• a gain of $217 million from the sale of our 15.96% interest in MTS in the third quarter, for net cash pro- ceeds of $584 million • partly offset by net losses on other investments of  $6 million. Capital loss carryforwards fully sheltered the taxes on these gains.  Net gains on investments of $76 million in 2003 included: • a $120 million gain from the sale of a 3.66% interest in YPG in the fourth quarter, for net cash proceeds of $135 million • a $44 million loss from the write-down of a number of our cost-accounted investments. In April 2003, we entered into forward contracts to hedge US$200 million of long-term debt at Bell Canada that previously had not been hedged. This removed the foreign currency risk on the principal amount of that debt. Lower interest income in 2004 was a result of lower average cash balances. Interest expense declined 9% or $100 million to $1,005 million in 2004, compared to 2003. This was a result of a lower average debt level of approximately $1,370 million in 2004, mainly from the positive free cash flows achieved in the last two years. The average interest rate on our debt in 2004 and 2003 was 7.1%. Income taxes declined 37% or $409 million to  $710 million in 2004, compared to 2003. The decline was mainly due to: As a result of these items, the effective tax rate was 29.8% in 2004, compared to 35.1% in 2003. Non-controlling interest decreased 13.4% or $27 mil- lion to $174 million in 2004, compared to 2003. The decrease was a result of: The decrease was partly offset by higher net earnings at Bell Globemedia. The net gain from discontinued operations of $26 mil- lion in 2004 consisted of: The net loss from discontinued operations of $56 mil- lion in 2003 consisted of a loss of $160 million relat- ing to Emergis’ sale of its US Health operations in the fourth quarter. The loss was partly offset by: We purchased the Canadian operations of 360networks in the fourth quarter of 2004 for $293 million in cash. The fair value of the net assets acquired exceeded the purchase price by approximately $227 million. For accounting purposes, the excess was eliminated by: Non-Controlling Interest Discontinued Operations Interest Expense Income Taxes Extraordinary Gain • lower pre-tax earnings • no tax on the $325 million of gains on the sale of MTS and YPG due to the availability of capital loss carryforwards partly offset by $45 million of restructur- ing charges that were not tax-effected • the reduction in the statutory income tax rate to 34.3% in 2004 from 35.4% in 2003. • a higher net loss at Bell West, mainly due to the loss on the Government of Alberta contract • lower net earnings at Aliant because of the labour disruption and the restructuring charge. • a gain of $58 million on the sale of our 63.9% interest in Emergis in the second quarter • our share of Emergis’ operating losses of $44 million. • net gains of $56 million on our share of Aliant’s sales of its emerging business and remote communication segments • net gains of $39 million from the use of available capital loss carryforwards that were applied against taxes payable on Bell Canada’s sale of its 3.66% inter- est in YPG and Aliant’s sale of its investment in Stratos • our share of operating gains from the discontinued businesses of $9 million. • reducing the amounts assigned to the acquired  non-monetary assets (e.g., capital and intangible assets) to zero • recognizing the balance of $69 million as an extraor- dinary gain. Non-Controlling Interest The non-controlling interest in the statements of opera- tions reflects the percentage of a subsidiary that we do not own multiplied by the amount of the subsidiary’s after-tax earnings. Bell Canada Enterprises  2004 Annual Report 59