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Providing Content in Canada's Official Languages

Please note that the Official Languages Act requires that government publications be available in both official languages.

In order to meet some of the requirements under this Act, the Commission's transcripts will therefore be bilingual as to their covers, the listing of CRTC members and staff attending the hearings, and the table of contents.

However, the aforementioned publication is the recorded verbatim transcript and, as such, is transcribed in either of the official languages, depending on the language spoken by the participant at the hearing.




















                      SUBJECT / SUJET:




To consider the broadcasting application by BCE Inc. (BCE), on

its behalf and on behalf of certain of its affiliates, licensees

of broadcasting and distribution undertakings /

Afin d'étudier la demande en radiodiffusion présentée par

BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,

titulaires d'entreprises de radiodiffusion et de distribution













HELD AT:                              TENUE À:


Conference Centre                     Centre de conférences

Outaouais Room                        Salle Outaouais

140 Promenade du Portage              140, Promenade du Portage

Gatineau, Quebec                      Gatineau (Québec)


February 25, 2008                     Le 25 février 2008








In order to meet the requirements of the Official Languages

Act, transcripts of proceedings before the Commission will be

bilingual as to their covers, the listing of the CRTC members

and staff attending the public hearings, and the Table of



However, the aforementioned publication is the recorded

verbatim transcript and, as such, is taped and transcribed in

either of the official languages, depending on the language

spoken by the participant at the public hearing.







Afin de rencontrer les exigences de la Loi sur les langues

officielles, les procès‑verbaux pour le Conseil seront

bilingues en ce qui a trait à la page couverture, la liste des

membres et du personnel du CRTC participant à l'audience

publique ainsi que la table des matières.


Toutefois, la publication susmentionnée est un compte rendu

textuel des délibérations et, en tant que tel, est enregistrée

et transcrite dans l'une ou l'autre des deux langues

officielles, compte tenu de la langue utilisée par le

participant à l'audience publique.

               Canadian Radio‑television and

               Telecommunications Commission


            Conseil de la radiodiffusion et des

               télécommunications canadiennes



                 Transcript / Transcription




To consider the broadcasting application by BCE Inc. (BCE), on

its behalf and on behalf of certain of its affiliates, licensees

of broadcasting and distribution undertakings /

Afin d'étudier la demande en radiodiffusion présentée par

BCE Inc. (BCE), en son nom et au nom de certaines de ses filiales,

titulaires d'entreprises de radiodiffusion et de distribution







Konrad von Finckenstein           Chairperson / Président

Michel Arpin                      Commissioner / Conseiller

Leonard Katz                      Commissioner / Conseiller







Cindy Ventura                     Secretary / Secretaire

Claude Rousseau                   Hearing Manager /

                                  Gérant de l'audience

Steve Millington                  Legal Counsel /

Anthony McIntyre                  Conseillers juridiques





HELD AT:                          TENUE À:


Conference Centre                 Centre de conférences

Outaouais Room                    Salle Outaouais

140 Promenade du Portage          140, Promenade du Portage

Gatineau, Quebec                  Gatineau (Québec)


February 25, 2008                 Le 25 février 2008


- iv -





                                                 PAGE / PARA







BCE Inc.                                            4 /   21









Bell Broadcast and New Media Fund                128 /  761


Toronto International Film Festival Group         139 /  838


Media Awareness Network                          144 /  883


Catalyst Asset Management Inc.                    152 /  924









Gatineau, Quebec / Gatineau (Québec)

‑‑‑ Upon commencing on Monday, February 25, 2008

    at 0928 / L'audience débute le lundi 25 fevrier

    2008 à 0928

listnum "WP List 3" \l 11                THE CHAIRPERSON:  Good morning.  Welcome to this hearing.

listnum "WP List 3" \l 12                The Panel today consists of my colleagues; Michel Arpin, Vice‑Chairman Broadcasting; Len Katz, Vice‑Chairman Telecommunications and myself, Konrad von Finckenstein, Chairman.

listnum "WP List 3" \l 13                The team assisting us today includes the Hearing Manager, Claude Rousseau and the Counsels, Steve Millington and Anthony McIntyre.  Our Hearing Secretary is Cindy Ventura.

listnum "WP List 3" \l 14                Today we will consider the application presented by BCE to transfer the effective control of its broadcasting assets to a new corporation, BCE Holdco.

listnum "WP List 3" \l 15                The applicant is also requesting authority on behalf of CTVglobemedia (CTVgm) to allow a chain in ownership of CTVgm as a result of this transaction.

listnum "WP List 3" \l 16                That's really all I have to say.

listnum "WP List 3" \l 17                Madam Secretary, do you want to announce the procedures, please?

listnum "WP List 3" \l 18                THE SECRETARY:  Merci, monsieur le président et bonjour à tous.

listnum "WP List 3" \l 19                Before beginning I would like to go over a few housekeeping matters to ensure the proper conduct of the hearing.

listnum "WP List 3" \l 110               When you are in the hearing room we would ask that you please turn off your cell phones, beepers and Blackberrys as they are an unwelcome distraction and they cause interference on the internal communications systems used by our translators.

listnum "WP List 3" \l 111               We would appreciate your cooperation in this regard throughout the hearing.

listnum "WP List 3" \l 112               Please note that the Commission Members may ask questions in either English or French.  You can obtain an interpretation receiver from the commissionaire sitting at the entrance of the conference centre.  Le service d'interprétation simultanée est disponible durant cette audience.  L'interprétation anglaise se trouve au canal 7 et l'interprétation française au canal 8.

listnum "WP List 3" \l 113               We expect the hearing to take no longer than two days.  Tomorrow morning we will also begin at 9:30.  We will have a break in the morning, a break in the afternoon and a break for lunch.  We will let you know of any scheduled changes as they may occur.

listnum "WP List 3" \l 114               Pendent toute la durée de l'audience, vous pourrez consulter led documents qui font partie du dossier public pour cette audience publique dans la salle d'examen qui se trouve dans la Salle Papineau, située à l'extérieur de la salle d'audience à votre droite.  As indicated in the Agenda, the telephone number of the examination room is (819) 953‑3168.

listnum "WP List 3" \l 115               There is a verbatim transcript of the hearing being taken by the court reporter sitting at the table to my right.  If you have any questions on how to obtain all or part of this transcript please approach the court reporter during a break.  Please note that the full transcript will be made available on the Commission's website shortly after the conclusion of this hearing.

listnum "WP List 3" \l 116               For the record, please note that in its questioning of the applicant, the Panel will refer to a document entitled "Reference Materials Regarding Control in Fact Issues for the CRTC Hearing on the Acquisition of BCE Inc." prepared by McMillan, Binch, Mendelsohn for the CRTC.  This document is entered into the record as Exhibit CRTC‑1 and copies are available in the examination room.

listnum "WP List 3" \l 117               And now, Mr. Chairman, we will proceed with the application by BCE Inc. (BCE) on its behalf and on behalf of certain of its affiliates, licensees of broadcasting and distribution undertakings (the applicant) seeking authority for the transfer of effective control of the applicant to a corporation to be incorporated (BCE Holdco).  BCE Holdco will hold the shares of BCE through its subsidiary 6796508 Canada Inc. (Bidco).

listnum "WP List 3" \l 118               The applicant is also requesting authority, on behalf of CTVglobemedia Inc. (CTVgm), owner of the licensees of radio, television and specialty programming undertakings, to allow a consequential change in ownership of CTVgm subject to the approval of the Commission.

listnum "WP List 3" \l 119               Appearing for the applicant is Mr. Jim Leech.  Please introduce your colleagues and you will have 20 minutes for your presentation.

listnum "WP List 3" \l 120               Mr. Leech.


listnum "WP List 3" \l 121               MR. LEECH:  Mr. Chairman, Members of the Panel, my name is Jim Leech and I am the President and Chief Executive Officer of the Ontario Teachers' Pension Plan.

listnum "WP List 3" \l 122               Together with George Cope, the President and Chief Operating Officer of Bell Canada, and the other members of our panel, we are pleased to be here today to present our application for the Commission's prior approval of a change in effective control of BCE's broadcasting and distribution undertakings which we collectively describe as the "BCE Broadcasting Services".

listnum "WP List 3" \l 123               Before we begin, I would like to introduce the other members of our panel.

listnum "WP List 3" \l 124               To my left are Glen Silvestri, Director, Teachers' Private Capital; Mr. Dean Metcalf, Vice President, Teachers' Private Capital; Mr. Mark Masiello, Managing Director, Providence Equity Partners; and Mr. Michael Cole, Managing Director, Madison Dearborn Partners.

listnum "WP List 3" \l 125               To George's right are Mirko Bibic, Chief, Regulatory Affairs, Bell Canada; Gary Smith, President of Bell ExpressVu and Martine Turcotte, Chief Legal Officer, BCE Inc.

listnum "WP List 3" \l 126               In the back row, starting from your left are Derek Melo, a Partner with KPMG Valuation Services who prepared the Valuation Report; Mr. Jonathan Lampe, a partner at Goodmans LLP and our corporate counsel and Michael Koch, a partner at Goodmans LLP and our regulatory counsel.

listnum "WP List 3" \l 127               I would also like to introduce Mazen Makarem, Senior Principal, Merrill Lynch Private Equity, and Morgan McCague, President, Morcague Holdings Corporation, who are seated in the front row of the audience and available for any questions should the Commission have any specifically for them.

listnum "WP List 3" \l 128               I will now begin our opening statement.

listnum "WP List 3" \l 129               BCE's broadcasting services are integral to BCE's continued success in an increasingly converged Canadian market, even though from a financial point of view they are a relatively minor part of the transaction that will see our group acquire control of BCE.  The Commission's approval is important for our transaction to proceed and also for the continued contribution of the BCE Broadcasting Services to the Canadian broadcasting system that you regulate in the public interest.

listnum "WP List 3" \l 130               (FRENCH 6:49)Nous tous devant vous ce matin, de même que les employés des sociétés que nous représentons, sommes très enthousiastes au sujet de l'acquisition de BCE par un groupe d'investisseurs ayant le Régime de retraite des enseignantes et des enseignants de l'Ontario à sa tête.

listnum "WP List 3" \l 131               Vous vous êtes peut‑être demandé comment Teachers' s'est retrouvé dans cette situation. La réponse se trouve dans notre expérience passé et nos projets pour l'avenir.  Teachers' est chargé d'investir la caisse et d'administrer les prestations de retraite des 278 000 participants actifs et retraités du domaine de l'enseignement en Ontario.  Avec un actif net sous gestion de 106 G$, le Régime est le plus important régime de retraite s'adressant à une seule profession au Canada.

listnum "WP List 3" \l 132               Bell has been one of Teachers' largest holdings since 1991 and Teachers has been BCE's largest shareholder since 2005.  We currently have $2 billion invested in the company.  For some time we have felt that BCE's share price did not reflect its underlying value.

listnum "WP List 3" \l 133               Last February when it became clear that other private equity firms were planning to initiate a bid for BCE, we advised management that we were interested in evaluating a privatization plan ourselves.  In early June of last year, we officially entered the race established by BCE's board.

listnum "WP List 3" \l 134               We put the best bid for BCE on the table, and not just from a monetary standpoint, but also from the standpoint of safeguarding the future of this important Canadian company.  As good as BCE is, we are of the view that it can still be better ‑‑ more focused, more efficient and a world class Canadian corporation.

listnum "WP List 3" \l 135               The global private capital environment has very much been transformed through the involvement of Teachers' and other Canadian pension plans.  Given the investment timeline of our members, which includes both their working as well as their retired lives, we have been patient investors.  This is a major benefit of pension plan private capital, which can bring significant stability to the operations of the companies in which we invest.

listnum "WP List 3" \l 136               Our patient capital has driven business success in our portfolio companies.   In fact, we have frequently remained major investors in our portfolio companies even following potential liquidity events such as initial public offerings or income trust conversions.

listnum "WP List 3" \l 137               Two good examples of our long term outlook are Maple Leaf Sports & Entertainment and Maple Leaf Foods.  We made initial investments in each of these companies in the early 1990s and have increased our interest over the years.

listnum "WP List 3" \l 138               But the privatization of BCE is not a transaction which we could do alone.  Nor, for that matter, could any other investment firm have done it on its own.  To take BCE private we sought out co‑investors, both in Canada and beyond our borders.  Ultimately, we assembled a group of like‑minded private equity firms to assist in our bid and to ultimately hold interests in BCE.

listnum "WP List 3" \l 139               I am very proud to be sitting here today with representatives of our minority co‑investors, Providence Equity Partners, Madison Dearborn Capital Partners and Merrill Lynch, each of whom is a world‑class private equity investor in its own right.

listnum "WP List 3" \l 140               I personally sought out the involvement of Providence in this transaction, based on the high regard in which we at Teachers' hold their team, the excellent working relationship we have developed with them over many years, and Providence's unparalleled track record in successfully financing and growing telecommunications investments both internationally and in Canada, such as in MetroNet.

listnum "WP List 3" \l 141               Madison Dearborn is also a natural choice as a co‑investor in BCE.  Like Providence, Madison Dearborn brings a stellar reputation and an international perspective, together with a familiarity with the Canadian market through its previous investment in Clearnet.

listnum "WP List 3" \l 142               Further on in the process, we were very pleased to welcome a financial institution of the calibre of Merrill Lynch to the table.

listnum "WP List 3" \l 143               Together they enjoy specific expertise investing in the communications industry around the world, and that's a very good reason for Teachers' wanting them on our team to augment our own communications experience.  We did not seek them out in order to cede control to non‑Canadians.  Nor did they join to gain it, as is evidenced by the comprehensive corporate governance agreements we've proposed.  These arrangements reflect our experience, as well as good governance principles, and respect the restrictions on foreign ownership in this sector.

listnum "WP List 3" \l 144               Providence, Madison Dearborn and Merrill Lynch will help to bring international best practices and significant additional value to the table.

listnum "WP List 3" \l 145               We are also comforted by the knowledge that they have succeeded in Canada before, and are knowledgeable with and respectful of the Canadian rules.

listnum "WP List 3" \l 146               We firmly believe that their participation is good for Canada, as the benefits of their involvement will accrue to our members, to BCE, to consumers, and to the Canadian broadcasting system.

listnum "WP List 3" \l 147               Like Teachers', each of Providence, Madison Dearborn and Merrill Lynch are financial rather than strategic investors.  This means that each of us participates at the level of the Board of Directors of the companies in our respective portfolios, not by managing the companies themselves.

listnum "WP List 3" \l 148               The bottom line is that a clear majority of the equity in a privately owned BCE will be held by Canadians, with day‑to‑day management and operation residing with the management of the various companies, all under the supervision of a Board of Directors with Canadians in control.

listnum "WP List 3" \l 149               Fortunately, BCE has a very strong management team in place to which we will entrust the continuing day‑to‑day management of the company.

listnum "WP List 3" \l 150               We were particularly pleased that George Cope agreed to assume the role of Chief Executive Officer of a privatized BCE.

listnum "WP List 3" \l 151               Under the proposed governance structure, this will make George a key member of the Board of Directors of BCE Holdco, with, among other things, a pivotal role in the selection of independent members of the Board.

listnum "WP List 3" \l 152               Speaking for Teachers', as well as the other investors, we have all the confidence in the world in George, who has distinguished himself as one of the top executives in our country.

listnum "WP List 3" \l 153               We are all keenly aware that you must reach a determination that BCE's broadcasting services will remain Canadian owned and controlled.  Keeping them in the hands of Canadians has been our intent from the outset, and we are eager to satisfy the Commission that we meet this important requirement.

listnum "WP List 3" \l 154               I would therefore like to turn the microphone over to George and his team, so that they can speak to the role of the broadcasting services within BCE and the intangible and tangible benefits as set out in our application.

listnum "WP List 3" \l 155               MR. COPE:  Thank you, Jim, and good morning.

listnum "WP List 3" \l 156               Mr. Chairman and Members of the panel, I am pleased to be appearing at this Public Hearing, a first for me, despite my many years in the industry.

listnum "WP List 3" \l 157               As Jim mentioned at the outset, we are seeking the Commission's approval for a change in the effective control of BCE's broadcasting services, which include both distribution and programming undertakings owned or controlled by BCE and its affiliates.

listnum "WP List 3" \l 158               By approving this application, the Commission will ensure that BCE's broadcasting services maintain their leadership position by securing for these businesses the necessary financial and other resources provided by Teachers' and its co‑investors.

listnum "WP List 3" \l 159               The Government of Canada and the Commission have recognized the importance of vigorous competition between incumbent local exchange carriers and cable companies for bundled telecommunications and broadcasting distribution services.

listnum "WP List 3" \l 160               Broadcasting distribution services are a growing segment for telecommunications carriers, and BCE is no exception.  We are very proud of the success of our direct‑to‑home satellite service, Bell ExpressVu, which has built a subscriber base nationwide of more than 1.8 million households, and is Canada's leading digital distribution platform, boasting more high definition channels than any of our large cable competitors.

listnum "WP List 3" \l 161               But with Canada's largest cable operators aggressively entering and expanding into the market for local telephone services, we cannot afford to stop investing.  This is why the BCE broadcasting services are now, and will continue to be a significant component of our overall competitive strategy, all to the benefit of Canadian consumers and the Canadian broadcasting system.

listnum "WP List 3" \l 162               BCE management is excited to work with this group of investors who, we know, share a value‑added approach and are determined to concentrate on the long‑term horizon.

listnum "WP List 3" \l 163               Teachers' and its co‑investors are focused on growth, yet understand that growth requires investment.

listnum "WP List 3" \l 164               This privatization comes at a pivotal time in BCE's history, when it has shed its most significant non‑core assets.

listnum "WP List 3" \l 165               As professional management, we are confident that the shift to private ownership will facilitate the implementation of BCE's long‑term strategy, including its broadcasting services.

listnum "WP List 3" \l 166               Day‑to‑day management of BCE, including the licensed undertakings before the Commission in this application, will remain with their respective management teams.

listnum "WP List 3" \l 167               Teachers' and its co‑investors intend to work with us in a forward manner to provide us with access to the capital necessary to finance growth in an increasingly competitive marketplace.

listnum "WP List 3" \l 168               We believe this will provide the broadcasting services with an enhanced ability to respond to new challenges raised by the increasingly rapid pace of technological change in a multi‑platform, multi‑product industry.

listnum "WP List 3" \l 169               In addition to the intangible benefits of the proposed transaction, we have proposed a package of tangible benefits.  Gary Smith, President of Bell ExpressVu, will now describe the proposed allocation of these benefits.

listnum "WP List 3" \l 170               MR. SMITH:  Thank you, George.

listnum "WP List 3" \l 171               In compliance with Commission policies and practices, we have proposed tangible benefits of $10.96 million to be spent over a seven‑year period.  These proposed incremental expenditures will be put toward significant tangible benefits, which will yield measurable improvements to the Canadian broadcasting system and to the Canadian public.

listnum "WP List 3" \l 172               We are proposing that a significant portion of the dollars, over $6 million, be dedicated to on‑screen resources, particularly for the creation of first‑window Canadian programs for pay‑per‑view.

listnum "WP List 3" \l 173               As such, we commit expenditures to the creation of programming that features important and under‑served Canadian entertainment properties on a pay or free‑per‑view basis.

listnum "WP List 3" \l 174               Furthermore, we commit to funding this programming in high definition.

listnum "WP List 3" \l 175               In our application we have provided a number of programming creation proposals.  Among the initiatives proposed is the allocation of moneys to the coverage of live theatrical productions.  A series aimed at promoting Canadian playwrights, actors and directors would provide significant exposure and sponsorship opportunities within the "A List" theatrical community in Canada.

listnum "WP List 3" \l 176               A potential partner for such a venture is the Stratford Festival, a national institution of international renown, dedicated to cultivating theatre‑related education and training for Canadian artists.

listnum "WP List 3" \l 177               We also propose to direct a significant portion of these benefits to the creation and administration of funding for Quebec independent production.  This funding will be dedicated to the production of original programming that is both of popular interest and specific relevance to viewers in Quebec.

listnum "WP List 3" \l 178               We would commit to assisting to fund the production of at least one original comedy or drama series in the French language produced by the independent production sector in Quebec.

listnum "WP List 3" \l 179               In support of independent filmmaking in Quebec, our programming service, Vu!, would invest in coverage of the Montreal Film Festival, including daily reports, trailers, and interviews from the red carpet, showcasing the festival as well as the exciting culture and cuisine of one of Canada's finest cities.

listnum "WP List 3" \l 180               Finally, as part of its festival coverage, Vu! would solicit entries by independent filmmakers in Quebec and exhibit five of the top films on its French pay‑per‑view service as a means of providing exposure to up‑and‑coming directorial and screenwriting talent.

listnum "WP List 3" \l 181               Furthermore, we propose that more than $4 million of the benefits from this transaction be directed to the Bell Fund.  The Bell Fund's mandate is to advance the Canadian broadcasting system, and it has invested in the production of new media projects associated with television productions since 1997.

listnum "WP List 3" \l 182               The Bell Fund encourages and funds the creation of excellent Canadian digital media, promotes partnerships and sustainable businesses in the broadcasting and new media sectors, engages in research and sharing of knowledge, and enhances the national and international profile of industry stakeholders.

listnum "WP List 3" \l 183               Finally, we propose that $700,000 be dedicated to social benefits, and, more specifically, the Media Awareness Network.  MNet is a non‑profit Canadian organization whose mission is to support and encourage media and internet education, and its widest possible integration into Canadian schools, homes and communities.

listnum "WP List 3" \l 184               Its aim is to help children and youth develop an informed and critical understanding of the nature of the media, the new techniques used in creating media products, and the media's role and influence within society.

listnum "WP List 3" \l 185               Bell is a founding sponsor of the Media Awareness Network and has partnered with it over the past five years to deliver original programming for educators, parents and children aimed at keeping Canadian children safe on the internet.

listnum "WP List 3" \l 186               We are proud of the benefits package we have assembled, and believe it will clearly advance a number of key public policy initiatives that contribute to the broadcasting system, including Canadian independent production in HD, the development of Canadian new media, and keeping our kids safe on the Internet.

listnum "WP List 3" \l 187               Jim.

listnum "WP List 3" \l 188               MR. LEECH:  In conclusion, Mr. Chairman, and Members of the Panel, we're asking for your prior approval of our application concerning BCE's broadcasting services.

listnum "WP List 3" \l 189               As we have demonstrated in our application, the services will be owned and controlled by Canadians consistent with the Broadcasting Act and the rules that govern your decision‑making responsibilities.

listnum "WP List 3" \l 190               Teachers and our fellow investors are committed to realizing the full potential of the BCE broadcasting services over a long‑term horizon and have an interest in increasing the value of the services being provided to consumers.

listnum "WP List 3" \l 191               We have the superior resources and experience required in order to achieve success in this investment by enabling the BCE broadcasting services to respond in a timely and effective fashion to the changing trends in the industry and to retain their position as respected competitors in the broadcasting industry.

listnum "WP List 3" \l 192               The proposed benefits package will deliver significant and incremental benefits to the Canadian programming community for years to come.

listnum "WP List 3" \l 193               We firmly believe that our application is in the public interest and is consistent with the objectives of the Broadcasting Act and we look forward to responding to your questions.

listnum "WP List 3" \l 194               Thank you very much.

listnum "WP List 3" \l 195               THE CHAIRPERSON:  Thank you very much, Mr. Leech.

listnum "WP List 3" \l 196               We have a lot of questions for you, a lot of clarifications.

listnum "WP List 3" \l 197               This is far from an easy transaction to understand and there is some aspects which we consider problematic.

listnum "WP List 3" \l 198               So, the way we are going to do it, I am going to ask you about control questions, my colleague, Mr. Katz, will talk about valuation and financial affairs and my colleague, Mr. Arpin, will talk about programming and benefits.

listnum "WP List 3" \l 199               Needless to say, me and others may interject, but basically that is how we divided it.

listnum "WP List 3" \l 1100              So, let me start off.  I would like to understand this whole issue of Morcague, first of all.  I know that you are subject to the Ontario Pensions regime which incorporates the federal regulations which say:

                      "The Administrator of a Plan shall not directly or indirectly invest monies of the Plan in the securities of a corporation to which are attached more than 30% of the votes that may be cast to elect the directors of the corporation."

listnum "WP List 3" \l 1101              THE CHAIRPERSON:  When I look at this structure and I take Exhibit 1 here which is the easiest one for me to ‑‑ so, page ‑‑ it says, BCE Inc. Proposed Structure.

listnum "WP List 3" \l 1102              I see that all the voting shares which are called Class "A" shares which are held by Morcague, and then there's an agreement between Morcague and Teachers as to the voting of those shares.

listnum "WP List 3" \l 1103              Can you explain to me, first of all, how did Mr. McCague get those shares, I don't ‑‑ does he hold them, does Teachers hold them, who holds them, et cetera?  There is nothing in the documentation that I could find that explains to me what Mr. McCague's role is other than that he votes his shares.

listnum "WP List 3" \l 1104              MR. LEECH:  You're correct, Mr. Chair, that the Pension Benefits Act of Ontario states that Teachers cannot invest its funds in shares that vote for directors in excess of 30 per cent and, therefore, this is a structure that we've used over many years to ensure that we comply.

listnum "WP List 3" \l 1105              Mr. McCague will be investing his own funds through Morcague to own those shares.  He will own the shares and we have an agreement with Mr. McCague on how he will vote them.

listnum "WP List 3" \l 1106              He does not have the right to designate directors, he will follow our direction on that.  So, he is the beneficial owner of those shares and has invested his own money for those shares.

listnum "WP List 3" \l 1107              THE CHAIRPERSON:  Now I'm really confused.  I thought you owned 50 or whatever the percentage of equity is.  Are you telling me now that Mr. McCague owns the equity?

listnum "WP List 3" \l 1108              MR. LEECH:  No, we own in excess    of 50 per cent of the non‑voting shares and Mr. McCague, through Morcague, owns 66 and two thirds of the voting shares.

listnum "WP List 3" \l 1109              THE CHAIRPERSON:  So, he is actually the owner of the shares?

listnum "WP List 3" \l 1110              MR. LEECH:  He is actually the owner of the voting shares, yes, sir.

listnum "WP List 3" \l 1111              THE CHAIRPERSON:  And he buys them from you, or how does he get them?

listnum "WP List 3" \l 1112              MR. LEECH:  He w ill be investing ‑‑ Morcague will be investing in BCE Holdco.

listnum "WP List 3" \l 1113              THE CHAIRPERSON:  When, at what point in time?  How does this...

listnum "WP List 3" \l 1114              MR. LEECH:  At closing.

listnum "WP List 3" \l 1115              THE CHAIRPERSON:  At closing.  So, he buys 66.7 per cent of the Class "A" voting shares of BCE Holdco?

listnum "WP List 3" \l 1116              MR. LEECH:  That's correct, sir.

listnum "WP List 3" \l 1117              THE CHAIRPERSON:  At the fair market value of those shares or whatever, of the agreed upon value or whatever it is?

listnum "WP List 3" \l 1118              MR. LEECH:  At the agreed upon value, yes.

listnum "WP List 3" \l 1119              THE CHAIRPERSON:  And besides this document that I have beside me which is called Agreement Pertaining to Class "A" Shares of Canadian Holdco, et cetera, is there another document between Teachers and Morcague?

listnum "WP List 3" \l 1120              MR. LEECH:  There's the irrevocable proxy and there's that agreement, sir.

listnum "WP List 3" \l 1121              THE CHAIRPERSON:  And that's it.  I'm not sure there's a proxy here, I haven't seen that, but maybe you can furnish that that to us.

listnum "WP List 3" \l 1122              MR. LEECH:  I'm advised that the proxy is actually part of the agreement, sir.

listnum "WP List 3" \l 1123              THE CHAIRPERSON:  Well, I have the agreement in front of me.

listnum "WP List 3" \l 1124              MR. LAMPE:  Mr. Chairman, the agreement contains all of the arrangements as between Teachers and Morcague and the proxy is actually a form of Power of Attorney that can be found in section 3.1 of that agreement and it provides a mechanism to ensure the voting of the shares in accordance with that agreement.

listnum "WP List 3" \l 1125              THE CHAIRPERSON:  But Mr. McCague is acquiring all the Class "A" shares on closing.  There must be some sort of agreement, some sort of arrangement between Teachers and Morcague saying, on closing we acquire Class "B" and "C" shares, you are expected to acquire Class "A" shares, 66.7 per cent, et cetera, at the value of so‑and‑so.

listnum "WP List 3" \l 1126              I haven't seen any documentation along those lines.

listnum "WP List 3" \l 1127              MR. LAMPE:  Mr. McCague has actually acquired a limited number of voting shares already when the company was established and on closing will acquire an additional number of those shares.

listnum "WP List 3" \l 1128              There isn't any formal documentation.  Similar to the rest of the transaction, there's a closing agreement that provides for those mechanics.

listnum "WP List 3" \l 1129              So, those documents will be entered into at closing to formalize the arrangements and result in the issuance of the shares so that the structure will end up being as depicted in Staff's diagram.

listnum "WP List 3" \l 1130              THE CHAIRPERSON:  But, sorry, I'm somewhat lost here.  On all the documentation that you have furnished to me, including here the whole of the binders, I'm looking for a document which lays out the agreement saying that on closing this is what Mr. McCague will acquire and basically that's the deal that you struck with him.

listnum "WP List 3" \l 1131              There must be some document.  It can't be all just verbal.

listnum "WP List 3" \l 1132              MR. LAMPE:  There's no other formal agreements that are set out.  The structure has been developed by the tax people and by the other lawyers and it's reflected in a closing agenda or a checklist and we can certainly provide that to you.

listnum "WP List 3" \l 1133              But there's no other ‑‑ there are no other forms of agreements at this point to implement that.  Those will be executed in the form of subscription agreements for closing though.

listnum "WP List 3" \l 1134              THE CHAIRPERSON:  So, the checklist that you're talking about for the closing provides for Mr. McCague to submit evidence that he has acquired 66.7 per cent of ‑‑

listnum "WP List 3" \l 1135              MR. LAMPE:  Correct, to complete the ‑‑

listnum "WP List 3" \l 1136              THE CHAIRPERSON:  ‑‑ the voting shares, of Class "A" voting shares.

listnum "WP List 3" \l 1137              MR. LAMPE:  Correct.

listnum "WP List 3" \l 1138              THE CHAIRPERSON:  Okay.  Now, we all know the specific reading ‑‑ reference that I read out, it says "directly or indirectly".

listnum "WP List 3" \l 1139              Why isn't this a means of Teachers doing indirectly what it can't do directly?  Clearly can't vote more than 30 per cent.

listnum "WP List 3" \l 1140              Here 67 per cent are being held by Mr. McCague, Morcague has undertaken in writing to vote it in the way that Teachers directs or else at Teachers request transfer to another designee.

listnum "WP List 3" \l 1141              Why doesn't this amount to doing indirectly what you can't do directly?

listnum "WP List 3" \l 1142              MR. LAMPE:  Mr. Chairman, the language in the legislation provides that Teachers can't invest the monies of the Plan in voting shares to which are attached more than 30 per cent of the votes for election of directors.

listnum "WP List 3" \l 1143              And as Mr. Leech has indicated, a structure along these lines in which Teachers has not invested any of its monies in those shares has been used in the context of other investments.

listnum "WP List 3" \l 1144              So, the situation that we have is there is no investment of Plan monies in voting shares here, although you're absolutely right that Teachers does retain the ability to vote those shares.

listnum "WP List 3" \l 1145              That's a structure the Teachers has used previously and that the pension regulators are aware of in the context of other transactions that have been undertaken by Teachers and they're also aware of it being used in the context of this transaction.

listnum "WP List 3" \l 1146              THE CHAIRPERSON:  I'm not so much interested in other transactions, I'm interested in the one that you just mentioned, that the pension authorities are ‑‑ I'm obviously not a pension expert and it is, therefore, them to decide not for me.

listnum "WP List 3" \l 1147              Do you have a ‑‑ whatever, a clearance certificate, an opinion or something from the Ontario Pension people saying that this arrangement for this transaction in their view meets the requirements of the Ontario Pension legislation?

listnum "WP List 3" \l 1148              MR. LAMPE:  Mr. Chairman, we don't have any such form of certificate, and I'm not a pension expert either, but I'm told that the Pension authorities do not provide written opinions or clearance certificates in that form.

listnum "WP List 3" \l 1149              THE CHAIRPERSON:  Well, I can advise you they do.  Our counsel has told me that if you make an application to the Deputy Superintendent for a ruling he will give such a ruling.

listnum "WP List 3" \l 1150              And if there's no issue ‑‑ I mean, I take your word for it, I just want the proof, not from you but from the regulator that, in effect, this is in accordance with the pension regulation.

listnum "WP List 3" \l 1151              MR. LAMPE:  We'll follow up with them.

listnum "WP List 3" \l 1152              THE CHAIRPERSON:  Okay.  Because obviously I don't want to sanction a transaction where you are doing something indirectly that you can't do directly.

listnum "WP List 3" \l 1153              If it is in conformance with the Ontario legislation and the Ontario Pension people sign off, then that is fine; if not, then we have to revisit this issue.

listnum "WP List 3" \l 1154              Madam Secretary, there is somebody at the back there who is holding up their hand.  Will you please deal with them.

‑‑‑ (off mic)

listnum "WP List 3" \l 1155              THE CHAIRPERSON:      I'm sorry, speak to Madam Secretary.

listnum "WP List 3" \l 1156              Now, looking at the transaction, and it is really going principally to the principal investors agreement.

listnum "WP List 3" \l 1157              I was wondering, first of all, why are the various rights vested in the shareholders and not in your designees and the Board?  Everything under the shareholders agreement says it is the right of the requisite investor, for instance, rather than the designee of the investor.

listnum "WP List 3" \l 1158              Is there any reason why you did put the rights in the shareholder rather than in the designee?

listnum "WP List 3" \l 1159              MR. LEECH:  The agreement calls for some approval rights for requisite shareholders which are above the levels or in addition to the approval rights of the Board.

listnum "WP List 3" \l 1160              So, it's almost a super majority concept where there are very large transactions, for example, major acquisitions or divestitures out of the ordinary course of business, changes to the capital structures, those sorts of things which is normal in a buy‑out transaction that some of those powers over certain levels rest with the largest shareholders.

listnum "WP List 3" \l 1161              THE CHAIRPERSON:  Yes, I understand but you, assuredly, Mr. Leech, understand my point.  The directors and your designees have duties qua directors over and above representing your interest as the designated shareholder, requisite shareholder, et cetera.

listnum "WP List 3" \l 1162              And all the rights that you have here which are vested in the shareholders could just as well have been vested in your designee, and in a lot of transactions they are, and I was wondering why it isn't done in this case and whether you have any objection to restructuring and putting those rights in your designees who then would have to act, obviously, in the interest of the shareholders who have appointed them, but also in the overall corporate best interests of the corporation as is normal under corporate law.

listnum "WP List 3" \l 1163              MR. LEECH:  Basically we view that when somebody is acting as a director they're dealing as a fiduciary to the organization and have fiduciary responsibilities to the organization.

listnum "WP List 3" \l 1164              By moving these limited number of approvals out into the hands of the shareholders, they are acting in accordance with their interest as a shareholder and not as an interest as a director and I think there's a ‑‑ from a governance perspective, that to us makes more sense.

listnum "WP List 3" \l 1165              THE CHAIRPERSON:  Do I read too much in your answer when I say it would not be acceptable to you to move those rights into the hands of your designees rather than in the shareholders?

listnum "WP List 3" \l 1166              MR. LEECH:  From Teachers' perspective, with regard to governance, we believe it's best to be vested ‑‑ those rights are best vested at the shareholder level, sir.

listnum "WP List 3" \l 1167              THE CHAIRPERSON:  Can I hear from Providence on that point.

listnum "WP List 3" \l 1168              MR. MASIELLO:  Mr. Chairman, what we have seen is I think quite common practice, the way that the governance is constructed here for Bell, in the sense that certain approvals would rest with the shareholders as opposed to the director level because therein sometimes fiduciary duty of a director versus the fiduciary duty of a shareholder can be at conflict.

listnum "WP List 3" \l 1169              THE CHAIRPERSON:  Well, that's precisely the point I'm making and I want to make sure that the interests of the corporation as a whole always are present at the decision‑making.

listnum "WP List 3" \l 1170              MR. MASIELLO:  Correct.  And that is why it's frequently constructed in this structure that you see before you.

listnum "WP List 3" \l 1171              THE CHAIRPERSON:  Okay.  In answer to my question to Mr. Leech, you would be adverse to moving these rights to the designee level rather than the shareholder level?

listnum "WP List 3" \l 1172              MR. MASIELLO:  Yes, and for ‑‑ really principally because I think what ‑‑ as I've said, is what's before you is very common practice.

listnum "WP List 3" \l 1173              THE CHAIRPERSON:  Okay.  Secondly, the structure of the documentation basically puts Providence and Teachers as equals.  You are both requisite investors, you have some special rights and et cetera, both for the Board, for nominations, for all sorts of things.

listnum "WP List 3" \l 1174              And what ‑‑ I don't quite understand why you are basically put as equals, given that Teachers clearly has a dominant voting control and a dominant equity control, and Teachers is the Canadian owner and you're telling me has control in fact, why then does Teachers treat itself as an equal to what effectively is a minority investor?

listnum "WP List 3" \l 1175              MR. LEECH:  A little bit of background on the transaction, Mr. Chair.

listnum "WP List 3" \l 1176              It was always Teachers' intention to be the largest shareholder in the acquisition of BCE, but it is not our intention to always be the controlling shareholder in BCE.  And, as has been provided to Staff, we will ‑‑ it's our intention to look to syndicate some of our interest, none of the voting interest will be syndicated by others, but of our non‑voting interest.

listnum "WP List 3" \l 1177              So, it was never the intention that we would for ever and ever be a 51 per cent shareholder as we are right now, it was always the intention that Providence would be the second largest shareholder.

listnum "WP List 3" \l 1178              And, so, that's how ‑‑ that's the background.  So, when we sat down to work out the various governance rules, we kept that in mind.

listnum "WP List 3" \l 1179              The way we structured the Board with 13 members, was that there would be 10 Board members who indeed are designated directly by the investor group who has invested substantial sums.  That would be five nominated by Teachers, three by Providence, one each by Merrill Lynch and Madison Dearborn, and then we would have three additional directors, one the Chief Executive Officer, who's Canadian, and two independents.

listnum "WP List 3" \l 1180              And it was our intention to ensure that we have control of the Board in the hands of Canadians, not necessarily Teachers, but Canadians through that structure.

listnum "WP List 3" \l 1181              A little bit about the role of the independents.  It's a ‑‑ Teachers has always employed independent directors in its investments, even if it owns a hundred per cent, we've always felt that it was very good governance, very good value add to go out and introduce independent directors to the Board to bring an independent perspective and that's served us very, very well over the years.

listnum "WP List 3" \l 1182              And we have investments where we own a hundred per cent and we would have seven directors.  The Ports that we acquired last year where we invested $2.5‑billion, we own a hundred per cent and the Chair, plus three of the other Board members are independent, and we have three Teachers' representatives on the Board.

listnum "WP List 3" \l 1183              That has worked very well for us, but we put a lot of stock in the value‑add that independent directors can bring to this situation.

listnum "WP List 3" \l 1184              So that is the background.

listnum "WP List 3" \l 1185              Then, when we went on to the requisite shareholders for approvals, it was:  Okay.  What matters are large enough and out of the ordinary course that, indeed, they need to have full endorsement by the shareholder base, not just the Board of Directors.

listnum "WP List 3" \l 1186              That is the structure of the Requisite Shareholder Agreement.

listnum "WP List 3" \l 1187              THE CHAIRPERSON:  I understand your wish to have independent directors and the benefits they bring; I don't understand why you have to share the nomination with Providence.

listnum "WP List 3" \l 1188              You, as majority shareholder, having voting control, if you want to have an independent director, you can nominate one, et cetera.  But why do you have to share that responsibility with Providence?

listnum "WP List 3" \l 1189              MR. LEECH:  The responsibility is actually shared between Teachers', Providence and the Chief Executive Officer, who is Canadian.  Our ‑‑

listnum "WP List 3" \l 1190              THE CHAIRPERSON:  It still begs the question why you would give up the right, given that you have control, both voting and equity.

listnum "WP List 3" \l 1191              MR. LEECH:  First, I would go back to my original point, that we will not necessarily always have 51 percent.  This isn't an issue of Teachers' being in control; we believe it is an issue of Canadians being in control, and we wanted to set up a circumstance where those independent directors were being chosen by Canadians.

listnum "WP List 3" \l 1192              THE CHAIRPERSON:  Unless my mathematics is wrong, you basically have a tied Board.

listnum "WP List 3" \l 1193              You have a certain number of votes, the other investors have a certain number of votes, and then you have the CEO, and you will have the real swing, which will be the two independent directors.

listnum "WP List 3" \l 1194              I still am not quite sure why you felt it was necessary to give up this.

listnum "WP List 3" \l 1195              MR. LEECH:  Again, our view is that the majority of the Board will be Canadian through this structure.

listnum "WP List 3" \l 1196              THE CHAIRPERSON:  We will come to the Canadian in a moment.

listnum "WP List 3" \l 1197              You haven't defined "independent".

listnum "WP List 3" \l 1198              In other transactions we have defined "independent" to say:  Individuals in good standing in the business community who were not currently, nor had been in the three years prior to the appointment employed by one of the shareholders.  Furthermore, the independent could not have or have had any relationship or characteristics that might reasonably be expected to compromise their independence from the shareholder groups.

listnum "WP List 3" \l 1199              A definition along those lines, I assume, you would not have any objection to it being inserted in your principles ‑‑

listnum "WP List 3" \l 1200              MR. LEECH:  Mr. Chair, in anticipation of that, I went to the agreement that we have in place at CTVglobemedia and thought that that definition was most appropriate; that is, they must have no direct or indirect relationship with the company, any major shareholder, or any of their respective subsidiaries which could reasonably be expected to interfere with the exercise of his/her independent judgment as a director.

listnum "WP List 3" \l 1201              THE CHAIRPERSON:  Okay.  You are going to add that to the agreement, I gather.

listnum "WP List 3" \l 1202              MR. LEECH:  Yes, sir.

listnum "WP List 3" \l 1203              MR. KOCH:  Mr. Chairman, if I could go one question back, if you would permit me; on the subject of the choice of independents, I would note that in the Unitel case, as well, the banks, which had 66 and two‑thirds of the voting shares, shared, actually, the role of appointing independents with AT&T, the U.S. company.

listnum "WP List 3" \l 1204              So there is a precedent for this type of Board, where the independents are chosen jointly by Canadians and non‑Canadians, sir.

listnum "WP List 3" \l 1205              THE CHAIRPERSON:  I am well aware of that, Mr. Koch, but you are also well aware that each one of these control in fact cases is done on the facts of the particular case and the totality of the situation as it comes through the corporate arrangements.

listnum "WP List 3" \l 1206              MR. KOCH:  Yes.

listnum "WP List 3" \l 1207              THE CHAIRPERSON:  And Unitel was quite different from this one.

listnum "WP List 3" \l 1208              Canadians ‑‑ you said that the majority would be Canadians.

listnum "WP List 3" \l 1209              Now, I have a problem with just calling them Canadians.  Let's say that Madison Dearborn or Providence designates a Canadian to be their representative.  Yes, the person may have Canadian citizenship, but he really represents the interests of Providence or the interests of Madison Dearborn, as the case may be.

listnum "WP List 3" \l 1210              To get around this situation, should we not be speaking here about Canadians designated by the Canadian shareholders?  Those are the ones that matter.

listnum "WP List 3" \l 1211              You could have a majority of Canadians, but yet, if they are all nominated by Providence, that is really very cold comfort in terms of control in fact for this corporation.

listnum "WP List 3" \l 1212              MR. LEECH:  I understand, Mr. Chair.

listnum "WP List 3" \l 1213              My first response would be that people who are sitting on the Board have a fiduciary responsibility to the corporation, as opposed to the specific shareholder that designated them.

listnum "WP List 3" \l 1214              That notwithstanding, in the structure that we have established for selecting the Board, in our view, at least seven of those directors will be Canadians, who are either designated directly by Teachers' or in which Teachers' has had a significant say with the independents plus the Chief Executive Officer.

listnum "WP List 3" \l 1215              THE CHAIRPERSON:  That is exactly what I am saying, it takes us back to the independents.

listnum "WP List 3" \l 1216              You nominate five, Providence, MDB and Merrill Lynch designate five, and then you have the CEO and two independents, who have to be jointly nominated by you and Providence.

listnum "WP List 3" \l 1217              MR. LEECH:  And the CEO.

listnum "WP List 3" \l 1218              THE CHAIRPERSON:  And the CEO.

listnum "WP List 3" \l 1219              Either you nominate one of the independents or one of the independents becomes a Teachers' representative.  But the way you have it right now, I don't ‑‑

listnum "WP List 3" \l 1220              (a) I don't see that you have control; and (b), more importantly, the way you talk about Canadians in there, it doesn't reference who has appointed them.

listnum "WP List 3" \l 1221              So you always have a majority of Canadians, but they are not necessarily a majority of the ones that have been designated by the Canadian shareholders.

listnum "WP List 3" \l 1222              MR. LEECH:  No, they are not.  That is correct, they are not designated solely by the Canadian shareholders, they are designated through the mechanism of Teachers', Providence and the Chief Executive Officer.

listnum "WP List 3" \l 1223              THE CHAIRPERSON:  That leads to paper compliance, but it doesn't mean, necessarily, control in fact.  That is my point here.  I want to make sure that there is control in fact at all times by the Canadian shareholders.

listnum "WP List 3" \l 1224              MR. MASIELLO:  Mr. Chairman, I would add that I think the construct that you have before you was really designed to build ‑‑

listnum "WP List 3" \l 1225              I think, in practice, the independents will be chosen by consensus.  In our experience, it is not the case that it would be a divided vote.

listnum "WP List 3" \l 1226              That said, I think the construct is such that, if there ever were a divided vote, it would be Canadians that made the decision, as opposed to ‑‑ because of the three parties involved in selecting.

listnum "WP List 3" \l 1227              Just to repeat, I think we are really trying to build consensus, and this is meant to be a check and balance to ensure that the independents truly are independents, which is what the agreement is among the parties, to really be able to recruit the best individuals possible.

listnum "WP List 3" \l 1228              THE CHAIRPERSON:  I hear you, and I certainly hope that you are right, that everything will be done by consensus and that you have as few divided votes as possible.  That would ensure a good functioning of the Board, and it would be healthy for the corporation.

listnum "WP List 3" \l 1229              But being a lawyer, I have to, unfortunately, look at the worst case scenario, and I want to make sure that, in case there is division, the control is with Canadians.  I am not convinced of that the way you have constructed it, both in terms of nominees to the Board and in terms of the way you define Canadians.

listnum "WP List 3" \l 1230              That is why I raise it.  Is there a difference between Canadians and Canadians who represent the Canadian shareholders?

listnum "WP List 3" \l 1231              I think the document before us very artfully mingles those two separate contexts.  Therefore, I suggest that they should be more clarified.

listnum "WP List 3" \l 1232              MR. BIBIC:  Mr. Chairman, if I may ‑‑ and I am mindful of the point you made to Mr. Koch about precedent ‑‑ certainly there is a recent precedent in the context of the sale by BCE of Telesat, with which we are very familiar, as are you.  I can't go into too many details, for obvious reasons, but I think there are some parallels to be drawn there, which I think are more appropriate perhaps than Unitel, in the context that you have a pension fund, you have a non‑Canadian investor, you have the same number of directors, you have a role for independents, and a role for the non‑Canadian in appointing them.

listnum "WP List 3" \l 1233              And to the extent that there are distinguishing factors ‑‑ and there are ‑‑ I would suggest that those distinguishing factors in this particular case support the view that this transaction even more strongly supports that the Board would be a Canadian control.

listnum "WP List 3" \l 1234              THE CHAIRPERSON:  Well, Mr. Bibic, you can choose to hear me or not hear me.  I made my point so I expect you to take it under consideration.

listnum "WP List 3" \l 1235              The other point is Teachers' clearly contemplates ‑‑ and you mentioned so yourself, Mr. Leech ‑‑ that you will divest at a certain point in time some of your equity, et cetera, and there are two triggers there, when you go below 66 ‑‑ when you lose one Board Member and then you may lose two Board Members, depending how much interest you sell.

listnum "WP List 3" \l 1236              I'm not quite clear what happens if you lose a Board Member.  Do the persons whom you sell your interest to, which presumably would be other Canadians otherwise you run into problems in the ownership, do they acquire that vote?

listnum "WP List 3" \l 1237              MR. LEECH:  You are quite right in that we will only syndicate to other Canadians, at which point we will look to shift their ability to designate shareholders to those to whom we syndicate it.

listnum "WP List 3" \l 1238              THE CHAIRPERSON:  Yes, but unless I missed it, I don't think the Principal Investors' Agreements sort of provides that right will go to the person who acquires the shares from you.  It just suggests that the Board is reduced by one member.  It is reduced and you lose the right to appoint that one Director.  But I don't think it suggests that the person acquiring it steps into your shoes.

listnum "WP List 3" \l 1239              MR. LEECH:  Maybe I will ask Mr. Lampe to be a bit more specific on that.

listnum "WP List 3" \l 1240              MR. LAMPE:  Mr. Chairman, you are correct in that the agreements doesn't contemplate that.

listnum "WP List 3" \l 1241              What the agreements contemplate more broadly is that if there are going to be any transfers of shares that the result of the transfer would be in compliance with the applicable legislation, and since there are a variety of circumstances it has been left in that method to make sure that the formulation of the Board at the time is appropriate.

listnum "WP List 3" \l 1242              But you are absolutely right that there isn't something that says if one of the Teachers' Board Members is lost as a result of going down by a third it moves in a specific direction.

listnum "WP List 3" \l 1243              THE CHAIRPERSON:  So are you coming to us, then, for approval at that point in time?

listnum "WP List 3" \l 1244              MR. KOCH:  Sir, I think whether or not we would reappear before you for approval would depend on the various thresholds set out in the regulations.

listnum "WP List 3" \l 1245              THE CHAIRPERSON:  Yes but, Mr. Koch, this is what causes me the problem, it is not clear whether you come but, on the other hand, Mr. Leech may lose one Member on the Board of Directors.  So I want to make sure that one that he loses is being reappointed by somebody else who is now in his shoes.

listnum "WP List 3" \l 1246              MR. KOCH:  There is an overriding requirement under the agreements that the structure always comply with the restrictions, as well as that the majority of the Board always be composed of Canadians.

listnum "WP List 3" \l 1247              THE CHAIRPERSON:  Of course.  I expect you to be in compliance with the law and you will do that, but we are talking here about control in fact which, as you know, is a factual determination as well as a documentary term.

listnum "WP List 3" \l 1248              I mean, I just don't understand why the agreement cannot be amended so as to provide that when this happens you trigger ‑‑ you either go beneath 62 2/3 or 33 1/3, then each time where you lose the right to nominate one of your directors, that that right gets vested in the people who acquire from you.

listnum "WP List 3" \l 1249              You probably will do it by syndication, there will be some lead investor and he gets it right, I don't care how you structure it, but if you want me to have comfort in the structure as it is then you surely have to make sure that it will continue to remain in place or that there will be somebody stepping into your shoes so that the same assurance that I get from you presently I would get from somebody else.

listnum "WP List 3" \l 1250              MR. LEECH:  I understand, Mr. Chair.

listnum "WP List 3" \l 1251              We will take that under consideration.

listnum "WP List 3" \l 1252              THE CHAIRPERSON:  Related to that...

‑‑‑ Pause

listnum "WP List 3" \l 1253              THE CHAIRPERSON:  If at some point in time you divest a huge number, you cease being a principal investor, if I understand it correctly, under the agreement.

listnum "WP List 3" \l 1254              Let me just go to the specific section.

‑‑‑ Pause

listnum "WP List 3" \l 1255              THE CHAIRPERSON:  Section 2.4.6 of the Principal Investors' Agreements.

listnum "WP List 3" \l 1256              What happens when 2.4.6 kicks in?

listnum "WP List 3" \l 1257              Maybe, Mr. Lampe, you can explain that to me.

listnum "WP List 3" \l 1258              MR. LAMPE:  Yes, Mr. Chairman.

listnum "WP List 3" \l 1259              The notion here is if a principal investor ceases to hold a meaningful investment, which has been set up to $225 million level, that person won't have the fundamental investor protection rights that are in the Principal Investors' Agreements.

listnum "WP List 3" \l 1260              The consequence of that isn't, once again, contemplated in these agreements from a control perspective because that is a significant change from Teachers' existing holding.  And because there are a variety of circumstances we didn't feel that we could contemplate all of those situations.

listnum "WP List 3" \l 1261              I think our attempt to deal with that was to provide that any transfers would have to be in compliance with the applicable ownership requirements and that the situation would be addressed at the time.

listnum "WP List 3" \l 1262              THE CHAIRPERSON:  You know, I appreciate that it is very difficult to contemplate all of these ramifications, but at that point in time, which I presume is fairly far down the road, do you contemplate coming back to us with a renewed Principal Investors' Agreement reflecting the new situation and the new structure that will then govern?

listnum "WP List 3" \l 1263              MR. KOCH:  Mr. Chairman, I expect that if Teachers' ever got to ‑‑ and I don't know that it anticipates to getting to that level ‑‑ that we would be dealing with something so fundamental that it's difficult to believe that the thresholds contained in the regulations wouldn't then be triggered, which would bring us back before you indeed.

listnum "WP List 3" \l 1264              THE CHAIRPERSON:  So presumably something along those lines can be put in the Principal Investors' Agreement?

listnum "WP List 3" \l 1265              MR. KOCH:  That is something the group can take under advisement, sir.

listnum "WP List 3" \l 1266              THE CHAIRPERSON:  All right.

listnum "WP List 3" \l 1267              Then let's turn our minds for a second to the Executive Committee.

listnum "WP List 3" \l 1268              If I understand it, Mr. Leech, your position in the Executive Committee is even more tenuous than in the Board, because there is one Teachers designee, one Providence designee, one MPD designee and the CEO of BCE.  So basically you and the CEO of BCE, assuming he is on your side, are matched equally by the Providence and the Madison Dearborn designee.  And there is an observer by Merrill Lynch, but who has no vote.

listnum "WP List 3" \l 1269              I appreciate the powers of the Executive Committee are limited, but still you have basically gone one notch down from where you were on the Board.  On the Board you and the others were equal and the CEO would be elected by the two of you.  Here you have, in effect, lost one representative and, in case of division, if the CEO of BCE is not with you you will be outvoted every time.

listnum "WP List 3" \l 1270              MR. LEECH:  The agreement also with respect to the Executive Committee is that a majority ‑‑ in this case three‑quarters, that's three out of four ‑‑ must be Canadian.  So one envisages there that we will have one Teachers' representative, the CEO, there will be one representative from Madison and Providence, and one will in fact be an independent Director who is a Canadian.  That's the structure that we envisage.

listnum "WP List 3" \l 1271              THE CHAIRPERSON:  I'm sorry?  Where does the independent come from?

listnum "WP List 3" \l 1272              MR. LEECH:  Well, Madison ‑‑ let's assume that Providence nominates one of its own employees who was a non‑Canadian, or one of its designees who is a non‑Canadian, then Madison will have to nominate someone who is a Canadian.

listnum "WP List 3" \l 1273              So I think from a practical perspective it's going to end up being one of the independents.

listnum "WP List 3" \l 1274              THE CHAIRPERSON:  Can you show me where it says so?

listnum "WP List 3" \l 1275              MR. LEECH:  A majority of that committee must be made up ‑‑ must comprise Canadians.

listnum "WP List 3" \l 1276              THE CHAIRPERSON:  Yes, but assume Madison Dearborn nominates to the Board a Canadian as its representative, then he can appoint that same Canadian onto the Executive Committee, but he still is, you know, acting in the interests of Madison Dearborn.  For all intents, he may be an employee of Madison Dearborn.  As long as he had Canadian citizenship he would meet the requirements.

listnum "WP List 3" \l 1277              MR. LEECH:  As long as he is a Canadian citizen, yes.  We were looking to ensure that that committee was comprised of three‑quarters of Canadians.

listnum "WP List 3" \l 1278              I think two other things I will point out, one is that this committee has very, very, very limited powers.  It really has insignificant decision‑making and certainly has no powers designated or delegated to it from the Board.

listnum "WP List 3" \l 1279              In reality how this works, and how this suggested committee has come about, what we have found in the past, and what has stood us in good stead in the past with regard to these investments, is that there is an informal set up once a month where the CEO can bring forward his Flash Reports, his Dashboard Reports.  He can update ‑‑ it gives him a forum to update Members of the Board with regard to any significant activities that are going on.  It's kind of a one‑way data dump, so to speak, from the Chief Executive Officer to a subgroup of his Board, but it isn't a formal Board meeting.

listnum "WP List 3" \l 1280              How we have operated in the past in these situations is indeed all Board Members are invited to attend, as they are invited to attend every committee.  Our modus operandi has always been that whether it's an Audit Committee, whether it's a Compensation Committee or whether it is this committee, every single Board Member is invited to attend and participate and receive the materials, et cetera, but it is largely an information delivery mechanism by the CEO so that he is keeping people up to date.

listnum "WP List 3" \l 1281              In this case it isn't required that all five designees of Teachers' show up for that meeting.  As long as one of them is there it is assumed that information gets passed to them.

listnum "WP List 3" \l 1282              THE CHAIRPERSON:  But the Executive Committee schedules Board meetings and determines the Board Agenda.  I would have thought that's a fairly meaningful way where if something doesn't come to the Board the Board can't decide on it.  I mean, I wouldn't sort of pass this off as limited powers.  It's a fairly ‑‑ for the government of a corporation when and what you discuss surely is a key issue in terms of whether something gets done or not.

listnum "WP List 3" \l 1283              MR. LEECH:  That's not the only way that the Board schedule agendas are set.  It can make suggestions with regard to that, but it doesn't ‑‑ that is not the only way that Board schedules and agendas are set, sir.

listnum "WP List 3" \l 1284              THE CHAIRPERSON:  Yes, all right.

listnum "WP List 3" \l 1285              MR. KOCH:  Mr. Chairman, there is in addition Teachers' role as nominating the Chairman of that committee, which I think should be considered in the overall ‑‑

listnum "WP List 3" \l 1286              THE CHAIRPERSON:  Can you speak up, please, Mr. Koch?

listnum "WP List 3" \l 1287              MR. KOCH:  I'm sorry, sir.

listnum "WP List 3" \l 1288              In our submission the Commission should also consider Teachers' role in nominating the Chairman of the committee.  So you have on the one hand the clear indication that the Board powers will not be delegated to this committee.  The committee's role, as Mr. Leech outlines, although it can suggest matters for Board approval or Board consideration, it is not the unique way for the Board to take these matters before it and, in addition, the Teachers' designee does serve the role as Chair of the committee.

listnum "WP List 3" \l 1289              THE CHAIRPERSON:  Not quite.  It's a person designated by Teachers' ‑‑

listnum "WP List 3" \l 1290              MR. KOCH:  That's right.

listnum "WP List 3" \l 1291              THE CHAIRPERSON:  ‑‑ and the Chief Operating Officer, which I presume it's Mr. Cope.

listnum "WP List 3" \l 1292              MR. KOCH:  Right.

listnum "WP List 3" \l 1293              THE CHAIRPERSON:  Yes.

listnum "WP List 3" \l 1294              Again, I mean I don't understand why the principal shareholder, the one who has voting control and equity control, in effect ‑‑ first, contrary to what you said, Mr. Koch, they can't unilaterally determine the Chairman of the Executive Committee, it has to be done in conjunction with the CEO of BCE.

listnum "WP List 3" \l 1295              Second, there are two other representatives which represent a minority shareholder.  So you can have a deadlock or you ‑‑

listnum "WP List 3" \l 1296              I just don't understand why Teachers' doesn't insist on a control of the Executive.  By not doing that, and given the fairly principal role of the Executive Committee, how can you say unequivocally that you are in control here?

listnum "WP List 3" \l 1297              MR. LAMPE:  Mr. Chairman, just to clarify, I think the agreement does contemplate that the Chairman of the Executive Committee ‑‑ and it's in section 2.5.1 ‑‑ would be a Member designated by Teachers' on its own.  It's down at the bottom of page 13 of the text that I have in any event.  So it would be the Teachers' designee that was the Chair of that committee.

listnum "WP List 3" \l 1298              THE CHAIRPERSON:  Page 13 you say?

listnum "WP List 3" \l 1299              MR. LAMPE:  It's page 13 of my draft.  It's about halfway through section 2.5.1.

listnum "WP List 3" \l 1300              THE CHAIRPERSON:  Yes.

listnum "WP List 3" \l 1301              MR. LAMPE:  It's right after the sentence that says:

                      "The majority of the members shall be Canadian."  (As read)

listnum "WP List 3" \l 1302              And it says:

                      "The Chairman of the Executive Committee shall be the member designated by Teachers'."  (As read)

listnum "WP List 3" \l 1303              It then goes on to talk about Merrill Lynch investors having the right to designate an observer.

listnum "WP List 3" \l 1304              THE CHAIRPERSON:  All right.  I stand corrected.  Thank you.

listnum "WP List 3" \l 1305              MR. LEECH:  And I think that holds for all committees of the Board, that Teachers' has the unilateral right on all the committees.

listnum "WP List 3" \l 1306              THE CHAIRPERSON:  But you have one member of a 4‑member Executive Committee, but you have the right to designate the Chairman, presumably your own guy if you want to, but that ‑‑ and counting on the support of the CEO you think gives you sufficient control over the Executive Committee, should the need arise.  As Providence suggested, you are not in a consensus mode.

listnum "WP List 3" \l 1307              MR. LEECH:  Yes.

listnum "WP List 3" \l 1308              THE CHAIRPERSON:  But you will admit, Mr. Leech, that this is a lesser form of control than you have over the Board itself.  On the Board itself you are equal to Providence, Dearborn and Merrill Lynch, here they actually outvote you and you need the support of the CEO?

listnum "WP List 3" \l 1309              MR. LEECH:  We looked at the powers that this Committee has and none are delegated by the Board so they cannot take any action.  So it's not as though a non‑Canadian can exert control over the organization through this committee is our view, sir.

listnum "WP List 3" \l 1310              MR. MASIELLO:  I would just add, I think that this is not meant to be a mini‑Board, Mr. Chairman, it's really meant to be a forum for Mr. Cope to report on activities at the company on an interim basis prior to scheduling an entire Board meeting.

listnum "WP List 3" \l 1311              I would also note that Mr. Cope reports not to the Executive Committee but to the Board of Directors of the company.

listnum "WP List 3" \l 1312              THE CHAIRPERSON:  Same way as my comments about the Board, I think you might want to reflect on this and whether this truly meets the test, because at first blush it certainly doesn't look as if Teachers' is running the Executive Committee.

listnum "WP List 3" \l 1313              MR. LEECH;  Now let's go on to the quorum.

listnum "WP List 3" \l 1314              If I understand the way the quorum works it is a very complicated provision, but again we have this distinction between Canadians and Canadians designated by Canadians.  Unless I misread this, there is a possibility if you miss ‑‑ I admit remote that you miss a meeting, you do miss the second time, you can actually have a quorum of the Board and meeting and voting which doesn't include Teachers', as long as some of the designees by Madison or Providence or so actually have Canadian citizenship?

listnum "WP List 3" \l 1315              MR. LEECH:  As part of the construct, and in accordance with our view on good governance, we didn't want to set up a situation where any one shareholder, including Teachers', could frustrate the activities of the company, and so we have set up this multiple movement through ‑‑ you know, if there isn't a quorum the first time, if there isn't a quorum the second time, what would the quorum be on the third time.

listnum "WP List 3" \l 1316              Given that Teachers' and all the shareholders have had notice of those meetings and have had the opportunity to attend, I mean there should be no reason why the shareholders don't attend those meetings unless indeed they are endeavouring to try to frustrate something that the board is trying to grind the business to a halt, et cetera.  So we have set up the construct that the meeting could go ahead without Teachers in effect vetoing the meeting but that at that quorum there must be a majority of Canadians; and for those purposes a Canadian citizen nominated or designated to the board by Providence or Merrill.  So Dearborn would not count.

listnum "WP List 3" \l 1317              So in that limited circumstance, the situation of a Canadian citizen nominated by a non‑Canadian would not count towards the Canadian component of that third reconvened board meeting.

listnum "WP List 3" \l 1318              THE CHAIRPERSON:  I assumed that was your intent.  When you look at the section, and I have  had my outside counsel on it, it is actually somewhat muddled.  It can be read both ways.

listnum "WP List 3" \l 1319              If that is what you want, maybe our counsel can talk and suggest how it should be.

listnum "WP List 3" \l 1320              So you basically want to make sure that at any point in time the majority of the quorum are Canadians nominated by Canadian shareholders.

listnum "WP List 3" \l 1321              MR. LEECH:  No, no, that is taking it one step farther.

listnum "WP List 3" \l 1322              THE CHAIRPERSON:  Okay.

listnum "WP List 3" \l 1323              MR. LEECH:  We want to make sure that on that reconvened quorum that indeed it will be a majority of Canadians and it will not count a designee of a non‑Canadian.

listnum "WP List 3" \l 1324              So counting towards that quorum would be the Chief Executive Officer and any independent director who is indeed a Canadian.

listnum "WP List 3" \l 1325              THE CHAIRPERSON:  Any independent.

listnum "WP List 3" \l 1326              MR. LAMPE:  Mr. Chairman, I'm not sure if it's relevant to your question ‑‑

listnum "WP List 3" \l 1327              THE CHAIRPERSON:  One second, Mr. Lampe.  I just want to absorb what Mr. Leech said.

listnum "WP List 3" \l 1328              So you are trying to now make sure that nobody can deadlock the board.  That is one thing.

listnum "WP List 3" \l 1329              On the other hand you want to make sure that Canadians representing either being independent directors or Canadians representing Canadian shareholders that at all times have a majority.

listnum "WP List 3" \l 1330              MR. LEECH:  That's correct, sir.

listnum "WP List 3" \l 1331              THE CHAIRPERSON:  I understand what you are saying.  I'm not so sure the text reflects it.

listnum "WP List 3" \l 1332              Why don't I have my counsel talk to your counsel.  I think there are words missing if we are talking here.

listnum "WP List 3" \l 1333              If that is the intent, at least it is now clear that that is what you mean to do.

listnum "WP List 3" \l 1334              MR. LEECH:  Okay.

listnum "WP List 3" \l 1335              THE CHAIRPERSON:  Sorry, Mr. Lampe.  What were you going to say?

listnum "WP List 3" \l 1336              MR. LAMPE:  I think it has actually been covered.

listnum "WP List 3" \l 1337              The provision that is in here about the default quorum requirement was actually something that was put into the agreement at Teachers' request ‑‑ it wasn't in the original drafts when we were working through them ‑‑ to actually achieve the goal that Mr. Leech had pointed out; that nobody could effectively veto something simply by not showing up.

listnum "WP List 3" \l 1338              THE CHAIRPERSON:  Then I would like to talk about the consent rights, which are in Section 2.1.

listnum "WP List 3" \l 1339              There are various ones, which are the normal ones, about restructuring so that the investors have to consent.  I'm also worried about the ones where you have a specific amount, $100 million.  It is under Prepayment of Debt.  It's under Special Sale of Assets, Acquisition of Assets and Investments.

listnum "WP List 3" \l 1340              I just wondered how you arrived at $100 million.

listnum "WP List 3" \l 1341              As you are undoubtedly aware, we very recently approved the CanWest transaction of Alliance Atlantis where we said it should really be 5 per cent, which, if I understand it correctly, works out to ‑‑ under this mass of paper I have the exact number; about $109 million, or something like that.

listnum "WP List 3" \l 1342              So I just wonder how you ‑‑ let's see, $106,383,000, to be exact, taking the enterprise value of Expressvu and IPTV, et cetera.

listnum "WP List 3" \l 1343              So how did you come up to $100 million?

listnum "WP List 3" \l 1344              MR. LEECH:  I think it is a bit of the math of large numbers.  $100 million in any context is a very large amount of money.  We have found over the years that expressing these types of limits as a percentage of something which can change over time sometimes creates confusion.  Is it in the last quarterly statement?  Is it the last annual statement?  Does it take into account write‑offs or reserves, et cetera?

listnum "WP List 3" \l 1345              And it is much better and much more practical and much easier for management to carry forward with its plans if there is an absolute number.  Everybody understands $100 million is the bright light; and below it, okay; above it, you require shareholder endorsement as well.

listnum "WP List 3" \l 1346              In this case what we have done in setting up this threshold is also with regard to acquisitions and asset sales, is exclude transactions in the ordinary course of business.

listnum "WP List 3" \l 1347              We have the situation where Mr. Cope and his team have brought forward their management plan for the year.  That plan has been approved by the board and they are moving forward, and now all of a sudden they would like to do something that is out of the ordinary; sell an asset or require an asset, which is out of the ordinary course and is not already in their business plan.

listnum "WP List 3" \l 1348              We just want to set the situation up that there is a sober second thought and has the full endorsement of the shareholders behind that.

listnum "WP List 3" \l 1349              We felt that $100 million, certainly in the context of our organization, is very large.

listnum "WP List 3" \l 1350              We looked at precedent transactions and with one exception that type of threshold is appropriate.  Most of our thresholds are significantly lower.

listnum "WP List 3" \l 1351              THE CHAIRPERSON:  I don't disagree with you that the number is preferable to a percentage.  I was just thinking how you arrived at it.

listnum "WP List 3" \l 1352              You have heard me talk about predictability in trying to establish rules, et cetera.  So I think 5 per cent is the appropriate number.

listnum "WP List 3" \l 1353              So if you calculate it as of closing, it should be $106 million, not a hundred.  That was my point.

listnum "WP List 3" \l 1354              MR. LEECH:  We didn't come at it that way, sir.  We came at it as being a large number.

listnum "WP List 3" \l 1355              THE CHAIRPERSON:  Now you know how I came at it.

listnum "WP List 3" \l 1356              Finally, in 2.6 you are talking about the cascading of the provisions from the board to Bidco's directors and then to Opco's directors, et cetera.

listnum "WP List 3" \l 1357              If I understand it, basically you are going to mirror what you do at B.C. Holdings in the underlying companies.  Please correct me if that is a misrepresentation.

listnum "WP List 3" \l 1358              I understand that basically the agreement deals with how BCE Holdco is structured and then the governance is going to be reflected one level down in Bidco and another level down in Opco.

listnum "WP List 3" \l 1359              That is 2.6 and 2.7.  That is essentially the purpose of these provisions.

listnum "WP List 3" \l 1360              MR. LAMPE:  That is correct, Mr. Chairman.

listnum "WP List 3" \l 1361              THE CHAIRPERSON:  One thing.  Why do you have the words "best efforts" in those?

listnum "WP List 3" \l 1362              It seems to me that if you are going to reflect it, you are going to reflect it.  Why are you only using your best efforts to reflect it?

listnum "WP List 3" \l 1363              MR. LAMPE:  I think the only reason there ‑‑ and it may be a lawyer's point more than anything else ‑‑ is at the top level, the company will use its efforts by voting the chairs and providing the direction, but it's going to be the board at the lower level that is going to exercise its fiduciary duties.

listnum "WP List 3" \l 1364              So as the shareholder, the company will do everything it can to cause that to be replicated.

listnum "WP List 3" \l 1365              There wasn't anything more devious than that that was intended.

listnum "WP List 3" \l 1366              THE CHAIRPERSON:  May I suggest you don't need that.  You run the company.  Surely you can affect what the subsidiary does.

listnum "WP List 3" \l 1367              MR. LAMPE:  We will take a look at the language.

listnum "WP List 3" \l 1368              THE CHAIRPERSON:  Those were basically my questions on control.

listnum "WP List 3" \l 1369              Len or Michel, do you have any other questions on the control issue?

listnum "WP List 3" \l 1370              COMMISSIONER KATZ:  I do.

listnum "WP List 3" \l 1371              THE CHAIRPERSON:  Go ahead.

listnum "WP List 3" \l 1372              COMMISSIONER KATZ:  I have a few on control.

listnum "WP List 3" \l 1373              I want to take a look at the Advisory Services Agreement for a second.

listnum "WP List 3" \l 1374              I know that in reading an awful lot of the material that was filed, there is an awful lot of emphasis on the fact that teachers and I guess the principal investors will be spending time on strategic rather than day‑to‑day operations and leaving the day‑to‑day with management.

listnum "WP List 3" \l 1375              Yet when I look at this Advisory Services Agreement there is a clause in there, the last "Whereas", talking about the advisors willing to provide certain advisory services, sort of a catch‑all.  Yet when I read down below at the sub‑items under the definition of services, (a), (b) and (c), it appears to me that they are doing an awful lot more than just providing some advice.

listnum "WP List 3" \l 1376              There seems to be an awful lot of emphasis placed on financial advice related to development and implementation strategies, financial and business planning and analysis.

listnum "WP List 3" \l 1377              What struck me is that Teachers is not a party to this agreement and yet if Teachers is one of the strategic partners, I'm just wondering why they are not identified here as integral to this under the assumption that the work that is being done by the investors is all good work in an attempt to help the CEO run his business and maximize shareholder value.

listnum "WP List 3" \l 1378              MR. LEECH:  Thank you.  A decision was made, Mr. Vice‑Chair, that Teachers would not be a part of the Advisory Services Agreement because it is not in the ordinary course that Teachers itself sells its services to third parties, giving advice this way.

listnum "WP List 3" \l 1379              The model that teachers has used in the past, and we have replicated here, is to have a special class of shares in which we receive distributions on in the form of dividends.  And that indeed is the way teachers would be compensated for its significant role in leading this transaction and in reserving members of its staff with regard to giving strategic advice.

listnum "WP List 3" \l 1380              Finally, I would also point out that in the case of all of the financial investors that are designees on the boards, they will not be receiving any directors' fees.

listnum "WP List 3" \l 1381              COMMISSIONER KATZ:  I'm less concerned about the financial transaction itself and how you structure the transaction fees and whatever.  I'm more concerned about the fact that when I looked at the Class C agreement, there is no reference there at all to work being done of a strategic nature.

listnum "WP List 3" \l 1382              I'm just focusing on the fact that from what I gather, there will be a lot of people from Madison Dearborn and Providence spending time and management time dedicated, from what I gather here as well, to looking at the strategic business plans of BCE.

listnum "WP List 3" \l 1383              MR. COPE:  If I can interrupt here, the amount of fees for a company that we spend over $10 billion of expenses, this is immaterial in terms of truly providing a lot of strategic services to the company.

listnum "WP List 3" \l 1384              Clearly services that we buy from other people would now correctly be directed to our shareholders, when appropriate.  And there is some expertise, as Mr. Leech mentioned, that some of our co‑investors bring to the table, not services that Teachers particularly provides.

listnum "WP List 3" \l 1385              So this model, if you will, allows us to purchase those services from our partners, if you will, as opposed to other organizations; not a material amount.  And it is clearly my responsibility to make sure that even though it is not material, it's money, and that we are getting value for that money.  And we certainly will going forward.

listnum "WP List 3" \l 1386              COMMISSIONER KATZ:  The point I'm just trying to make is why Teachers wouldn't be a party to that work that is being done.  Regardless of the fees and everything else, why wouldn't they be an integral part of the analysis, the business planning?

listnum "WP List 3" \l 1387              MR. LEECH:  There is no question that Teachers indeed will be dedicating staff, and the quid pro quo for that, shall we say, is the investment in the special class of shares that carries a dividend with it.

listnum "WP List 3" \l 1388              COMMISSIONER KATZ:  I just would presume that all this work is being done and presented to a board and if Teachers isn't part of the work‑up ‑‑ seeing it and having a presentation is great, but at the end of the day if you haven't been there in the guts of the thing as well, you are sort of missing out on a piece of it.

listnum "WP List 3" \l 1389              And Teachers, being the largest investor, I would have thought would have been interested in being part of that fundamental development of the strategy.

listnum "WP List 3" \l 1390              MR. LEECH:  We are very interested ‑‑ Mr. Silvestri, sorry.

listnum "WP List 3" \l 1391              MR. SILVESTRI:  I think it's just a nuance.  I think MDP, Merrill Lynch and Providence will be providing that service, as will Teachers.  We are just providing it as a shareholder and they will be providing it as a separate line of business.

listnum "WP List 3" \l 1392              So it's just a nuance in the agreements.

listnum "WP List 3" \l 1393              COMMISSIONER KATZ:  All right.

‑‑‑ Pause

listnum "WP List 3" \l 1394              COMMISSIONER KATZ:  I think we want to take a break now, Mr. Chairman.

listnum "WP List 3" \l 1395              THE CHAIRPERSON:  Before I do that, just one last thing.

listnum "WP List 3" \l 1396              When we talked about the limit of $100 million, you said outside the ordinary course of business.  I notice you have no definition of "ordinary course of business".

listnum "WP List 3" \l 1397              The same issue came up in CanWest and I think it's not beyond the ability of your counsel to draft something on what is the ordinary course of business so that there is some clarity on this point.

listnum "WP List 3" \l 1398              MS TURCOTTE:  Maybe I could help the Commission here.

listnum "WP List 3" \l 1399              We do deal with ordinary course of business today under the current governance model at BCE, for example.  We've looked at the CanWest definition, but we do use a different model and a different guide.

listnum "WP List 3" \l 1400              Essentially under the BCE policy on authorization where our board delegates to officers and managers certain corporate actions to be taken on behalf of BCE, there is a concept that if the action or the transaction is not in the ordinary course of business, it must go back to the board.

listnum "WP List 3" \l 1401              So we do deal with this on an ongoing course of business.

listnum "WP List 3" \l 1402              The important thing is we have not attempted to define precisely the definition simply because the business of the company evolves over time.  And that's very important to give us the flexibility to address ordinary course of business over time.

listnum "WP List 3" \l 1403              An importantly here, Mr. Chairman, what would worry us as management is if we put a strict definition in an agreement that is really structured for the long term, including well past an IPO.  We want to make sure that we are able to maintain the flexibility for the company to evolve over time.

listnum "WP List 3" \l 1404              What we do today is we've not defined it but we've put a guidance principle around what is ordinary course of business.

listnum "WP List 3" \l 1405              Maybe I can read it to you to give you a sense.

                      "Ordinary course of business is a term that defines actions that are routine or occur frequently, undertaken in good faith and consistent with the company's usual custom and past practice, including with respect to the quantity, quality and frequency of transactions, and do not expose the company to a business risk that is materially different from other similar actions."

listnum "WP List 3" \l 1406              And then we go on to say:

                      "In determining whether a proposed action is in the ordinary course of the company's business, it is necessary to consider balance and weight in their entirety, a variety of relevant factors."

listnum "WP List 3" \l 1407              And then we go through a non‑exhaustive list, and there are about nine questions to simply guide you.

listnum "WP List 3" \l 1408              Maybe just to give you an example of a few of them:

                      "Is the action related to or complementary with other pre‑existing core or traditional offerings of the company?

                      Is the action something that direct competitors of the company are offering or have announced that they intend to offer and are such actions reasonably viewed as a natural and logical evolution of the company's business?

listnum "WP List 3" \l 1409              Those are the types of things we would look at.  But we would prefer, in fact, more of a guidance concept than a very precise definition because we think actually that is going to be more helpful for a company's management in addressing the flexibility of its  business over time.

listnum "WP List 3" \l 1410              THE CHAIRPERSON:  I can see it may be more helpful for you.  I doubt it's more helpful for me, because we have to determine what is the effect of these veto rights, which is a big factor.

listnum "WP List 3" \l 1411              So you may want to look at this issue of defining ordinary course of business and putting it in the agreement.

listnum "WP List 3" \l 1412              Let's take a 15‑minute break.

listnum "WP List 3" \l 1413              Thank you.

‑‑‑ Upon recessing at 1058 / Suspension à 1058

‑‑‑ Upon resuming at 1115 / Reprise à 1115

listnum "WP List 3" \l 1414              THE CHAIRPERSON:  Mr. Leech, just a couple of follow‑up questions that I was reminded of during the break.

listnum "WP List 3" \l 1415              MR. LEECH:  Yes, sir.

listnum "WP List 3" \l 1416              THE CHAIRPERSON:  The independent directors, if I understand it they are optional; there is no requirement to have those.  So right now you have five and five and Mr. Cope and possibly two independent directors.  But there is no requirement to appoint independent directors, if I understood it correctly?

listnum "WP List 3" \l 1417              MR. LEECH:  My understanding is the agreement does say that, but it is entirely our intention to ensure that we have two independent directors, sir.

listnum "WP List 3" \l 1418              THE CHAIRPERSON:  So are you prepared to take that out?

listnum "WP List 3" \l 1419              MR. LEECH:  Yes, sir.

listnum "WP List 3" \l 1420              THE CHAIRPERSON:  Okay.

listnum "WP List 3" \l 1421              And secondly, the appointment of the chairman, I gather this is going to be done but requires the approval of you and Providence, right?

listnum "WP List 3" \l 1422              MR. LEECH:  That's right.

listnum "WP List 3" \l 1423              THE CHAIRPERSON:  But there is no stipulation as to the chairman's nationality?

listnum "WP List 3" \l 1424              MR. LEECH:  That's correct, sir.

listnum "WP List 3" \l 1425              THE CHAIRPERSON:  And have you selected a chairman?  Do you know who the chairman is going to be?

listnum "WP List 3" \l 1426              MR. LEECH:  No, not as yet, sir.

listnum "WP List 3" \l 1427              THE CHAIRPERSON:  Okay, thank you.

listnum "WP List 3" \l 1428              Mr. Katz.

listnum "WP List 3" \l 1429              COMMISSIONER KATZ:  I just have one more questions as a follow up, and I think you touched upon it but I didn't understand the answer.

listnum "WP List 3" \l 1430              Who ultimately is responsible for setting the agenda for the board of directors?

listnum "WP List 3" \l 1431              MR. LEECH:  I will defer to Mr. Lampe as to the exact mechanism.

listnum "WP List 3" \l 1432              MR. LAMPE:  Ultimately, it is going to be like any other board where each of the directors has the ability to put matters onto the agenda which would then be coordinated with the chairman.  And you know generally, once again, it's a consensual process but every director has the ability to put what he or she believes is appropriate onto the agenda for discussion and raise it at the meeting.

listnum "WP List 3" \l 1433              COMMISSIONER KATZ:  So there is no opportunity for someone to not have something go on the agenda if they wanted to?

listnum "WP List 3" \l 1434              MR. LAMPE:  Correct.

listnum "WP List 3" \l 1435              COMMISSIONER KATZ:  Everything goes on the agenda that any principal investor wants to see on there including the CEO, obviously?

listnum "WP List 3" \l 1436              MR. LAMPE:  What any director wants to have on.

listnum "WP List 3" \l 1437              COMMISSIONER KATZ:  Any director, okay.

listnum "WP List 3" \l 1438              Thank you.

listnum "WP List 3" \l 1439              Okay.  Mr. Chairman, did you want to ask the Vice‑Chair of Broadcasting if he had any control questions before I delved into the value of the transaction?

listnum "WP List 3" \l 1440              THE CHAIRPERSON:  Michel?

listnum "WP List 3" \l 1441              COMMISSIONER ARPIN:  Thank you, Mr. Chair.

listnum "WP List 3" \l 1442              Well, I want to have a better understanding of the long term plans of the acquiring party regarding the existing broadcasting business.  I noted in your remarks, Mr. Leech, you stated that BCE Broadcasting Services are an integral part of the BCE continued success and that you ‑‑ and somehow ‑‑ but I want to have a more complete discussion, an opportunity maybe for you to say a bit more about the long term intent of BCE regarding; first, Bell ExpressVu and; second, the IPTV operations that have not yet been launched.

listnum "WP List 3" \l 1443              MR. LEECH:  Certainly, Mr. Chair or Vice‑Chair.

listnum "WP List 3" \l 1444              When Teachers' ‑‑ and I think I can speak on behalf of the other investors in our consortium ‑‑ looked at Bell and its competitive position within Canada the broadcasting capabilities are, as I said, integral.  When we look at the market of the residential market ‑‑ I mean, as you know, Bell is involved in or BCE is involved in many different market components from large enterprises to small and medium enterprises to residential.

listnum "WP List 3" \l 1445              And if you look specifically at the residential where the competition is coming from it is basically coming from the cable companies.  And so it is critical that Bell have in its arsenal a very good broadcasting alternative.  And fortunately, Bell is one of the CLECs in North America that indeed does have a strong position through ExpressVu.

listnum "WP List 3" \l 1446              Our view is that the concept of IPTV is also a very formidable, potential weapon in the arsenal but that the company is, from our perspective, is fairly well positioned where it has the advantage of an existing satellite service with, I think, it's 1.8 million subscribers and it has the ability to keep working on and perfecting the IPT offering to solidify its position in the residential market which of course is very important to Bell.

listnum "WP List 3" \l 1447              So we see it, as I said in my opening statement, quite integral.

listnum "WP List 3" \l 1448              MR. COPE:  Maybe I will simply add that in the marketplace today, particularly in the market on the household moving to competitive bundling where our cable operators have moved into if you will our telecom space, ExpressVu is a key part of our strategy going forward and that relationship for us is critical as we rollout in a competitive environment.  And in that context we are the only ILEC in North America who has a satellite TV business.

listnum "WP List 3" \l 1449              So our strategy to rollout IPTV continues in that we plan at a point in time to be in the market with that product.  But we are in a different situation than some of our competitors both in Canada and in the United States in that we have a TV in ExpressVu, an offering today.  And so we are, if you will, following the developments by other players in North America, making sure that technology is at the level we want it to be at and then at a point in time we at this point intend to add that capability in the marketplace, complementing what we continue to invest in ExpressVu.

listnum "WP List 3" \l 1450              And so the Commission should rest assured that that continues to be a core part of our strategy going forward.

listnum "WP List 3" \l 1451              COMMISSIONER ARPIN:  Now, it's public knowledge that ExpressVu's signal is often ‑‑ theft by black market operators or that there is a big issue of the technology that you have been using regarding theft of signal.

listnum "WP List 3" \l 1452              Do you have any long term plan regarding correcting that issue and do you think it is correctable to some extent?

listnum "WP List 3" \l 1453              MR. COPE:  Gary, maybe I will turn that over to you.

listnum "WP List 3" \l 1454              MR. SMITH:  Yes, I will be happy to take that, that question.

listnum "WP List 3" \l 1455              Signal theft is a challenge for all television providers and particularly the satellite providers.  So Bell ExpressVu is by no means alone in facing that challenge.  And the industry has a variety of tools that it can use to minimize signal theft and in fact eliminate it at certain points in time by conducting things like card swaps and using electronic countermeasures.     And without disclosing any of ExpressVu's plans, it would certainly be our intent to continue to use those methods to maintain the security of our signal and, when necessary, to restore the security of our signal so it doesn't cause a significant long term problem.

listnum "WP List 3" \l 1456              COMMISSIONER ARPIN:  And back again regarding ExpressVu, would you say that ExpressVu is a mature operation or it still has a lot of potential for growth?

listnum "WP List 3" \l 1457              MR. COPE:  I know what the President of ExpressVu is going to say for sure.

‑‑‑ Laughter / Rires

listnum "WP List 3" \l 1458              MR. COPE:  But let me also add to the comments so we are consistent.

listnum "WP List 3" \l 1459              Yes, we think it has an opportunity for growth.  We are looking at a number of ways to accelerate the growth of ExpressVu, particularly in a marketplace where we are now competing as we mentioned before for our telephone business with the cable operators.  So it's actually a core part of our product portfolio going forward.  And Gary can talk a little bit about the significant investment we see going forward in that business.

listnum "WP List 3" \l 1460              But, yes, it certainly has taken a long time to generate profits off that business.  You know, the size of BEC allowing us to make that type of investment and create a competitive marketplace in Canada for broadcasting is one of the benefits of the organization and now, going forward, we will continue to invest.

listnum "WP List 3" \l 1461              MR. SMITH:  The Canadian market is a relatively small market even though it's geographically very large.  So obviously the long term opportunity for satellite television is finite, but we still think there is growth opportunities within that market and we are anxious to explore those.

listnum "WP List 3" \l 1462              And I think that the business has a healthy future both in terms of satellite growth and subscriber growth, but also in terms of growth of the offering.  As the Commission is aware, we have taken a leading position in the introduction of high definition services and adding satellite capacity for more and more high‑definition services, and we have a rollout plan for additional capacity which will enable us to continue that for the foreseeable future.

listnum "WP List 3" \l 1463              COMMISSIONER ARPIN:  Well, gentlemen, those were my questions.  I will be back regarding tangible benefits at a later time ‑‑

listnum "WP List 3" \l 1464              THE CHAIRPERSON:  Len?

listnum "WP List 3" \l 1465              COMMISSIONER ARPIN:  ‑‑ but I will return the microphone to the Chair.

listnum "WP List 3" \l 1466              COMMISSIONER KATZ:  Thank you, Mr. Chair and Mr. Vice‑Chair.

listnum "WP List 3" \l 1467              I have got a series of questions on the value of the transaction for the purpose of establishing benefits, and I'm not sure who is going to answer the question so I will look over to the Bell side of the table on my left.

listnum "WP List 3" \l 1468              First of all, the exclusion of the value of the IPTV pay‑per‑view, VOD undertaking from the overall value of the transaction, you stated in here in a couple of cases that the future rollout was still unclear at the time.

listnum "WP List 3" \l 1469              Can you shed some light as to where that stands now and the degree of uncertainty that may or may not still exist?

listnum "WP List 3" \l 1470              MR. COPE:  Yes, let me start and then I will turn this over to our colleagues to talk about some of the details around some of the further questions you may ask.

listnum "WP List 3" \l 1471              IPTV, we have been working on it for a fair amount of time; made a decision even in our '07 business plan ‑‑ we want to be careful with competitive.  This is a public hearing ‑‑ but in '07 timeframe that in '08 we would continue to monitor developments by other players in North America because of the unique position we are in with the ExpressVu asset.

listnum "WP List 3" \l 1472              We think the technology ‑‑ as we see it going forward we are hopeful it will become a part of our business going forward and add to the strength we have with ExpressVu as a competitive.  But in terms of rollout that's why we actually deferred it out of our capital planning, primarily for '08, and that we are continuing to monitor the developments of other players.

listnum "WP List 3" \l 1473              So hopefully that's a clear answer.  It is a commercial intent of ours to ultimately add that to our product portfolio but clearly not a core of our strategy for '08.  Probably you will want to be a little careful, as I mentioned before about ‑‑

listnum "WP List 3" \l 1474              COMMISSIONER KATZ:  No, I won't get into the actual strategic direction of your plans.

listnum "WP List 3" \l 1475              The point I was trying to get to was one of the reasons why you suggested that it was inappropriate to impute some value to it was because it was still uncertain and it was unlaunched, I guess, effectively.  Yet, CFTPA and the Directors Guild both in their submissions cited numerous cases where the CRTC has ruled in the past that, notwithstanding the fact that they are unlaunched, there has been some substantial investments made as well and there is precedent for including them.

listnum "WP List 3" \l 1476              I think you also made the suggestion that the fact that there was no genre protection was another reason why it should be excluded and, again, either the Directors Guild or CFTPA equally said that there has been precedence by the CRTC as well.

listnum "WP List 3" \l 1477              Is there any new information you want to bring forward to counter those, because in your reply you did not counter them at all?

listnum "WP List 3" \l 1478              MR. BIBIC:  Mr. Vice‑Chairman, I'm not sure which precedents you are specifically referring to when you say that our reply didn't counter them, because certainly in our reply we did raise a number of arguments directly distinguishing some of the precedents raised by the CFTPA and the Directors Guild in support of their argument that there should be benefits attached to the IPTV video‑on‑demand and pay‑per‑view services which have not been fully commercially launched.

listnum "WP List 3" \l 1479              But essentially the ‑‑ from a ‑‑ the principle that we are putting forward is ‑‑ I mean, we well understand that the benefits policy relates to the fact that the CRTC doesn't solicit competing applications when there is an application before you for changing control of a licensee.  So we do understand that.  And because there is no soliciting of competing applications the applicant has to come forward and put benefits back into the broadcasting system as the reflection of the fact that it will, for lack of a better word, take from the broadcasting system.

listnum "WP List 3" \l 1480              And in the particular case of these licenses, the services not being at a stage where they are fully commercially launched, we do not believe, or we put forward the position that we didn't believe that it's the type of operation that should attract and benefits ‑‑ full scale benefits of the sort that would attach to the services which have been fully launched.

listnum "WP List 3" \l 1481              So at the core of it that's the argument.  Of course, we have added on the distinction that you know, this is a Category 2 service, there is no entry restriction and the fact that there is no genre protection, and, as well, just the practical issue of the difficulty of valuing an enterprise like this, which hasn't been fully commercially launched.

listnum "WP List 3" \l 1482              Those are the basic principles that we are putting forward.

listnum "WP List 3" \l 1483              COMMISSIONER KATZ:  Again, I would suggest that you re‑read CFTPA's submission, where, in fact, they quote a CRTC decision in that regard, and I quote:

                      "The Commission acknowledges that Category 2 services are not guaranteed carriage by BDUs and do not enjoy protection from the entry of new services providing programming in the same genre.  The Commission, however, notes that, for example, conventional television stations are not protected from competition and are subject, nonetheless, to the benefits test.  The mere fact of the presence of real or potential competition does not exempt the programming service from requirements related to tangible benefits."  (As read)

listnum "WP List 3" \l 1484              I will refer that back to you and let you contemplate that finding of the Commission in the past.

listnum "WP List 3" \l 1485              MR. BIBIC:  That is on the very specific issue of the argument relating to the licence being a Category 2 service, Mr. Vice‑Chair, but, in a sense, we have a unique situation here.  I would suggest to you that there is no case or precedent suggesting that benefits should be paid when you have a service like this that is in, kind of, a soft‑launch test mode, but not fully commercially launched.

listnum "WP List 3" \l 1486              So there is no case like this that suggests that benefits should be paid, or suggests that benefits shouldn't be paid.  In a sense, we are in a unique situation here, and it is really for the Commission to decide whether, on the facts of this case, benefits should apply given the broader arguments we have put forward.

listnum "WP List 3" \l 1487              THE CHAIRPERSON:  Is there a possibility that you won't launch the service, Mr. Bibic or Mr. Cope?

listnum "WP List 3" \l 1488              MR. COPE:  We have not launched fully commercial today.  In business there is never certainty.

listnum "WP List 3" \l 1489              And in a product that is ‑‑ and I don't mean that out of disrespect, but in a product that is as new as this one, our strategy at this point would be to, ultimately, enter the IP TV market, when we see developments on a North American basis stabilize the way we want to see.

listnum "WP List 3" \l 1490              And, as I mentioned, I think it is important ‑‑ without the product portfolio we have of ExpressVu, we may have had to be a little further out on that technology, but I wouldn't want to have something on the record that said definitely that we will do something with our business.  I think that would not be appropriate.

listnum "WP List 3" \l 1491              But current plans would include that in the future.

listnum "WP List 3" \l 1492              THE CHAIRPERSON:  Thank you.

listnum "WP List 3" \l 1493              COMMISSIONER KATZ:  I want to move now to the issue of inclusion of operating leases in the valuation for benefit purposes.

listnum "WP List 3" \l 1494              Again, you appear to have excluded them.

listnum "WP List 3" \l 1495              Is that correct?

listnum "WP List 3" \l 1496              MR. MELO:  That's correct, they are not included in the calculation.

listnum "WP List 3" \l 1497              COMMISSIONER KATZ:  Again, there have been a number of CRTC decisions in this regard.  Four alone took place in 2007, and two of them, in fact, related to holdings of Teachers', both the CTV purchase of CHUM and the CTV purchase of Best Broadcasting.

listnum "WP List 3" \l 1498              Both had decisions by the CRTC where, in fact, the Commission ruled that they were including both long‑term debt as well as operating leases in the calculation of the transaction for the purpose of attracting benefits.

listnum "WP List 3" \l 1499              Do you have anything to add to what you have already brought before the Commission in this regard?

listnum "WP List 3" \l 1500              I can read them to you here.  I have the decisions in front of me.

listnum "WP List 3" \l 1501              There were two others, as well.  One was Canwest and one was the Rogers acquisition of Larche.

listnum "WP List 3" \l 1502              There were four of them.

listnum "WP List 3" \l 1503              I will read the one with respect to the CTV purchase of CHUM, which is pretty clear:

                      "In assessing the value of the transaction, CTVgm excluded CHUM's long‑term debt of $270 million and operating leases and other commitments of $65.5 million.  The latter, as financing alternatives, are considered as debt.  The Commission has therefore determined the value of the transaction to take into account these assumed liabilities, and concludes that the revised value of the transaction amounts to..."  (As read)

listnum "WP List 3" \l 1504              Whatever the number is ‑‑ $1.7 billion.

listnum "WP List 3" \l 1505              We have clearly included it.  We have clearly ruled on the inclusion of operating leases in four specific cases, and this one that I just read to you, as well.

listnum "WP List 3" \l 1506              I am just wondering if there is anything more you want to bring forward on this issue.

listnum "WP List 3" \l 1507              MR. MELO:  I would add that we have calculated the benefits based on the enterprise value.  The enterprise value represents the value of those assets that are either owned or substantially owned by the company.

listnum "WP List 3" \l 1508              We have not in this case, as you know, included the operating leases, which would be to add value relating to assets that are not owned by the business ‑‑ for example, real estate.  The company does not own the real estate, so, in that case, we would be adding in the enterprise value and subjecting the company to benefits for items that are not owned by the company.

listnum "WP List 3" \l 1509              Again, we have not included it.  Can we provide that number to you?  We can.

listnum "WP List 3" \l 1510              The number is quite small.  I think it was in the previous deficiency letter, the actual amount.

listnum "WP List 3" \l 1511              COMMISSIONER KATZ:  Could you provide it again, just for the record, please?

listnum "WP List 3" \l 1512              MR. MELO:  I think it was confidential, was it not?

listnum "WP List 3" \l 1513              COMMISSIONER KATZ:  You can file it in confidence, that's not a problem.

listnum "WP List 3" \l 1514              MR. MELO:  Yes, we can.

listnum "WP List 3" \l 1515              COMMISSIONER KATZ:  You can file that at a later date.

listnum "WP List 3" \l 1516              I would like to pursue next the issue of the acquisition premium that purchasers placed on the deal.

listnum "WP List 3" \l 1517              Again, Commission practice has been in the past to include the purchase of the premium in the value of the transaction, for the purpose of benefit calculations.

listnum "WP List 3" \l 1518              In cases where assets had different benefit requirements, the value has been allocated based on a proportion of the value of the assets.

listnum "WP List 3" \l 1519              I believe in a press release back in July of last year there was the suggestion that the premium was in the order of 40 percent, and yet the premium was not included in the calculation, in this case, as well, for modelling purposes.

listnum "WP List 3" \l 1520              I am wondering, in light of the fact that the Commission has already made rulings on this in the past, as well, why it was excluded.

listnum "WP List 3" \l 1521              MR. MELO:  We certainly have included the premium in the valuation.

listnum "WP List 3" \l 1522              The approach, as you know, is that we have taken a discounted cash flow approach and valued the company on a controlling basis.  Therefore, the value we have come up with includes that premium.

listnum "WP List 3" \l 1523              We also tested the conclusions that we arrived at under the discounted cash flow approach to public company multiples, and understood that public company multiples do not reflect control premiums, so we would expect our multiple to be higher, all other things being equal.

listnum "WP List 3" \l 1524              We also considered precedent transaction multiples, and understood why there would be perhaps differences.

listnum "WP List 3" \l 1525              Then, the third thing that we also considered was the fact that, if you look at the overall transaction, the overall transaction is at a multiple of around seven times, based on publicly available information; whereas, in the valuation of the assets we are looking at here, we have actually valued them at ten times.

listnum "WP List 3" \l 1526              So, in fact, there is about a 40 or 50 percent premium that we have applied to these assets over and above the overall transaction.

listnum "WP List 3" \l 1527              COMMISSIONER KATZ:  Again, I can only direct you to previous CRTC decisions, and, again, one of our guiding principles is transparency and predictability in the CRTC.

listnum "WP List 3" \l 1528              Again, last year, at the CTV‑CHUM hearing, we took a look at the issue of acquisition premiums being allocated across all products, as well, and made a ruling in that regard.

listnum "WP List 3" \l 1529              I will leave that thought with you, as well.

listnum "WP List 3" \l 1530              To start changing things without rationalization for changing them basically removes the predictability and transparency that the Commission strives to achieve.

listnum "WP List 3" \l 1531              MR. MELO:  We could consider that.

listnum "WP List 3" \l 1532              The one thing I would like to add right now, though, is that the alternate approach would have been to take the total transaction and then allocated a value based on relative EBITDA.

listnum "WP List 3" \l 1533              That is certainly an approach that was put forward by the Commissioners.

listnum "WP List 3" \l 1534              In that case, again, we would have allocated based on a seven times EBITDA, which would produce a value considerably lower than what we have come up with using a bottom‑up or a discounted cash flow approach.

listnum "WP List 3" \l 1535              Again, compared to the seven times implied, which would get you a value of around $70 million for the assets we are talking about, we have done the discounted cash flow approach and come up with the $109 million, which implies, again, ten times.

listnum "WP List 3" \l 1536              Under the approach that we have selected, which we believe is appropriate in the circumstances to reflect the specifics of the business, but, at the same time, account for the overall control premium, we have arrived at this conclusion in our professional judgment.

listnum "WP List 3" \l 1537              COMMISSIONER KATZ:  I can only comment on your proposal, which was a DCF approach ‑‑ a discounted cash flow approach.

listnum "WP List 3" \l 1538              Based on that, and based on the way we have ruled in the past in previous decisions, including Quebecor's purchase of TVA several years ago, where we did the same thing, I would suggest that you take another look at how that was done and how that was decided.

listnum "WP List 3" \l 1539              And if there is anything more that you want to bring forward, by all means, bring it forward.

listnum "WP List 3" \l 1540              MR. MELO:  Okay.

listnum "WP List 3" \l 1541              MR. COPE:  I will only comment because it is a BCE valuation.

listnum "WP List 3" \l 1542              I think to take a multiple premium in a press release, which also would have talked about the multiple on EBITDA, and then for us to have a valuation north of the multiple of EBITDA than the purchasers are paying, and then add to that the premium, would be a highly inconsistent way to value ‑‑ outside of professional valuations, just to value a business.

listnum "WP List 3" \l 1543              That really would be a double premium, if you will, because the multiple being applied is much higher, Commissioner, than the multiple being applied to the transaction itself.

listnum "WP List 3" \l 1544              So I think, if we are going to take the 40 percent premium reference, we also have to take the multiple reference, which was at seven times, not ten.

listnum "WP List 3" \l 1545              But I will leave that to the valuation experts and to the Commission.

listnum "WP List 3" \l 1546              COMMISSIONER KATZ:  Okay.  Thank you.

listnum "WP List 3" \l 1547              The fourth item I have is a clarification.  The assumptions that you have made in modelling appear to be based on what was called "Selected Comparable Public Companies in Optimal Capital Structures".

listnum "WP List 3" \l 1548              Why did you offer that rather than using the actual capital structure that exists in BCE today, which, I would think, has a higher debt‑to‑equity ratio, and therefore would lower the weighted average cost of capital, which would increase the value of the transaction?

listnum "WP List 3" \l 1549              MR. MELO:  The overall transaction, or the overall company, is made up of various constituent parts.  We looked at this specific component and said:  What would the appropriate capital structure be for this part of the business.

listnum "WP List 3" \l 1550              That is the primary reason for using that structure.

listnum "WP List 3" \l 1551              COMMISSIONER KATZ:  But this business isn't being hived off, it is part of the existing business, and the capital structure is there.

listnum "WP List 3" \l 1552              MR. MELO:  Agreed, but the capital structure that is in place is also ‑‑ presumably there is a lot more debt in areas where that debt can be serviced.

listnum "WP List 3" \l 1553              It is a compilation or a combination of a whole bunch of different business units, all with different asset and earning‑type coverages.  So, depending on what that looked like, you would have different levels of debt at different parts of the business.

listnum "WP List 3" \l 1554              Overall, you arrive at the total.

listnum "WP List 3" \l 1555              COMMISSIONER KATZ:  The last area is one that is a bit complicated, and I am going to take us through it slowly.  It is with regard to the undertaking of the specific risk premium, which is included in here, which is somewhat of a very technical nature.

listnum "WP List 3" \l 1556              I will try and take it slowly.  Hopefully, my financial background will bring me back to where I think we will get to.

listnum "WP List 3" \l 1557              Let me start by making sure that I understand the concept of the weighted average cost of capital which you applied in the valuation.

listnum "WP List 3" \l 1558              Basically what we are doing is discounting the EBITDA ‑‑ the earnings before interest, taxes, depreciation and amortization ‑‑ based on the weighted average cost of capital.

listnum "WP List 3" \l 1559              Is that correct?

listnum "WP List 3" \l 1560              MR. MELO:  You are actually discounting the free cash flow, which is EBITDA less working capital investment, less capital expenditures, less cash taxes.

listnum "WP List 3" \l 1561              So it is not just EBITDA, it is what we refer to as free cash flow.

listnum "WP List 3" \l 1562              COMMISSIONER KATZ:  Okay.  And this weighted average cost of capital is based on the weighting of the cost of equity and the cost of debt.

listnum "WP List 3" \l 1563              MR. MELO:  That's correct.

listnum "WP List 3" \l 1564              COMMISSIONER KATZ:  We have already covered off the issue of debt‑to‑equity ratio, so I won't cover that one again.

listnum "WP List 3" \l 1565              Let's look at how we arrived at the cost of equity.

listnum "WP List 3" \l 1566              As I understand it ‑‑ and I have gone through your report ‑‑ you applied the prevailing long‑term, risk‑free rate at the time of the transaction.  You then applied a market equity risk return premium, a beta factor, to recognize the sector, and a size premium, before then applying an additional risk premium for the specific risk of each of ExpressVu, CNQ VOD, and the IP TV, pay‑per‑view, and VOD.

listnum "WP List 3" \l 1567              Is that correct?

listnum "WP List 3" \l 1568              MR. MELO:  That's correct.

listnum "WP List 3" \l 1569              COMMISSIONER KATZ:  How common is it to apply a further undertaking‑specific risk premium after including all of the other premiums and risks that I have alluded to above?

listnum "WP List 3" \l 1570              MR. MELO:  It is very common.

listnum "WP List 3" \l 1571              COMMISSIONER KATZ:  Has it been done before the CRTC or any other regulatory body in Canada?

listnum "WP List 3" \l 1572              MR. MELO:  I am not aware of those specifics.

listnum "WP List 3" \l 1573              There are two ways to adjust for risk in any given valuation.  You either adjust for risk directly through the cash flows themselves, where you go through and you take out all of the risk, or most of the risk, through the cash flows, or, secondly, you adjust for it through the specific risk premium.

listnum "WP List 3" \l 1574              The one difference perhaps here versus other cases is, when we look at the comparable public companies, to the extent that they were directly comparable, we would have probably not adjusted as much as we did.

listnum "WP List 3" \l 1575              The issue here is that we were starting with those guidelines for public companies, which are very different.  Although they are in the broadcasting space, they are very different from what we are valuing at hand.

listnum "WP List 3" \l 1576              That was the primary reason for having to add specific risk to the calculation in getting to the cost of equity.

listnum "WP List 3" \l 1577              COMMISSIONER KATZ:  But once you add that specific risk, aren't you required, then, to reduce the risk of the market equity in the beta to offset it, as well, since they are supposed to be all‑encompassing and take into consideration the various life cycles of the various products, some in their infancy, some in their S‑curve ramp‑up, and some at the maturity level?

listnum "WP List 3" \l 1578              MR. MELO:  No.  The base would very much be the equity risk premium times the beta factor, as you point out, and that gets you to, for example, one of our public comparables.  What is the weighted average cost of capital for, say, a Canwest.  That would be, probably, the simple calculation.

listnum "WP List 3" \l 1579              But here, again, we are looking at this particular business, with, as you can see, significant growth built into the projections.  Therefore, in performing the valuation you need to account for that.

listnum "WP List 3" \l 1580              So, in our professional judgment, we have added a specific risk premium.

listnum "WP List 3" \l 1581              COMMISSIONER KATZ:  We will get to the judgmentally selected factors in a minute.

listnum "WP List 3" \l 1582              You cite ‑‑ and I will use the last valuation, the one for IP TV, pay‑per‑view, and VOD.

listnum "WP List 3" \l 1583              When you take all of these factors into account, you are into a discount factor, or a weighted average cost of capital, in the 17.5 to 20 percent range, which is quite high.

listnum "WP List 3" \l 1584              What types of businesses have that high a discount factor in an industry like telecom or broadcasting?

listnum "WP List 3" \l 1585              MR. MELO:  I think the businesses you are looking at are very much start‑ups, particularly IP TV.  There is no history, so you are definitely looking at returns that, probably, the private equity gentleman here could speak to, which are oftentimes north of 20, and north of 25 percent, in fact.

listnum "WP List 3" \l 1586              COMMISSIONER KATZ:  These are start‑ups, which, as you cite here, companies such as AT&T, British Telecom, and Deutsche Telekom are actively involved in, and for which Microsoft is developing technology.

listnum "WP List 3" \l 1587              Surely there is risk there, I can grant you that, but there can't be that much risk if all of these global companies around the world are investing in this technology.

listnum "WP List 3" \l 1588              MR. MELO:  There still is significant risk.  They would look at it internally and decide what the risk would be and whether they would pursue.

listnum "WP List 3" \l 1589              But I would expect them, very much, to view it also as a risk proposition.

listnum "WP List 3" \l 1590              MR. SMITH:  Mr. Vice‑Chairman, if I could add, I think that with the pay‑per‑view and the VOD components, these businesses would carry a significantly higher risk premium than in the core distribution business, because of the inroads of alternative distribution mechanisms that are likely to affect the industry first in the VOD and the pay‑per‑view sector.

listnum "WP List 3" \l 1591              The risk premium associated with that portion of IP TV would generally be higher than just the pure distribution piece.

listnum "WP List 3" \l 1592              COMMISSIONER KATZ:  And the risk is the risk of what, the risk of being replaced by another technology, being competed against and not having the market or the business that you are looking for?

listnum "WP List 3" \l 1593              What is the risk exactly?

listnum "WP List 3" \l 1594              MR. SMITH:  I see it as consumer acceptance, in a holistic manner.

listnum "WP List 3" \l 1595              For example, there have been a number of new distribution mechanisms entered into, or started in the distribution of movies ‑‑ things like NetFliks and CinemaNow and the Ott offerings.  Some of those are succeeding and are moving ahead, and some of them are just not succeeding.

listnum "WP List 3" \l 1596              There is a significant possibility of a new business in this sector either succeeding or completely failing, and I think the VOD and the pay‑per‑view aspect of our business is far from certain.

listnum "WP List 3" \l 1597              COMMISSIONER KATZ:  I hear you, Mr. Smith, yet I read Mr. Melo's comments here talking about the future as transaction‑based, and this technology is clearly a transaction‑based technology, which is a positive as opposed to a negative.

listnum "WP List 3" \l 1598              And when I look at the rest of the world going this way, as well ‑‑

listnum "WP List 3" \l 1599              Certainly there is risk.  I don't doubt that there is risk, but I can't believe that the risk is to the tune of a risk factor of an additional 10 percent, or thereabouts, which ‑‑ and we will come to the judgmental in a minute ‑‑ seems to dramatically reduce the value of the valuations here.

listnum "WP List 3" \l 1600              Can I ask, Mr. Melo, just for CRTC purposes, can you re‑run your models removing all of the judgmentally selected risk that you have included for all three products, just so we can see the sensitivity of these numbers ourselves?

listnum "WP List 3" \l 1601              MR. MELO:  Yes, I can do that, and we can look at the conclusions thereafter.

listnum "WP List 3" \l 1602              I think the one overriding thing that you also need to consider at the end of the valuation is to look at the implied EBITDA multiple, which, again, in the case of the PPV business, is ten times, which I believe is quite significant for a business of this magnitude.

listnum "WP List 3" \l 1603              Again, we can do that.  I will run that for you, but we need to keep that in mind.

listnum "WP List 3" \l 1604              COMMISSIONER KATZ:  Okay.  Lastly, as you correctly say here, you judgmentally selected these ranges, of 8.5 to 11 percent in the case of IP TV VOD, 4 to 6 percent on ExpressVu pay‑per‑view, and I think it was 5 to 7 percent on the other one.

listnum "WP List 3" \l 1605              Where did these judgmentally selected data come from?

listnum "WP List 3" \l 1606              How did you pick these numbers?

listnum "WP List 3" \l 1607              MR. MELO:  As you probably can appreciate, we do many valuations at KPMG.  We have been through many transactions.

listnum "WP List 3" \l 1608              And we also know, when we are looking at companies, what sorts of specific risk premiums we should be applying to them relative to the public companies, which is really the starting point here.

listnum "WP List 3" \l 1609              If the company has very little risk built into the projections, then we would probably be in the order of a zero to 1 or 2 percent risk premium.

listnum "WP List 3" \l 1610              In the case where there is some significant risk in the projections, it would be 4 to 5, 6 or 7 per cent and where it gets ‑‑ becomes very risky and we look at it, there's no history, you're certainly ‑‑ we're talking about risk premiums that are north of 10 per cent.

listnum "WP List 3" \l 1611              We also then sit back and look at what is the equity ‑‑ overall equity rate of return telling us and we also know, again, you know, when it's all equity finance as to what these private equity and venture capitalists are looking at in terms of rates of return.

listnum "WP List 3" \l 1612              I'm not suggesting we're up at that magnitude, but we're certainly, in the case of IPTV, nearing.

listnum "WP List 3" \l 1613              COMMISSIONER KATZ:  Is the amounts that Morcague paid for his shares find its way into this evaluation at all?

listnum "WP List 3" \l 1614              MR. MELO:  I mean ‑‑ no, we value the business and, again, we've cross‑checked that against public company multiples and the overall transaction multiple.  So, we've done sort of bottom‑up to get to the value of what we think the business is worth.

listnum "WP List 3" \l 1615              COMMISSIONER KATZ:  Thank you.

listnum "WP List 3" \l 1616              Those are all my questions, Mr. Chairman.

listnum "WP List 3" \l 1617              THE CHAIRPERSON:  Can you clarify the last question.  I thought we ‑‑ for the purpose of benefits, et cetera, we actually look at value paid.  Shouldn't whatever Morcague paid for his shares be included?

listnum "WP List 3" \l 1618              I don't know what he paid, so I don't know whether it makes any difference or not, but it's...

                 MR. MELO:  Yeah.  We certainly did a bottom‑up valuation.  So, our value reflects the value of this business in light of the overall transaction.

listnum "WP List 3" \l 1619              MR. COPE:  Let me just add, make sure we understand the question because I want to make sure our group does.

listnum "WP List 3" \l 1620              The Commissioner has mentioned the press about the 40 per cent premium, if that's what's being asked.  The multiple on the transaction, I'll mention the investor's comment, on EBDA is somewhere around seven as I recall.  The valuation on this business, if I'm correct, is north because it's a stand‑alone valuation free cashflow methodology used.

listnum "WP List 3" \l 1621              If you applied the ideal multiple to this the valuation would be lower, not higher.  That's what I'm trying to...

listnum "WP List 3" \l 1622              THE CHAIRPERSON:  Even if you included Morcague.

listnum "WP List 3" \l 1623              MR. COPE:  Even with the premium.

listnum "WP List 3" \l 1624              THE CHAIRPERSON:  That's what my question was.

listnum "WP List 3" \l 1625              MR. COPE:  Because the premium was at seven.  The transaction, this is a higher multiple than the transaction.

listnum "WP List 3" \l 1626              I just want to make sure we're not mixing things up, that's ‑‑ hopefully that's helpful.

listnum "WP List 3" \l 1627              THE CHAIRPERSON:  Okay.  You clarified that.  Thank you.

listnum "WP List 3" \l 1628              Michel.

listnum "WP List 3" \l 1629              MR. BIBIC:  And Mr. ‑‑ my apologies, Mr. Vice‑Chair Katz, we started the discussion on valuation about the precedents raised by Directors Guild and CFTPA.  I was answering kind of conceptually where we were coming from.

listnum "WP List 3" \l 1630              I've since had the time to go back to our February 4th intervention, or reply to interventions and at paragraphs 25, 26, 27 and 28 we do deal quite specifically with the precedents raised by the CFTPA and there's the principle regarding whether benefits should attach to Category 2 services because of the genre protection issue.  That's addressed in paragraph 25.

listnum "WP List 3" \l 1631              And, of course, there's the application of the principle and there are a number of precedents where the Commission has not attached benefits to Category 2 services which were unlaunched including quite recently in CanWest Alliance Atlantis.

listnum "WP List 3" \l 1632              I didn't answer the question specifically on the precedents, but I since had the time.

listnum "WP List 3" \l 1633              COMMISSIONER KATZ:  Thank you.

listnum "WP List 3" \l 1634              COMMISSIONER ARPIN:  Thank you, Mr. Chair.

listnum "WP List 3" \l 1635              My line of questions will deal with tangible benefit.  Obviously it has been covered very well in your supplementary brief and through various exchange of correspondence with the Commission regarding the various projects that you have, but need to further investigate and maybe have some further clarification for the record.

listnum "WP List 3" \l 1636              So, here are some of my questions.

listnum "WP List 3" \l 1637              I note that in one of your ‑‑ you broke down ‑‑ we will start with the money that you are investing in programming, and before talking about the contribution to the Bell Fund and to the social benefits, we will deal with the first part which is the investment of $6‑million into new programming.

listnum "WP List 3" \l 1638              For the sake of clarification, you have said in your submission and your letter that you will be making use of independent producers.  For further clarification, what do you mean by independent producer?

listnum "WP List 3" \l 1639              Could you help?  You have your own definition, or is it the standard definition of independent producers that are usually members of either CFPTA or of AFPTQ?

listnum "WP List 3" \l 1640              MR. SMITH:  I think the ‑‑ to respond to the Vice‑Chair's question, the key aspect of our proposal is to ‑‑ we wouldn't be undertaking any in‑house production at all in respect of these funds.  We have very, very limited in‑house production capability which is generally just used for promos, et cetera.

listnum "WP List 3" \l 1641              And any funding that we send to the Canadian broadcasting industry goes into typically independent producers usually working in conjunction with another broadcaster.

listnum "WP List 3" \l 1642              We very rarely fund something completely, we would normally contribute to the production which would be undertaken in conjunction with one of the major broadcasters in Canada.

listnum "WP List 3" \l 1643              COMMISSIONER ARPIN:  Now, one of the areas where you want to invest is the coverage of live theatrical production and you have allocated 10 per cent of the funds over a seven‑year period towards coverage of live theatrical.

listnum "WP List 3" \l 1644              And are you talking about specifically coverage or talking about the production of a specific theatrical event, because coverage obviously is you put three cameras around the scene and you do like covering a hockey game.  I don't think it's going to be a very good programming fair that you will be producing if you do only strict coverage.

listnum "WP List 3" \l 1645              MR. SMITH:  The example I can cite is the work we are attempting to do with the Stratford Festival.

listnum "WP List 3" \l 1646              We've been working with one of the major broadcasters in Canada to create a pay‑per‑view version of one of their plays.  So, it would actually be one of the Stratford plays produced or filmed for broadcast on pay‑per‑view and on other platforms.

listnum "WP List 3" \l 1647              COMMISSIONER ARPIN:  So, you are talking a full production, not a coverage?

listnum "WP List 3" \l 1648              MR. SMITH:  Yes, but the reason I pointed out that it would be in conjunction with a broadcaster is that we see this as extra funding to get some of those prospects into the broadcast community which currently don't quite make it.

listnum "WP List 3" \l 1649              So, we wouldn't be funding the entire event, we'll be contributing to the funding.

listnum "WP List 3" \l 1650              COMMISSIONER ARPIN:  Yes, obviously because if I'm looking at the ‑‑ I was asking myself, with about $90,000 a year what kind of productions you will be able to support.

listnum "WP List 3" \l 1651              Now, you are telling me that it is going to be done in conjunction with another broadcaster and probably an independent producer as well that could be involved.  So, you will be putting up the necessary funding, you will be a support funding instrument to develop ‑‑ to do that type of production.

listnum "WP List 3" \l 1652              MR. SMITH:  That's correct.

listnum "WP List 3" \l 1653              COMMISSIONER ARPIN:  Now, the second area is ‑‑ and I am referring to your answer to question A9 of your letter dated September the 19th.

listnum "WP List 3" \l 1654              In the second category you have, you have:

                      "We will create and administer funding to Quebec independent production in order to produce original programming for the viewers in Quebec."  (As read)

listnum "WP List 3" \l 1655              COMMISSIONER ARPIN:  And you will allocate 25 per cent of that money.  And that will be production that will be broadcast on your pay‑per‑view?

listnum "WP List 3" \l 1656              MR. SMITH:  Yes.  We would generally expect broadcasting which is where we assist with funding from this benefits package to be carried on a first window basis on our pay‑per‑view platform, but also it will be made available by the independent producers to other distributors in Canada and other broadcasting undertakings.

listnum "WP List 3" \l 1657              We found in the past, for example, with "La Job", which was something that we contributed funding towards, that we carried that production first on pay‑per‑view and because it had both some funding from Bell but also carriage on our first window on pay‑per‑view, it actually then carried on to carry second runs on terrestrial broadcasting.

listnum "WP List 3" \l 1658              So, we can help not only with the money but by seeding the market with the first run on pay‑per‑view.

listnum "WP List 3" \l 1659              COMMISSIONER ARPIN:  So, again, that could be a production that will be made in conjunction him with existing broadcasters or who benefit from broadcasting performance envelope from CTF.

listnum "WP List 3" \l 1660              MR. SMITH:  It could be.  We certainly envisage that these funds would go towards productions which would have other sources of funding and obviously the CTF could be one of those, but we do see our funding as being taking the broadcasting industry slightly further in the area of under served events and under served technologies.  We are proposing to have all of this production done in high definition and also tailor those production so that they would suit a pay‑per‑view platform which is, after all, where the benefits are arising here.

listnum "WP List 3" \l 1661              COMMISSIONER ARPIN:  Now, without jumping immediately to the second category, the Bell Fund, just as an aside, one of these productions also gets financial support from the Bell Fund?

listnum "WP List 3" \l 1662              MR. SMITH:  We are certainly not proposing to limit the sources of funding for these productions, although I think it would be fair to say that a number of these productions, because they would be targeted at under served niche audiences and niche subjects, are perhaps unlikely to also qualify for the type of initiative that the Bell Fund contributes to, the reason being that the Bell Fund is very much about the production of digital media and enhancing broadcasting content with interactive services either on the television or on the web.

listnum "WP List 3" \l 1663              So the number of these productions which will both be niche in content, niche in audience, high definition and have a digital media component are probably very, very small, Vice Chair.

listnum "WP List 3" \l 1664              COMMISSIONER ARPIN:  You are ending your reply to that Question A9  by saying:

                      "We will also commit a further 10% over seven years to additional projects with the exact concept to be developed as consumer demand and viewing habits change over time."  (As read)

listnum "WP List 3" \l 1665              Do you have any specific things in mind at this time?

listnum "WP List 3" \l 1666              MR. SMITH:  Other than to retain a certain amount of flexibility over which of the under served categories which high definition type of property would benefit, no, Vice Chairman.  I think these sounds are relatively small, also in the context of Québec production community they can be significant and they can get these productions over the finishing line to become a reality.  If we can move that 10 per cent of the funds around a little bit to enable us to tune the benefits package to what the market needs over the course of the seven years, that will be our proposal.

listnum "WP List 3" \l 1667              COMMISSIONER ARPIN:  If I am making an assumption that after a couple of years, or three or four years even, that money has not been used because there were no specific events that could have triggered the use of these funds, how would you make use of those benefits?  Will you reallocate them through the other four items that you have described in your letter?

listnum "WP List 3" \l 1668              MR. SMITH:  Yes, that would be the most likely use of these funds in any case.  They would go to top up one of the other four components of the benefits package.

listnum "WP List 3" \l 1669              COMMISSIONER ARPIN:  Now, to one of the questions that the Commission asked, they asked if those amounts of money will be distributed evenly over the seven‑year period.  You said that it wasn't something that you were contemplating for the time being.

listnum "WP List 3" \l 1670              How do you think these monies will flow over time?

listnum "WP List 3" \l 1671              MR. SMITH:  Well, I think our expectation is that the benefits will not flow evenly within each category.  For example, there wouldn't be an even flow of 10 per cent every year for seven years into theatrical productions, but over the seven years the 10 per cent would hit that particular target sector.

listnum "WP List 3" \l 1672              I think as a whole fund of $6.1 million associated with the independent production area, then yes, it would flow relatively evenly.  We just didn't want to be constrained at the individual component level because we think that different productions will require more or less.

listnum "WP List 3" \l 1673              COMMISSIONER ARPIN:  All right.

listnum "WP List 3" \l 1674              You have a located some money to the coverage of existing festivals and you gave an example of the Montréal Film Festival.  My question is very simple, but I know that most of the Montréal‑based over‑the‑air broadcasters are also doing that during the Montréal Film Festival.

listnum "WP List 3" \l 1675              How different will your coverage be to what is currently done by the over‑the‑air broadcasters?

listnum "WP List 3" \l 1676              MR. SMITH:  The exact proposals in respect to the Montréal Film Festival have not been developed, so I can't give the Commission a specific answer, but I can assure the Commission that our intention would be to broaden the coverage of the Montréal Film Festival to cover to the same degree that we already achieve coverage of the Toronto Film Festival.

listnum "WP List 3" \l 1677              At the moment it's not commercially viable for us to extend the Montréal Film Festival coverage to that extent.  This funding would enable us to do so and therefore serve an audience that is currently non‑served.

listnum "WP List 3" \l 1678              COMMISSIONER ARPIN:  All right.

listnum "WP List 3" \l 1679              We will now move to my questions pertaining specifically to the Bell Fund benefits.

listnum "WP List 3" \l 1680              In the reply to the Commission you said that the Board of Directors of the Bell Fund has not yet made any decisions regarding how they are going to use and allocate the funding that they will be receiving on a yearly basis.

listnum "WP List 3" \l 1681              Have you had any further discussions with them regarding if they have specific plans?

listnum "WP List 3" \l 1682              I know they are going to be heard this afternoon and I'm looking also at asking them a similar question, so they could start preparing their answer.

‑‑‑ Laughter / Rires

listnum "WP List 3" \l 1683              MR. SMITH:  No, I think at this stage we are certainly waiting for the Commission's approval of this transaction and of the benefits package that we proposed before we go into too much detail with any of the organizations which will benefit from this.

listnum "WP List 3" \l 1684              Obviously the Bell Fund is something that Bell has been involved with for quite some time.  I think over the years we have contributed more than $50 million to the Bell Fund since it was formed and it currently undertakes, I think it's a hundred projects every year, and there are many projects which remain unfunded.

listnum "WP List 3" \l 1685              So we have worked with the Bell Fund to the extent of reassuring ourselves that there is a large opportunity for this funding to effectively extend their current commitments.

listnum "WP List 3" \l 1686              COMMISSIONER ARPIN:  Now, I'm sure that the Bell Fund is producing a yearly annual report and they make it available for the Commission to consider, but could you ascertain to us that if the Bell Fund wasn't doing it the BCE will do it and make sure that the Commission gets apprised of how the money has been used by Bell Fund?

listnum "WP List 3" \l 1687              MR. SMITH:  My understanding is that Bell Fund does report.  I think I would seek confirmation from the organizers of the Bell Fund that that is the case.

listnum "WP List 3" \l 1688              To the extent that they don't, I would certainly want to know that Bell's funding is being used beneficially and I would be happy to share that information with the Commission, should it be necessary.

listnum "WP List 3" \l 1689              COMMISSIONER ARPIN:  One of your projects, at least that you have described in your submission, is that you want to allocate some money to cover the costs of digitally remastering important French Canadian archival films.

listnum "WP List 3" \l 1690              Now, how different will that be from the video ‑‑ I think it is Québecor elephant project, which is also already doing that and seems to have an understanding through the APFTQ with all of the film producers to remaster their feature films for the benefit of their service.

listnum "WP List 3" \l 1691              I am drawing your attention to a news release that they issued on May 7, 2007 in which they say:

                      "Québecor to spend $2.5 million to preserve, promote and provide access to Québec film heritage."  (As read)

listnum "WP List 3" \l 1692              My question to you is how different your plan is to that one?

listnum "WP List 3" \l 1693              MR. SMITH:  It's early to say, Commissioner Arpin.  I think the importance to us is that we feel that there is a large bank of archival media which currently will not reach a digital audience unless funding is achieved for digital remastering of that archival material and we are not sure that TVA, Québecor's proposal is going to cover enough.

listnum "WP List 3" \l 1694              So that's why we would like to provide some more funds as part of his benefits package, or at least keep the options open to use some of the 10 per cent for that purpose.

listnum "WP List 3" \l 1695              I think something which would be important to us, as I'm sure it is important to Québecor, is to make sure that benefits package monies goes to the benefit of all Canadians and therefore the material that is digitally remastered is available through all distribution platforms, or can be acquired by all distribution platforms.  It is something that we would be very anxious to assure ourselves of associated with or funding and I'm sure Québecor would feel the same.

listnum "WP List 3" \l 1696              COMMISSIONER ARPIN:  Now, my next question has to do with the baseline for your making sure that the money you are going to be investing is incremental to what you are already spending regarding programming for your own services.

listnum "WP List 3" \l 1697              I know that you are aware that in the CTV/CHUM decision and in the Canwest/Alliance Atlantis the Commission had a specific condition of licence for that purpose.  If you want me to read what the Commission has said in the Canwest/Alliance Atlantis, or you are knowledgeable about these conditions of licence, my question to you is:  Are you ready to accept a similar condition of licence?

listnum "WP List 3" \l 1698              MR. SMITH:  I will leave it to my colleagues to comment on those specific cases, Commissioner, but my expectation is that we would be reporting for the funds that we allocate to this purpose every year to the Commission as we have done in the past and the incrementality of this will be assured by ensuring that the amounts we provide are incremental over and above the run rate for the last three years, which is the practice which the Commission has accepted in previous instances.

listnum "WP List 3" \l 1699              COMMISSIONER ARPIN:  Yes, all right.

‑‑‑ Pause

listnum "WP List 3" \l 1700              COMMISSIONER ARPIN:  Now, really my last question has to do with the Programming Committee that BCE is planning to set.

‑‑‑ Pause

listnum "WP List 3" \l 1701              THE CHAIRPERSON:  That Programming Committee will be made up of employees of BCE or independent members?  Because the draft by‑law doesn't address that.

listnum "WP List 3" \l 1702              MR. BIBIC:  What the draft by‑law does address is that no member of the Programming Committee shall be a member of the Board of Directors of any non‑Canadian shareholder.

listnum "WP List 3" \l 1703              COMMISSIONER ARPIN:  Yes.

listnum "WP List 3" \l 1704              MR. BIBIC:  It does address that.

listnum "WP List 3" \l 1705              COMMISSIONER ARPIN:  Yes.

listnum "WP List 3" \l 1706              MR. BIBIC:  And no member of the Programming Committee may be a Director, an employee or an officer of BCE Holdco, which it does address that as well.

listnum "WP List 3" \l 1707              You are correct, Vice Chair Arpin, that it does not specifically restrict the ability of employees otherwise, as long as they are not related ‑‑ they are not a Director of a non‑Canadian shareholder or an employee of BCE Holdco Inc. proper to be part of the Programming Committee.

listnum "WP List 3" \l 1708              COMMISSIONER ARPIN:  Or even employees a Bell ExpressVu.

listnum "WP List 3" \l 1709              MR. BIBIC:  Correct.

listnum "WP List 3" \l 1710              COMMISSIONER ARPIN:  So is it the intent of having employees on that Programming Committee or to have independent Directors or members?

listnum "WP List 3" \l 1711              MR. BIBIC:  I have to say we haven't turned our mind specifically to that issue yet.  I mean, if there is a specific concern of the Commission we would be more than happy to take it into account as we ‑‑

listnum "WP List 3" \l 1712              COMMISSIONER ARPIN:  No.  My next question is:  If they are independent, will they be remunerated and will it be taken off the benefit package?

listnum "WP List 3" \l 1713              MR. BIBIC:  I wouldn't have thought that they would be remunerated, but ‑‑

listnum "WP List 3" \l 1714              MR. SMITH:  No, I think we made a commitment in our deficiency responses that there would be no administrative fees charged associated with the distribution of Bell's Funds and I think that would extend to the remuneration of the Programming Committee.

listnum "WP List 3" \l 1715              We have quite substantial expertise within our programming team and I would hope that they can contribute to this particular function.

listnum "WP List 3" \l 1716              COMMISSIONER ARPIN:  Now, if in it's wisdom the Commission was to conclude that the value of the transaction is higher than the amount that you have arrived at, how will ‑‑ it means that is going to trigger more ‑‑ or tangible benefits.

listnum "WP List 3" \l 1717              Have you thought how you are going to be using and where you are going to be using those extra monies?

listnum "WP List 3" \l 1718              MR. SMITH:  I think my expectation is that any modest increase in the size of the benefits package that the CRTC may feel appropriate would be distributed pro rata to all of the existing proposals.  Obviously if the CRTC felt that a substantial change to the benefits package was required, then we would have to reconsider.

listnum "WP List 3" \l 1719              COMMISSIONER ARPIN:  Well, Mr. Chair, those were my questions.

listnum "WP List 3" \l 1720              Thank you very much.

listnum "WP List 3" \l 1721              THE CHAIRPERSON:  Thank you.

listnum "WP List 3" \l 1722              A couple of clean up questions.

listnum "WP List 3" \l 1723              Mr. Bibic, can you answer the question of the Vice Chairman in terms of employees?  Is it your intention to have employees on the Programming Committee or not or are you prepared to put a provision in there specifically excluding them?

listnum "WP List 3" \l 1724              Employees of the non‑Canadian partners is what we are obviously talking about.

listnum "WP List 3" \l 1725              MR. BIBIC:  Again, as I mentioned, Mr. Chair, I don't think we had actually turned our minds to the actual composition, but we hadn't foreseen specifically or necessarily excluding employees of the company, as long as they didn't trigger the other restrictions.  I think there could be value to having employees of Bell ExpressVu for example who are Canadian and not associated with the non‑Canadian shareholders from participating in the independent Programming Committee.

listnum "WP List 3" \l 1726              THE CHAIRPERSON:  You know what we are driving at.  Obviously we want the program to be done for Canadians by Canadians.  We might want to address how you ensure that.

listnum "WP List 3" \l 1727              The other one, the Advisory Services Agreement, as far as I understand it, does not cover any programming matters, although it has not explicitly said so.  But unless I misread it, I think the intention is it covers other issues in programming.

listnum "WP List 3" \l 1728              MR. BIBIC:  You are correct, Mr. Chair.

listnum "WP List 3" \l 1729              THE CHAIRPERSON:  We could spell that out presumably somehow.

listnum "WP List 3" \l 1730              MR. LEECH:  Mr. Chairman, may I go back to your first question to me, is the concern regarding having employees of the non‑Canadian shareholders from being on the Programming Committees or it's employees of Bell Canada or Bell ExpressVu being on the programming committee, just so I understand what we are going to take back and consider?

listnum "WP List 3" \l 1731              THE CHAIRPERSON:  Well, I said programming by Canadians for Canadians.  If someone is an employee of Bell I don't care, I just want to make sure that the programming is done by somebody who is familiar with, understands and identifies with the goals of the Broadcasting Act.

listnum "WP List 3" \l 1732              MR. BIBIC:  That does clarify it.  Thank you.

listnum "WP List 3" \l 1733              THE CHAIRPERSON:  All right.

listnum "WP List 3" \l 1734              Then we asked you for three reports which you commissioned in contemplation of this.  One was by Barry Allen(ph), one was by Herb Riber(ph) the other one by Shirley Sohn(ph).  Notwithstanding that we specifically ask for them, you didn't tender them on the assumption that they are irrelevant.

listnum "WP List 3" \l 1735              Could you explain why we did get a copy of those reports?

listnum "WP List 3" \l 1736              MR. BIBIC:  I will turn to Mr. Lampe or Mr. Koch.

listnum "WP List 3" \l 1737              MR. LAMPE:  My information was that there was no report delivered either by Mr. Riber or Mr. Allen.

listnum "WP List 3" \l 1738              In the case of Ms Sohn, we have had communications with ‑‑ and I see Commission counsel nodding that ‑‑

listnum "WP List 3" \l 1739              UNIDENTIFIED SPEAKER:  We have the Sohn Report.

listnum "WP List 3" \l 1740              MR. LAMPE:  ‑‑ that has been provided, sir.

listnum "WP List 3" \l 1741              THE CHAIRPERSON:  So Barry Allen and Herb Riber did not present you with any report or document of any kind?

listnum "WP List 3" \l 1742              MR. LAMPE:  That's my understanding, Mr. Chairman.

listnum "WP List 3" \l 1743              MR. MASIELLO:  Mr. Chairman, that is correct.  Their work was really verbal and incorporated into the work product of the sponsors.

listnum "WP List 3" \l 1744              THE CHAIRPERSON:  All right.  Glad to hear that information.

listnum "WP List 3" \l 1745              As I say, I was surprised why you wouldn't deliver a report that we had asked for, so I thought we would clarify that.  I'm glad we did that.

listnum "WP List 3" \l 1746              Mr. Leech, you mentioned that Mr. McCague's purchase for the Class A shares obviously is confidential, but we don't know what it is and how much he paid, but you assured us that even if you add that to it that wouldn't be north of the valuation value.  So I just think for completeness of the record, if you could file with us on a confidential basis what is the consideration that he paid for the Class A shares it would be appreciated.

listnum "WP List 3" \l 1747              MR. LEECH:  We shall, Mr. Chair.

listnum "WP List 3" \l 1748              THE CHAIRPERSON:  All right.  I think that just about covers it.

listnum "WP List 3" \l 1749              The only thing is, I raised 12 specific points in my questioning of you, my colleagues both raised a number.  I think you can see we were clearly concerned, terribly concerned based first of all on the Morcague ruling; want to have some ruling by the pension people just to take it off; and the various issues dealing with directors; Executive Committee; quorum; the independent directors; the appointment of independent directors; what happens to your votes if there is divestiture; the 5 per cent limit; the ordinary course of business; best efforts; and, finally, why all these obligations are vested at the shareholder level rather than director level or designee level.

listnum "WP List 3" \l 1750              So I hope that tomorrow you can address those points because they are of great concern to us.  We asked them because this is a very big transaction and we want to be absolutely sure that the control is where it should be.

listnum "WP List 3" \l 1751              MR. LEECH:  We understand, Mr. Chairman.

listnum "WP List 3" \l 1752              THE CHAIRPERSON:  All right, thank you very much.

listnum "WP List 3" \l 1753              We will then break for lunch now.  We will take an hour break and we will resume at 1:30.

listnum "WP List 3" \l 1754              Thank you.

‑‑‑ Upon recessing at 1221 / Suspension à 1221

‑‑‑ Upon resuming at 1337 / Reprise à 1337

listnum "WP List 3" \l 1755              THE CHAIRPERSON:  Good afternoon.

listnum "WP List 3" \l 1756              Madam Secretary, whom do we have now?

listnum "WP List 3" \l 1757              THE SECRETARY:  Thank you, Mr. Chairman.

listnum "WP List 3" \l 1758              We will now proceed to Phase II in which intervenors appear in the order set out in the Agenda to present their intervention.

listnum "WP List 3" \l 1759              We will begin with Bell Broadcast and New Media Fund.  Appearing for Bell Broadcast and New Media Fund is Ms Andrea Sheffer.

listnum "WP List 3" \l 1760              Ms Andrea Sheffer, you have 10 minutes for your presentation.


listnum "WP List 3" \l 1761              MS SHEFFER:  Thank you.

listnum "WP List 3" \l 1762              Good afternoon, Mr. Chairman, Members of the Panel, Commission Staff, ladies and gentlemen.

listnum "WP List 3" \l 1763              My name is Andrea Sheffer, I'm the Executive Director of the Bell Broadcast and New Media Fund and the Bell Fund hopes that you will approve the benefits that have been proposed for it through this application.

listnum "WP List 3" \l 1764              The Bell Fund was certified in 1999 by the Commission as an independent production fund qualified to receive and administer up to 20 per cent of  a broadcast distribution undertaking's contribution to Canadian programming.

listnum "WP List 3" \l 1765              It has received approximately $50‑million from Bell ExpressVu since 1999 to support the Canadian broadcast and new media industry.

listnum "WP List 3" \l 1766              It funds the production of Canadian television programs and their associated interactive digital productions created for multiple platforms.

listnum "WP List 3" \l 1767              It presently receives approximately .6 per cent of Bell ExpressVu's revenues which are expected to reach $10‑million 2008.

listnum "WP List 3" \l 1768              The Bell Fund also operates a $10‑million endowment resulting from the BCE CTV benefits in 2001.  The income generated by this endowment specifically funds the development of new media projects associated with television programs.

listnum "WP List 3" \l 1769              The Bell Fund has a nine‑person Board made up of industry executives, including three from the Bell family.  This Board makes all funding decisions and determines the policies and directions of the Fund.

listnum "WP List 3" \l 1770              The Board was visionary in 1997 when it determined that supporting the broadcasting industry meant encouraging production for alternate platforms as well.  Thus, the Bell Fund has been at the forefront of cross‑platform TV new media production for the past 10 years.

listnum "WP List 3" \l 1771              There remain today very few alternatives for funding productions of this nature and yet the demand is great and growing.

listnum "WP List 3" \l 1772              As the Commission is well aware, there has been much discussion recently, particularly in relation to the mandate of the Canadian Television Fund, about the need to find new monies to support the growing Canadian new media industry.

listnum "WP List 3" \l 1773              The proposal by BCE as part of the transfer control transaction to allocate $4.1‑million over seven years to the Bell Fund is a recognition of this need and is consistent with BCE's long‑term commitment to this new industry.

listnum "WP List 3" \l 1774              The Bell Fund has invested over $57‑million to build this industry in Canada, it has funded over 500 television and new media projects in English and in French.  These have benefitted nearly 30 different Canadian broadcasters and hundreds of independent producers.

listnum "WP List 3" \l 1775              There is no question that the new media industry could certainly use additional funding to grow and maintain the competitive edge that has been established.

listnum "WP List 3" \l 1776              The Bell Fund presently is able to support only one out of every two or three good applications that it receives.  Producers have few funding alternatives, TeleFilm is one of these.  The Canada New Media Fund which expires potentially in May, 2009, has only $14‑million annually and has limited interest in this kind of cross‑platform production.

listnum "WP List 3" \l 1777              The Fonds Quebecor is oriented towards projects with an educational focus.  There is some limited funding from several different provincial funding agencies and training institutions.  No other independent Fund exists with a mandate to support this type of production, although several have requested that the CRTC amend the regulations to allow BDU funds the flexibility to finance projects designed for new media platforms.

listnum "WP List 3" \l 1778              The Bell Fund proposes to allocate the new benefit monies to its development program and associated industry activities.

listnum "WP List 3" \l 1779              The present CRTC regulations governing certified independent Funds require that projects eligible to be funded must have a licensed television program, therefore, the BDU funds are allocated to production of television programs and their related interactive digital property.

listnum "WP List 3" \l 1780              This regulation, however, effectively eliminates any kind of development as at the development stage there is normally only a development agreement with the broadcaster and no commitment to licence.  Therefore, development which is a very critical early, higher risk stage in the process of creating outstanding new media projects has lacked any substantive funding.

listnum "WP List 3" \l 1781              The Bell Fund has used the interest generated from its endowment for this purpose, but it needs to enhance this development support.

listnum "WP List 3" \l 1782              The BCE benefits would enable the Bell Fund to allocate close to $600,000 per year for the next seven years to invest in the development of new media productions and the support required.

listnum "WP List 3" \l 1783              As the Bell Fund presently finances up to 75 per cent of the costs of development to a maximum of $50,000 per project, this new funding could be allocated to 12 to 15 new projects per year, more than a 50 per cent increase for the Bell Fund's development program.

listnum "WP List 3" \l 1784              There would also be very minimal increase in administrative costs, if any, as much of the evaluation work and processing is already being undertaken but with a higher rejection rate.

listnum "WP List 3" \l 1785              The Bell Fund has an excellent track record and is highly regarded by the industry.

listnum "WP List 3" \l 1786              The proposed benefits to the Bell Fund were strongly supported by many interventions to the Commission from producers and the industry, including the Producers Association, the CFPTA, which noted in its intervention that this is much needed additional support for Canadian content creation for digital platforms.

listnum "WP List 3" \l 1787              The Bell Fund has played a critical role in developing Canadian interactive digital production which has resulted in international recognition of Canada's leadership and excellence in this area.  Bell Fund projects are international award winners, including two of its projects that tied for the International Interactive Emmy Award last year, the best in the world.

listnum "WP List 3" \l 1788              The Bell Fund has been at the forefront of this industry and has proactively encouraged its growth and development in many ways, not only through direct project funding, but through various training programs, research, publications and promotional activities.

listnum "WP List 3" \l 1789              The BCE benefits offered through this transaction will be of direct benefit to the independent producers who continue to be challenged to find the resources and financing that is essential for production of cross‑platform interactive digital media.

listnum "WP List 3" \l 1790              The Bell Fund has the expertise to help them and has earned the trust of the industry.

listnum "WP List 3" \l 1791              BCE's leadership in this type of production was demonstrated 10 years ago with the establishment of the Bell Fund and its continued interest in this industry is much welcome.

listnum "WP List 3" \l 1792              Therefore, I urge you to approve the benefits as proposed for the Bell Broadcast and New Media Fund and I would be pleased to answer any questions you may have about the Fund.

listnum "WP List 3" \l 1793              Thank you.

listnum "WP List 3" \l 1794              THE CHAIRPERSON:  Thank you.

listnum "WP List 3" \l 1795              You mentioned that you have a new media fund, or you finance new media projects.

listnum "WP List 3" \l 1796              As you know, in new media the crucial issue is always rights, what are the rights, how do you share them, et cetera.

listnum "WP List 3" \l 1797              Have you at the Bell Fund developed a template on how to deal with them in the new media context?

listnum "WP List 3" \l 1798              MS SHEFFER:  We're actually working right now with terms of trade with the CFTPA to try to settle that.  It is a huge issue and it has caused a lot of complications, recently.  You know, it hasn't been an issue up until the last year or two.

listnum "WP List 3" \l 1799              THE CHAIRPERSON:  No, I know that, yes.

listnum "WP List 3" \l 1800              So, you are part of the terms of trade...

listnum "WP List 3" \l 1801              MS SHEFFER:  Yes.

listnum "WP List 3" \l 1802              THE CHAIRPERSON:  Okay, wonderful.

listnum "WP List 3" \l 1803              Michel, you have some questions?

listnum "WP List 3" \l 1804              COMMISSIONER ARPIN:  Yes.  Thank you, Mr. Chair.

listnum "WP List 3" \l 1805              Good afternoon, Mrs. Sheffer.  A few questions and the first one  directly goes to your oral presentation.

listnum "WP List 3" \l 1806              At the bottom of your page 4 you are saying that the new program, if CRTC approves it, will have very minimal increase in administrative costs on one end, that is what you have stated, and now I have Bell in reply to a question in a letter dated September 19, 2007, the question was question 13 and one of the questions was:

                      "Confirm whether or not administrative fees will be charged."  (As read)

listnum "WP List 3" \l 1807              COMMISSIONER ARPIN:  And the answer is :

                      "No administrative fees will be charged."  (As read)

listnum "WP List 3" \l 1808              MS SHEFFER:  My understanding of that is that they are going to give us the money, the full amount of the money without charging any administrative charges to themselves or to us and that's my understanding of that clause.

listnum "WP List 3" \l 1809              COMMISSIONER ARPIN:  Okay.

listnum "WP List 3" \l 1810              MS SHEFFER:  And I suspect there will be very, very minimal, if any, administrative charges for us too.

listnum "WP List 3" \l 1811              COMMISSIONER ARPIN:  Because you already have the infrastructure ‑‑

listnum "WP List 3" \l 1812              MS SHEFFER:  That's right.

listnum "WP List 3" \l 1813              COMMISSIONER ARPIN:  ‑‑ to manage those funds.

listnum "WP List 3" \l 1814              MS SHEFFER:  Exactly.

listnum "WP List 3" \l 1815              COMMISSIONER ARPIN:  Are you contemplating having a separate envelope for that money, or will it be added to the existing funds that you are managing?

listnum "WP List 3" \l 1816              MS SHEFFER:  Presently it's simply to add to the funds that exist.

listnum "WP List 3" \l 1817              COMMISSIONER ARPIN:  Now, since there will ‑‑ how could the Commission recognize that what has been invested specifically from this benefit package toward ‑‑

listnum "WP List 3" \l 1818              MS SHEFFER:  We can actually show ‑‑ presently the money that we use is the interest generated by the endowment.  We can show you exactly how much that is and the incremental increase would be specifically  this kind of funding from the benefits.  So, it's very clear.  We can show that to you.

listnum "WP List 3" \l 1819              COMMISSIONER ARPIN:  So, you will be able to report exactly what has been ‑‑ how the money has been used for that very purpose?

listnum "WP List 3" \l 1820              MS SHEFFER:  Absolutely.

listnum "WP List 3" \l 1821              COMMISSIONER ARPIN:  Absolutely.  Okay.

listnum "WP List 3" \l 1822              Well, again on your page 4 you made a plea to have the CRTC revisit somehow its policy of 1999 regarding development.  I'm sure that you will use the opportunity of the April hearing to make that case again.

listnum "WP List 3" \l 1823              MS SHEFFER:  I'm not sure if it belongs in the April hearing or with the new media hearings or whether it's a stand‑alone ‑‑ it's a minor change to the wording, I think.

listnum "WP List 3" \l 1824              COMMISSIONER ARPIN:  So, in a way what you are saying here today is that you are asking us to take it into consideration for and may come up with a different process, but to at least initiate a process of some kind to look into that matter.

listnum "WP List 3" \l 1825              MS SHEFFER:  Yes, please.

listnum "WP List 3" \l 1826              COMMISSIONER ARPIN:  Yes.  So, I appreciate your comment.

listnum "WP List 3" \l 1827              Thank you very much, Mr. Chairman.

listnum "WP List 3" \l 1828              MS SHEFFER:  Thank you.

listnum "WP List 3" \l 1829              COMMISSIONER ARPIN:  I have no further questions.

listnum "WP List 3" \l 1830              THE CHAIRPERSON:  Thank you very much.

listnum "WP List 3" \l 1831              MS SHEFFER:  Thank you.

listnum "WP List 3" \l 1832              THE CHAIRPERSON:  Madam Secretary, over to you.

listnum "WP List 3" \l 1833              THE SECRETARY:  Thank you, Mr. Chairman.

listnum "WP List 3" \l 1834              I would now invite Toronto International Film Festival Group to come forward to the presentation table.

‑‑‑ Pause

listnum "WP List 3" \l 1835              THE SECRETARY:  We will now proceed with the Toronto International Film Festival Group to make their presentation.

listnum "WP List 3" \l 1836              Appearing for the Toronto International Film Festival is Piers Handling.

listnum "WP List 3" \l 1837              Please introduce your colleague.  You will have ten minutes for your presentation.


listnum "WP List 3" \l 1838              MR. HANDLING:  Thank you very much.

listnum "WP List 3" \l 1839              My name is Piers Handling of the Toronto International Film Festival Group.

listnum "WP List 3" \l 1840              With me is Stuart McBurnie, Director of Sponsorship for the group as well.

listnum "WP List 3" \l 1841              I would like to thank the Commission for inviting me today to make this presentation.

listnum "WP List 3" \l 1842              The Toronto International Film Festival Group is a charitable cultural organization whose mission is to offer our audiences experiences that affect the way they see the world.  We are also passionate advocates for Canadian cinema.

listnum "WP List 3" \l 1843              We have had a 13‑year relationship with Bell, the length of which speaks to the strength of this bond.  Bell has been one of our top flight major sponsors since 1995.  Their funding provides annual support for the film festival, but through their sponsorship they also support our many ongoing annual activities, which include a children's film festival, a film library and archive and an outreach program which screens Canadian and international films in almost 200 communities across Canada.

listnum "WP List 3" \l 1844              Four years ago we announced plans to build a new film centre which would house all of the film festival group's annual activities.  In a very exciting development Bell approached us to name this building, now called Bell Lightbox.

listnum "WP List 3" \l 1845              Their multi‑million dollar commitment constituted the largest investment in a not‑for‑profit arts organization in the history of giving in Canada.  Their commitment meant that our new home would be built.

listnum "WP List 3" \l 1846              This partnership is also very exciting for us because Bell is at the forefront of new media and technologies.  We hope to deploy these in Bell Lightbox.

listnum "WP List 3" \l 1847              Bell presently uses the film festival for marketing and promotional activities.  Bell Mobility offers consumer ticket promotions while Sympatico/MSN provides online access to editorial coverage, film trailers and talent profiles.  Bell ExpressVu brings the festival experience to new audiences across the country by capturing and broadcasting our high profile press conferences, which feature not only the major Hollywood stars but also Canadian talent, such as David Cronenberg, Denys Arcand, Deepa Mehta and Sarah Polley.

listnum "WP List 3" \l 1848              Bell has been one of the film festival group's most loyal supporters.  Their commitment to our long‑term future speaks of an exemplary corporate commitment to supporting culture and the film and media industry in Canada.

listnum "WP List 3" \l 1849              The proposed BCE transaction marks an important milestone in Bell's development.  It is highly encouraging to us that the majority equity interest will lie with Teachers' Private Capital, a Canadian private equity inventory with an admirable track record of creating long‑term value within organizations.

listnum "WP List 3" \l 1850              Thank you.

listnum "WP List 3" \l 1851              THE CHAIRPERSON:  Thank you.

listnum "WP List 3" \l 1852              You speak very highly of Bell and of the admiral support for your organization.

listnum "WP List 3" \l 1853              Are you enjoying any support from Teachers' presently?

listnum "WP List 3" \l 1854              MR. HANDLING:  No, we are not.

listnum "WP List 3" \l 1855              THE CHAIRPERSON:  so in effect the change from Bell to Teachers' is a zero sum gain for you.

listnum "WP List 3" \l 1856              MR. HANDLING:  Absolutely.

listnum "WP List 3" \l 1857              THE CHAIRPERSON:  Thank you.

listnum "WP List 3" \l 1858              Mr. Katz?

‑‑‑ Pause

listnum "WP List 3" \l 1859              MR. LEECH:  Mr. Chairman, if I may speak, it is against the legislation for Teachers' ‑‑

listnum "WP List 3" \l 1860              THE CHAIRPERSON:  Just push the button so it can be recorded.

listnum "WP List 3" \l 1861              MR. LEECH:  Thank you, Mr. Chair.  I'm sorry to interrupt.

listnum "WP List 3" \l 1862              It is against the legislation for Teachers' to invest its funds in philanthropic activities.

listnum "WP List 3" \l 1863              THE CHAIRPERSON:  I didn't mean to cast any negative dispersion on Teachers'.  I just wanted to know what the financial effect of this transaction was.

listnum "WP List 3" \l 1864              Thank you for the clarification.

listnum "WP List 3" \l 1865              Commissioner Katz.

listnum "WP List 3" \l 1866              COMMISSIONER KATZ:  Thank you, Mr. Chairman.

listnum "WP List 3" \l 1867              I just wanted to follow up on your actual filing on January 16th where you talk about the moving image of all media that Bell has been sponsoring.

listnum "WP List 3" \l 1868              Can you expand upon that and how it's impacting the Toronto Film Festival.

listnum "WP List 3" \l 1869              MR. HANDLING:  We are not just a film organization.  Obviously we are concentrating on the moving image.  But we hope to use the new technologies in our new building.  We are certainly employing the new technologies at this point in time to get information about the moving image, our film festival, to new audiences.

listnum "WP List 3" \l 1870              So every single facet of new media is something that interests us.

listnum "WP List 3" \l 1871              COMMISSIONER KATZ:  Are you involved in wireless as well, for example, and broadcasting through wireless media?

listnum "WP List 3" \l 1872              MR. HANDLING:  Broadcasting through wireless?

listnum "WP List 3" \l 1873              COMMISSIONER KATZ:  Well, projecting some of the sorts or whatever out of the film festival towards customers using this technology.

listnum "WP List 3" \l 1874              MR. HANDLING:  We do have ‑‑ through Motorola, actually, we do have some short films that are being put on their service.

listnum "WP List 3" \l 1875              COMMISSIONER KATZ:  Thank you.

listnum "WP List 3" \l 1876              THE CHAIRPERSON:  Thank you very much for your presentation.  I think those are our questions, unless, Michel, did you have something?  No.

listnum "WP List 3" \l 1877              Okay, that's it; thanks.

listnum "WP List 3" \l 1878              MR. HANDLING:  Thank you.

listnum "WP List 3" \l 1879              THE SECRETARY:  I would now invite Media Awareness Network to come forward to the presentation table.

‑‑‑ Pause

listnum "WP List 3" \l 1880              THE SECRETARY:  Appearing for the Media Awareness Network is Cathy Wing.

listnum "WP List 3" \l 1881              You will have ten minutes for your presentation.  Thank you.

listnum "WP List 3" \l 1882              MS WING:  Thank you.


listnum "WP List 3" \l 1883              MS WING:  Good afternoon, ladies and gentlemen.  I am Cathy Wing, Co‑Executive Director of the Media Awareness Network, Réseau éducation média.

listnum "WP List 3" \l 1884              I would like to thank Mr. Chairman and the Commission Panel for allowing the Media Awareness Network to appear today to express its support of the BCE transaction application currently before the Commission.

listnum "WP List 3" \l 1885              The Media Awareness Network is a unique Canadian success story that grew out of a recommendation made at a roundtable on children and television violence hosted by the CRTC and was initially formed under the auspices of the National Film Board of Canada in 1995.

listnum "WP List 3" \l 1886              Since that time this national bilingual not‑for‑profit organization has firmly established itself nationally and internationally as a leading centre of expertise in media education.

listnum "WP List 3" \l 1887              Our mission is to provide media literacy resources and awareness programs for educators, parents, children and youth and the community at large, and this includes everything from lessons and resources for our classrooms to professional development workshops and tutorials for teachers and librarians, original research that informs journalists, policy‑makers and academics, to information and workshops for parents and games and activities for children and youth.

listnum "WP List 3" \l 1888              It is now widely accepted in education circles that to be literate today children and youth must bring critical thinking skills to information in all its forms, including media.  Media education is the essential tool in helping young people acquire these media literacy skills, and these skills are at the heart of a healthy and informed society and they are increasingly important as children turn to the Internet as their main source of information.

listnum "WP List 3" \l 1889              As a not‑for‑profit organization, Media Awareness Network receives revenue primarily from the Canadian media industries, the government of Canada and the licensing of some of our resources.  Strong private sector support is critical to the work of the organization and Bell Canada's contribution to MNet over the past 12 years have been exceptional.

listnum "WP List 3" \l 1890              Bell was a founding sponsor of the organization and has contributed more than half a million dollars in annual sponsorships and donations since 1996.  In 2001, BCE allocated half a million dollars in social benefits dollars to MNet upon acquisition of CTV.  This generous financial contribution helped to support the development of many of our award‑winning school‑based anti‑racism and Internet literacy programs.

listnum "WP List 3" \l 1891              In addition to critical financial support, we have also been fortunate to have the active involvement of senior executives from Bell Canada on our board of directors since its incorporation.  This support continues today through the efforts of Barry Chapman, Vice‑President, Regulatory Affairs, who serves as our Treasurer.

listnum "WP List 3" \l 1892              In addition, Bell has been an active partner with MNet in creating tools to raise awareness among Canadian parents about issues relating to children's Internet use.  With Bell's support, we have developed workshops, public awareness campaigns and online resources, all with the end goal of helping parents understand and effectively guide their children's online experiences.

listnum "WP List 3" \l 1893              For example, just last year we launched a French language online tutorial for parents on our website.  It was supported by Bell and Industry Canada and it has won international accolades for its unique approach to teaching parents about wise Internet use.

listnum "WP List 3" \l 1894              In 2006, with funding from Bell, we partnered with the Canadian Home and School Federation to make our Internet safety workshop "Parenting the NetGeneration" available for free to every school in the country.

listnum "WP List 3" \l 1895              In 2004 and again in 2006, Bell collaborated with Microsoft Canada and MNet to deliver a national Internet safety campaign, "Be Web Aware".  The public awareness campaign comprised a website for parents and extensive public service announcements.

listnum "WP List 3" \l 1896              In 2003 and 2004 Bell supported the Canadian Library Association and MNet in promoting a national day of awareness.  Activities were held in public libraries across the country to equip parents with skills they need to help their children make critical decisions on the Internet.

listnum "WP List 3" \l 1897              And in 2007 Bell was the silver sponsor of National Media Education Week, an initiative of the Media Awareness Network and the Canadian Teachers' Federation.

listnum "WP List 3" \l 1898              Bell's long‑term support of MNet continues with the benefits package proposed in BCE's current application before the Commission.  We are pleased to note that Media Awareness Network is written into the application to receive $700,000 in benefits over seven years, starting in 2008.

listnum "WP List 3" \l 1899              Tangible benefits have played a critical role in the sustainability of our organization, going back to the CRTC's 1996 Public Notice on TV violence.  At that time the Commission encouraged programmers and distributors to deepen their involvement in media literacy and public awareness initiatives.  We have received strong support from the communications industry over the years through benefits, and we are very grateful to these generous contributions.

listnum "WP List 3" \l 1900              These proposed contributions come at a critical time for the organization.  They will help provide a firm financial foundation and create a stabilizing effect and help to ensure the long‑term stability of MNet.

listnum "WP List 3" \l 1901              The benefits will be used to ensure that we are able to equip adults with the tools they need to help young people make informed online decisions.  They will enable us to build on existing programs and research and to enhance or develop new programs to respond to stakeholders' needs.

listnum "WP List 3" \l 1902              And we will use it to develop heightened awareness about our programs, increase our visibility with the Canadian public and expand our reach.

listnum "WP List 3" \l 1903              We believe that it is important that the BCE broadcasting services remain Canadian owned and controlled to maintain and encourage BCE's long‑time commitment to ensuring Canadian youth have the critical thinking skills they need for the new media milieu.

listnum "WP List 3" \l 1904              In addition, the proposed transaction ensures that MNet, as the lead provider of media literacy resources for Canadians, will continue to have a strong private sector partner that supports and advocates for media education in the communities it serves.

listnum "WP List 3" \l 1905              The monies committed in the benefits package to support our work build on Bell's legacy investment in media education and we heartily commend the applicant for renewing its commitment to our organization and to media literacy in Canada.

listnum "WP List 3" \l 1906              Thank you for your time.

listnum "WP List 3" \l 1907              THE CHAIRPERSON:  Thank you very much.

listnum "WP List 3" \l 1908              If I understand your submission ‑‑ and I read the letter of January 23rd that you sent ‑‑ you originally got half a million from BCE when they acquired CTV.

listnum "WP List 3" \l 1909              On top of that, over the years Bell Canada has been very involved, both in giving you management support and funding for various activities.  And now you stand to gain $700,000 from it.

listnum "WP List 3" \l 1910              Are you at all afraid that this is going to be the end of the line; that Bell after this and the new ownership with a huge debt load will not be able to be as generous in its support as it has been in the past?

listnum "WP List 3" \l 1911              MS WING:  Well, we certainly hope to continue the important relationship that we have.  As we said, they are a founder of the organization.  They have been involved in our board of directors.

listnum "WP List 3" \l 1912              We believe that as a corporate citizen, they have supported many, many interesting and important community initiatives across the country, and we hope that that support will continue.

listnum "WP List 3" \l 1913              I think that the fact that most of our work in the last few years has involved new media makes us a really valuable partner to Bell as well.

listnum "WP List 3" \l 1914              THE CHAIRPERSON:  So the $700,000 that you would receive, if this transaction is approved, you expect to spend this mostly on new media?

listnum "WP List 3" \l 1915              MS WING:  Most of our resources are related to new media because that is an area that not a lot of educational organizations in the country have been working in.  We have pioneered approaches to Internet safety and critical thinking in new media.  So we will definitely continue to produce resources in this area with Bell's support.  It is certainly their area of interest, and ours as well.

listnum "WP List 3" \l 1916              THE CHAIRPERSON:  And you would expect Bell Canada executives to continue to be on your board of directors and assist you in your endeavours?

listnum "WP List 3" \l 1917              MS WING:  Yes, we do.

listnum "WP List 3" \l 1918              THE CHAIRPERSON:  Len, Michel, any questions?  No.

listnum "WP List 3" \l 1919              Thank you very much.

listnum "WP List 3" \l 1920              THE SECRETARY:  I would now invite Catalyst Asset Management Inc. to come forward.

‑‑‑ Pause

listnum "WP List 3" \l 1921              THE SECRETARY:  Appearing for Catalyst Asset Management Inc. is Mr. Christian Tacit and Mr. Brent Fullard.

listnum "WP List 3" \l 1922              You have ten minutes for your presentation.

listnum "WP List 3" \l 1923              MR. TACIT:  Thank you.


listnum "WP List 3" \l 1924              MR. TACIT:  Hello, Mr. Chair and Vice‑Commissioners.  I am pleased to appear today with Mr. Brent Fullard, Executive Managing Director of Catalyst Asset Management Inc.

listnum "WP List 3" \l 1925              Mr. Fullard will deliver Catalyst's oral intervention.

listnum "WP List 3" \l 1926              MR. FULLARD:  Good morning, Mr. Chair and Commissioners ‑‑ good afternoon, I should say.

listnum "WP List 3" \l 1927              The outcome of this proceeding will be crucial in determining the future state of a very significant segment of the Canadian broadcasting industry, given BCE's significant holdings.

listnum "WP List 3" \l 1928              In our written intervention we explained how the absence of public disclosure of the Catalyst proposal in BCE's bid circular deprived both BCE shareholders and the Canadian public of a made‑in‑Canada alternative that would have avoided all the adverse consequences that are manifest in the application as presently before the Commission, including those related to foreign ownership and control and the resulting financial degradation of BCE under the proposed leverage buyout.

listnum "WP List 3" \l 1929              I understand that we must focus on the application that is before the Commission.  However, in assessing Bell Canada's application, we would like to point out that the Catalyst proposal serves as a useful benchmark for assessing a number of difficulties raised by the transaction proposed by BCE.

listnum "WP List 3" \l 1930              In the balance of this oral intervention I will focus primarily on the issue of Canadian ownership and control.

listnum "WP List 3" \l 1931              We believe that the transaction proposed by BCE does not comply with the direction to the CRTC on the ineligibility of non‑Canadians and for that reason BCE's application should not be approved by the Commission.

listnum "WP List 3" \l 1932              As described in the BCE bid circular, when BCE commenced its public process for enhancing shareholder value it faced a dilemma with respect to one of its broad alternatives; namely, a leverage buyout sale to a private equity and BCE's attempt to strike a balance in the equity syndication rules for the limited pool of private equity buyers.

listnum "WP List 3" \l 1933              On the one hand, the rules could not be overly restrictive, which may have undermined a bidding consortium's access to the required private equity capital, but they could also not be too permissive, which might enable the consortium to obtain disproportionate access to available Canadian private equity to the detriment of other consortiums, thereby potentially adversely affecting the bid price through fewer bids.

listnum "WP List 3" \l 1934              Unfortunately, in our view, the manner in which the balance was ultimately struck, as manifested in the proposed transaction, has too much non‑Canadian content.  Accordingly, it does not conform to the direction.

listnum "WP List 3" \l 1935              Meanwhile, Teachers' is also subject to the Ontario Pension Benefits Act, which under sections 78 and 79 of corresponding regulations requires Teachers' to conform to the Pension Benefits Standards Regulations which, under section 11, require that:

                      "The administration of a plan shall not directly or indirectly invest the monies of the plan in the securities of a corporation to which are attached more than 30 per cent of the votes that may be cast to elect the directors of the corporation."

listnum "WP List 3" \l 1936              The operative words are "more than 30 per cent" and "directly or indirectly".

listnum "WP List 3" \l 1937              In its attempt to circumvent this requirement, Teachers' will not hold any voting shares of Holdco.  Instead, 66‑2/3 per cent of the voting shares will be held by Morcague Holdings Corporation, which is wholly owned by Morgan McCague, a Canadian citizen and retired officer of Teachers'.

listnum "WP List 3" \l 1938              Under the proposed agreement between Morcague and Teachers', Morcague will exercise its votes of Holdco for the election of directors specified to it by Teachers', and Morcague is also required to exercise other votes as directed by Teachers'.

listnum "WP List 3" \l 1939              Teachers' can also redeem from Morcague the voting shares held by it at the original price paid by Morcague with funds originally provided by Teachers'.  This means that Morcague has no economic stake in the shares it holds as the shares are non‑participating.

listnum "WP List 3" \l 1940              In addition, the Secretary of Holdco is granted unrestricted power of attorney over the shares notionally owned by Morcague, which must be deposited by Morcague with the Secretary.  Morcague will receive compensation for participating in this arrangement in the form of an upfront payment of $10,000, plus the amount paid for the issuance of the shares, and thereafter a $10,000 annual fee plus reimbursement of expenses.

listnum "WP List 3" \l 1941              Teachers' will also provide Morcague with a full indemnity relating to this arrangement.

listnum "WP List 3" \l 1942              In summary, Morcague has none of the indicia or indicators of share ownership.  Morcague won't pay for the shares; Teachers' will.

listnum "WP List 3" \l 1943              Morcague has no economic upside or downside from its share ownership; Teachers' does.

listnum "WP List 3" \l 1944              Morcague is indemnified by Teachers' for any liability under the scheme.

listnum "WP List 3" \l 1945              And finally, Morcague can't vote its shares independently.  It must do so according to the direction of Teachers'.

listnum "WP List 3" \l 1946              In summary, this is an artifice of share ownership and should be treated as such by the CRTC.  Under the scheme Teachers' does not wish to be considered the beneficial owner of the shares registered in the name of Morcague because doing so would place Teachers' in breach of the pension regulations just discussed.

listnum "WP List 3" \l 1947              However, given the severe restrictions placed on Morcague with regards to the shares and the nature of its economic non‑entitlement to these shares it is abundantly clear that Morcague is not the true beneficial owner.

listnum "WP List 3" \l 1948              If neither Teachers' nor Morcague is the true beneficial owner of the shares held by Morcague, those shares cannot be said to be beneficially owned by Canadians and Holdco does not meet the definition of a qualified corporation in the direction.

listnum "WP List 3" \l 1949              The fact that Appendix 2B of the Bell application states that Holdco's board of directors will exercise ultimate control over the BCE Broadcasting Services does not cure this problem either.  The legal definition of qualified corporation in a direction is clear:  Canadians must beneficially own at least two‑thirds of the voting shares.  Other Commission decisions such as 83566 and 2006‑566 are also completely consistent in this view.

listnum "WP List 3" \l 1950              If, on the other hand, beneficial ownership of the shares has to be deemed in law to rest with either Teachers' or Morcague, it clearly rests with Teachers' and not Morcague given the restrictions placed on Morcague for the sole benefit of Teachers'.  And if this is the case the structure of the deal is illegal and, hence, unstable due to non‑compliance with its pension regulations.

listnum "WP List 3" \l 1951              Approval of such a deal would put BCE's broadcasting undertakings at risk, contrary to the Broadcasting Policy of Canada and for that reason as well approval should not be granted.

listnum "WP List 3" \l 1952              In summary, it appears to be impossible for the scheme devised by Teachers' to satisfy simultaneously the 30 percent voting limitations imposed on Teachers' under the Pension Benefits Standard Act and the requirement that Canadians own directly or indirectly no less than two‑thirds of all the issued and outstanding voting shares of Holdco under the direction in the Broadcasting Act.

listnum "WP List 3" \l 1953              In addition, there is also another important reason why we believe that Holdco can only be deemed to be non‑Canadian under the direction.  The overall structure of Holdco gives non‑Canadian shareholders a degree of control to influence Holdco far beyond that of minority shareholders including:

listnum "WP List 3" \l 1954              One, the participation and registration rights and coordination agreement as administered by a coordination committee comprised of the designates of Teachers', Providence and Madison Dearborn and the designates of the two non‑Canadian parties can outvote Teachers'.

listnum "WP List 3" \l 1955              Two, out of that same agreement Providence and Madison Dearborn can initiate an IPO even if Teachers' objects or an IPO can be prevented if Teachers' wants one.

listnum "WP List 3" \l 1956              Three, Providence has a veto right over a broad array of matters, including the composition of the audit and compensation committee, a broad array of fundamental changes and transfers of shares under a wide variety of circumstances.

listnum "WP List 3" \l 1957              Four, Providence as well as Teachers' has the right to nominate the CEO of Holdco who is then also a member of the board while Teachers' does not get to nominate a majority of the members of the board.