Consolidated Financial Statements

Management’s Report

These financial statements form the basis for all of the financial information that appears in this annual report.
     The financial statements and all of the information in this annual report are the responsibility of the management of BCE Inc. and have been reviewed and approved by the board of directors. The board of directors is responsible for ensuring that management fulfills its financial reporting responsibilities. Deloitte & Touche LLP, the shareholders’ auditors, have audited the financial statements.
     Management has prepared the financial statements according to Canadian generally accepted accounting principles. Under these principles, management has made certain estimates and assumptions that are reflected in the financial statements and notes. Management believes that these financial statements fairly present BCE’s consolidated financial position, results of operations and cash flows.
     Management has a system of internal controls designed to provide reasonable assurance that the financial statements are accurate and complete in all material respects. This is supported by an internal audit group that reports to the audit committee, and includes communication with employees about policies for ethical business conduct. Management believes that the internal controls provide reasonable assurance that our financial records are reliable and form a proper basis for preparing the financial statements, and that our assets are properly accounted for and safeguarded.
     The board of directors has appointed an audit committee, which is made up of unrelated and independent directors. The audit committee’s responsibilities include reviewing the financial statements and other information in this annual report, and recommending them to the board of directors for approval. You will find a description of the audit committee’s other responsibilities on page 123 of this annual report. The internal auditors and the shareholders’ auditors have free and independent access to the audit committee.

Michael J. Sabia
President and Chief Executive Officer

Siim A. Vanaselja
Chief Financial Officer

Karyn A. Brooks
Vice-President and Controller

March 2, 2005

Auditors’ Report

To the Shareholders of BCE Inc.:

We have audited the consolidated balance sheets of BCE Inc. as at December 31, 2004 and 2003, and the consolidated statements of operations, deficit and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of BCE Inc.’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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 BCE Inc. as at December 31, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2004, in accordance with Canadian generally accepted accounting principles.

Deloitte & Touche LLP
Chartered Accountants

Montréal, Canada
March 2, 2005

Consolidated Statements of Operations
FOR THE YEAR ENDED DECEMBER 31 (in $ millions, except share amounts)	NOTES	2004		2003		2002

Operating revenues		19,193		18,737		18,900

Operating expenses		(11,629	)	(11,327	)	(11,516	)
Amortization expense		(3,108	)	(3,100	)	(3,024	)
Net benefit plans (cost) credit	23	(256	)	(175	)	33
Restructuring and other items	4	(1,224	)	(14	)	(768	)

Total operating expenses		(16,217	)	(14,616	)	(15,275	)

Operating income		2,976		4,121		3,625
Other income	5	411		175		2,408
Impairment charge	6	–		–		(765	)
Interest expense	7	(1,005	)	(1,105	)	(1,120	)

Pre-tax earnings from continuing operations		2,382		3,191		4,148
Income taxes	8	(710	)	(1,119	)	(1,614	)
Non-controlling interest		(174	)	(201	)	(663	)

Earnings from continuing operations		1,498		1,871		1,871
Discontinued operations	9	26		(56	)	536

Net earnings before extraordinary gain		1,524		1,815		2,407
Extraordinary gain	3	69		–		–

Net earnings		1,593		1,815		2,407
Dividends on preferred shares		(70	)	(64	)	(59	)
Premium on redemption of preferred shares		–		(7	)	(6	)

Net earnings applicable to common shares		1,523		1,744		2,342

Net earnings (loss) per common share – basic	10
Continuing operations		1.55		1.96		2.11
Discontinued operations		0.03		(0.06	)	0.55
Extraordinary gain		0.07		–		–

Net earnings		1.65		1.90		2.66
Net earnings (loss) per common share – diluted	10
Continuing operations		1.55		1.95		2.09
Discontinued operations		0.03		(0.06	)	0.53
Extraordinary gain		0.07		–		–

Net earnings		1.65		1.89		2.62
Dividends per common share		1.20		1.20		1.20
Average number of common shares outstanding – basic (millions)		924.6		920.3		847.9

Consolidated Statements of Deficit
FOR THE YEAR ENDED DECEMBER 31 (in $ millions)	NOTES	2004		2003		2002

Balance at beginning of year, as previously reported		(5,830	)	(6,435	)	(7,686	)
Accounting policy change for asset retirement obligations	1	(7	)	(7	)	(7	)

Balance at beginning of year, as restated		(5,837	)	(6,442	)	(7,693	)
Consolidation of variable interest entity	1	–		(25	)	–
Net earnings		1,593		1,815		2,407
Dividends declared on common shares		(1,110	)	(1,105	)	(1,031	)
Dividends declared on preferred shares		(70	)	(64	)	(59	)
Costs relating to the issuance of common shares, net of $22 million of taxes		–		–		(62	)
Premium on redemption of preferred shares		–		(7	)	(6	)
Other		–		(9	)	2

Balance at end of year		(5,424	)	(5,837	)	(6,442	)

Consolidated Balance Sheets
AT DECEMBER 31 (in $ millions)	NOTES	2004		2003

Assets

Current assets
Cash and cash equivalents		380		585
Accounts receivable	11	2,119		2,061
Other current assets	12	1,211		739
Current assets of discontinued operations	9	–		280

Total current assets		3,710		3,665
Capital assets	13	21,398		21,114
Other long-term assets	14	2,656		3,459
Indefinite-life intangible assets	15	2,916		2,910
Goodwill	16	8,413		7,761
Non-current assets of discontinued operations	9	50		511

Total assets		39,143		39,420

Liabilities

Current liabilities
Accounts payable and accrued liabilities		3,700		3,046
Interest payable		183		194
Dividends payable		297		294
Debt due within one year	17	1,276		1,519
Current liabilities of discontinued operations	9	–		285

Total current liabilities		5,456		5,338
Long-term debt	18	11,809		12,381
Other long-term liabilities	19	4,932		4,705
Non-current liabilities of discontinued operations	9	–		20

Total liabilities		22,197		22,444

Non-controlling interest		2,914		3,403

Commitments and contingencies	24

Shareholders’ Equity

Preferred shares	21	1,670		1,670

Common shareholders’ equity
Common shares	21	16,781		16,749
Contributed surplus		1,061		1,037
Deficit		(5,424	)	(5,837	)
Currency translation adjustment		(56	)	(46	)

Total common shareholders’ equity		12,362		11,903

Total shareholders’ equity		14,032		13,573

Total liabilities and shareholders’ equity		39,143		39,420

Consolidated Financial Statements

Management’s Report

Auditors’ Report

To the Shareholders of BCE Inc.:

Consolidated Statements of Operations

Consolidated Statements of Deficit

Consolidated Balance Sheets

Consolidated Statements of Cash Flows