2004 Annual Report

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I. Year 4 (for the period ending March 31, 2004 ) Report of the Joint Committee

Overview And Summary

1. The 1986-1990 Hepatitis C Fund (the "Trust Fund") completed its fourth full year of operation on March 31, 2004 ("Year Four").
2. In Year 4, the Centre received 1,467 new claims as follows:
   
   

   288	-	Primarily Infected Transfused
   67	-	Primarily Infected Hemophiliac
   10	-	Secondarily Infected
   290	-	HCV Personal Representative claims where deceased died on or after January 1, 1999
   40	-	Personal Representative Claims where deceased died before January 1, 1999
   772	-	Family member/dependant claims

   
   The Centre paid out approximately $62.5 million to all claimants (prior and new) in Year 4. Since its inception, the Centre has paid out a total of approximately $362 million in benefits in response to approximately 8,824 claims. * There are a further 1,200 claims, which are in process awaiting the submission of further information by the claimants or the completion of a traceback search, or both.

3. The Investment Summary of Eckler Partners Ltd. at Schedule "H" indicates a value of $865 million held by the Trustee as at March 31, 2004. The total unpaid liability of the provincial governments is approximately $240 million for a total available to satisfy the claims of class members of approximately $1.105 billion.
4. The following chart summarizes the budget versus actual expenses for the service providers in the past year ended March 31, 2004:
   
   

   Service Provider	Budget to March 31 2004	Actual	Variance from budget	Note
   Auditor [Audit Only] Deloitte & Touche	61,000	61,000		See paragraphs 15 to 21 below.
   Trustee Royal Trust	130,000	106,400	(23,600)	No monies beyond actual expenses have been paid.
   Investment Manager TD Asset Management Inc.	225,000	181,069	(43,931)	No monies beyond actual expenses have been paid.
   Actuarial Services & Investment Review Eckler Partners	60,000	58,901	(7,905)	Credit balance includes overage from Year 3 and will be offset by billings in Year 5. See paragraph 37 below.
   Administrator (Crawford)	3,133,100	3,254,633	121,534	Debit balance will be paid through billings in Year 5
   Canadian Blood Services (CBS)	269,579	213,490	(56,089)	Credit balance will be offset by billings in Year 5. See paragraphs 45 to  47 below.
   PriceWaterhouse Coopers	22,500	18,020	(4,480)	See paragraphs  41 to 44 below.

5. The total administration expenses for the twelve-month period were $6.1 million, inclusive of administration, legal and appeal costs. The Joint Committee is recommending that the budgets for the Administrator and Canadian Blood Services be reduced in Year 5 to reflect a lower volume of applications and claims processing.
6. The following chart summarizes the proposed budgets for service providers in Year 5:
   
   

   Service Provider	Proposed Budget to March 31, 2005 (excludes GST)	Proposed Monthly Charges (excludes GST)
   Auditor (Deloitte & Touche) (audit only)	61,000.00	5,083.33
   Trustee (Royal Trust)	130,000.00	up to 10,833.33
   Investment Manager (TD Asset Management Inc.)	225,000.00	up to 18,750.00
   Actuary & Investment Review (Eckler Partners Ltd.)	66,000.00	5,500.00
   Administrator (Crawford) [HepC & EAPII]	2,728,046.00	227,337.21
   Canadian Blood Services (CBS)	100,791.39	8,399.28
   PriceWaterhouseCoopers LLP	20,660.00	1,722.00

7. Fund Counsel incurred fees and disbursements in the 12 months ending March 31, 2004 of approximately $682,389 inclusive of taxes. It is anticipated that this amount will be similar in Year 5 as the volume of appeals will be substantially the same as in Year 4. No amounts are paid to Fund Counsel without a specific court order.
8. Joint Committee fees incurred in the 12 months ending March 31, 2004 (exclusive of taxes) were approximately $686,299. No amounts are paid to the Joint Committee without a specific court order. In Year 5 the Joint Committee will be involved in the sufficiency review which will entail significant actuarial and legal work.

General

9. This is the fourth annual report of the Joint Committee to the Supreme Court of British Columbia, the Superior Court of Justice for Ontario and the Superior Court of Quebec (collectively the "Courts") on the status of the Trust Fund and the administration of the Hemophiliac HCV plan and Transfused HCV Plan (collectively the "Plans").
10. The Joint Committee is comprised of Harvey Strosberg, J.J. Camp, Bonnie Tough and Michel Savonitto. Harvey Strosberg was appointed by Order of the Superior Court of Justice for Ontario. J.J. Camp was appointed by Order of the Supreme Court of British Columbia and Michel Savonitto by Order of the Superior Court of Quebec. Bonnie Tough was appointed by Order of each of the Superior Court of Justice for Ontario , the Supreme Court of British Columbia and the Superior Court of Quebec. This Report is prepared by and on behalf of all members of the Joint Committee.
11. In conjunction with the advice of Deloitte & Touche, the Joint Committee has, for audit and reporting purposes, established March 31 as the year-end of the Trust Fund and the administration of the Plans. The Year 4 Audit Report, therefore, is based upon a twelve-month cycle commencing April 1, 2003 and ending March 31, 2004.
12. In the period commencing April 1, 2003 and ending March 31, 2004 , approximately $ 62.5  million was paid to claimants. Since inception of the Plan a total of approximately $ 362  million has been paid to claimants.
13. The budget and expenses of each of the service providers are discussed in detail below.
14. The Joint Committee recommends that the budgets of service providers include payment through to June 1, 2005 in order to provide time from March 31, 2005 until June 2005 for the audit and accounting review of the expenses in preparation for a report to the Courts in June 2005.

Deloitte & Touche

15. Deloitte & Touche was appointed auditor of the Trust Fund pursuant to the Orders of the Courts. The Joint Committee recommends the continuation of this appointment.
16. In addition to the audit of the Trust Fund, the Joint Committee requested the following services from Deloitte & Touche:
    1. A cost review (but not an audit) of the expenses charged by the Administrator to the Trust Fund. Attached hereto and marked as Schedule B is a copy of the Cost Review of the Administrator.
    2. The preparation of the annual financial statements. Attached hereto and marked as Schedule A is a copy of the financial statements prepared and audited by Deloitte & Touche;
17. The chart set out below summarizes the work done by Deloitte & Touche in Year 4 in comparison to budget and the proposed budget for Year 5.
    
    

    Work	Year 4 Budget $	Year 4 Actual $	Year 5 Budget $
    Audit	61,000	61,000	61,000
    Financial Statements	8,000 - 10,000	8,000	8,000 - 10,000
    Administrator Cost Review	6,000 - 9,000	7,000	6,000 - 9,000

18. The Deloitte & Touche budget numbers are exclusive of travel costs, administration charges and GST. Variances from budget in the final invoices are solely a result of the addition of travel and administration charges. The costs incurred by Deloitte & Touche for the audit, the financial statements and the Administrator Cost Review are $82,026 inclusive of an administrative charge of $4,560 and travel expenses of $1,466.
19. A copy of the invoices for the work of Deloitte & Touche in Year 4 are attached as Schedule "C". Deloitte & Touche received payment throughout the year of $71,000. The Joint Committee recommends approval of Deloitte & Touche's outstanding invoices in the amount of $11,025.96 plus taxes.
20. Deloitte & Touche proposes and the Joint Committee recommends that its audit budget for the year April 1, 2004 to March 31, 2005 be $61,000.00, exclusive of administration and travel charges.
21. The Joint Committee notes that the total payable to Deloitte & Touche is significantly reduced through a decision not to have a six-month disbursement audit or a cost review of the now much-reduced CBS and Hema-Quebec expenses.

Royal Trust

22. Royal Trust was appointed Trustee of the Fund pursuant to Orders of the Courts. The Joint Committee recommends the continuation of this appointment.
23. Attached hereto and marked as Schedule "D" is a brief description from Royal Trust of its Custodial Trustee activities in the year ended March 31, 2004.
24. The Courts approved an annual budget for Royal Trust of $130,000 for the year ended March 31, 2004.
25. The actual charge to the Trust Fund by Royal Trust for the year ended March 31, 2004 was $106,400.00. No payments have been made to Royal Trust beyond those expenses actually incurred.
26. Royal Trust proposes and the Joint Committee recommends that Royal Trust's budget for the year April 1, 2004 to March 31, 2005 be $130,000.00. Royal Trust will charge monthly an amount not to exceed $10,833.33.

TD Asset Management Inc.

27. TD Asset Management Inc. ("TD Asset Management") was appointed Investment Manager of the Trust Fund pursuant to Orders of the Courts. The Joint Committee recommends the continuation of that appointment. Attached as Schedule "E" is confirmation that TD Asset Management has complied with the court approved Investment Guidelines.
28. The Courts approved an annual budget for TD Asset Management of $225,000.00 for the year ended March 31, 2004.
29. Total fees charged by TD Asset Management for the year ended March 31, 2004 were $181,069.17. No payments have been made to TD Asset Management beyond those expenses actually incurred. Attached as Schedule "F" is the TD Asset Management Report setting out the actual charges for the year ended March 31, 2004 by quarter.
30. TD Asset Management proposes and the Joint Committee recommends that its budget for the year April 1, 2004 to March 31, 2005 be $225,000.00. TD Asset Management will charge monthly an amount not to exceed $18,750.00.

Eckler Partners Limited

31. Eckler Partners Limited ("Eckler Partners") was retained by Class Counsel and subsequently the Joint Committee to provide actuarial advice in respect of the Trust Fund.
32. Eckler Partners also provides advice to the Joint Committee in respect of investments on an as needed basis.
33. Attached as Schedule "G" is the Report of Eckler Partners regarding their activities during the year ended March 31, 2004.
34. Attached as Schedule "H" is an Investment Summary provided by Eckler Partners.
35. The Courts approved an annual budget for Eckler Partners' actuarial services of $40,000.00 for the year ended March 31, 2004 to be paid in monthly instalments of $3,333.33.
36. The Courts also approved an annual budget for the provision of investment review services by Eckler Partners in the amount of $20,000.00 for the year ended March 31, 2004 to be paid in monthly instalments of $1,666.67. The total actuarial and investment services amounted to monthly payments of $5,000.00.
37. Eckler Partners incurred $58,901.00 in charges for the period from April 3, 2003 to March 31, 2004 . Eckler Partners was paid $60,000.00. Additionally there was a balance owing to the Fund of $6,806.00 from Year 3 for a total balance owing of $7,905.00. This balance owing to the fund of $7,905.00 will be offset by charges in Year 5. Attached as Schedule I is the Accounting Summary from Eckler.
38. In addition to its annual work, Eckler Partners was also retained by the Joint Committee to provide actuarial advice on the issue of removing certain limits or holdbacks on class member payments. A special charge in the amount of $31,720.00 was incurred for this work and a separate order has been sought to approve this payment.
39. Eckler Partners has proposed and the Joint Committee recommends that the total budget for both actuarial services and investment review services be $66,000.00 for the year ending March 31, 2005 to be paid in monthly payments of $5,500.00. Attached as Schedule J is the proposed budget for Year 5.
40. Eckler Partners will be engaged in the actuarial review required by s. 10.01 of the Settlement Agreement in June of 2005. Budgets for this special project will be the subject of a separate court order.

PriceWaterhouse Coopers LLP

41. PriceWaterhouseCoopers  LLP provides annual updates for tax calculations on software used to calculate income loss, software maintenance for the software used to calculate loss of income claims and separate software used to calculate and track loss of income payment caps and holdbacks, and advice, assistance and training to the Administrator of the Trust Fund with respect to both types of software.
42. The total budget approved for PriceWaterhouseCoopers  LLP in the period between April 1, 2003 to March 31, 2004 , under the various court Orders was $22,500.00, exclusive of G.S.T.
43. Actual billings by PriceWaterhouseCoopers  LLP for services between April 1, 2003 and March 31, 2004 were $25,670 exclusive of GST. This results in an overage to PriceWaterhouse Coopers  LLP a total of $7,560 compared to actual of $18,020.
44. PriceWaterhouseCoopers  LLP has proposed and the Joint Committee recommends a budget in the amount of $20,660.00 for the year ending March 31, 2005 to be paid in monthly instalments of $1,722.00. The budget prepared by PriceWaterhouseCoopers  LLP is attached as Schedule K . No monies will be paid until such time as the $7,560.00 owing to the Trust Fund has been expended by PriceWaterhouse Coopers  LLP.

Canadian Blood Services

45. The total budget approved for CBS was $269,579 inclusive of taxes. Actual expenses incurred by CBS in Year 4 were $213,490. As at March 31, 2004 , Royal Trust has made payments to CBS in the amount of $269,579 exclusive of GST. CBS actual versus budget reconciliation is attached as Schedule L.
46. The efficient and effective conduct of tracebacks is a key component of the administration of the Plans. However the demand for such tracebacks has been reduced significantly as has the costs. The Joint Committee anticipates that this trend will continue.
47. Attached hereto and marked as Schedule M is a copy of the proposed budget for CBS for the period April 1, 2004 to March 31, 2005. The budgeted amount is $100,791.39, to be paid in monthly instalments not exceeding $8,399.00, plus GST after CBS has provided services equal to the overpayment in Year 4.

Crawford

48. Crawford Adjusters Canada Incorporated/Expertises Crawford Canada Incorporée and The Garden City Group Inc. ("Crawford") was appointed by the Courts as Administrator of the Plans for a 5-year term.
49. The Courts approved a budget for Crawford for Year 4, which provided for an annual payment to Crawford of $3,133,100.00 to be paid on a monthly basis, subject to certain adjustments, at the rate of $261,091.67 per month, exclusive of GST.
50. The total expenses of Crawford in the year ended March 31, 2004, were $3,254,633.00 for an over budget of $121,534.00. As is discussed in paragraph 16 above, Deloitte & Touche was asked to review the expenses of Crawford and the Report on the Cost Review of the Expenses of Crawford is attached as Schedule "B". The Joint Committee recommends approval of payment of this overage to Crawford.
51. Attached as Schedule N is a brief description from Crawford of its activities in the period ending March 31, 2004.
52. Crawford proposes and the Joint Committee recommends a budget for the year commencing April 1, 2004 of $2,728,046.00 plus GST. Attached hereto as Schedule O is a detailed budget proposal prepared by Crawford. The proposed budget is less than the previous year due to reduced staffing and operational costs.
53. As part of the Year 4 budget and as approved by the courts, Crawford also administered the HIV Secondarily-Infected Settlement ("EAP2"). The cost of that administration was $23,109 and is included in the totals set out in paragraph  50 above.
54. The Joint Committee therefore recommends that Crawford be paid in monthly instalments of $227,337.21 plus GST.
55. Crawford has requested and the Joint Committee has agreed, subject to court approval, to one other class action administration in the Centre. Any time spent by personnel at the Centre on this other administration would be charged to the other administration and be a saving to the Trust Fund. Similarly, expenses incurred by the other administration will be pro-rated according to staffing. In addition to other savings, Crawford will pay or credit the sum of $7,500 for each new hire brought into the Centre in respect of the administration of the other class action. This payment will reflect the use of the resources previously expensed at the Centre. Deloitte & Touche will be asked to verify the systems for cost allocation.

Fund Counsel

56. Carolyn Horkins and John Callaghan were appointed as Trust Fund Counsel in the Ontario Class Actions by Order of the Ontario Court of Justice for Ontario. Mason Poplaw was appointed Trust Fund Counsel in the Quebec Class Actions by Order of the Quebec Superior Court and Bill Ferguson was appointed Trust Fund Counsel in the B.C. Class Actions by Order of the B.C. Supreme Court.
57. Carolyn Horkins has been appointed a judge of the Ontario Superior Court of Justice. In a separate court application the Joint Committee is seeking an order that Belinda Bain be appointed to replace Carolyn Horkins.
58. In the 12-month period ending March 31, 2004 , the total Fund Counsel fees and disbursements were $682,389.00 inclusive of taxes. No amounts have been or will be paid to Trust Fund Counsel without prior court approval of the fees and disbursements.
59. The Joint Committee and Trust Fund Counsel estimate that the fees for the year April 1, 2004 to March 31, 2005 will be in the same range as in the past. The volume and complexity of appeal work is anticipated to be substantially the same as in Year 4.
60. Attached hereto and marked as Schedule P is a report of Trust Fund Counsel on their activities and their fees incurred in the 12 months ending March 31, 2004.

Joint Committee

61. A brief summary of the work of the Joint Committee in the past 12 months is set out in Schedule Q .
62. In the 12-month period ending March 31, 2004 , the total Joint Committee fees were approximately $686,299 exclusive of taxes. A summary of fees incurred by the Joint Committee is set out in Schedule R . No amounts have been or will be paid to the Joint Committee without prior court approval of the fees and disbursements.
63. The Joint Committee estimates that the fees for the year April 1, 2004 to March 31, 2005 will be higher than in Year 4 because the Joint Committee will be engaged in full-scale fund sufficiency hearings.

Referees and Arbitrators

64. In the 12-month period ending March 31, 2004 , the total fees and disbursements of the Arbitrators and Referees were approximately $205,932.74 exclusive of taxes on fees.
65. A brief summary of the work of the Referees and Arbitrators as well as the fees incurred for the period April 1, 2003 to March 31, 2004 is set out in Schedule S .
66. The Joint Committee estimates that the fees of the Arbitrators and Referees will be similar for the year April 1, 2004 to March 31, 2005 and recommends a budget equal to that actually incurred in Year 4.

Dated: June ___, 2004
J. J. Camp,
Camp Fiorante Matthews

Dated: June ___, 2004
Harvey Strosberg,
Sutts Strosberg  LLP

Dated: June ___, 2004     
Michel Savonitto,
Marchand Melançon Forget

Dated: June ___, 2004     
Bonnie A. Tough,
Hodgson Tough Shields DesBrisay O'Donnell  LLP

* Proprietary, personal and financially sensitive information has been excluded from the publicly-disclosed copies of this report.

* Includes dependant and family member claims.