive local access providers andcable-TV operators.

 

These customer facing businessunits receive essential support from the business capabilities units comprisedof Network Operations, Business Transformation and Technology Strategy, as wellas from the business enabling units comprised of Finance, Corporate Affairs(which includes public policy, law, regulation, government relations andcorporate communications) and Human Resources.

 

***Corporate developments***

 

The corporate structure ofTELUS underwent changes during the three years ended December 31, 2007.

 

Inaddition to the wireline-wireless merger, TELUS proceeded with modest internalreorganizations in 2005, 2006 and 2007.

 

OnSeptember 11, 2006, the Company announced that its Board of Directors hadunanimously approved a proposal to reorganize the Company in its entirety intoan 

 

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incometrust. On October 31, 2006, the federal Minister of Finance announced a new taxplan that would increase the taxation of income trusts. The Companyre-evaluated its proposal in light of the Minister’s announcement and, onNovember 24, 2006, the Company announced that it would not proceed with theproposal as TELUS management and the Board of Directors believed it was nolonger in the best interests of the Company and its shareholders to do so.

 

InApril 2007, Canada’s largest telecommunications service provider, BCE Inc.,entered into a strategic review process. On June 21, 2007, TELUS announced thatit had entered into a mutual non-disclosure and standstill agreement and waspursuing non-exclusive discussions to acquire BCE. On June 26, TELUS announcedthat inadequacies in BCE’s bid process did not make it possible for TELUS tosubmit an offer to acquire BCE. On June 30, BCE announced that it had enteredinto a definitive agreement to be acquired by a consortium led by TeachersPrivate Capital, the private investment arm of the Ontario Teachers’ PensionPlan, and the U.S.-based Providence Equity Partners and Madison DearbornPartners, LLC. In early August, TELUS concluded its assessment of whether itshould potentially make a competing offer for BCE, and announced that it didnot intend to submit a competing offer.

 

OnNovember 29, 2007, TELUS and Emergis Inc. (“Emergis”) announced that they hadentered into a support agreement pursuant to which TELUS agreed to make anall-cash offer to acquire by way of a take over bid all the outstanding commonshares of Emergis at $8.25 per share. The take over bid was supported by theboard of Emergis and, as part of the transaction, Emergis’ directors, officers,and certain shareholders entered into lock-up agreements with TELUS pursuant towhich they agreed to, among other things, tender all of their Emergis shares,representing approximately 22 per cent of the outstanding Emergis shares on afully-diluted basis.

 

OnJanuary 17, 2008, 6886116 Canada Ltd., a wholly-owned subsidiary of TCI, hadpurchased approximately 94 per cent of the issued and outstanding common sharesof Emergis on a fully diluted basis at a price of $8.25 cash per share. 6886116Canada Ltd. exercised its statutory rights under the Canada BusinessCorporations Act**and purchased the remainingcommon shares of Emergis by compulsory acquisition. The approximate totalpurchase price of the Emergis common shares was $743 million. A corporatereorganization of Emergis was completed immediately prior to the purchase. Thecommon shares of Emergis have been de-listed from the Toronto Stock Exchangeand Emergis is no longer a reporting issuer.

 

Emergisdevelops and manages solutions that automate transactions and the secureexchange of information. Emergis has expertise in electronic health-relatedclaims processing, health records systems, pharmacy management solutions,point-of-sale transaction processing, cash management and loan documentprocessing and registration. In Canada, Emergis delivers solutions to majorinsurance companies, top financial institutions, government agencies,hospitals, large corporations, real estate lawyers and notaries, andapproximately 3,000 pharmacies.

 

# **DESCRIPTIONOF THE BUSINESS AND GENERAL DEVELOPMENTS**

 

TELUS is the largest incumbenttelecommunications company in Western Canada and one of the largesttelecommunications companies in Canada. TELUS has two reportable segments:wireline and wireless.

 

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In the wireline segment, TELUSoffers the following solutions: voice (local, long distance, call managementand the sale, rental and maintenance of telephone equipment); Internet(high-speed or dial-up with security features); TELUS TV fully digitalentertainment service available in select neighbourhoods with Video on Demandand Pay Per View; data (IP networks, private line, switched services, networkwholesale, network management and hosting); converged voice and data solutions(TELUS IP-One Innovation® and TELUS IP-One Evolution®); hosting andinfrastructure (managed IT and infrastructure solutions delivered through TELUS’IP networks connected to TELUS’ Internet Data Centres); security solutions(managed and non-managed solutions to protect business networks, messaging anddata, in addition to security consulting services); and customized solutionssuch as contact centre services including Call Centre AnywhereTM, conferencingservices (webcasting, audio, web and video), and human resource and health andsafety outsourcing solutions.

 

In the wireless segment, TELUSoffers the following solutions: digital voice – PCS (postpaid and Pay &Talk® prepaid) Mike® all-in-one (iDEN) and Push To TalkTM capability on bothMike (Direct Connect®) and PCS (Instant Talk®); Internet – TELUS SparkTMincluding TELUS Mobile Music®, TELUS Mobile RadioTM and TELUS Mobile TVTM, Webbrowsing, Windows Live Messenger, text and picture messaging, and downloadablegames, videos ringtones and images; and data – devices including air cards andpersonal digital assistants (PDAs) available for use on wireless high-speed(evolution data optimized (“EVDO”) and EVDO Rev A), 1X and Mike packet datanetworks.

 

TELUS earns the majority of itsrevenue (voice, data and wireless network revenue) from access to, and usageof, its telecommunication infrastructure. The majority of the balance of TELUS’revenue (other revenue and wireless equipment revenue) arises from providingproducts that facilitate access to, and usage of, TELUS’ telecommunicationinfrastructure.

 

***TELUS’ nationalgrowth strategy***

 

Since 1999, the Company has beenpursuing a national wireline and wireless growth strategy outside Alberta andB.C. into the rest of Canada. This has been implemented by both organic growthand through a series of wireline and wireless acquisitions. This has providedTELUS with a regional full service wireline presence in Eastern Québec throughacquisitions in 1999 and 2000 and ongoing investments in facilities, marketingand distribution focused on the business market in urban centres of Québec andOntario. In 2000, TELUS acquired national digital wireless communicationsnetworks and subscribers, spectrum, employees, and infrastructure and salesdistribution channels primarily in central and eastern Canada and has continuedto invest in and grow the business.

 

TELUS’ approach to the businessmarket is through a focus on non-incumbent growth in Central Canada as well as,nationally, a focus on key vertical markets of healthcare, financial services,energy and the public sector. For example, in January 2008, TELUS completed itsacquisition of Emergis, a business process outsourcer specializing in the healthcareand financial services sectors, and a leader in the automation of electronichealth records.

 

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***TELUS’ networks***

 

The Company has a coast-to-coast fibre optic network,which interconnects cities between Halifax and Vancouver and extends into theU.S. via points of presence in Albany, Ashburn, Palo Alto, Boston, Buffalo,Chicago, Detroit, New York and Seattle. This network is fully integrated withTELUS’ extensive metropolitan networks in Alberta and B.C. and connects intonetworks constructed in Montréal, Ottawa, Toronto and other cities. As atDecember 31, 2007, the total amount of network fibre reached more than18,000 kilometres.

 

*TELUS wirelinenetworks*

 

TELUS’ wireline network includesthe Alberta and B.C. portion of the transcontinental high-density fibre optictransmission system used by the various incumbent local exchange carriers (“ILECs”)across Canada. As part of the national strategy, TELUS also built its ownnational inter-city fibre optic backbone network that interconnects the networkin Alberta and B.C. with major centres in Ontario and Québec. This fibre opticnetwork is supplemented by new local fibre optic networks in 54 competitivelocal exchange carrier (“CLEC”) exchanges or metropolitan areas. TELUS’ networkinterconnects with the networks of Verizon Communications Inc. (“Verizon”) andother carriers in the U.S. for the exchange of U.S. and international traffic.

 

*TELUS wirelessnetworks*

 

TELUS is one of three nationalCanadian facilities-based wireless service providers, and offers wireless voiceand data services to consumers and businesses nationally on two networks. As aresult of acquisitions and purchases completed in previous years, TELUS holds asignificant mobile spectrum position of up to 45 MHz PCS and cellular spectrumand as much as 55 MHz in many areas with the inclusion of its iDEN networkspectrum. The federal government will make available additional wirelessspectrum through an auction in mid-2008 and further auctions are anticipatedfor spectrum in the 700 MHz and 2.5 and 2.6 GHz bands. See “Upcoming spectrumauction”.

 

*PCS/cellularnetworks*

 

TELUS owns and operates a nationaldigital PCS network and analogue/digital cellular facilities in Alberta, B.C.,and eastern Québec, with 40 to 45 MHz of PCS spectrum throughout all majorpopulation regions of Canada. Its national PCS wirelessnetwork utilizes 1X, CDMA (code division multiple access), and EVDO and EVDORev A digital technology.

 

TELUS expanded its network coveragethrough roaming/resale agreements entered into in 1999 (“the Roaming/ResaleAgreements”), principally with Bell Canada and certain of its affiliates. Theseagreements expanded TELUS’ digital PCS coverage areas outside of major urbanmarkets in Ontario, Québec and Atlantic Canada and were subsequently amended toinclude 1X and the EVDO high-speed network. At the end of 2007, TELUS’ nationaldigital networks, combined with coverage provided by the Roaming/ResaleAgreements, reached approximately 31.6 million Canadians.

 

In 2004, TELUS and Verizon Wirelessexpanded their Canada and U.S. roaming arrangements under a consolidatedlong-term roaming agreement to improve each 

 

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other’s ability to provide more consistentand comprehensive roaming services to each other’s customers. Substantially allof TELUS’ digital subscribers are provided extended coverage in Canada, theU.S. and various other countries through analogue and digital roamingarrangements with other carriers by means of dual-mode or tri-mode, dual-bandhandsets.

 

Beginning in late 2005, EVDOservices were introduced in major centres across Canada offering to customersaverage wireless data transfers at speeds of approximately 400 – 700 kilobitsper second. In2007, TELUS continued the enhancement of digital wireless capacity andcoverage and continued its investment in higher-speed wireless EVDO Rev A network technology,which now reaches 80 per cent of Canadians and enables roaming to 242 metropolitanareas in the U.S.

 

TELUS also operates analoguespecialized mobile radio (“SMR”) systems in most major urban centres in Canadaand paging networks in Alberta, B.C., and eastern Québec.

 

***iDEN networ******k***

 

TELUS also owns and operates Canada’sonly national enhanced specialized mobile radio (“ESMR”) network. ESMRdigital wireless business communications services are offered under the Miketrademark using iDEN technology from Motorola. The Mike network covers thelarger population centres and surrounding areas in Alberta, B.C., Manitoba,Ontario and Québec, and many non-urban areas and transport corridors inOntario, Québec and western Canada. The Mike network utilizes frequencies inthe 800 MHz range which have propagation advantages over higher frequencies suchas those used in digital 1900 MHz PCS networks, resulting in more costeffective geographic coverage. While the amount of 800 MHz spectrum licenced toTELUS varies by region, TELUS has ten to seventeen MHz of ESMR spectrumavailable for its Mike network in Montréal, Toronto and Vancouver, Canada’sthree most populous metropolitan areas. The Mike service is marketed primarilythrough independent and corporate-owned dealers to businesses and otherorganizations as a digital PCS-like service with the added benefit of Mike’sDirect ConnectTM Push to TalkTM functionality, which provides low-cost instantconnectivity for work groups.

 

In 2006, Sprint/Nextel completed amandatory shift of channels (rebanding) for its iDEN service due to concernsfrom the Federal Communications Commission (“FCC”) about interference withpublic safety operations. Part of the TELUS Mike network utilizes channelsunder control of the FCC and discussions are underway to determine if TELUSwill be required to shift some of the channels for its iDEN service to addresssimilar concerns in selected areas along the Canada/U.S. border. See “800 MHzRe-banding”.

 

***TELUS - wirelinesegment***

 

TELUS operates as an ILEC inAlberta, B.C. and eastern Québec where it provides comprehensive local, long distance,data, Internet and information services in its incumbent or ILEC territoriesand is a CLEC offering services primarily in central Canada through itsnon-incumbent or non-ILEC operations. TELUS’ ILEC operations serve a populationof approximately 7.8 million in its incumbent western Canada service territory,and a population of more than 500,000 in its incumbent eastern Québec territory.On a combined basis, wireline services accounted for revenue of$4,811 million for the year ended December 31, 2007($4,823 million for the year ended December 31, 2006) 

 

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representing 53 per cent of the total revenueof TELUS for 2007 (56 per cent of the total revenue of TELUS for 2006).

* *

*Local*

 

Local wireline services allowcustomers to complete calls in their local calling areas and to access longdistance networks, wireless networks and the Internet. Virtually all homes andbusinesses in TELUS’ incumbent service areas have access to some or all of itslocal services. In addition to local calling, local services generally includeenhanced calling features, such as call display, call waiting, call forwardingand voice mail; Centrex for business customers; public pay telephones; andcompetitive long distance carrier access. Local access or exchange service isthe largest component of local wireline service, and is generally provided on amonthly flat rate basis.

 

CLECs operating in Canada provideservice to their customers over facilities they have constructed or leased fromILECs in a given region or by reselling the local services of the ILECs(including TELUS). CLECs that use their own facilities or facilities leasedfrom TELUS are eligible to receive a subsidy when they provide service toresidential customers living in high cost areas where TELUS, as an ILEC,receives a per customer subsidy.

 

TELUS is competing outside itsincumbent territories as a non-dominant carrier and has obtained approval tooperate as a CLEC in certain targeted markets in central Canada where itconcentrates on providing business wireline services. TELUS is continuing topursue CLEC status in other areas in central and eastern Canada.

 

*Long distance*

 

Wireline long distance servicesinterconnect customers in different local calling areas, and provide domesticand international connectivity. TELUS offers its residential and businesscustomers a range of long distance savings plans, billing options, and calloptions. The largest component of wireline long distance services is messagetoll services, which are transmitted through fibre optic cables, microwaveradio systems, cable carrier systems andsatellite channels. National and international wireline long distanceservices are provided through TELUS’ national network and by way ofinterconnection with the networks of other facilities-based carriers andresellers.

 

*Data, Internetand IT services*

 

TELUS provides both “traditional”(or “legacy”) data services and “enhanced” data services. Traditional dataservices include circuit switched, packet switched and dedicated private lines.Enhanced data services provide greater functionality to the customer, allowinga customer to compress their telecommunications applications onto a singleinfrastructure. The primary enhanced data services offered by TELUS areInternet access, private Intranets, wide area network outsourcing andelectronic commerce. Customers may choose from a wide range of data services tosuit the complexity of their requirements, including required speed and volume.

 

TELUS is the second largestInternet service provider (“ISP”) in Alberta and B.C., and the fourth largestwireline ISP in Canada. As at December 31, 2007, TELUS had 1,175,500wireline Internet subscribers, including 1,020,200 high-speed Internet 

 

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subscribers. In 2007, the number ofhigh-speed subscribers increased by approximately 11 per cent. TELUS has seenan increase in the use of data services such as business Intranets by businesscustomers and in the use of personal computer and Internet access byresidential customers. TELUS also offers a range of broadcast, teleconferencingand advanced intelligent network services – services that can be customized tomeet the specific needs of individual customers through software changes tonetwork switches. These services include special number services such as tollfree 1-800 and 1-900 and enhanced call routing.

 

Through growth, investment and strategicacquisitions in prior years, TELUS also became a leading managed data-hosting provider in Canadawith a national network of intelligent Internet data centres.

 

TELUS provides businesses with ITservices such as IT outsourcing, application development and sustainment, andnational IT consulting. As a provider of Web hosting services, TELUS alsooffers managed hosting, co-location including shared Web and e-mail hostingservices, media streaming, data storage and security services. In addition,TELUS offers managed applications services and software such as online backupWeb conferencing, expense management, customer relationship management andsales force automation. These services are available across Canada and can beenhanced by connection with TELUS’ infrastructure through points of presencethroughout Alberta and B.C., and in Winnipeg, Regina, Saskatoon, and manycities in Ontario and Québec.

 

*Recent developments – consumer*

 

An important element of the Company’s wirelinerevenue growth strategy is the TELUS Future FriendlyâHome initiative in its incumbent service areas. TELUS offers a suite ofintegrated, advanced digital and wireless services that leverage itssignificant investments in high-speed Internet. Two services, TELUS HomeNetworking and TELUS HomeSitterÒ, were launched in 2004. In 2007, TELUScontinued the expansion of its digital television service, TELUS TV®, in selectneighbourhoods in Calgary, Edmonton, and Vancouver. TELUS TV was also launchedin Rimouski following extensive employee trials. In 2007, TELUS continuedenhancing its broadband infrastructure under a three-year, $600 millionprogram first announced in the fall of 2006. This investment isenabling emerging high-speed Internet services and expand network coverageacross British Columbia, Alberta and Eastern Québec. The broadband project complements a ruralcapital investment program to bring high-speed Internet services to more than450 additional remote communities B.C., Alberta and Eastern Québec by 2010. (See “Management’s Discussion and Analysis – Risks and Risk Management –Section 10.3 Regulatory” in TELUS’ 2007 Annual Report – Financial Review).

 

The Company continued its transformational billinginitiative to re-engineer processes in the wireline segment for order entry,pre-qualification, service fulfillment and assurance, customer care, billing,collections/credit, customer contract and information management. In 2007, TELUSsuccessfully implemented its consolidation of multiple order entry and billingsystems into one unified customer care platform for one million Albertacustomers. While unplanned order entry issues had to be overcome, the critical billingfunction worked well. Additional related development and conversions are plannedover the next several years, including a similar system conversion for morethan one million B.C. customers planned for the second half of 2008. Theexpected benefits of this project include streamlined and standardizedprocesses and the elimination over time of

 

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multiple legacy information systems.

 

In 2007, the CRTC granted residential localexchange forbearance in markets where incumbents are facing increasingcompetitive pressure. TELUS received approval for deregulation of wirelineresidential phone service in 63 communities (about 75 per cent of residentiallines in non-high cost serving areas) across B.C., Alberta and Québec. This isexpected to positively impact TELUS’ competitiveness by providing improvedpricing, marketing and bundling flexibility.

 

*Recent developments – business*

 

In 2005, TELUS successfully completed a migrationof 99 per cent of its long distance traffic from the old Stentor platform. Thisfibre-optic network provides TELUS with certain competitive advantages in thebusiness marketplace.

 

For business customers, TELUS provides a full suiteof IP-based advanced application services and the ability to integrate voicemail, e-mail, data and video through a user-friendly online Web portal. TELUSis exploiting the competitive advantage it has in managed data and IPsolutions, utilizing its IP network to secure recurring data revenues inOntario and Québec.

 

TELUS has offered its IP-OneÒproduct family to businesses in many cities in Ontario and Québec since 2004. In2005, the Company expanded its suite of advanced IP-based network applicationswith the introduction of IP-One EvolutionÒ.This service enables business customers to migrate from their existing Centrexsystems to IP telephony at a pace that best suits their needs.

 

In the small business market, TELUS is pursuinggrowth with TELUS Business One®, a portfolio of solutions tailored to the needsof small business customers. In 2007, TELUS expanded the solutions available,which now include connectivity, security and a range of powerful IP-based toolscustomized for smaller clients.

 

TELUS delivers human resources andend-to-end solutions to healthcare and other organizations.

 

In 2005, TELUS Sourcing Solutions Inc. (“TSSI”), an indirectsubsidiary of TELUS, entered into a 10-year contract with the Calgary Board ofEducation, in which 50 Calgary Board employees were transferred to TSSI. Thiscontract provides for the delivery of some of the district’s human resourcesservices. TSSI also signed a 15-year agreement with Hamilton Health Sciences todeliver the process and information technology components of its humanresources services.

 

The acquisition of Emergis in January 2008 combines Emergis’capabilities with TELUS’ customer base, strong brand, and financial resources,and should position TELUS to lead the development of solutions in electronichealth claims, electronic health records, pharmacy management systems,consulting, security and financial business process outsourcing in Canada.

 

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A number of large national contracts for managed data solutionswere signed in 2005, including an eight-year agreement with IntrawestCorporation to be the exclusive supplier of certain IP and telecommunications services at Intrawestresorts across Canada, and an agreement with a large manufacturer to provide andmanage Internet-based voice and data services. In 2006, in addition to severalother multi-million dollar contracts, TELUS secured a five-year$140 million contract with the Government of Ontario to provide fullymanaged network access services. In 2007, TELUS won several major enterprisecontracts, including a five-year $200 million transaction with the Departmentof National Defense for its national and international locations.

 

In 2005, TELUS purchased acontrolling interest in Ambergris Solutions Inc. (“TELUS InternationalPhilippines”), which provides TELUS with international call centre capabilityand backup capabilities. The international call centre capability providessupport for TELUS’ bids to offer competitive call centre services to potentialnew clients. In 2006, TELUS further increased its ownership interest in TELUSInternational Philippines.

 

In 2006, TELUS strengthened its ITcapabilities by acquiring Assurent Secure Technologies, a world-leadingCanadian information technology security services and research company. TELUSis leveraging Assurent’s global reputation and expertise to provide solutionsthat help customers protect their assets, identities, and information.

 

TELUS continues to focus onenhancing operational efficiency and effectiveness in its wireline business. In2004 and 2005, a number of initiatives were undertaken, noticeably in theinformation technology resources area and in the merger of two customer-facingbusiness units, aimed to enable greater efficiencies of scale, improveeffectiveness of program delivery, improve competitiveness in the marketplaceand improve operating and capital productivity. In 2006, TELUS fully orpartially contracted out a number of non-core functions including propertymanagement, custodial services, building maintenance, mail services, fleetmaintenance, and pay phone coin counting. In addition, management rationalizeda number of offices into larger centres and completed the consolidation of twofield dispatch centres. In addition, a number of process improvement andautomation initiatives were undertaken.

 

In 2007, efficiency activities weresomewhat curtailed due in part to a major implementation of a consolidatedorder entry and billing system in Alberta to some one million customers which broughtabout the need for extra labour in the short term. In 2008, there will be aheightened focus to indentify opportunities which deliver continuous costimprovements through network evolution, workforce and process optimization, andsystem enhancements.

 

The operatingprofitability of non-ILEC operations has been steadily improving because ofcontinued data-focused growth, cost containment efforts and increases in theproportion of services provided on TELUS facilities. See “TELUS’ nationalgrowth strategy”.

 

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The following table sets forthcertain statistical information with respect to the wireline segment as atDecember 31 in each of the last three years:

 

**Wireline segment**

 
| ** **                                    | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|-----------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Network access  lines (000’s)            |       | 4,404    |       | 4,548    |       | 4,691    |       |
| High-speed  Internet net additions (000s)     |       | 104      |       | 154      |       | 73       |       |
| High-speed  Internet subscribers (000’s) |       | 1,020    |       | 917      |       | 763      |       |
| Dial-up Internet  net reductions (000’s) |       | (39      | )          | (42      | )          | (46      | )          |
| Dial-up Internet  subscribers (000’s)    |       | 155      |       | 194      |       | 236      |       |
| Total Internet  subscribers (000’s)      |       | 1,175    |       | 1,111    |       | 999      |       |
| Full-time  equivalent employees               |       | 25,731   | (2)        | 23,884   | (2)        | n/a      | (1)        |
| Total employees                               |       | 26,075   | (2)        | 24,228   | (2)        | 22,888   | (2)        |

 

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(1)     The measurefor full-time equivalent employees is not available for 2005 as it does notfactor in the effective overtime hours on staff equivalents because of thelabour disruption from July to November.

(2)     IncludesTELUS’ international operations.

 

***TELUS – wirelesssegment***

 

TELUS is a national wirelessprovider with 5.6 million consumer and business subscribers, and extensivecoverage to 31.6 million people or 96 per cent of Canada’s population. TELUSprovides integrated digital wireless voice, data and Internet services,including Push To Talk (PTT) services with Mike, Canada’s only iDEN network,and a nationwide digital PCS (CDMA) network, including 1X and high-speed (EVDOand EVDO Rev A) data capabilities

 

TELUS is a leading wirelesscommunications service provider in Canada and a leading North American carrierin terms of average monthly revenue per subscriber unit (“ARPU”), churn,operating margins and operating cash flow yield, based on publicly availableinformation.

 

For the year endedDecember 31, 2007, the wireless segment accounted for revenue of$4,264 million ($3,858 million for the year ended December31, 2006), representing approximately 47 per cent of the total revenue ofTELUS in 2007 (44 per cent of the total revenue of TELUS for 2006).

 

A key development during the yearwas the successful implementation of wireless number portability (WNP) by allCanadian carriers including TELUS, which gives consumers and businesses theability to change carriers without changing their telephone number. The adventof WNP presents significant opportunities for TELUS in the Central Canadianmarket. For example, TELUS was selected in early 2007 by the Government ofCanada to be its prime wireless supplier with wireless subscribers migrating toTELUS in 2007 and 2008.

 

In 2006, TELUS introduced SPARKTM, anew brand name for its portfolio of mobile entertainment, information andmessaging services. TELUS Spark services include TELUS 

 

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Mobile Music® and TELUS MobileRadioTM, launched in 2006 and TELUS Mobile TVTM, launched in August 2005.

 

TELUS’ EVDO network, first launchedin late 2005, was upgraded to higher speed EVDO Rev A services in 2007, whichare now available to more than 80 per cent of Canadians. To complementcapabilities of its enhanced high-speed network in 2007, TELUS offered aline-up of mobile devices, many with rich multimedia benefits. Notably, TELUSlaunched the BlackBerry 8830 World Edition which works on both CDMA and GSM(global system for mobile communications) networks keeping internationaltravelers connected to e-mail and voice services.

 

In 2006, TELUS signed an agreementwith AMP’D Mobile, a specialized provider of wireless multimedia services totarget the young adult market with services beginning in March 2007. AMP’DMobile subsequently filed for Chapter 11 in early June 2007. As a result, AMP’DMobile sales were discontinued in Canada and TELUS contacted AMP’D subscribersto offer comparable packages of TELUS voice and Spark multimedia services.

 

The following table sets forth certainstatistical information with respect to the wireless segment as at December 31in each of the last three years:

 

**Wireless segment**

 
| ** **                                                 | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| Net subscriber  additions (000’s)                     |       | 515      |       | 535      |       | 584      |       |
| Gross subscriber  additions (000’s)                   |       | 1,434    |       | 1,293    |       | 1,279    |       |
| Wireless  subscribers (000’s)                         |       | 5,568    |       | 5,056    |       | 4,521    |       |
| Penetration rate (1)                                       |       | 17.5     | %          | 16.2     | %          | 14.5     | %          |
| Wireless market  share, subscriber based                   |       | 27       | %          | 27       | %          | 27       | %          |
| Average monthly  revenue per subscriber unit               |       | $64      |       | $63      |       | $62      |       |
| Minutes of use  per subscriber per month (“MOU”) |       | 404      |       | 403      |       | 399      |       |
| Cost of  acquisition, per gross addition                   |       | $395     |       | $412     |       | $386     |       |
| Monthly  deactivations (churn rate)                        |       | 1.45     | %          | 1.33     | %          | 1.39     | %          |
| Digital  population coverage (millions)                    |       | 31.6     |       | 31.0     |       | 30.6     |       |
| Full-time  equivalent employees                            |       | 7,643    |       | 7,210    |       | n/a      | (2)        |
| Total employees                                            |       | 8,118    |       | 7,727    |       | 6,931    |       |

 

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(1)             Subscribers divided by population coverage.

(2)             The measure for full-time equivalent employees is notavailable for 2005 as it does not factor in the effective overtime hours onstaff equivalents because of the labour disruption.

 

# **EMPLOYEERELATIONS**

 

As atDecember 31, 2007, TELUS employed approximately 34,200 employees. Of them,approximately 15,000 (approximately 11,200 in the wireline segment and 3,800 in thewireless segment) were unionized.

 

On November20, 2005, a five-year collective agreement came into effect coveringapproximately 13,276 employees in both the wireline and wireless segments. Theagreement, which expires on November 19, 2010 (the “TWU Collective Agreement”),

 

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replaced six previously separatecollective agreements and applies to all unionized employees represented by theTelecommunications Workers Union (“TWU”) located predominantly in B.C.,Alberta, Ontario and Québec.

 

***Wireline segment***

 

The TWUrepresents approximately 9,500 unionized employees in TELUS’ wirelineoperations across Canada. These employees are covered by the TWU CollectiveAgreement. Approximately 1,000 office, clerical and technical employees in thewireline segment in Québec are represented by the Syndicat Québécois des employés de TELUS, under a collectiveagreement that will expire on December 31, 2009. In addition, the Syndicat desAgents de Maîtrise de TELUS (“SAMT”) represents approximately 480unionized employees in TELUS’ wireline operations in Québec under a collectiveagreement that expired on March 31, 2007. TSSI,which employs approximately 115 unionized employees in the payroll and humanresources services business, is signatory to three separate collectiveagreements in the provinces of Alberta and BC.

 

***Wireless segment***

 

TELUS’ wireless operations employed approximately 3,800 unionized employees in two separatebargaining units, with the majority of unionized employees (approximately 3,700clerical and technical employees across Canada) included in the TWU’s nationalbargaining unit and a smaller number (approximately 15 professional andsupervisory employees) represented by the SAMTin Québec under a collective agreement thatexpired on March 31, 2007.

 

***Collectivebargaining in 2007***

 

Renewalnegotiations for the two collective agreements with the SAMT commenced in 2007and remain ongoing. The terms of these expired agreements continue to applyuntil new collective agreements are put in place. (See “Management’s Discussionand Analysis – Risks and Risk Management – Section 10.4 Human Resources” inTELUS’ 2007 Annual Report – Financial Review).

 

# **CAPITALASSETS AND GOODWILL**

 

As atDecember 31, 2007, the total investment of TELUS in capital assets andgoodwill was recorded at a net book value of $14.3 billion on a consolidated basis.

 

The principalcapital assets of TELUS consist of telecommunications property, plant andequipment and intangible assets and do not lend themselves to description byexact location. As at December 31, 2007, the total investment of TELUS incapital assets was recorded at a net book value of $11.1 billion on aconsolidated basis. Such assets, located principally in Alberta, B.C., Ontarioand Québec, include network facilities, relay and transmission towers,switching equipment, terminal devices, computers, motor vehicles, tools andtest equipment, furniture, office equipment and intangible assets. Spectrumlicences, which had a net book value of $3.0 billion as atDecember 31, 2007, comprise the majority of identifiable intangible assetsincluded in capital assets.

 

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With theexception of terminal devices located at customer premises, most of the Company’scommunications plant and equipment are located on land owned or leased, or onrights-of-way obtained, by TELUS.

 

Theproperties of TELUS include:  (i) officespace; (ii) work centres for field service and materials management personnel;and (iii) space for exchange, toll and mobile radio equipment. A small numberof buildings are constructed on leasehold land and the majority of the relaystations for TELUS’ public service radio-telephone network are situated onlands held under leases or licences for varying terms. The network facilitiesof TELUS are constructed under or along streets or highways pursuant torights-of-way granted by the owners of land including municipalities and onland owned by the Crown or on freehold land owned by TELUS. Other communicationsproperty, plant and equipment consist of plant under construction and materialsand supplies used for construction and repair purposes. Identifiable intangibleassets include wireless spectrum licences, subscriber base and computersoftware.

 

As at December 31,2007, goodwill had a net book value of $3.2 billion. Goodwill represents theexcess of cost of acquired businesses over the fair value attributed to the netidentifiable assets.

 

TELUSmonitors its operations for compliance with applicable environmentalrequirements and standards, and implements preventative and remedial actions asrequired. TELUS’ business of telecommunications services does not generatesignificant waste products that would be considered hazardous. For thesereasons, remedial action has not been significant to the ongoing operations andexpenditures of TELUS.

 

***Value ofintangible assets and goodwill***

 

The carryingvalue of intangible assets with indefinite lives, and goodwill, areperiodically tested for impairment using a two-step impairment test. Thefrequency of the impairment test generally is the reciprocal of the stabilityof the relevant events and circumstances, but intangible assets with indefinitelives and goodwill must, at a minimum, be tested annually. The Company has selectedDecember as its annual test time. No impairment amounts arose from the December2007, 2006 and 2005 annual tests. The test is applied to each of the Company’stwo reporting units: wireline and wireless, which reporting units areidentified in accordance with the criteria in the Canadian Institute ofChartered Accountants (“CICA”) Handbook section for intangible assets andgoodwill.

 

Intangibleassets with finite lives (“intangible assets subject to amortization”) areamortized on a straight-line basis over their estimated lives; estimated livesare reviewed at least annually and are adjusted as appropriate.

 

# **RISKFACTORS**

 

Management’sdiscussion and analysis — Section 10 Risks and risk management in TELUS’ 2007Annual Report – Financial Review is hereby incorporated by reference. Management’sdiscussion and analysis is available at www.sedar.com.

 

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# **ALLIANCES**

 

***Verizon softwareand related technology and services***

 

Concurrentlywith the 2004 sale by Verizon of its equity interest in TELUS (the “VerizonSale”), Verizon and TELUS adjusted their business relationships to reflectchanges in their business requirements since their business alliance was firstestablished.

 

Inparticular, there were significant amendments to the January 1, 2001 allianceagreement between TELUS and Verizon (the “Verizon Agreement”). Subject toexisting third party rights and certain other exceptions and conditions, TELUSand its affiliates had obtained under the Verizon Agreement certain rights topurchase exclusive licences of Verizon software and other technology,trademarks and service marks as specified by TELUS, and to use exclusively theremaining Verizon software and other technology, trademarks and service marks,in each instance in connection with the provision of TelecommunicationsServices (as defined in the Verizon Agreement) in Canada. TelecommunicationsServices do not include the provision of content for broadcasting, video, cableor Internet services, or the sale, publication or provision of directories. Asamended on December 14, 2004, TELUS retains the exclusive licences inCanada to specified Verizon trademarks, and software and technology where suchlicences were purchased or such trademarks, software and technology were usedby TELUS prior to the closing of the Verizon Sale, together with certaincollateral rights associated therewith granted under the Verizon Agreement, butnot to any other Verizon trademarks or software and technology. TELUS also hasrelinquished certain purchasing rights. Verizon is required to continue toprovide upgrade and support on the retained software and technology.

 

Verizon’sobligation to provide intellectual property rights, or any other right, serviceor product called for in the Verizon Agreement is subject to compliance withU.S. regulatory requirements by Verizon and its affiliates.

 

The VerizonAgreement required Verizon to provide certain functional and consultingservices to TELUS as requested by TELUS. As amended on December 14, 2004,TELUS has the right to require Verizon to provide such services undercommercial terms with respect to the software and technology and their upgradesthat are licenced to TELUS, and the two companies will use each other’scross-border services where capabilities and customer requirements permit. TheVerizon Agreement also contained certain joint marketing and non-competitionprovisions, which do not apply to Verizon Wireless or TELUS Mobility. As atDecember 14, 2004, TELUS was released from its obligation not to competeagainst Verizon in the U.S., and the exceptions to the remainingnon-competition obligations were in some cases clarified or modified.

 

The VerizonAgreement applies to Verizon and its American and Canadian affiliates, butspecifically excludes Verizon Wireless. Independent of the Verizon Agreement,TELUS Mobility and Verizon Wireless negotiated and implemented mutuallybeneficial changes to their reciprocal roaming arrangements.

 

The VerizonAgreement, as amended on December 14, 2004, will expire onDecember 31, 2008. In most instances, TELUS will have a right to use thelicenced software and technology on a non-exclusive basis following the expiryor other 

 

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terminationof the agreement. As amended on December 14, 2004, annual payments in theaggregate of U.S. $82 million for the years 2005 to 2008 were reduced toan aggregate nominal amount of only four U.S. dollars for that time period.

 

***Directorybusiness***

 

In 2001, TELUS sold its directoryadvertising services business to Verizon Information Services – Canada Inc. (“VIS”),a subsidiary of Verizon. At the same time, various TELUS subsidiaries and VISentered into a series of commercial arrangements whereby VIS acquired theexclusive right to publish TELUSdirectories and provide on-line directories on TELUS portals, in Canada andwithin 40 miles of the Canada-U.S. border, for an initial term of 30 years withcertain renewal rights thereafter, and TELUS agreed not to compete with this businessfor the term of the agreement.

 

On November 9, 2004, Verizonannounced that it had completed a transaction to sell VIS to AdvertisingDirectory Solutions Holdings Inc. (“ADSHI”), an affiliate of Bain Capital. OnMay 25, 2005, the Yellow Pages Group announced that it, through YellowPages Income Fund, had completed the purchase of ADSHI from an affiliate ofBain Capital.

 

# **LEGALPROCEEDINGS AND REGULATORY ACTIONS**

 

On May 8, 1998, an action wascommenced against BC TEL (nowTCI) by certain holders of the $117.75 million principalamount of First Mortgage Bonds, 11.35 per cent Series AL (the “Bonds”) whichwere redeemed by BCTEL on December 30, 1997. The action alleged that the Bondswere improperly redeemed and claimeddamages as a result thereof. TCI successfully defended the action, which wasdismissed by the Ontario Superior Court of Justice in January 2003. OnJune 8, 2005, the Ontario Court of Appeal overturned the lower courtdecision and ruled that the redemption of the Bonds breached the terms of theFirst Mortgage Bonds. The Court of Appeal referred the matter back to the lowercourt for an assessment of damages. On January 26, 2006, the Supreme Courtof Canada denied TCI’s leave to appeal the decision of the Court of Appeal. OnNovember 2, 2006, the Ontario Superior Court of Justice ruled that the lawsuitshould be treated as a representative action by all bondholders and not justthe named plaintiffs. On February 19, 2008, the trial court issued a decisionsetting out the method of calculating damages. The Company is assessing thatdecision, but the accruals made by the Company of estimated damages as part offinancing costs since the second quarter of 2005 continue to be adequate.

 

Two lawsuits were commenced againstTELUS and other defendants in the Alberta Court of Queen’s Bench onDecember 31, 2001 and January 2, 2002 respectively, by plaintiffsalleging to be either members or business agents of the TWU. In one action, thethree plaintiffs alleged to be suing on behalf of all current or futurebeneficiaries of the TELUS Corporation Pension Plan (“TCPP”), and in the otheraction, the two plaintiffs allege to be suing on behalf of all current orfuture beneficiaries of the TELUS Edmonton Pension Plan (“TEPP”). The statementof claim in the TCPP-related action named TELUS, certain of its affiliates andcertain present and former trustees of the TCPP as defendants, and claimsdamages in the sum of $445 million. The statement of claim in theTEPP-related action named TELUS, certain of its affiliates and certainindividuals who are alleged to be trustees of the TEPP and claims damages inthe sum of 

 

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$15.5 million. InMay 2002, the statements of claim were amended by the plaintiffs andinclude allegations, inter alia, that benefits provided under the TCPP and TEPPare less advantageous than the benefits provided under the respective formerpension plans, contrary to applicable legislation, that insufficientcontributions were made to the plans and contribution holidays were taken andthat the defendants wrongfully used the diverted funds, and that administrationfees and expenses were improperly deducted. TELUS has filed statements ofdefence to both the original and the amended statements of claims. As a term ofsettlement of the 2005 collective agreement between TELUS and the TWU, the TWUhas agreed to not provide any direct or indirect financial or other assistanceto the plaintiffs in these actions, and to communicate to the plaintiffs theTWU’s desire and recommendation that these proceedings be dismissed ordiscontinued. TELUS has been advised by the TWU that the plaintiffs have notagreed to dismiss or discontinue these actions. The likelihood of the actionsbeing determined adversely against TELUS is still being evaluated, but TELUSbelieves it has good defences to the actions. Should the lawsuits continuebecause of the actions of the court, the plaintiffs or for any other reason,and their ultimate resolution differ from management’s assessment andassumptions, a material adjustment to the Company’s financial position and theresults of its operations could result.

 

A class action was brought August9, 2004, under the Class Actions Act (Saskatchewan), against a number of pastand present wireless service providers including the Company. The claim allegesthat each of the carriers is in breach of contract and has violatedcompetition, trade practices and consumer protection legislation across Canadain connection with the collection of system access fees, and seeks to recoverdirect and punitive damages in an unspecified amount. Similar proceedings havebeen filed by or on behalf of plaintiffs’ counsel in other provincialjurisdictions. The class was certified on September 17, 2007, by the SaskatchewanCourt of Queen’s Bench. On February 20, 2008, applying two recent decisions ofthe Supreme Court of Canada, the Saskatchewan court removed from the class allTELUS customers who are bound by an arbitration clause. The Company has appliedfor leave to appeal the certification decision. Certification is a proceduraldevelopment. If the Company is unsuccessful with its appeal of thecertification decision, the plaintiffs would still be required to prove themerits of these claims. The Company believes that it has good defences to theaction.

 

# **FOREIGNOWNERSHIP RESTRICTIONS**

 

Certain subsidiaries of TELUS orpartnerships in which TELUS has a controlling interest, as Canadian carriers,holders of radio authorizations or licences, and holders of broadcasting licences,are required by the Telecommunications Act (Canada) (the “TelecommunicationsAct”), the Radiocommunication Act (Canada) (the “Radiocommunication Act”) and aDirection to the CRTC (Ineligibility of Non-Canadians) given under theBroadcasting Act (Canada) (the “Broadcasting Act”) to be Canadian-owned andcontrolled. Each of the Canadian carriers, under the Telecommunications Act, isconsidered to be Canadian-owned and controlled as long as: (a) not less than 80per cent of the members of its board of directors are individual Canadians; (b)Canadians beneficially own not less than 80 per cent of its issued andoutstanding voting shares; and (c) it is not otherwise controlled in fact bypersons who are not Canadians. Substantially the same rules apply under theRadiocommunication Act and the Broadcasting Act. After the 2006 legal entityrestructure, TELUS filed with the CRTC the requisite documentation affirmingTCC’s status as a Canadian carrier. TELUS further 

 

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intends that TCC will remaincontrolled by TELUS and that it will ensure that TCC remains “Canadian” for thepurposes of these ownership requirements.

 

The Telecommunications Act alsoprovides that in order for a company that holds shares in a carrier to beconsidered Canadian, not less than 66-2/3 per cent of the issued andoutstanding voting shares of that company must be owned by Canadians and thatsuch company must not otherwise be controlled in fact by non-Canadians. Accordingly,not less than 66-2/3 per cent of the issued and outstanding voting shares ofTELUS must be owned by Canadians and TELUS must not otherwise be controlled infact by non-Canadians. To the best of TELUS’ knowledge, Canadians beneficiallyown and control in the aggregate not less than 66-2/3 per cent of the issuedand outstanding Common Shares of TELUS and TELUS is not otherwise controlled infact by non-Canadians.

 

The regulations under theTelecommunications Act provide Canadian carriers and carrier holding companies,such as TELUS, with the time and ability to rectify ineligibility resultingfrom insufficient Canadian ownership of voting shares. Under these regulations,such companies may restrict the issue, transfer and ownership of shares, ifnecessary, to ensure that they and their subsidiaries remain qualified undersuch legislation. For such purposes, in particular but without limitation, acompany may, in accordance with the provisions contained in such regulations:

 

(i)                                     refuse toaccept any subscription for any voting shares;

 

(ii)                                  refuse toallow any transfer of voting shares to be recorded in its share register;

 

(iii)                               suspendthe rights of a holder of voting shares to vote at a meeting of itsshareholders; and

 

(iv)                              sell,repurchase or redeem any voting shares.

 

To ensure that TELUS remainsCanadian and that any subsidiary of TELUS, including TCC, is and continues tobe eligible to operate as a telecommunications common carrier under theTelecommunications Act, to be issued radio authorizations or radio licences asa radiocommunications carrier under the Radiocommunication Act, or to be issuedbroadcasting licences under the Broadcasting Act, provisions substantiallysimilar to the foregoing have been incorporated into TELUS’ Articles permittingthe directors to make determinations to effect any of the foregoing actions.

 

# **REGULATION**

 

***General***

 

The provision of telecommunicationsservices and broadcasting services in Canada is regulated by the CanadianRadio-television and Telecommunications Commission (the “CRTC”) pursuant to theTelecommunications Act and the Broadcasting Act, respectively. In addition, theprovision of cellular and other wireless services using radio spectrum is alsosubject to regulation and licensing by Industry Canada pursuant to theRadiocommunication Act.

 

The Telecommunications Act givesthe CRTC the power to regulate the provision of telecommunications services,and to forbear from regulating certain services, classes of 

 

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services or locations (i.e. notsubject them to rate regulation) if they are subject to a degree of competitionwhich is sufficient to protect the interests of customers. However, even whenthe CRTC forbears from price regulation of certain services or locations, itcan continue to regulate these services for certain other matters such asnetwork access and interconnection.

 

***Localforbearance***

 

The CRTC and federal government have implementedseveral changes to the regulatory regime for local telecommunications services. On December 14, 2006, the Governor in Council issued adirection to the CRTC to rely on market forces to the maximum extent feasible;to ensure technological and competitive neutrality and enable competition fromnew technologies; to use tariff approval mechanisms that are as minimallyintrusive as possible; to complete a review of the framework for mandatedaccess to wholesale services; to publish and maintain performance standards forits various processes; and, to continue to explore new ways of streamlining itsprocesses.

 

On April 4, 2007, the Governor inCouncil issued Order in Council P.C. 2007-532 and varied a previous CRTC localforbearance decision (Decision 2006-15) by changing the criteria for localforbearance for residential and business local exchange services. Instead ofrequiring at least 25 per cent market share loss in large local forbearanceregions, the Order in Council requires two independent facilities-basedcompetitors (of which one can be a wireless service provider) capable ofserving at least 75 per cent of the residential lines for forbearance based onlocal exchange areas. For business local exchange service, forbearance isgranted when one facilities-based competitor is able to serve at least 75 percent of the business lines.

 

The Order in Council reduced thenumber of quality of service indicators that must be met for the six-monthperiod prior to the forbearance application. The Order in Council also removedrestrictions on winbacks (actions to regain customers who changed to a competingservice provider) and promotions by the incumbent telephone companies.

 

Since the Order in Council wasissued, TELUS has obtained forbearance for local residential service in 63exchanges in B.C., Alberta and Québec (about three quarters of residentiallines in non-high-cost serving areas). TELUS has also obtained forbearance forlocal business service in 35 exchanges in B.C., Alberta and Québec (abouttwo-thirds of business lines).

 

On April 4, 2007, the Governor inCouncil also issued Order in Council P.C. 2007-533, which effectively requiredTELUS and the other incumbent telephone companies to set up an ombudsmanservice to resolve complaints between consumer and small business customers andproviders of forborne retail telecommunications services, including local andlong distance telephone service, Internet access service, and wireless service.TELUS and other telecommunications service providers created the Commissionerfor Complaints for Telecommunications Services (CCTS), and TELUS became a foundingmember on July 23, 2007. In Decision 2007-130 (released December 21, 2007), theCRTC ordered a number of changes to CCTS’ structure and mandate and mademembership mandatory for most telecommunications service providers as ofFebruary 1, 2008. Some providers (not including TELUS) have challenged the CRTC’sdecision, but in the meantime, CCTS continues to operate under its existingmodel. CCTS has the authority to investigate, make recommendations, andultimately to render decisions that 

 

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are binding on its members withrespect to eligible complaints from their consumer and small businesscustomers.

 

The major categories oftelecommunications services provided by TELUS that remain subject to rate regulationare Competitor Services, Public Telephone Services, Services with Frozen Ratesand Other Capped Services. The rates for Residential and Business Services inexchanges where forbearance has not yet been granted are also still regulatedby the CRTC.

 

***Price capregulation***

 

Price cap regulation continues toapply to a basket of local services provided by ILECs. TELUS is subject toprice cap regulation as an ILEC in Alberta, B.C. and Eastern Québec.

 

On April 30, 2007, the CRTC issuedDecision 2007-27 and established an open-ended price cap regime. The CRTCremoved the productivity adjustment from the Residential Services innon-high-cost serving areas (non-HCSA) price cap basket and the Other CappedServices price cap basket. For the Competitor Services price cap basket, theCRTC reduced the productivity adjustment from inflation (as measured by thechain-weighted Gross Domestic Product Price Index) minus 3.5 per cent toinflation minus 3.2 per cent. The Commission moved residential optional localservices and service bundles containing residential local exchange service tothe Uncapped Services basket (no upward pricing constraints).

 

The CRTC capped residential servicerates in urban areas at existing levels and limited annual rate increases inrural areas to the rate of inflation (to a maximum of 5 per cent). However, theCRTC removed restrictions on rate de-averaging for residential local serviceand optional local services. Subsequent to the price cap decision, the CRTCalso removed restrictions on rate de-averaging for business and pay telephoneservices (Decision 2007-106).

 

In 2002, the CRTC incorporated adeferral account into the previous price cap regime to which an amountequivalent to the cumulative annual productivity adjustments for residentialservices in non-high cost serving areas was added less mandated pricereductions (generally for competitor wholesale services).

 

In February 2006, the CRTCdetermined in Decision 2006-9 that the funds accumulated in the ILEC deferralaccounts would be used to expand broadband services to rural and remotecommunities and to improve accessibility to telecommunications services forindividuals with disabilities. After receiving proposals from the ILECs inresponse to Decision 2006-9, the CRTC launched a further proceeding in November2006 (Public Notice 2006-15) to further explore the ILECs’ proposals. InSeptember 2006, the Federal Court of Appeal granted the Consumer’s Associationof Canada and Bell Canada leave to appeal Decision 2006-9. The Consumer’s Associationhas filed its appeal asking the Court to direct rebates to local telephonesubscribers, rather than have the accumulated deferral account funds used forpurposes determined by the CRTC, as noted above. Bell Canada has also filed itsappeal of Decision 2006-9 on the grounds that the CRTC exceeded itsjurisdiction to the extent it approved rebates from the deferral account. TheFederal Court of Appeal granted a Bell Canada motion for a stay of Decision2006-9 in so far as it requires the disposition of funds in the deferralaccounts for any activities other than the improvement of accessibility tocommunications services for persons with disabilities.

 

On July 6, 2007, the CRTC issuedDecision 2007-50 which partially approved TELUS’ broadband expansion proposalfor 115 locations in B.C. and Québec. On January 17, 2008, the CRTC releasedDecision 2008-1 which identified an additional 119 rural and remote communitiesin TELUS’ incumbent operating territory that are eligible for broadbandexpansion using deferral account funds. In addition, the decision approves theuse of approximately 5 per cent of the accumulated balance of TELUS’ deferralaccount for improving access to telecommunications services for persons with 

 

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disabilities. The CRTC alsodetermined that any funds remaining in TELUS’ deferral account, other thanthose required to implement the broadband expansion and accessibilityinitiative, should be rebated to the Company’s residential local customers innon-high cost serving areas. On February 11, 2008, Bell Canada applied to theFederal Court of Appeal for leave to appeal, and for a stay of, Decision2008-1. The stay, if granted, would apply to the rebate and broadband expansiondeterminations in Decision 2008-1. TELUS would still be obligated to implementthe accessibility initiatives.

 

On March 8, 2008, the Federal Courtof Appeal rejected the Consumer’s Association and Bell Canada appeals ofDecision 2006-9. Decision 2006-9 continues to be subject to the stay imposed bythe Federal Court Appeal until the 60 day period to appeal the Federal Court ofAppeal decision expires or until the Supreme Court of Canada determines whetheror not to hear any appeal filed in respect of the Federal Court of Appeal decision.There is no guarantee that the ILECs will be able to proceed with theirproposals for the use of deferral account funds pending the outcome of suchappeals.

 

***Localcompetition framework***

 

The regulatory framework for localservices competition has a number of components, the more important of whichare summarized below.

 

*EssentialServices*

 

The CRTC requires ILECs like TELUSto make certain “essential facilities” available to competitors, at rates basedon the ILEC’s incremental cost plus an approved mark-up. In December 2007, theCRTC completed an extensive review of the regulatory framework for essentialservices initiated by Public Notice 2006-14.

 

On March 3, 2008, the CRTC issuedDecision 2008-17 which set out a three to five year phase-out process afterwhich time various non-essential services will no longer be subject toregulation. Services subject to phase out include fibre-based access andtransport services, higher speed competitor digital network (“CDN”) access, allspeeds of other CDN services, Ethernet services, and operator services. Duringthe phase-out period, ILECs are permitted to negotiate “off-tariff”,competitor-specific supply arrangements, for services subject to phase out,without Commission approval. For all other mandated wholesale services(including unbundled local loops, low-speed CDN access facilities, asymmetric digitalsubscriber line (“ADSL”) access service and co-location services), there is nochange to the pricing principles. As well, these facilities remain subject tomandated supply until market conditions change. Any party can apply in thefuture to remove the mandated supply obligations for these facilities based onchanges in market conditions.

 

*Contribution and portable subsidies*

 

The cost to local exchange carriers of providing thebasic level of residential services in high-cost serving areas (as required bythe CRTC) is higher than the amounts the CRTC allows the local exchangecarriers to charge for the level of service. Accordingly, the CRTC collectscontribution payments from all Canadian telecommunication service providers(including voice, data and wireless service providers) that are then disbursedas portable subsidy payments to subsidize the costs of providing residentialtelephone services in these high-cost serving areas. The portable subsidypayments are paid based upon a total subsidy requirement calculated on a perline/per band subsidy rate. The CRTC currently determines, at a national level,the total contribution requirement necessary to pay the portable subsidies andthen collects contribution payments from the Canadian telecommunication serviceproviders, calculated as a percentage of their telecommunication servicerevenue. Internet, paging and terminal equipment revenues 

 

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are exempt from the revenue charge. In November2007, the CRTC finalized the contribution revenue percentage charge for 2007 at0.94 per cent and also set an interim rate for 2008 at 0.94 per cent.

 

***Quality of service***

 

The CRTC monitors quality of service for retail andcompetitor services and enforces a rate adjustment plan and associated raterebates for ILECs that do not meet approved quality of service standards. Whenan ILEC’s quality of service standards are not met due to circumstances beyondits control, the ILEC can apply to exclude the impact of these circumstancesfrom its quality of service results.

 

In 2007, in response to several exclusionapplications filed by TELUS, the CRTC excluded the impact of a number of eventsthat were beyond TELUS’ control from its quality of service results includingvarious severe weather events, the 2005 labour disruption, and a major cablecut in downtown Vancouver. As a result, the impact of these events was removedfrom the applicable retail and competitor quality of service measures and thecorresponding quality of service rebates were reduced.

 

***Regulation ofwireless services***

 

The use of radio spectrum issubject to regulation and licensing by Industry Canada pursuant to theRadiocommunication Act, which is administered by Industry Canada. All of TELUS’wireless communications services depend on the use of radio frequencies. Whileeconomic regulation of wireless services falls under CRTC jurisdiction,wireless services have, generally, been subject to regulatory forbearance.

 

The Minister of Industry has theauthority to suspend or revoke radio spectrum licences if the licence holderhas contravened the Radiocommunication Act, regulations or terms and conditionsof its licence and after giving the holder of the licence a reasonableopportunity to make representations. Licence revocation is rare; licences areusually renewed upon expiration (see “Management’s Discussion and Analysis –Risks and risk management – Section 10.3 Regulatory – “Radiocommunicationslicences regulated by Industry Canada” and “Foreign ownership restrictions” inTELUS’ 2007 Annual Report – Financial Review).

 

*Wireless NumberPortability*. Wireless number portability (“WNP”) enablesconsumers to retain their telephone number when switching between serviceproviders or between wireline and wireless service. In Decision 2005-72, theCRTC directed Bell Mobility, Rogers Wireless Inc. and the wireless division ofTELUS to fully implement WNP by September 2007. TELUS has successfullycompleted this implementation. Canada is the second country in the world afterthe United States to offer complete number portability (wireless-to-wireless,wireless-to-wireline and wireline-to-wireless). WNP could lead to an increasein migration of network access lines to wireless services, increased wirelesssubscriber churn and/or additional customer retention costs for the Company, aswell as present opportunities to TELUS to market more effectively in thebusiness/enterprise market in Central Canada where TELUS has a lower marketshare than its competitors.

 

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***Radiocommunicationsspectrum licences***

 

TELUS holds radiocommunicationspectrum licences and authorizations for a variety of wireless services andapplications, both mobile and fixed. TELUS holds significant 1.9 GHz PCS spectrum throughout Canada, is the leadingholder of 800 MHz SMR/ESMR spectrum in all of the major Canadian markets, andholds 25 MHz of cellular 800 MHz spectrum in Alberta, B.C. and easternQuébec.  In addition, TELUS holds variousradio spectrum licences for fixed services in the 2.3/3.5 GHz band throughoutCanada, paging services, analogue two-way radio services, and legacymobile-telephone and other miscellaneous wireless services.

 

*Licence termsand renewals*. Currently, spectrum licences in Canada for PCS andcellular spectrum will expire in 2011 and 2013 (see “Management’s Discussionand Analysis – Risk and risk management – Section 10.3 Regulatory –Radiocommunications licences regulated by Industry Canada” and “ForeignOwnership Restrictions” in TELUS’ 2007 Annual Report – Financial Review).  The spectrum licences for the auctioned 24/38GHz, 2.3/3.5 GHz and PCS spectrum have a ten-year term from the date ofissuance.  Most other radiocommunicationsspectrum licences are renewed annually (see “Management’s Discussion andAnalysis – Risks and risk management – Section 10.3 Regulatory – Radiocommunication licences regulated byIndustry Canada” in TELUS’ 2007 Annual Report – Financial Review).

 

*Upcomingspectrum auction.*  On February16, 2007, Industry Canada released a discussion paper for the upcoming auctionfor advanced wireless services (AWS) spectrum in various spectrum bands.  On November 28, 2007, the Minister released apolicy framework on how the auction will be conducted. The major elementsinclude a set aside for new entrants of 40 MHz of the available 90 MHz of AWSspectrum, mandated roaming, and mandated tower and site sharing requirements atcommercial rates subject to binding arbitration.  On February 27, 2008, Industry Canadaclarified its decision on roaming indicating that new entrants are required tobuild before roaming and that resale will not be mandated, but rather left tocommercial negotiations between relevant parties. Terms of roaming and towerand site sharing will be based on commercial terms and subject to bindingarbitration where commercial negotiations are not successful.  Final conditions of licence were subsequentlyreleased on February 29, 2008.  Theauction is scheduled for May 27, 2008, with March 10, 2008 set as the deadlinefor filing applications to participate. Shaw Communications Inc., QuebecorMedia Inc., Globalive Communitications Corp., and a consortium of ManitibaTelecom Services Inc., Canada Pension Plan Investment Board and BlackstoneGroup LP have announced their intention to participate in the auction.

 

While the auction may provideopportunities for TELUS to increase capacity for advanced wireless services,given the size of the set aside, the spectrum auction is anticipated to resultin the establishment of increased entry and competition on a national and/orregional basis.

 

*700 MHz Spectrum*: The U.S.had a spectrum auction for the 700 MHz spectrum in early 2008, and the auctionwas ongoing as of March 13, 2008.  This spectrum is currentlyassigned to over-the-air broadcasters and is scheduled to become mobile in theU.S. once broadcasters vacate these airwaves by February 2009. The CRTC has seta shut-down date for analog television transmission in Canada by August 31,2011.  After this date, no licences foranalog transmission will be issued or renewed, thereby eventually freeing upthis spectrum.  On January 19, 2008,Industry Canada initiated an auction consultation process for spectrum at 700MHz strictly covering public safety usage. A consultation process for commercial use is expected to be announcedsometime between late 2008 and before the analog TV shut down in 2011.  There is no guarantee 

 

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that the Canadian government willnot reserve spectrum for new entrants or that it will not, as was done in theU.S., adopt some elements of open access for some of this spectrum.

 

*2.5/2.6GHz*: IndustryCanada had previously announced plans to auction some unlicenced spectrum at2.6GHz and clawback spectrum at 2.5/2.6 GHz for mobile and fixed wirelessservices.  A consultation on thisspectrum will be announced, presumably sometime between late 2008 and beforeexpiration of current licences in 2011. TELUS does not currently hold spectrum in these bands.

 

*800 MHzRe-banding*: In 2004, the FCC released a Report and Orderadopting a plan to resolve interference to public safety radio systems in the800 MHz band in the U.S.  Sprint Nextel’sESMR system was identified as the primary contributor of this interference. TheU.S. is planning to realign the band so that Public Safety systems would berelocated to the bottom of the 800 MHz band and Sprint Nextel’s ESMR systemwould operate in the upper part of the band.

 

In Canada, the TELUS Mike (ESMR)network also uses this same frequency spectrum. Because of the way licensing iscarried out for the Mike network (i.e. each site is analyzed and licencedindividually), TELUS and Industry Canada have been able to minimize the numberof Public Safety interference issues to a few across the country (compared tomore than 1500 in the U.S.).

 

However, TELUS has an existingSpecial Co-Ordination Procedure (SCP), endorsed by both Industry Canada and theFCC, wherein TELUS and Sprint-Nextel utilize each other’s channels within theirrespective ESMR networks at specific border areas across the country. Thesechannels serve to increase the number of available channels available to bothnetworks to better serve the area. The re-alignment threatens the continued useof the channels specified in the SCP.

 

While discussions with both theCanadian and U.S. regulators indicate that TELUS should be able to continue tohave access to a certain number of SCP channels in the border areas, until suchtime as the U.S. announces their final decision, there is no assurance that TELUSwill be able to continue to use these channels.

 

***Broadcastingservices***

*** ***

TheBroadcasting Act governs all types of broadcasting activities includingcommercial off-air radio and television broadcasting, the operation of otherprogramming services such as specialty and pay television, as well as thedistribution of television services through cable or satellite undertakings.

 

TheBroadcasting Act and its regulations give the CRTC the authority to issuelicences for specific categories of broadcasting undertakings and to regulatethe content provided and rates charged by each category of broadcastingundertaking.  In August 1996, the federalgovernment issued its policy under which “telecommunications common carriers”(as defined in the Telecommunications Act) would be allowed to apply forbroadcasting distribution undertaking (“BDU”) licences to provide cabletelevision service.  In 1997, the CRTCconfirmed that new entrant BDUs, including telecommunications common carriers,would not be rate regulated and would not have an obligation to serve.  

 

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However,the CRTC confirmed that new entrants would have to meet all the same contentand carriage obligations as incumbent BDUs.

 

TELUShas been licenced by the CRTC to operate Class 1 Regional BDUs in each of B.C.,Alberta and Québec utilizing its IP facilities. TELUS also holds a national licence to operate a video-on-demandprogramming service.  All of TELUS’services are fully digital and thus benefit from the more flexible regulatoryregime regarding BDU packaging established by the CRTC in its Digital MigrationFramework.

 

*Licence renewals*:  The TELUS broadcastinglicences are set to expire in 2009 and the renewal process for these licenceswill be commenced in 2008.  TELUS doesnot expect any difficulties in obtaining these renewals for further seven yearterms.

 

*Policy frameworkreview for broadcasting distribution and specialty and pay television services*:  The CRTC has undertaken tore-examine the policy framework in which the broadcast distribution anddiscretionary television services operate. This proceeding will affect the three regional distribution licencesheld by TELUS, as well as the national video-on-demand service which isconsidered a discretionary television service. It is expected that the CRTC will aim to reduce regulatory operatingconstraints, such as restrictions on packaging of programming services, but itwill also be examining the financing model for Canadian programming which couldresult in increased payments to programming services and production funds.  These additional costs would likely bepassed-on to subscribers through higher service charges.  TELUS and other affected parties filedsubmissions in this proceeding on January 25, 2008 and February 22, 2008.  The oral public hearing is scheduled to starton April 7, 2008, with a decision expected by the end of 2008.

 

# **COMPETITION**

 

TELUS expects continued strongcompetition in the wireline and wireless businesses within both its ILEC andnon-ILEC territories.  The following is asummary of the competitive environment in each of TELUS’ principal markets andgeographic areas.

 

***Wireline segment***

 

TELUS companies have alwaysexperienced competition for data services, while the long distance and localaccess voice services have faced competition since 1993 and 1998 respectively.

 

TELUS’ wireline competitiveenvironment is divided into two regions, ILEC and non-ILEC (CLEC), based on itstreatment under CRTC rules. TELUS is an ILEC in Alberta, B.C. and parts ofQuébec, while it operates as a CLEC in the rest of Canada.  Where it competes as a CLEC, TELUS hassignificantly more freedom from regulation than in the regions where itcompetes as the ILEC. As such its competitive position differs greatly betweenthe geographies.  Generally TELUS hashigher market share in areas where it is the ILEC however that has beenchanging over time.

 

Within TELUS’ ILEC territories anumber of competitors offer voice and data service through a combination oftheir own facilities and unbundled network elements provided by TELUS. Theprimary competitors are: BCE Inc. including its subsidiary Bell Canada, 

 

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Shaw Communications, Allstream (asubsidiary of Manitoba Telecom Services Inc), Rogers Telecom (formerly SprintCanada), and Primus Telecommunications Canada. Certain of these competitorshave built extensive local fibre optic networks in TELUS’ ILEC serviceterritories.  All of these competitorsare increasingly integrating or bundling voice and data services in order toprovide both discounted and more extensive service offerings to customers.

 

TELUS is an ISP in Alberta, B.C.,and in parts of Ontario and Québec.  Inthe residential sector and, to a lesser extent, the business sector, cable-TVcompanies are also providing high-speed Internet access and representsignificant competition to the ILECs. Shaw Communications is TELUS’ primary competitor in the provisioning ofhigh-speed Internet services to consumers in Alberta and B.C. ILECregions.  In Québec ILEC regions, theprimary competitor is Cogeco.

 

In recent years a number of newInternet based competitors have entered the market for local and long distancevoice services in TELUS’ ILEC and non-ILEC regions.  These competitors utilize voice over Internetprotocol (“VoIP”) technology to offer customers phone service over existingInternet connections. In the past few years, non-facilities based VoIPservice providers (such as Vonage and Skype) have had some success, however thecable-TV companies including Shaw Communications, Rogers, Videotron and Cogeco,are expected to be the more capable competitors in this area havingcaptured approximately 1.9 million VoIP service subscribers by theend of 2007.  At present VoIPcompetitors are largely free from regulatory burden, offering them significantflexibility in competing against ILECs such as TELUS.  Competition from VoIP competitors continuedto be intense in 2007 and is expected to intensify further in coming years.

 

TELUS also faces competition fromcompanies without wireline networks. Wireless service providers offer rate plans and services that areintended to compete directly with ILEC local services.  Resellers of primary local exchange servicesand smaller competitors in niches such as dial-around plans and calling cardservices have been in operation in Alberta and B.C. for several years and alsopresent competition to TELUS’ ILEC operations.

 

In its non-ILEC territories, TELUS’major competitors for wireline voice and data services are the incumbentcarriers.  In most cases thesecompetitors are subsidiaries or affiliates of BCE Inc.  The other primary competitors are Allstreamand Rogers Telecom with increasing competition beginning to emerge fromcable-TV companies and municipal hydro company owned telecommunicationsproviders.

 

For higher bandwidth and other dataservices to businesses nationally, systems integrators such as IBM Canada andEDS also represent a competitive threat as they compete with TELUS not only inIT services but also in the provision of data and voice network management andnetwork integration services.

 

A significant development on thecompetitive front in 2007 was the initiation of the strategic review process atBCE Inc., parent company of Bell Canada. As a result of this strategic review, in June 2007 BCE announced that ithad entered into a definitive agreement to be acquired by a group of privateequity investors.  The sale of BCE isexpected to be completed in the first half of 2008.  It is anticipated that there will be asignificant change in BCE’s operational and investment priorities after thecompletion of 

 

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the privatization.  It is also expected that BCE will reduce itspublic disclosure going forward.

 

***Wireless segment***

 

TELUS offers wireless voice anddata services to consumers and businesses nationally on both the ESMR (brandedMike) and the PCS/cellular networks and competes in both the prepaid andpostpaid markets.

 

The primary competitors with TELUSare Bell Mobility and Rogers Wireless, both of which have national networks, abroad offering of wireless voice and data services for consumers andbusinesses, and a large existing customer base. In April 2005, Virgin Mobile began offering services across Canada.  Virgin Mobile is a Mobile Virtual NetworkOperator (“MVNO”) which is owned in part by Bell Mobility and utilizes the BellMobility network for the provisioning of services.  In addition, both Bell Mobility and RogersCommunications are supporting other MVNO partnerships with cable-TV companiessuch as Videotron and Eastlink, and other resellers, such as President’sChoice, Petro-Canada and 7-Eleven.  Inthe price-sensitive market, Bell and Rogers are promoting their respectivediscount brand offerings to compete against the MVNOs and TELUS.   Competition within the wireless market isanticipated to remain intense.  There isa high probability that the auction processes for AWS or a future auction of2.5 GHz spectrum will lead to the entry of additional wireless providers on aregional and/or national basis as early as 2009.  These new competitors are expected to benefitfrom subsidized spectrum, mandated roaming and tower sharing rights which willafford the advantage of lower cost of entry than would otherwise be the case.

 

TELUS also competes with numerousnational, regional and local-paging companies for paging customers in Alberta,B.C., and eastern Québec.  TELUS offers anumber of wireless Internet offerings using the networks noted above as well aswireless LAN services such as WiFi (802.11) in so-called “hotspots” and otherareas utilizing unlicenced spectrum.  Inoffering wireless Internet and LAN access service, TELUS competes, to a limitedextent, with wireline business Internet access providers.  It also competes with major equipmentmanufacturers for private radio engineered systems.

 

***Other emergingcompetitive services***

 

Over the longer term there are anumber of factors that are expected to increase competition in thecommunications industry.  Of note is thecompetitive escalation resulting from the continuing convergence of cable-TV,satellite, computer, wireline and wireless technologies.  In November 2005, TELUS commercially launchedTELUS TV within select neighbourhoods in the Edmonton and Calgary markets.  In 2006, the expansion continued with atargeted commercial launch in Vancouver and in 2007 TELUS TV was launched inRimouski.  There are plans underway tolaunch TELUS TV in other major centres within its ILEC territories.  In this segment, TELUS competes withestablished cable-TV video providers, such as Shaw Communications and Cogeco,and with direct-to-home broadcast satellite companies, such as Bell ExpressVuand Star Choice.

 

Competition is also intense inother areas as TELUS continues its growth into emerging markets such as Webhosting and application services and human resource process outsourcing.  TELUS took a significant step forward in theadvancement of its growth 

 

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strategy in 2007 with the decisionto acquire Emergis, a transaction completed on January 17, 2008. (See “CorporateDevelopments”.)  Emergis specializes inmanaged services for the healthcare and financial services industries where itfaces competition from large systems development and integration companies suchas IBM as well as smaller focused software providers. These industries are twoimportant areas of potential growth for TELUS Business Solutions.  The acquisition of Emergis is expected toenable TELUS to further enhance its reputation as an organization thatunderstands these industries and can deliver innovative solutions to increasetheir efficiency and the service they provide to Canadians.

 

# **DIVIDENDSDECLARED**

 

The dividends per Common Share andNon-Voting Share declared with respect to each quarter by TELUS, during thethree-year period ended December 31, 2007, are shown below.

 
| **Quarter ended (1)0** | ** ** | **2007** | ** ** | **2006** | ** ** | **2005** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|----------|------------|
| March 31                    |       | $        | 0.375      |     | $          | 0.275    |       | $ | 0.20 |   |
| June 30                     |       | $        | 0.375      |     | $          | 0.275    |       | $ | 0.20 |   |
| September 30                |       | $        | 0.375      |     | $          | 0.275    |       | $ | 0.20 |   |
| December 31                 |       | $        | 0.45       |     | $          | 0.375    |       | $ | 0.275 |   |

 

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(1) Paid onthe first business day of the next month.

 

TELUS’ Boardof Directors reviews its dividend rate quarterly.  On November 2, 2007,TELUS announced that it was increasing its dividend to $0.45 per share on theissued and outstanding Common and Non-Voting Shares.  This 20 per cent increase was consistent withthe Company’s forward-looking dividend payout ratio guideline of 45 to 55 percent of sustainable net earnings first set in October 2004.  TELUS’ quarterly dividend rate will depend onan ongoing assessment of free cash flow generation and financial indicatorsincluding leverage, dividend yield and payout ratio.

 

# **CAPITAL STRUCTURE OF TELUS**

 

The authorized capital of TELUS consists of4,000,000,000 shares, divided into: 1) 1,000,000,000 Common Shares without parvalue; 2) 1,000,000,000 Non-Voting Shares without par value; 3) 1,000,000,000First Preferred shares without par value and; 4) 1,000,000,000 Second Preferredshares without par value.  The CommonShares and Non-Voting Shares are listed for trading on the Toronto StockExchange and the Non-Voting Shares are listed for trading on the New York StockExchange.  See “Market for Securities”.

 

***TELUS CommonShares and TELUS Non-Voting Shares***

 

Subject to theprior rights of the holders of First Preferred shares and Second Preferredshares, the Common Shares and the Non-Voting Shares are entitled to participateequally with each other with respect to the payment of dividends and thedistribution of assets of TELUS on the liquidation, dissolution or winding upof TELUS.

 

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Neither theCommon Shares nor the Non-Voting Shares can be subdivided, consolidated,reclassified or otherwise changed unless the other class is changed in the samemanner.

 

The holders ofthe Common Shares are entitled to receive notice of, attend, be heard and voteat any general meeting of the members of TELUS on the basis of one vote perCommon Share held.  The holders ofNon-Voting Shares are entitled to receive notice of, attend and be heard at allgeneral meetings of the members of TELUS and are entitled to receive allnotices of meetings, information circulars and other written information fromTELUS that the holders of Common Shares are entitled to receive from TELUS, butare not entitled to vote at such general meetings unless otherwise requiredby law.

 

In 2005, with therequisite shareholder approval, the Articles of TELUS were amended to removecumulative voting for directors and replace it with a provision permittingholders of Common Shares to vote by a separate resolution for each directorrather than a slate.

 

In order toensure that the holders of the Non-Voting Shares can participate in any offerwhich is made to the holders of the Common Shares (but is not made to theholders of Non-Voting Shares on the same terms), which offer, by reason ofapplicable securities legislation or the requirements of a stock exchange onwhich the Common Shares are listed, must be made to all or substantially allthe holders of Common Shares who are in any province of Canada to which therequirement applies (an “Exclusionary Offer”), each holder of Non-Voting Shareswill, for the purposes of the Exclusionary Offer only, be permitted to convertall or part of the Non-Voting Shares held into an equivalent number of CommonShares during the applicable conversion period. In certain circumstances (namely, the delivery of certificates, atspecified times, by holders of 50 per cent or more of the issued andoutstanding Common Shares to the effect that they will not, among other things,tender to such Exclusionary Offer or make an Exclusionary Offer), theseconversion rights will not come into effect.

 

If all of the Telecommunications Act, theRadiocommunication Act and the Broadcasting Act are changed so thatthere is no restriction on any non-Canadians holding Common Shares, holders ofNon-Voting Shares will have the right to convert all or part of theirNon-Voting Shares into Common Shares on a one for one basis, and TELUS willhave the right to require holders of Non-Voting Shares who do not make such anelection to convert such shares into an equivalent number of Common Shares.

 

TELUS willprovide notice to each holder of Common Shares before a general meeting ofmembers at which holders of Non-Voting Shares will be entitled to vote as aclass.  In such event, holders of CommonShares will have the right to convert all or part or their Common Shares intoNon-Voting Shares on a one for one basis provided and to the extent that TELUSand its subsidiaries remain in compliance with the foreign ownership provisionsof the Telecommunications Act, theRadiocommunication Act and the Broadcasting Act.

 

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The Common Sharesare subject to constraints on transfer to ensure TELUS’ ongoing compliance withthe foreign ownership provisions of the TelecommunicationsAct, the Radiocommunication Act and the Broadcasting Act.  As well, holders of Common Shares will havethe right, if approved by the Board of Directors of TELUS, to convert CommonShares into Non-Voting Shares in order that TELUS be in compliance with theforeign ownership provisions of the TelecommunicationsAct, the Radiocommunication Act and the Broadcasting Act.

 

In all otherrespects, each Common Share and each Non-Voting Share have the same rights andattributes.

 

***First Preferredshares***

 

The First Preferred shares may beissued from time to time in one or more series, each series comprising thenumber of shares, and having attached thereto the designation, rights,privileges, restrictions and conditions which the board of directors of TELUSdetermines by resolution and subject to filing an amendment to the Notice ofArticles and Articles of TELUS.  Noseries of First Preferred shares may have attached thereto the right to vote atany general meeting of TELUS or the right to be convertible into or exchangeablefor Common Shares.  Except as required bylaw, the TELUS holders of the First Preferred shares as a class are notentitled to receive notice of, attend or vote at any meeting of the members ofTELUS.  The First Preferred shares rankprior to the Second Preferred shares, Common Shares and Non-Voting Shares withrespect to priority in payment of dividends and in the distribution of assetsin the event of liquidation, dissolution or winding up of TELUS.

 

 ***SecondPreferred shares***

 

The Second Preferred shares may beissued from time to time in one or more series, each series comprising thenumber of shares, and having attached thereto the designation, rights,privileges, restrictions and conditions, which the board of directors of TELUSdetermines by resolution and subject to filing an amendment to the Notice ofArticles and Articles of TELUS. No series of Second Preferred shares may haveattached thereto the right to vote at any general meeting of TELUS or the rightto be convertible into or exchangeable for Common Shares.  Except as required by law, the holders of theSecond Preferred shares as a class are not entitled to receive notice of,attend or vote at any meeting of the members of TELUS.  The Second Preferred shares rank, subject tothe prior rights of the holders of the First Preferred shares, prior to theCommon Shares and Non-Voting Shares with respect to priority in payment ofdividends and in the distribution of assets in the event of liquidation,dissolution or winding up of TELUS.

 

***TELUS RightsPlan***

 

TELUS adopted ashareholder rights plan (the “Rights Plan”) in March 2000 and issued one right(a “Series A Right”) in respect of each Common Share outstanding as at suchdate and issued one right (a “Series B Right”) in respect of each Non-VotingShare outstanding as of such date.  TheRights Plan has a term of 10 years subject to shareholder confirmation everythree years.  The Rights Plan was amendedand confirmed as amended by the shareholders first in 2003 and then in 2005,and is scheduled to be confirmed with further minor amendments at TELUS’ 2008annual and 

 

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specialmeeting.  Each Series B Right, other thanthose held by an Acquiring Person (as defined in the Rights Plan) and certainof its related parties, entitles the holder in certain circumstances followingthe acquisition by an Acquiring Person of 20 per cent or more of the votingshares of TELUS (otherwise than through the “Permitted Bid” requirements of theRights Plan) to purchase from TELUS $320 worth of Non-Voting Shares for $160(i.e. at a 50 per cent discount).

 

# **RATINGS**

 

Ratingsinformation contained in Management’s Discussion and Analysis — Section 7.7Credit Ratings in TELUS’ 2007 Annual Report – Financial Review is herebyincorporated by reference.  Management’sDiscussion and Analysis is available at www.sedar.com.  Credit ratings are not recommendations topurchase, hold or sell securities and do not address the market price orsuitability of a specific security for a particular investor.  In addition, real or anticipated changes inthe rating assigned to a security will generally affect the market value ofthat security.  There can be no assurancethat a rating will remain in effect for any given period of time or that a ratingwill not be revised or withdrawn entirely by a rating agency in the future.

 

A description ofthe rating categories applied to TELUS as at December 31, 2007 from each agencyis below.  The outlook or trend for TELUSfrom four agencies was stable.

 
| **Institution** | ** ** | **Rating**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | ** ** | **Outlook**                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Fitch**       |       | “BBB” ratings indicate that there is currently expectation of low credit  risk. The capacity for payment of financial commitments is considered  adequate but adverse changes in circumstances and economic conditions are  more likely to impair this capacity. This is the lowest investment grade  category. 

 

The modifiers “+” or “-” may be appended to ratings “AA” to “CCC” to  denote relative status within major rating categories. |       | An Outlook indicates  the direction a rating is likely to move over a one to two-year period.  Outlooks may be positive, stable or negative. A positive or negative Rating  Outlook does not imply a rating change is inevitable. Similarly, ratings for  which outlooks are ‘stable’ could be upgraded or downgraded before an outlook  moves to positive or negative if circumstances warrant such an action. |
| ** **      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       |                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **DBRS**        |       | Long-term debt rated “A” is of satisfactory  credit quality. Protection of interest and principal is still substantial,  but the degree of strength is less than that of AA rated entities. 

 

While “A” is a respectable rating, entities in  this category are considered to be more susceptible to adverse economic  conditions and have greater cyclical tendencies                                                                                                       |       | Each DBRS rating category is appended with one of three rating trends -  “Positive”, “Stable”, or “Negative”. The rating trend helps to give the  investor an understanding of DBRS’s opinion regarding the outlook for the  rating in question. However, the investor must not assume that a positive or  negative trend necessarily indicates that a rating change is imminent.      |

 

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| **Institution** | ** ** | **Rating**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | ** ** | **Outlook** |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------|
| ** **      |       | than higher-rated securities.

 

Long-term debt rated “BBB” is of adequate credit  quality. Protection of interest and principal is considered acceptable, but  the entity is fairly susceptible to adverse changes in financial and economic  conditions, or there may be other adverse conditions present which reduce the  strength of the entity and its rated securities.

 

The ratings from “AA” to “CCC” are denoted by the  subcategories “high” and “low”. The absence of either a “high” or “low”  designation indicates the rating is in the “middle” of the category. 

 

DBRS’  short-term debt rating scale is meant to give an indication of the risk that  a borrower will not fulfill its near-term debt obligations in a timely  manner. The ratings range from R-1 (high) to D. Short-term debt rated R-1 (low) is of satisfactory credit  quality. The overall strength and outlook for key liquidity, debt, and  profitability ratios is not normally as favourable as with higher rating  categories, but these considerations are still respectable. Any qualifying  negative factors that exist are considered manageable, and the entity is  normally of sufficient size to have some influence in its industry. |       |        |

 

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| **Institution**  | ** ** | **Rating**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | ** ** | **Outlook**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **S&P**      |       | An  obligator rated ‘BBB’ exhibits adequate protection parameters. However,  adverse economic conditions or changing circumstances are more likely to lead  to a weakened capacity of the obligor to meet its financial commitments.

 

The  ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus or minus  sign to show relative standing within the major rating categories.                                                                                                                                        |       | Rating  outlooks assess the potential direction of a long term credit rating over the  intermediate term (typically six months to two years). An outlook is not  necessarily a precursor to a rating change or CreditWatch placement. Outlooks  may be positive, negative, stable, or developing and they accompany all  long-term credit ratings except those on CreditWatch.                                                                                                                      |
| ** **       |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| **Moody’s** |       | Obligations rated “Baa” are subject to moderate  credit risk. They are considered medium-grade and as such may possess certain  speculative characteristics.

 

Moody’s  appends numerical modifiers 1, 2, and 3 to each generic rating classification  from ‘Aa’ through ‘Caa’.  The modifier 1 indicates that the obligation ranks in the higher end of its  generic rating category; the modifier 2 indicates a mid-range ranking; and  the modifier 3 indicates a ranking in the lower end of that generic rating  category. |       | Moody’s  also provides a rating outlook which is an opinion regarding the likely  direction of a rating over the medium term. Where assigned, rating outlooks  fall into the following four categories: Positive (POS), Negative (NEG),  Stable (STA), and Developing (DEV — contingent upon an event. 

 

Ratings Under Review (RUR) designation indicates that the issuer has one or more  ratings under review for possible change, and thus overrides the outlook  designation. |

 

See also “MaterialContracts” on page 44 of this annual information form for more information.

 

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# **DIRECTORS AND OFFICERS**

 

***Directors***

 

The names, municipalities ofresidence, principal occupations of the directors of TELUS and the date theperson became a director of TELUS are as set out below.  Currently, there are 12 directors on theTELUS Board.  Each was elected at TELUS’annual general meeting on May 2, 2007 for a one year term.

 
| **Directors of TELUS   (Name and municipality of residence)** | ** ** | **Director  since (1)** | ** ** | **Principal  occupation**                                                             |
|---------------------------------------------------------------|------------|-------------------------|------------|---------------------------------------------------------------------------------------|
|                                                          |       |                    |       |                                                                                  |
| R.H.  (Dick) Auchinleck((4) - Chair) (5)   Calgary, Alberta   |       | 2003                    |       | Corporate  Director                                                                   |
| A. Charles Baillie ((3) - Chair) (5)   Toronto, Ontario       |       | 2003                    |       | Corporate  Director                                                                   |
| Micheline Bouchard (2)  Montréal, Québec            |       | 2004                    |       | Corporate Director                                                                    |
| R.  John Butler (3)(4)  Edmonton, Alberta                     |       | 1995                    |       | Counsel,  Bryan & Company (law firm)                                              |
| Brian  A. Canfield (5)  Point Roberts, Washington             |       | 1989                    |       | Chair,  TELUS Corporation                                                             |
| Pierre Y. Ducros(2)  Montréal, Québec               |       | 2005                    |       | President  of P. Ducros & Associés Inc. (investment and administration firm) |
| Darren  Entwistle   Vancouver, B.C.                           |       | 2000                    |       | President  and Chief Executive Officer, TELUS Corporation                             |
| Ruston E.T. Goepel (2)  Vancouver, B.C.                       |       | 2004                    |       | Senior  Vice President, Raymond James Financial Ltd. (investment firm)                |
| John  S. Lacey (3)(4)  Toronto, Ontario                       |       | 2000                    |       | Chairman,  Advisory Board, Tricap Restructuring Fund (investment fund)                |
| Brian  F. MacNeill  ((2) - Chair)   Calgary, Alberta          |       | 2001                    |       | Chairman,  Petro Canada (oil and gas company)                                         |
| Ronald  P. Triffo (2)  Edmonton, Alberta                      |       | 1995                    |       | Chairman,  Stantec Inc. (engineering company)                                         |
| Donald  Woodley (4) ((5) — Chair)  Orangeville, Ontario  |       | 1998                    |       | President,  The Fifth Line Enterprise (strategic advisory services company)           |

 

----

(1)             TELUS or its predecessors

(2)             Member of Audit Committee

(3)             Member of Human Resources and Compensation Committee

(4)             Member of Corporate Governance Committee

(5)             Member of Pension Committee

 

All of the directors of TELUS haveheld the principal occupations set forth above or executive positions with thesame companies or firms referred to, or with affiliates or predecessorsthereof, for the past five years except as follows: Charles Baillie wasChairman and Chief Executive Officer of the Toronto-Dominion Bank from 1998until 2003; Micheline Bouchard was President and CEO, ART Advanced Research 

 

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Technologies Inc. from 2002 to July2006;and Don Woodley was interim CEO and President of GENNUM Corporation fromNovember 2005 to September 2006.

 

***ExecutiveOfficers***

 

The name, municipality of residenceand present and principal occupations of each of the executive officers ofTELUS, as of March 14, 2008, are as follows:

 
| **Executive Officers of TELUS   (Name and municipality of residence)** | ** ** | **Position held with TELUS**                                                        |
|------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|
| Josh  Blair   Vancouver, B.C.                                          |       | Executive Vice President,   Human Resources                                         |
|                                                                   |       |                                                                                |
| Brian A. Canfield   Point Roberts, Washington                          |       | Chair,   TELUS Corporation                                                          |
|                                                                   |       |                                                                                |
| Darren Entwistle   Vancouver, B.C.                                     |       | President and Chief Executive  Officer,   TELUS Corporation                         |
|                                                                   |       |                                                                                |
| Joseph R. Grech   Vancouver, B.C.                                      |       | Executive Vice President,   TELUS Network Operations                                |
|                                                                   |       |                                                                                |
| Robert  G. McFarlane   Vancouver, B.C.                                 |       | Executive Vice President and  Chief Financial   Officer                             |
|                                                                   |       |                                                                                |
| Joe  M. Natale   Toronto, Ontario                                      |       | Executive Vice President and  President,   Business Solutions                       |
|                                                                   |       |                                                                                |
| Karen Radford Westmount, Québec                                   |       | Executive Vice President and  President, Partner   Solutions and TELUS Québec  |
|                                                                   |       |                                                                                |
| Kevin  A. Salvadori   Vancouver, B.C.                                  |       | Executive Vice President,   Business Transformation and   Chief Information Officer |
|                                                                   |       |                                                                                |
| Judy A. Shuttleworth   Surrey, B.C.                                    |       | Vice Chair,   Human Resources                                                       |
|                                                                   |       |                                                                                |
| Eros Spadotto   Toronto, Ontario                                       |       | Executive Vice President,   Technology Strategy                                     |
|                                                                   |       |                                                                                |
| John Watson   Toronto, Ontario                                         |       | Executive Vice President and  President,   Consumer Solutions                       |
|                                                                   |       |                                                                                |
| Janet S. Yale   Ottawa, Ontario                                        |       | Executive Vice President,   Corporate Affairs                                       |

 

All of the officers abovehave been engaged for the past five years with TELUS, its subsidiaries, affiliatesor predecessors thereof, except as described as follows: Janet Yale wasPresident and Chief Executive Officer of the Canadian Cable TelevisionAssociation from 1999 until she joined TELUS in 2003; and Joe Natale heldsenior leadership roles with BearingPoint (formerly KPMG Consulting), includingas country leader for Canada prior to joining TELUS in 2003.

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***TELUS sharesheld by directors and executive officers***

 

As at March 10, 2008, thedirectors and executive officers of TELUS, as a group, beneficially owned,directly or indirectly, or exercised control or direction more than 97,285Common Shares, which represented approximately 0.03 per cent of the outstandingCommon Shares and 482,859 Non-Voting Shares, which represented approximately 0.15per cent of the outstanding Non-Voting Shares.

 

***Cease tradeorders, bankruptcies, penalties or sanctions***

 

Other than as disclosed, for the ten years ended December 31,2007, TELUS is not aware that any current director or officer of TELUS had beena director or officer of another issuer which, while that person was acting inthat capacity, became bankrupt or made a proposal under any legislationrelating to bankruptcy or insolvency or was subject to or instituted anyproceedings, arrangements or compromises with creditors or had a receiver,receiver manager or trustee appointed to hold its assets.  In December 1998, John Lacey was asked by agroup of shareholders to lead the Loewen restructuring, as Chairman of theBoard, a position he held at the time of Loewen’s filing under Chapter 11 ofthe U.S. Bankruptcy Code and the Companies’Creditors Arrangement Act (Canada) (“CCAA”). In March 2006, Mr. Lacey was appointed to the board of directors ofStelco Inc. (“Stelco”) as a nominee of Tricap Management Limited (“Tricap”).  Stelco filed for bankruptcy protection underthe CCAA in January 2004.  Mr. Lacey’sappointment as a director was part of a court supervised restructuring, fromwhich Stelco emerged on March 31, 2006 and pursuant to which Tricap had theright to appoint four of Stelco’s nine directors.  Charles Baillie was formerly a director ofDana Corporation, which filed for bankruptcy in March 2006 under Chapter 11 ofthe U.S. Bankruptcy Code.  He ceased tobe director when the company emerged from bankruptcy on February 1, 2008.

 

Other than as disclosed,for the ten years ended December 31, 2007, TELUS is not aware that any currentdirector or officer of TELUS had been a director, chief executive officer orchief financial officer of another issuer which was the subject of a ceasetrade or similar order while that person was acting in that capacity, or wassubject to such an order issued after the director or executive officer ceasedto be a director, chief executive officer or chief financial officer andresulted from an event that occurred while that person was acting in thatcapacity, or any order which denied such company access to any exemption undersecurities legislation for a period of more than 30 consecutive days.  On June 14, 2006, and at the request ofCognos Incorporated (“Cognos”), the Ontario Securities Commission (“OSC”)issued a cease trade order against all directors of Cognos, including PierreDucros, in connection with a delay in filing its annual report with Canadianregulators.  The delay was related to areview by the United States Securities and Exchange Commission (“SEC”) of theway Cognos allocated revenue between post-contract customer support and licencefees.  The OSC lifted the cease tradeorder on August 3, 2006 after the SEC concluded that it did not object toCognos’ revenue recognition policy.  Mr.Ducros ceased to be a director of Cognos in February 2008 after its takeover byIBM.

 

 

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# **MARKET FOR SECURITIES**

 

TELUS Common Shares and Non-VotingShares are listed on the Toronto Stock Exchange (“TSX”) under “T” and “T.A”respectively and the TELUS Non-Voting Shares are listed on the New York StockExchange under “TU”.  Monthly share pricesand volumes for 2007 are listed below:

 

***TSX – Common andNon-Voting Shares***

 
| ** ** | ** ** | **Common Shares** | ** ** | **Non-Voting Shares** | ** ** |
|------------|------------|------------------------|------------|----------------------------|------------|
| **Month**  | ** ** | **High($ )**      | ** ** | **Low($ )**           | ** ** | **Volume** | ** ** | **High($ )** | ** ** | **Low($ )** | ** ** | **Volume** | ** ** |
| January    |       | 56.56                  |       | 53.00                      |       | 20,645,758 |   | 55.56 |   | 51.38 |   | 21,001,228 |   |
| February   |       | 58.99                  |       | 55.65                      |       | 20,365,484 |   | 57.47 |   | 54.31 |   | 16,884,196 |   |
| March      |       | 60.80                  |       | 54.98                      |       | 24,055,579 |   | 59.22 |   | 53.52 |   | 22,871,672 |   |
| April      |       | 65.59                  |       | 58.65                      |       | 22,708,468 |   | 64.20 |   | 57.24 |   | 19,037,814 |   |
| May        |       | 66.45                  |       | 60.35                      |       | 14,618,828 |   | 65.80 |   | 59.01 |   | 20,258,929 |   |
| June       |       | 66.17                  |       | 61.30                      |       | 27,264,002 |   | 65.45 |   | 60.56 |   | 21,751,488 |   |
| July       |       | 65.99                  |       | 59.32                      |       | 18,693,776 |   | 64.93 |   | 57.62 |   | 15,168,421 |   |
| August     |       | 60.70                  |       | 51.12                      |       | 34,875,834 |   | 59.19 |   | 50.26 |   | 25,561,745 |   |
| September  |       | 58.48                  |       | 54.54                      |       | 16,638,016 |   | 56.65 |   | 53.42 |   | 9,331,585 |   |
| October    |       | 58.95                  |       | 54.92                      |       | 18,864,738 |   | 57.28 |   | 52.78 |   | 13,238,630 |   |
| November   |       | 57.34                  |       | 45.00                      |       | 30,392,698 |   | 55.53 |   | 44.35 |   | 18,700,145 |   |
| December   |       | 49.68                  |       | 41.97                      |       | 26,034,621 |   | 49.00 |   | 40.37 |   | 19,051,887 |   |

 

***NYSE –Non-Voting Shares***

 
| **Month** | ** ** | **High ($ U.S.)** | ** ** | **Low ($ U.S.)** | ** ** | **Volume** | ** ** |
|-----------|------------|-----------------------------|------------|----------------------------|------------|------------|------------|
| January   |       | 47.11                       |       | 44.23                      |       | 1,437,200  |       |
| February  |       | 49.47                       |       | 46.07                      |       | 1,390,800  |       |
| March     |       | 51.16                       |       | 45.76                      |       | 1,202,300  |       |
| April     |       | 56.87                       |       | 49.60                      |       | 1,860,600  |       |
| May       |       | 61.05                       |       | 53.29                      |       | 1,519,800  |       |
| June      |       | 61.85                       |       | 56.45                      |       | 1,502,400  |       |
| July      |       | 62.46                       |       | 54.24                      |       | 2,078,000  |       |
| August    |       | 56.18                       |       | 46.85                      |       | 2,560,800  |       |
| September |       | 56.82                       |       | 50.65                      |       | 1,395,300  |       |
| October   |       | 58.64                       |       | 52.55                      |       | 1,781,000  |       |
| November  |       | 58.50                       |       | 44.43                      |       | 1,831,789  |       |
| December  |       | 49.20                       |       | 39.67                      |       | 3,242,118  |       |

 

# **INTERESTS OF EXPERTS**

 

Deloitte& Touche LLP has audited the Consolidated financial statements of theCompany for the years ended December 31, 2007 and 2006 that are includedin the Company’s Annual Report filed under National Instrument 51-102Continuous Disclosure Obligations (portions of which are incorporated byreference into this AIF).

 

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# **AUDIT COMMITTEE**

 

The Audit Committee of the Company supports theBoard in fulfilling its oversight responsibilities regarding the integrity ofthe Company’s accounting and financial reporting, internal controls anddisclosure controls, legal and regulatory compliance, ethics policy andtimeliness of filings with regulatory authorities, the independence andperformance of the Company’s external and internal auditors, the management ofthe Company’s risk, credit worthiness, treasury plans and financial policy andwhistleblower and complaint procedures.  A copy of the Audit Committee’s Terms ofReference is attached as Appendix A to this annual information form.

 

Thecurrent members of the Audit Committee are Brian F. MacNeill (Chair), MichelineBouchard, Pierre Y. Ducros, Ruston E. T. Goepel and Ronald P. Triffo.  Each member of the Audit Committee isindependent and financially literate within the meaning of MultilateralInstrument 52-110 “Audit Committees” and the Board has determined that BrianMacNeill is an audit committee financial expert and has accounting or relatedfinancial management expertise.  Thefollowing lists the relevant education and experience of the members of TELUS’Audit Committee that is relevant to his or her role on the committee.

 

**BrianMacNeill** chairs theAudit Committee.  He holds a Bachelor ofCommerce from Montana State University and has over 35 years of experience inaccounting having earned his Certified Public Accounting designation(California) and his Chartered Accountant designation (Canada).  In 1995, Mr. MacNeill was made a Fellow ofthe Chartered Accountants of Alberta. Mr. MacNeill served as Chief Executive Officer of Enbridge Inc. from1990 until his retirement in 2001.  Priorto that, he served as Chief Operating Officer of Enbridge and held numerousfinancial positions with various Canadian companies.

 

**MichelineBouchard** holds aBachelor of Applied Science (Engineering Physics) and a Master of AppliedScience (Electrical Engineering) from Ecole Polytechnique.  She served as President and CEO of ART Advanced Research Technologies, a biomedicalcompany, from 2002 until July 2006 andprior to that, she held senior executive positions at both Motorola Inc. andMotorola Canada Limited.  Ms. Bouchard iscurrently a director and a member of the audit committee of Home Capital/HomeTrust, Citadel Group of Funds and Harry Winston Diamond Corporation.  She has previously served on seven auditcommittees, and served as chair for two of them.

 

**PierreY. Ducros**obtained aBachelor of Arts Degree from the Université de Paris at Collège Stanislas inMontréal and a Bachelor of Engineering (Communications) degree from McGillUniversity.  Mr. Ducros was President andCEO of DMR Consulting Group, Inc. (Canada), an information technology servicescompany, which he co-founded in 1973. Mr. Ducros has also held various management positions at IBM CanadaLimited and serves on the board of a number of other public companies.

 

**RustonE.T. Goepel** holds aBachelor of Commerce from the University of British Columbia and has over 35years of experience in the investment banking industry.  He is currently Senior Vice President withRaymond James Financial Ltd.  Mr. Goepelis a director of several public companies, and currently serves as a member ofthe audit committee of Amerigo Resources Ltd.

 

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**RonaldP. Triffo**obtainedBachelor of Applied Science from the University of Manitoba and an MSc(Engineering) from the University of Illinois. Mr. Triffo is the Chairman and a director of Stantec Inc., anengineering and international professional services company where he served invarious executive management positions for more than 25 years. He is theChairman of the Alberta Ingenuity Fund and the immediate past Chairman of ATBFinancial.

 

***Audit,audit-related and non-audit services***

 

Allrequests for non-prohibited audit, audit-related and non-audit servicesprovided by TELUS’ external auditor and its affiliates to TELUS are required tobe pre-approved by the Audit Committee of TELUS’ Board of Directors.  To enable this, TELUS has implemented aprocess by which all requests for services involving the External Auditor arerouted for review by the VP Risk Management and Chief Internal Auditor tovalidate that the requested service is a non-prohibited service and to verifythat there is a compelling business reason for the request.  If the request passes this review, it is thenforwarded to the CFO for further review. Pending the CFO’s affirmation, the request is then presented to theAudit Committee for its review, evaluation and pre-approval or denial at itsnext scheduled quarterly meeting.  If thetiming of the request is urgent, it is provided to the Audit Committee Chairfor his review, evaluation and pre-approval or denial on behalf of the AuditCommittee (with the full committee’s review at the next scheduled quarterlymeeting).  Throughout the year, the AuditCommittee monitors the actual versus approved expenditure for each of theapproved requests.   

 

Thefollowing table is a summary of billing by Deloitte & Touche, LLP, asexternal auditors of TELUS, during the period from January 1, 2007 to December 31,2007:

 

| **Type of work** | ** ** | **Deloitte & Touche** | ** **    | **%**      | ** ** |
|----------------------------|------------|-------------------------------------|---------------|------------|------------|
| Audit fees                 |       | $                                   | 4,087,308     |       | 94.60      |   |
| Audit-related  fees        |       | $                                   | 203,191       |       | 4.70       |   |
| Tax fees                   |       | $                                   | 30,000        |       | 0.70       |   |
| All other fees             |       | —                              |          | —     |       |
| **Total**                  | ** ** | **$**                               | **4,320,499** | ** ** | **100.0**  | ** ** |

 

Thefollowing table is a summary of billing by Deloitte & Touche, LLP, asexternal auditors of TELUS, during the period from January 1, 2006 to December31, 2006:

 

| **Type of work** | ** ** | **Deloitte & Touche** | ** **    | **%**      | ** ** |
|----------------------------|------------|-------------------------------------|---------------|------------|------------|
| Audit fees                 |       | $                                   | 3,857,244     |       | 94.11      |   |
| Audit-related  fees        |       | $                                   | 162,000       |       | 4.06       |   |
| Tax fees                   |       | $                                   | 72,763        |       | 1.83       |   |
| All other fees             |       | —                              |          | —     |       |
| **Total**                  | ** ** | **$**                               | **4,092,007** | ** ** | **100.0**  | ** ** |

 

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# **MATERIAL CONTRACTS**

 

On July 26, 2002, TCI enteredinto a Purchase and Servicing Agreement, which was amended September 30, 2002,March 1, 2006, and November 30, 2006, with an arm’s-length securitizationreceivables trust which enables TCI to sell an interest in certain of itsreceivables up to a maximum of $650 million.  This revolving period securitization had aninitial term ending July 18, 2007, and the November 30, 2006 amendmentresulted in the term being extended to July 18, 2008.  TCI is required to maintain at least a BBB(low) credit rating by Dominion Bond Rating Service (“DBRS”), or the purchasermay require the sale program to be wound down. The necessary credit rating wasexceeded by three levels at A (low) as of March 13, 2008.  The proceeds of securitized receivables were$500 million at December 31, 2007, unchanged from one year earlier.

 

On March 2, 2007, TELUS entered into a replacement five year$2 billion unsecured credit facility (the “2007 Credit Facility”) with asyndicate of 18 financial institutions. The 2007 Credit Facility replaces TELUS’ $1.6 billion previouslyexisting credit facilities, which consisted of an $800 million facility, whichwould have expired in May 2008 and an $800 million facility, which would haveexpired in May 2010.  The 2007 CreditFacility may be used for general corporate purposes including the backstop ofcommercial paper.  The material terms ofthe 2007 Credit Facility are substantively the same as under TELUS’ previouscredit facilities other than reduced pricing and an extension of the term toMay 2012.

 

# **TRANSFER AGENTS ANDREGISTRARS**

 

The Company’s transferagent and registrar is Computershare Trust Company of Canada.  Computershare maintains the Company’sregisters at 600, 530 - 8th Avenue SW, Calgary, Alberta T2P 3S8.

 

# **ADDITIONALINFORMATION**

 

Additional information relating toTELUS may be found on SEDAR at www.sedar.com and EDGAR at www.sec.gov.  Additional information regarding directors’and officers’ remuneration, indebtedness and options to purchase securities, iscontained in the TELUS information circular dated March 10, 2008 for the annualand special general meeting to be held on May 8, 2008.  Additional financial information, includingsupplementary quarterly financial data and the audited Consolidated financialstatements of TELUS for the year ended December 31, 2007, is set out inthe 2007 Annual Report – Financial Review. All of the above information can also be found at www.telus.com.

 

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# **APPENDIX A:  TERMS OF REFERENCE FOR THE AUDIT COMMITTEE**

 

The Board hasestablished an Audit Committee (the “Committee”) to assist the Board infulfilling its oversight responsibilities regarding the integrity of theCompany’s accounting and financial reporting, the Company’s internal controlsand disclosure controls, the Company’s legal and regulatory compliance, theCompany’s ethics policy and timeliness of filings with regulatory authorities,the independence and performance of the Company’s external and internalauditors, the management of the Company’s risks, the Company’s creditworthiness, treasury plans and financial policy and the Company’s whistleblowerand complaint procedures.

 

**1.****             MEMBERSHIP**

 

1.1           TheCommittee will have a minimum of three members, including the chair of theCommittee.  The Board, following therecommendation of the Corporate Governance Committee, will appoint and removethe members of the Committee by a majority vote.  The members will sit on the Committee at thepleasure of the Board.

 

1.2           The Board,following the recommendation of the Corporate Governance Committee, willappoint the chair of the Committee from the Committee’s members by a majorityvote.  The chair of the Committee willhold such position at the pleasure of the Board.

 

1.3           All membersof the Committee will be Independent Directors.

 

1.4           All membersof the Committee will be financially literate, as defined in accordance withapplicable securities laws and standards of the stock exchanges on which theCompany’s securities are listed.

 

1.5           At least onemember of the Committee will be an audit committee financial expert, as definedin accordance with applicable securities laws, and at least one member of theCommittee will have accounting or related financial management expertise, asdefined in accordance with applicable securities laws.

 

**2.****            ****MEETINGS**

 

2.1           TheCommittee will meet at least once each quarter and otherwise as necessary.  Any member of the Committee may call meetingsof the Committee.

 

2.2           Alldirectors of the Company, including management directors, may attend meetingsof the Committee provided, however, that no director is entitled to vote atsuch meetings and is not counted as part of the quorum for the Committee if heor she is not a member of the Committee.

 

2.3           Notwithstandingsection 2.2 above, the Committee will, as a regular feature of each regularlyscheduled meeting, hold an in-camera session with the external auditors andseparately with the internal auditors, without management or managementdirectors present.   The Committee may,however, hold other in-camera sessions with such members of management present asthe Committee deems appropriate.

 

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2.4           TheCorporate Secretary or his or her nominee will act as Secretary to theCommittee.

 

2.5           TheCommittee will report to the Board on its meetings and each member of the Boardwill have access to the minutes of the Committee’s meetings, regardless ofwhether the director is a member of the Committee.

 

2.6           The externalauditors of the Company will receive notice of every meeting of the Committeeand may request a meeting of the Committee be called by notifying the chair ofthe Committee of such request.

 

**3.****            ****QUORUM**

 

3.1           The quorum necessary for the transaction ofbusiness at Committee meetings will be a majority of the members of theCommittee.  A quorum onceestablished is maintained even if members of the Committee choose to leave themeeting prior to conclusion.

 

**4.****            ****DUTIES**

 

The Board herebydelegates to the Committee the following duties to be performed by theCommittee on behalf of and for the Board:

 

## ***4.1***          Financial Reporting

 

Prior to publicdisclosure, the Committee will review and recommend to the Board, and whereapplicable, to the boards of the Company’s subsidiaries which are reportingissuers, for approval:

 

a)             the annual auditedconsolidated financial statements and interim unaudited consolidated financialstatements of the Company and those of its subsidiaries that are reportingissuers, as defined in accordance with applicable securities laws;

 

b)            the interim and annual management’sdiscussion and analysis of financial condition and results of operations(MD&A) of the Company and those of its subsidiaries that are reportingissuers, as defined in accordance with applicable securities laws;

 

d)            earnings pressreleases and earnings guidance, if any;

 

e)             Management’s Statement on FinancialReporting; and

 

f)             all other material financial publicdisclosure documents of the Company and those of its subsidiaries that arereporting issuers, including prospectuses, press releases with financialresults and the Annual Information Form.

 

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## ***4.2***          External Auditors

 

The external auditorswill report directly to the Committee and the Committee will:

 

a)             appoint the external auditors,subject to the approval of the shareholders, and determine the compensation ofthe external auditors;

 

b)            oversee the work of the externalauditors and review and approve the annual audit plan of the external auditors,including the scope of the audit to be performed and the degree ofco-ordination between the plans of the external and internal auditors.  The Committee will discuss with the internalauditors, the external auditors and management, the adequacy and effectivenessof the disclosure controls and internal controls of the Company and elicit recommendationsfor the improvement of such controls or particular areas where new or moredetailed controls or procedures are desirable. Particular emphasis will be given to the adequacy of internal controlsto prevent or detect any payments, transactions or procedures that might bedeemed illegal or otherwise improper;

 

c)             meet regularly with the externalauditors without management present and ask the external auditors to report anysignificant disagreements with management regarding financial reporting, theresolution of such disagreements and any restrictions imposed by management onthe scope and extent of the audit examinations conducted by the externalauditors;

 

d)            pre-approve all audit, audit-relatedand non-audit services to be provided to the Company or any of itssubsidiaries, by the external auditors (and its affiliates), in accordance withapplicable securities laws;

 

e)             annually review the qualifications,expertise and resources and the overall performance of the external audit teamand, if necessary, recommend to the Board the termination of the externalauditors or the rotation of the audit partner in charge;

 

f)             at least annually, obtain and reviewa report by the external auditors describing: the firm’s internalquality-control procedures; any material issues raised by the most recentinternal quality control review, or peer review of the firm, or by any inquiryor investigation by governmental or professional authorities, within thepreceding five years, respecting one or more independent audits carried out bythe firm, and any steps taken to deal with such issues; and all relationshipsbetween the external auditors and the Company;

 

g)            annually assess and confirm theindependence of the external auditors and require the external auditors todeliver an annual report to the Committee regarding its independence, suchreport to include disclosure regarding all engagements (and fees relatedthereto) by the Company and relationships which may impact the objectivity andindependence of the external auditors;

 

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h)            require the external auditors todeliver an annual acknowledgement in writing to the Committee that theshareholders, as represented by the Board and the Committee, are its primaryclient;

 

i)              review post-audit or management letters,containing recommendations of the external auditors and management’s response;

 

j)              review reports of the externalauditors; and

 

k)             pre-approve the hiring of employeesand former employees of current and former auditors in accordance withapplicable securities laws and TELUS policies.

 

Notwithstanding section 4.2(d) above, the Committeemay delegate the pre-approval of audit, audit-related and non-audit services toany one member of the Committee, provided, however, a report is made to theCommittee on any pre-approval of such services at the Committee’s firstscheduled meeting following the pre-approval.

 

## ***4.3***          Internal Auditors

 

## ***The internal auditors will reportfunctionally to the Committee and administratively to the Chief FinancialOfficer and the Committee will:***

## *** ***

## ***a)***             reviewand approve management’s appointment, termination or replacement of the ChiefInternal Auditor;

## *** ***

## ***b)***            overseethe work of the internal auditors including reviewing and approving the annualinternal audit plan and updates thereto;

## *** ***

## ***c)***             reviewthe report of the internal auditors on the status of significant internal auditfindings, recommendations and management’s responses and review any otherreports of the internal auditors; and

## *** ***

## ***d)***            reviewthe scope of responsibilities and effectiveness of the internal audit team, itsreporting relationships, activities, organizational structure and resources,its independence from management, its credentials and its working relationshipwith the external auditors.

## *** ***

The internal auditors will report quarterly to theCommittee on the results of internal audit activities and will also have directaccess to the chair of the Committee when the internal auditors determine it isnecessary.

 

## ***4.4***          Whistleblower, Ethics andInternal Controls Complaint Procedures

 

The Committee will ensure that the Company has inplace adequate procedures for:

 

a)             the receipt,retention and treatment of complaints received by the Company regardingaccounting, internal controls or auditing matters; and

 

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b)            the confidential,anonymous submission by employees of the Company of concerns regardingquestionable accounting or auditing matters.

 

The CEO or CFO willreport to the Committee, and the Committee will review such reports, on anyfraud, whether or not material, that involves management or other employees whohave a significant role in the Company’s internal controls.  Where the CEO, CFO and/or the Chief InternalAuditor are named in a complaint, the Director of Ethics and Internal Controlswill speak directly with the Chair of the Committee.

 

The Chief InternalAuditor will report to the Committee, and the Committee will consider suchreports, on the results of the investigation of whistleblower, ethics andinternal controls complaints.

 

**4.5****          Accounting and FinancialManagement**

 

The Committee willreview:

 

a)             with management andthe external auditors, the Company’s major accounting policies, including theimpact of alternative accounting policies and key management estimates and judgmentsthat could materially affect the financial results and whether they should bedisclosed in the MD&A;

 

b)            emerging accountingissues and their potential impact on the Company’s financial reporting;

 

c)             significantjudgments, assumptions and estimates made by management in preparing financialstatements;

 

d)            the evaluation byeither the internal or external auditors of management’s internal controlsystems, and management’s responses to any identified weaknesses;

 

e)             the evaluation bymanagement of the adequacy and effectiveness in the design and operation of theCompany’s disclosure controls and internal controls for financial reporting;

 

f)             audits designed toreport on management’s representations on the effectiveness and efficiency ofselected projects, processes, programs or departments;

 

g)            management’s approachfor safeguarding corporate assets and information systems, the adequacy ofstaffing of key financial functions and their plans for improvements; and

 

h)            internal interim andpost implementation reviews of major capital projects.

 

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**4.6****          Credit Worthiness,Treasury Plans and Financial Policy**

 

The Committee will reviewwith management:

 

a)             the Company’sfinancial policies and compliance with such policies;

 

b)            the credit worthinessof the Company;

 

c)             the liquidity of theCompany; and

 

d)            important treasurymatters including financing plans.

 

**4.7****          Legal/Regulatory Mattersand Ethics**

 

The Committee willreview:

 

a)             with management, theexternal auditors and legal counsel, any litigation, claim or othercontingency, including any tax assessment, that could have a material effectupon the financial position or operating results of the Company;

 

b)            annually, management’srelationships and compliance with regulators, and the accuracy and timelinessof filings with regulatory authorities; and

 

c)             annually, the ethicspolicy, management’s approach to business ethics and corporate conduct and theprogram used by management to monitor compliance with the policy.

 

### ***4.8***          Risk Management

 

The Committee will:

 

a)             consider reports onthe annual enterprise business risk assessment and updates thereto;

 

b)            consider reports onthe business continuity disaster recovery plan(s) for the Company;

 

c)             consider reports onthe insurance coverage of the Company;

 

d)            consider reports onfinancial risk management including derivative exposure and policies;

 

e)             monitor, on behalf ofthe Board, the Company’s compliance with environmental legislation and theadequacy of the Company’s environmental budget expenditures;

 

f)             monitor, on behalf ofthe Board, the Company’s health and safety policies and receive and reviewregular reports concerning the Company’s health and safety programs, policiesand results from the Chief Internal Auditor and the Chief Compliance Officer;

 

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g)            review and recommendto the Board for approval environmental policies and procedure guidelines andany amendments or changes thereto;

 

h)            report to the Board,and require management to report to the Committee, on environmental matterseach quarter; and

 

i)              review other riskmanagement matters as from time to time the Committee may consider suitable orthe Board may specifically direct.

 

### ***4.9***          Other

 

The Committee will review:

 

a)             the expenses of theChair of the Board and CEO and will assess the Company’s policies andprocedures with respect to the Executive Leadership Team members’ expenseaccounts and perquisites, including their use of corporate assets;

 

b)            the proposeddisclosure concerning the Committee to be included in the Company’s AnnualInformation Form to verify, among other things, that it is in compliance withapplicable securities law requirements;

 

c)             significant relatedparty transactions and actual and potential conflicts of interest relatingthereto to verify their propriety and that disclosure is appropriate;

 

d)            the disclosure policyof the Company; and

 

e)             at least onceannually, and evaluate the adequacy of these Terms of Reference and theCommittee’s performance, and report its evaluation and any recommendations forchange to the Corporate Governance Committee.

 

The Committee will also have such other duties andresponsibilities as are delegated to it and review such other matters as, fromtime to time, are referred to it by the Board.

 

**5.****             AUTHORITY**

 

The Committee, infulfilling its mandate, will have the authority to:

 

a)             engage and setcompensation for independent counsel and other advisors;

 

b)            communicate directlywith the Chief Financial Officer, internal and external auditors, ChiefCompliance Officer and Chief General Counsel;

 

c)             delegate tasks toCommittee members or subcommittees of the Committee; and

 

d)            access appropriatefunding as determined by the Committee to carry out its duties.

 

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