BCI Announces 2004 Results.

MONTREAL -- BCI (NEX:BI.H) - As a result of the adoption on July 17, 2002 of BCI's Plan of Arrangement, BCI's annual audited consolidated financial statements for 2004 reflect only the activities of BCI as a holding company.Such audited consolidated financial statements together with management's discussion and analysis (the "MD&A") thereon are attached hereto and readers are encouraged to refer to such documents for full details.

2004 Results

As at December 31, 2004, BCI's shareholders' equity was $277.4 million, up by $51.8 million from December 31, 2003. This increase was mainly as a result of the recognition in the fourth quarter of 2004 of an income tax recovery of $62.0 million (and corresponding future income tax asset) associated with BCI's Loss Monetization Plan (as defined below); interest income of $7.6 million; and a $2.6 million gain on the disposition of BCI's remaining interest in Axtel S.A. de C.V. ("Axtel").Offsetting these factors were nine months of accrued interest expense of $13.8 million on the BCI 11% senior unsecured notes, employee and office costs of $3.2 million, legal, tax and audit fees of $2.1 million and other administrative expenses of $1.3 million.

BCI's cash and cash equivalents together with temporary investments as at December 31, 2004 were $221.6 million down by $163.0 million from December 31, 2003.This decline was due principally to the repayment at maturity on September 29, 2004 of BCI's $160 million 11% senior unsecured notes, together with cash interest thereon paid during 2004 in the amount of $17.6 million, partially offset by an initial distribution from Canbras Communications Corp. ("Canbras") of $8.7 million and the proceeds of disposition from Axtel of $2.6 million.

Accrued liabilities were $15.9 million at the end of 2004, down $6.5 million from December 31, 2003 mainly as a result of a reduction in accrued interest payable on BCI's 11% notes.

Net income for 2004 was $51.8 million, or $1.29 per share reflecting primarily the recognition of the income tax recovery together with interest income and the Axtel gain, partially offset by interest and administrative expenses.

Update on Loss Monetization Plan

On August 4, 2004, BCI announced that it had entered into an agreement with BCE Inc. ("BCE") and Bell Canada to monetize a portion of BCI's non-capital tax losses (the "Loss Monetization Plan") which was expected to result in a compensatory cash payment to BCI of at least $42 million. Following the completion of an audit by the Canada Revenue Agency ("CRA") of BCI's tax returns for years up to December 31, 2004 to determine its losses, BCI now expects this compensatory payment to be approximately $62.0 million.BCI expects to receive the proceeds of the Loss Monetization Plan in the first quarter of 2007, although at BCI's request and subject to the consent of BCE, the proceeds may be received in 2006 at a reduced amount based on a discount rate to be mutually agreed at that time.

Timing of Potential Shareholder Distributions

Prior to the end of the third quarter of 2004, BCI believed that an initial distribution to shareholders could be made as early as the first half of 2005. However, due to delays in resolving the 6.75% Debenture Class Action and certain implications of BCI's Plan of Arrangement, the Corporation now believes that no such distribution will be possible until the second half of 2006 and that such initial distribution may be further delayed. Furthermore, as a final distribution to shareholders will not take place until BCI receives payment in connection with the Loss Monetization Plan, such final distribution may not occur until 2007.

Estimated Future Net Assets

In recognition of the foregoing timing, BCI is now calculating its estimated future net assets at June 30, 2007, rather than at March 31, 2006.Estimated future net assets of BCI at June 30, 2007 are $279.3 million ($6.98 per share).The differences between shareholders' equity on the consolidated balance sheet at December 31, 2004 and the estimated future net assets at June 30, 2007 are: (i) the deduction of estimated future net costs from January 1, 2005 to June 30, 2007; and(ii) the inclusion of the expected gain on the Canbras investment of $5.0 million.

The future net costs estimated at approximately $3.1 million are comprised of administrative expenses of approximately $16.0 million partially offset by interest income of approximately $12.9 million. The expected gain on the Canbras investment of approximately $5.0 million represents the excess over current carrying value that BCI expects to receive on its investment in Canbras (see the attached MD&A for more details).

The future net costs exclude any amounts that may be required to settle contingent liabilities such as lawsuits. To the extent BCI remains in operation beyond June 30, 2007, interest income thereafter may not be sufficient to cover operating expenses estimated at approximately $1.5 million per quarter. The extent of any shortfall would be dependent on a number of factors, including the level of interest rates and BCI's cash balances at the time.

The currently estimated future net assets of BCI at June 30, 2007 of $279.3 million have increased by $25.7 million from the estimate of future net assets at March 31, 2006 prepared on October 26, 2004 in connection with BCI's third quarter results.This increase is primarily attributable to an increase in the expected proceeds from the Loss Monetization Plan, higher assumed interest income on cash balances (due to higher interest rate assumptions) as well as lower expected administrative costs in the period up to March 31, 2006. These factors are partially offset by an increase in estimated future net costs resulting from an extension in the planning horizon from March 31, 2006 to June 30, 2007.

Plan of Arrangement Update

On March 3, 2005, the Supreme Court of Canada refused an application for leave to appeal filed in connection with the two proposed class action lawsuits brought by Mr. Wilfred Shaw and Mr. Cameron Gillespie on behalf of BCI common shareholders and seeking $1 billion in damages against BCI and BCE.No further appeal of these actions is available to the plaintiffs and the actions are effectively dismissed.

BCI is operating under a court supervised Plan of Arrangement, pursuant to which BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds  to its shareholders and dissolving the company.BCI is listed on the NEX Exchange under the symbol BI.H.Visit our Web site at www.bci.ca.

Certain statements made in this press release describing BCI's intentions, expectations or predictions are forward-looking and are subject to important risks and uncertainties.The results or events predicted in these statements may differ materially from actual results or events.For additional information with respect to risk factors relevant to BCI, see the attached MD&A.BCI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

MANAGEMENT'S DISCUSSION & ANALYSIS

This management's discussion and analysis of financial condition and results of operations ("MD&A") for Bell Canada International Inc. ("BCI" or the "Corporation") for 2004 should be read in conjunction  with BCI's audited consolidated financial statements for the year ended December 31, 2004 including related notes thereto.The consolidated financial statements, as well as information contained in this MD&A, are prepared in accordance with Canadian generally accepted accounting principles and reported in Canadian dollars. Information contained in this MD&A includes all material developments up to March 21, 2005, the date on which the consolidated financial statements were approved by the Board of Directors.

Certain sections of this MD&A contain forward-looking statements with respect to the Corporation. These forward-looking statements, by their nature, necessarily involve risks and uncertainties that could cause actual results to differ materially from those contemplated by the forward-looking statements. Factors which could cause actual results to differ materially from current expectations are discussed under "Risk Factors".

Overview

BCI is operating under a plan of arrangement (the "Plan of Arrangement") approved by the Ontario Superior Court of Justice (the "Court") on July 17, 2002. Pursuant to the Plan of Arrangement, BCI has now monetized a significant portion of its assets and is in the process of resolving outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the Corporation all with the assistance of a court-appointed monitor (the "Monitor").Although BCI believes that a final distribution to shareholders could be made in the first half of 2007, such distribution may be delayed (see Risk Factors - "Timing of Distribution to Shareholders and Completion of the Plan of Arrangement" and "Future Costs").

In view of the purpose of the Plan of Arrangement, and in order to provide relevant information to shareholders, this MD&A does not provide a detailed analysis of the results of operations for the year ended December 31, 2004 compared to the previous year. Instead, this MD&A focuses on an analysis of BCI's balance sheet at December 31, 2004, and develops it into a statement of estimated future net assets at June 30, 2007, the date that BCI now believes it maybe in a position to make its final distribution to shareholders.While BCI believes that an initial distribution to shareholders could be made as early as the second half of 2006, the initial and final distributions may be delayed beyond such dates.(See Risk Factors - "Timing of Distribution and Completion of the Plan of Arrangement" and "Future Costs").

This MD&A also includes a discussion of possible future events and contingencies that could cause estimated future net assets to change and consequently affect the amount which would ultimately be available for distribution to shareholders.

Loss Monetization Plan

As described more fully in Note 9 to the consolidated financial statements, the corporation has entered into an agreement to monetize a portion of its non-capital taxes losses (the "Loss Monetization Plan") which is expected to give rise to a compensatory cash payment to BCI of approximately $62.0 million in the first quarter of 2007. This amount was recorded as an income tax recovery with a corresponding future income tax asset in the consolidated financial statements for 2004.The amount of such recovery could be increased in certain circumstances, as more fully described in Note 9 to the consolidated financial statements.However, there can be no assurance that the amount to be realized under the Loss Monetization Plan will exceed $62.0 million.

Statement of Estimated Future Net Assets at June 30, 2007

The following table summarizes the consolidated balance sheet of the Corporation as at December 31, 2004 in the form of a statement of estimated future net assets at June 30, 2007 (being the date by which the Corporation believes it may be in a position to make a final distribution to shareholders subsequent to the collection of the expected benefit from Loss Monetization Plan). The difference between the consolidated balance sheet and the statement of estimated future net assets at June 30, 2007 is the inclusion of the following items: (i) estimated future net costs of $3.1 million from January 1, 2005 to June 30, 2007 (ii) the expected gain on the Canbras Communications Corp. ("Canbras") investment of approximately $5 million (see Risk Factors - "Timing of Distributions to Shareholders and Completion of the Plan of Arrangement", "Future Costs" - and Realization of Canbras Sale Proceeds").

STATEMENT OF ESTIMATED FUTURE NET ASSETS AT JUNE 30, 2007
                  (thousands of Canadian dollars)

Assets at December 31, 2004

Cash and cash equivalents                                     $1,047
Temporary investments                                        220,561
Investment in Canbras                                          6,257
Other current assets                                           3,462
Future income tax asset                                       62,000
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Total assets                                                 293,327

Liabilities at December 31, 2004

Accounts payable and accrued liabilities                      15,895
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Net assets as at December 31, 2004                           277,432
Items Affecting the Future Net Assets to June 30, 2007

Estimated future net costs until June 30, 2007                (3,130)
Expected gain on Canbras investment                            5,000
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Estimated future net assets as at June 30, 2007(1)          $279,302
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(1) Before unaccrued contingencies - See Note 13 to the consolidated
    financial statements and the discussion that follows.  Also
    assumes no distribution to shareholders will be made before
    June 30, 2007.

As at December 31, 2004, total assets were $293.3 million of which $221.6 million, or 75.6%, were in the form of cash and temporary investments.

Other current assets of $3.5 million consist of $2.4 million of accrued interest on cash and cash equivalents as well as on temporary investments, prepaid expenses and other current assets.

The future income tax asset was recorded in the fourth quarter of 2004 in the amount of the expected benefit to be received by BCI in the first quarter of 2007 under the Loss Monetization Plan.

Total liabilities include accounts payable and accrued liabilities of $15.9 million.This amount includes employee related accruals, such as pension and severance costs typical for a company in a wind-down process as well as other accounts payable and accruals.

The expected future net costs from January 1, 2005 until June 30, 2007, of $3.1 million include estimated administrative expenses of approximately $16.0 million partially offset by estimated interest income on cash and cash equivalents and temporary investments of approximately $12.9 million.In calculating estimated interest income, it has been assumed that short-term investments will provide a 2.25% to 2.5% per annum return and that no distribution to shareholders will be made before June 30, 2007.

As at December 31, 2003, the estimated future net assets of BCI were reported as at December 31, 2004 and were estimated to be approximately $217.1 million compared to the current estimate at June 30, 2007 of $ 279.3 million, an increase of $ 62.2 million.This increase is principally due to the income tax recovery associated with the Loss Monetization Plan as well as the gain on Axtel S.A. de C.V. ("Axtel"), both recorded in 2004.As the table below shows, excluding income from the Loss Monetization Plan and the gain on Axtel (which had not been previously estimated), all other costs for the one-year period from January 1, 2004 to December 31, 2004 were $1.7 million lower than previously estimated. This is principally due to lower administration expenses of $2.6 million, partially offset by lower interest income as a result of lower than estimated interest rates.Also impacting the increase in estimated future net assets at June 30, 2007 are additional net costs in the 30 month period from December 31, 2004 to June 30, 2007 as well as a lower estimated gain on Canbras (see Risk Factors - "Realization of Canbras Sale Proceeds").

(thousands of Canadian dollars)

                              Estimated as   Estimated as
                                        at             at  Difference
                               December 31    December 31
                                      2004           2003
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Net assets as reported
 at December 31, 2003             $225,651       $225,651         $-

  Income tax recovery               62,000              -     62,000
  Reported/expected gain on Axtel    2,644              -      2,644
  Reported/expected gain
   on investment in Canbras              -          6,000     (6,000)
  All other costs (net)            (12,863)       (14,579)     1,716
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Net assets reported/estimated
 at December 31, 2004              277,432        217,072     60,360

  Expected gain on investment
   in Canbras                        5,000              -      5,000
  Estimated future net costs
   until June 30, 2007              (3,130)             -     (3,130)
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  Estimated future net assets
   at June 30, 2007               $279,302       $217,072    $62,230
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In accordance with Canadian GAAP, contingent liabilities are not included on a balance sheet unless the event giving rise to the liability is likely and the amount of the liability can be reasonably estimated. BCI has several contingent liabilities that are not included on the consolidated balance sheet which are described in Note 13a) to the consolidated financial statements. Such contingent liabilities, although not considered likely at the present time, may result in material changes to BCI's balance sheet and the statement of estimated future net assets at June 30, 2007 and consequently in the amounts which may be available for distribution to BCI's shareholders.

The following is a discussion of all material contingencies of which the Corporation is currently aware.

1) Class Action Proceeding against the Corporation on behalf of former debenture holders

As described more fully in Note 13a) to the consolidated financial statements, the Corporation, and certain current and former members of BCI's board of directors, and BCI's majority shareholder, BCE, are defendants in a class action proceeding seeking $250 million in damages plus costs of $5 million on behalf of certain former holders of 6.75% convertible unsecured subordinated debentures in connection with BCI's Recapitalization Plan (the "6.75% Debenture Class Action").

All of the defendants filed statements of defence with respect to the 6.75% Debenture Class Action in the third quarter of 2003 and a trial is expected to take place in the second half of 2005.

The Corporation believes that the allegations in the class action are without merit and intends to vigorously defend its position. As a result, no provision has been included in the consolidated financial statements.

2) Lawsuit filed by La Caisse de depot et placement du Quebec

As described more fully in Note 13b) to the consolidated financial statements, La Caisse de depot et placement du Quebec ("CDP"), filed a lawsuit with the Court in connection with CDP's former holdings of a portion of BCI's 6.5% convertible unsecured subordinated debentures. CDP is seeking up to $110 million in damages, together with interest and costs, against BCI, BCE and certain current and former members of BCI's board of directors (the "CDP Action").

As CDP's claim contains allegations that are substantially similar to those contained in the 6.75% Debenture Class Action, BCI entered into an agreement with CDP, which was approved by the Court on December 19, 2003, whereby the CDP Action was stayed pending a final adjudication or settlement of the 6.75% Debenture Class Action, and the resolution of the 6.75% Debenture Class Action shall form the basis for the final resolution of the CDP Action.

The Corporation believes that the allegations in this action and the 6.75% Debenture Claim are without merit and intends to vigorously defend its position. As a result, no provision has been included in the consolidated financial statements.

3) Lawsuits against the Corporation on behalf of common shareholders As described more fully in Note 13c) to the consolidated financial statements, the Corporation and BCE were defendants in proposed class action proceedings filed by Mr. Wilfred Shaw and Mr. Cameron Gillespie each seeking $1 billion in damages on behalf of all persons who owned BCI common shares on December 3, 2001.

On July 23, 2004, the Ontario Court of Appeal ("OCA") dismissed the two proposed class action lawsuits.The OCA upheld the decision of the lower courtdismissing the lawsuits as failing to disclose a reasonable cause of action. On September 29, 2004, the plaintiffs filed an application with the Supreme Court of Canada ("SCC") seeking leave to appeal the decision of the OCA.On March 3, 2005, the SCC refused the plaintiff's application for leave to appeal.No further appeal of these actions is available to the plaintiffs and these actions are effectively dismissed.

4) Comcel's Voice-over Internet Protocol ('VOIP') litigation

As described more fully in Note 13d) to the consolidated financial statements, BCI had indemnified Comcel in connection with litigation claiming damages of approximately US$70 million relating to Comcel's provision of VOIP service between December 1998 and September 1999. Comcel believes that the claims lack an evidentiary basis and is vigorously defending itself in this litigation.

In connection with the claims identification process as part of the Plan of Arrangement, Comcel did not file a claim with the Monitor with respect to its VOIP indemnity. As a result, pursuant to the order of the Court approving the claims identification process, Comcel is now barred from asserting any claim against BCI in connection with this lawsuit. However, BCI understands that Comcel may dispute that its claim is so barred.

BCI has not included any provision for its indemnity of Comcel in the consolidated financial statements.

5) Employee Litigation

As more fully described in Note 13e) to the consolidated financial statements, former employees have filed claims against BCI totaling $8.6 million.BCI believes that these claims are either without merit and intends to vigorously defend its position or are in amounts significantly in excess of BCI's potential liability.BCI has included a provision in the consolidated financial statements (included in accounts payable and accrued liabilities) in respect of the estimated amount of its potential liability to such claims.

Results of Operations for 2004

As at December 31, 2004, BCI's shareholders' equity was $277.4 million, up by $51.8 million from December 31, 2003. This increase was mainly as a result of the recognition in the fourth quarter of 2004 of an income tax recovery of $62.0 million (and corresponding future income tax asset) associated with BCI's Loss Monetization Plan; interest income of $7.6 million; and a $2.6 million gain on the disposition of BCI's remaining interest in Axtel.Offsetting these factors were nine months of accrued interest expense of $13.8 million on the BCI 11% senior unsecured notes, employee and office costs of $3.2 million, legal, tax and audit fees of $2.1 million and other administrative expenses of $1.3 million.

BCI's cash and cash equivalents together with temporary investments as at December 31, 2004 were $221.6 million down by $163.0 million from December 31, 2003.This decline was due principally to the repayment at maturity on September 29, 2004 of BCI's $160 million 11% senior unsecured notes, together with cash interest thereon paid during 2004 in the amount of $17.6 million, partially offset by an initial distribution from Canbras of $8.7 million and the proceeds of disposition from Axtel of $2.6 million.

Accrued liabilities were $15.9 million at the end of of 2004, down $6.5 million from December 31, 2003 mainly as a result of a reduction in accrued interest payable on BCI's 11% notes.

Net income for 2004 was $51.8 million, or $1.29 per share reflecting primarily the recognition of income tax recovery of $62.0 million together with interest income and the Axtel gain, partially offset by accrued interest expense and administrative expenses.

Results of Operations for the Fourth Quarter of 2004

Earnings for the fourth quarter were $62.1 million, or $1.55 per share. During the quarter, BCI recorded income of $62.0 million, being the amount expected to be received in the first quarter of 2007 under the Loss Monetization Plan.Interest income in the fourth quarter was $1.2 million while administrative expenses totaled $1.0 million.

Financial Instruments

The Corporation does not trade derivative financial instruments.

The Corporation's financial assets that are exposed to credit risk consist primarily of temporary investments. Credit risk is minimized substantially by ensuring that these financial assets are invested in treasury bills, bankers' acceptances, commercial paper and corporate bonds and debentures with investment grade credit ratings.In addition, dollar limits are established on a per investment basis.Interest rate risk is minimized by the Corporation purchasing financial assets with the intention of holding them until maturity.

Temporary Investments

As at December 31, 2004, the Corporation held investment grade commercial paper in the amount of $220.6 million. The commercial paper matures at varying dates from January 4, 2005 to April 4, 2005. The effective yields on the commercial paper range from 1.86% to 2.57%. At December 31, 2004 the estimated fair value (based on market values) of the commercial paper amounted to $ 222.9 million. During the year ended December 31, 2004, the Corporation recorded interest income of $ 7.6 million related to temporary investments.

Senior Unsecured Notes due September 29, 2004

On September 29, 2004, the Corporation repaid on their scheduled maturity date $160 million of senior unsecured notes. These notes were issued on September 29, 1999 and bore interest at 11% per annum payable semi-annually.During the year ended December 31, 2004 (and 2003), the Corporation recorded interest expense of $13.8 million (and $18.5 million in 2003) related to the notes.

Stated Capital

An unlimited number of First Preferred Shares, issuable in series; an unlimited number of Second Preferred Shares issuable in series; and an unlimited number of Common Shares are authorized.All authorized classes of shares are without nominal or par value.

Number of       Stated
                                                 Common      capital
                                                 Shares
                                            Outstanding
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Balance, December 31, 2003                   40,000,000      $10,000
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Balance, December 31, 2004                   40,000,000      $10,000
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At December 31, 2004, 6,071 stock options were outstanding and
exercisable. The stock options are exercisable on a one-for-one basis
for common shares of the Corporation. The total stock options
outstanding have exercise prices ranging from $2,368 to $5,037 per
share over the remaining term of the options of between 0.9 to 5.4
years.

Transactions with Related Parties

In the normal course of business, the Corporation had transactions
which were measured at exchange amounts with BCE, its affiliated
companies and associated companies as follows:

BCE and affiliated companies(1)                    2004         2003
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   Administrative expenses(2)                  $507,000     $639,000
   Interest income on Bell Canada
    medium term note                                 $-     $286,000

   (1)Affiliated companies are companies under the control of BCE
   (2)Principally information technology services and various
      corporate services

As the Loss Monetization Plan is to be implemented between BCI and related parties, an Independent Committee of the Board of Directors of BCI was appointed to consider the transaction.The Independent Committee recommended that the Board of Directors approve the Loss Monetization Plan based in part on an opinion received from its financial advisors that the transaction is fair, from a financial point of view, to BCI and BCI's shareholders other than BCE Inc. After receiving the recommendation of the Independent Committee, the BCI Board approved the Loss Monetization Plan.In addition, because the Loss Monetization Plan was to be entered into with BCI's majority shareholder, BCE Inc., and Bell Canada (or their affiliates), the transaction would be subject to the approval of a majority of BCI's shareholders other than BCE Inc.; however, an exemption from such requirement was granted to BCI by securities regulators on September 7, 2004.

Risk Factors

The following are major risk factors facing the Corporation. Certain of these risk factors are also discussed in this MD&A under "Statement of Estimated Future Net Assets at June 30, 2007".

Timing of Distributions to Shareholders and Completion of the Plan of Arrangement

While BCI believes that an initial distribution to shareholders may be possible in the second half of 2006, this timing is dependent upon the resolution of claims against BCI(in particular, outstanding litigation described below under "Litigation-6.75% Debenture Class Action" and "Litigation-CDP Action"), the receipt of tax clearance certificates and the completion of further steps in the Plan of Arrangement (such as obtaining Court approval for such a distribution).

While BCI believes that a final distribution to shareholders may be possible in the first half of 2007, this timing is dependent on the factors affecting the initial distribution described above as well as on the timely receipt of the proceeds from the Loss Monetization Plan, the receipt of final tax clearance certificates and the completion of the Plan of Arrangement.

Litigation - 6.75% Debenture Class Action

As described in Note 13a) to the consolidated financial statements, the Corporation is currently involved in litigation with respect to the 6.75% Debenture Class Action.

Although BCI is confident that the allegations are without merit, there can be no assurance that BCI will be successful in its defense. Furthermore, regardless of the outcome with respect to the Corporation, BCI has indemnification arrangements in place with its directors and will therefore bear the cost of damages in the event, and to the extent, that the claim is successful against BCI's directors. In addition, in the event that BCI is not successful in its defence of the 6.75% Debenture Class Action, BCI's insurers have indicated that this claim will not be covered by BCI's insurance policies. BCI has indicated that it disagrees with this interpretation and has reserved its rights to contest such interpretation at a later date.

Litigation - CDP Action

As described in Note 13b) to the consolidated financial statements, the Corporation is currently involved in litigation with respect to the CDP Action. As CDP's claim contains allegations that are substantially similar to those contained in the 6.75% Debenture Class Action, BCI entered into an agreement with CDP, which was approved by the Court on December 19, 2003, whereby the CDP Action was stayed pending a final adjudication or settlement of the 6.75% Debenture Class Action, and the resolution of the 6.75% Debenture Class Action shall form the basis for the final resolution of the CDP Action.

Although BCI is confident that the allegations in this action and in the 6.75% Debenture Class Action are without merit, there can be no assurance that BCI will be successful in its defense. Furthermore, regardless of the outcome with respect to the Corporation, BCI has indemnification arrangements in place with its directors and will therefore bear the cost of damages in the event, and to the extent, that the claim is successful against BCI's directors.In addition, in the event that BCI is not successful in its defense of the CDP Action, BCI expects that its insurers would take the position that this claim, as with the 6.75% Debenture Class Action, would not be covered by BCI's insurance policies. In this event, BCI would disagree with this interpretation.

Comcel VOIP Indemnification

As described in Note 13d) to the consolidated financial statements, BCI had indemnified Comcel in connection with litigation claiming damages of approximately US$70 million relating to Comcel's provision of VOIP service between December 1998 and September 1999. Comcel believes that the claims lack an evidentiary basis and is vigorously defending itself in this litigation. However, there can be no assurance that Comcel will be successful in its defense.

In connection with the claims identification process as part of the Plan of Arrangement (see Note 1 to the consolidated financial statements), Comcel did not file a claim with the Monitor with respect to its VOIP indemnity. As a result, pursuant to the order of the Court approving the claims identification process, Comcel is now barred from asserting any claim against BCI in connection with this lawsuit. However, BCI understands that Comcel may dispute that its claim is so barred and there can be no assurance that if the order of the Court were to be appealed that such appeal would be denied.

Employee Litigation

As described in Note 13e) to the consolidated financial statements, former employees have filed claims against BCI totaling $8.6 million.BCI has included a provision in the consolidated financial statements in the amount of the estimated amount of its potential liability to such claims.However, there can be no assurance that such provision is sufficient to cover BCI's ultimate liability to such claims.

Realization of Canbras Sale Proceeds

As described in Note 5 to the consolidated financial statements, on December 24, 2003, Canbras announced the closing of the sale of all of its assets (the "Canbras Sale").Canbras received gross proceeds of approximately $22.2 million in cash and a one year promissory note (the "Note") bearing interest at 10% in the original principal amount of $10.4 million (subject to reduction in the event indemnification obligations of Canbras arise under the terms of the sale transaction).In August 2004, BCI received an initial distribution from Canbras of $8.7 million. On December 21, 2004, Canbras provided details of claims made against it pursuant to the Canbras Sale.Canbras' potential exposure to such claims is limited to the amount of the Note together with accrued interest thereon. Canbras believes that less than R$2 million of the total amount claimed of R$58 million are potentially subject to indemnification under the Canbras Sale.Based on this estimate, BCI has reduced its estimate of BCI's expected gain on its Canbras investment from $6 million to $5 million.However, there can be no assurance that the full amount of the claims made against Canbras will not be successfully asserted, in which case, Canbras may not collect any amounts due to it under the Note.Furthermore, even if such claims are not indemnifiable under the Canbras Sale, there can be no assurances that the issuer of the Note or its guarantor will be able to pay amounts due under the Note.As a result, BCI's ability to receive future distribution from Canbras may be limited to BCI's approximate 76% share of Canbras' cash on hand of $7.4million at September 30, 2004 less the costs that Canbras will incur to contest the claims against it as well as in the ordinary course of maintaining its corporate existence until such time as it is wound up and liquidated.

Cash and Cash Equivalents and Temporary Investments

As at December 31, 2004, BCI has approximately $222 million of cash and temporary investments. BCI has invested such funds in investment grade debt instruments with various maturities, not extending beyond April 4, 2005, in such a manner as to preserve the value of capital while also earning interest income. However, there can be no assurance that one or more issuers of such debt instruments might not default on such obligations.

Future Costs

BCI's actual future net costs after December 31, 2004, may be materially different than estimated in this MD&A. Moreover, there can be no assurance that BCI will be in a position to make a final distribution to its shareholders in the first half of 2007. To the extent that BCI has not completed its Plan of Arrangement by June 30, 2007, interest income from BCI's temporary investments may not be sufficient to cover operating costs estimated at approximately $1.5 million per quarter.

Stock Exchange Listing and US Deregistration

BCI's common shares currently trade on the NEX, a separate board of the TSX Venture Exchange which provides a trading forum for listed companies that have low levels of business activity. Effective December 21, 2004, the Corporation voluntarily de-listed its common shares from the TSX and effective December 31, 2003, the Corporation voluntarily de-listed its common shares from the NASDAQ National market.Subject to TSX approval, BCI would be permitted to remain listed and trade on NEX, an open auction market on which trading takes place on the same electronic system as the TSX Venture Exchange, indefinitely. However, there can be no assurance that NEX will provide BCI's common shares with the same level of liquidity or visibility as the TSX.

In conjunction with the de-listing of its common shares from NASDAQ, on January 8, 2004 BCI filed the appropriate form with the United States Securities and Exchange Commission ("SEC") for the termination of the registration of BCI's common shares with the SEC and the suspension of all reporting obligations in the United States. Although BCI will remain a Canadian reporting issuer and all relevant documents will continue to be available through the company's web site (www.bci.ca) and through SEDAR (System Electronic Document Analysis and Retrieval, www.sedar.com), BCI shareholders in the United States can no longer access documents filed by BCI by means of the SEC, NASDAQ, or the EDGAR electronic reporting system.

(1) Before unaccrued contingencies - See Note 13 to the consolidated financial statements and the discussion that follows. Also assumes no distribution to shareholders will be made before June 30, 2007.

Management's Responsibility for Financial Statements

The accompanying consolidated financial statements of Bell Canada International Inc. ("BCI"), and all information in this annual report are the responsibility of management and have been approved by the Board of Directors.

The financial statements have been prepared by management in conformity with Canadian generally accepted accounting principles. The financial statements include some amounts that are based on best estimates and judgments of management, and in their opinion present fairly BCI's financial position, results of operations and cash flows. Financial information presented elsewhere in the annual report is consistent with that in the financial statements.

Management of BCI, in furtherance of the integrity and objectivity of the financial statements, has developed and maintains a system of internal controls. Management believes the internal controls provide reasonable assurance that financial records are reliable and form a proper basis for the preparation of financial statements and that BCI's assets are properly accounted for and safeguarded. The internal control process includes management's communications to employees of policies which govern ethical business conduct.

The Board of Directors carries out its responsibility for the accompanying financial statements principally through its Audit Committee.The Audit Committee reviews the Corporation's annual consolidated financial statements and other information in the annual report, and recommends their approval by the Board of Directors. The shareholders' auditors have free and independent access to the Audit Committee.

These financial statements have been audited by the shareholders' auditors, Deloitte & Touche LLP, Chartered Accountants, and their report follows.

(s/ William D. Anderson)              (s/ Howard N. Hendrick)

William D. Anderson                    Howard N. Hendrick
Chairman and Chief Executive Officer   Executive Vice-President and
                                       Chief Financial Officer

Auditors' Report

To the Shareholders of Bell Canada International Inc.

We have audited the consolidated balance sheets of Bell Canada International Inc. as at December 31, 2004 and 2003 and the consolidated statements of operations, deficit and cash flows for the years then ended.These financial statements are the responsibility of the Corporation's management.Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2004 and 2003 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted accounting principles.

(s/ Deloitte & Touche LLP)

Deloitte & Touche LLP
Chartered Accountants
Montreal, Canada
March 21, 2005



Consolidated Balance Sheets

Years ended December 31,
(in thousands of canadian dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
                                     Notes        2004          2003
---------------------------------------------------------------------

Current assets
Cash and cash equivalents                       $1,047        $1,408
Temporary investments                    3     220,561       383,143
Interest receivable on cash
 equivalents and temporary
 investments                                     2,380         5,809
Investment in Canbras                    5       6,257        15,000
Prepaid expenses and other
 current assets                                  1,082         2,713
---------------------------------------------------------------------
                                               231,327       408,073

Future income tax asset                  9      62,000             -
---------------------------------------------------------------------
                                              $293,327      $408,073
---------------------------------------------------------------------
---------------------------------------------------------------------

Current liabilities
Accounts payable and accrued
 liabilities                         6, 14     $15,895       $22,422
Long-term debt due within one year       7           -       160,000
---------------------------------------------------------------------
                                                15,895       182,422
---------------------------------------------------------------------
Contingencies and commitments           13

Shareholders' equity
Stated capital                           8      10,000        10,000
Contributed surplus                      8   1,941,560     1,941,560
Deficit                                     (1,674,128)   (1,725,909)
---------------------------------------------------------------------
                                               277,432       225,651
---------------------------------------------------------------------
                                              $293,327      $408,073
---------------------------------------------------------------------
---------------------------------------------------------------------


On behalf of the Board of Directors

(s/ H. Brian Thompson)                    (s/ William D. Anderson)

 H. Brian Thompson                         William D. Anderson



Consolidated Statements of Operations
(In thousands of Canadian dollars, except per share amounts)
---------------------------------------------------------------------
---------------------------------------------------------------------
                                     Notes        2004          2003
---------------------------------------------------------------------

Interest on long-term debt                    $(13,780)     $(18,486)
Employee and office costs                       (3,204)       (6,405)
Legal, tax and audit fees                       (2,058)       (2,766)
Other administrative expenses                   (1,274)         (772)
Interest income                                  7,601        10,421
Gain (loss) on disposal of
 investments                             5       2,644        (1,442)
Loss on settlement of Vesper loan
 guarantees                             12           -       (16,947)
Gain on collection of Axtel
 long-term note                          4           -         9,778
Foreign exchange losses and other                 (148)      (11,658)
---------------------------------------------------------------------
Net loss before income taxes                   (10,219)      (38,277)
Income tax recovery                      9      62,000             -
---------------------------------------------------------------------
Net earnings (loss)                            $51,781      $(38,277)
---------------------------------------------------------------------
---------------------------------------------------------------------

Net earnings (loss) per common
 share - basic and diluted               8       $1.29        $(0.96)
---------------------------------------------------------------------
---------------------------------------------------------------------



Consolidated Statements of Deficit

Years ended December 31,
(in thousands of Canadian dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
                                                  2004          2003
---------------------------------------------------------------------
Deficit, beginning of year                 $(1,725,909)  $(1,687,632)
Net earnings (loss)                             51,781       (38,277)
---------------------------------------------------------------------
Deficit, end of year                       $(1,674,128)  $(1,725,909)
---------------------------------------------------------------------
---------------------------------------------------------------------



Consolidated Statements of Cash Flows
(in thousands of Canadian dollars)
---------------------------------------------------------------------
---------------------------------------------------------------------
                                     Notes        2004          2003
---------------------------------------------------------------------

Operations
Net earnings (loss)                            $51,781      $(38,277)
Items not affecting cash
 Income tax recovery                     9     (62,000)            -
 Loss on settlement of Vesper loan
  guarantees                            12           -        16,947
 Gain on collection of Axtel
  long-term note                         4           -        (9,778)
 (Gain) loss on investments              5      (2,644)        1,442
 Depreciation and amortization                      25            73
 Foreign exchange losses                            82        11,823
 Amortization of deferred financing
  costs                                            665           954
 Amortization of premium on temporary
  investments                                       35           867
Changes in working capital items        10      (2,236)       (7,445)
---------------------------------------------------------------------

Cash used in operations                        (14,292)      (23,394)
---------------------------------------------------------------------

Investing activities
Notes receivable, including exercise
 of foreign currency option                          -       278,428
Decrease (Increase) in temporary
 investments                                   162,547      (239,511)
Proceeds from Axtel disposition          5       2,644         3,821
Initial distribution from Canbras        5       8,743             -
---------------------------------------------------------------------
Cash provided by investing activities          173,934        42,738
---------------------------------------------------------------------

Financing activities
Repayment of long-term debt                   (160,000)            -
Payment of Vesper loan guarantees       12           -       (15,628)
---------------------------------------------------------------------
Cash provided by financing activities         (160,000)      (15,628)
---------------------------------------------------------------------
Foreign exchange loss on cash held in
 foreign currencies                                 (3)       (4,925)
---------------------------------------------------------------------

Net decrease in cash and cash
 equivalents                                      (361)       (1,209)
Cash and cash equivalents, beginning
 of year                                         1,408         2,617
---------------------------------------------------------------------

Cash and cash equivalents, end of year          $1,047        $1,408
---------------------------------------------------------------------
---------------------------------------------------------------------

See Note 10 for supplementary cash flow information



Notes to the Consolidated Financial Statements

Years ended December 31, 2004 and 2003
(all tabular amounts are in thousands of Canadian dollars, unless
otherwise noted and except per share amounts)

1. Description of business and basis of presentation

Bell Canada International Inc. ("BCI" or the "Corporation") is operating under a Plan of Arrangement (the "Plan of Arrangement") approved by the Ontario Superior Court of Justice (the "Court") pursuant to which, BCI intends to monetize its assets in an orderly fashion and resolve outstanding claims against it in an expeditious manner with the ultimate objective of distributing the net proceeds to its shareholders and dissolving the Corporation. The consolidated balance sheet at December 31, 2004 reflects BCI's 75.6% interest in Canbras Communications Corp. ("Canbras") as an investment recorded at the lower of carrying value and net realizable value. BCI's 49.9% interest in Genesis Telecom S.A. ("Genesis") was previously written off. Since July 1, 2002, the consolidated statements of earnings and cash flows have reflected only the activities of BCI as a holding company.

PLAN OF ARRANGEMENT

On July 12, 2002, the shareholders and noteholders of BCI approved a Plan of Arrangement under the Canada Business Corporations Act. Court approval for the Plan of Arrangement was received on July 17, 2002.

The principal elements of the Plan of Arrangement are as follows:

- Performance by BCI of all its obligations pursuant to the share
  purchase agreement to effect the disposition of its then held
  investment in Telecom Americas Ltd;

- A share consolidation that took place on July 12, 2002 pursuant to
  which the number of BCI common shares outstanding was reduced to 40
  million;

- With the assistance of a court-appointed monitor, Ernst & Young
  Inc., (the "Monitor") and under the supervision of the Court, BCI's
  continued management of its remaining assets for purposes of
  disposing of such assets in an orderly manner;

- BCI's development, with the assistance of the Monitor, of
  recommendations to the Court with respect to the identification of
  claims against BCI and a process for adjudicating and determining
  such claims;

- Following the disposition of all the assets of BCI and the
  determination and adjudication of all claims against BCI, the
  liquidation of BCI and the final distribution to BCI's shareholders
  with the assistance of the monitor and the approval of the Court;
  and

- Following the liquidation of BCI and the final distribution to
  BCI's shareholders, the dissolution of BCI.

BCI has discharged all of its obligations and monetized the entire
consideration in connection with the Telecom Americas disposition as
well completed the share consolidation.

On December 2, 2002, the Court approved a claims identification
process for BCI. The claims identification process established a
procedure by which all claims against BCI would be identified within
a specified period. This period began on May 31, 2003 and concluded
on August 31, 2003 (September 30, 2003 for taxation authorities) (the
"Claims Bar Date"). A creditor that did not submit a proof of claim
by the Claims Bar Date is not entitled to receive any payment in
respect of that claim and is barred from making that claim in the
future against BCI (see Note 13).

The following parties (the "Exempt Creditors") were not required to
submit proofs of claim, and their claims are not barred:

- Members of the class action lawsuit (the "6.75% Debenture Class
  Action") seeking damages of $250 million against BCI, BCI's
  directors and BCE Inc. ("BCE"), BCI's parent company, on
  behalf of all persons that owned 6.75% Debentures on December 3,
  2001, which action was certified as a class proceeding under the
  Class Proceedings Act by order of the Court dated December 2, 2002;

- The holders of BCI's $160 million 11% senior unsecured notes due
  September 29, 2004;

- Parties with claims relating to the supply of goods or services to
  BCI in the ordinary course, whether before or after May 31, 2003;

- The holders of the Vesper Guarantees (see note 12); and

- Current or former employees of BCI in respect of employment-related
  claims for services provided to BCI, whether before or after May
  31, 2003, other than employment-related claims in respect of which
  the current or former employee has initiated litigation against
  BCI.

As a result of the claims identification process, the claims shown in
the following table were filed by non-exempt creditors:

        Claims filed                                 Amounts Claimed
---------------------------------------------------------------------

Shareholder Class Action (Shaw) (see Note 13c))           $1 Billion
Shareholder Class Action (Gillespie) (see Note 13c))      $1 Billion
Caisse de depot et placement ("CDP") (see Note 13b))    $110 Million
Other                                                    $19 Million

In addition to the claims listed above, claims were filed by certain parties indemnifiedby BCI in connection with any liability they incur as a result of the 6.75%DebentureClassAction orthe action filedby CDP. These claimswerefiledbyBCI's directors,onthebasisofstandard indemnification arrangements in place with all of BCI's directors, and by BCI's financial advisor in the Recapitalization Plan, on the basis of an indemnity granted to such advisor at the time of the Recapitalization Plan.These indemnity claims do not increase BCI's overall exposure to the underlying litigation.

Of the $19 million in claims listed above under the heading "Other", approximately $4.5 million were filed by former holders of BCI's convertible debentures who either filed a claim but neglected to opt out of the 6.75% Debenture Class Action, in which case they still form part of the Class Action and cannot advance a separate claim, or who opted out but subsequently changed their mind. All of these claimants will be bound by the resolution or settlement of the 6.75% Debenture Class Action and cannot maintain separate claims against BCI. In addition, approximately $9 million of the claims relate to litigation that has been dismissed or settled for the payment of a nominal amount. For the balance of the claims under the heading "Other", BCI has established adequate provisions.

On January 27, 2004, the Court approved a claims resolution process recommended by the Monitor. For all non-litigated claims, the Monitor made a determination in February 2004 as to the validity of the claim. If a claimant wished to contest the Monitor's finding, then the claim was referred to a Court-appointed claims officer. The claims officer is also empowered to make certain recommendations with respect to litigated claims against BCI other than the 6.75% Debenture Class Action, the Shaw and Gillespie Class Actions and the action filed by the CDP. These latter actions will all remain subject to the case management of the Court.

2. Summary of significant accounting policies

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP").The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.The significant estimates made are for the net realizable value of the Corporation's investment in Canbras, the future income tax asset and provisions for claims.

a) Investments

   As a result of the adoption of the Plan of Arrangement, the
   operations of the Corporation are limited to the execution of the
   Plan of Arrangement. As of December 31, 2002, BCI's 75.6% interest
   in Canbras and its 27.7% interest in Axtel, its remaining
   investments as of that date, were recorded at the lower of
   carrying value and net realizable value. The Corporation's
   investments in the Vespers were previously written off. During
   2003, BCI's then remaining 1.5% interest in Axtel was written down
   to a net realizable value of zero and in 2004, BCI sold its
   investment in Axtel (see Note 5b)).

b) Translation of Foreign Currencies

   Unrealized translation gains and losses on assets and liabilities
   denominated in foreign currencies are included in earnings for the
   year.

   Assets and liabilities denominated in foreign currencies are
   translated at exchange rates in effect at the balance sheet dates.
   Revenues and expenses are translated at average exchange rates
   prevailing during the period.

c) Cash and Cash Equivalents

   Cash and cash equivalents represent cash and highly-liquid
   investments with an initial maturity of three months or less at
   the date of acquisition.

d) Temporary Investments

   Temporary investments consist of debt instruments with an initial
   maturity date greater than three months at the date of acquisition
   which the Corporation intends to hold to maturity.  Temporary
   investments are carried at cost with discounts or premiums arising
   on purchase amortized to maturity.

e) Stock-Based Compensation Plans

   Effective January 1, 2004, the Corporation adopted the amended
   Handbook Section 3870, Stock-Based Compensation and other Stock-
   Based Payments of the Canadian Institute of Chartered Accountants
   ("CICA"). The amended standards require the Corporation to use the
   fair value-based method for all stock-based awards and the
   recognition of an expense in the financial statements.

   The adoption of this amended Section, applied retroactively as
   required, did not have an impact on these financial statements
   since no stock-based awards have been made since January 1, 2002.

f) Income Taxes

   Future income taxes relate to the expected future tax consequences
   of differences between the carrying amount of balance sheet items
   and their corresponding tax values. Future tax assets are
   recognized only to the extent that it is more likely than not that
   the future income tax assets will be realized. Future income tax
   assets and liabilities are adjusted for the effects of changes in
   tax laws and rates on the date of enactment or substantive
   enactment.

g) Postretirement Benefits

   BCI maintains non-contributory defined benefit plans that provide
   for pensions for substantially all its employees based on length
   of service and rate of pay, as well as other retirement benefits
   such as certain health care and life insurance benefits on
   retirement and various disability plans, workers' compensation and
   medical benefits to former or inactive employees, their
   beneficiaries and covered dependants after employment but before
   retirement, under specified circumstances.

   BCI is responsible for adequately funding the postretirement
   benefits plans.  BCI accrues its obligations under employee
   benefit plans and the related costs, net of plan assets. Pension
   costs and other retirement benefits earned by employees are
   actuarially determined using the projected benefit method pro
   rated on service and based on management's best estimate of
   expected plan investment performance, salary escalation,
   retirement ages of employees and expected health care costs.
   Pension plan assets are valued at fair value, which is determined
   using current market values.  For the purpose of calculating the
   expected return on plan assets and the amortization of actuarial
   gains and losses, a market-related value of assets recognizing
   fluctuations over a four-year period is used. Past service costs
   arising from plan amendments are amortized on a straight-line
   basis over the estimated average remaining service period of the
   employees active at the date of amendment. The excess of the net
   actuarial gain (loss) over 10% of the greater of the benefit
   obligation and the fair value of plan assets is amortized over the
   estimated average remaining service period of active employees.

h) Future Accounting Changes

(i)   Financial Instruments

      The CICA recently issued revisions to section 3860 of the CICA
      Handbook, Financial Instruments - Disclosure and Presentation.
      The revisions change the accounting for certain financial
      instruments that have liability and equity characteristics. It
      requires instruments that meet specific criteria to be
      classified as liabilities on the balance sheet. Some of these
      financial instruments were previously classified as equities.

      These revisions come into effect on January 1, 2005. Because
      BCI does not have any instruments with these characteristics,
      adopting this section on January 1, 2005 will not affect future
      consolidated financial statements of the Corporation.

(ii)  Comprehensive Income

      The CICA recently issued section 1530 of the CICA Handbook,
      Comprehensive Income. The section is effective for years
      beginning on or after October 1, 2006. It describes how to
      report and disclose comprehensive income and its components.

      Comprehensive income is the change in a company's net assets
      that results from transactions, events and circumstances from
      sources other than the company's shareholders. It includes
      items that would be excluded from net earnings, such as the
      unrealized gains or losses on available-for-sale investments
      and the additional minimum liability for pension obligations.

      The CICA also made changes to section 3250 of the CICA
      Handbook, Surplus, and reissued it as section 3251, Equity. The
      section is also effective for years beginning on or after
      October 1, 2006. The changes in how to report and disclose
      equity and changes in equity are consistent with the new
      requirements of section 1530, Comprehensive Income.

      Adopting these sections on January 1, 2007 will require that
      BCI report the following items in its consolidated financial
      statements:

      - comprehensive income and its components
      - accumulated other comprehensive income and its components.

(iii) Financial Instruments - Recognition and Measurement

      The CICA recently issued section 3855 of the CICA Handbook,
      Financial Instruments - Recognition and Measurement. The
      section is effective for years beginning on or after October 1,
      2006. It describes the standards for recognizing and measuring
      financial assets, financial liabilities and non-financial
      derivatives.

      This section requires that:
      - all financial assets be measured at fair value, with some
        exceptions like loans and investments that are classified as
        held-to-maturity
      - all financial liabilities be measured at fair value when they
        are derivatives or classified as held for trading purposes.
        Other financial liabilities are measured at their carrying
        value.
      - all derivative financial instruments be measured at fair
        value, even when they are part of a hedging relationship.

      Adoption of this section on January 1, 2007 is not expected to
      affect future consolidated financial statements of the
      Corporation.

(iv)  Hedges

      The CICA recently issued section 3865 of the CICA Handbook,
      Hedges. The section is effective for years beginning on or
      after October 1, 2006. It describes when and how hedge
      accounting may be applied.

      Hedging is an activity used by a company to change an exposure
      to one or more risks by creating an offset between:
      - changes in the fair value of a hedged item and a hedging item
      - changes in the cash flows attributable to a hedged item and a
        hedging item, or
      - changes resulting from a risk exposure relating to a hedged
        item and a hedging item.

      Hedge accounting changes the normal basis for recording the
      gains, losses, revenues and expenses associated with a hedged
      item or a hedging item in a company's statement of operations.
      It ensures that all offsetting gains, losses, revenues and
      expenses are recorded in the same period.

Adoption of this section on January 1, 2007 is not expected to affect
future consolidated financial statements of the Corporation.

3. Temporary investments

As at December 31, 2004, the Corporation held investment grade
commercial paper in the amount of $220,560,892. The commercial paper
matures at varying dates from January 4, 2005 to April 4, 2005.  The
effective yields on the commercial paper range from 1.86% to 2.57%.
At December 31, 2004 the estimated fair value of the commercial paper
amounted to $222,941,135.

4. Notes receivable

a) In connection with the Axtel restructuring (see Note 5), BCI
   received two non-interest bearing notes from Axtel. One in the
   amount of $4,737,000 (US$3,456,000) (the "Short-Term Note"), was
   payable in installments on June 30, September 20, and December 31,
   2003. The other note, in the amount of US$9,395,000 (recorded at
   estimated fair value of zero) (the "Long-Term Note") was to mature
   in the second quarter of 2006.

   On December 17, 2003 BCI received US$8,555,000 in connection with
   the prepayment by Axtel of the two promissory notes then held by
   BCI: US$1,172,000 in respect of the final instalment on the Short-
   Term Note, and US$7,383,000 in respect of the Long-Term Note.
   These prepayment amounts were provided for in the agreement
   governing the notes. As a result of these prepayments, BCI
   recorded a net gain of approximately $9,778,000 (US$7,380,000).

b) On March 3, 2003, BCI received the payment of the remaining
   balance of US$170 million  due from America Movil. These proceeds
   represented the final payment on the sale of BCI's interest in
   Telecom Americas on July 24, 2002. Upon the exercise of a foreign
   currency option on March 4, 2003, the Corporation received net
   proceeds of approximately $264,010,000.

5. Investment in Canbras and Axtel

The Corporation's 75.6% economic interest in Canbras is recorded at
the lower of carrying value and net realizable value.

a) Investment in Canbras

   On October 8, 2003, Canbras announced that it had entered into
   agreements to sell all its operations which sale was completed on
   December 24, 2003, (the "Canbras Sale").  Canbras received gross
   proceeds of $32,600,000, comprised of $22,168,000 in cash and a
   one-year promissory note bearing interest at 10% in the original
   principal amount of $10,432,000 (subject to reduction in the event
   indemnification obligations of Canbras arise under the terms of
   the sale transaction).

   In connection with Canbras' winding up process which began as a
   result of the Canbras Sale, the Corporation received a preliminary
   distribution from Canbras of $8,742,994 in August 2004.  As a
   result, as of that date, BCI reduced its carrying value for its
   investment in Canbras from $15,000,000 to $6,257,006.

   On December 21, 2004, Canbras provided details of claims made
   against it under the Canbras Sale.  Canbras' potential exposure to
   such claims is limited to the amount of the Note together with
   accrued interest thereon.  Canbras believes that less than R$2
   million of the total amount claimed of R$58 million is potentially
   subject to indemnification under the Canbras Sale in which case
   the Corporation will likely recover from Canbras an amount in
   excess of the Corporation's current carrying value.  However,
   there can be no assurance that the full amount of the claims will
   not be successfully asserted, in which case, Canbras may not
   collect any amounts due to it under the Note.  Furthermore, even
   if such claims are not indemnifiable under the Canbras Sale, there
   can be no assurances that the issuer of the Note or its guarantor
   will be able to pay amounts due under the Note.  As a result,
   BCI's ability to receive future distributions from Canbras and the
   Corporation's  net realizable value for its investment in Canada
   may be limited to BCI's approximate 76% share of Canbras' cash on
   hand of $7.4 million at September 30, 2004 less the costs that
   Canbras will incur to contest the claims against it as well as in
   the ordinary course of maintaining its corporate existence until
   such time as it is wound up and liquidated.

b) Investment in Axtel

   On March 27, 2003, BCI announced that Axtel was proceeding with a
   series of transactions pursuant to which Axtel's debt was reduced
   by US$400 million. These restructuring transactions, which were
   concluded in the second quarter of 2003, included a capital call
   on shareholders, in which BCI did not participate, which resulted
   in a reduction of BCI's equity interest in Axtel to 1.5%.

   In connection with the restructuring, which also included a
   settlement of all obligations under a BCI service agreement with
   Axtel, on May 30, 2003, BCI received $3,821,000 (US$2,787,000) in
   cash and two non-interest bearing notes. One note, in the amount
   of $4,737,000 (US$3,456,000), was payable in instalments on June
   30, September 20 and December 31, 2003, and was recorded at
   estimated fair value equal to face value. The other note, in the
   amount of US$9,395,000, was payable in the second quarter of 2006,
   and was recorded at its estimated fair value of zero. BCI's
   residual equity interest in Axtel was also recorded at its
   estimated fair value of zero. As a result of the Corporation
   having carried its investments in Axtel at $10,000,000, a loss of
   $1,442,000 was recorded in the second quarter of 2003.  On
   December 17, 2003 BCI received US$8,555,000 in connection with the
   prepayment by Axtel of the two promissory notes then held by BCI:
   US$1,172,000 in respect of the final installment on the Short-Term
   Note, and US$7,383,000 in respect of the Long-Term Note. As a
   result of these prepayments, BCI recorded a net gain in the fourth
   quarter of 2003 of approximately $9,778,000 (US$7,380,000).

   On July 14, 2004, BCI sold its remaining investment in Axtel for
   US $2,000,000 (C $2,644,200). This investment had previously been
   written off.

6. Accounts payable and accrued liabilities


                                                  2004          2003
---------------------------------------------------------------------

Third parties                                  $15,871       $22,377
Affiliated companies                                24            45
---------------------------------------------------------------------
                                               $15,895       $22,422
---------------------------------------------------------------------
---------------------------------------------------------------------

7. Long-term debt due within one year

On September 29, 1999 the Corporation issued $160,000,000 of Senior
Unsecured Notes bearing interest at 11% payable semi-annually. These
notes were repaid on their scheduled maturity date on September 29,
2004.

8. Stated capital

AUTHORIZED

An unlimited number of First Preferred Shares, issuable in series; an
unlimited number of Second Preferred Shares issuable in series; and
an unlimited number of Common Shares are authorized for issuance.
All authorized classes of shares are without nominal or par value.

ISSUED AND OUTSTANDING

There has been no issuance of First and Second Preferred Shares.
Common shares for 2004 and 2003 are as follows:


                                             Number of        Stated
                                                Shares       Capital
---------------------------------------------------------------------
Balance, December 31, 2003                  40,000,000       $10,000
---------------------------------------------------------------------
Balance, December 31, 2004                  40,000,000       $10,000
---------------------------------------------------------------------
---------------------------------------------------------------------

Contributed surplus for 2004 and 2003 is as follows:

                                                              Stated
                                                             Capital
---------------------------------------------------------------------
Balance, December 31, 2003                                $1,941,560
---------------------------------------------------------------------
Balance, December 31, 2004                                $1,941,560
---------------------------------------------------------------------
---------------------------------------------------------------------

STOCK-BASED COMPENSATION PLANS

a) Stock options (1997 Plan)

   The Corporation implemented a stock option plan ("1997 Plan") in
   order to assist in attracting and retaining executives and other
   key employees.  Options were granted based on the position of the
   incumbent and at a price equal to the market value of the
   Corporation's shares on the last trading day prior to the
   effective date of the grant.  The right to exercise an award of
   options in its entirety, accrues over a period of four years
   unless otherwise determined by the Corporate Governance Committee
   at the time of grant, and options must be exercised during a
   period established by the Corporation but, in any event, within
   ten years of the grant date. 14,813 common shares were reserved
   for issuance under the stock option plan.

   As at December 31, 2004, 5,904 options are outstanding to acquire
   common shares at prices ranging from $2,213 to $2,396 per share,
   representing the market value of such shares at the date of grant,
   expiring at various dates to July 24, 2010.

   The following table summarizes information concerning stock
   options granted under the 1997 Plan:


                                      2004                     2003
---------------------------------------------------------------------
                                  Weighted-                Weighted-
                                    average                  average
                                   exercise                 exercise
                         Number   price per       Number   price per
                             of       share           of       share
                        options           $      options           $
---------------------------------------------------------------------

Outstanding
 beginning of year        6,789       2,743        6,950       2,768
Forfeited during the
 year                      (885)      1,983         (161)      3,795
---------------------------------------------------------------------
Outstanding end of year   5,904       2,857        6,789       2,743
---------------------------------------------------------------------
---------------------------------------------------------------------
Exercisable end of year   5,904       2,857        6,680       2,706
---------------------------------------------------------------------
---------------------------------------------------------------------

   The following table presents additional information concerning
   stock options granted under the 1997 Plan which were outstanding
   at December 31, 2004:

---------------------------------------------------------------------
                     Options outstanding         Options exercisable
---------------------------------------------------------------------
                                     Weighted-              Weighted-
Range of                               average                average
 exercise                 Weighted-   exercise               exercise
 prices per                 average  price per              price per
 share          Number    remaining      share       Number     share
 $         outstanding life (years)          $  exercisable         $
---------------------------------------------------------------------
2,213
 to 2,396          275           3       2,368          275     2,368
2,686
 to 2,710        5,193           2       2,700        5,193     2,700
5,037              436           5       5,037          436     5,037
---------------------------------------------------------------------
                 5,904           3       2,857        5,904     2,857
---------------------------------------------------------------------
---------------------------------------------------------------------

b) BCI - Stock options (2000 Plan)

   On January 25, 2000, the Board of Directors of BCI approved an
   additional stock option plan ("2000 Plan") for employees of BCI.
   Under the 2000 Plan, 25,014 common shares were reserved for
   issuance. Options were granted based on the position of the
   incumbent and at a price equal to the market value of the
   Corporation's shares on the last trading day prior to the
   effective date of the grant.

   The right to exercise an award of options vests at a rate of 33
   1/3% per year, provided BCI's share price (measured as the average
   price on the TSX over the last 60 days prior to each anniversary
   date) increases by at least 25% per year on a compounded basis.
   The right to exercise an award of options may also vest under
   certain circumstances at the discretion of the Corporation's Board
   of Directors.

   As at December 31, 2004, 167 options are outstanding to acquire
   common shares at $3,904 per share representing the market value of
   such shares at the date of grant, expiring on various dates to
   November 18, 2005.

   The following table summarizes information concerning stock
   options granted under the 2000 Plan:

                                        2004                    2003
---------------------------------------------------------------------
                                   Weighted-               Weighted-
                                     average                 average
                           Number   exercise       Number   exercise
                               of  price per           of  price per
                          options    share $      options    share $
---------------------------------------------------------------------
Outstanding beginning
 of year                      167      3,904        2,591      3,996
Exercised during the year       -          -            -          -
Forfeited during the year       -          -       (2,424)     4,002
---------------------------------------------------------------------
Outstanding end of year       167      3,904          167      3,904
---------------------------------------------------------------------
Exercisable end of year       167      3,904          167      3,904
---------------------------------------------------------------------

The following table presents additional information concerning stock
options granted under the 2000 Plan at December 31, 2004:

---------------------------------------------------------------------
         Options outstanding               Options exercisable
---------------------------------------------------------------------
                                   Weighted-               Weighted-
Exercise                Weighted-    average                 average
price                     average   exercise                exercise
per           Number    remaining  price per       Number  price per
share $  outstanding  life (years)   share $  exercisable    share $
---------------------------------------------------------------------
  3,904          167            1      3,904          167      3,904

c) Performance Share Units ("PSUs")

   Certain executives of the Corporation were granted PSUs. PSUs are
   notional shares which fluctuate with the share price of the
   underlying security and vest over a period of four years. As at
   December 31, 2004, 187 PSUs were outstanding, of which 182 were
   vested. The compensation expense related to PSUs amounted to $150
   in 2004, ($45,000 in 2003).

d) BCE Employees' Savings Plan ("ESP")

   The ESP enables employees of BCI to acquire BCE common shares
   through regular payroll deductions plus employer contributions, if
   applicable. Under the terms of the ESP, employees can choose each
   year to have up to 10% of their annual salary and annual incentive
   plan ("AIP") bonus withheld to purchase common shares. BCI matches
   employees' contributions up to 2% of these earnings. Compensation
   expense related to the ESP amounted to $39,000 in 2004 ($43,000 in
   2003).

e) BCE  - Stock options

   Certain executives and key employees of the Corporation have been
   granted options by BCE. Under the terms of the plan, the
   subscription price for each share covered by an option is
   established at 100% of the market value of a share on the last
   trading day prior to the effective date of the grant. The options
   are exercisable during a period not to exceed ten years. The right
   to exercise the options generally accrues over a period of four
   years of continuous employment. Options are not generally
   exercisable during the first twelve months after the date of the
   grant. As a result of the distribution of common shares of Nortel
   Networks Inc., ("Nortel") to holders of BCE common shares by BCE
   in May 2000, each of the then outstanding BCE stock options was
   replaced by a new stock option which, in addition to the right to
   acquire one BCE common share, gave the holder the right to acquire
   approximately 1.57 post-split common shares of Nortel. Prior to
   2000, simultaneously with the grant of an option, certain
   employees of the Corporation may have also been granted the right
   to a Special Compensation Payment ("SCP"). As a result of the
   distribution of Nortel common shares, the related SCPs were
   appropriately adjusted. The amount of any SCP is equal to the
   increase in market value of the number of the BCE and Nortel
   shares covered by SCPs from the date of grant of SCPs to the date
   of exercise of the option to which the SCP is related.
   Compensation expense related to SCPs amounted to NIL in 2004
   ($492,000 in 2003).

The following table summarizes information concerning BCE stock
options granted on a post-split basis:

                                        2004                    2003
---------------------------------------------------------------------
                                   Weighted-               Weighted-
                                     average                 average
                           Number   exercise       Number   exercise
                               of  price per           of  price per
                          options    share $      options    share $
---------------------------------------------------------------------
Outstanding beginning of
 year                     120,618      13.27      147,590      13.16
Exercised during the year (73,174)     16.76      (26,972)     12.62
---------------------------------------------------------------------
Outstanding end of year    47,444       7.90      120,618      13.27
---------------------------------------------------------------------
Exercisable end of year    47,444       7.90      120,618      13.27
---------------------------------------------------------------------

The following table presents additional information concerning BCE
stock options granted to certain executives and key employees of the
Corporation at December 31, 2004:

---------------------------------------------------------------------
                         Options outstanding
---------------------------------------------------------------------
                                           Weighted-       Weighted-
                                             average         average
                                           remaining        exercise
       Range of            Number        contractual       price per
exercise prices       outstanding        life (years)         share $
---------------------------------------------------------------------
 $6.11 to $8.24            47,444                1.8             7.90


EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted
earnings (loss) per share:

                                               2004            2003
---------------------------------------------------------------------
Numerator:
Net earnings (loss)                         $51,781        $(38,277)
---------------------------------------------------------------------
Net earnings (loss) applicable to
 common shares - basic and diluted          $51,781        $(38,277)
---------------------------------------------------------------------
---------------------------------------------------------------------
Denominator (in thousands):
Weighted-average number of common
 shares - basic and diluted                  40,000          40,000
---------------------------------------------------------------------
---------------------------------------------------------------------
Basic and diluted earnings (loss)
 per share                                    $1.29          $(0.96)
---------------------------------------------------------------------
---------------------------------------------------------------------

For the years ended December 31, 2004 and 2003, the Corporation
excluded all potential common share equivalents from the earnings
(loss) per share calculation as they were anti-dilutive.

9. Income taxes

At December 31, 2004, the Corporation's income tax returns contained Canadian non-capital tax losses carried forward amounting to approximately $440,722,000, expiring at various dates to the year 2014. In addition, the Corporation had Canadian capital losses amounting to approximately$279,782,000 that can be carried forward indefinitely.

On August 4, 2004, the Corporation announced that it had entered into an agreement to monetize a portion of its non-capital tax losses (the "Loss Monetization Plan").As further announced on March 21, 2005, the Loss Monetization Plan is expected to result in a compensatory cash payment to BCI of approximately $62,000,000 (based on the monetization of $297,600,000 of losses as described below), and this amount was recorded as a future income tax asset in the Corporation's financial statements for 2004.The Loss Monetization Plan, which is the subject of an advance income tax ruling received from the Canada Revenue Agency ("CRA") was approved by the Court pursuant to BCI's Plan of Arrangement on September 8, 2004.BCI expects to receive the proceeds of the Loss Monetization Plan in the first quarter of 2007, although at BCI's request, and subject to the consent of BCE, the proceeds may be received in 2006 at a reduced amount based on a discount rate to be mutually agreed at that time.

In connection with the Loss Monetization Plan, BCI had requested that the CRA audit BCI's income tax returns for years up to December 31, 2004 for the purpose of making a final determination of BCI's losses. While the Corporation's income tax returns were filed using tax positions that were believed at the time to be appropriate, based on more recent discussions with the CRA, the Corporation believes that the maximum amount available for use under the Loss Monetization Plan will be less than the amounts filed.Following the completion of the CRA audit, the Loss Monetization Plan is now estimated to be based on the monetization of $297,600,000 of losses.Discussions are ongoing with certain government officials that could result in an increase in the compensatory payment under the Loss Monetization Plan.Such discussions are expected to be resolved before the end of 2005.There can be no assurance that these discussions will result in any increase of the amount to be received by BCI under the Loss Monetization Plan.

As the Loss Monetization Plan is to be implemented between BCI and related parties, an Independent Committee of the Board of Directors of BCI was appointed to consider the transaction.The Independent Committee recommended that the Board of Directors approve the Loss Monetization Plan based in part on an opinion received from its financial advisors that the transaction is fair, from a financial point of view, to BCI and BCI's shareholders other than BCE. After receiving the recommendation of the Independent Committee, the BCI Board approved the Loss Monetization Plan.In addition, because the Loss Monetization Plan was to be entered into with BCI's majority shareholder, BCE Inc., and Bell Canada (or their affiliates), the transaction would be subject to the approval of a majority of BCI's shareholders other than BCE; however, an exemption from such requirement was granted to BCI by securities regulators on September 7, 2004.

As at December 31, future income taxes are as follows:


                                               2004            2003
---------------------------------------------------------------------
Future income tax asset                     $62,000              $-
---------------------------------------------------------------------
---------------------------------------------------------------------

The reconciliation of income taxes at Canadian statutory rates to
income tax expense for continuing operations is as follows:

                                               2004            2003
---------------------------------------------------------------------
Income tax (recovery) at Canadian
 statutory rates                            $(3,921)       $(15,472)

Reduction (increase) of tax
 recovery resulting from:
  Loss on sale of investments not tax
   effected                                       -             584
  Difference between Canadian
   statutory rates and those applicable
   to the Loss Monetization                   1,775               -

  Difference between Canadian
   statutory rates and those
   applicable to foreign operations               -            (913)
  Losses not tax effected                         -          15,801
  Monetization of prior years' losses       (59,854)              -
---------------------------------------------------------------------
  Income tax expense                       $(62,000)             $-
---------------------------------------------------------------------
---------------------------------------------------------------------



10. Supplementary cash flow information.
                                               2004            2003
---------------------------------------------------------------------
a) Changes in working capital items
    Decrease (increase) in current assets
     Accounts receivable including
      interest receivable                    $3,429         $(4,700)
     Prepaid expenses and other current
      assets                                    942          (1,781)
     (Decrease) in accounts payable and
      accrued liabilities                    (6,607)           (964)
---------------------------------------------------------------------
     (Increase) in working capital items    $(2,236)        $(7,445)
---------------------------------------------------------------------
---------------------------------------------------------------------
b) Other cash flow information
    Interest paid                           $17,600         $17,600
---------------------------------------------------------------------
---------------------------------------------------------------------


11. Postretirement benefits

BCI maintains non-contributory defined benefit plans that provide for
pension, other retirement and post-employment benefits for
substantially all its employees based on length of service and rate
of pay. Certain employees participate in a defined contribution plan.
BCI's funding policy is to make contributions to its pension funds
based on various actuarial cost methods as permitted by pension
regulatory bodies. BCI is responsible to adequately fund the plans.
Contributions reflect actuarial assumptions concerning future
investment returns, salary projections and future service benefits.
Plan assets are represented primarily by Canadian and foreign
equities, government and corporate bonds, debentures and secured
mortgages.

The changes in the benefit obligations and in the fair value of
assets and the funded status of the defined benefit plans as at
December 31, were as follows:

                          Pension      Other      Pension      Other
                         Benefits   Benefits     Benefits   Benefits
                             2004       2004         2003       2003
---------------------------------------------------------------------
Change in benefit
 obligations:
  Benefit obligation,
   beginning of year      $14,021     $1,135      $13,267       $822
  Current service cost        148          -          154         14
  Interest cost               892         58          850         45
  Actuarial (gains)
   losses                   1,051       (351)         441        385
  Benefit payments           (904)       (20)        (691)      (131)
---------------------------------------------------------------------
  Benefit obligation,
   end of year            $15,208        822      $14,021     $1,135
---------------------------------------------------------------------

Change in fair value
 of plan assets:
  Fair value of plan
   assets, beginning of
   year                   $15,470         $-      $14,615         $-
   Return on plan assets    1,979          -        1,546          -
   Benefit payments          (904)         -         (691)         -
---------------------------------------------------------------------
   Fair value of plan
    assets, end of year    16,545          -      $15,470         $-
---------------------------------------------------------------------
  Plan surplus (deficit)    1,337       (822)       1,449     (1,135)
  Unamortized net
   actuarial (gains)
   losses                   4,577          -        4,542          -
  Unamortized
   transitional (asset)
   obligation              (3,426)         -       (3,854)         -
  Valuation allowance      (2,488)         -       (2,137)         -
---------------------------------------------------------------------
  Accrued (liability)
   included in accounts
   payable and accrued
   liabilities                 $-      $(822)          $-    $(1,135)
---------------------------------------------------------------------

The significant assumptions adopted in measuring the Corporation's
pension and other benefit obligations as at December 31, were as
follows:

                          Pension      Other      Pension      Other
                         Benefits   Benefits     Benefits   Benefits
                             2004       2004         2003       2003
---------------------------------------------------------------------
Weighted-average
 discount rate                6.0%       6.0%         6.5%       6.5%
Expected long-term
 rate of return on
 plan assets                  7.5%         -          7.5%         -
Rate of compensation
 increase                     3.5%       3.5%         3.5%       3.5%
Inflation                     2.5%       2.5%         2.5%       2.5%


For measurement purposes, a 10.5% (prescription medication) and 4.5%
(other) annual rate of increase in the per capita cost of covered
health care benefits (the health care cost trend rate) was assumed
for 2004. This prescription medication rate was assumed to gradually
decline to 4.5% over six years and remain at that level thereafter.

The net benefit expenses for the years ended December 31, included
the following components:


                          Pension      Other      Pension      Other
                         Benefits   Benefits     Benefits   Benefits
                             2004       2004         2003       2003
---------------------------------------------------------------------
Current service cost         $148         $-         $154        $14
Interest cost                 892         58          850         45
Expected return on
 plan assets (1)           (1,173)         -       (1,180)         -
Amortization of net
 actuarial loss
 (gain) (1)                   210       (351)         140        457
Amortization of
 transitional (asset)
 obligation                  (428)         -         (428)         -
Increase in valuation
 allowance                    351          -          464          -
---------------------------------------------------------------------
Net benefit expense            $-      $(293)          $-       $516
---------------------------------------------------------------------

(1) The market-related value of pension plan assets for purposes of
    calculating expected returns on plan assets and the amortization
    of net actuarial losses was $16,089,000 for 2004 and $16,076,000
    for 2003.

12. Vesper loan guarantees

As part of the Vesper financial restructuring, which was concluded in
November 2001, the Corporation entered into agreements (the "Vesper
Guarantees") with certain Brazilian banks  (the"Vespers' Banks") to
guarantee 31.4% of the US dollar equivalent of the Vespers' debt
outstanding with such banks. At the time BCI entered into the Vesper
Guarantees, the aggregate debt outstanding with the Vespers' Banks,
which was principally denominated in Brazilian reais, represented the
equivalent of approximately US$102.9 million.

Following certain prepayment transactions in January 2003, BCI's
exposure under the Vesper Guarantees was reduced to US$20.2 million.
In light of this prepayment, and as a consequence of certain public
statements by the Vespers' majority shareholder, QUALCOMM, concerning
the Vespers', a provision of $27,336,000 was recorded as of June 30,
2003. On December 2, 2003, pursuant to the agreement announced on
September 23, 2003 among BCI, the Vespers, the Vespers' majority
shareholder QUALCOMM and the Vespers' Banks, BCI paid US$12,000,000
as consideration for the absolute release of its obligation under the
Vesper Guarantees.   At the same time, BCI disposed of its remaining
1.5% indirect equity interest in the Vespers for nominal
consideration, and BCI and QUALCOMM provided each other with full
releases with respect to all matters related to the Vespers. As a
result of these transactions, BCI recorded a gain of $10,389,000 in
the fourth quarter of 2003 resulting in a net loss on the settlement
of the Vesper loan guarantees of $16,947,000.

13. Contingencies and commitments

CONTINGENCIES

   With the exception of employee litigation, the Corporation has not
   accrued any amounts with respect to the following contingencies:

a) On April 29, 2002, BCI announced that a lawsuit had been filed
   with the Court by certain former holders of BCI's $250 million
   6.75% convertible unsecured subordinated debentures, (the "6.75%
   Debenture Class Action").  The plaintiffs seek damages from BCI,
   BCE and certain current and former members of BCI's Board of
   Directors, for up to an amount of $250 million plus $5 million in
   costs in connection with the settlement, on February 15, 2002, of
   the debentures through the issuance of common shares, in
   accordance with BCI's recapitalization plan (the "Recapitalization
   Plan") completed on February 15, 2002.  In accordance with an
   agreement reached among the parties to this lawsuit in December
   2002, the Court has ordered that this lawsuit be certified as a
   class action within the meaning of applicable legislation.  The
   certification order does not constitute a decision on the merits
   of the class action, and BCI continues to be of the view that the
   allegations contained in the lawsuit are without merit and intends
   to vigorously defend its position.

   As part of the agreement among the parties, the plaintiffs in the
   class action have abandoned their claim for punitive damages (the
   statement of claim originating the lawsuit sought $30 million in
   punitive damages).  The plaintiffs have also agreed to the
   dismissal of the class action against BMO Nesbitt Burns Inc., one
   of the original defendants in the proceeding.

   All of the defendants filed statements of defense in the third
   quarter of 2003. Document production and examinations on discovery
   have proceeded throughout 2004. Certain motions were brought to
   the Court during the fourth quarter to resolve procedural issues
   that have arisen during this process, and BCI further expects the
   plaintiffs to bring a motion to the Court seeking certain
   amendments to the statement of claim before the end of the first
   quarter of 2005.  As a result of these developments, BCI no longer
   believes, as it has previously advised shareholders, that a trial
   of this matter is likely in the first quarter of 2005.  Rather,
   the Corporation expects that the trial will take place in the
   fourth quarter of 2005.

   BCI is of the view that the allegations are without merit and
   intends to take all appropriate actions in order to vigorously
   defend its position.

b) In August 2003, La Caisse de depot et placement du Quebec (CDP)
   filed a proof of claim with the Monitor and a Notice of Action in
   the Court in connection with CDP's former holdings of a portion of
   BCI's 6.5% convertible unsecured subordinated debentures (the "CDP
   Action") CDP is seeking up to $110 million in damages, together
   with interest and costs, against BCI, BCE and certain current and
   former members of BCI's board of directors. CDP's claim contains
   allegations that are substantially similar to those contained in
   the 6.75% Debenture Class Action.

   On September 9, 2003, BCI, BCE and the other defendants in the CDP
   Action entered into an agreement (modified November 28, 2003) with
   CDP with respect to the procedure to be followed in connection
   with the CDP action. Pursuant to the agreement, the defendants
   agreed with CDP that the prosecution of the CDP Action should be
   stayed pending a final adjudication or settlement of the 6.75%
   Debenture Class Action, and the resolution of the 6.75% Debenture
   Class Action shall form the basis for the final resolution of the
   CDP Action. CDP has also agreed not to advance any claims as a
   holder of 6.75% debentures outside of the 6.75% Debenture Class
   Action, nor any claims as a common shareholder of BCI outside of
   any certified common shareholder class action of which it may be
   found to be a member.

   By order dated December 19, 2003, this agreement was approved by
   the Court and the action was stayed until final disposition of the
   6.75% Debenture Class Action.

   BCI is of the view that the allegations are without merit and
   intends to take all appropriate actions in order to vigorously
   defend its position.

c) On July 23, 2004, the Ontario Court of Appeal ("OCA") dismissed
   the two proposed class action lawsuits brought by Mr. Wilfred Shaw
   and Mr. Cameron Gillespie on behalf of BCI common shareholders and
   seeking $1 billion in damages against BCI and BCE (the
   "Shareholder Class Actions").  The OCA upheld the decision of the
   lower court dismissing the lawsuits as failing to disclose a
   reasonable cause of action. On September 29, 2004, the plaintiffs
   filed an application with the Supreme Court of Canada ("SCC")
   seeking leave to appeal the decision of the OCA and BCI filed
   materials with the SCC opposing the plaintiff's application.  On
   March 3, 2005, the SCC refused leave to appeal the Shareholder
   Class Action.  No further appeal of these actions is available to
   the plaintiffs and the actions are effectively dismissed.

d) Communicacion Celular S.A. - Comcel S.A. ("Comcel") is currently
   involved in litigation before the Superintendent of Industry and
   Commerce ("SIC") in Colombia wherein plaintiffs are claiming
   damages of approximately US$70 million relating to the provision
   by Comcel of long-distance services through voice-over internet
   protocol ("VOIP") between December 1998 and September 1999.
   During the fourth quarter of 2003, Comcel's attempt to have the
   SIC's initial finding that it improperly provided services
   appealed to a judicial tribunal was dismissed and the action has
   returned to a damages determination phase before the SIC. Comcel's
   Colombian counsel believes that the damage allegations will be
   subject to defenses on the merits and that substantially all of
   the claims lack a sufficient evidentiary basis.

   BCI had agreed to indemnify Comcel and its affiliates for the
   initial US$5 million of damages and for any damages Comcel may
   suffer in excess of US$7.5 million. Comcel is responsible for any
   damages incurred in excess of US$5 million and up to US$7.5
   million. However, in connection with BCI's claims identification
   process (see Note 1), Comcel did not file a claim with BCI's
   court-appointed Monitor with respect to the Comcel VOIP indemnity.
   As a result, pursuant to the order of the Court approving the
   claims identification process, Comcel is now barred from asserting
   any claim against BCI in connection with this lawsuit. However,
   BCI understands that Comcel may dispute that its claim is so
   barred.

e) Former employees of BCI have filed claims against it totaling $8.6
   million.  These claims contain allegations of a failure to
   honour a promise of employment, breaches of an employee agreement
   and inaccurate pension calculations.  A provision has been
   included in accounts payable and accrued liabilities in the amount
   of BCI's estimated exposure to such claims.

Commitments

At December 31, 2004, the Corporation has no commitments under
operating leases or other arrangements.  However, the Corporation was
in negotiations to extend its lease for office premises.

Annual lease payments in 2004 amounted to $296,000 (2003 - $892,000).

It is not expected that future payments will be materially different.

14. Related party transactions (see also Note 9)

In the normal course of business, the Corporation had transactions
which were measured at exchange amounts with BCE, its affiliated
companies and associated companies, and not otherwise disclosed
elsewhere herein, as follows:

                                               2004            2003
---------------------------------------------------------------------
BCE and affiliated companies: (1)
  Administrative expenses                      $507            $639
  Interest income                                $-            $286

(1) Affiliated companies are companies under the control of the
    Corporation's ultimate parent company.

15. Financial instruments

a) Currency Risk

   The Corporation is exposed to market risks from changes in foreign
   currency rates.  From time to time, the Corporation may enter into
   foreign currency contracts to mitigate this risk.

   The Corporation does not trade derivative financial instruments.

b) Credit Risk

   The Corporation's financial assets that are exposed to credit risk
   consist primarily of temporary investments. Credit risk is
   minimized substantially by ensuring that these financial assets
   are invested in treasury bills, bankers' acceptances, commercial
   paper and corporate bonds with investment grade credit ratings.
   In addition, dollar limits are established on a per investment
   basis.

c) Fair Value of Financial Instruments

   As at December 31, 2004 the Corporation's financial instruments
   were comprised of cash and cash equivalents, temporary
   investments, interest receivable and accounts payable and accrued
   liabilities.

   Fair values approximate amounts at which financial instruments
   could be exchanged for instruments of similar risk, principal and
   remaining features.  Fair values are based on estimates using
   present value and other valuation techniques which are
   significantly affected by assumptions concerning future cash flows
   and discount rates and should not be interpreted as being
   realizable in an immediate settlement of the instruments.

   Estimated fair value of the Corporation's financial instruments,
   where the fair value differs from the carrying amounts in the
   financial statements as at December 31, 2004 and 2003, are as
   follows:

                                  2004                  2003
---------------------------------------------------------------------
                          Carrying   Estimated  Carrying   Estimated
                             value  fair value     value  fair value
---------------------------------------------------------------------

Long-term debt                  $-          $-  $160,000    $163,600
---------------------------------------------------------------------
Temporary investments
 (see Note 3)             $220,561    $222,941  $383,143    $388,977
---------------------------------------------------------------------
---------------------------------------------------------------------

   The carrying amounts of cash and cash equivalents, interest
   receivable, and accounts payable, in the consolidated balance
   sheets, approximate their estimated fair values.

16. Comparative figures

Certain comparative figures have been reclassified in order to
conform with the presentation adopted in 2004.

Bell Canada International Inc. (NEX BOARD:BI.H)