Yell Finance Bv

SECURITIES AND EXCHANGE COMMISSION

FORM 20-F Annual and transition report of foreign private issuers pursuant to sections 13 or 15(d)

Filing Date: 2004-06-08 | Period of Report: 2004-03-31 SEC Accession No. 0001193125-04-100057

(HTML Version on secdatabase.com)

FILER YELL FINANCE BV Mailing Address Business Address QUEENS WALK OXFORD RD QUEENS WALK OXFORD CIK:1158536| IRS No.: 000000000 READING BERKSHIRE ROAD Type: 20-F | Act: 34 | File No.: 333-13860 | Film No.: 04853380 UNITED KINGD X0 RG17PT READING BERKSHIRE UK A0 SIC: 2741 Miscellaneous publishing RG17PT 441187592111

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2004. ¨ TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

Commission file number: 333-13860 YELL FINANCE B.V. (Registrant)

Yellow Pages Limited (Additional Registrant) (Exact name of Registrants as specified in their charters)

THE NETHERLANDS (Jurisdiction of incorporation or organization of Registrant)

ENGLAND AND WALES (Jurisdiction of incorporation or organization of Additional Registrant)

QUEENS WALK, OXFORD ROAD READING, BERKSHIRE RG1 7PT UNITED KINGDOM (Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

None None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: 10 ¾% Senior Sterling Notes due 2011 10 ¾% Senior Dollar Notes due 2011 13 ½% Senior Discount Dollar Notes due 2011 Guarantee relating to the Senior Sterling Notes, Senior Dollar Notes and Senior Discount Dollar Notes (Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report:

350 ordinary shares of 100 each

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes ¨ No

Indicate by check mark which financial statement item the registrant has elected to follow.

¨ Item 17 x Item 18

TABLE OF CONTENTS

Page PART I ITEM 1. Identity of Directors, Senior Management and Advisers 2 ITEM 2. Offer Statistics and Expected Timetable 2 ITEM 3. Key Information 2 ITEM 4. Information on the Company 14 ITEM 5. Operating and Financial Review and Prospects 40 ITEM 6. Directors, Senior Management and Employees 56 ITEM 7. Major Shareholders and Related Party Transactions 81 ITEM 8. Financial Information 82 ITEM 9. The Offer and Listing 82 ITEM 10. Additional Information 83 ITEM 11. Quantitative and Qualitative Disclosures About Market Risk 96 ITEM 12. Description of Securities Other than Equity Securities 96

PART II ITEM 13. Defaults, Dividend Arrearages and Delinquencies 97 ITEM 14. Material Modifications to the Rights of Security Holders and Use of Proceeds 97 ITEM 15. Controls and Procedures 97 ITEM 16. [Reserved] 97 ITEM 16A. Audit Committee Financial Expert 97 ITEM 16B. Code of Ethics 97 ITEM 16C. Principal Accountant Fees and Services 97 ITEM 16D. Exemptions from the Listing Standards for Audit Committees 98 ITEM 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers 98

PART III ITEM 17. Financial Statements 99 ITEM 18. Financial Statements 99 ITEM 19. Exhibits 99 Signatures 101

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

BASIS OF PRESENTATION OF INFORMATION

Certain Definitions and Presentation of Financial and Other Information

Unless otherwise indicated, all references in this annual report to:

the Company are to Yell Finance B.V., a company incorporated with limited liability under the laws of the Netherlands; the parent are to Yell Group plc (formerly Yell Group Limited); the guarantor are to Yellow Pages Limited;

we, us, our, Yell, Group and the Yell Group are to the Company and, where the context requires, its consolidated subsidiaries, except as otherwise indicated; these terms also refer to the Yellow Pages and Yellow Book businesses and companies acquired from British Telecommunications plc (BT); after 16 April 2002, the business of McLeodUSA Media Group, Inc.; after 31 December 2002, the business of National Directory Company; and after 31 March 2004, Feist Publications, Inc., except as otherwise indicated;

Yellow Book East are to Yellow Book LP, with respect to periods prior to and subsequent to BTs acquisition of the assets of Yellow Book USA, LP on 31 August 1999, or the Yellow Book acquisition;

McLeod and NDC which together are referred to throughout this document as Yellow Book West, are to McLeodUSA Media Group, Inc. and its subsidiaries acquired on 16 April 2002 and the business of National Directory Company acquired on 31 December 2002;

NDC are to National Directory Company acquired on 31 December 2002;

Feist are to the yellow pages telephone directories published by Feist Publications, Inc. and Feist Directories, L.L.C. acquired on 26 March 2004;

Apax Partners are to each and any of Apax Partners Holding Ltd., its subsidiaries and Apax Partners, Inc;

Hicks Muse are to Hicks, Muse, Tate & Furst Incorporated;

the Former Sponsors are to Apax Partners and Hicks Muse, with respect to the acquisition of Yell from BT;

Former Sponsor Funds are to funds managed or advised by the Former Sponsors;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document financial year are to a given 12-month period ended on 31 March of the year; for example, the 2004 financial year refers to the 12 months ended 31 March 2004;

United Kingdom and UK are to the United Kingdom of Great Britain and Northern Ireland;

EU are to the European Union;

United States and US are to the United States of America, its states, territories, possessions and all areas subject to its jurisdiction;

pound sterling, pounds sterling, sterling and £ are to the lawful currency of the United Kingdom;

euro or are to the single currency of the Member States of the European Union that have adopted such currency as their lawful currency in accordance with legislation of the European Union relating to European Economic and Monetary Union; and

dollar, dollars, US$ and $ are to the lawful currency of the United States.

Yellow Pages, Business Pages, Yell, Yell.com and Yellow Pages 118 24 7 are trademarks we use in the United Kingdom. Yellow Book, McLeodUSA®, McLeod USA®, Yell and Yell.com are trademarks we use in the United States.

We present our financial statements and financial information in pounds sterling. Unless otherwise indicated, financial information in this annual report has been prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP). UK GAAP differs in certain significant respects from US generally accepted accounting principles (US GAAP). See note 27 of the notes to our audited combined and consolidated historical financial statements included elsewhere in this annual report for an explanation of these differences.

Market Share Information

Information regarding market share, market position and industry data pertaining to our business contained in this annual report consists of estimates based on data and reports compiled by industry professional organisations and analysts and our knowledge of our sales and markets.

We take responsibility for compiling and extracting, but have not independently verified, market data provided by third parties, or industry or general publications, and take no further responsibility for such data. Similarly, while we believe our internal estimates to be reliable, they have not been verified by any independent sources and we cannot assure you as to their accuracy.

Cautionary Statement Regarding Forward-Looking Information

This annual report includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, anticipates, expects, intends, may, will or should or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this annual report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industries in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this annual report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industries in which we operate are consistent with the forward- looking statements contained in this annual report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause those differences include, but are not limited to:

our substantial leverage and our ability to meet our debt obligations;

further changes in our regulatory environment in the United Kingdom;

our ability to continue to attract new advertisers;

our ability to compete with other printed directories businesses; and

general local and global economic conditions.

We urge you to read Item 3.D. Key InformationRisk Factors, Item 4. Information on the Company and Item 5. Operating and Financial Review and Prospects for a more complete discussion of the factors that could affect our future performance and the industries in

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described in this annual report may not occur.

We undertake no obligation to update publicly or publicly revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. All subsequent written and oral forward-looking statements

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this annual report.

A. Selected Financial Data

Selected Yell Group Financial Information

The table below sets out selected historical combined and consolidated financial information for the Yell Group for the periods indicated.

Unless otherwise noted, the Yell Group historical combined and consolidated financial information presented and discussed below has been prepared in accordance with UK GAAP. UK GAAP differs in certain important respects from US GAAP. For a description of these differences, and a reconciliation to some of the US GAAP financial information presented below, see note 27 of the notes to the financial statements included elsewhere in this annual report.

Combined (Predecessor) Consolidated (Successor) Year ended or 22 June Year ended or at at 31 March 1 April to 2001 to 31 March 22 June 31 March 2000 2001 2001 2002 2003 2004 (in £ millions)

UK GAAP

Combined and Consolidated Condensed Profit and Loss Information

Group turnover 622.2 774.3 169.1 696.3 1,114.0 1,186.9

Group operating profit 193.1 187.5 32.9 118.7 183.4 150.4

Net interest payable (10.8 ) (24.5 ) (5.8 ) (158.6 ) (236.6 ) (194.5 )

Profit (loss) on ordinary activities before taxation 182.3 163.0 27.1 (39.9 ) (53.2 ) (44.1 )

Tax (charge) credit on profit (loss) on ordinary activities (57.7 ) (60.3 ) (11.3 ) (7.3 ) 12.6 (7.0 )

Profit (loss) for the financial year 124.6 102.7 15.8 (47.2 ) (40.6 ) (51.1 )

Combined and Consolidated Condensed Balance Sheet Information

Current assets 289.2 390.4 528.3 637.2 630.9

Total assets 683.2 864.3 2,200.9 2,510.3 2,409.7

Creditors: amounts falling due within one year (111.6) (230.2) (200.1 ) (348.7 ) (358.7 )

Net current assets 177.6 160.2 328.2 288.5 272.2

Total assets less current liabilities 571.6 634.1 2,000.8 2,161.6 2,051.0

Loans and other borrowings falling due after more than one year (206.6) (239.8) (2,050.7) (2,286.0) (1,987.1)

Net assets (liabilities)/equity shareholders funds (deficit) 365.0 394.3 (49.9 ) (124.4 ) 63.9

Other Financial Information Depreciation and amortisation (17.7 ) (35.1 ) (9.8 ) (81.1 ) (120.9 ) (119.6 )

Capital expenditure(2) (10.8 ) (23.1 ) (16.9 ) (8.6 ) (16.0 ) (24.5 )

Net cash inflow from operating activities 190.6 194.1 37.6 158.7 309.1 253.5

Combined (Predecessor) Consolidated (Successor) Year ended or 1 April to 22 June 2001 Year ended or at 31 March 22 June to 31 March at 31 March 2001 2001 2002 2003 2004 (in £ millions) US GAAP Combined and Consolidated Profit and Loss Information

Net income (loss) 84.8 (18.2 ) (147.9 ) (79.1 ) (21.3 )

Adjusted net income (loss)(3) 159.9 (16.6 ) (92.3 ) (79.1 ) (21.3 )

Combined and Consolidated Balance Sheet Information

Total assets 789.0 2,361.5 2,647.4 2,309.9

Total shareholders equity (deficit) 319.0 (150.7 ) (295.7 ) (77.0 ) Other Financial Information Net cash provided by operating activities 176.5 28.8 48.3 143.8 56.1

Net cash used in investing activities (72.0 ) (16.9 ) (1,890.9 ) (486.9 ) (139.2 )

Net cash (used in) provided by financing activities (84.7 ) 12.4 1,942.7 273.9 74.3

(1) EBITDA comprises total Group operating profit before depreciation and amortisation, both being non-cash items. EBITDA is not a measurement of performance under UK or US GAAP and you should not consider EBITDA as an alternative to (a) operating income or net income (as determined in accordance with generally accepted accounting principles), (b) cash flows from operating, investing or financing activities (as determined in accordance with generally accepted accounting principles), or as a measure of our ability to meet cash needs or (c) any other measures of performance under generally accepted accounting principles. EBITDA is not a direct measure of our liquidity, which is shown by the Groups cash flow statement and needs to be considered in the context of our financial commitments. EBITDA may not be indicative of our historical operating results, nor is it meant to be predictive of our potential future results. We believe that EBITDA is a measure commonly reported and widely used by investors in comparing performance on a consistent basis without regard to depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or non-operating factors. Accordingly, EBITDA has been disclosed in this annual report to permit a more complete and comprehensive analysis of our operating performance relative to other companies and of our ability to service our debt. Because all companies do not calculate EBITDA identically, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. See the reconciliation of Group operating profit to EBITDA to profit (loss) in the financial year in Item 5 - Operating and Financial Review and Prospects and the reconciliation of operating profit to net cash inflow from operating activities in the financial statements.

(2) Capital expenditure represents cash expenditure on tangible fixed assets, which in the period from 1 April to 22 June 2001 includes £11.7 million in payments to BT relating to the transfer of a car fleet to the Group.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (3) Effective 1 April 2002, the Group prospectively adopted SFAS 142 for US GAAP reporting purposes, which eliminated the requirement to amortise goodwill. Adjusted net income (loss) presents the prior periods net income (loss) after eliminating the effect of goodwill amortisation from 1 April 2000.

Selected Unaudited Yell Group Operational Information

The table below sets out selected unaudited operational data for the Yell Group for the periods indicated.

Year ended or at 31 March 2002 2003 2004

Yell Group Operational Information

UK information

Unique advertisers (thousands)(1) 438 451 480

Directory editions published(2) 89 94 99

Turnover per unique advertiser (pounds) 1,234 1,272 1,237

Unique advertiser retention rate (%)(4) 80 78 77

US information

Unique advertisers (thousands)(1)(3) 166 363 386

Directory editions published 272 525 536

Turnover per unique advertiser (dollars) 2,450 2,135 2,434

Unique advertiser retention rate (%)(4) 70 70 70

Other UK products and services

Yell.com page impressions for March (millions) 33 39 67

Yell.com searchable advertisers as at 31 March (thousands)(5) 56 75 103

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (1) Number of unique advertisers in printed directories that were recognised for turnover purposes and have been billed. Unique advertisers are counted once only, regardless of the number of advertisements they purchase or the number of directories in which they advertise.

(2) The number of directory editions published in the UK has increased due to the rescoping of the Colchester directory into two directories, Colchester and Ipswich; the rescoping of the Sheffield directory into two directories, Sheffield and Barnsley; and the publication of three new Business Pages directories.

(3) As a result of the progress in the United States towards integrating our customer database, we have been able to make improvements in the ways in which we capture, record and analyse customer information. This has led to a significant overall elimination of duplicated records of unique advertisers. We have not adjusted the previously reported 2002 and 2003 figures for any duplicated records in those years. There remains some overlap in reporting unique advertisers between Yellow Book and the former McLeod that we expect to be removed. These improvements have not affected the reporting of our financial results.

(4) The proportion of unique advertisers that have renewed their advertising from the preceding publication. In the United Kingdom, this measure excludes national and key accounts where retention is very high. In the United States, this measure is based on unique directory advertisers.

(5) Unique customers with a live contract at month end. These figures refer to searchable advertisers only, i.e. advertisers for whom users can search on Yell.com. It excludes advertisers who purchase products such as banners and domain names.

Currency and Exchange Rate Data

The table below sets forth, for the period indicated, certain information regarding the noon buying rates in New York City for cable transfers in pounds sterling, as certified for customs purposes by the Federal Reserve Bank of New York expressed in dollars per pound sterling:

£1.00 = dollars Month and year High Low Period end

November 2003 1.7219 1.6693 1.7219

December 2003 1.7842 1.7200 1.7842

January 2004 1.8511 1.7902 1.8215

February 2004 1.9045 1.8182 1.8575

March 2004 1.8680 1.7943 1.8400

April 2004 1.8564 1.7674 1.7744

May 2004 1.8369 1.7544 1.8330

June 2004 (through 4 June) 1.8387 1.8359 1.8367

The following table sets forth the average of the noon buying rates in New York City for cable transfers in pounds sterling on the last full day of each full month during each of the last five years ended 31 March 2004; and for the period from 1 April 2004 through 25 May 2004 as certified for customs purposes by the Federal Reserve Bank of New York expressed in dollars per pound sterling:

Year ended 31 March £1.00 = dollars

2000 1.6084

2001 1.4737

2002 1.4320

2003 1.5541

2004 1.7051

1 April 2004 through 4 June 2004. 1.7987

We make no representation that any amount translated in this annual report could have been or could be converted at any of the rates indicated above or at any other rates.

B. Capitalisation and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Our regulatory environment restricts our revenue growth in the United Kingdom.

Our UK printed consumer classified directories, which represent our largest product offering in terms of turnover and profits, are subject to undertakings we have given to the UK Secretary of State for Trade and Industry. These undertakings regulate the prices we may charge for classified advertisements, and were revised from January 2002 to reduce further the prices that we may charge for classified advertisements in the United Kingdom following acceptance by the Secretary of State of the advice of the Director General of Fair Trading that a stronger price cap was needed to address the concerns expressed in his review. The revised undertakings limit any annual price increase to a percentage equal to the inflation rate as measured by the official UK Retail Price Index (RPI) minus six percentage points. This means that our prices for these advertisements are required to be reduced in absolute terms each year that the inflation rate is less than 6% and that, relative to inflation, these prices are reduced every year so long as the undertakings remain in effect. Our new undertakings to the UK Secretary of State for Trade and Industry are expected to remain in effect for a period of approximately four years from January 2002, by the end of which they may be reviewed. The Enterprise Act 2002 (the competition provisions of which came into force on 20 June 2003) brings about changes to the UK competition regime, including, in general, removing the role of the Secretary of State for Trade and Industry in competition proceedings

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and transferring her functions to the Office for Fair Trading and the Competition Commission. The competition authorities have the power to review the effectiveness and appropriateness of the undertakings at any time and may at any time request revised terms, which may be more restrictive. For a further description of these matters and of other regulatory factors that could affect our business, including the advice of the Director General of Fair Trading concerning the 2002 revision of the undertakings, see Information on the Company Competition Laws.

Our results may vary from quarter to quarter and may not be indicative of our results for the full year.

Because the different editions of our classified directories are published and distributed at different times throughout the year, our business does not experience significant seasonality. In accordance with our accounting policies, we do not recognise turnover or the costs directly related to sales, production, printing and distribution for any given directory until delivery of that directory has been completed. This means that because the number and type of directories are not evenly distributed during the year or published in the same quarter every year, our turnover and profits do not arise evenly over the year. Any delay in the publication and distribution of a significant directory, or a number of directories that either singly or together generate significant turnover, could have the effect of postponing the recognition of turnover and costs from that directory or those directories to the following financial period. Similarly,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents an earlier distribution of directories during the year could result in recognition of turnover and costs in an earlier period as compared to the prior year, making year-to-year comparisons more difficult. Finally, due to timing differences among the recognition of revenues and costs, the payment of costs and invoicing our advertisers, operating profit, EBITDA and other financial indicators generally relied on by investors to evaluate a companys financial performance may not, in our case, reflect actual cash received or expended during a given period. See Operating and Financial Review and Prospects.

Our business may be adversely affected by our reliance on, and our extension of credit to, small and medium-sized businesses.

A significant portion of our turnover is derived from selling advertising to small and medium-sized businesses. In the ordinary course of our business, we extend credit to these advertisers for advertising purchases. Small and medium-sized businesses, however, tend to have fewer financial resources and higher financial failure rates than large businesses. We believe these limitations are a significant contributing factor to having advertisers in any given year not renew their advertising in the following year. Bad debt expense as a percentage of Group turnover was 6.1% and 6.0% for the financial years ended 31 March 2003 and 2004, respectively, and has been and currently is higher in the United States, where churn rates are higher. In addition, full collection of delinquent accounts can take an extended period of time. Consequently, we could be adversely affected by our dependence on and our extension of credit to small and medium-sized businesses.

Increased paper prices may have a material adverse effect on our business.

Paper represents our single largest raw material expense. In the 2004 financial year, paper costs represented approximately 4.4% of turnover and 11.5% of our total cost of sales in the United Kingdom. Paper costs represented 9.4% of turnover and approximately 16.5% of our total cost of sales in the 2004 financial year in the United States. In the past, paper prices have fluctuated significantly. For example, during the past five years, the newspaper-grade paper prices we have paid in the United Kingdom have fluctuated by 14%, and may significantly increase in the future. We estimate that a 10% change in paper prices during the 2004 financial year would have had an annual impact of approximately £7.9 million on our Group operating profit. We seek to limit our exposure to market fluctuations through maximum or fixed price arrangements with our suppliers. Our current arrangements in the United Kingdom expire in March 2007. Historically, Yellow Book had no fixed price arrangements and, instead, obtained paper at prevailing market rates. In the United States we have executed an agreement with a fixed price ceiling from a US-based supplier who will provide 50% of Yellow Books requirements for the next five years until August 2009. A further 40% of paper requirements will be provided on a three year fixed ceiling price contract with the remaining 10% supplied on contract until December 2005. We may not be able to renew these arrangements on satisfactory terms, if at all. The failure to deliver by any of our major suppliers could require that we make purchases in the spot market, at potentially higher prices, during the period it takes to replace such major suppliers.

If we cannot expand through acquisitions and integrate our acquisitions and new directory introductions successfully, our ability to expand our business may be adversely affected. Material acquisitions by us may have a material adverse effect on our business.

We have expanded in the United States through several acquisitions of classified directory publishers and new directory introductions or launches. As part of our strategy, we actively evaluate and intend to continue from time to time to evaluate potential acquisitions, some of which may be material. While we currently have no agreement or understanding with any third party with respect to a material acquisition, any future material acquisition may affect significantly the nature of an investment in our 10 3/4% Senior Sterling Notes due 2011, 10 3/4% Senior Dollar Notes due 2011 and 13 ½% Senior Discount Dollar Notes due 2011 (collectively, the Notes). Further, any future new acquisitions, and recent and future directory launches will require the attention of our management and the diversion of other resources. We cannot assure you that we will be able to identify, acquire, launch or profitably manage additional classified directory publishers or directory launches or successfully integrate such publishers without substantial costs, delays or other problems, if at all. In addition, we cannot assure you that any companies acquired or directories launched will be profitable at the time of their acquisition or launch or that they will achieve levels of profitability that will justify the investment we made in them. We cannot assure you in the case of acquisitions that we will successfully overcome disparities between our corporate strategies and cultures and those of the businesses we acquire in the future. We may also seek to expand into geographic areas where we currently have no operations and where we may encounter cultural differences. In addition, we expect that we will encounter additional competitors pursuing acquisitions of classified directories businesses. These competitors

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document may include the Regional Bell Operating Companies, recently divested directory publishing businesses and smaller independent publishers with

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents aggressive growth strategies. Our ability to expand our business in the future may be affected if we are unable to identify and consummate acquisitions and integrate our acquisitions or directory launches successfully.

If we lose the services of our key executive officers, we may not succeed in implementing our business strategy.

Our Chief Executive Officer and certain other senior managers are key to the successful implementation of our business strategy in the near to medium term. Our executive and senior managers have extensive experience and knowledge of our industry and its potential. The loss of their services could have a material adverse effect on our ability to implement our business strategy.

The loss of important intellectual property rights could adversely affect our competitiveness.

Some of our trademarks, such as our Yellow Pages brand name in the United Kingdom and our Yellow Book brand name in the United States, and other intellectual property rights are important to our business. We rely upon a combination of copyright and trademark laws as well as, where appropriate, contractual arrangements, including licensing agreements, to establish and protect our intellectual property rights. We are required from time to time to bring lawsuits against third parties in order to protect our intellectual property rights. Similarly, we are, and expect from time to time to be, party to proceedings where third parties challenge our rights. We cannot be sure that any lawsuits or other actions brought by us will be successful or that we will not be found to infringe the intellectual property rights of third parties. As the internet grows, it may prove more onerous to protect our trademarks such as Yell.com from domain name infringement or to prevent others from using internet domain names that associate their business with ours. Although we are not aware of any material infringements of any trademark rights that are significant to our business, any lawsuits, regardless of their outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition or operating results. In addition, we do not have rights to the Yellow Pages brand name, or its local-language equivalent, in any countries in which we might operate other than in the United Kingdom, the Republic of Ireland and some of the former and current British territories overseas. The loss of important trademarks could have a material adverse effect upon our business, financial condition and results of operations.

Foreign exchange rate fluctuations may adversely affect our business, financial condition and results of operations.

As our reporting currency is the pound sterling, any movement in foreign currency exchange rates in relation to pounds sterling, particularly the movements in the dollar/pound sterling exchange rate, could have an impact on our business, financial condition and results of operations. If the average dollar/pound sterling exchange rate used for reporting purposes had been $0.10 higher during our 2004 financial year, then our reported turnover would have been £31.1 million lower. Any dilution of our earnings reported in pounds sterling as a result of the weakening US dollar is partially offset by a natural hedging within the Group as a result of our having a significant amount of debt denominated in US dollars. Nevertheless, in the future, we may also experience exchange gains or losses upon translation of our dollar- denominated liabilities relating to a portion of the Notes or upon translation of our US assets or results of operations, and we may incur foreign exchange transaction losses to the extent we are required to fund payments on the dollar-denominated Notes with pounds sterling. We do not currently hedge against foreign exchange risk, although we may choose to do so in the future.

Additional regulation regarding information technology may increase our costs.

In addition to our printed directories, we also offer internet-based products and services. General advertising laws and regulations and data protection legislation may apply to our internet-based activities in the same way in which they apply to our activities generally. As our business in this area develops, specific laws and regulations relating to the provision of internet services and to the use of the internet and of related applications may become more relevant. Regulation of the internet and related services is itself still developing. If our regulatory environment becomes more restrictive, including increased internet content regulation, our profitability could decrease.

Our exposure to defamation and privacy claims could have a material effect on our operating results or financial condition.

We are exposed to defamation and breach of privacy claims relating to our directories business as well as methods of collection, processing and use of personal data. The subjects of our data and users of data collected and processed by us could also have claims

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents against us if our data were found to be inaccurate, or if personal data stored by us were improperly accessed and disseminated by unauthorised persons. Although we have not had any material claims relating to either defamation or breach of privacy to date, we may be party to litigation matters that could have a material adverse effect on our business, financial condition or results of operations or otherwise distract our management.

If we cannot adapt our business to technological change, we may be unable to maintain our competitive position.

We anticipate that the classified advertising industry may experience significant changes arising from rapid developments in technology and users technology preferences. We currently derive substantially all of our revenue from our printed classified directories. However, increasing use by business and residential users of internet-based and other technologically advanced products and services may cause our future turnover mix to shift in favour of products and services other than our printed classified directories, such as our internet-based products and services. Turnover derived from our printed classified directories may decline and may not be offset by turnover derived from our other products and services. Our ability to maintain our competitive position may depend upon our ability to enhance existing products and services, develop and market new products and services and attract and retain key managers and employees to respond to the growing presence of internet-based and other technologically advanced products in our industry. If we fail to anticipate or to respond adequately to changes in technology and user preferences, or incur significant delays or costs in product development or introduction, we may be unable to maintain our competitive position. As a result of the growing use of internet-based and other technologically advanced products and services, we may face increased competition from new as well as existing providers of services similar to ours.

Our reliance on technology could have a material adverse impact on our business.

Most of our business activities rely to a significant degree on the efficient and uninterrupted operation of our computer and communications systems and those of third parties. Any failure of current or, in the future, new systems could impair our collection, processing or storage of data and the day-to-day management of our business. This could have a material adverse effect on our business, financial condition and results of operations.

Our computer and communications systems are vulnerable to damage or interruption from a variety of sources. Despite precautions taken by us, a natural disaster or other unanticipated problems that lead to the corruption or loss of data at our facilities could have a material adverse effect on our business, financial condition and results of operations.

Our dependence on two principal suppliers may have a material adverse effect on our business.

We depend on two principal suppliers in the United Kingdom for many of our printing and pre-press needs. To that end, we have several long-term contracts with both RR Donnelley, for printing and binding our classified directories, and Pindar Set Ltd., for pre-press needs, including preparing artwork and paginating the directories. In the United States, we depend on Pindar Set Ltd. for substantially all of our pre- press needs and also on RR Donnelley and Quebecor Printing, Inc. for substantially all of Yellow Books printing needs. These contracts are for services that are integral to our business. Should our suppliers be unable to fulfil their contractual obligations under these agreements, this could result in a material adverse effect on our business until we find replacement suppliers for these services. However, both suppliers have developed extensive and robust Business Continuity Plans which would become effective in the unlikely event of any adverse circumstances which would affect the continuation of our business operations.

Our substantial leverage could adversely affect our financial wellbeing.

At 31 March 2004, we had total third-party debt, before the allocation of deferred finance costs, of £2,134.9 million, including £952.8 million of secured debt under our senior credit facilities and £308.2 million in Notes issued, and subordinated parent company loans of £873.1 million. We anticipate that we will continue to maintain considerable debt for the foreseeable future. Our substantial leverage poses the risk to our noteholders that:

a significant portion of our cash flow from our operations will have to be dedicated to servicing our debt;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document our ability to obtain additional financing for working capital, capital expenditures or business opportunities may be impaired;

we may have a much higher level of debt than certain of our competitors, which may put us at a competitive disadvantage and may make it difficult for us to pursue our business strategy; and

our debt level may render us unable to adequately plan for or react to changing market conditions, changes in our business and the industry in which we operate.

Our debt agreements contain significant restrictions limiting our flexibility in operating our business.

Various covenants contained in our debt instruments limit or may limit our ability to:

borrow money;

use assets as security in other transactions;

make certain asset dispositions;

make investments;

enter into transactions with subsidiaries other than on arms-length terms; and

pay dividends or make other distributions.

These restrictions could hinder our ability to carry out our business strategy and make payments of principal or interest on the Notes. A breach of the covenants of the indentures under which the Notes were issued could cause a default under the terms of the other financing arrangements of our subsidiaries, causing all debt under those financing arrangements to become due.

Our ability to generate the cash needed to service our debt depends on certain factors beyond our control.

The future success of our operations will in large part dictate our ability to make scheduled payments on, and satisfy our obligations under, our debt, including our senior credit facilities and the Notes. Our future operating performance will be affected by general economic, competitive, market, business and other conditions, many of which are beyond our control. To the extent we are not able to fund any principal payment at maturity with respect to the senior credit facilities, the Notes or any interest payment when due from cash flow from operations, we will be required to refinance this debt pursuant to credit facilities and/or the issue of new debt and equity securities into the capital markets. Any failure to raise the additional funds necessary to achieve this would result in a default under the senior credit facilities and/or a default under the Notes. We anticipate that we will have to refinance in part the repayment of the Notes at maturity. We cannot assure you that we will be able to refinance any of our debt, obtain additional financing or sell assets on commercially reasonable terms or at all.

Both the Company and the guarantor are holding companies with no revenue-generating operations of their own.

The Companys and the guarantors only assets are in each case an intercompany interest receivable loan and shares in each of their direct wholly owned subsidiaries, which are themselves holding companies. We are therefore entirely dependent on intercompany interest receipts, dividends and other distributions from our operating subsidiaries that are indirectly held through our holding company subsidiaries. The ability of these operating subsidiaries to make payments to us is dependent on their cash flow and earnings. Our operating company subsidiaries may not generate cash flow sufficient to enable us to meet our payment obligations.

The terms of the intercreditor deed and the senior credit facilities as well as local corporate law restrict our subsidiaries ability to provide funds to us.

The Company, our parent, the guarantor and most of our subsidiaries are parties to an intercreditor deed with, among others, the lenders under the senior credit facilities. The intercreditor deed contractually subordinates each of the Companys and the guarantors rights to receive payments from subsidiaries under intercompany loans to the subsidiaries obligations under the senior credit facilities. In addition,

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document prior to the time the senior credit facilities are repaid, the intercreditor deed prohibits our subsidiaries from making payments to the Company and guarantor except to fund interest due on the Notes, certain permitted investor payments and administrative expenses. In the case of a default under the senior credit facilities, payments to the Company and guarantor from their

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents subsidiaries, including payments under the Companys and the guarantors intercompany loans, will be suspended in the event of a payment default or in the event of any other default if a blockage notice is issued by the senior facility agent under the senior credit facilities. These payments may be resumed when the default is cured, waived or ceases to exist, when any acceleration has been rescinded or when the senior facility agent terminates the blockage notice. The intercreditor deed also provides that, in addition to the payment blockage, prior to the time the senior credit facilities are repaid, enforcement action may not be taken by the Company or guarantor in relation to their intercompany loans without the consent of a majority of lenders under the senior credit facilities.

In addition, the terms of the senior credit facilities as well as local corporate law restrict our subsidiaries ability to provide funds to us. Dividends are typically limited to accumulated earnings of the relevant subsidiary. Further, dividends and other distributions from our operating company subsidiaries will be applied to amounts owing under the senior credit facilities before any surplus is available for payment to the Company to satisfy its obligations under the Notes. As a result of these restrictions we may not have sufficient funds to pay the principal of and interest on the Notes.

The Notes and the guarantees are structurally subordinated to the obligations of our subsidiaries and you may not be repaid if we become insolvent.

Our obligations under the Notes are structurally subordinated to the obligations of our subsidiaries, including approximately £941.6 million of debt, net of deferred finance costs (including the revolving credit facility) under the senior credit facilities. Our subsidiaries are separate and distinct legal entities. Other than the guarantor, which is also a holding company without independent operations, our subsidiaries will have no direct obligation, contingent or otherwise, to pay any amount due under the Notes. In the event of an insolvency, liquidation or other reorganisation of any of our subsidiaries (other than the guarantor), our creditors (including you) will have no right to proceed at law against our subsidiaries assets. Creditors of these subsidiaries will be entitled to payment in full from the sale or other disposal of these assets in priority to the Company, except to the extent that the Company may be a distinct creditor with recognised claims against those subsidiaries.

The Notes and the guarantees are unsecured obligations of the Company and the guarantor, respectively. Debt under the senior credit facilities is secured by liens on substantially all of the assets of the guarantor, including its intercompany loans to its direct subsidiary and payments made under them and the shares and assets of our material operating subsidiaries. In the event of a default under the senior credit facilities or an insolvency, liquidation, winding-up or similar proceeding relating to the guarantor or any of the Companys other material subsidiaries, the guarantors assets would be available to satisfy obligations under the senior credit facilities before any payment would be made on the Notes or under the guarantees. Any future secured indebtedness, whether of the Company or any of its subsidiaries, including the guarantor, would effectively rank senior to the Notes and the guarantees.

We may not be able to finance a change of control offer required by the indentures.

Upon a change of control (as defined under the indentures governing the Notes), the noteholders may require us to offer to purchase all of the Notes then outstanding at prices set forth in the indentures. The change of control provision in the indentures requires the occurrence of a rating decline to become effective. If a change of control were to occur, we cannot assure the noteholders that we would have sufficient funds to pay the purchase price of the outstanding notes, and we expect that we would require third-party financing to do so. We cannot assure the noteholders that we would be able to obtain this financing on favourable terms, if at all. In addition, the senior credit facilities impose restrictions on distributions from our subsidiaries that will restrict our ability to repurchase the Notes, including pursuant to an offer in connection with a change of control. A change of control may result in an event of default under the senior credit facilities and may cause the acceleration of other debt which may be senior to the Notes. Our future debt also may contain restrictions on repayment requirements with respect to specified events or transactions that could constitute a change of control under the indentures.

Dutch insolvency laws may adversely affect a recovery by the holders of the Notes.

We are organised under the laws of the Netherlands. Dutch insolvency laws differ significantly from insolvency proceedings in the United States and may make it more difficult for holders of the Notes to effect a restructuring of us or to recover the amount they would have

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document recovered in a liquidation or bankruptcy proceeding in the United States. There are two primary insolvency regimes under Dutch law; the first, moratorium of payment (surséance van betaling), is intended to facilitate the reorganisation of a debtors debts and enable the debtor to investigate the possibilities for continuing its business as a going concern. The second, bankruptcy (faillissement), is primarily designed to liquidate and distribute the assets of a debtor to its creditors.

If a company applies for a moratorium of payment, the court will grant the moratorium provisionally and appoint a trustee administrator (bewindvoerder), who, jointly with the companys management, will be in charge of the company and its business undertakings. A definitive moratorium will generally be granted upon the approval of a qualified majority of the unsecured creditors. In both cases, certain creditors will be precluded from attempting to recover their claims from the assets. A provisional or definitive moratorium of payment will be withdrawn and in most cases be converted into a bankruptcy if, among others, the assets or financial condition of the debtor is such that continuation of the moratorium is no longer desirable or the prospect that the debtor may eventually satisfy its creditors, appears not to exist. The moratorium does not apply to claims of secured creditors (such as pledgees and mortgagees), claims which are accorded preferential rights (such as tax, social security duties and employee wages) or any debts arising after the date of the moratorium. Unlike chapter 11 proceedings under US bankruptcy law during which both secured and unsecured creditors are generally barred from seeking to recover on their claims, during a Dutch moratorium of payment secured creditors and preferential creditors may proceed against the assets that secure their claims or to which they have preferential rights, in order to satisfy their claims. A recovery under Dutch law, therefore, could involve a sale of the assets of the debtor in a manner that does not reflect the going-concern value of the debtor. Consequently, Dutch insolvency laws could preclude or inhibit the ability of the holders of the Notes to effect a restructuring of us and could reduce the recovery in a Dutch insolvency proceeding.

On 31 May 2002 the European Union (EU) Council Regulation on Insolvency Proceedings (No. 1346/2000 of 29 May 2000) came into force for all EU member states with the exception of Denmark. In relation to a company or legal entity, the place of the registered office shall be presumed to be its centre of main activities in the absence of proof to the contrary. The Companys registered office is situated in Amsterdam, The Netherlands, and the Company has offices at Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT, England. The regulation provides that the courts of the EU member state within the territory of which the centre of a debtors main interest is situated has jurisdiction to open insolvency proceedings in that respect of such debtor. English courts may rule that the centre of the Companys main interest is situated in England and that the English court will have jurisdiction under the Regulation to open insolvency proceedings in respect of the Company. In that case the laws of England, being the state of the opening of insolvency proceedings, shall determine the conditions for the opening of those proceedings, their conduct and their closure in accordance with the regulation, save for the exceptions mentioned in the regulation.

In connection with Dutch bankruptcy proceedings, the assets of a debtor are generally liquidated and the proceeds distributed to the debtors creditors in accordance with their respective ranks and, to the extent claims of certain creditors have equal ranking, in proportion to the amount of such claims. Certain parties (such as secured creditors and preferential creditors) will have special rights that may adversely affect the interests of holders of the Notes. Secured creditors such as pledgees and mortgagees may enforce their rights separate from the bankruptcy. Other creditors need to submit their claims to the receiver for verification. The claim of a creditor may be limited depending on the date the claim becomes due and payable in accordance with its terms. Generally, claims of holders of Notes which were not due and payable by their terms on the date of a bankruptcy of the Company will be accelerated and become due and payable on that date. Each of these claims will have to be submitted to the receiver of the Company to be verified by the receiver. Verification under Dutch law means that the receiver determines the existence, ranking and value of the claim and whether and to what extent it will be admitted in the bankruptcy proceedings. The valuation of claims that otherwise would not have been payable to the time of the bankruptcy proceedings may be based on a net present value analysis. Creditors that wish to dispute the verification of their claims by the receiver will need to commence a court proceeding. These verification procedures could cause holders of Notes to recover substantially less than the principal amount of their notes or less than they could recover in a US liquidation. Such verification procedures could also cause payments to the holders of Notes (if any) to be delayed compared with holders of undisputed claims.

Fraudulent conveyance legislation is also in force in the Netherlands. Portions of the legislation provide generally that certain transactions with a creditor entered into voluntarily by the debtor are subject to avoidance if both parties to the transaction know or should have known that the transaction would prejudice other creditors or that the debtor has previously made an application for bankruptcy. Knowledge that the transaction would prejudice other creditors is presumed by law for all transactions performed within one year of the adjudication before bankruptcy or within one year before the date the claim of fraudulent conveyance is made, if it is also established that one of the conditions mentioned in Article 43 of the Dutch Bankruptcy Act or, respectively, Article 46 of Book 3 of the Dutch Civil Code is fulfilled. These conditions include, but are not limited to, situations in which: (1) the value of the obligation of the debtor materially exceeds the value of the obligation of the creditor, (2) the debtor pays or grants security for debts that are not yet due, (3) an agreement is made

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document between legal entities or an obligation arises from one legal entity towards another if a director of one of these legal entities is also a director of the other or (4) an agreement is made or an obligation would arise with a Group company. Accordingly, if a court of competent jurisdiction in a suit by an unpaid creditor of the Company or a representative of such

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents a creditor were to find that the issue of the Notes met the foregoing criteria, the court could avoid the Notes. A consequence of such avoidance could be the subordination of claims of holders of the Notes to existing and possibly future debt of the Company. We cannot assure you as to what standards a court would apply to determine whether the Company was solvent at the relevant time or whether, whatever standard was applied, the Notes would not be avoided on another of the grounds set forth above.

UK insolvency laws are not as favourable to unsecured creditors as US insolvency laws.

The procedural and substantive provisions of English insolvency laws generally are more favourable to secured creditors than the comparable provisions of US law. These provisions afford debtors and unsecured creditors only limited protection against the rights of secured creditors and it will generally not be possible for the Company, as an unsecured creditor under intercompany loans, or the holders of the Notes, as unsecured creditors of the Company under the Notes, or unsecured creditors of the guarantor under the guarantees to prevent the secured creditors from enforcing their security to repay the debts. After an event of default occurs, the security agent under the senior credit facilities will have the effective right to direct the disposition of any collateral. In addition, under English insolvency law, the Companys debt under the Notes and the guarantors debt under the guarantees will, in a winding-up, rank after the claims of certain creditors which are entitled to priority under English insolvency law. The claims of these preferred creditors include:

expenses of the relevant insolvency proceedings;

amounts owed under occupational pension schemes; and

amounts owed to employees.

Under English insolvency law, an administration order can be made if the court is satisfied that the relevant company is or is likely to become unable to pay its debts for the purpose of the relevant statute and that the administration order is reasonably likely to achieve the purpose/objective of administration. Administrators are required to carry out their functions with the primary objective of rescuing the company as a going concern. If this primary objective is not achievable the administrators must carry out their functions with the objective of achieving a better result for the companys creditors as a whole than would be likely if the company was wound up or realising property in order to make a distribution to one or more secured or preferred creditors. The administration regime is in some respects similar to the regime under chapter 11 of the US Bankruptcy Code as no steps may be taken to enforce security over a companys property and no proceedings or other legal process may be commenced or continued against a company in administration except with the consent of the administrator or court. It is possible, however, for a secured creditor that has the power to appoint an administrative receiver (which will generally be the case where the secured lender has security in the form of a floating charge, granted before 15 September 2003, over all or substantially all of the companys property, as is the case of the lenders under the senior credit facilities) to prevent the appointment of an administrator and, as a result, that secured creditor and other secured creditors will be able to enforce their security. The Financial Collateral Arrangements (No. 2) Regulations 2003 came into force on 26 December 2003. This enables security holders to enforce their security rights over shares, other financial instruments and securities or cash, regardless of the usual moratorium imposed by administration and without being affected by the various rights of administrators and liquidators relating to disposal of property. The application of these new regulations is, however, still untested. As a result, the protection given to unsecured creditors under English insolvency law will in most cases be less than the protection that would be given to unsecured creditors under chapter 11 of the US Bankruptcy Code. It is possible that we could be subject to insolvency proceedings in other jurisdictions in which we operate. The insolvency laws of those jurisdictions may also differ from US insolvency laws.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

Yell is a leading international directories business that includes the Yellow Pages and Business Pages directories in the United Kingdom and the Yellow Book directories in the United States, as well as Yell.com, Yellowbook.com and Yellow Pages 118 24 7 (formerly Talking Pages).

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company was incorporated on 19 June 2001 as a private company with limited liability under the laws of the Netherlands with its registered office in Amsterdam, the Netherlands. Our principal offices are located at Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT, England, our telephone number is +44 (0) 118 959 2111, and our facsimile number is +44 (0) 118 950 9888.

The Yell Group operated as a business within BT prior to 22 June 2001, when funds managed or advised by the Former Sponsors purchased BTs equity interests in Yellow Book USA, Inc. and Yellow Pages Sales Limited and the net assets and operations of BTs subsidiary Yell Limited.

Our business originated in 1966, when the General Post Office, a department of the UK Government and the predecessor to BT, first published a classified advertising book, later to be called Yellow Pages, as part of the Brighton telephone directory.

Between 1966 and the early 1980s, we expanded our coverage in the United Kingdom, publishing Yellow Pages sections and then separate Yellow Pages directories for substantially all of the United Kingdom. In the 2004 financial year, we published 99 directories, including Business Pages, across the United Kingdom. Although we have traditionally focused on paper-based directories, for a number of years we have been exploring other means of delivering our products and services.

In the mid-1980s, we began expanding our range of products and services in order to build on our database of information on UK businesses, our advertiser base and the expertise of our national sales force. In 1987, we initiated our first electronic delivery of classified directory information. In 1994, we launched Talking Pages, a 24-hour telephone-based, operator-assisted classified directory service, on a nationwide basis. This was replaced in March 2003 by the Yellow Pages 118 24 7 phone service. In 1996, we began offering online internet services for users in the United Kingdom using the Yell.co.uk domain name and, in June 2000, we relaunched Yell.co.uk as Yell.com.

Since March 1996, increases in advertising rates in our UK Yellow Pages directories have been subject to price caps as a result of undertakings given to the UK Secretary of State for Trade and Industry. In 2001, following a review by the Office of Fair Trading, we entered into revised undertakings setting forth new price caps. For further information, see Information on the CompanyCompetition LawsUK Competition Laws.

In addition to expanding our products and services, we have expanded geographically. The Yellow Book acquisition in August 1999 expanded our core business into the United States. The first Yellow Book business was founded in 1930 to publish local community directories for the then-newly emerging communities on Long Island, New York. In the 2004 financial year, Yellow Book published 536 directories under the Yellow Book name covering 41 US states and Washington, DC.

Yellow Book has expanded through the acquisition of smaller independent directory publishers, building density of coverage and strengthening its market presence. Since 1997, Yellow Book has made 21 acquisitions. Seventeen of these have been made since we acquired Yellow Book in August 1999, including an acquisition of directories from Sprint for $46.6 million, and 16 others with a combined value of $47.4 million.

In April 2002, we significantly expanded our US geographic coverage with the acquisition of McLeod. Acquisitions were a key component of McLeods growth strategy. From 1997 until its acquisition by us, McLeod made 25 separate acquisitions. Since February 1999, these included an acquisition of directories from Talking Directories, Inc. (TDI) for a total cost of $132 million including expenses and four other significant acquisitions with a combined total cost of $84 million.

On 31 December 2002, we acquired NDC, an independent publisher of yellow pages in California, New Mexico and Arizona in the United States. Since its acquisition, NDCs results have been included in those of Yellow Book. For further information on the acquisition of NDC, see Operating and Financial Review and Prospects - The National Directory Company Acquisition.

On 26 March 2004 we acquired the yellow pages telephone directors published by Feist Publications, Inc. and Feist Directories, L.L.C. at the time the fifth largest independent yellow pages publisher in the United States, publishing 20 directories in Texas, Oklahoma and Kansas.

In addition to acquisitions, we have expanded our geographic coverage in the United States through new directory launches. Since we acquired Yellow Book in August 1999, we have launched 50 new directories, including directories in the borough of Manhattan in New York City, metropolitan Boston and greater Chicago.

As part of our ongoing strategy to focus on generating business leads for advertisers through connecting buyers and sellers, we decided to sell our Yell Data operation, which contributed £5.5 million in revenue during the 2003 financial year. As of 15 June 2003, we transferred our ownership of Yell Data to Experian, a major UK data services company. We have licensed Experian to use our data and certain trading names for a five year period.

We are the leading provider of classified directory advertising and associated products and services in the United Kingdom and the leading independent provider (not affiliated with a US telephone service provider) of classified directory advertising in the United States. We seek to generate business leads for our advertisers by connecting buyers and sellers through an integrated portfolio of simple-to-use, cost- effective advertising solutions, including printed, telephone-based and online directories. Approximately 96% of our revenues during our 2004 financial year were derived from selling advertising in printed classified directories to our advertisers, which are principally small and medium-sized businesses.

During the 2004 financial year, we published a total of 635 directories in the United Kingdom and the United States and distributed approximately 100 million copies containing advertisements on behalf of over 866,000 unique advertisers.

We believe that our advertisers value the effectiveness and low cost of advertising in our directories relative to many other forms of advertising, our broad distribution to potential buyers of our advertisers products and services and the quality of our client service and support. During our 2004 financial year, we provided services to advertisers across a diverse range of industry sectors and achieved annual retention rates for our printed directories of approximately 77% in the United Kingdom and approximately 70% in the United States.

B. Business Overview

Our activities are organised into the following areas:

UK printed directories. In the United Kingdom, we are the largest classified directory publisher with approximately 28 million copies of the Yellow Pages directories distributed during our 2004 financial year, with an average of approximately 100 million directory uses each month. We published 90 regional Yellow Pages directories throughout substantially the whole of the United Kingdom, which together contained approximately 1,133,000 advertisements on behalf of approximately 475,000 unique advertisers during the same period. We also published nine Business Pages directories, which are targeted at the business-to- business market, and which together contained approximately 31,000 advertisements on behalf of approximately 22,500 unique advertisers during our 2004 financial year. In total, our UK printed directories contained advertisements on behalf of 480,000 unique advertisers and contributed 50.0% of Group turnover during the 2004 financial year. Yellow Pages directories, excluding Business Pages, are delivered mainly to consumers and form part of our UK printed directories business. They are the only part of our business that is subject to specific price and other regulatory controls.

US printed directories. In the United States, through our publication of the Yellow Book directories, we are the leading independent publisher of classified directory advertising and according to industry sources, the fifth-largest overall publisher of classified directories based on Yellow Book turnover for the 2004 financial year. We served 41 states and Washington, DC during the same period. Yellow Book published 536 directories during our 2004 financial year.

Other products and services. Our other products and services, which contributed 3.5% of our Group turnover during the 2004 financial year, principally include:

Online services. Yell.com, our online products and service business, is the United Kingdoms leading online classified directory service; it offers comprehensive directory services and provides access to a database of approximately 1.7 million businesses. Users can also access our services on iDTV and through SMS messaging over mobile phones. Advertisers can

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document buy web links, template websites (including design and hosting), other online advertising products and services and domain names. We also offer online directory services in the United States through our Yellowbook.com site.

Yellow Pages 118 24 7. Yellow Pages 118 24 7 (formerly Talking Pages) is our 24-hour, telephone-based, operator- assisted service that provides up-to-date information throughout the United Kingdom on businesses and services through a single telephone number. Yellow Pages 118 24 7 had approximately 64,000 paying advertisers as at 31 March 2004.

Industry Overview

The following are important characteristics of the classified directories business:

Classified directories are a widely used and highly effective form of advertising. Classified directories are simple to use, and are frequently used by a wide variety of consumers and businesses to search for a broad range of products and services. Because most directory users have already made a decision to purchase, or at least are seriously considering purchasing, a product or service when they use a directory, we believe that classified directory advertising frequently has a higher probability of leading to a purchase than other traditional forms of advertising such as direct mail, telemarketing and television, and thus represents a cost- effective solution for advertisers.

Virtuous circle model. A key characteristic of the classified directories business is the virtuous circle model. In this model, the greater the number of advertisers that advertise in a directory, the more useful it becomes to users. Users refer to the directory more frequently in their search for a supplier, which in turn provides more leads, and therefore better value, to advertisers, who are thus encouraged to pay for more advertising. Publishers facilitate this process by promoting the use of directories, and brand reputation grows as a result, which in turn contributes to increased usage and advertising.

Valuable form of advertising for small and medium-sized businesses. Given the effectiveness and value for money of classified directory advertising compared to other forms of advertising, we believe that a large number of small and medium-sized businesses view classified directory advertising as a very valuable form of advertising which forms a significant part of their marketing budget.

High start-up costs. New entrants require significant investment to obtain up-to-date databases, recruit and train a sales force, build brand recognition, acquire an advertiser base sufficiently large to justify directory use, and acquire and operate the necessary infrastructure before they can viably offer a large-scale service.

Strong financial characteristics and resilience in an economic downturn. Given the characteristics described above, once successfully established, classified directories businesses, including Yells, have historically been characterised by strong cash flow generation, relatively low ongoing capital expenditure requirements after business start-up and a relatively stable advertiser base. In addition, given the importance of classified directory advertising to a broad and relatively stable base of small and medium-sized businesses and the low exposure of classified directory advertising to cyclical advertising, such as offers for employment, automotive sales and property sales, we believe that the classified directories business is more resilient to economic downturns than other forms of advertising.

We believe that the following industry trends are important in evaluating Yells growth potential:

Continued growth potential in the United Kingdom. The UK directories sector has experienced continuous growth during the past 10 years. We believe that the sector will continue to grow and that this growth will be driven primarily by increased volumes. Turnover growth in the sector is expected to be achieved as penetration among the potential advertiser base of small and medium- sized businesses increases, as existing advertisers increase their advertising spend on additional or larger advertisements, and as the result of the introduction of new product offerings.

High growth rates of independent yellow pages directories in the United States. Within the classified advertising market in the United States, the revenues of all telephone directory publishers were approximately $14.3 billion in 2003 and are forecast to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document continue to grow. These revenues are generated by the incumbent and recently sold directories divisions of telecommunications companies (85%), independent publishers (13%) and online publishers (around 2%). According to industry sources, US independent telephone directory revenues grew from $1.0 billion in 1998 (representing an 8% share of the overall US telephone directory sector) to $1.9 billion in 2003 (representing a 13% share). Within the printed sector, the independent segment is the faster growing and is forecast to grow at a compound rate of 9% a year to 2008.

Expanded revenue opportunities through advances in technology. Most participants in the classified directories industry have expanded beyond their traditional printed directories business and are delivering directory content and services through a broader range of media, including fixed and mobile internet and voice telephony. We expect that this trend will continue and that the directories market will grow as new media forms are introduced and improved, and as users become more familiar with these new technologies.

Increased opportunities for consolidation. We believe that the directories sector generally is fragmented in nature. For example, industry sources estimate that in the United States there were 265 yellow pages publishers in 2003. Further, there are telecommunications companies in Europe and the United States that have recently divested their classified directories businesses. As a result, we believe there is potential for further consolidation in the industry, notwithstanding the additional buyers pursuing acquisitions in this industry.

For a more detailed description of our competitive environment, see Information on the CompanyCompetition.

Products and Services

UK Printed Directories

UK printed directories contributed 50.0% to Group turnover in the 2004 financial year. The following table sets forth certain information regarding our Yellow Pages and Business Pages directories for the 2004 financial year:

Yellow Pages Business Pages

Directory editions(1) 90 9

Copies distributed (in millions) 28 2.2

Unique advertisers(2) 475,000 22,500

Advertisements(3) 1,133,000 31,000 (1) Number of editions that have been recognised for revenue purposes. (2) Number of unique advertisers in printed directories that were recognised for turnover purposes and have been billed. Unique advertisers are counted once only, regardless of the number of advertisements they purchase or the number of directories in which they advertise. (3) This number is not comparable with figures reported prior to 2003 due to an improvement in our systems that now allows us to count all advertisements accounted for in our directories. The resultant increase in numbers of advertisements is less than 3% above that which we would have reported had the system improvements not been made.

Yellow Pages Directories

Yellow Pages is a series of annual regional classified directories that list the name, address and telephone number of substantially all business telephone subscribers in the United Kingdom. The listings are currently organised into over 2,200 available classifications, with more than one classification potentially applicable to a business. We published 90 regional directories in the 2004 financial year, covering substantially the whole of the United Kingdom. Our Yellow Pages directories are used approximately 1.2 billion times each year, based upon an estimated average monthly usage of approximately 100 million.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Businesses are offered a free-line entry, which is a listing on a discretionary basis at no charge in the relevant edition of our Yellow Pages directories. The entry includes only the name, address and telephone number of the business, which is listed in alphabetical order in the relevant classification in a three-columns-to-a-page format. We maintain the information that forms the basis of these listings as part of our proprietary database, which is derived from raw data purchased in the United Kingdom from BT, which includes BTs and other telecommunications providers (Telcos) subscriber information and is supplemented with further information we obtain from our field sales and customer service employees. See OperationsCustomer Service and Credit Control.

A range of additional paid advertising options are available in our Yellow Pages directories, as follows:

Light-faced entriesAn additional line of contact information in standard text that appears underneath the free-line entry. It can be a web address, email address, mobile phone number or fax number.

Bold entriesAn advertisers name is printed in bold text and in a larger font than in free-line entries.

Semi-displayAn advertisers line entry is separated from surrounding entries in a box format, sometimes including limited additional information and logos.

DisplayA full display enables advertisers to include a wide range of information, illustrations and logos. The cost of display advertisements depends on the size and type of advertisement purchased. The following types of display advertisements are available:

Columncovers all or part of one of the three columns on a page. Part pagetwo or three columns wide, for greater prominence on the page.

Full pagecovers an entire page for greater prominence within a business classification.

White Knock-OutWe print our Yellow Pages directories using yellow ink on white paper to create the yellow background characteristic of our directories, as a more cost-effective and environmentally friendly alternative to printing on yellow paper. Businesses may pay to have all or a portion of their advertisement printed against a white background for increased visibility in contrast to surrounding advertisements that are printed against a yellow background.

ColourSince October 2001, we have offered a complete range of colour advertisement options in all of our published directories. All colour advertisements are priced at a premium to our normal advertisements and give advertisers even greater prominence on a page.

Bound insertsInclusion of a full-page, double-sided, heavyweight, full-colour insert that is bound inside the directory. These inserts enable advertisers to achieve prominence and increase the amount of information displayed to directory users. Technical considerations limit the number of bound inserts to approximately six per directory.

CoverPremium location advertisements are available on the inside and outside back covers and spines of Yellow Pages directories.

GuidesA range of unclassified advertising options within the Yellow Pages Guides such as the Late Night Guide and the Wedding Guide.

Branded FillersThe opportunity to display an advertiser logo in filler spaces that are generated at the pagination stage.

In addition, we sell artwork services to our directory advertisers in Yellow Pages.

Business Pages

In addition to our Yellow Pages directories, we published nine Business Pages directories in the 2004 financial year. We began publishing Business Pages directories in 1984. Business Pages is an annual classified business-to-business directory that carries the name, address and telephone number of selected businesses across all of England, Scotland and Wales together with information on general business topics such as security, office technology and taxation. The Business Pages directory is designed for businesses that supply goods and services to other businesses. Information on Business Pages advertisers is also available through Yell.com.

As with our consumer Yellow Pages directories, Business Pages offers free-line entries, bold entries and a range of display advertisements in approximately 1,430 available classifications.

US printed directories contributed 46.5% to Group turnover in the 2004 financial year. During the 2004 financial year, our US printed directories were published in 41 US states and Washington, DC under the Yellow Book brand with additional McLeod branding in the directories that we had acquired from McLeodUSA, in accordance with our prior trade dress agreement with McLeodUSA.

The following table sets forth certain information regarding our Yellow Book directories for the 2004 financial year:

Yellow Book

Directory editions 536

Copies distributed (in millions) 72

Unique advertisers(1) 386,000 (1) As a result of the progress in the United States towards integrating our customer database, we have been able to make improvements in the ways in which we capture, record and analyse customer information. This has led to a significant overall elimination of duplicate records of unique advertisers. We have not adjusted the previously reported 2003 figures for any duplicated records in 2003. These improvements have not affected the reporting of our financial results.

Our classified directories list the name, address and telephone numbers of business telephone subscribers in the geographic areas covered by our directories. The listings are currently organised into over 6,000 available classifications with more than one classification potentially applicable to a business. As is the case with our UK printed directories, businesses in the geographic areas covered by our directories are offered free-line entries at no charge.

Our US printed directories offer advertisers a range of paid advertisement types and sizes similar to those available in our UK printed directories. Advertisers may choose to buy bold text, semi-display, a range of display advertisements (including graphics) and/or premium- location advertisements on the spine and front and back covers of our directories.

Due to a more fragmented market, we believe that there is a much greater opportunity for the introduction of new directories and geographic expansion in the United States compared to the United Kingdom. The large number of US directory publishers could also provide further opportunity for acquisitions. Since we acquired Yellow Book in August 1999, we have pursued a strategy of rapid geographic expansion and we have launched 50 new directories to increase our geographic coverage in the United States. Significant directories launched include directories in the borough of Manhattan in New York City, metropolitan Boston and greater Chicago.

Historically, we have launched directories to cover new areas in two ways. Where we believe we can effectively do so we launch a new directory with paid advertisements, utilising our field sales and telesales employees. In areas where we do not have significant name recognition, where we do not have a nearby sales force or where there is significant competition, we may launch using a prototype directory in which we offer free advertisements in the first directory. Although we intend to continue geographic expansion through new directory launches, no prototype directories are currently forseen for the 2005 financial year.

The early Yellow Book directories on Long Island, New York, were community directories, generally with distribution of 25,000 or less. These continue to be published in this format. However, Yellow Books primary format today is the wide-area directory serving a county, suburban, or metropolitan area, in either a 3 or 4 column format. Most community directories in Florida have been re-scoped into the larger format. The decision to publish a directory in 3 or 4 column format is made on a case-by-case basis, depending on a number of factors, including the nature of the directory published by the local telephone operator, our view of the potential level of demand for advertising and our ability to offer advertisers and users a differentiated product.

Community directories. In the 2004 financial year, we published 78 community classified directories in Long Island, Florida and New Jersey. Our community directories consist of:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document a yellow classified directory section, which contains display advertisements in two columns and listings of businesses under approximately 6,000 available classifications;

a white pages section, which lists in alphabetical order the names, addresses and telephone numbers of businesses and individuals located in the geographic area covered by the directory;

a community information section, which includes maps and other reference information about general community services such as listings for government offices, schools and hospitals; and

coupons and advertising inserts.

Wide-area directories. In the 2004 financial year, we published 457 wide-area classified directories covering areas larger than our community directories.

Our wide-area directories have essentially the same format as our community directories with either three or four columns. Our larger directories do not include consumer white pages. In the 2004 financial year, 16 of our directories had a circulation greater than 500,000 and a further 43 had a circulation of between 250,000 and 500,000.

In addition to our consumer wide-area directories, we also publish one business-to-business directory serving the boroughs of Brooklyn and Queens, and Long Island, New York. The business-to-business directory consists of classified listings, alphabetical business listings on white pages, a business information section and a guide to the online business-to-business directory. First published in 1988, the business-to- business directory is generated from the proprietary database we developed based on the advertisers in our community directories, known businesses in the area and business suppliers identified through market research. We distributed approximately 240,000 copies of the business- to-business directory in the 2004 financial year.

The Acquisition and Integration of McLeod and NDC

We acquired McLeod, in April 2002. Through its third-party contract publishing business unit, Consolidated Communications Directories, Inc. (CCD), Yellow Book currently acts as the vendor and publisher of various directories for several small telephone companies across the United States. As a result of a lack of perceived attractive future growth potential, Yellow Book has decided to exit this business.

With the integration of McLeod and NDC, we have implemented a single management structure over all of our US printed directories. We believe that the integration of McLeod and NDC includes the following benefits:

improved sales force utilisation and management in contiguous or overlapping markets;

the ability to more effectively target national customers by offering a presence, at the time of the acquisition, in 39 US states and Washington, DC as opposed to 19 US states and Washington, DC;

significant cost savings through an improvement in volume discounts for general expenses, such as paper, pre-press costs and printing;

cost savings on the closure of one of three production sites;

the transfer of strengths and best practices such as improved marketing performance through the transfer of sales strengths and improved standardisation and process management in back-office and production systems through the adoption of McLeods processes; and

a broader base in the United States into which some of Yell UKs more sophisticated sales and production processes and technologies can be introduced, creating the possibility of a single customer service and production platform offering substantial economies of scale.

In connection with the McLeod acquisition, we entered into a publishing, branding and operating agreement with McLeods former parent companies. Under this agreement, we were obliged for a period of three years to publish the directories previously published by McLeod prior to its acquisition under McLeod trademarks, and also retain some aspects of McLeods trade dress. The trade dress of the directory cover is a black background with a yellow star in its centre; in the star is a map of the region covered by the directory; and the names of the towns and the directorys date, amongst other things, appear in specific colours in specific places on the cover and spine of the directory. This agreement has now been renegotiated, and Yellow Book is no longer obliged to publish directories under the McLeod trade dress. Instead, for no fee, McLeod receive a credit-card sized advertisement on the cover of each directory, up to four pages within the community section and advertising under various headings. See Additional Information - Material Contracts.

In March 2004 we acquired Feist, which we will integrate into Yellow Book as appropriate.

Other products or services contributed 3.5% to Group turnover in the 2004 financial year. In addition to our printed directories, we provided other associated products and services such as online services, Yellow Pages 118 24 7 and Service Call. During the

2003 financial year, we also provided direct marketing and database development services to businesses principally in the United Kingdom through our Yell Data business, which we sold in 2004.

Online Products and Services

In the United Kingdom, our online products and services are based on our internet site, Yell.com, which is designed to complement our off-line products and services. They include a directory search engine, web links, template websites (including design and hosting), other online advertising products and services and domain names. These products and services are designed to generate sales leads for our advertisers by enabling consumers and businesses to identify appropriate suppliers of goods and services and by facilitating contact.

The following table sets forth certain information regarding Yell.com:

March March March 2002 2003 2004

Yell.com page impressions per month (in millions) 33 39 67

Yell.com searchable advertisers(1) (in thousands) 56 75 103 (1) Unique customers with a live contract at month end. Figures refer to searchable advertisers only, i.e. advertisers who can be searched for by users on Yell.com. It excludes advertisers who purchase such products as banners and domain names.

Charges for our online services are currently largely based on annual fees or costs per thousand views. We currently generate most of our turnover for our online services from advertising, and in the future we expect increased revenue from those sources and from the development of other lead-generating services such as enhanced listings.

In the United States, we generate turnover from our Yellowbook.com website through selling templated advertisements, print directory advertisements online (INT), and banner advertising, mainly to existing printed directory customers for a monthly fee.

Yellow Pages 118 24 7

The Yellow Pages 118 24 7 phone service is our telephone-based, operator-assisted directory service that is available 24 hours a day, seven days a week. The service was launched on 3 March 2003, in connection with the deregulation of the UK directory enquiries market, to replace the Talking Pages service. Yellow Pages 118 24 7 provides up-to-date information on businesses and services throughout the United Kingdom through a single telephone number accessible from fixed and mobile lines in the United Kingdom. Yellow Pages 118 24 7 operators are able to access our Yellow Pages database and perform searches based on classifications, geographic locations and key words to identify businesses, shops and services that match criteria specified by the caller. The service also provides full business and residential listings as well as film and cinema information. Advertisers can update their information as frequently as they wish, giving them the ability to highlight special promotions, new services or changes in their business details.

As at 31 March 2004, we had approximately 1.9 million free-line entries for businesses on Yellow Pages 118 24 7 and approximately 64,000 paying advertisers whose information is given out on a preferential basis to the free-line entries. In the 2004 financial year, Yellow Pages 118 24 7, received over 3.9 million enquiries. Yellow Pages 118 24 7 provides a complementary information source for users of our printed and online products and services and, therefore, provides an additional source of sales leads for advertisers. As at 31 March 2004, approximately 51% of our Yellow Pages 118 24 7 advertisers also advertised in Yellow Pages.

Yell Data

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document As part of our ongoing strategy to focus on generating business leads for advertisers through connecting buyers and sellers, we decided to sell our Yell Data operation, which contributed £5.5 million in revenue during the 2003 financial year. As of 15 June 2003, we transferred our ownership of Yell Data to Experian, a major UK data services company. We have licensed Experian to use our data and certain trading names for a five year period.

Service Call

Service Call offers a telephone answering service in the United Kingdom to advertisers requiring 24-hour call-out facilities. The advertiser pays a flat monthly fee and an additional fee on a per-call basis to use Service Call.

Operations

Publishing Cycle

We publish our directories on a 12-month cycle and in general produce each directory once each year. The nature of the publishing process means that there is a long lead time between the first sales activity and final distribution of a directory.

SellingSales activity for a specific directory typically starts six months prior to publication. Our sales team focuses on a directory region and commences selling advertisements for the home directory of each advertiser as well as selling advertisements for all of our other directories. Utilising a canvass-based approach, they contact existing advertisers and encourage them to renew and increase their advertising programme and to purchase other products in our portfolio. At the same time they approach new business prospects and leads generated by our customer service group and by our marketing activities.

Book closureTwo months prior to publication, the sales activity for a particular directory is halted and the directory is considered to be closed. At this stage we continue to process orders, but the sales team does not actively sell advertisements. During this period we concentrate on amendments to sold advertisements.

Final closureOne month prior to publication the directory is finally closed. This is the deadline date for all amendments and cancellations. After this date all advertisements booked on or before this date will be published. As these dates are critical to the publication process they are clearly shown on our rate cards.

Pre-pressThe preparation, proofing and amendment of customer advertisements takes place throughout the sales process. When completed, directory content is finalised and directories are paginated.

Printing and distributionOn completion of the pre-press activities, printing, binding and poly-bagging of the directories commences. Distribution begins as soon as the first completed directories are produced and takes on average three weeks per directory.

Although we recognise our revenues for accounting purposes when each published directory has been delivered, the long lead time of the publishing process gives us early visibility of revenue flows. We monitor sales on a book-by-book basis and are able to forecast the performance of each directory early in the sales cycle. This allows us to make changes to the sales activity in a particular region in response to initial sales performance and allows more accurate forecasting of final revenue flows.

Marketing and Sales

We continually seek to increase both the number of advertisers and the number of users of our directories, with success in one area generating success in the other area in accordance with the virtuous circle model characteristic of our industry. Our marketing and sales activities include promotion of our brands, our direct sales activity and specific sales promotions.

Brand Awareness

We believe that the strength of our brands facilitates our ability to increase usage of our directories as well as increases our number of advertisers and the volume of advertisements our advertisers purchase.

We promote the Yell, Yellow Pages, Yellow Book, Yell.com and Yellowbook.com brand names and our other individual products through a variety of media, including television, newspapers, billboards, magazines, radio publicity and the internet. Our advertising

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document campaigns are designed to build brand awareness among users of our products and among advertisers that advertise in our directories. In the United Kingdom, in particular, we have a reputation for clever, amusing advertisements and have won numerous awards for our advertising campaigns.

In the United States, to capitalise on the extensive national footprint resulting from the acquisitions of McLeod and NDC during the last year, as well as Yellow Books continued organic growth, we launched a national advertising campaign on cable television. That campaign has succeeded in increasing brand awareness and in differentiating Yellow Book from its primary competitors in the minds of consumers and advertisers.

Sales Force

We currently have a sales force of more than 4,500 employees in the United Kingdom and the United States. We believe that this extensive sales force is both experienced and well trained and that it constitutes one of our key business resources. Our sales force is divided into three principal groups in both the United Kingdom and the United States:

Field sales focus on advertisers for new and repeat medium-sized and large advertisements in the United Kingdom. In the United States, we target most of our advertisers through our field sales force. All of our field sales force in the United Kingdom are equipped with laptop computers, which provide them access to up-to-date advertiser information and market data and enable them to assist advertisers in developing advertising programmes and designing their own advertisements. Our field sales force in the United Kingdom has access to a proprietary software application which allows them to design advertisements in the field. We expect that we will be well positioned in the future to adopt those practices and technologies used by the UK field sales force that would be appropriate for our US field sales force.

Telephone sales focus on new and repeat advertisers for smaller advertisements and represents our principal source of new advertisers in the United Kingdom. Historically, Yellow Book East has not maintained a significant telephone sales force. Yellow Book West has a more-established telephone sales force. In the future, we expect that telephone sales will be an increasing and cost-effective source of new advertisers in the United States.

National account sales in both the United Kingdom and the United States focus on larger businesses that place advertisements in multiple directories. We believe that we will attract more national accounts in the United States due to our increased geographic coverage resulting from the McLeod, NDC and Feist acquisitions.

Sales Channel Allocation

The table below sets out our information on the approximate proportion of accounts and turnover corresponding to each sales group during the 2004 financial year:

Proportion of Proportion of accounts turnover covered by generated by Number of respective respective Sales channel employees(1) sales channel sales channel (%) (%) United Kingdom Field sales 1,050 47.5 61.9

Telephone sales 662 51.5 10.1

National account sales 140 1.0 28.0

1,852 100.0 100.0

Telephone sales 163 14.3 3.3

National account sales 13 2.8 7.6

2,688 100.0 100.0

Total number of employees 4,540

(1) Approximate number at period end.

Each of these groups work together in a co-ordinated fashion within a region and focuses its efforts on a rotating basis on specific geographical areas based on the publishing cycles of directories within the region whilst focusing on our sales strategy of encouraging our existing advertisers to allocate more of their advertising budget to our products, of increasing the number of our products they use and of winning new advertisers and retaining new and existing advertisers. We continually review the structure of our sales force and re-allocate accounts to maximise both service and added value.

Given our experience that average turnover per advertiser generally increases with the duration of our advertiser relationship, we focus on promoting a stable sales force that will help build and maintain advertiser relationships. To that end, in the United Kingdom we pay our sales force largely on a fixed-salary basis with an open-ended element that is commission based. In the United States, we pay our sales force on a similar basis, but with a higher level of variable commission.

We believe that overall we have a loyal and mature sales force, as demonstrated by the fact that the average age of our sales force, including relevant management and support staff, in the United Kingdom is 35, with an average length of service of 4.8 years. The average age of our Yellow Book field sales force in the United States is 39 years, with an average length of service of 4.75 years.

In order to ensure that we maintain a competitive sales force, we seek to be very selective in recruiting from amongst the large number of applicants we consider, and our sales representatives undergo continual training programmes and have regular appraisals to ensure that they are able to give advertisers high-quality service and advice on appropriate advertising products and services.

Promotions

As part of our marketing and sales effort, we have also engaged from time to time in specific promotional initiatives. In April 2002, we introduced our Move In programme, which offers a discounted rate for one year on quarter-column display advertising and semi-display advertising. Also in April 2002 we introduced our Move Up programme, offering discounted rates for the take-up of larger display advertisements. In October 2003, we introduced our First Year Packages programme that offers discounted rates to existing customers about to enter their second year of advertising.

In the United States, Yellow Book offers a number of promotions to encourage advertisers to promote their businesses in additional headings and additional directories. The programs are geared towards driving content into advertisements that consumers will find useful when they are shopping for a product or service.

Customer Service and Credit Control

Our ability to retain and increase sales to existing advertisers and to increase our penetration amongst potential advertisers is substantially dependent on the quality of our customer service and the business records and databases we maintain. Our customer service groups, particularly in the United Kingdom, maintain and update our business records and databases by capturing data from lists purchased from Telcos and from our existing advertisers and potential advertisers. Our customer service groups enhance the raw data by contacting businesses, verifying the validity of the data and collecting further information about the business. They also generate sales leads for our sales force. We take the commercially available data and transform it into a proprietary database, which we then use as the basis for the majority of our products and services.

Our customer service groups in the United Kingdom also manage pre- and post-sales order processing, respond to advertiser enquiries, and provide information and support to our sales teams. In addition, our customer service groups monitor advertiser cancellations, requests for additional directories and advertisement errors, and determine the types and causes of errors.

Our customer service groups in the United Kingdom are also responsible for billing and collection. We continue to manage our exposure to bad debt through initial credit checking of new advertisers. Our credit check of new advertisers focuses on known areas of bad debt expense risk, such as certain directory classifications and levels of amounts spent. All new orders for existing advertisers are automatically checked for

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document outstanding debt prior to confirmation. Both internal and external data are used to arrive at a decision on whether or not to extend credit to an advertiser. Where doubts about an advertisers creditworthiness exist, we require the advertiser to pre-pay part or all of the value of its order.

Some of our bad debt may be written off through uncontrollable loss for a number of reasons such as liquidation, bankruptcy, voluntary arrangement and death. Our remaining bad debt arises when collection efforts are judged to be no longer viable or economical. See Item 3.D. Key InformationRisk FactorsOur business may be adversely affected by our reliance on, and our extension of credit to, small and medium- sized businesses.

Production, Pre-press and Printing

The following table sets out certain information regarding our publishing activities in the 2004 financial year:

Metric Printed directories Editions Copies tonnage(1) (in millions)

Yellow Pages 90 27.9 57,255

Business Pages 9 2.2 2,697

Yellow Book 536 72 119,024 (1) Metric tonnage is paper used in the production process. One tonne equals 2,200 lbs.

Pre-press

Pre-press activities include preparing the artwork, format and layout of advertisements, implementing customer amendments, proof reading and paginating the directories. At the end of the pre-press stage, directory pages are sent in digital format to the printers for printing. In the United Kingdom, we outsource most of our pre-press activities to Pindar Set Ltd., with whom we have maintained ongoing relations for nearly 20 years. Our operational contract with Pindar Set Ltd. for pre-press services commenced on 1 May 1995. Contract amendments are negotiated on an annual basis. In the United Kingdom, we also maintain a graphic arts studio for some pre-press services, currently employing approximately 64 full-time employees and six part-time employees to design display advertisements for our large advertisers. In the 2004 financial year, our graphic arts studio produced approximately 206,780 designs for advertisers. This includes speculative visuals used to support the recommendation of a new programme of advertising through to final artwork and amendments.

Historically, pre-press activity in the United States was either outsourced to a number of suppliers or worked in-house. Following a trial period, in order to improve our US pre-press capability, we entered into an agreement on 5 April 2002 to outsource our pre-press activities in the United States to Pindar Set Ltd. In January 2004 we completed the conversion known as the Business System Unification project which gives Yellow Book a common set of systems, across the business, to operate on a single integrated platform. Our contract with Pindar Set Ltd. has been extended and is now fully integrated across the business. The only exception to this is the recently acquired Feist business. Printing

Because of the large print volume and particular binding requirements, the printing of directories requires a high level of specialisation. We outsource our printing in the United Kingdom to RR Donnelley, who print and bind all of our Yellow Pages and Business Pages directories and with whom we have had a relationship for over 20 years. We entered into a new five-year contract with RR Donnelley (subsequently extended to eight years), which commenced in August 2001 and includes the printing of colour advertising. In the United States, we have entered into fixed, long-term contracts with our principal printers who are RR Donnelley and Quebecor Printing, Inc. These contracts run to 31 March 2007 and 31 December 2007, respectively.

Distribution

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document We typically aim to deliver our directories free of charge door-to-door to all of the residences and businesses in all of the geographical areas for which we produce directories. We currently outsource our directory distribution to four independent distribution companies in the United Kingdom pursuant to long- and short-term agreements. In the United States, 40% of distribution is outsourced to independent distribution companies pursuant to long and short-term agreements. The remaining 60% of distribution is handled internally in a highly automated distribution facility located on our Cedar Rapids, Iowa property. This facility organizes the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents routing, mapping, hand-delivery and mailing of directories and also works directly with the US Postal Service to ensure cost-effective mailing methods.

Paper Supplies

Paper is our largest raw material and one of our largest variable-cost items. In the 2004 financial year, we purchased approximately 178,976 tonnes of paper for our directories. Our principal paper suppliers in the United Kingdom are UPM-Kymmene, who provided over 90% of our paper requirements in the 2004 financial year. Our principal paper suppliers in the United States were Norske Skog Canada, Bulkley Dunton/Kruger and UPM-Kymmene, which together supplied over 90% of our paper requirements in the 2004 financial year. Our existing paper agreements with the three principal suppliers run until August 2004. From September 2004 we have contracted for the supply of paper from three different paper suppliers. 50% of our paper requirements will be provided by a US based supplier with whom we have a five year, fixed ceiling price contract. A further 40% of our paper requirements will be provided by a Finnish supplier with whom we have a three year, fixed ceiling price contract. The remaining 10% will be supplied by a Canadian supplier on contract until December 2005.

To realise economies of scale, we tend to concentrate our paper purchases with a small number of suppliers. To help limit our exposure to fluctuating paper purchase prices, we have fixed-price arrangements with our main suppliers. In the United Kingdom, the current maximum-price arrangement with UPM-Kymmene expires on 31 March 2007. See Item 3.D. Key InformationRisk FactorsIncreased paper prices may have a material adverse effect on our business.

We have worked with our printers in the United Kingdom to achieve reductions in the amount of paper wasted in the production process. The use of special typefaces and advanced pagination and production techniques, including digital formatting, coupled with effective wastepaper management, enables us to further optimise paper usage and costs in the United Kingdom.

Intellectual Property

We have made significant investments in our brand names and logos, including our Yellow Pages, Walking Fingers, Yell, Yell.com, Business Pages, Yellow Pages 118 24 7, Yellow Book, Yellowbook.com and Talking Pages brand names and logos. We currently use 139 trademark registrations in the United Kingdom, including Yell, Yell.com, Yellow Pages, Yellow Pages 118 24 7, Business Pages and the Walking Fingers logo. We have eight registered community trademarks which cover the European Union, and 12 pending community trademark applications. In addition, we have two registered trademarks in the United States and 5 trademark applications pending. This number excludes the brand name Yellow Pages and the Walking Fingers logo, which are generic terms in the United States and therefore in the public domain in the United States. We do not have exclusive rights to the Yellow Pages brand name, or its local-language equivalent, in any countries in which we might operate, other than the United Kingdom, (including Northern Ireland) and some of the former and current British territories overseas. We have registered over 1,000 internet domain names, of which we currently use 14 to connect to our websites in the United Kingdom, including Yell.com, which provides a link to Yellowbook.com.

We have registered the Yellow Book trademark in the United Kingdom and the European Union and have applied to register the mark in the United States. We cannot assure you that our applications for registration will be granted. However, we are actively pursuing our registration on the primary register.

We actively protect our brand names, internet domain names and logos in the countries in which we operate. For example, we have protested the use by third parties of certain internet domain names that include the words Business Pages, Yell, Yellow Pages and the number 118247. In doing so, we are from time to time obliged to bring legal proceedings against third parties in order to protect our intellectual property rights. See Item 3.D. Key InformationRisk FactorsThe loss of important intellectual property rights could adversely affect our competitiveness.

We are the proprietor of the database rights in the databases we have developed. As the proprietor of the database rights in our databases, we are entitled to prevent third parties from extracting or re-utilising all or a substantial part of the contents of our databases without our

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consent. In addition, we believe that we are the proprietor of the copyright in the databases we have developed to the extent that copyright subsists in them. As the proprietor of copyright in a database, we are entitled to prevent third parties from doing certain things, including copying the database, issuing copies of the database to the public or renting or lending the database to the public. In the United States, we also have copyrights in each edition of our directories.

We also own the copyright in software, artwork and literary work created by our employees during the course of their employment or assigned to us by contractors. We have also been assigned the trade dress that is displayed on the cover of the Yellow Book West directories, in accordance with the McLeod Branding Agreement.

Competition

We compete in the United Kingdom with other producers of classified and local advertising, such as Thomson directories, local, regional and national newspapers and classified advertising magazines, such as Exchange & Mart. As well, in early 2003 our former parent, BT started to include a classified advertising section within its telephone directory publications and to gradually change the life span of these directories from 18 months to 12 months. In the United Kingdom, our price-setting is constrained by price controls imposed under the terms of undertakings given to the UK Secretary of State for Trade and Industry in 1996, which were revised in 2001. Our competitors are not constrained by such undertakings. We sell our advertisements for printed directories on a fixed annual sales cycle and publish an advanced price list well before we publish a directory. In the United Kingdom, unlike in the United States, price differentials between classified directory publishers are not significant. We believe we are price competitive with other media.

In the United States, Yellow Book is the oldest and largest independent publisher of classified directories and we believe that we hold strong competitive positions in a number of markets in which we have published directories for several years. We are a relatively new entrant in many of the other areas in which we publish our directories, and we are seeking to establish our market position in these areas. We compete and may compete in the future primarily with telecommunication company publishers such as the Regional Bell Operating Companies, SBC, Verizon and BellSouth (the RBOCs), as well as recently divested directory publishing businesses, such as those previously belonging to Sprint and Qwest, both of whom have sold all or part of their directory businesses to private equity investors, and smaller independent publishers with aggressive growth strategies. These remain key competitors. We compete with these businesses on the basis of price and quality. Our prices are in general substantially lower than those of the RBOC publishers. In the United States, we are not subject to any government-imposed price restrictions.

In the United States, the relatively small size of the independent yellow pages publishers compared to the RBOCs has allowed them to compete on the time taken to bring a directory to the market and, particularly, on price. The following table compares prices charged by Yellow Book with prices charged by its main utility competitor in six areas:

Rate comparison: Incumbent vs Independent

Full-page Market mono rate (in dollars) New York Manhattan (Verizon) 90,191

Manhattan (Yellow Book) 41,064 North Carolina Charlotte (BellSouth) 60,156

Charlotte (Yellow Book) 25,956 Pennsylvania Pittsburgh (Verizon) 34,260

Columbia (Yellow Book) 13,920 Tennessee Jackson (BellSouth) 18,264

Jackson (Yellow Book) 6,840 Colorado Colorado Springs (Dex Media) 32,640

Colorado Springs (Yellow Book) 15,768

Source: Yellow Pages Integrated Media Association (YPIMA) (formerly known as YPPA), Rate and Data, May 2004.

The internet is an increasingly attractive medium for advertisers. Internet advertising enables companies to deliver messages to targeted audiences with specific demographics and interests. Although advertising on the internet still represents only a small part of total advertising turnover, we believe that as the internet grows it may become increasingly important as an advertising medium. We compete through our internet sites Yell.com and Yellowbook.com, with, amongst others, companies providing classified directory information over the internet, such as in the United Kingdom, to a greater or lesser extent, www.thomweb.co.uk, www.118500.com, www.kellysearch.com, www.fish4it.co.uk and in the United States, to a greater or lesser extent, www.smartpages.com (RBOC), www.dexonline.com, www.superpages.com (RBOC) and www.worldpages.com (independent publisher).

Regulation

The Group is subject to the regulations that apply generally to businesses in the countries in which we operate. We conduct most of our business in the United Kingdom and in the United States.

The following summary relates to those regulations in force that are material in the context of our principal business activities.

Competition Laws

UK Competition Laws

In the United Kingdom, the Secretary of State for Trade and Industry and the Director General of Fair Trading had power under the Fair Trading Act 1973 to investigate monopoly situations, which could occur when a company supplied or purchased 25% or more of all the goods or services of a particular description in the United Kingdom or a defined part of it, or when a group of companies, which together supplied or purchased 25% or more of all the goods or services of a particular description in the United Kingdom or a defined part of it, behaved in ways that adversely affected competition. If the UK Secretary of State for Trade and Industry or the Director General of Fair Trading considered that a monopoly situation may exist, he had the power to decide to refer the matter to the UK Competition Commission (formerly known as the Monopolies and Mergers Commission).

Since 20 June 2003, the provisions of the Fair Trading Act 1973 described above have been repealed and replaced with new provisions under the Enterprise Act 2002. These provisions, in general, remove or reduce the role of the Secretary of State from competition matters and replace the Director General of Fair Tradings functions with those of the Office of Fair Trading. By virtue of the Enterprise Act the Office of Fair Trading has become a corporate body and the Director General is now the chairman of the board of directors. From 20 June 2003 the Office of Fair Trading has power under the Enterprise Act to make a reference to the Competition Commission of any feature or features of a market in the United Kingdom which prevents, restricts or distorts competition in connection with the supply or acquisition of goods or services into the United Kingdom or a part thereof (market references). The Secretary of State also has the power to make references where she is not satisfied with a decision of the Office of Fair Trading not to make a market reference or she has brought to its attention information which she considers to be relevant but is not satisfied that the Office of Fair Trading will decide whether to make a reference within a period of time she considers to be reasonable.

In 1995, the UK Director General of Fair Trading asked the Monopolies and Mergers Commission under the Fair Trading Act to investigate and report on classified directory advertising services relating to directories that are distributed directly to consumers, predominantly free of charge in the United Kingdom. The publication of advertisements in voice-assisted services, such as our then Talking Pages, and online services, such as Yell.com, were excluded from the terms of reference of this investigation. The Monopolies and Mergers Commission concluded that BTs Yellow Pages division enjoyed a dominant situation in relation to the supply of printed consumer classified directory services in the United Kingdom. The Monopolies and Mergers Commission found that this dominant situation operated against the public interest in some respects, for example, in that the prices charged by BTs Yellow Pages division were higher than would have been the case in a competitive environment. Following the publication of the Monopolies and Mergers Commission Report in March 1996, BT gave undertakings to the Secretary of State for Trade and Industry in respect of its printed consumer classified directories, Yellow Pages. The

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Secretary of State requested that the Director General of Fair Trading report in three years time, or earlier if necessary, on the effectiveness of the undertakings.

The undertakings imposed a price cap on advertising rates, under which the prices which could be charged for advertising in our UK printed consumer classified directories could not increase by more than the annual change in the official UK RPI, minus a percentage determined by the Secretary of State for Trade and Industry. For directories published in the period from September 1996

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents until the end of December 2001, the maximum price increase in each annual edition of a Yellow Pages directory was fixed at RPI minus 2%.

In 2000, the Director General of Fair Trading announced he was conducting a review of the undertakings, with a view to making a recommendation to the Secretary of State for Trade and Industry as to whether the undertakings were still necessary, or whether they should be varied or superseded. Following this review, the Director General of Fair Trading recommended to the Secretary of State for Trade and Industry that the Group be required to amend the rates for its UK printed consumer classified directories in order to bring the return on sales from that business towards that which could, in his view, be expected in a competitive market and that, in order to do so by 2005, the Yell Group be required to cut those rates by 15% on 1 January 2002, and then by RPI minus 4% on 1 January 2003, 2004 and 2005. On 11 May 2001, the Office of Fair Trading announced that the Secretary of State for Trade and Industry had decided that the price cap should be RPI minus 6% every year for a period of four years for directories published from January 2002. This means, for example, that if inflation as measured by RPI is 2% at the time prices are set for given directories in each of the next four years, then advertisement prices would be reduced in absolute terms by 4% in each of the next four years and the prices in the fourth year would be approximately 15% lower than they are currently. We will only be able to increase prices in absolute terms if inflation exceeds 6% and our prices relative to inflation will continue to decline so long as the undertakings remain in effect. It should also be noted that the four-year period is entirely at the discretion of the Office of Fair Trading, which has the power to advance or delay a review and is likely to decide any future price controls.

Our subsidiary, Yell Limited, has signed a set of revised undertakings that it has given to the Secretary of State for Trade and Industry. The undertakings continue to operate, unchanged by the entry into force of the competition provisions of the Enterprise Act on 20 June 2003. In addition to the price cap, these revised undertakings (which affect only our UK printed directories business) require us to observe certain other conditions:

publication of a price list that covers all Yellow Pages directories and sets out the charges for advertisements, including any discounts;

a prohibition on publishing more than one printed consumer classified directory in each distribution area except as allowed in certain limited areas;

an obligation to prepare and make available financial statements in respect of the printed consumer classified directory business; and

a requirement that, if we publish new directories as a result of altering distribution areas, we must not, when calculating rates for the new directories, exceed prices determined with reference to a specified formula.

The revised undertakings, unlike those given in 1996, permit us, after two years, to publish local directories in areas where no other supplier operates and do not require us to obtain consent from the Director General of Fair Trading (whose functions since 20 June 2003 are carried out by the Office of Fair Trading) for withdrawal of discount schemes or changes in certain business practices, such as the introduction of new features.

We have a variety of measures in place to ensure compliance with the undertakings given to the Secretary of State and its other regulatory obligations. In particular, Yell regularly submits to the Office of Fair Trading a draft of the rate card for its Yellow Pages directories, to provide an opportunity for the Office of Fair Trading to verify before the rate card is released that Yells proposed rates comply with its undertakings. Once Yells rates have been set, Yells systems ensure that advertisements can only be sold at those rates. Yell is also required each year to prepare accounts for its UK printed directories business and to submit those accounts to the Office of Fair Trading. The Office of Fair Trading has never initiated any investigations (other than during its formal review of the undertakings in 2000-2001) concerning the Yell Groups compliance with any aspects of Yells undertakings. Compliance with Yells regulatory obligations more generally is assisted by the work of Yells regulatory compliance officer, who provides regular training to Yells employees regarding the regulatory obligations, and by procedures designed to ensure that all the Yell Groups business plans are developed taking into account the groups regulatory obligations.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In addition, in the United Kingdom we are required to comply with the UK Competition Act 1998, the main provisions of which came into force in March 2000. The UK Competition Act 1998 prohibits anti-competitive agreements and concerted practices which may affect trade within the United Kingdom and have as their object or effect the prevention, restriction or distortion of competition

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents within the United Kingdom or a substantial part of the United Kingdom. It also prohibits conduct that unilaterally, or jointly with others, amounts to the abuse of a dominant position in a market in the United Kingdom. Behaviour that the Office of Fair Trading Guidelines indicate might be abusive includes excessive prices, price and other discrimination, predation and the imposition of certain vertical restraints (such as exclusive purchasing or tie-in sales). Breaches of the UK Competition Act 1998 by a company could lead to fines of up to 10% of its worldwide revenue for the previous year, could result in directions by the Office of Fair Trading as to conduct (including the modification or termination of agreements), could result in claims for damages and additionally or alternatively could result in agreements found to be anti- competitive becoming void and unenforceable in whole or in part. Alongside these civil sanctions, the UK Enterprise Act 2002 introduced a criminal offence for participation in hardcore cartel activity. Directors found guilty of cartel participation can also be disqualified from acting as a director.

EU Competition Laws

Provisions similar to the provisions of the UK Competition Act 1998 apply under EU competition laws. Article 81 of the EU Treaty prohibits all agreements and concerted practices which have the object or effect of preventing, restricting or distorting competition within the common market and may affect trade between EU Member States. Article 82 of the EU Treaty prohibits the abuse of a dominant position by one or more businesses within the common market, or in a substantial part of it, insofar as the abuse may affect trade between EU Member States. Breaches of the EU competition rules could lead to fines of up to 10% of a companys worldwide turnover for the previous year, could result in claims for damages in national courts and additionally or alternatively could result in agreements found to be anti-competitive becoming void and unenforceable in whole or in part.

US Competition Laws

While there are competition and antitrust laws in the United States that prohibit anti-competitive practices, no restrictions have been imposed on our business in the United States, and we do not anticipate any such restrictions being imposed unless these laws change or the Yell Group grows substantially.

In the United States, our activities are subject to various competition and antitrust laws, including the Sherman Act, the Clayton Act and the Federal Trade Commission Act, all of which generally prohibit parties from engaging in anti-competitive activities that restrain trade, substantially lessen competition or tend to create a monopoly. At present, no restrictions under any of these laws have been imposed on our business activities in the United States. Future business activities of the Yell Group, including future acquisitions, will be subject to these laws, the violation of which can result in government enforcement actions which may seek fines, injunctive relief and/or imprisonment of individuals, as well as civil lawsuits which may seek damages and/or injunctive relief.

Data Protection

The Yell Groups ability to collect, use and process personal data of advertisers, users and employees is constrained by EU and UK legislation.

At the EU level, the Data Protection Directive (EC Directive 95/46/EC) and the Directive Concerning the processing of personal data and the protection of privacy in the telecommunications sector (C2002/58/EC) set out the underlying requirements for processing personal data within the European Union. In the United Kingdom, personal data are data relating to living individuals who can be identified from those data or from those data and other information available to the person processing the data. Persons whose personal data are processed in the European Union have several rights, including the right of access to their personal data, the right to recourse in the event of unlawful processing of personal data and the right to withhold permission for the use of their personal data for direct marketing.

In the United Kingdom, the Data Protection Act 1998, the main provisions of which came into force on 1 March 2000, affects the Yell Groups activities. The Data Protection Act 1998 provides that personal data must be: (1) processed fairly and lawfully, usually with the consent of the data subject; (2) obtained only for specified and lawful purposes; (3) adequate, relevant and not excessive in relation to those

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document purposes; (4) accurate; (5) not kept longer than is necessary for those purposes; (6) processed in accordance with the data subjects rights; (7) protected against accidental loss or destruction by measures appropriate to the sensitivity of the data concerned and the harm that might result from that loss or destruction; and (8) not transferred to countries without adequate protection.

The Data Protection Act 1998 impacts on our activities to the extent that it deals with data relating to identifiable living individuals. Although our activities relate primarily to printed directories of business information, rather than to individual or personal data, we also process data concerning individuals, such as sole traders, partnerships, individual users and employees. We must also comply with requirements relating to a data subjects rights of access to personal information we hold and, if the requisite consent from the data subject has not been secured, the Group must take steps to prevent the use of such data for the purposes of direct marketing.

The Data Protection Act 1998 also requires that personal data must not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects or an exemption applies. In this context, the European Commission has determined that an arrangement put in place by the US Department of Commerce, under which US companies can voluntarily adhere to a set of data protection principles recognised by the European Commission, provides adequate protection for personal data transferred from the European Union to such US companies.

We continue to monitor our data protection practices and will continue to evaluate potential improvements or changes to our practices and policies. To the extent we make or are required to make further changes to our compliance procedures, we may be required to incur additional costs, which may be significant.

If the Data Protection Act 1998 is breached, a violator may be subject to a regulatory enforcement action. Failure to comply with an enforcement order or to co-operate with the Data Protection Registrar in this regard is a criminal offence. A breach may also render the violator liable to pay compensation if any individual suffers damage or, in certain circumstances, distress.

Under the Directive Concerning the processing of personal data and the protection of privacy in the electronic communications sector (2002/58/EC), the European Union introduced new rules on data protection regarding the processing of personal data and the protection of privacy in the electronic communications sector. This Directive repeals the earlier Directive 97/66/EC of the same name and is implemented into UK law by the Privacy and Electronic Communications (EC Directive) Regulations 2003.

Under this Directive, directory publishers obliged to obtain the consent of a subscriber to a publicly available electronic communications service in order to process traffic data relating to that subscribers use of electronic communications and data relating to that subscribers location. This the case whether the subscriber is an individual or an entity such as a company. Consent will also be required in order to send unsolicited electronic communications, including e-mail, for direct-marketing purposes to an individual. Received opinion is that provisions may also apply to sending emails to individuals in a business context which could have an impact on our business if we sought to increase our levels of internet marketing. Subscribers who are natural persons, as referred to in Article 12 of the Directive, have a right to be informed about usage possibilities based on search functions in electronic versions of directories. The costs of compliance with the Directive currently are not substantial as we do not currently undertake or expect to undertake many of the activities covered by the new provisions contained in the Directive and, in so far as these new provisions do apply, our existing business practices are largely compliant with them.

Protection of Databases

The Yell Groups business uses a number of databases, both licensed to it and developed by it. For further information see Item 4.D. Property, Plant and EquipmentInformation Systems. Directive 96/9/EC harmonises the laws of EU Member States relating to the protection of copyright in databases and introduces a specific right to prevent extraction and re-utilisation of the contents of a database. The Copyrights and Rights in Databases Regulations 1997 have implemented Directive 96/9/EC in UK law. These regulations provide a right for the maker of a database in which there has been a substantial investment in obtaining, verifying or presenting database content, to prevent extraction and re-utilisation of the whole or a substantial part of a database.

Database rights subsist in all databases completed on or after 1 January 1983, provided there has been substantial investment. Under the Directive and the Regulations, where a company has database rights in a database and the database was completed before 1 January 1998, these database rights subsist for a period of 15 years commencing 1 January 1998 or, if the database was completed on or after 1 January

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1998, for a period of 15 years from the end of the calendar year in which the database was completed. However, if there is a substantial change to the contents of the database after its compilation such that the resulting database would be

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents considered to be a substantially new investment, in terms of the quantity or quality or a combination of both, then the database rights in that database will subsist for a period of 15 years from the date on which the substantially new investment was made. We are continually updating our databases and believe that we have made sufficient investment since 1 January 1983 in obtaining, verifying and presenting the data in its databases for database rights to subsist in them.

In addition, we believe that we are the proprietor of the copyright in the databases we have developed to the extent that copyright subsists in them. In the United Kingdom, to the extent that copyright does not subsist in any of our proprietary databases, our rights in these databases are protected as confidential information and/or under database rights. Any copyright in our databases will subsist in those databases for a period of 50 years from the end of the calendar year in which the database was created, if the database was computer generated, or 70 years from the end of the calendar year in which the last person responsible for creating the database died, if the database was not computer generated. In the United States, we have developed one proprietary database, in which we believe we have copyright protection subject to the limitations of our license agreements with US Telcos. Copyright in this database will subsist for a period of 95 years from the year of first publication or 120 years from the year of creation, whichever period is shorter. As the proprietor of copyright in a database, we are entitled to prevent third parties from doing certain things, including copying the database, issuing copies of the database to the public or renting or lending the database to the public. In the United States, we also have copyrights in each edition of its directories.

Advertising

Our principal activity is the sale of advertising in, and the preparation and publication of, our classified directories. As with other publishers of advertisements, we are subject to advertising laws and regulations. The Advertising Standards Authority has also produced a code of conduct for advertising in the United Kingdom. Although this code of conduct does not have the force of law, failure to comply with its directions can result in soft sanctions such as naming the offending company publicly. Under EU directives, UK regulations and general UK advertising industry standards, we could be required to cease publishing any misleading advertisements which our advertisers may have placed in our directories. Further, in the United Kingdom, specific rules, broadly intended to ensure that consumers are protected, apply to publishers of particular types of advertisements, such as advertisements for financial services under the terms of the Financial Services and Markets Act 2000, or advertisements offering consumer credit under the terms of the Consumer Credit (Advertisements) Regulations 1989. Some of these specific rules are enforced by criminal sanctions.

We have put in place extensive programmes and procedures designed to ensure that we comply with the advertising laws and regulations that impact on our operations. We have internal advertisement compliance policies that our employees and advertisers are required to follow. Our internal advertisement compliance policies contain details of the legal requirements that apply to advertising. In specific sectors we take particular care: for example, we check and require that advertisements include any prescribed warnings; and we obtain written confirmation that investment business advertisers are regulated by their relevant regulatory body.

Telecommunications

The UK government has established a new regime for the regulation of electronic communications under four EU Communications Directives which were implemented in the United Kingdom by provisions of the Communications Act 2003 (the Act) which came into force on 25 July 2003.

In the United Kingdom, the Act has had an impact on our telecommunications services such as Yellow Pages 118 24 7 as it abolished current licences and replaced them with a number of general conditions (very similar to the old licence regime) that apply to operators of electronic communications networks and the service providers that use them. These conditions are set in the United Kingdom by the industry regulator, the Office of Communications. Our Yellow Pages 118 24 7 services currently comply with these conditions.

In certain circumstances additional specific obligations may apply to those undertakings found by the UK Office of Communications to have Significant Market Power (as defined in The Communications Act 2003) in certain specified markets. The Group does not believe it is likely that it will be found to have Significant Market Power in any of these markets.

Internet Regulation and E-commerce

The internet has emerged as an attractive new medium for advertisers. Internet advertising allows companies to deliver messages to targeted audiences with specific demographics and interests. Although advertising on the internet still represents only a small part of total advertising revenues in Europe, we believe that as the internet grows it will become increasingly important as an advertising medium. We offer internet-based products and services in addition to printed consumer classified directories. General advertising laws and regulations and data protection legislation apply to our internet-based activities in the same way in which they apply to our activities generally. As our business in this area develops, specific laws relating to the provision of internet services and to the use of the internet and of internet-related applications may become relevant. Regulation of the internet and internet-related services is itself still developing, both formally by, for instance, statutory regulation, and also less formally by such methods as industry self-regulation.

Depending on the scope and timing of these developments, they could have a material impact on our internet operations. The main issues are set out below.

Content Regulation and Content Liability

We publish third-party content on our website, in the form of content and links to advertisers websites. We intend to develop our content offerings. Future internet content regulation, such as any measures that may be adopted by the European Union under the Safer Internet Action Plan, and the possibility of service provider liability for information distributed over the internet or contained on websites hosted by such a provider, may become relevant to our business.

Internet Domain Names

A domain name is part of a websites internet address. The current system for registering, allocating and managing internet domain names has given rise to litigation, including trademark litigation, since internet domain names are allocated in many countries on a first-come, first-served basis to any person who requests that allocation, whether or not a third party owns the rights to a trademark incorporated in that domain name.

Abusive registrations of internet domain names may be subject to cancellation or transfer to a trademark proprietor where, amongst other things, a domain name registrant has been found to have registered the domain name in bad faith. Most domain name administrators have a dispute resolution policy in place for dealing with abusive registrations of internet domain names. For example, ICANN, the organisation that coordinates generic top-level domains, including .com, requires all generic top-level domain name registrants to submit to a Uniform Domain Name Dispute Resolution Policy. In the event that a trademark proprietor alleges that the domain name registrant has abusively registered a domain name, the trademark proprietor may select an arbitrator from a panel of arbitral bodies available under the domain name resolution policy which includes the World Intellectual Property Organisation. In the event that the arbitrators decide that the domain name has been abusively registered, ICANN will cancel the domain name registration and/or transfer it to the trademark proprietor.

We have registered a large number of internet domain names, both on our own behalf and for our advertisers, in the United Kingdom and internationally, including Yell.com and Yell.co.uk. All of our domain name registrations are composed of words in which we have registered or unregistered trademark rights in one or more jurisdictions around the world. Consequently, we do not consider any of our domain name registrations to have been made abusively. We are not aware of any challenges to our domain name registrations under ICANNs Uniform Domain Name Dispute Resolution Policy or any similar policy offered by other domain name administrators.

E-commerce and Electronic Signatures

In addition to providing an attractive new advertising medium, the internet has begun to have an impact on the way consumers and businesses buy and sell goods and services. The internet allows sellers to reach a vast global audience and enables buyers to benefit from increased product information and price comparison power. We conduct intermediary e-commerce activities by renting

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents hyperlinks on our Yell.com internet site to external online retailers, and we may expand our offering of online products and services in the future.

At the EU level, Directive 2000/31/EC (the E-Commerce Directive), is part of a Europe-wide initiative to promote e-commerce. This has now been implemented in the United Kingdom. Currently in the United Kingdom, the Electronic Communications Act 2000 creates a legal framework for e-commerce and the use of technology. Directive 1999/93/EC provides a European Community framework for electronic signatures and was adopted on 13 December 1999. It was implemented in the United Kingdom as the Electronic Signature Regulations 2002, which came into force on 8 March 2002.

These legislative measures set up a framework for legal recognition of electronic contracts and electronic signatures. Under the terms of the E-Commerce Directive, generally, service providers are subject to the laws of the country in which they are established. Further, of particular relevance to our business are those provisions in the E-Commerce Directive that provide that advertising must be identifiable clearly and unambiguously as such as soon as it is received.

Consumer Credit

Yell Limited has a licence from the Office of Fair Trading to conduct regulated consumer credit business. Regulated Credit Agreements are written by Yell Limited in respect of instalment payments made by individuals, partnerships and unincorporated associations that place advertisements in our publications. Procedures are in place to ensure that the agreements used are prepared and executed in compliance with the Consumer Credit Act 1974. Breaches of the detailed requirements of the Consumer Credit Act 1974 may lead to the agreements in question being unenforceable without a court order or, in some instances, totally unenforceable. Should the Office of Fair Trading at any time determine that Yell Limited is no longer a fit and proper person to hold the licence, the licence may be revoked, preventing Yell Limited from writing any further, or administering our existing agreements. Certain specific rules under the Consumer Credit Act 1974 are reinforced by criminal sanctions.

C. Organizational Structure

The principal subsidiaries of the Company are as follows:

Class of share capital Name and country of (issued and Proportion of incorporation Registered office fully paid) share capital Nature of business Yell Limited (England) Queens Walk, 73 ordinary 100% (indirect) classified directory Oxford Road, shares of publisher Reading, Berkshire £1 each RG1 7PT Yellow Pages Sales Limited Queens Walk, 2 ordinary shares of £1 100% (indirect) provision of sales (England) Oxford Road, each services Reading, Berkshire RG1 7PT Yellow Book USA, Inc. 193 EAB Plaza 500 shares of 100% (indirect) classified directory (Delaware, US) Uniondale, common stock of publisher New York $0.01 each 11556-0193 Yellow Pages Limited Queens Walk, 81 ordinary shares of £1 100% (direct) intermediate holding (England) Oxford Road, each company Reading, Berkshire RG1 7PT

D. Property, Plant and Equipment

Property

We operate from 39 leasehold properties in the United Kingdom, in each case, held on rack rent full repairing leases. Legal title to two of the properties, including one of the Yell Groups principal establishments, 54, Hagley Road, Birmingham, is not yet vested in the Yell Group. The landlord has consented to the assignment but the assignment has not to date been completed. A number of these leases will come to the end of their contractual term within the next five years and consequently there may be a financial burden with regard to potential dilapidations claims by the relevant landlord in relation to these leases. In addition, the Group may have contingent liabilities under leases previously held but which have been assigned. The annual rent in respect of a number of these leases are currently under review or are due to be reviewed in the next year and consequently rental liabilities may increase in the immediate future. In the United States, we operate from over 300 locations.

No property of the Yell Group accounts for 10% or more of the Yell Groups net turnover. Details of the Groups registered office and principal places of business are as follows:

Approximate Location Tenure Rent Term floor area Yellow Pages House, Queens Walk, leasehold £1,165,500 p.a. 25 years expiring 70,000 sq.ft Reading, England 24 March 2009 First and Second Floors, leasehold £920,000 p.a. 24 and 25 years 55,000 sq.ft Bridge Street, each expiring Reading, England 24 December 2012

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Directories House, leasehold £1,530,000 p.a. 25 years expiring 56,659 sq.ft Wellington Street, 24 March 2015 Slough, England Second and Fourth Floors, leasehold £376,399 p.a. 10 years expiring 33,922 sq.ft Whitefriars, Lewins Mead, 31 December 2008 Bristol, England

Approximate Location Tenure Rent Term floor area Ground, Fourth and Part Fourth leasehold £259,470 p.a. 25 years expiring 23,112 sq.ft Floor, Jackson House, Sale, 31 August 2005, Cheshire, England (together with revisionary lease for fourth floor expiring 12 November 2011) and 10 years expiring 12 November 2011 Parts of Eighth, Twelfth, leasehold £181,125 p.a. 25 years expiring 25,766 sq.ft Thirteenth and Fourteenth Floors, 25 August 2005 Edgbaston House, Duchess Place, Birmingham, England Block C, 54 Hagley Road, leasehold £306,600 p.a. 25 years expiring 23,956 sq.ft Birmingham, England 23 June 2005 and 20 March 2013 (together with reversionary leases for the seventh, eighth and twelfth floors for terms of 24 June 2005 to 20 March 2013) Sixth, Seventh, Eight, and Ninth floors leasehold £458,769 p.a. 15 years and 9 20,966 sq.ft months expiring 180 St Vincent Street 28 February 2018 Glasgow, Scotland Fourth Floor leasehold £124,700 p.a. 18 years and 5 5,800 sq.ft months expiring 29 180 St Vincent Street May 2017

Glasgow, Scotland Fourteenth, Fifteenth, Sixteenth and leasehold £379,728 p.a. 15 years expiring 21,096 sq.ft Seventeenth floors from 22 February 2019 25 August 2004 Quayside Tower Broad Street Birmingham BH1 2HF 2004 Renaissance Blvd, King of leasehold $669,515 p.a. 10 years expiring 28,490 sq.ft Prussia, Pennsylvania, USA 31 January 2011 2008 Renaissance Blvd, King of leasehold $185,215 p.a. 5 years expiring 10,860 sq.ft Prussia, Pennsylvania, USA 30 April 2009

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2540 Renaissance Blvd, King of leasehold $227,844 p.a. 5 years expiring 14,700 sq.ft Prussia, Pennsylvania, USA 31 May 2008 2560 Renaissance Blvd, King of leasehold $878,829 p.a. 10 years expiring 35,000 sq.ft Prussia, Pennsylvania, USA 30 April 2010 193 EAB Plaza, Uniondale, leasehold $953,247 p.a. 5 years expiring 30,375 sq.ft New York, USA 31 January 2007 Cedar Rapids, IA-Tech Park and freehold N/A N/A 215,000 sq.ft IA Distribution, 6300 C Street SW, Cedar Rapids IA 52406, USA 2201 Willenborg Avenue, leasehold $649,716 p.a. expires 15 April 56,520 sq.ft Effingham, IL 62401, USA 2009

Approximate Location Tenure Rent Term floor area 3020 North Cypress leasehold $318,000 10 years 18,000 Suite 200 Wichita, Kansas p.a. expiring sq.ft/ 67226, USA 30 July 2010 316 Main Street owned n/a n/a 8,000 Spearville, Kansas 67876, sq.ft. USA 4314 South Loop 289 owned n/a n/a 15,000 Suite 100 Lubbock, Texas sq.ft. 79413, USA 4045 Northwest 64th leasehold $123,000 10 years 12,000 Street p.a. expiring sq.ft. Suite 400 30 Oklahoma City, September Oklahoma 73116, USA 2010 4210 Shawnee Mission leasehold $165,000 10 years 10,000 Parkway p.a. expiring sq.ft. Suite 400A Fairway, 28 Kansas 66205, USA February 2005

Information Systems

Our key business processes are highly automated, and we believe that our information systems are key operational and management assets. Our information systems are an integral part of our business processes and support systems and we use them to help sell and deliver our products, and to maintain our databases.

Our advertiser database enables us to identify market potential and allocate advertisers to appropriate sales channels, develop sales campaigns and compile advertiser data for use by our sales force. In the United Kingdom, our field sales force is equipped to allow remote working and reduced travel downtime. Their equipment includes standard templates to enable sales consultants to assist advertisers to design their own advertisements. We have developed specialised proprietary applications for market analysis as well as to support our telephone sales and field sales forces. For example, we have developed a sophisticated application for analysing the advertiser base and developing sales strategies for each directory area.

We have developed advanced systems to support our business processes. We operate wide-area networks in the United Kingdom and the United States to provide nationwide access to data. In the United Kingdom, we have direct data links with our pre-press supplier. In the United Kingdom, we have implemented management information systems provided by SAP for management accounting, human resources, core sales order processing, customer services and billing activities. Our total storage capability in the UK is over 100 terabytes. Our Information Services department has over 200 employees.

In the United States, our storage capacity is over 25 terabytes and our Information Technology Department has over 130 employees. We use DIAD, Clipper and PagEntry as our standard production system and Lawson as our platform for accounting and human resources. The McLeod and NDC acquisitions have now been integrated onto that standard platform. The recent Feist acquisition runs on a proprietary AS400/Miles 33 system and remains the only area of the business not operating on our standard platform.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document We expect to continue to undertake significant expenditures in developing and integrating our information systems in the future to support continuing operational efficiencies within the Group. In the United Kingdom, we have developed significant expertise in the development and implementation of our information systems and we intend to facilitate development of our US systems by transferring this expertise on a project-by-project basis.

Environment

In both the United Kingdom and the United States, we actively seek to minimise the impact of the production of our directories on the environment. In particular, we have been increasing the percentage of recycled paper fibre used in our printed directories. All of the new paper for the production of Yellow Pages and Business Pages is sourced from sustainable forestry and our paper suppliers are registered with The Finnish Forest Certification Scheme which is endorsed by the Pan European Forest Certification Council (PEFC). In the United States we are working with our suppliers to ensure we use sustainable forestry. We work closely with our pre-press and printing suppliers to minimise paper wastage in our directory production process and have successfully reduced wastage to very low industry-leading levels. In the 2004 financial year, the recycled fibre content of our UK Yellow Pages directories was approximately 48%. We actively promote the collection and recycling of used directories in the United Kingdom through links with, and by providing financial support to, local authorities. In the United States, we have partnered with earth 911, an environmental information network, to provide community-specific recycling. Our activities in the United Kingdom are registered to ISO 14001, the environmental standard of the International Standards Organisation.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A. Operating Results

The following information should be read in conjunction with the audited financial statements for the Yell Group. The financial statements have been prepared in accordance with generally accepted accounting principles in the United Kingdom (UK GAAP). UK GAAP differs in certain important respects from generally accepted accounting principles in the United States (US GAAP). See the reconciliation of UK GAAP to US GAAP in note 27.

Factors Affecting Results of Operations

Group Turnover

We are the leading provider of classified directory advertising and associated products and services in the United Kingdom and the leading independent provider of classified directory advertising in the United States. We currently derive our turnover principally from sales of advertisements in our printed directories, Yellow Pages, Yellow Book East, Yellow Book West (from 16 April 2002), NDC (included in Yellow Book West from 31 December 2002) and Business Pages. We also generate turnover from online-related activities such as online advertising, website design and domain-name sales and from Yellow Pages 118 24 7. Our sales and publishing cycle requires us to agree to an advertising sale often months in advance of the actual delivery of the directories and recognition of the corresponding revenues. Therefore, we have better visibility of our expected near-term financial results than might otherwise be the case.

We recognise turnover from advertisement sales for a printed directory when we have completed delivery of that directory, in accordance with UK GAAP. Because the number and type of directories are not evenly distributed throughout the year, turnover and profits do not arise evenly over the year. Therefore, certain periods have higher-than-average levels of turnover and profits, while others have lower- than-average levels. For example, during our 2004 financial year, the four financial quarters accounted for 22%, 26%, 23% and 29% of Group turnover, respectively. Different directories may grow at different rates, such that growth may not be evenly distributed between quarters. The re-phasing or timing of distribution into an earlier or later period also affects the quarterly distribution of turnover. By the same token, our sales and publishing cycle requires us to agree to an advertising sale often months in advance of the actual delivery of the directories and recognition of the corresponding revenues, and hence provides better visibility of our expected near-term financial results than might otherwise be the case. We recognise turnover from non-printed directories and other activities over the life of the contract from the point at which the service is first provided or, in the case of a single delivery, at the time of delivery.

Growth in our turnover is driven primarily by the volume of advertisement sales to new and existing advertisers and by new product offerings. In the United States, we have also experienced growth in turnover as a result of acquisitions of other independent directory publishers and new printed directory launches.

Our ability to increase turnover in the United Kingdom during most of the period under review was limited by the undertakings given to the UK Secretary of State for Trade and Industry in 2001, under which, from January 2002 we were required to limit the annual growth in advertising rates in our UK printed Yellow Pages directories to RPI less 6%, for an expected period of four years. This has restricted our ability to raise prices on advertisements within our printed Yellow Pages directories in the United Kingdom.

When RPI is less than 6%, this new price cap requires us to reduce the price in absolute terms that we can charge our advertisers for placing advertisements in our UK printed consumer classified directories. Relative to inflation, our prices will decrease each year that the price cap remains in effect. For example, if inflation as measured by RPI were 2% at the time prices are set for given directories in each of the four years commencing January 2002, then advertisement prices would be reduced in absolute terms by 4% each year, and the prices in the fourth year would be approximately 15% lower than they were when the new price cap took effect. During our 2004 financial year, the average price of advertising in our Yellow Pages directories decreased by 4.8%, as compared to a decrease of 4.4% during our 2003 financial year. We are not subject to any regulatory price constraints in the United States.

In the 2004 financial year, approximately 49% of our Group turnover was affected by a price cap, as compared to 50% during the 2003 financial year and 60% during the 2002 financial year. In the 2004 financial year, 53% of our turnover came from UK operations compared with 55% in the 2003 financial year.

Cost of Sales

Our cost of sales consists principally of costs associated with the publication of directories, including advertising sales, paper, printing and pre-press production, as well as bad debt expense. The principal components of advertising sales costs, which represent a significant portion of our cost of sales, are employee costs of the sales force, including salaries, benefits and commissions, and associated direct costs. We recognise the cost of sales for each directory on completion of delivery of that directory.

We anticipate that cost of sales will increase as we expand and introduce new directories and other products. Our expansion into new markets in the United States also increases our employee costs. In addition to requiring a larger sales force, the commissions we pay to our sales force tend to be higher in new markets, as our commission structure pays higher remuneration for new advertisers.

Paper is our largest raw material and one of our largest variable-cost items. In recent years paper prices have fluctuated significantly. In the 2004 financial year, paper costs were equivalent to 6.7% of Group turnover and represented 11.5% of our total cost of sales in the United Kingdom and 16.5% of our total cost of sales in the United States.

Cost of sales also includes bad debt expense. Our UK business currently has low bad debt expense relative to our US business due to our established market position in the United Kingdom. Our Yellow Book directories business operates in a number of markets in which we are a relatively new entrant, and as a result a higher proportion of our advertisers are new advertisers, a category in which historically we have intentionally allowed a higher rate of bad debts. We believe that the benefits of our growth strategy in the United States outweigh any risks associated with the credit profile of our advertisers, and over time, as our newer directories become more established in their respective markets, we expect that bad debt expense as a percentage of turnover in the United States will decrease. Nevertheless, because we expect to continue our growth strategy in the future, we expect our bad debt expense as a percentage of turnover in the United States to remain higher than in the United Kingdom.

Distribution Costs and Administrative Costs

Our distribution costs consist principally of amounts payable to third-party delivery companies with which we contract for the delivery of our printed directories. Our distribution costs related to a directory are recognised when the directory is delivered.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Our administrative costs consist principally of amortisation and depreciation, advertising, promotion and marketing expenses, administrative staff expenses, information technology costs and staff training. Advertising, promotion and marketing expenses represent our most significant discretionary expenses.

A substantial portion of our advertising, promotion and marketing expenses and the costs relating to the development of our online services relate to promotional and brand-building expenditures, which are largely discretionary and which we can reduce if we determine at any stage that the business environment does not justify the related expenditure.

Gross Profit Margins

The change of the geographic mix of our business, as well as the strategy we have pursued of rapid growth and geographic expansion of our business in the United States, has had an important effect on our financial results during the periods under review, including our profit margins. These factors are expected to continue affecting our financial results in the future.

Our printed directories business in the United Kingdom, which we view as more developed and which covers substantially all of the United Kingdom, has historically had higher gross profit margins than those in the United States.

In the United States, the different market dynamics and the younger portfolio result in lower gross profit margin. In the 2004 financial year, for example, our gross profit margin for our UK printed directories was 62.1%, compared to 43.4% for our US printed directories. Our overall gross profit margin is therefore affected and will continue to be affected to the extent our US operations continue to form an increasing portion of the geographic mix of our business.

We intend to increase our focus on enhancing our operating efficiencies and organic growth in the United States, and we believe there will be opportunities to improve our US gross profit margins as our US operations become more established.

Year Ended 31 March 2004 Compared to Year Ended 31 March 2003

Group Turnover

Year ended 31 March Year ended 31 March 2003 2004 (£ in (£ in millions) (%)(2) millions) (%)(2)

UK printed directories 573.7 51.5 593.9 50.0

Other UK products and services 41.2 3.7 41.0 3.5

Total UK turnover 614.9 55.2 634.9 53.5

US printed directories:

US printed directories at constant exchange rate(1) 499.1 44.8 605.0 51.0

Exchange impact(1) (53.0 ) (4.5 )

Total US turnover 499.1 44.8 552.0 46.5

(1) Constant exchange rate states the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at a constant exchange rate and the actual results reported using current year exchange rates. (2) The percentage of total group turnover.

Group turnover increased by £72.9 million, or 6.5%, from £1,114.0 million in the 2003 financial year to £1,186.9 million in the 2004 financial year, reflecting increased turnover during the period from each business segment, particularly US printed directories.

UK turnover

UK printed directories increased by 3.5%, or £20.2 million during the 2004 financial year. The growth was primarily the result of an increase in the number of unique advertisers from approximately 451,000 to approximately 480,000 as a result of the continued success of our first-year advertiser discount programmes and our ability to retain 77% of existing customers. We attracted 116,300 new advertisers, achieving our target of 100,000 new advertisers for the fourth successive year.

Turnover per unique advertiser in decreased for all UK printed directories by 2.8% to £1,237 from £1,272, after the impact of the 4.8% price reduction, on our Yellow Pages directories and the dampening effect that the increased number of customers had on yield.

Turnover from our online directory service increased by £5.5 million, or 27.1%, from £20.3 million to £25.8 million. This increase was offset by a reduction in turnover from our other products and services, primarily from discontinued products resulting from the sale of our data-service business, Yell Data, in June 2003 and the ending of our contract with BT to sell advertising in their phone books in March 2003.

US turnover

Turnover from US printed directories increased by £52.9 million, or 10.6%, from £499.1 million in the 2003 financial year to £552.0 million for the 2004 financial year. Turnover was negatively affected by £53.0 million from a weakening US dollar. On a constant US dollar basis, US turnover grew by £105.9 million, or 21.2%. The average exchange rates were approximately $1.69 to £1.00 in the year ended 31 March 2004 and $1.55 to £1.00 in the prior year.

The Group had 386,000 unique advertisers in the United States in the year ended 31 March 2004 compared to 363,000 in the prior year. Average turnover per unique advertiser grew 14% from $2,135 to $2,434.

Same-market growth of 9.3% has grown from 6.1%. Directories from acquisitions that published for the first time in the most recent year are not included in the same market growth results. The former McLeod directories are now performing in line with Yellow Book same- market growth.

Same-market growth is derived by comparing the turnover from directories (including rescoped directories) that we published in a period with turnover from these same directories or predecessor directories covering substantially the same geographic area published in the previous publishing cycle, which is not necessarily the same period in the prior financial year. Rescoped directories are directories where we redefined the geographic boundaries covered by one or more directories, which could include replacing one directory with multiple directories or combining multiple directories into fewer directories.

Remaining growth was due to ten new directory launches (contributing 2.2% to the growth), four directories publishing for the first time after acquisition and the inclusion of a full year of results of McLeod and NDC (contributing 9.4% to the growth).

Cost of Sales

Year ended 31 March Year ended 31 March 2003 2004 (£ in millions) (%)(2) (£ in millions) (%)(2)

UK printed directories 207.9 36.2 228.0 38.4

Other UK products and services 15.0 36.4 12.4 30.2

Total UK cost of sales 222.9 36.2 240.4 37.9

US printed directories:

Exchange impact(1) (31.0 ) (5.8 )

Total US cost of sales 287.0 57.5 312.5 56.6

Total cost of sales 509.9 45.8 552.9 46.6

Total cost of sales in 2004 increased by £43.0 million, or 8.4%, compared to the 2003 financial year.

The £20.1 million, or 9.7%, increase in cost of sales for UK printed directories from £207.9 million in the 2003 financial year to £228.0 million in the 2004 financial year reflected higher advertisement volumes. Cost of sales for Yellow Book directories as a percentage of related turnover remained flat at 56.6% in the 2004 financial year, as compared to 57.5% in the 2003 financial year.

Cost of sales for other UK products and services decreased by £2.6 million, or 17.3%, from £15.0 million in the 2003 financial year to £12.4 million in the 2004 financial year, reflecting the products discontinued in the year.

Our consolidated bad debt expense was £71.0 million, or 6.0%, of Group turnover in the 2004 financial year, as compared with £67.6 million, or 6.1%, of Group turnover in the 2003 financial year. The charge for UK bad debts was 4.5% of UK printed directories and other products and services turnover for both the 2003 and 2004 financial years. The US bad debt expense was 7.7% of US printed directories turnover in the 2004 financial year as compared to 8.1% in the 2003 financial year, reflecting the more developed US profile and the relatively low level of launches in 2004.

Gross Profit and Gross Profit Margin

Year ended 31 March Year ended 31 March 2003 2004 (£ in millions) (%) (2) (£ in millions) (%) (2)

UK printed directories 365.8 60.5 365.9 57.7

Other UK products and services 26.2 4.3 28.6 4.5

Total UK gross profit 392.0 64.9 394.5 62.2

US printed directories:

US printed directories at constant exchange rate(1) 212.1 35.1 261.5 41.3

Exchange impact(1) (22.0) (3.5)

Total US gross profit 212.1 35.1 239.5 37.8

Gross profit 604.1 100.0 634.0 100.0

Gross profit margin (%)

US operations 42.5 43.4

Group total (%) 54.2 53.4 (1) Constant exchange rate states the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at a constant exchange rate and the actual results reported using current year exchange rates. (2) The percentage of total group profit.

The decrease in gross profit as a percentage of Group turnover from 54.2% in the 2003 financial year to 53.4% in the 2004 financial year principally reflected the changing geographic mix of our operations resulting from the increased contribution of our US business.

Distribution Costs and Administrative Costs

Distribution costs decreased by £1.5 million, or 4.2%, from £36.0 million in the 2003 financial year (3.2% of Group turnover) to £34.5 million in the 2004 financial year ( 2.9% of Group turnover). Excluding the effects of the weakening dollar, distribution costs would have increased by £0.4 million.

Administrative costs increased by £64.4 million, or 16.7%, from £384.7 million in the 2003 financial year to £449.1 million in the 2004 financial year. The increase was largely due to exceptional costs arising as a result of our parent companys initial public offering in July 2003:

£57.0 million for employee incentive plans;

£28.9 million in fees, including VAT, paid to the previous owners; and

£4.2 million for other costs.

These increases were partially offset by the absence of £15.0 million in costs incurred for the withdrawn initial public offering of our parent company in July 2002 and the effect of the weakening US dollar.

Group Operating Profit and EBITDA

Year ended Year ended 31 March 31 March 2003 2004 Change (£ in millions) (£ in millions) (%)

UK operations

Operating profit 142.3 129.8

Depreciation and amortization 69.2 69.4

EBITDA(1) 211.5 199.2 (5.8 )

US operations

Operating profit 41.1 20.6

Depreciation and amortisation 51.7 50.2

Exchange impact(2) 11.4

EBITDA at constant exchange rate 92.8 82.2 (11.4 )

Exchange impact(2) (11.4 )

EBITDA(1) 92.8 70.8 (23.7 )

Group

Depreciation and amortisation 120.9 119.6

Group EBITDA(1) 304.3 270.0 (11.3 )

Depreciation and amortisation (120.9 ) (119.6 )

Net interest payable (236.6 ) (194.5 )

Taxation 12.6 (7.0 )

Loss for the financial year (40.6 ) (51.1 )

(1) EBITDA comprises total operating profit before depreciation and amortisation, both being non-cash items. EBITDA is not a measurement of performance under UK or US GAAP and you should not consider EBITDA as an alternative to (a) operating profit or net profit (loss) (as determined in accordance with generally accepted accounting principles), (b) cash flows from operating, investing or financing activities (as determined in accordance with generally accepted accounting principles), or as a measure of our ability to meet cash needs or (c) any other measures of performance under generally accepted accounting principles. EBITDA is not a direct measure of our liquidity, which is shown by the Groups cash flow statement and needs to be considered in the context of our financial commitments. EBITDA may not be indicative of our historical operating results and is not meant to be predictive of our potential future results. We believe that EBITDA is a measure commonly reported and widely used by investors in comparing performance on a consistent basis without regard to depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or non-operating factors. Accordingly, EBITDA has been disclosed in this annual report to permit a more complete and comprehensive analysis of our operating performance relative to other companies and of our ability to service our debt. Because all companies do not calculate EBITDA identically, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. EBITDA is one of the key financial measures that we use to assess the success of our people in achieving growth in the business and operational efficiencies (see note 2 to the financial statements, segmental analysis). (2) Constant exchange rate states the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at a constant exchange rate and the actual results reported using current year exchange rates.

EBITDA from the UK operations decreased 5.8% to £199.2 million after charging £33.9 million in connection with the initial public offering of our parent company in July 2003 and £14.7 million for the postponed initial public offering in July 2002. Excluding exceptional costs, EBITDA from the UK operations increased by £6.9 million, or 3.1%. Growth in EBITDA before exceptional costs primarily reflects the increased profitability of Yell.com. Yell.com reported EBITDA of £5.3 million (operating profit of £3.6 million adding back depreciation of £1.7 million) for the 2004 financial year as compared to £1.1 million (operating loss of £1.3 million adding back depreciation of £2.4 million) in the prior year.

EBITDA from Yellow Book for the 2004 financial year decreased by £22.0 million compared to the 2003 financial year after including exceptional costs of £56.2 million in 2004 relating to our parent companys initial public offering, and costs in 2003 of £4.0 million relating to the postponed initial public offering and a one-off restructuring cost. Excluding the exceptional items, EBITDA from Yellow Book increased by £30.2 million, or 31.2%, compared to the 2003 financial year. The EBITDA margin for Yellow Book

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents was 12.8% in the 2004 financial year; excluding exceptional items, the EBITDA margin increased to 23.0%, as we focused on increasing the benefit and yield from our directory investments. We increased the profitability of our directories by leveraging off our existing operations and administrative cost base to yield additional turnover from our directories without a corresponding increase in costs.

Group EBITDA for the financial year ended 31 March 2004 decreased by £34.3, or 11.3%, compared to 2003. Excluding the exceptional and other one-off items in 2004 and 2003, Group EBITDA would have increased by £37.1 million, or 11.5%. If we also exclude the effect of exchange rate movements of £11.4 million, Group EBITDA would have increased by £48.5 million, or 15.0%.

Net Interest Payable

Net interest expense was £194.5 million, comprising both cash interest and non-cash interest, in the 2004 financial year, compared to £236.6 million in the 2003 financial year. Net interest before exceptional items was £136.1 million in the 2004 financial year, compared to £236.6 million in 2003. The exceptional items of £58.4 million comprised £36.4 million accelerated amortisation of deferred financing costs in connection with the repayment of the senior credit facilities on 15 July 2003 and senior notes on 18 August 2003; £19.7 million early redemption of 35% of our senior notes on 18 August 2003, and £2.3 million arrangement fee on the undrawn revolving credit facility. Net interest expense before exceptional items comprised £118.9 million of net interest paid or to be paid within a six-month period, £12.0 million of interest rolled-up into our long-term debt and £5.2 million of amortised financing costs.

Taxation

Taxation before exceptional items was a charge of £44.2 million for the 2004 financial year and a credit of £10.3 million in the 2003 financial year. Taxation is determined on taxable profits that do not reflect certain amortisation charges. Tax credits in the amount of £37.2 million for the 2004 financial year and £2.3 million in the 2003 financial year were recognised as a benefit arising from exceptional items. Our future taxation charge will depend on our taxable income in the United Kingdom and the United States and our ability to continue using our net operating losses to offset our future taxable income in the United States.

Profit (Loss) Before and After Tax

After charging the exceptional items, the loss on ordinary activities before tax was £44.1 million in the 2004 financial year as compared to a loss of £53.2 million in the 2003 financial year. Excluding the effect of the exceptional IPO costs, the profit before taxation and profit after taxation for the 2004 financial year would have been £104.4 million and £60.2 million, respectively.

Loss before taxation for the year ended 31 March 2003 was £53.2 million. Excluding the exceptional costs of £15.0 million and the £3.7 million charge for non-recurring restructuring costs as part of the integration of the former McLeod organisation in the United States, loss before taxation for the year ended 31 March 2003 would have been £34.5 million. The effect on the loss after tax of excluding the restructuring cost is £2.4 million, bringing the loss after tax and before exceptional costs for the year ended 31 March 2003 to £25.5 million.

Year Ended 31 March 2003 Compared to Year Ended 31 March 2002

Group Turnover

Combined Consolidated (Predecessor) (Successor) Year ended 31 March Year ended 31 March 1 April to 22 June 2001 to 22 June 2001 31 March 2002 2002(1) Aggregated 2003 (£ in millions) (£ in millions) (£ in millions) (%) (£ in millions) (%)

UK printed directories:

Yellow Pages 111.2 414.6 525.8 60.8 560.7 50.3

Business Pages 7.3 7.4 14.7 1.7 13.0 1.2

Total UK printed directories 118.5 422.0 540.5 62.5 573.7 51.5

US printed directories:

Yellow Book East at constant exchange rates 42.3 241.8 284.1 32.8 324.8 (2) 29.1

Exchange impact (26.1 )(2) (2.3 )

Yellow Book East 42.3 241.8 284.1 32.8 298.7 26.8

Yellow Book West(3) 200.4 18.0

Total US printed directories 42.3 241.8 284.1 32.8 499.1 44.8

Group turnover 169.1 696.3 865.4 100.0 1,114.0 100.0

(1) Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002. (2) Constant exchange rate states the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at a constant exchange rate and the actual results reported using current year exchange rates. (3) Includes results of NDC from 1 January 2003.

Group turnover increased by £248.6 million, or 28.7%, from £865.4 million in the 2002 financial year to £1,114.0 million in the 2003 financial year, reflecting increased turnover during the period from each business segment, particularly US printed directories.

UK printed directories

Yellow Pages turnover increased by 6.6%, or £34.9 million, during the 2003 financial year.

The growth was primarily the result of:

an increase in the number of unique advertisers from approximately 434,000 to approximately 448,000 as a result of the continued success of our first-year advertiser discount programmes and our ability to retain 78.4% of existing customers. We attracted 101,800 new advertisers, achieving our target of 100,000 new advertisers for the third successive year; and

continuing strong advertiser yield driven by the exceptional performance of colour advertising in the first and second years following its introduction in October 2001. In addition, the yield benefited from such initiatives as Move Up and Move-In. Move Up offers discounts to advertisers trading up to larger advertisements, and Move In, in addition to attracting additional customers, has provided additional turnover as compared to our previous programmes by offering first-year advertisers discounts to take out larger advertisements. As a result, turnover per unique advertiser rose for all UK printed directories by 3.1% to £1,272 from £1,234, after the impact of the 4.4% price reduction. Going forward, we expect lower incremental growth from colour advertising.

In addition, we introduced five new directories through rescoping or redefining the geographic coverage of some of our directories which we believe will allow us to attract new advertisers and additional advertising by aligning the geographic coverage of our directories more closely to the target market areas of our advertisers.

A lower level of demand for business-to-business advertisements during the year resulted in turnover from our Business Pages directories decreasing by £1.7 million, or 11.6%, from £14.7 million in the 2002 financial year to £13.0 million in the 2003 financial year. We are seeking to address the level of demand by introducing various product and marketing initiatives.

US printed directories

Turnover from US printed directories increased by £215.0 million, or 75.7%, from £284.1 million in the 2002 financial year to £499.1 million for the 2003 financial year, reflecting the inclusion of McLeod and other acquisitions for the first time and a strong performance by Yellow Book East.

The Group had 363,000 unique advertisers in the United States in the year ended 31 March 2003 compared to 166,000 in the prior year, when the Group owned only the Yellow Book East operations.

Yellow Book East. Yellow Book East grew turnover by 5.1% as reported in pounds sterling from £284.1 million to £298.7 million. The results were affected by a weakening US dollar, which had a negative impact of £26.1 million. On a constant US dollar basis, Yellow Book East turnover grew by £40.7 million ($57.8 million), or 14.3%, comprising:

same-market growth(1) of 6.9%, during the 2003 financial year (excluding the Manhattan directory, which was directly affected by the events of 11 September 2001), which was due primarily to volume and yield improvement, and which contributed £18.2 million ($26.1 million), or 45.2%, of the growth. Same-market growth including the Manhattan directory was 6.1%;

the strong performance of three new launches and two books in their first year following prototype publication in the 2002 financial year, which together contributed £12.6 million ($18.0 million), or 31.0%, of the growth;

an additional £6.6 million ($9.4 million) in revenues, or 16.2%, of the growth from rescopes which could not be included in same- market growth as the original directories did not cover materially the same geographic scope; and

first-time publication of certain directories following their acquisition, which contributed an additional £1.5 million ($2.2 million).

Yellow Book West. Turnover from the acquired McLeod and NDC operations was £200.4 million for the period from their acquisition on 16 April 2002 and 31 December 2002, respectively, through 31 March 2003. Same-market growth during this period for the McLeod and NDC operations, which was due primarily to volume and yield improvement, was 2.8% and 8.7%, respectively. Yellow Book Wests contribution to Yells turnover during the period was still largely the result of sales made by the McLeod and NDC sales organisations prior to, or shortly after, their acquisition by Yell. The results therefore do not reflect the benefit of integration with the Yellow Book East sales organisation and the transfer of best practises, which we expect to come through continually during the 2004 financial year.

Other products and services. Turnover from other products and services increased by £0.4 million, or 1.0%, from £40.8 million in the 2002 financial year to £41.2 million in the 2003 financial year. This was primarily due to growth in our online directory service, which grew from £14.9 million to £20.3 million during the period. Growth in Yell.com more than offset a decline in turnover from Talking Pages (now replaced by Yellow Pages 118 24 7) and Yell Data (which has been sold). (1) Same-market growth is derived by comparing the turnover from directories (including rescoped directories) that we published in a period with turnover from these same directories or predecessor directories covering substantially the same geographic area published in the previous publishing cycle, which is not necessarily the same period in the prior financial year. Rescoped directories are directories where we redefined the geographic boundaries covered by one or more directories, which could include replacing one directory with multiple directories or combining multiple directories into fewer directories.

Cost of Sales

Combined Consolidated (Predecessor) (Successor) Year ended 31 March Year ended 31 March 22 June 2001 1 April to to 31 March 22 June 2001 2002 2002(1) Aggregated 2003 (£ in millions) (£ in millions) (£ in millions) (%)(4) (£ in millions) (%)(4)

UK printed directories:

Yellow Pages 40.8 151.8 192.6 36.6 203.4 36.3

Business Pages 2.5 3.1 5.6 38.1 4.5 34.6

Total UK printed directories 43.3 154.9 198.2 36.7 207.9 36.2

US printed directories:

Yellow Book East at constant exchange rates 24.6 147.1 171.7 60.4 191.9 (2) 59.1

Exchange impact (15.6 )(2) (59.8)

Yellow Book East 24.6 147.1 171.7 60.4 176.3 59.0

Yellow Book West (3) 110.7 55.2

Total US printed directories 24.6 147.1 171.7 60.4 287.0 57.5

Other UK products and services 3.2 13.9 17.1 41.9 15.0 36.4

Total cost of sales for the 2003 financial year increased by £122.9 million, or 31.8%, as compared to the 2002 financial year. The acquisition of McLeod and other acquisitions account for £110.7 million of the increase.

The £9.7 million, or 4.9%, increase in cost of sales for UK printed directories from £198.2 million in the 2002 financial year to £207.9 million in the 2003 financial year reflected higher advertisement volumes and increases in printing and production costs associated with the introduction of colour into our Yellow Pages directories. Cost of sales as a percentage of turnover was 36.2% in the 2003 financial year, as compared to 36.7% in the 2002 financial year.

The £4.6 million, or 2.7%, increase in cost of sales for Yellow Book East reflected higher selling costs associated with revenue growth and a reclassification of certain administrative costs to cost of sales for consistency across the Yell Group, offset by a decrease due to the weakening US dollar. On a constant US dollar basis, cost of sales increased by 11.8%. Cost of sales for Yellow Book East directories as a percentage of related turnover was 59.0% in the 2003 financial year, as compared to 60.4% in the 2002 financial year.

We realised synergies (the majority of which are reflected in Yellow Book Easts results) arising from the McLeod and NDC acquisitions, particularly in paper and printing and binding costs, where the directors believe that we have achieved estimated savings to 31 March 2003 of approximately £7 million ($11 million).

Cost of sales for other products and services decreased by £2.1 million, or 12.3%, from £17.1 million in the 2002 financial year to £15.0 million in the 2003 financial year.

Our consolidated bad debt expense was £67.6 million, or 6.1%, of Group turnover in the 2003 financial year, as compared with £53.2 million, or 6.1%, of Group turnover in the 2002 financial year. The £14.4 million increase is mainly due to the acquisition of McLeod. The charge for UK bad debts was 4.5% of UK printed directories and other products and services turnover in the 2003 financial year compared to a 4.6% charge in the 2002 financial year. The US bad debt expense was 8.1% of US printed directories turnover in the 2003 financial year as compared to 9.3% in the 2002 financial year. Historically, the US bad debt expense as a percentage of turnover has been higher than that in the United Kingdom due to different market dynamics.

Gross Profit and Gross Profit Margin

UK printed directories:

Yellow Pages 70.4 262.8 333.2 69.6 357.3 59.1

Business Pages 4.8 4.3 9.1 1.9 8.5 1.4

Total UK printed directories 75.2 267.1 342.3 71.5 365.8 60.5

US printed directories:

Yellow Book East at constant exchange rates 17.7 94.7 112.4 23.5 132.9 (2) 22.0

Exchange impact (10.5 )(2) (1.7 )

Yellow Book East 17.7 94.7 112.4 23.5 122.4 20.3

Yellow Book West(3) 89.7 14.8

Total US printed directories 17.7 94.7 112.4 23.5 212.1 35.1

Other UK products and services 5.1 18.6 23.7 5.0 26.2 4.3

Gross profit margin (%)

Yellow Pages 63.3 63.4 63.4 63.7

Business Pages 65.8 58.1 61.9 65.4

Yellow Book East 41.8 39.2 39.6 41.0

Yellow Book West 44.8

Other UK products and services 61.4 57.2 58.1 63.6

Group total (%) 58.0 54.6 55.3 54.2 (1) Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002. (2) Constant exchange rate states the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at a constant exchange rate and the actual results reported using current year exchange rates. (3) Includes results of NDC from 1 January 2003.

The decrease in gross profit as a percentage of Group turnover from 55.3% in the 2002 financial year to 54.2% in the 2003 financial year principally reflected the changing geographic mix of our operations resulting from the increased contribution of our US business.

Distribution Costs and Administrative Expenses

Distribution costs increased by £12.0 million, or 50.0%, from £24.0 million in the 2002 financial year (2.8% of Group turnover) to £36.0 million in the 2003 financial year (3.2% of Group turnover). The acquisition of McLeod and other acquisitions account for £11.9 million of this increase.

Administrative expenses increased by £81.9 million, or 27.0%, from £302.8 million in the 2002 financial year to £384.7 million in the 2003 financial year.

The increase was largely due to:

the £55.3 million of Yellow Book West administrative expenses, before goodwill amortisation, included since the McLeod acquisition date;

a £27.7 million increase in the amortisation of goodwill following the full years impact of the Yell Purchase, the McLeod acquisition and the NDC acquisition;

£15.0 million of costs incurred in connection with the decision not to proceed with the initial public offering of our parent company; and

£3.7 million of restructuring charges incurred for the closure of a production site as part of the integration of Yellow Book West; offset by

the absence of a £3.0 million US management incentive scheme cost for a scheme that was terminated on 22 June 2001.

The increase was partially offset by lower administrative expenses in Yellow Book East.

Group Operating Profit and EBITDA

Combined Consolidated Year ended Year ended (Predecessor) (Successor) 31 March 31 March 1 April to 22 June 2001 to 2002(1) 22 June 2001 31 March 2002 Aggregated 2003 Change (£ in (£ in millions) (£ in millions) millions) (£ in millions) (%)

UK operations

Operating profit 42.4 108.0 150.4 142.3

Depreciation and amortisation 2.6 57.4 60.0 69.2

EBITDA(2) 45.0 165.4 210.4 211.5 0.5

Yellow Book East

Operating (loss) profit (9.5 ) 10.7 1.2 34.2

Depreciation and amortisation 7.2 23.7 30.9 30.0

Exchange impact 6.0 (3)

EBITDA at constant exchange rates (2.3 ) 34.4 32.1 70.2 118.7

EBITDA(2) (2.3 ) 34.4 32.1 64.2 100.0

Yellow Book West(4)

Operating profit 6.9

Depreciation and amortisation 21.7

EBITDA(2) 28.6

Group

Total operating profit 32.9 118.7 151.6 183.4

Depreciation and amortisation 9.8 81.1 90.9 120.9

Group EBITDA(2) 42.7 199.8 242.5 304.3 25.5

Depreciation and amortisation (9.8 ) (81.1 ) (90.9 ) (120.9 )

Net interest payable (5.8 ) (158.6 ) (164.4 ) (236.6 )

Taxation (11.3 ) (7.3 ) (18.6 ) 12.6

Profit (loss) for the financial year 15.8 (47.2 ) (31.4 ) (40.6 )

(1) Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002. (2) EBITDA comprises total Group operating profit before depreciation and amortisation, both being non-cash items. EBITDA is not a measurement of performance under UK or US GAAP and you should not consider EBITDA as an alternative to (a) operating profit or net profit (loss) (as determined in accordance with generally accepted accounting principles), (b) cash flows from operating, investing or financing activities (as determined in accordance with generally accepted accounting principles), or as a

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document measure of our ability to meet cash needs or (c) any other measures of performance under generally accepted accounting principles. EBITDA is not a direct measure of our liquidity, which is shown by the Groups cash flow statement and needs to be considered in the context of our financial commitments. EBITDA may not be indicative of our historical operating results and is not meant to be predictive of our potential future results. We believe that EBITDA is a measure commonly reported and widely used by investors in comparing performance on a consistent basis without regard to depreciation and amortisation, which can vary significantly depending upon accounting methods (particularly when acquisitions have occurred) or non-operating factors. Accordingly, EBITDA has been disclosed in this annual report to permit a more complete and comprehensive analysis of our operating performance relative to other companies and of our ability to service our debt. Because all companies do not calculate EBITDA identically, our presentation of EBITDA may not be comparable to similarly titled measures of other companies. EBITDA is one of the key financial measures that we use to assess the success of our people in achieving growth in the business and operational efficiencies (see note 2 to the financial statements, segmental analysis). (3) Constant exchange rates state the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange impact is the difference between the results reported at constant exchange rates and the actual results reported using current year exchange rates.

EBITDA from the UK operations increased 0.5% to £211.5 million after charging £14.7 million of costs for the postponed initial public offering. EBITDA growth from the UK operations would have been 7.5% without these costs. This growth reflects growth in earnings of our directories and the move into profitability of Yell.com, which were offset in part by a decline in Talking Pages and Yell Data. Yell.com reported EBITDA of £1.1 million (operating loss of £1.3 million adding back depreciation of £2.4 million) for the 2003 financial year as compared to losses of £10.1 million (operating loss of £12.3 million adding back depreciation of £2.2 million), £22.4 million (operating loss of £23.7 million adding back depreciation of £1.3 million) and £9.7 million (operating loss of £10.1 million adding back depreciation of £0.4 million) for the 2002, 2001 and 2000 financial years, respectively.

EBITDA from Yellow Book East for the 2003 financial year increased by £32.1 million compared to the 2002 financial year. The EBITDA margin for Yellow Book East increased to 21.5% from 11.3%, as we focused on increasing the benefit and yield from our directory investments. We increased the profitability of our directories by leveraging off our existing operations and administrative cost base to yield additional turnover from our directories without a corresponding increase in costs. The increases in EBITDA and related margins also reflected the absence of the costs of prototype launches and of one-off costs of running parallel pre-press activities during migration to a new supplier, which were incurred in the previous year.

EBITDA from the Yellow Book West operations was £28.6 million since the acquisition date, 16 April 2002, and was after charging £4.0 million of reorganisation costs primarily arising from the integration of Yellow Book West and Yellow Book East.

The acquisition of McLeod and other directories businesses were the most important factors leading to growth in EBITDA. Excluding the effect of acquisitions, in the 2003 financial year, our EBITDA increased by £33.2 million, or 13.7%. Excluding one-off items, comprising the terminated US management incentive scheme (£3.0 million) in the 2002 financial year, and the cost incurred in connection with the decision not to proceed with the initial public offering (£15.0 million) in July 2002 and the costs of closing a production site (£3.7 million), in the 2003 financial year our EBITDA increased by £77.5 million, or 31.6%.

B. Liquidity and Capital Resources

Apart from significant acquisitions which we have funded through a combination of borrowings, cash from contributions from the investment funds which previously owned our parent company and cash flow from operations, we have funded our existing business largely from cash flows generated from our operations. We believe that we have sufficient working capital to meet our operating and capital expenditure requirements. In addition, we have access to a £200.0 million revolving credit facility as part of the senior credit facilities, which expires on 7 July 2008, of which £5.0 million was drawn down at 31 March 2004.

Our net cash inflow from operating activities was £309.1 million in the 2003 financial year and £253.5 million in the 2004 financial year, or a 21.9% decrease.

Our net cash inflow from operating activities before payments of exceptional costs (2003 - £14.3 million; 2004 - £33.8 million) and non- cash charges relating to our parent companys initial public offering in 2004 of £40.7 million and after capital expenditure (2003 - £16.0 million; 2004 - £24.5 million) decreased from £307.4 million in the 2003 financial year to £303.5 million in the 2004 financial year. Net cash inflow of £253.5 million for 2004 as a percentage of EBITDA of £270 million was 93.9%. Excluding the exceptional costs relating to our parent companys initial public offering, (cash conversion) it fell from 95.2% in the 2003 financial year, which benefited from one-off timing differences, to a more sustainable 84.3% in the 2004 financial year. These cash flow measures are the measures that we use to manage the efficiency of our operations in converting earnings into cash.

Net cash outflow from returns on investments and servicing of finance of £177.9 million for the 2004 financial year comprises £132.3 million of cash pay interest, £9.5 million of rolled up interest settled, £19.7 million of premiums on early redemption of senior notes and £16.4 million finance fees paid.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net cash outflow for capital expenditures and financial investment comprises capital expenditure on fixed assets and purchases of shares in our parent company to be held in trust for employees. Capital expenditure was £24.5 million in the 2004 financial year compared to £16.0 million in the 2003 financial year. The capital expenditure was principally in respect of the acquisition of fixed assets to support our sales force and central administrative staff. We continued to augment our growth in the United States with further selective acquisitions totalling £108.9 million in the 2004 financial year.

Capital Resources

At 31 March 2004, we had cash of £18.4 million.

We expect that any significant acquisitions or other significant expenditures, including those related to the development of our online services, would in the future be financed through any one or more of operating cash flows, credit facilities and the issue of new debt and equity securities.

We had net debt of £2,096.4 million at 31 March 2004, as set out below.

Payments due by period 1-3 Debt Within 1 year years 3-5 years After 5 years Total (£ in millions)

Long-term loans and other borrowings

Term Loan A1denominated in sterling 80.0 190.0 354.0 624.0

Term Loan A2denominated in US dollars 323.8 323.8

Senior notes 308.2 308.2

Other 5.8 5.8

Total debt owed to third parties 85.8 190.0 677.8 308.2 1,261.8

Subordinated parent company loans 41.9 831.2 873.1

Total debt, including subordinated parent company loans 127.7 190.0 677.8 1,139.4 2,134.9

Unamortised financing costs (20.1 )

Total debt, net of unamortised financing costs 2,114.8

Net debt at end of the period 2,096.4

We are required to satisfy interest and principal payments on our borrowings as they become due. To the extent we are not able to fund any principal payment at maturity or any interest payment when due from cash flow from operations, we would be required to refinance this indebtedness pursuant to credit facilities and/or the issue of new debt and equity securities into the capital markets. Any failure to raise additional funds necessary to achieve this would result in default under our debt covenants. We anticipate that we will have to refinance in part the repayment of the Senior Notes at maturity. No one has guaranteed our obligations under the Senior Notes or has any obligation to provide additional equity financing to us.

The terms of the senior credit facilities require us to maintain specified consolidated financial ratios for net total debt to Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA, as defined in the senior credit facilities), EBITDA to net cash interest payable and, until 31 March 2005, net senior debt to EBITDA. Certain of these financial ratios have to be prepared for the preceding 12 month period and reported to the providers of the senior credit facility on a six-monthly basis from 31 March 2004. We have maintained the financial ratios for the year ended 31 March 2004 in compliance with these debt covenants.

Acquisitions

In the year ended 31 March 2004, we acquired yellow pages directories in the United States (including Feist) for an aggregate purchase price of $198.9 million (£108.6 million) plus expenses of $0.5 million (£0.3 million). These acquisitions gave rise to £100.4 million of goodwill recorded in the year.

In the year ended 31 March 2003, we acquired McLeod, one of the largest independent directory publishers in the United States, for $600.0 million (£417.0 million) plus expenses giving rise to $475.0 million (£330.0 million) of goodwill. The results of operations of McLeod, are included in our results from the date of acquisition on 16 April 2002. We also made other US acquisitions in the year for an aggregate purchase price of £47.4 million. These additional acquisitions gave rise to £31.4 million of goodwill recorded in the year.

We have operated as an independent group since 22 June 2001, the date the businesses and companies comprising the Yell Group were purchased from BT. We borrowed £2,099.0 million to fund the purchase, which gave rise to £1,235.9 million of goodwill.

Our Parent Companys Global Offer and Refinancing

On 15 July 2003, our parent company, Yell Group plc, completed raising £433.6 million (gross proceeds) through a global offer of shares to institutional investors, also referred to as an initial public offering.

Our parent company passed £304.4 million of net proceeds to us. We used these monies to pay £79.6 million of exceptional costs; to repay £48.3 million of debt under the senior credit facilities; and to redeem 35% (£172.5 million) of the senior notes pursuant to the optional redemption features under the indentures. We replaced our remaining senior credit facilities with new senior credit facilities of £664 million and $596 million and a revolving credit facility of £200 million of which £5.0 million had been drawn at 31 March 2004. As part of the refinancing, the subordinated parent company loan ceased bearing interest to reflect the fact that the equivalent amounts borrowed by our parent company were settled upon the initial public offering.

As a result of the capital-raising, we incurred a number of exceptional or one-off costs, including: cash and non-cash interest charges relating to premiums paid in connection with the redemption of the senior notes and to the write-off of deferred finance costs; charges relating to option grants under existing share ownership plans; fees paid to the owners of our parent company before the global offer; and other transaction fees and costs arising out of the offering. In addition, participants in a plan implemented for certain key employees of Yellow Book and its subsidiaries were entitled to a payment under the Yellow Book Phantom DDB Plan, under which the participants as a group are treated economically as if they had invested approximately £32 million in the Yell Group in the same manner as the funds advanced by the owners of our parent company before the global offer. We recorded a compensation charge of $63 million (£39 million) in connection with this. In satisfaction of those obligations, the plan participants exchanged their interests in the plan for equity in our parent company.

Treasury Policy

Our treasury operations primary role is to manage liquidity, funding investment and our financial risk, including risk from volatility in currency and interest rates and counterparty credit risk. The treasury operation is not a profit centre and its objective is to manage risk at optimum cost.

Our board of directors sets the treasury departments policy and its activities are subject to a set of controls commensurate with the magnitude of the investments and borrowings under its management. Counterparty credit risk is closely monitored and managed within controls set by our board of directors. It is likely that derivative financial instruments, including forward foreign exchange contracts, if entered into, will be used only for hedging purposes.

Policy and practice on payment of creditors

The Groups policy is to use its purchasing power fairly and to pay promptly and as agreed. The Group has a variety of payment terms with suppliers. Payment terms for purchases under major contracts are settled as part of the contract negotiations.

It is the Groups policy to make payments for other purchases within 30 days following the end of the month in which a correct and valid invoice is received.

At 31 March 2004 trade creditors represented 21 days of purchases. The Company has no significant trade creditors.

Significant Differences Between UK and US GAAP

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Our combined and consolidated financial statements are prepared in accordance with UK GAAP, which differ in certain respects from US GAAP. Differences result primarily from acquisition accounting, which affects the accounting for directories in progress, goodwill and other intangibles and taxation. Timing differences also arise when recognising certain costs associated with directories

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents in progress, interest that is fixed by derivative financial instruments, and deferred tax assets associated with net operating losses in the United States. Differences in accounting for pensions arise from the requirements to use different actuarial methods and assumptions. Under UK GAAP, dividends are recorded in the period in respect of which they are declared (in the case of interim or any special dividends) or proposed by the board of directors to the shareholders (in the case of final dividends). Under US GAAP dividends are recorded in the period in which dividends are declared. See note 27 of the notes to the financial statements included elsewhere in this annual report on differences between US GAAP and UK GAAP.

New UK Accounting Standards

In December 2003, the Urgent Issues Task Force (UITF) issued UITF Abstract 38 Accounting for ESOP trusts. This Abstract is effective for periods ending on or after 22 June 2004, but earlier adoption is encouraged. We have adopted UITF Abstract 38 in the year ended 31 March 2004 and accordingly have presented shares purchased by the ESOP Trust as a deduction in arriving at shareholders funds.

In April 2004 the ASB issued Financial Reporting Standard 20 Share based payments, which is the same as IFRS 2, discussed below.

International Financial Reporting Standards

In June 2002, the Council of Ministers of the European Union approved a regulation (the Regulation) requiring all companies that are governed by the law of a Member State of the European Union and whose securities are admitted to trading on a regulated market of any Member State to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Regulation is to be effective for each financial year starting on or after 1 January 2005. Accordingly, we will adopt IFRS from 1 April 2005.

The International Accounting Standards Board (IASB) issued IFRS1 a standard on transition to IFRS, in June 2003. It is expected that there will be more developments in IFRS between now and the 2006 financial year, and consequently there is uncertainty about exactly what IFRS will require on 1 April 2005. This uncertainty will be reduced as the IASB finalises and publishes its standards.

In the meantime, the UK Accounting Standards Board is adopting a phased transition to the conversion of existing UK GAAP. It is possible that by the implementation date set by the European Union, UK GAAP will not be fully aligned with IFRS.

In February 2004, the IASB issued IFRS 2, Share-based Payment. The standard deals with the accounting for transactions where an entity obtains goods or services in consideration for equity instruments or cash-settled amounts based on the value of the entitys equity instruments. For transactions with employees (for example, share option awards), the fair value of the employee services received should be measured by reference to the fair value of the equity instrument at the grant date. The standard is effective for financial periods beginning 1 January 2005.

In March 2004, the IASB issued IFRS 3, Business Combinations. The standard states that all business combinations should be accounted for by applying the purchase method. This means that the acquirer recognizes the identifiable purchased assets and liabilities at their fair values at the acquisition date, and also recognizes goodwill which is subsequently tested for impairment rather than amortised. The standard is effective for business combinations agreed on or after 31 March 2004.

The Yell Group has an active programme to consider the effects of adopting IFRS on the Groups reporting systems and financial statements.

Critical Accounting Estimates

In general, our accounting policies are consistent with those generally adopted by others operating within the same industry in the United Kingdom.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In preparing the consolidated financial statements, our management has made its best estimates and judgements of certain amounts included in the financial statements, giving due consideration to materiality. We regularly review these estimates and update them when required. Actual results could differ from these estimates. Unless otherwise indicated, we do not believe that there is a great likelihood that materially different amounts would be reported related to the items described below. We consider the following items to be the most significant estimates, which require our management to make subjective and complex judgements or to consider matters that are inherently uncertain.

Allowance for doubtful debts. Debtors are reduced by an allowance for amounts that may become uncollectable in the future. We continuously monitor collections and payments from our customers and maintain a provision for estimated credit losses based upon our historical experience and any specific customer collection issues that we have identified. We have demonstrated the ability to make reasonable and reliable estimates of allowances for doubtful accounts based on significant historical experience. Whilst such bad debts have historically been within our expectations and the provisions established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past.

If our allowance for credit losses as a percentage of turnover had been 1.0% higher or lower during the year ended 31 March 2004, then loss before tax would have varied by approximately £12 million.

Goodwill and tangible fixed assets. Goodwill and tangible fixed assets are long-lived assets that are amortised over their useful lives. Useful lives are based on managements estimates of the period that the assets will generate revenue. If the useful economic lives of our goodwill had increased or decreased by an average of one year during the year ended 31 March 2004, then our amortisation charge would have varied by approximately £5 million. Our depreciation charge would have decreased by approximately £6 million if the useful lives of our fixed assets had increased by an average of one year, or increased by approximately £14 million if the useful lives had decreased by an average of one year. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable and at the end of the first full year following acquisition.

Historically, we have not realized large gains or losses on disposals of fixed assets.

Pensions. The determination of our obligation and expense for pensions is dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions are described in note 23 of the notes to the financial statements included elsewhere in this annual report and include, amongst others, the discount rate, the expected long-term rate of return on plan assets and rates of increase in compensation. Whilst we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in our assumptions may materially affect the amount of our future pension obligations, future valuation adjustments in the statement of total recognised gains and losses and our future employee expenses.

Taxes. The determination of our obligation and expense for taxes requires an interpretation of tax law. We seek appropriate competent and professional tax advice before making any judgements on tax matters. Whilst we believe that our judgements are prudent and appropriate, significant differences in our actual experience may materially affect our future tax charges. We recognise deferred tax assets and liabilities arising from timing differences where we have a taxable benefit or obligation in the future as a result of past events. We record deferred tax assets to the extent that we believe they are more likely than not to be realised. Should we determine that we would be able to realise our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. In the year ended 31 March 2004, we reduced our net loss for the year by £14 million when we recognised previously unrecognised deferred tax assets that we believe we will realise in the near future. At 31 March 2004, we have not recognised potential deferred tax assets totalling £8 million.

C. Research and Development, Patents, Licenses, etc.

Not applicable.

D. Trend Information

Current Trading and Prospects

Since 31 March 2004, trading has developed favourably and in line with our expectations.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document We have put in place substantial groundwork to ensure that our growth momentum continues in the current financial year. Our strong cash generation should allow us to continue to finance acquisitions in the US and grow dividends in line with earnings.

E. Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than the hedges discussed in this document.

F. Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations and their maturity dates as at 31 March 2004:

Within After 1 year 1-3 years 3-5 years 5 years Total (£ in millions)

Long-term debt 121.9 190.0 677.8 1,139.4 2,129.1

Revolver loan 5.0 5.0

Operating lease obligations 18.9 27.7 17.1 27.2 90.9

Finance lease obligations 0.8 0.8

Total 146.6 217.7 694.9 1,166.6 2,225.8

There were no purchase commitments or other long-term liabilities as at 31 March 2004 other than those stated above.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors

A. Directors and Senior Management

The Directors of Yell Group plc, our parent, their dates of birth and positions are as follows:

Name Date of birth Position Robert Avisson Scott 6 January 1942 Chairman (non-executive) John Condron 14 November 1949 Chief Executive Officer (executive) John Gordon Davis 21 March 1962 Chief Financial Officer (executive) Charles Gordon Carey 22 November 1953 Director (non-executive) John Bernard Coghlan 19 April 1958 Director (non-executive) Joachim Eberhardt 26 August 1963 Director (non-executive) Lyndon Lea 13 January 1969 Director (non-executive) Lord Charles David Powell of Bayswater 6 July 1941 Director (non-executive)

John Condron was previously the Managing Director of the Group, when it was a division of BT. He continued as CEO of Yell Group on its sale by BT in 2001. Mr Condron started working for BT in 1973 in the International Finance Division. He became Strategy Manager for BTs White Pages Division in 1978 before joining the Group in 1980 as New Product Development Manager. In 1987, he became the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Marketing and Sales Controller and, in 1992, he assumed the additional responsibility of Managing Director of Yellow Pages Sales Limited. In January 1994, Mr Condron was appointed as the Managing Director of the Group. Mr Condron is a member of the UK Governments Advisory Committee on Advertising. He is also a director of Yellow Pages Sales Limited, General Art Services Limited, Yellow Book USA, Inc., Yellow Book of New York, Inc. and Yellow Book of Pennsylvania, Inc. He received an honours degree in Economics from Queens University in Belfast.

John Gordon Davis. Before joining the Company in September 2000, Mr Davis was Group Finance Director at Yahoo! Europe. Prior to that, he worked for Pearson plc from 1997 to 2000 as Chief Financial Officer for their US operations, and as a board director of Pearson Inc. He subsequently became Finance Director of the Financial Times Group Limited. Mr Davis was a director of a number of Pearson subsidiaries from which he resigned prior to leaving Pearson, including Millartrice Limited. Mr Davis began his career at Price Waterhouse, where he qualified as a Chartered Accountant. From 1989 to 1997, he held a variety of positions at EMAP plc, including Director of Corporate Finance/ Treasury and Finance Director of EMAP Radio. Mr Davis received a degree in Accounting from the University of Kent and a masters degree from the Stanford Graduate School of Business.

Robert Avisson Scott is currently a non-executive director of The Royal Bank of Scotland Group plc, and its subsidiary companies, Royal Bank of Scotland plc and National Westminster Bank plc, as well as Jardine Lloyd Thompson Group plc and Swiss Reinsurance Company Zurich. Mr Scott retired as group chief executive of CGNU plc in 2001, having previously held the same

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents position with CGU plc and General Accident plc, where he had been director since 1992. He was also chairman of the Association of British Insurers in 2000-2001, having been a board member for four years and a member of the Presidents Committee of the CBI from 1998-2000. He is also a director of Focus Wickes Group Ltd.

Charles Gordon Carey is currently a consultant and member of the board of directors of News Corporation, Inc. Until January 2002, Mr Carey had served as co-chief operating officer of News Corporation, Inc. and the Fox Entertainment Group, Inc., and president and chief executive officer of Sky Global Networks, Inc. Mr. Carey has been appointed president and chief executive officer of Hughes Electronics Corporation and will assume this role upon the completion of News Corporations acquisition of a 34% interest in Hughes Electronics. Mr Carey joined News Corporation, Inc. and The Fox Entertainment Group, Inc. in 1988, and served in numerous roles including executive vice president of Fox, Inc. from 1992 to 1994, chairman and chief executive officer of the Fox Television Group from 1994 to 2000 and co-chief operating officer of News Corporation, Inc., British Sky Broadcasting Group and Sky Italia from 1996. Prior to joining News Corporation, Inc., Mr Carey was employed at Columbia Pictures in various senior capacities from 1981 to 1987. Mr Carey is also a member of the board of directors of Gateway, Inc.

John Bernard Coghlan is currently deputy chief executive and group finance director of Exel plc. Prior to joining Exel/Ocean Group plc in 1995, Mr Coghlan qualified as a chartered accountant in 1982 and worked for Arthur Andersen for eight years before joining Tomkins plc, where he spent seven years in various financial roles.

Joachim Eberhardt is currently the Executive Vice President of Global Sales, Marketing and Service for DaimlerChrysler Motors LLC in the United States. Until 1 June of 2003 he was President & CEO of DaimlerChrysler UK Ltd, a position he held since November 1999. He is currently a non-executive director of a number of DaimlerChrysler owned subsidiaries, including DaimlerChrysler Services UK Ltd and Evobus UK Ltd. Mr Eberhardt holds a Masters of Arts degree from the Academy for Administration and Economics in Stuttgart, Germany and an MBA from New York University Stern School of Business.

Lyndon Lea is a Partner of Hicks Muse where he has been since 1998. Mr Lea currently serves on the boards of Premier International Foods Plc and various Cayman Limited companies which wholly own Aster City Cable, Weetabix Limited, Eurotax Glasss Holdings Limited and Burtons Food Limited. Prior to joining Hicks Muse, Mr Lea served at Glenisla, which was then the European affiliate of Kohlberg Kravis Roberts & Co. He previously served in the investment banking division of Schroders in London and in the mergers and acquisitions department of Goldman Sachs in New York. Mr Lea received his BA Honours in Business Administration from the University of Western Ontario, Canada.

Lord Charles David Powell of Bayswater is currently UK chairman of Moet Hennessy-Louis Vuitton and chairman of Sagitta Asset Management Limited. Lord Powell is also a director of, amongst others, Matheson & Co., Textron Corporation, Caterpillar Inc., Mandarin Oriental Hotel Group, LVMH, Schindler Holdings and British Mediterranean Airways. Lord Powell is also a member of a number of advisory boards and a trustee of a number of not-for-profit organisations.

Senior Management

Our senior management team (in addition to the executive directors listed above), their dates of birth and positions are as follows:

Name Date of birth Position

Steve Chambers 29 September 1953 Chief Commercial Officer

Eddie Cheng 15 March 1952 eBusiness Director

Paul Fry 25 May 1951 Strategy & Business Development Director

James Haddad 4 March 1957 Chief Financial Officer USA

John Satchwell 11 March 1955 Operations Director

Victoria Sharrar 2 June 1958 Chief Sales Officer USA

Joseph Walsh 15 April 1963 Chief Executive Officer USA

Steve Chambers is responsible for sales and marketing of the Groups services. Mr Chambers has worked in the directories business for over 20 years and prior to joining us in 1993, Mr Chambers held a variety of sales management positions including serving as a sales director with ITT World Directories UK. Prior to his appointment as Chief Commercial Officer, he served as Head of Sales of Yellow Pages Sales Limited.

Eddie Cheng is responsible for all the Groups UK new media services. Dr Cheng joined the Group in 1984 as a product development manager. He started his career as a sales representative for Ciba Geigy before joining BT in 1981 as a product manager in Prestel. Dr Cheng served on the Department of Trade and Industrys steering committee on electronic publishing during 1998. In 2003 Dr Cheng was involved in a National Audit Offices study on eBusiness transformation. Dr Cheng serves on the IABs (UK) leadership council and was a member of BTs Executive Technology Council when Yellow Pages was a division of BT.

Ann Francke is Chief Marketing Officer in the UK. She joined Yell on 5 May 2004. Ms Francke, 45, has almost 20 years experience of product development and brand management and was previously director of strategic marketing at Boots. Prior to her position there, she was Vice President, Petcare Marketing Europe, at Mars Incorporated from 1999 to 2002. Previously, she worked for Procter & Gamble for 13 years, the last five of which were as general manager and marketing director of its UK cosmetics and skincare business. Ms Francke received a BA from Stanford University, California and an MBA/MS in Business and Journalism from Columbia University, New York.

Paul Fry joined us in 1974. Since then, Mr Fry has worked in the Operations, Marketing and Business planning departments and has lead a number of key business development projects. Mr Fry has served as our Strategic Development Director. He has represented the Group in several external organisations, including in the role of board director of the European Association of Directory Publishers.

James Haddad is Chief Financial Officer in the United States. Mr Haddad joined McLeodUSA Publishing Company in 1986, where he served as a Senior Vice President and its Chief Operating Officer until its acquisition by the Yell Group. Prior to 1996, Mr Haddad was Vice PresidentFinance and Chief Financial Officer from 1986 to 1996. Mr Haddad received a bachelors degree in Business Administration with distinction from the University of Iowa.

John Satchwell is responsible for our customer services, computing, process development and publishing activities. Prior to joining us in 1993, Mr Satchwell was Deputy Managing Director of ITT World Directories UK. He has also held management positions in GKN and Burmah Castrol. He is also a director of River Gardens Management Company Limited. Mr Satchwell received an MA in Business Administration from Warwick University.

Victoria Sharrar is Chief Sales Officer in the United States. Ms Sharrar was Vice President and General Manager of the RH Donnelley Proprietary East business that Yellow Book acquired in 1997. Prior to the acquisition Ms Sharrar worked for the RH Donnelley Proprietary East and West coast operations for over 12 years. She has a total of over 18 years experience in the independent directory business. Ms Sharrar received a BA from the University of Southern California. She currently sits on the board of the Association of Directory Publishers.

Joseph Walsh joined Yellow Book USA, Inc. in 1987 and served as its Chairman and Chief Executive Officer from 1993 until its acquisition by us in August 1999. Before then, he co-founded IYP Publishing in 1982 and joined Data National as the Vice President of Sales in 1985, when IYP Publishing was acquired by Data National. Mr Walsh has been Chairman of the Association of Directory Publishers and has served on the Board of the Association of Directory Marketing in the United States.

B. Compensation

The aggregate remuneration paid to or on behalf of all our senior management, including those members of management appointed as executive directors for the 2004 financial year, was £46,774,441 (including salaries, fees, shares, commissions and bonuses).

These amounts exclude all pension and other post-retirement benefits provided to our executive directors and senior management, other than those required to be paid or contributed to by law. These amounts also exclude expenses such as business travel, professional and business association dues and expenses reimbursed to our senior management.

Pension contributions paid in respect of our senior management as a group for the 2004 financial year was £297,611.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The remuneration paid to or on behalf of our highest-paid senior manager or executive director for the 2004 financial year was £37,668,304 in salaries, fees, shares, commissions, bonuses and pensions.

The remuneration of the directors of our parent for the year ended 31 March 2004 was as follows:

Performance- Other Share benefits Salary/Fees related bonus benefits (a) (b) Total 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

Executive Directors

John Condron 485 550 485 550 27 47 997 1,147

John Davis 310 340 310 340 21 22 641 702

Non-executive Directors

Robert Scott 38 129 150 38 279

Charles Carey 38 57 150 38 207

John Coghlan 39 64 75 39 139

Joachim Eberhardt 38 63 75 38 138

Lyndon Lea (c) 45 45

Lord Powell of Bayswater 44 50 75 44 125 (a) Executive directors benefits mainly comprise company cars, life assurance, private health cover, long-term disability insurance, telecommunications services, health club membership and allowances for personal tax and financial advice. (b) Under an arrangement pre-dating our parent companys IPO, non-executive directors subscribed for shares in Yell Group plc at the date of the IPO at a discount to market value. 105,263 ordinary shares were issued for £150,000 to each of Charles Carey and Robert Scott, 52,632 ordinary shares were issued for £75,000 to each of Joachim Eberhardt, John Coghlan, and Lord Powell. Gains made on exercise of share options by John Condron and John Davis are detailed in Note 22 to the financial statements. (c) Lyndon Lea provided non-executive director services to Yell Group plc until 7 January 2004 via Hicks Muse where he is a partner. His fees for the year to 7 January 2004 were therefore paid to Hicks Muse rather than Mr Lea directly. From 8 January 2004 Mr Leas fees have been paid to him directly.

At 31 July 2002 and 31 March 2004, we had total outstanding loans of £20,000 made to our senior management in relation to a car ownership scheme. No outstanding loans or guarantees were granted or provided by us or any of our subsidiaries to or for the benefit of any of our senior management subsequent to 31 July 2002.

Pension Schemes

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In the United Kingdom, Yell Group employees participate in the Yell pension plan (the Yell Pension Plan).

In the United States, employees of Yellow Book East were able to participate in the Yellow Book Profit Sharing Retirement Savings Plan (the Yellow Book Pension Scheme) and employees of Yellow Book West in the McLeod USA Publishing 401(k) Profit Sharing Plan (the McLeod Pension Scheme) until 31 December 2002.

The Yellow Book Pension Scheme and the McLeod Pension Scheme were replaced by a single new Yellow Book USA 401(k) Profit Sharing Plan (the Yellow Book USA Pension Scheme), available to Yell Groups eligible employees in the United States from 1 January 2003.

Yell Pension Plan

The Yell Pension Plan was established with effect from 6 April 1981.

Group employees who prior to the Yell purchase participated in the BT pension scheme (the BT Pension Scheme) continued to do so until 31 October 2001. These employees were then offered membership of the Yell Pension Plan with effect from 1 November 2001. In October 2001, the Yell Pension Plan was amended to include two additional defined benefit sections so that former BT Pension Scheme members could receive substantially similar benefits under the Yell Pension Plan for future service and an additional defined contribution section.

The Yell Pension Plan now has four benefit sections, each of which is governed by a separate section within the scheme rules. The Yell Pension Plan is a funded, contributory, exempt-approved scheme. One of the conditions of approval by the UK Inland

Revenue is that the benefits for individual members do not exceed prescribed limits. Sections One to Three of the Yell Pension Plan provide defined benefits and are contracted out of the State Second Pension. Section Four attracts defined contributions and members are contracted in to the State Second Pension.

Section One provides defined benefits for those employees who were members of the Yell Pension Plan prior to the Yell purchase and is closed to new entrants. Section Two was designed to provide defined benefits similar to those provided under Sections B of the BT Pension Scheme and is closed to new entrants. Former members of Section A of the BT Pension Scheme were also offered membership in Section Two of the Yell Pension Plan with effect from 1 November 2001. Section Three of the Yell Pension Plan was designed to provide defined benefits similar to those provided under Section C of the BT Pension Scheme and is closed to new entrants.

Section Four of the Yell Pension Plan provides benefits on a defined contribution basis and generally is for employees joining the Yell Pension Plan after 1 October 2001 (other than those eligible to join Section Two or Section Three on 1 November 2001).

As at 31 March 2004, there were approximately 1,718 members of Sections One, Two and Three and 297 members of Section Four of the Yell Pension Plan and a further 1,483 members who were covered for death benefits only.

There are no special arrangements for Directors or senior managers within the Yell Pension Plan, with the exception of John Davis and John Condron. For further information see C. Board PracticesDirectors Service Agreements and Senior Managements Employment Agreements.

Net Pension Liability

We currently operate a defined benefit pension scheme for our UK employees employed before 1 October 2001 that is accounted for on a Statement of Standard Accounting Practice 24 Accounting for Pension Costs (SSAP 24) basis. At the last valuation date, 5 April 2002, under SSAP 24 and on an ongoing basis, the assets of the scheme were sufficient to cover 102% of accrued benefits. Although there has been no formal valuation done since that time, it is likely that the funding position has worsened due to recent adverse changes in the capital markets.

We have also complied with the transitional disclosure requirements of UK Financial Reporting Standard 17 Retirement Benefits (FRS 17). Valuations of this scheme for the purposes of FRS 17 were carried out at 31 March 2003 and 31 March 2004 by a qualified independent actuary. The liability, net of tax, measured in accordance with FRS 17 was £46.5 million at 31 March 2004. This deficit arose primarily as a result of recent adverse conditions in the capital markets. The increase in the deficit in the 2004 financial year primarily reflects the increase in the liabilities of the scheme due to changes in inflationary expectations, which exceeded the gains in the asset values due to conditions in the capital markets.

Our employer pension contribution to the defined benefit pension scheme during the 2004 financial year was £9.4 million. We will continue to review the funding position of the scheme to determine whether additional increases in contributions will be required. Full details of the SSAP 24 and FRS 17 disclosures are given in Note 23 to the financial statements.

The Group currently contributes 13.05% of pensionable earnings to the Yell Pension Plan Sections One, Two and Three. The Company currently makes contributions to Section Four of the Yell Pension Plan as follows:

Employer contribution rate Years of service completed at previous month end (percentage of pensionable earnings)

Up to 5 4 %

10-14 8 %

15+ 10 %

In common with most UK pension schemes, no attempt has been made to equalise between the sexes guaranteed minimum pensions and associated entitlements arising out of the arrangements for contracting out of the State Earnings Related Pension Scheme up to 6 April 1997.

The Yell Pension Plan is managed by a board of independent trustees, who act after taking appropriate advice from actuaries, lawyers and investment advisors. The trustees have appointed professional administrators and fund managers. Funds to meet the defined liabilities of Sections One, Two and Three are managed in line with an asset allocation strategy determined by the trustees and agreed with the employer. The trustees offer members of the defined contribution Section Four a choice of investment funds which are administered by an independent manager, who directs funds in line with a members directions and reports on the performance of independent fund managers.

Yellow Book USA Pension Scheme

The Yellow Book USA Pension Scheme provides deferred retirement and savings benefits to participants based upon the amounts contributed to the participants account by the employer and the employee and the investment return achieved on these accounts. The Yellow Book USA Pension Scheme is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and is also qualified under Section 401(a) of the US Internal Revenue Code of 1986, as amended (the US Internal Revenue Code) and is therefore exempt from federal taxes under Section 501(a) of the US Internal Revenue Code.

Participants may contribute up to 60% of their annual eligible compensation. Yellow Book makes matching contributions of 50% of the first 6% of participant contributions. During the 2004 financial year, Yellow Book paid employers contributions of $4,015,250 to the Yellow Book Pension Schemes. Matching contributions vest according to a schedule based on years of service. In addition, Yellow Book may make discretionary profit-sharing contributions to the Yellow Book Pension Scheme on behalf of eligible participants. Yellow Book did not make any discretionary sharing contributions to the Yellow Book Pension Schemes in the 2003 financial year. The assets of the plan are held separately from those of the Group in an independently administered fund. See also note 23 of the notes to the financial statements included elsewhere in this annual report.

C. Board Practices

Please see Item 10.B. Additional InformationMemorandum and Articles of Association for a description of the provisions regarding directors in the Articles of Association of Yell Group plc.

Board Composition

Currently, the board of our parent is composed of eight members. Each director has one vote. Resolutions will be adopted by a majority vote of those present at meetings. Our parents board of directors has established an audit committee and a remuneration committee.

Terms of Office

The following table shows the details of individual non-executive directors current term of office and period during which the person has served in that office:

Director Start date of current appointment Unexpired term

Robert Scott 1 July 2003 3 months

Charles Carey 1 July 2003 27 months

John Coghlan 1 July 2003 15 months

Lyndon Lea 1 July 2003 27 months

Lord Powell of Bayswater 1 July 2003 3 months

Non-executive directors each have a letter of appointment which sets out details of their appointments. The initial period of appointments determined by the letters of appointment vary in length from one to three years with a notice period of three months if the appointment is terminated by the director or Yell Group plc. As required by its Articles of Association, Yell Group plc also has a policy of periodic re-election of directors.

Non-Executive Directors Remuneration

The Group endeavors to pay non-executive directors fees that reflect a market competitive rate.

All the non-executive directors with the exception of Robert Scott receive fees for their services of £50,000 per annum. Robert Scott receives fees for his services as a non-executive director and as Yell Group plcs Chairman of £150,000 per annum. In addition, a further fee of £10,000 per annum is payable to each non-executive director for chairing committees and £5,000 per annum is payable for membership of committees.

Non-executive directors are not eligible to participate in Yell Group plcs share plans and Yell Group plc does not make any benefits available to them under other employee benefit arrangements or make any contributions to their personal pension plans.

Details of the remuneration paid to non-executive directors during the years ended 31 March 2003 and 2004 can be found below.

Performance- Salary/Fees related bonus Other benefits(a) Share benefits(b) Total 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000

NON-EXECUTIVE DIRECTORS

Robert Scott 38 129 150 38 279

Charles Carey 38 57 150 38 207

John Coghlan 39 64 75 39 139

Joachim Eberhardt 38 63 75 38 138

Lyndon Lea(c) 45 45

Lord Powell of Bayswater 44 50 75 44 125 (a) Executive directors benefits mainly comprise car allowance, life assurance, private health cover, long-term disability insurance, telecommunications services, health club membership and allowances for personal tax and financial advice. (b) Under an arrangement pre-dating our parent companys IPO, non-executive directors subscribed for shares in Yell Group plc at the date of the IPO at a discount to market value. 105,263 ordinary shares were issued for £150,000 to each of Charles Carey and Robert Scott, 52,632 ordinary shares were issued for £75,000 to each of Joachim Eberhardt, John Coghlan, and Lord Powell. (c) Lyndon Lea provided non-executive director services to the company until 7 January 2004 via Hicks Muse where he is a partner. His fees for the year to 7 January 2004 were therefore paid to Hicks Muse rather than Mr Lea directly. From 8 January 2004 Mr Leas fees have been paid to him directly.

Audit Committee

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Audit Committee is chaired by John Coghlan and throughout the year the other members were Robert Scott and Joachim Eberhardt. It meets at least four times a year.

The committee assists the Board in fulfilling its duties regarding the reporting of financial and non-financial information to shareholders. On behalf of the Board, it is also responsible for the effectiveness of our systems of internal control, the management of risk and the audit process. The external auditors and Yells Head of Risk attend all meetings.

The Board formally reviewed the effectiveness of the systems of internal control during the last financial year.

The Audit Committee also reviews the independence and objectivity of our external auditors. The nature of non-audit work which may be undertaken by our auditors has been defined and financial limits on the amount of this work have been established. Regular updates are prepared for the Audit Committee on the nature and extent of non-audit services provided by our auditors. The auditors are also required to confirm their independence at least annually.

Remuneration Committee

The Committee is chaired by Joachim Eberhardt and its other member is Charles Carey. The Company will appoint a third member of the Committee during the coming year. Both members of the Committee are independent non-executive directors of the Company.

The Chief Executive Officer is invited to attend Committee meetings, except when his remuneration is being discussed.

The Committee met on three occasions during the year ended 31 March 2004.

The Committee received advice from the Chief Executive Officer and Head of Human Resources. The Committee also appointed and received advice from Deloitte & Touche LLP in respect of remuneration policy, market practice and corporate governance for senior management and other employees. Tax services and internal audit services were also received from Deloitte & Touche LLP by the Company during the year.

Directors Service Agreements and Senior Managements Employment Agreements

On 10 July 2003, we entered into service agreements with John Condron and John Davis (the Executive Directors), respectively, which became effective on 15 July 2003. Both the Executive Directors service agreements are terminable upon 12 months notice by either party. If either Executive Directors employment is terminated by us (other than for reasons justifying summary termination under the service agreement) the Executive Director is entitled to a pro rata bonus payment for the period from the start of the bonus year to the date on which his employment terminates, based on the greater of the target bonus and an amount determined by the board of Yell Group plc based on projected performance for that year. If the employment is terminated by us (other than by serving 12 months notice or for a reason justifying summary termination) or as a result of the constructive dismissal of the Executive Director (as defined in the service agreements) (a) we will pay to the Executive Director the prescribed sum (with the prescribed sum being a sum equal to 95% of the annual value of the Executive Directors then salary, benefits, pension contributions and on-target bonus (reduced pro rata on a daily basis in respect of any part of the notice period served by the Executive Director)); and (b) all conditional awards of shares and all share options held by the Executive Director shall immediately vest and become exercisable.

Each Executive Director is eligible to receive a bonus subject to the achievement of performance targets. The performance targets are set by the board of Yell Group plc (or by a committee designated by the board of Yell Group plc to set performance targets) each year having regard to (but without having to adopt or utilise) the performance targets recommended by the Directors. The bonus range shall be between 40% and 100% of his salary. If we achieve performance targets (as set by the board of Yell Group plc or any designated committee) (net of the Directors bonus) in any financial year, the Director will be entitled to a bonus of 65% of his salary increasing to a maximum of 100% of his salary if the said performance targets are also met in the relevant financial year.

Each Executive Director is provided with life assurance equivalent to four times annual salary, car and telecommunications services, health club membership and an allowance for personal tax and financial planning. Each Executive Director is also provided with private health cover and long-term disability insurance.

Mr Davis is contractually entitled to a lump-sum life assurance benefit of four times uncapped salary. The contractual life cover that exceeds the approved benefit which can be provided from the Yell Pension Plan is provided on an unapproved basis.

John Condron is a member of Section 2 of the Yell Pension Plan. This was previously Section B of the BT scheme, which Mr. Condron joined in January 1973. As such, he is not currently subject to the Pension earnings cap under the UK 1989 Finance Act. There has been an arrangement in place since 1996 for 1/45th accrual (an additional 71 days service per year). This provision is subject to the total pension from all sources not exceeding Inland Revenue limits.

John Davis has a contractual pension arrangement which is partially met by membership in both Sections One and Three of the Yell Pension Plan. The entitlement that exceeds the approved benefit under the UK 1989 Finance Act is currently being provided on an unfunded basis. There is an overriding clause that restricts benefits and the pension equivalent of any cash sum taken at retirement to two thirds of his pensionable salary. Benefits payable by us may have to be reduced to ensure that this limit is not exceeded.

The non-executive Directors have each been issued with a letter of appointment confirming their appointment for initial periods ranging from one year to three years, unless terminated by either party giving the other three months written notice. The appointments are subject to the provisions of the Companies Act 1985, as amended and Yell Group plcs articles of association, in particular the need for periodic re-

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document election. Charles Carey, John Coghlan, Joachim Eberhardt, Lyndon Lea and Lord Powell will each be paid fees for services as a non-executive director of £50,000 per annum (plus VAT if applicable). An additional fee of £10,000 per annum is payable for chairing committees and £5,000 per annum per committee is payable for membership of committees. Robert Scott receives aggregate fees of £150,000 per annum (plus VAT if applicable) for services as a non-executive director and as Yell Group plcs Chairman. Mr Scott also receives an additional fee of £10,000 per annum for chairing committees and £5,000 per annum for membership of committees.

On 22 June 2001, we also entered into service agreements with Steve Chambers, Eddie Cheng, Paul Fry and John Satchwell. Each agreement can be terminated at any time by either party upon 12 months notice. Each of these senior managers is eligible to receive an annual bonus payment of 40% to 100% of his base salary. If a senior managers employment is terminated by us other than for cause, he will be entitled to his salary and the value of benefits for a period equivalent to the notice period or any unexpired part thereof.

All agreements described above contain restrictions governing competition, solicitation of customers and solicitation of key employees, each lasting for a period of 12 months from termination of employment.

D. Employees

The following table reflects the number of employees by employment status in the Yell Group as at 31 March 2004:

United United Kingdom States Total

Full-time employees 3,030 4,759 7,789

Part-time employees 461 15 476

Total employees 3,491 4,774 8,265

Full-time equivalent 3,332 4,767 8,099

The following table reflects the average number of employees(1) in the Yell Group for the periods indicated:

Year ended 31 March 2002 2003 2004

UK employees 3,271 3,319 3,414

US employees 2,050 4,350 4,668

Total employees 5,321 7,669 8,082

Year ended 31 March 2004 United United

Marketing and sales 60 70

Other 40 30 (1) Full-time and full-time equivalent.

In the United Kingdom, some of our employees are represented by three labour unions which collectively represent approximately 250 full-time employees and approximately 30 part-time employees. Membership in those unions is individual and voluntary. No unions have representation rights in respect of our employees in the United States.

We believe our relations with the unions of which our employees are members are on good terms.

E. Share Ownership

The following table reflects the share ownership of our directors in our parent, Yell Group plc and our senior management at 26 May 2004:

Number of £0.01 ordinary Percentage of Name Shares held share ownership (restated)

John Condron(a) 6,549,853 0.9

John Davis(a) 2,901,379 0.4

Robert Scott 105,263 *

Charles Carey 105,263 *

John Coghlan 52,632 *

Joachim Eberhardt 52,632 *

Lyndon Lea 200,000 *

Lord Powell of Bayswater 52,632 * (a) On 9 March 2004, Mourant & Co Trustees Limited, as trustee for the Yell Employee Benefit Trust, (the Trust) acquired in the market, at an average price of £3.387 per share, a total of 1,735,205 Ordinary Shares in Yell Group plc (the Shares). The shares will be held by the Trust until they are transferred to participants in Yell Group plcs Capital Accummulation Plan (the Plan). Neither John Condron nor John Davis is entitled to receive any of the Shares or be granted any benefit under the Plan. The Trust is a discretionary trust and all employees (including John Condron and John Davis) are included in the class of potential beneficiaries. Therefore, John Condron and John Davis are deemed to be interested in the Shares whilst they are held by the Trust. This interest will cease following distribution of the Shares to the participants in the Plan. Accordingly, the Shares are not included in the table of Directors interests above. * Less than one percent of share ownership.

The information summarised in the table below shows the directors share options under the Yell Group Limited Senior Manager Incentive Plan, the Yell Group plc Executive Share Option Plan and the Yell Group plc Sharesave Plan as of March 2004. The Yell Group plc Sharesave Plan is an Inland Revenue approved share option plan which allows shares to be acquired at a discount. Neither the Yell Group Ltd Senior Manager Incentive Plan nor the Yell Group plc Executive Share Option Plan are Inland Revenue approved share option plans. No other directors have share options under these, or any other, share option plans operated by the Company.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document At 31 At 31 Market March March price at Type of 2003 Granted Exercised 2004 Exercise date of Date from which option (number) (number) (number) (number) Price exercise first exercisable Date of expiry SMIP (1) 1,089,217 499,455 589,762 0.365p 285p John Condron 15 July 2003 14 July 2013 EXEC(2) 964,912 964,912 285p 15 July 2006 14 July 2013 SAYE(3) 3,548 3,548 260p 1 November 2006 1 May 2007 SMIP (1) 453,840 453,840 0.365p 285p John Davis 15 July 2003 14 July 2013 EXEC(2) 596,491 596,491 285p 15 July 2006 14 July 2013 SAYE(3) 6,096 6,096 260p 1 November 2008 1 May 2009 The closing market price of an ordinary share on 31 March 2004 was 322p. During the year the highest and lowest market prices were 340p and 275p respectively.

(1) SMIP = Yell Group Limited Senior Manager Incentive Plan. Options were granted and became exercisable on admission of Yell Group plcs shares to the London Stock Exchange on 15 July 2003. The options are not subject to performance conditions but a proportion of the underlying shares are subject to a sale restriction until 15 July 2004. (2) EXEC = Yell Group plc Executive Share Option Scheme. Options granted over shares with a value of three times salary will only be exercisable if the adjusted earnings per share over an initial three year period is at least equal to RPI plus 3% per annum at the end of the period. If the target is not met it may be retested at the end of the fourth year. Options granted over shares with a value of two times salary will only be exercisable if Yell Group plcs total shareholder return at the end of a three year period exceeds the growth in the total shareholder return of the companies making up the FTSE 100 (as at admission to the London Stock Exchange). Options will be exercisable in full if the growth in Yell Group plcs total shareholder return would put Yell Group plc at the 25th position or higher (taken from the top) of the FTSE 100. The proportion of options which may be exercised will be reduced on a straight-line basis to the 50th position of the FTSE 100, at which point 25% of the options may be exercised. If Yell Group plcs total shareholder return at the end of the three year period would placeYell Group plc below the 50th position, no options will be exercisable.

(3) SAYE = Yell Group plc Sharesave Plan.

The members of our senior management team (in addition to the executive directors listed above), Steve Chambers, Eddie Cheng, Ann Francke, Paul Fry, James Haddad, John Satchwell, Victoria Sharrar and Joseph Walsh, each hold ordinary shares and/or options for ordinary shares in Yell Group plc representing less than one percent of the beneficial ownership of the Company.

Incentive Schemes

Our parent has adopted the Yell Group Limited Employee Plan (the Yell Employee Plan), the Yell Group Limited US Employee Plan (the Yell US Employee Plan), the Yell Group Limited Senior Manager Incentive Plan (the Yell Manager Plan) and Yell Group plc Yellow Book (USA) West Management Share Option Scheme (including the US Supplement) (the Yellow Book (USA) West Management Scheme), the Yell Group plc Sharesave Plan (the Yell Sharesave Plan), the Yell Group plc Executive Share Option Scheme (the Yell Share Option Scheme), the Yell Group plc Share Incentive Plan (the Yell SIP), the Yell Group Long Term Incentive Plan (the Yell Incentive Plan), the Yell Group 2003 US Equity Incentive Plan (the Yell US Equity Incentive Plan), the Yell Group plc 2003 Employee Stock Purchase Plan (the Yell US Stock Purchase Plan) and the Yell Group plc Capital Accumulation Plan (the Yell CAP) (together the Yell Schemes) for employees of any participating company (being Yell Group plc and any subsidiary).

Yellow Book USA, Inc. (our indirect subsidiary) has adopted the Yellow Book USA, Inc. Phantom DDB Plan (the Phantom DDB Plan) and the Yellow Book USA Management Equity Plan (the US Equity Plan) (together the Yell US Schemes) for employees of Yellow Book USA, Inc. and its subsidiaries in the United States.

Our parent has not granted any options under the Yell Employee Plan, the Yell US Employee Plan, the Yell Manager Plan and the Yellow Book (USA) West Management Scheme since 15 July 2003 (being the date on which the ordinary shares of Yell Group plc commenced trading on the London Stock Exchange plc (hereinafter referred to as Admission).

No further options were granted or awards made under the Yell US Schemes following Admission.

The Yell Employee Plan, the Yell US Employee Plan and the Yell Manager Plan are all administered by the remuneration committee (the Committee) or, where relevant, the trustee for the time being of the Yell Employee Benefit Trust (the Trustee). The terms of the Trustees appointment are set out in the trust deed establishing the Yell Employee Benefit Trust dated 13 March 2002 (the Trust).

The Yell Group Limited Employee Plan

The Yell Employee Plan has the following main features:

Eligibility

The Yell Employee Plan is only available to employees of any participating company (including an employee who is also a director, but excluding non-executive directors of Yell Group plc).

Grant of options

Options may be granted at any time to eligible employees by the committee or, where relevant, the Trustee for the time being to acquire such number of ordinary shares as the committee or the Trustee (taking into account recommendations of the committee) may determine at such price and subject to such objective conditions as it may in its absolute discretion think fit (although the exercise price may not be less than the nominal value of an ordinary share).

Limits

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document No option to subscribe for ordinary shares may be granted under the rules of the Yell Employee Plan if, when aggregated with (i) the number of ordinary shares issued on the exercise of (or remaining capable of being issued on the exercise of) options, and (ii) the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents number of ordinary shares issued on the exercise of options (or remaining capable of being issued) pursuant to any other share incentive plan established by Yell Group plc (excluding any ordinary shares issued or issuable within the limits set out in the Yell Manager Plan and the Yellow Book (USA) West Management Scheme) would exceed two million ordinary shares.

Exercise of options and lapse of options

An option granted under the Yell Employee Plan may not be exercised until the occurrence of an Exit Event (being a Sale, Quotation (including Admission), Winding-Up or Change of Control of Yell Group plc (each as defined in the rules of the Yell Employee Plan)) and subject to the satisfaction of any conditions imposed (if any).

In the event of a Quotation (including Admission):

(i) an option may not be exercisable if it was granted on terms that prevented it being exercisable until a period of time following the Quotation, in which case the option shall be exercisable from the date specified in the option certificate; and

(ii) if all or some of the shareholders are required to give undertakings not to sell some of their ordinary shares in order to maintain a regular market, then the optionholder shall also undertake not to sell his ordinary shares (or such proportion of his ordinary shares as the committee may in its discretion determine), for a period of six months from the date of the Quotation or such shorter period as the committee may determine (and no option shall be exercised until such an undertaking has been given).

An optionholder may exercise his option in respect of all or some of the ordinary shares comprised in the option.

If an optionholder ceases to be an employee of Yell Group plc or any subsidiary in certain circumstances including death, retirement, redundancy, injury or disability, the option will be exercisable within a specified period from the date of such cessation.

Yell Group plc shall bear any liability to employers national insurance contributions arising in relation to the option.

Adjustment of option terms

In the event of an increase, or variation of the share capital of Yell Group plc, the committee (or, where relevant, the Trustee) may make such adjustments as it considers fair and reasonable to the number of ordinary shares in respect of which any option granted under the Yell Employee Plan may be exercised, the price payable for the ordinary shares under any option or any limits set out in the Yell Employee Plan, provided that the price payable per ordinary share on the exercise of an option to subscribe for ordinary shares shall not be less than a sum equal to the nominal value of an ordinary share.

Modifications to the scheme

The basic structure of the Yell Employee Plan cannot be altered without the prior sanction of an ordinary resolution of Yell Group plc in general meeting.

Termination

The Board may at any time (without prejudice to the rights of the optionholders under subsisting options) suspend or terminate the operation of the Yell Employee Plan.

The Yell Group Limited US Employee Plan

Options may be granted under the Yell US Employee Plan in accordance with the provisions as set out above in relation to the Yell Employee Plan with the following modifications:

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (i) if the option was granted on 14 March 2002, the option may not be exercised until or after the date falling six months after the date of Quotation (as defined in the Yell US Employee Plan) or such earlier date as the committee may, in its absolute discretion decide;

(ii) such modifications as are necessary to enable options to be granted on terms that they qualify as Incentive Stock Options within the meaning of Sections 421 and 422 of the US Internal Revenue Code of 1986 (as amended); and/or

(iii) such modificationsd as are necessary to comply with applicable US federal or state securities law.

In all other respects, the rules of the Yell US Employee Plan follow the rules of the Yell Employee Plan.

The Yell Group Limited Senior Manager Incentive Plan

The Yell Manager Plan has the following main features:

Eligibility

The Yell Manager Plan is only available to employees of any participating company (including an employee who is also a director, but excluding non-executive directors of Yell Group plc).

Grant of options

Limits

No option to subscribe for ordinary shares may be granted under the rules of the Yell Manager Plan if, when aggregated with (1) the number of ordinary shares in issue on that date (excluding any ordinary shares that are issued within (and count towards) the limit set out in the Yell Employee Plan); (2) the number of ordinary shares remaining capable of being issued on the exercise of options granted under the Yell Manager Plan; and (3) the number of ordinary shares capable of being issued pursuant to any other rights in existence on that date (excluding any ordinary shares issuable within (and counting towards) the limit set out in the Yell Employee Plan and the Yellow Book (USA) West Management Scheme), would exceed ten million ordinary shares.

Exercise of options and lapse of options

An option granted under the Yell Manager Plan may not be exercised until the occurrence of an Exit Event (being a Sale, Quotation (including Admission), Winding-Up or Change of Control of Yell Group plc (each as defined in the rules of the Yell Manager Plan)) and (subject to the satisfaction of any conditions imposed, if any).

In the event of a Quotation (including Admission):

(ii) if all or some of the Shareholders are required to give undertakings not to sell a percentage of their ordinary shares in order to maintain a regular market (referred to as the Relevant Shareholders) then the optionholder shall also undertake not to sell the same percentage of his or her ordinary shares (referred to as Restricted Shares) for the same period of time as the majority of the Relevant Shareholders are so restricted (and the optionholder may not exercise this option unless he has entered into such an undertaking); and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) if the Relevant Shareholders are subsequently permitted to sell a proportion of their ordinary shares, then the optionholder shall also be able to sell a proportion of his Restricted Shares, such proportion being equal to the highest proportion of shares that the Relevant Shareholder is permitted to sell.

An optionholder may exercise his option in respect of all or some of the ordinary shares comprised in the option.

If an optionholder ceases to be an employee of Yell Group plc or any subsidiary in certain circumstances including death, retirement, redundancy, injury or disability the option (or such vested portion of the option, where relevant) will be exercisable for a specified period from the date of such cessation.

Yell Group plc shall bear any liability to the employers national insurance contributions arising in relation to the option.

Adjustment of option terms

In the event of an increase, or variation of the share capital of Yell Group plc, the committee (or, where relevant, the Trustee) may make such adjustments as it considers fair and reasonable, to the number of ordinary shares in respect of which any option granted under the Yell Manager Plan may be exercised, the price payable for the ordinary shares under any option or any limits set out in the Yell Manager Plan, provided that the price payable per ordinary share on the exercise of an option to subscribe for ordinary shares shall not be less than a sum equal to the nominal value of an ordinary share.

Modifications to the scheme

The basic structure of the Yell Manager Plan cannot be altered without the prior sanction of an ordinary resolution of Yell Group plc in general meeting.

Termination

The Board may at any time (without prejudice to the rights of the optionholders under subsisting options) suspend or terminate the operation of the Yell Manager Plan.

In the year ended 31 March 2004 2,977,557 options under the Yell Employee Plan, the Yell US Employee Plan and the Yell Manager Plan were granted at an exercise price of 0.365 pence each, 5,685,594 options were exercised and 1,409,316 options lapsed.

Yell Group plc Yellow Book (USA) West Management Share Option Scheme

The Yellow Book (USA) West Management Scheme is for certain key individuals employed by Yellow Book USA (Yellow Book Management). It is administered by the committee and has the following main features:

Eligibility

The Yellow Book (USA) West Management Scheme is only available to an employee or director of Yellow Book USA or one of its subsidiaries who is required to devote substantially the whole of his working time to the performance of his duties.

Grant of Options

Options may be granted at any time to eligible employees by the committee or the trustee (taking account of the recommendations of the committee) to acquire such number of ordinary shares at such price and subject to such terms and conditions as the committee or the trustee (taking account of the recommendations of the committee) may in its absolute discretion determine.

Limits

The total aggregate number of ordinary shares over which options may be granted under the rules of the Yellow Book (USA) West Management Scheme shall not exceed 550,000 ordinary shares.

Exercise of options and lapse of options

Options vest and become exercisable on a straight-line basis over a three-year period (one third in each year) from the date of grant of the options. Special rules apply on the change of control of Yell Group plc whereby the committee may determine that options vest and become exercisable on a listing. The committee resolved, at a meeting held on 30 June 2003, that all options granted under this scheme should vest in their entirety and become exercisable on Admission.

In the event that a participant ceases to be in employment by reason of death, injury, disability, retirement at statutory age or any other circumstance that the committee in its absolute discretion so determines, his option will fully vest and be exercisable in its entirety, subject to and at the discretion of the committee.

Options will lapse five years after the date of grant or immediately on a participant ceasing to be in employment in circumstances other than those described above and (if relevant) on the bankruptcy of the participant.

The exercise price of the option shall be determined by the committee or the trustee (but shall not be less than £3.51 per ordinary share). The exercise price may be rebased in certain circumstances.

Modification to the scheme

The committee may by resolution at any time amend the rules of the Yellow Book (USA) West Management Scheme, although no amendment maybe made which would abrogate or materially affect the subsisting rights of a participant unless it is made with his written consent or approved by resolution at a meeting of the participants passed by more than 50% of the participants who attend and vote in person or by proxy.

Termination

No options may be granted under the Yellow Book (USA) West Management Scheme more than five years after the effective date.

Yell Group plc Yellow Book (USA) West Management Share Option Scheme US Supplement (the US Supplement)

Options may be granted under the US Supplement of the Yellow Book (USA) West Management Scheme to eligible employees employed in the United States of America at the absolute discretion of the committee in accordance with the provisions set out above in relation to the Yellow Book (USA) West Management Scheme with the following modifications:

(i) only non qualified stock options may be granted;

(ii) unless otherwise provided in the option certificate, the acquisition price of the options shall not be less than the higher of the exercise price determined in accordance with the rules of the Yellow Book (USA) West Management Scheme and 85% of the fair market value (within the meaning of Section 422 of the US Tax Code) of such ordinary shares on the date of grant;

(iii) Yell Group plc may cancel outstanding options at any time by paying the relevant participant a cash sum equal to the amount by which the value of the total number of ordinary shares subject to the option exceeds the aggregate exercise price of such shares; and

(iv) the US Supplement and any options granted pursuant to it shall comply with applicable US federal or state securities laws.

As a result of the initial public offering, 110,859 of the options granted under the Yellow Book (USA) West Management Scheme were exercised. 40,725 options lapsed in the year ended 31 March 2004.

Yellow Book USA Management Bonus Arrangements

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In October 2002, Yellow Book USA offered each of the individuals who were granted options under the Yellow Book (USA) West Management Scheme an opportunity to earn a specified cash bonus (in addition to the options granted to them under the Yellow Book (USA) West Management Scheme on 19 September 2002). A total cash bonus pool of $2,499,950 was paid pursuant to these bonus arrangements on Admission, and $2,499,950 six months after Admission.

Yellow Book USA, Inc, Phantom DDB Plan (the Phantom DDB Plan)

On Admission, payments of 13,568,179 ordinary shares in Yell Group plc in respect of the Phantom units were allocated to the Phantom DDB Plan participants, but were distributed to Yell Management Company LLC.

Yellow Book USA, Inc. Management Equity Plan (the US Equity Plan)

Under the US Equity Plan, the vesting of units representing all of the equity interests (LLC Interests) granted to certain employees of Yellow Book USA and its subsidiaries was accelerated on Admission.

In accordance with the Management Incentive Plan Trust and Distribution Agreement, if Yell Management Company LLC receives Yell Marketable Securities in respect of its partnership interests in Yellow Pages Investments L.P., Yell Management Company LLC will not distribute any such Yell Marketable Securities to the participants of the US Equity Plan until the earlier of the disposition of such Yell Marketable Securities by the Sponsors or one year from the date of any such receipt.

The Yell Sharesave Plan

The Yell Sharesave Plan is administered by the committee or, where relevant, the trustee for the time being of any employee benefit trust established by (the trustee) and has the following main features:

Eligibility

The Yell Sharesave Plan is available to all directors of any participating Yell Group plc who work at least 25 hours a week, and all employees of a participating Yell Group plc, in either case with a minimum period of continuous employment determined by the committee not exceeding five years and who are UK resident taxpayers. The committee may permit other employees or categories of employees of participating companies to participate.

Eligible employees who wish to participate must enter into a savings contract for a period of three or five years under which they will contribute payments of between £5 and £250 per month and a bonus is added at the end of three, five or seven years. In conjunction with the savings contract, an eligible employee is granted an option to subscribe for ordinary shares out of the repayment made under that contract at the end of three, five or seven years.

Options granted under the Yell Sharesave Plan are not transferable and may only be exercised by the persons to whom they were granted or their personal representatives. Ordinary shares acquired on the exercise of options will rank pari passu with ordinary shares then in issue.

Exercise price

The exercise price of any particular option will not be manifestly less than 80% of the market value of the ordinary shares at the date of grant. The market value of the ordinary shares shall be determined in accordance with Part VIII of the Taxation of Chargeable Gains Act 1992 (Part VIII).

Scheme limits

The Yell Sharesave Plan is subject to an overall limit on the number of ordinary shares which may be acquired on subscription with such limit being that on any date, the aggregate number of ordinary shares in respect of which options may be granted may not, when added to the number of ordinary shares issued or remaining issuable in the previous 10 years under the Yell Sharesave Plan and any other employee share scheme adopted by Yell Group plc, exceed 10% of the number of ordinary shares in issue on that date.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In determining the above limit, any ordinary shares issued or that may be issued to satisfy any options granted by the trustee shall be regarded as options to subscribe for ordinary shares and no account shall be taken of any ordinary shares where the right to acquire such ordinary shares was released or lapsed without being exercised or was granted pursuant to the Pre-Admission Schemes.

Rights of exercise and lapse of options

Options may normally only be exercised within the six-month period following the three- or five year duration of the contract (or after seven years). If a participant ceases to be an employee in certain circumstances including retirement, redundancy, death, injury or disability, the option will be exercisable within a specified period from the date of the event causing such termination of employment. Special provisions apply in the event of a takeover or reorganisation of Yell Group plc.

Adjustments

Following an adjustment of the share capital of Yell Group plc, the committee or the trustee (taking account of the recommendations of the committee) may adjust the number of ordinary shares under option and the option exercise price to the extent the auditors consider this to be fair and reasonable. Such adjustment requires the approval of the Inland Revenue.

Alterations

Certain minor amendments may be made to the Yell Sharesave Plan by the committee to benefit its administration or to obtain favourable tax or other treatment. However, the basic structure of the Yell Sharesave Scheme cannot be altered without the prior approval of Yell Group plc in a general meeting or, where necessary, the Inland Revenue.

Termination

The Yell Sharesave Plan terminates on the tenth anniversary of its approval by Yell Group plc or any earlier time by resolution of the Committee or by ordinary resolution of Yell Group plc in general meeting. Termination will be without prejudice to subsisting rights of the participants.

During the year ended 31 March 2004, 3,579,347 options were granted at an exercise price of £2.60 and 113,065 of these had lapsed by the end of the year.

The Yell Share Option Scheme

The Yell Share Option Scheme contains an unapproved section (Section A) and a section in a form capable of approval by the Inland Revenue (Section B) (the Approved Section). The Option Scheme was adopted by Yell Group plc on Admission and was approved by the Inland Revenue on 25 July 2003.

It may be operated in conjunction with the Yell Employee Benefit Trust and the trustee for the time being thereof. It has the following main features:

Section A

Eligibility

Options may be granted to eligible employees of any participating Yell Group plc who are not within six months of normal retirement date as selected by the committee.

Grant of options

The price per ordinary share at which options will be exercised will not be less than the market value of the ordinary shares at the date of grant. The market value of the ordinary shares shall be determined in accordance with Part VIII.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Options will normally be granted within the period of 42 days commencing on the day after the date on which Yell Group plc releases its quarterly, half-yearly or final results for any financial period if the committee considers that exceptional circumstances justifying the grant of options, options may be granted outside this period.

In most circumstances an objective performance condition must be satisfied before an option can be exercised. Appropriate performance conditions shall be determined by the Committee prior to the grant of any of options under the Yell Share Option Scheme.

An option granted under the Yell Share Option Scheme may not be transferred, assigned, charged or otherwise alienated other than to the participants personal representative on death. Any other purported transfer, assignment, charge, disposal or dealing with the rights and interests of the participant will render the option void.

Limits on the issue of new shares

The Yell Share Option Scheme is subject to the following limits on the overall number of ordinary shares which may be issued:

(i) in any 10-year period, not more than 5% of the issued ordinary share capital of Yell Group plc in aggregate may be placed under option under the Yell Share Option Scheme and any other executive share option scheme adopted by Yell Group plc; and

(ii) in any 10-year period, not more than 10% of the issued ordinary share capital of Yell Group plc in aggregate may be placed under option under the Yell Share Option Scheme and any other employees share scheme adopted by Yell Group plc be it where participation is extended to all employees on similar terms or limited to employees of executive status only.

In determining the above limit no account shall be taken of any ordinary shares where the right to acquire such ordinary shares was released or lapsed without being exercised or was granted pursuant to Yell Schemes in existence prior to Admission.

In general, the market value of the ordinary shares subject to each option at the date of grant will be determined by the committee or the trustee (acting on the recommendation of the committee) in its absolute discretion.

Exercise of option

Normally options may only be exercised after three years of their initial date of grant. If a participant ceases to be an employee in certain circumstances including death, retirement, redundancy, injury or disability, the option may be exercised within a specified period from the date of the event causing such termination of employment. Special provisions apply in the event of a takeover or reorganisation of Yell Group plc.

Discharge of option in cash/National Insurance contributions indemnity

If a participant gives notice of exercise of an option, the committee (or the Trustee taking account of the recommendation of the committee) may in lieu of allotting ordinary shares, pay the participant a cash sum equal to the amount by which the market value of the ordinary shares pursuant to the option on the date of exercise, exceeds the aggregate acquisition price of those ordinary shares.

If required by Yell Group plc, a participant must enter into an election whereby Yell Group plcs or any subsidiary of Yell Group plcs national insurance contributions liability which arises on exercise of the option is transferred to the participant.

Amendments to the schemes rules

Certain minor amendments may be made to the rules of the Yell Share Option Scheme by the committee to benefit its administration or to obtain favourable tax or other treatment. However, the basic structure of the Yell Share Option Scheme cannot be altered without the prior approval of Yell Group plc in general meeting. Amendments to key features of the Approved Section require the prior approval of the Inland Revenue.

Section B

The following provisions specifically apply to the Approved Section:

Performance requirements

Any performance requirements, additional terms and conditions shall require the prior approval of the Inland Revenue to the extent that such provisions are key features and necessary in order to meet the requirements of the legislation relating to Inland Revenue approved Yell Group plc share option plans.

Individual limits

The aggregate price payable for ordinary shares at the date of grant which may be acquired pursuant to options granted to the optionholder under the Approved Section or any other Inland Revenue-approved share option scheme (not being a savings-related share option scheme) established by Yell Group plc or any associated Yell Group company, which have neither lapsed nor have been exercised, must not exceed £30,000.

Discharge of option in cash

This rule does not apply to options granted under the Approved Section.

During the year ended 31 March 2004, 3,319,043 options were granted at an average price of £2.91.

The Yell SIP

The Yell SIP is operated through a UK-resident trust (the Yell SIP Trust) that buys or subscribes for ordinary shares that are subsequently awarded to employees. The Yell SIP Trust was constituted by a Trust Deed entered into between Yell Group plc, the participating companies (Yell Limited and Yellow Pages Sales Limited) and Yell SIP Trustees Limited (a Yell Group plc resident in the UK and incorporated on 21 June 2002 (registered number 4467291)). The Yell SIP is funded either by Yell Group plc, any participating companies or the employees (if Yell Group plc decides to incorporate partnership shares). The Yell SIP was approved by the Inland Revenue on 30 July 2003.

The Yell SIP has the following main features:

Eligibility

An employee of Yell Group plc or any subsidiary who is a UK resident taxpayer will be eligible to be offered the opportunity to participate in the Yell SIP whether they work full time or part time. Yell Group plc may also invite non-UK resident employees to participate on completion of a six-month qualifying service period.

Grant of shares

The Yell SIP has three main features that can be offered to employees. The rules of the Yell SIP provide that Yell Group plc can offer all three features, a single feature or a combination. Yell Group plc has not yet decided which feature or features will be offered to the employees following Admission.

The three features are:

(i) up to £3,000 of free shares each year can be given to employees free of tax and National Insurance contributions;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (ii) up to £1,500 in any tax year can be deducted from an employees salary to buy partnership shares; and/or

(iii) Yell Group plc can give employees up to two free matching shares for each partnership share an employee buys.

Free shares

Yell Group plc can award up to £3,000 worth of free shares to each employee in a tax year. The free shares must be given to all employees on the same terms. This means that the number of free shares an employee receives shall be determined by standard criteria relating to remuneration, length of service or similar factors as set out in the Yell SIP Rules. The award of free shares may be subject to objective performance conditions which must be satisfied.

Under the rules of the Yell SIP, there are two ways of awarding ordinary shares on the basis of performance:

(i) method 1 up to 80% of the free shares awarded can be linked to performance. The highest award by reference to performance to any employment cannot be more than four times greater than the highest award made to an employee without any performance condition;

(ii) method 2 all free shares may be awarded by reference to performance as long as the awards made to the employees in each performance unit are made on the same terms to all employees in that unit.

Yell Group plc has not yet determined which performance method it will use, if any, in relation to awards of free shares. However, if one of the performance methods is used or performance conditions are adopted, employees shall be given details of the performance conditions and measures before the relevant performance period starts.

Yell Group plc shall specify a holding period throughout which the participant shall be bound by the terms of a free share agreement. The holding period shall be a specified period of not less than three years and no more than five years from the date the free shares are awarded.

When an employee ceases to be employed by Yell Group plc or any subsidiary, his free shares will normally be transferred to him.

At the end of the five-year holding period the employee shall become entitled to the free shares unconditionally. The employee can then either choose to leave them in the Yell SIP Trust or take them out and hold them elsewhere, or sell them. Employees not wanting to pay income tax or National Insurance contributions on the free shares must keep them in the Yell SIP Trust for the period of five years.

Partnership Shares

If Yell Group plc offers employees the opportunity to acquire partnership shares under the Yell SIP, they shall enter into an agreement with Yell Group plc to allocate part of their pre-tax salary to buy the partnership shares. There is an overall limit of £1,500 of their pre-tax salary that can be allocated for the purchase of partnership shares in any tax year provided that no amount exceeding 10% of an employees salary in any tax year may be deducted for the purchase of partnership shares.

The rules of the Yell SIP provide for the purchase of partnership shares out of monthly deductions from employees with partnership shares being bought within 30 days of the deduction from salary at a price that represents the average cost of those shares to the Yell SIP trustees (taking into account all employees acquiring partnership shares at the same time).

An employee may stop and restart deductions from salary at any time during the accumulation period by giving notice to the Yell SIP trustees. The employee may also withdraw partnership shares from the Yell SIP Trust at any time. If any employee withdraws from the Yell SIP Trust before partnership shares have been bought, the accumulated salary will be paid to him after deduction of tax and national insurance contributions as appropriate.

Matching shares

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Under the terms of the Yell SIP, Yell Group plc can offer matching shares which are shares offered free to employees who have purchased partnership shares. When matching shares are awarded to an employee they must be offered on the same basis to all employees in a ratio of up to two matching shares for each partnership share purchased.

Matching shares shall be of the same class and carry the same rights as the partnership shares to which they relate and be appropriated to an employee on the same day as those partnership shares acquired. When an employee enters into a partnership share agreement, he must be informed whether he is to be offered matching shares and the ratio that will apply.

Matching shares shall have the same holding period as free shares (i.e. not less than three years and no more than five years) before an employee can withdraw them from the Yell SIP.

Dividend shares

The Yell SIP also allows Yell Group plc to offer dividend reinvestment for employees with shares in the Yell SIP. The rules of the Yell SIP provide for dividends to be reinvested in dividend shares (although there is a statutory limit on the amount of dividends that can be reinvested, and any balance must be paid out to the employees and taxed in the normal way). The limit on the amount of dividends that can be reinvested in this way, tax free, is £1,500 per employee in a tax year.

Dividend shares will also be subject to a holding period of three years during which an employee will not be permitted to sell them unless he leaves the relevant employment. Once the three-year holding period has expired, the dividend shares may be withdrawn tax free or, alternatively, continue to be held in the Yell SIP Trust until the participants employment with Yell Group plc or any subsidiary ceases.

No options have been granted under the Yell SIP.

The Yell Incentive Plan

The Yell Incentive Plan was adopted by our parent on Admission. It is administered by the Trustee in exercise of its powers under clause 4 of the Trust, although the prior approval of the Committee is required in relation to awards made or to be made and options granted or to be granted.

The Yell Incentive Plan has the following main features:

Eligibility

Awards may be given to such executives (being any eligible employee of a participating Yell Group plc who is obliged by the terms of his contract of employment to devote substantially the whole of his working time to the business of the participating companies) as the Trustee may, in its discretion, determine, taking account of the recommendations of and with the consent of the committee.

Giving of Awards

Awards, specifying the number of ordinary shares over which options may (if the performance target is satisfied) be granted, may only be given:

(i) within the period of 42 days following the release by Yell Group plc to the London Stock Exchange of its quarterly, half yearly or annual results for a particular financial year; or

(ii) any date on which the Trustee (taking account of the recommendations and with the consent of the committee) considers that exceptional circumstances exist which make it appropriate for awards to be given.

No awards maybe given more than 10 years after the date on which the Yell Incentive Plan is approved by shareholders in general meeting.

The Performance Target

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A performance target will apply to awards given under the Yell Incentive Plan, such performance target to be determined by the committee and notified to the Trustee in advance of the Trustee making an award in any particular year. The performance target shall

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents relate to Yell Group plcs performance over a minimum three-year period adjudged according to such objective criteria as the committee may determine having due regard to the best-practice provisions for long-term incentive schemes, and such other current guidance issued by or on behalf of the London Stock Exchange or institutional shareholders.

Grant of Option

The Trustee may grant the executive an option to acquire such number of ordinary shares as is determined on the basis specified at the time the award was given if the Trustee is satisfied that the performance target has been met and the executive continues to remain in full-time employment.

The Exercise Price

The price at which the ordinary shares may be acquired upon the exercise of an option shall be £1 in aggregate.

Exercise of Option

An option is exercisable only after the third anniversary of the date of the award and cannot in any event be exercised later than the tenth anniversary of the date of grant of the option. If the option holder ceases to be an employee in certain circumstances including retirement, redundancy, death, injury or disability, the option will be exercisable within a specified period from the date of such cessation. In the event of a take-over or reorganisation of Yell Group plc, all options may be exercised. Where an award has been given to an executive but an option has not been granted, the Trustee may, in its discretion and acting on the recommendation of the committee, transfer to an executive such number of ordinary shares in respect of which the award was made as it shall determine, but such number shall not exceed the proportion of such ordinary shares corresponding to such proportion of the measurement period as has elapsed at the time the change of control becomes effective.

Limits on the Issue of New Shares

The Yell Incentive Plan is subject to the following limits on the overall number of ordinary shares which may be issued:

(i) in any 10 year period, not more than 5% of the issued ordinary share capital of the new shares over which options to subscribe for shares (subscription options) maybe granted under the Yell Incentive Plan and any discretionary executive share option scheme; and

(ii) in any 10 year period, not more than 10% of the issued ordinary share capital on the new shares over which subscription options maybe granted under the Yell Incentive Plan and any other employee share scheme adopted by Yell Group plc.

The market value of the ordinary shares subject to each option at the date of grant, will be determined by the committee in its absolute discretion.

Amendments to the Plan Rules

Certain amendments may be made to the Yell Incentive Plan by the Trustee to obtain or maintain favourable tax, or other treatment. However, the basic structure of the Yell Incentive Plan cannot be altered without the prior consent in writing of the committee and Yell Group plc in a general meeting.

No awards have been made under the Yell Incentive Plan.

The Yell US Equity Incentive Plan

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Yell US Equity Incentive Plan allows Yell Group plc to issue both non-qualified and incentive stock options (together, the Stock Options) and ordinary shares (Stock Awards and together with the Stock Options, the Incentive Plan Awards) to officers and employees of Yell Group plc, its subsidiaries and affiliates.

Eligibility

The Committee has sole discretion to determine who may receive Incentive Plan Awards under the Yell US Equity Incentive Plan.

Stock Options

Option limitations

The Stock Options issued by Yell Group plc may not, in the aggregate, be exercisable for more than 33,333,333 ordinary shares; the maximum number of Incentive Plan Awards that may be granted to any individual participant during the term and under the Yell US Equity Plan cannot exceed 3,333,333 ordinary shares.

Yell Group plc may not grant incentive Stock Options to anyone owning ordinary shares who possesses more than 10% of the total combined voting power of all classes of shares of Yell Group plc unless the exercise price is fixed at not less than 110% of the fair market value of Yell Group plcs ordinary shares on the date of grant.

Exercise price

The Committee will determine the per-share exercise price for each Stock Option on the date of grant. The exercise price for incentive Stock Options will not be less than 100% of the fair market value of Yell Group plcs ordinary shares on the date of grant.

Change of control

Special provisions apply in the event of a takeover or reorganisation of Yell Group plc.

Stock Awards

Purchase price

An officer or employee may or may not be required to pay a purchase price for ordinary shares granted pursuant to a Stock Award. The purchase price, if any, is as established by the committee. Stock Awards may be made in consideration of services rendered to Yell Group plc, its subsidiaries or affiliates.

Rights as a shareholder

The Stock Award shall specify whether the officer or employee who has received such award will have, with respect to the granted ordinary shares, all of the rights of a holder of ordinary shares, including the right to receive dividends and to vote the shares.

Performance-based awards

Stock Awards may be granted in a manner such that such awards qualify for the performance based compensation exemption of Section 162(m) of the US Internal Revenue Code of 1986, as amended.

Duration, amendment and termination

No Incentive Plan Award may be granted more than 10 years after the effective date of the Yell US Equity Incentive Plan. With limited exceptions, the committee may amend or terminate the plan at any time.

During the year ended 31 March 2004, 4,610,281 options were granted at an average exercise price of £2.93.

The Yell US Stock Purchase Plan

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Yell US Stock Purchase Plan allows eligible employees of Yell Group plc, its subsidiaries and affiliates to purchase ordinary shares in Yell Group plc.

Eligibility

Employees of Yell Group plc or a participating subsidiary who are scheduled to work more than five months per year and at least 20 hours per week for Yell Group plc or participating subsidiaries and have been employed by Yell Group plc or participating subsidiaries for two years (or such shorter period as the committee may determine) are eligible to participate in offerings under the Yell US Stock Purchase Plan.

Limitations

No employee may participate in any offering period if, upon exercise of options and the acquisition of ordinary shares, the participant would hold 5% or more of the then-issued share capital of Yell Group plc. In addition, no participant may accrue the right to purchase more than US$25,000 worth of ordinary shares under the Yell US Stock Purchase Plan in any calendar year.

Offerings

Yell Group plc may offer ordinary shares for purchase for six-month periods beginning 1 May and 1 November of each calendar year. Alternative offerings may be made for different periods but no offer period will extend for more than 27 months.

Employee purchases

All ordinary shares must be purchased through the savings accumulated by an employee during an offer period through payroll deductions by Yell Group plc. The ordinary shares will be held by a broker on behalf of the employee. Yell Group plc will pay all of the brokerage commissions, fees and other charges incurred in connection with the purchase of ordinary shares with payroll deductions.

Purchase price

Participating employees will be entitled to purchase ordinary shares at the lower of 85% of the fair market value of the ordinary shares on the date the ordinary shares are offered and 85% of the fair market value of the ordinary shares on the date ending the offer period when the ordinary shares are purchased by the employee.

Amendment and termination

The board of directors of Yell Group plc has the right to terminate or amend the Yell US Stock Purchase Plan, provided that the number of ordinary shares subject to purchase under the Yell US Stock Purchase Plan may not be increased without approval of Yell Group plcs shareholders.

984,617 options were granted under the Yell US Stock Purchase Plan in November 2003.

The Yell CAP

The Yell CAP was adopted by Yell Group plc pursuant to a meeting of the committee on 6 February 2004.

The Yell CAP is administered by the committee and has the following main features:

Eligibility

The Yell CAP is only available to full time employees (other than a director) within a class of eligible employees specified by the committee from time to time.

Grant of Options

Options may be granted by the committee within 42 days following:

(i) the approval of the Yell CAP by the committee;

(ii) the release by Yell Group plc to the London Stock Exchange of its quarterly, half-yearly or annual results for any financial year; or

(iii) the date the committee determined exceptional circumstances exist to warrant the grant of an award pursuant to the Yell CAP.

No awards shall be granted within the period of two years before an eligible employees anticipated or normal retirement date and after the tenth anniversary of the date the Yell CAP is adopted.

The committee may grant conditional awards (being the right to receive ordinary shares subject to and in accordance with the rules of the Yell CAP) or restricted awards (being an award of ordinary shares which have restrictions attached to them in accordance with the rules of the Yell CAP).

Allocation of Funds

The Yell CAP may be operated in conjunction with the Trust. The committee may from time to time procure the payment of sums by Yell Group plc or any subsidiary to the Trustee for the purposes of enabling the Trustee to acquire ordinary shares in the open market. The committee may also from time to time procure the payment of additional sums to the Trustee equivalent to the dividends paid on such ordinary shares. These may be allocated to participants upon the vesting of awards (as described below).

Vesting and Payment of Awards

The awards vest three years from the date on which they are granted. Where the award granted is a conditional award, the committee must procure that the vested ordinary shares subject to the said award are transferred to the participant as soon as practicable after the end of the vesting period.

Where the award granted was a restricted award, the committee will confirm that the relevant restrictions attaching to the ordinary shares are lifted and procure that the ordinary shares are transferred to the participant.

The committee (or, where relevant, the Trustee, on the recommendation of the committee) may determine that participants be entitled to received amounts equal to the dividends paid on the ordinary shares in relation to the shares subject to the award. If so, the dividend amounts will be paid to the participants either in the form of cash or shares.

Amendments to the Plan Rules

The committee may at any time alter or add to any of the provisions of the Yell CAP in any respect provided that no such alteration or addition shall be made which imposes any additional burden or adversely affects Yell Group plc or any of its subsidiaries without the prior consent of Yell Group plc in writing.

Awards over 1,774,327 ordinary shares were made under the Yell CAP in March 2004.

Options over a total number of 6,777,988 ordinary shares remain capable of being exercised under the Yell Schemes as at 31 March 2004. Options over a total number of 19,158,211 ordinary shares have been granted as at 31 March 2004, as follows:

Total number of options Exercise granted over price per Plan ordinary shares share

Yell Manager Plan 4,599,304 £ 0.365

Yell Employee Plan 717,554 £ 0.365

Yell US Employee Plan 105,909 £ 0.365

Yellow Book (USA) West Management Scheme 1,355,221 £ 1.28

Yell Sharesave Plan 3,466,282 £ 2.60

Yell Share Option Scheme (July 2003 grant) 1,561,403 £ 2.85

Yell Share Option Scheme (Nov 2003 grant) 1,757,640 £ 2.96

Yell SIP NIL N/A

Yell Incentive Plan NIL N/A

Yell US Equity Incentive Plan (July 2003 grant) 1,250,000 £ 2.85

Yell US Equity Incentive Plan (Nov 2003 grant) 3,360,281 £ 2.96

Yell US Stock Purchase Plan 984,617 £ 2.60

Total 19,158,211 N/A

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

We are a wholly owned subsidiary of Yell Group plc, our parent.

At 17 May 2004, the most recent practicable date, Yell Group plc had received notification from the following entities under Part VI of the Companies Act 1985, showing a material interest of 3% or more in Yell Group plc.

Percentage of No. of issued ordinary Shareholder Shares share capital

FMR Corp and Fidelity International Limited and their subsidiaries 96,527,675 13.83

Merrill Lynch & Co., Inc 76,119,750 10.91

Aviva plc and its subsidiaries 37,955,803 5.44

The Goldman Sachs Group 34,730,286 4.98

Standard Life Group 28,286,360 4.05

Franklin Resources, Inc. 28,195,645 4.04

Legal & General Group plc 27,180,778 3.89

Scottish Widows Investment Partnership Limited 21,332,278 3.06

As at 1 April 2003 funds managed by Apax Partners, funds managed by Hicks Muse and directors and members of our management beneficially owned 44.35%, 44.35% and 11.30% of Yell Group plc, respectively. Upon admission of Yell Group plc to the London Stock Exchange on 15 July 2003, funds managed by Apax Partners and funds managed by Hicks Muse and directors beneficially owned approximately 19% each of the Company. Following the closing of the over-allotment arrangements in connection with the initial public offering of Yell Group plc on 12 August 2003, funds managed by Apax Partners and funds managed by Hicks Muse and directors beneficially owned approximately 17% each of the Company. On January 7 2004, Apax Partners and Hicks Muse announced that they had sold their respective entire shareholdings in Yell Group plc, representing in aggregate approximately 34% of the beneficial ownership of the company.

B. Related Party Transactions

On the acquisitions of McLeod and NDC, we paid an aggregate transaction fee of $9 million plus any applicable VAT (£6.2 million) and £0.6 million plus any applicable VAT respectively to affiliates of Hicks Muse and Apax Partners.

In connection with the global offering of our parent company, Yell Group plc, we made payments to affiliates of both Hicks Muse and Apax of approximately £12.9 million each, excluding VAT.

Please see note 24 of the notes to the financial statements included elsewhere in this annual report for a discussion of other related party transactions.

C. Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See Item 18.

Legal Proceedings

No member of the Yell Group is or has been engaged in or, so far as we are aware, has pending or threatened, any legal or arbitration proceedings which may have, or have had in the 2004 financial year a significant effect on the Groups financial position.

B. Significant Changes

Not applicable.

ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Not applicable.

B. Plan of Distribution

Not applicable.

C. Markets

The Notes are listed on the Luxembourg Stock Exchange.

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Articles of Association

The Articles of Association of Yell Finance B.V. provides that its object is to carry on the business of a holding company. The business and affairs of the Company are managed by the board of directors (the Board). The Board, which must consist of at least one Director but has no specified maximum number of directors, is elected by the Companys shareholders at a general meeting (a General Meeting). Board resolutions must be approved by an absolute majority of the votes cast. General Meetings, which must be held at least once a year, may be called by any of the Board, individual directors or individual shareholders. Actions that must be approved at a General Meeting include, amongst other things, (i) approving the Companys annual accounts, (ii) declaring dividends, (iii) increasing, reducing or authorising the transfer of the Companys share capital, (iv) appointing and removing directors, (v) approving certain Board resolutions and (vi) winding up the Company.

C. Material Contracts

The following contracts are contracts (not entered into in the ordinary course of business) which have been entered into by the Company or another member of the Yell Group within the two years immediately preceding the date of this document which are or may be material.

Senior Facilities Agreement

Yell Group plc and certain of its subsidiaries entered into a facilities agreement originally dated 8 July 2003 (as amended and restated on 12 August 2003 and as further amended and restated on 26 August 2003) among, inter alios, Yell Group plc, the subsidiaries identified therein as borrowers and guarantors, ABN AMRO Bank N.V. and HSBC Bank plc as joint mandated lead arrangers, the financial institutions named therein as lenders and HSBC Bank plc as facility agent and security trustee (the Senior Facilities Agreement).

Structure

The facilities made available to the members of the Yell Group comprised (i) a sterling term loan facility in an aggregate amount of £664 million (Term Facility A1); (ii) a US dollar term loan faclity in an aggregate amount of $596 million (Term Facility A2 and together with Term Facility A1, the Term Facilities); and (iii) a sterling denominated multicurrency revolving credit facility in an aggregate amount equal to £200 million (or its equivalent in other currencies) (Revolving Facility).

The Term Facilities were used to (i) refinance a certain proportion of the outstanding indebtedness under the prior senior facilities agreement, being the senior facilities agreement originally dated 25 May 2001 (as amended on 22 June 2001, 10 July 2001, 1 August 2001, 13 March 2002, 12 April 2002, 31 May 2002 and as amended and restated on 11 November 2002) among, inter alios, Yell Group plc, Yell Limited, Yellow Book Holdings, Inc., the companies identified therein as borrowers and guarantors, Merrill Lynch International, CIBC World Markets plc, Credit Suisse First Boston and Deutsche Bank AG London as arrangers, the banks and financial institutions party thereto as lenders and Deutsche Bank AG London as facility agent and security agent (the Prior Senior Facilities Agreement); (ii) redeem 35% of the senior notes.

The Revolving Facility provides for revolving advances to be used for the working capital, acquisitions and other general corporate purposes. Under the terms of the Senior Facilities Agreement, an amount of up to £50 million (or its equivalent in other currencies) of the Revolving Facility may also be made available by way of, among other things, overdraft facilities, letter of credit, bonding or guarantee facilities, foreign exchange or derivative facilities.

Interest rates and fees

Advances under the various facilities bear interest at rates per annum equal to LIBOR (or, in the case of any advance in euro, EURIBOR) plus, where appropriate, any applicable mandatory liquid asset costs (which are the adjustments required if The Bank of England mandates a change to the reserve requirements for lending banks), plus 1.50% per annum (the Margin). There is a margin adjustment mechanism in relation to the Term Facilities and the Revolving Facility, commencing upon delivery of the financial statements for the financial period ending 31 March 2004, under which the Margin may be reduced to as low as 0.70% per annum following reductions in Yell Group plcs leverage ratio as reflected in such financial statements. The leverage ratio is the ratio of Yell Group plcs consolidated total net debt to consolidated EBITDA (the Leverage Ratio).

Guarantees and security

The obligations of the subsidiaries of Yell Group plc under the Senior Facilities Agreement are guaranteed by, amongst others, Yellow Pages Limited, Yell Holdings 2 Limited, Yell Limited, YH Limited, Yell SàrL, Yellow Book Group, Inc. and each of Yell Limiteds and Yellow Book Group, Inc.s material subsidiaries.

Each of Yellow Pages Limited, Yell Holdings 2 Limited, Yell Limited, YH Limited and each subsidiary guarantor incorporated in the United Kingdom has granted a security interest over substantially all of its assets, including fixed charges over certain of its properties, debts, bank accounts, insurances, intellectual property and specified material agreements, and a floating charge over all of its other business, assets and undertakings. In addition, the shares of Yell SàrL, Yell Holdings 2 Limited, Yell Limited, YH Limited, and the subsidiary guarantors incorporated in the United Kingdom have been charged in favour of HSBC Bank plc as security trustee for the banks under the Senior Facilities Agreement.

Each of Yellow Book Group, Inc. and each borrower and/or subsidiary guarantor incorporated in the United States has granted a security interest over substantially all of its assets, including, first-priority perfected liens over certain of its properties (including property), debts, bank accounts, insurances, intellectual property and specified material agreements. In addition, the shares of the borrowers and the subsidiary guarantors incorporated in the United States have been pledged to HSBC Bank plc as security trustee for the banks under the Senior Facilities Agreement. Certain property owned by McLeodUSA in Cedar Rapids, Iowa has also been mortgaged in favour of HSBC Bank plc (as security trustee as aforesaid).

Yell SàrL has granted a security interest over its shares in Yellow Book Group, Inc. as security for its obligations as a guarantor under the Senior Facilities Agreement.

The security provided to HSBC Bank plc as security trustee for the banks under the Senior Facilities Agreement will be released at such time as (i) the Leverage Ratio is less than or equal to 3.50:1, and (ii) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys (with, in each case, a stable outlook or better).

Covenants

The Senior Facilities Agreement contains certain customary negative covenants which restrict Yell Group plc and its subsidiaries (subject to certain agreed exceptions) from, amongst other things: (i) incurring additional indebtedness; (ii) giving guarantees and indemnities; (iii) making loans to others; (iv) creating security interests on their assets; (v) making acquisitions and investments or entering into joint ventures; and (vi) disposing of assets.

Acquisitions of assets or companies whose business is similar or related to the business carried on by Yell Group plc and its subsidiaries are, amongst other things, permitted subject to certain requirements (subject to certain agreed exceptions), including, without limitation, to the extent (i) no defaults exist at the time of the acquisition or would result therefrom, (ii) such acquisitions do not exceed £200 million (rising to £350 million where (A) both prior to and after completion of the relevant acquisition the Leverage Ratio is less than or equal to 3.50:1, and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (B) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys (with, in each case, a stable outlook or better) prior to completion of any such acquisition) in any financial year (exclusive of amounts funded by equity or from excess cash flow (subject to certain conditions)), (iii) the proposed acquisition assets for the period of 12 months prior to the date of their acquisition had positive EBITDA, and, (iv) the financial covenants set out in the Senior Facilities Agreement will be met following such acquisition.

Dividends are, amongst other things, permitted to the extent that such dividends are permitted under the indentures for the senior notes.

The Senior Facilities Agreement requires the borrower to observe certain customary positive covenants including, but not limited to, covenants relating to legal status, notification of default, making of claims, financial assistance, financial condition and hedging arrangements.

In addition, the Senior Facilities Agreement requires Yell Group plc and its consolidated subsidiaries to maintain specified consolidated financial ratios for (i) consolidated total net debt to consolidated EBITDA, (ii) consolidated net senior debt to consolidated EBITDA (tested until 31 March 2005 only), and (iii) consolidated EBITDA to net cash interest payable.

Maturity and amortisation

The Term Facility A1 is to be repaid in fixed semi-annual instalments of £40 million commencing on 31 March 2004, increasing to fixed semi-annual instalments of £45 million beginning on 30 September 2005, increasing to fixed semi-annual instalments of £50 million beginning on 30 September 2006, with a final instalment equal to all amounts then unpaid and outstanding being due and payable on 8 July 2008 (being the final maturity date of the Term Facilities and Revolving Facility). The Term Facility A2 is to be repaid in one instalment on 8 July 2008. No amounts repaid by the subsidiaries of Yell Group plc that are borrowers under the Senior Facilities Agreement may be reborrowed.

The Revolving Facility ceases to be available for drawing on the date falling one month prior to the final maturity date. Each advance made under the Revolving Facility must be repaid on the last day of each interest period relating to it, although any amounts repaid under the Revolving Facility are available for re-drawing.

Prepayments

All loans under the Senior Facilities Agreement must be prepaid in full upon the occurrence of certain events including, (i) a change of control of Yell Group plc (if the majority lenders so require), (ii) from 100% of the net cash proceeds of any additional debt capital markets issue, other than to the extent used to refinance the senior notes, reducing to 50% when (A) the Leverage Ratio is less than or equal to 3.50:1, and (B) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys (with, in each case, a stable outlook or better), and (iii) from 50% of excess cash flow (reducing to 25% when the Levergage Ratio is 3.50:1 or better and reducing further to 0% when the Leverage Ratio is 3.00:1 or better.

Events of default

The Senior Facilities Agreement contains certain customary events of default for facilities of its type (including Yell Group plc ceasing to have a listing for its ordinary shares on any recognised exchange in the United Kingdom or the United States), the occurrence of which would allow the lenders to accelerate all outstanding loans and terminate their commitments under the Senior Facilities Agreement.

Hedging arrangements

The subsidiaries of Yell Group plc that are borrowers under the Senior Facilities Agreement are required by the terms of the Senior Facilities Agreement to enter into hedging arrangements to provide protection in respect of interest rate risk exposure because the financing under the Senior Facilities Agreement is at floating interest rates. The lenders require that a minimum aggregate notional amount of 50% of the consolidated net debt is on a fixed interest basis. The hedging requirement falls away in circumstances where (i) the Leverage Ratio is less than or equal to 3.50:1, and (ii) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys (with, in each case, a stable outlook or better).

Hedging banks have been granted security, guarantee and subordination rights which rank at least equally with the rights of the banks under the Senior Facilities Agreement.

Senior Sterling Notes, Senior Dollar Notes and Senior Discount Dollar Notes

Yell Finance B.V. has issued £250 million principal amount of 10 ¾% Senior Sterling Notes due 2011, $200 million principal amount of 10 ¾% Senior Dollar Notes due 2011 and $288.25 million principal amount at maturity of 13 ½% Senior Discount Dollar Notes due 2011 (collectively, the Notes) under indentures (the Indentures) dated as of 6 August 2001 and amended 18 January 2002, in each case among Yell Finance B.V., as the Issuer, Yellow Pages Limited as the Guarantor and The Bank of New York as the Trustee.

The Notes are general unsecured obligations of Yell Finance B.V. and mature on 1 August 2011, unless previously redeemed. The Senior Sterling Notes and Senior Dollar Notes bear interest at the rate of 10 ¾%, payable semi-annually in arrears on 1 February and 1 August in each year, commencing 1 February 2002. The Senior Discount Dollar Notes were initially issued at a discount with an issue price of $521.33 per $1,000 principal amount at maturity. No interest is payable on the Senior Discount Dollar Notes prior to 1 August 2006. From and after 1 August 2006, each Senior Discount Dollar Note will bear interest at the rate of 13 ½%, payable semi-annually in arrears on 1 February and 1 August in each year, commencing 1 February 2007.

The Notes will be subject to redemption at any time on or after 1 August 2006, at the option of the Issuer, in whole or in part, at the redemption prices set forth in the Indentures (initially par plus one-half the coupon declining to par on or after 1 August 2009). In addition, the Issuer may redeem all but not less than all of any series of Notes on or prior to 1 August 2006 by paying a make-whole premium based on the Gilt Rate (as defined therein) or the Treasury Rate (as defined therein).

Further, before 1 August 2004, the issuer may redeem up to 35% of the aggregate principal amount at maturity of each series of Notes with the net proceeds of a public equity offering at a price of 110.75% of the principal amount (in the case of the Senior Sterling Notes and Senior Dollar Notes) or 113.50% of the accreted amount of the Senior Discount Dollar Notes, if at least 65% of the original aggregate principal amount at maturity of such series remains outstanding after such redemption. On 18 August 2003, we exercised this right and redeemed 35% (£172.5 million) of our Senior Notes.

Unless previously called for redemption, if a Change of Control (as defined in the Indentures, which definition includes the requirement that a decline occur in respect of the rating of the Notes) shall occur at any time, then each holder of Notes shall have the right to require that the Issuer purchase such holders Notes in whole or in part at a purchase price in cash in an amount equal to 101% of the principal amount of the Senior Sterling Notes and the Senior Dollar Notes and 101% of the accreted value of the Senior Discount Dollar Notes.

The Indentures contain certain covenants which, amongst other things, restrict Yell Finance B.V.s ability and the Restricted Subsidiaries (as defined therein) to:

incur additional indebtedness;

pay dividends or make distributions in respect of Yell Finance B.V.s equity interests or make certain other investments or restricted payments;

issue certain guarantees;

enter into certain transactions with shareholders or affiliates;

create certain liens;

sell certain assets; or

create consensual restrictions on the ability of Restricted Subsidiaries to pay dividends and make certain other payments and transfer of assets to us and the other Restricted Subsidiaries.

In addition, the Indentures limit Yell Finance B.V.s ability to consolidate, merge or sell all or substantially all of its assets.

non-payment of amounts due;

failure to comply with provisions relating to a consolidation, merger or sale of all or substantially all of its assets;

failure to repurchase the Notes in accordance with the terms of the Indentures;

breach of covenants;

cross-defaults by Yell Finance B.V. or its significant subsidiaries;

certain judgment awards against Yell Finance B.V. or its significant subsidiaries; and

certain events of bankruptcy and insolvency.

Upon the occurrence of an event of default, the Trustee under the Indentures or the holders of 25% of outstanding Notes, may declare the Notes immediately due and payable at 100% of the principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of declaration.

Subordination Agreement

Yell Group Limited (now Yell Group plc) and Yell Finance B.V. entered into a subordination agreement dated 6 August 2001 with, amongst others, the holders of the DDBs and the trustee for the benefit of holders of the Notes (the Subordination Agreement). The terms of the Subordination Agreement are subject to those of the Intercreditor Deed.

The Subordination Agreement includes provisions that:

subordinate Yell Group plcs right of payment under the intercompany loans made to Yell Finance B.V. to the prior payment in full of the Notes;

prohibit the maturity, redemption or repurchase of the intercompany loans prior to the maturity and repayment of the Notes;

prohibit the Yell Group plcs subsidiaries from securing the intercompany loans by granting a lien on their assets or guaranteeing the intercompany loans;

entitle the holders of Notes to payment in full before Yell Group plc is entitled to receive any payment in respect of the intercompany loans, in the event of Yell Finance B.V.s dissolution, bankruptcy, insolvency or similar circumstances;

prohibit the amendment of the intercompany loans in any manner adverse to the holders of the Notes, prior to the repayment of the Notes;

prohibit Yell Finance B.V. from making any payments on the intercompany loans prior to the repayment of the Notes (other than permitted payments under the Indentures), setting off any of the intercompany loans or securing the intercompany loans by a lien on Yell Finance B.V.s assets; and

prohibit any of the holders of the DDBs from taking any action in respect of the DDBs contrary to Yell Group plcs and Yell Finance B.V.s obligations under the Subordination Agreement.

The provisions of the Subordination Agreement also prohibit Yell Group plc from:

taking any enforcement action on the intercompany loans prior to the maturity and repayment of the Notes in full in cash;

transferring or otherwise conveying any of the intercompany loans to any person other than Yell Finance B.V.; and

making any payments in respect of the DDBs or the BT Loan Notes; however, Yell Group plc may make such payments with its own funds or funds distributed to it in accordance with the restricted payments covenant in the Indentures.

Yell Group Limited (now Yell Group plc) has entered into a keepwell agreement with Yell Finance B.V. dated as of 6 August 2001 (as amended and restated on 6 April 2002), which provides that in the event Yell Finance B.V., in its sole discretion, determines that it will have insufficient funds (including funds available from its subsidiaries under the senior credit facilities) to meet its obligations under the Notes and under the bridge notes issued pursuant to a bridge credit facility put in place at the time of the McLeod acquisition in order to finance part of the McLeod acquisition costs (which bridge notes facility was refinanced in full on

11 November 2002 as described above in Senior Facilities Agreement), it will promptly notify Yell Group plc, and Yell Group plc will make available to Yell Finance B.V. before the due date of such obligations, funds sufficient to enable Yell Finance B.V. to satisfy such payment obligations (the Keepwell Agreement). Such funds will be made available to Yell Finance B.V. either as a capital contribution or a subordinated loan in compliance with the terms of the Indentures and on the basis that no interest or principal payments may be made on any such subordinated loan unless Yell Finance B.V., immediately before and after such payment, is solvent in all respects and such subordinated loan is subordinated to the Notes or the bridge notes in the event of bankruptcy or insolvency.

In accordance with certain requirements of the Dutch Central Bank, the Keepwell Agreement will be enforceable against Yell Group plc only by Yell Finance B.V. and/or its liquidator or administrator in the event of a bankruptcy, or, as the case may be, a moratorium under Dutch law (surseance van betaling). The Keepwell Agreement is not enforceable by the holders of the Notes or the bridge notes or the trustee on behalf of the holders of the Notes or the agent on behalf of the holders of the bridge notes.

Stamp Duty Agreement

On 25 May 2001, Yell Limited (now Castaim Limited and an affiliate of BT), Castaim Limited (now Yell Limited), BT Holdings Limited, Yellow Pages BV and BT entered into an agreement relating to the stamp duty (the Stamp Duty Agreement) which governed the execution and keeping of the original versions of the Business Sale Agreement and the Umbrella Agreement (together the Documents and each a Document) outside the United Kingdom.

Under the Stamp Duty Agreement, it was agreed that each party would not at any time cause or knowingly permit the Documents to be brought into the United Kingdom unless (i) it was necessary to produce the Document in any judicial, arbitration, administrative or other legal proceedings; (ii) it was required to do so by any tax authority; (iii) it was required to do so by any government department or other regulatory body; or (iv) it was required to do so by law.

Subject to the above, it was also agreed that each party would not argue or raise (or cause to be argued or raised) any question in any judicial, arbitration, administrative or other legal proceeding involving the Documents that a copy or certified copy of any of the Documents could not be produced as adequate evidence in any such proceedings.

In the event that any of the Documents is brought into the United Kingdom in the circumstances described above, then Yell Limited as the purchaser of the Yell business in the United Kingdom undertook that it would submit that Document as soon as reasonably practicable to the UK Inland Revenue and would pay any stamp duty thereon. If Yell Limited fails to comply with that obligation, Castaim Limited has the right to present the relevant Document to the UK Inland Revenue, pay the stamp duty and require repayment of such stamp duty from Yell Limited.

The Company is not aware of any circumstances which would require either it or BT to bring any of the Documents into the United Kingdom and believes the risk of such circumstances arising to be remote. However, if stamp duty were to be paid on the Documents, the amount payable by Yell would be in the order of £54.5 million plus applicable interest.

Management Incentive Plan Trust and Distribution Agreement (MIP Distribution Agreement)

The MIP Distribution Agreement works in conjunction with the Phantom DDB Plan and the US Equity Plan in the event that Yell Marketable Securities are allocated to the US management participants in those plans. Pursuant to this agreement, Yell Group plc will deliver to Yell Management Company LLC any Yell Marketable Securities paid in respect of the Phantom Units or LLC Interests held by the participants in the Phantom DDB Plan and the US Equity Plan.

The agreement remains partially in place and on 15 July 2004, the first anniversary of the initial public offering of Yell Group plc, any Yell Marketable Securities still held by Yell Management Company LLC will be distributed to the participants of the Phantom DDB and US Equity Plan.

McLeod Acquisition Agreement

The McLeod acquisition agreement was entered into between McLeodUSA Incorporated (the Parent), Yell Group Limited (now Yell Group plc) and McLeodUSA Holdings, Inc. (the Seller), a wholly owned subsidiary of the Parent, on 19 January 2002 (the McLeod Acquisition Agreement), pursuant to which in April 2002, Yell Group plc acquired all the issued share capital of McLeod, a wholly owned subsidiary of the Seller, in consideration of the payment of $600 million in cash.

The McLeod Acquisition Agreement contains warranties as to, amongst other things, ownership of the shares, employee benefit plans, intellectual property, material contracts, and the assets and properties of McLeod .

Under the terms of the McLeod Acquisition Agreement, active employees of McLeod as of the closing date shall be provided with comparable benefits for the two years following the closing of the acquisition and will be given credit for past service for purposes of eligibility and vesting under employee benefit plans. The Company has also agreed to maintain a major employment centre in Cedar Rapids, Iowa for a period of at least two years following the closing date of the acquisition.

The McLeod Acquisition Agreement also provides the Seller with an exclusive right of first negotiation for a limited period of time in the event that Yell Group plc decides to sell McLeod to a third party and McLeod is operating as a stand-alone business and is not integrated with the businesses of Yell Group Limited or any of its subsidiaries.

McLeod Operating Agreement

On 28 April 2003, Yellow Book/McLeod Holdings, Inc. (Yellow Book/McLeod) assigned its rights under the Publishing, Branding and Operating Agreement, dated as of 16 April 2002 (the Branding Agreement), between Yellow Book/McLeod and McLeodUSA Incorporated and McLeodUSA Telecommunications Services, Inc. (referred to together as McLeodUSA), to Yellow Book USA, Inc. (Yellow Book). Yellow Book then entered into an Amended and Restated Publishing, Branding and Operating Agreement, dated as of 29 April 2003 (the Amended Branding Agreement), with McLeodUSA.

Under the Branding Agreement, Yellow Book had been obliged to publish the directories acquired from McLeodUSA using the McLeod trademarks and trade dress on the covers. Any directories subsequently acquired in states where McLeod provided telephone service as of the date of the Branding Agreement (McLeodUSA Service States) also had to be published with the McLeod trademarks and trade dress on the cover. The Branding Agreement also contained restrictions on changing the geographic coverage of the affected directories and on discontinuing publication of the affected directories, and McLeodUSA had the right to ask Yellow Book to publish additional directories in McLeodUSA Service States. If Yellow Book declined to publish such additional directories, Yellow Book would be precluded from publishing directories in the relevant geographic area for the term of the Branding Agreement. McLeodUSA also received up to eight pages in the community section of many of the directories. The term of the Branding Agreement was five years from the effective date, with automatic renewals of two years, unless one of the parties sent notice of termination at least one year prior to the expiration of the term. McLeodUSA paid Yellow Book an annual fee of $1,900,000, plus a fee for advertisements equal to Yellow Books cost of producing the advertisements

The Amended Branding Agreement does not require Yellow Book to publish directories with the McLeod trademarks and trade dress. Instead, McLeodUSA receives a credit card-sized advertisement on the cover of each directory published in a McLeodUSA Service State. McLeodUSA also receives up to four pages in the community section of each directory and advertisements under various headings. The Amended Branding Agreement does not contain any restrictions on changing the geographic coverage of the affected directories or on discontinuing publication of any of the directories. However, Yellow Book has agreed to maintain a total circulation of at least thirty million with respect to the directories in the McLeodUSA Service States. In the event McLeodUSA wants Yellow Book to publish additional directories in the McLeodUSA Service States, the parties will discuss the feasibility of publishing such additional directories, but Yellow Book is no longer precluded from publishing in the relevant geographic areas if it declines to publish the additional directories. McLeodUSA no longer pays an annual fee to Yellow Book, nor does it pay for its advertisements in the directories. The term of the Amended Branding Agreement commences 29 April 2003 and expires 29 April 2008.

Yellow Book USA entered into an agreement with NDC Holdings II, Inc. (NDC Inc.), the stockholders of NDC Inc. and Three Cities Research Inc. on 10 December 2002 (the NDC Acquisition Agreement) pursuant to which Yellow Book USA agreed to

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents purchase all issued and outstanding shares of capital stock in NDC Inc. free and clear of all liens in consideration for the payment of US$69,000,000.

The NDC Acquisition Agreement contains certain representations and warranties given on an indemnity basis by the stockholders of NDC Inc. to Yellow Book USA relating to, amongst other things, liabilities, indebtedness, material adverse change, employees, tax, intellectual property and commercial contracts. Yellow Book USA also gave certain representations and warranties to the stockholders of NDC Inc. on an indemnity basis in relation to, amongst other things, due incorporation and authorisation. The period during which the parties can make a warranty claim expires on 30 June 2004 with the exception of certain specified warranties given to Yellow Book USA in respect of which the warranty period does not expire until 90 days after the applicable statute of limitations for such relevant claim.

D. Exchange Controls

None.

E. Taxation

European Directive on the Taxation of Savings Income

The European Union has adopted a directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed that Member States will be required from a date not earlier than 1 January 2005 to provide to the tax authorities of other Member States details of payments of interest and other similar income paid by a person to an individual in another Member State, except that Austria, Belgium and Luxembourg will instead impose a withholding system for a transitional period unless during such period they elect otherwise.

United States

US Federal Income Tax Considerations

This is a discussion of the important US federal income tax consequences of purchasing, holding and disposing of the senior sterling notes, the senior dollar notes and the senior discount dollar notes. Except to the limited extent discussed below, this discussion only applies to a US holder, defined as a beneficial owner of a note that is:

a citizen or individual resident of the United States;

a corporation (or other entity treated as a corporation for US federal income tax purposes) created or organised under the laws of the United States or any political subdivision thereof or therein;

an estate, the income of which is includible in gross income for US federal income tax purposes regardless of the source; or

a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control all substantial decisions of the trust.

This discussion is for general information only and does not address all aspects of US federal income taxation that may be relevant to a particular US holder based on such holders particular circumstances (including the potential application of the US alternative minimum tax), nor does it address any aspect of state, local or non-US tax laws, or the possible application of US federal gift or estate taxes. This discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold Notes through a partnership or other pass-through entity. This discussion does not address the US federal income tax consequences to US holders that are subject to special treatment, including US holders that:

are broker-dealers, traders, insurance companies, tax-exempt organisations, financial institutions or financial services entities;

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document hold notes as part of a straddle, hedge or conversion transaction with other investments; or

own at least 10% of the issuers voting stock (directly, indirectly or constructively).

This discussion considers only US holders that are beneficial owners of the notes that will own Notes as capital assets and whose functional currency is the dollar. The discussion is generally limited to the tax consequences to holders who purchase Notes in connection with their initial issue at the issue price, and does not address any special rules that may apply if the Notes are called before the maturity date. For this purpose the issue price of a note is the first price at which a substantial amount of the Notes are sold to the public for money, excluding sales to bond houses, brokers or similar persons or organisations acting in the capacity of underwriters, placement agents or wholesalers. It does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction.

This discussion is based upon the US Internal Revenue Code, existing and proposed regulations thereunder, and current administrative rulings and court decisions. All of the foregoing are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion.

You should consult your tax adviser concerning the application of US federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to your particular situation.

Interest and Original Issue Discount

Stated interest on the senior sterling notes and the senior dollar notes. Interest paid on a senior dollar note (including any amounts paid in respect of the guarantees) will be taxable to a US holder as ordinary income at the time it accrues or is received in accordance with such holders method of accounting for US federal income tax purposes.

Interest paid on a senior sterling note (including any amounts paid in respect of the guarantees) also will be taxable to a US holder as ordinary income at the time it accrues or is received in accordance with such holders method of accounting for US federal income tax purposes. A US holder of a senior sterling note that uses the cash method of accounting measures interest received by translating the amount of pounds sterling into dollars at the spot rate on the date of receipt or payment. A US holder of a senior sterling note that uses the accrual method of accounting is generally required to determine interest income received using either of two methods. Under the first method, the dollar value of interest accrued is translated at the average rate for the interest accrual period (or, with respect to an accrual period that spans two taxable years, the partial period within the taxable year). Under the second method, a US holder can make an election (which must be applied consistently to all debt instruments from year to year and may not be revoked without the consent of the US Internal Revenue Service) to accrue interest on a senior sterling note at the pounds sterling spot rate on the last day of an interest accrual period or, if the last day of an accrual period is within five business days of receipt, the spot rate on the date of receipt. A US holder will recognise exchange gain or loss, as the case may be, on the receipt of pounds sterling to the extent that the exchange rate on the date payment is received differs from the rate applicable to the accrual of that income. This foreign currency gain or loss will generally be treated as ordinary income or loss, and sourced to the United States for foreign tax credit purposes.

Pounds sterling received as interest on the senior sterling notes will have a tax basis equal to its dollar value at the time the interest payment is received. Gain or loss, if any, realised by a US holder on a sale or other disposition of that foreign currency will be ordinary income or loss and will generally be income from sources within the United States for foreign tax credit purposes.

Interest income received by a US holder on the senior sterling notes or senior dollar notes that is not subject to a withholding tax of 5% or more will generally be foreign source passive income for purposes of computing the US foreign tax credit limitation.

Original issue discount on the senior discount dollar notes. For the reasons set forth below, the senior discount dollar notes will be considered to have been issued with original issue discount (OID). OID arises when the stated redemption price at maturity of a debt instrument exceeds its issue price (as defined above). For this purpose, the stated redemption price at maturity will equal the stated principal and the total amount of interest provided for over the term of the notes other than qualified stated interest (which is defined as interest that is unconditionally payable at least annually throughout the term of the debt instrument). Because none of the interest provided for under the terms of the senior discount dollar notes is unconditionally payable at least annually, all of the interest on the senior discount dollar notes is added to the stated redemption price at maturity. Consequently, the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents senior discount dollar notes will be considered to have been issued with OID equal to the difference between the price at which a substantial amount of the senior discount dollar notes were sold to the public and the stated principal due on those notes plus the sum of all of the interest payments provided for in the senior discount dollar notes.

Each US holder of a senior discount dollar note will generally be required to accrue and include OID in income on an annual basis in advance of the receipt of cash attributable to such income, whether such US holder uses the cash or accrual method of accounting. The amount of OID that must be included in gross income for the taxable year will equal the sum of the daily portions of OID for each day of the taxable year on which the US holder held the senior discount dollar note. The daily portion of OID required to be included in a US holders gross income in a taxable year is determined under a constant yield to maturity method by allocating to each day during the taxable year on which the US holder holds the senior discount dollar note a ratable portion of the OID on the note attributable to the accrual period (i.e. the interval between compounding dates) in which such day is included. The amount of OID allocable to each accrual period will equal the product of the adjusted issue price of the senior discount dollar note at the beginning of the accrual period (i.e. the original issue price plus previously accrued OID minus previous cash payments) multiplied by the yield to maturity of the note (properly adjusted for the length of the accrual period). Finally, the yield to maturity of a senior discount dollar note is that discount rate which, when used in computing the present value of all principal and stated interest payments to be made under the senior discount dollar note, produces an amount equal to the issue price of that senior discount dollar note. The amount of OID included in income by a US holder will be treated as interest income. Thus, OID received from the issuer as well as any payments received pursuant to the guarantees that is not subject to a withholding tax of 5% or more will generally be foreign source passive income for purposes of computing the US foreign tax credit limitation.

Additional Amounts and Special Interest

We believe the likelihood that the issuer will pay additional amounts or special interest is remote or incidental (within the meaning of the applicable US Treasury regulations). In any event, a US holder will be required to treat the gross amount of any Additional Amounts or Special Interest as ordinary interest income at the time such amount is received or accrued in accordance with such US holders method of accounting for tax purposes. Consequently, the amount a US holder will include in gross income with respect to a note could exceed the amount includible by the US holder as stated interest.

Dispositions of Notes

Senior dollar notes and senior discount dollar notes. Unless a non-recognition provision applies, a US holder will generally recognise gain or loss on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note equal to the difference between:

the amount of cash received plus the fair market value of any property received on the sale, exchange, repayment or other disposition (other than amounts attributable to accrued interest, which will be taxable as ordinary interest income); and

the US holders adjusted tax basis in the note.

A US holders adjusted tax basis in a senior dollar note or a senior discount dollar note generally will equal the cost of the note to the US holder (net of accrued interest), and increased by amounts includible in income as OID. Because the senior dollar notes and senior discount dollar notes are held as a capital asset, such gain or loss will generally constitute capital gain or loss and will be long-term capital gain or loss if the notes are held for longer than one year. If the US holder is an individual, any capital gain generally will be subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to certain limitations. Any gain recognised by a US holder on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note will generally be treated as US source income for purposes of computing the US foreign tax credit limitation. Any loss recognised by a US holder on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note generally will be treated as US source loss.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Senior sterling notes. Gain or loss recognised by a US holder on the sale, exchange, repayment or other disposition of a senior sterling note will generally be computed in the same way as gain or loss on the sale, exchange, repayment or other disposition of a senior dollar note. For this purpose, however, the cost of a senior sterling note to a US holder will be the dollar value of the pound sterling purchase price, translated at the spot rate of the pound sterling on the date of purchase (or, in some cases, on the settlement

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Table of Contents date). The conversion of dollars into pounds sterling and the immediate use of those pounds sterling to purchase a senior sterling note generally will not result in a taxable gain or loss to the US holder. A US holder will have a tax basis in any pounds sterling received on the sale, exchange, repayment or other disposition of a senior sterling note equal to the dollar value of the pound sterling on the date of receipt.

The holding period for a sterling senior note, as well as the source of gain or loss recognised on the sale, exchange, repayment or other disposition of such a note, generally will be the same as for a senior dollar note. However, upon the sale, exchange, repayment or other disposition of a senior sterling note, the foreign currency amount realised will be considered first to be the payment of accrued but unpaid interest (on which exchange gain or loss is recognised as described above), then as accrued but unpaid original issue discount (on which exchange gain or loss is recognised as described above) and finally as a payment of principal. With respect to such payment of principal, (i) gain or loss is computed in the foreign currency and translated on the date of sale, exchange, repayment or other disposition and (ii) exchange gain or loss is separately computed on the foreign currency amount of the purchase price. A US holder will recognise exchange gain or loss measured by the difference between the currency exchange rate on the date of sale, exchange, repayment or other disposition and the exchange rate on the date that the senior sterling note was acquired. Exchange gain or loss computed on accrued interest and principal is recognised, however, only to the extent of total gain or loss on the transaction. For purposes of determining the total gain or loss on the transaction, a US holders tax basis in the note will generally equal the dollar cost of the note (as described above), increased by the dollar amounts includible in income as accrued interest or OID and reduced by the dollar amount of any payments other than payments of qualified stated interest. Exchange gain or loss is generally treated as US source income or loss.

Information Reporting and Backup Withholding

The amount of interest (including OID) and principal paid or accrued on the notes to a US holder (other than corporations and other exempt recipients) will be reported to the US Internal Revenue Service. Under the Internal Revenue Code, a US holder of a note may be subject, under certain circumstances, to backup withholding currently at a rate of 28% with respect to interest payments thereon or the gross proceeds from a sale, exchange or other disposition (including repayment of principal) thereof. Backup withholding generally applies only if the US holder:

fails to furnish his or her social security or other taxpayer identification number certified under penalties of perjury within a reasonable time after the request therefore;

furnishes an incorrect taxpayer identification number;

fails to report properly interest or OID; or

fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is the correct number and that such US holder is not subject to backup withholding.

A US holder of notes who does not provide his, her or its correct taxpayer identification number may be subject to penalties imposed by the US Internal Revenue Service. Any amount withheld from a payment to a US holder under backup withholding rules will be refunded or allowed as a credit against such holders US federal income tax liability, provided that the required information is furnished to the US Internal Revenue Service. A US holder of a note should consult their tax adviser as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption.

United Kingdom

UK Tax Consequences

The following summary describes certain UK tax consequences of the ownership of the Notes but does not purport to be comprehensive. Except where expressly stated, the summary relates only to the position of those persons who are the absolute beneficial owners of their Notes and the interest thereon and may not apply to special situations, such as those of dealers in securities. It is not intended to apply to persons

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document other than companies. Furthermore, the discussion below is generally based upon provisions of UK tax law and UK Inland Revenue practice as at the date hereof. These provisions may be repeated, revoked or modified (possibly with retrospective effect) so as to result in UK tax consequences different from those described below.

Persons considering the purchase, ownership or disposition of the Notes should consult their own tax advisers concerning UK tax consequences in the light of their particular situations as well as any consequences arising under the law of any other relevant tax jurisdiction. No representations with respect to the tax consequences to any particular holder of Notes are made hereby.

Interest on the Notes

The notes will constitute quoted Eurobonds within the meaning of section 349(4) of the UK Income and Corporation Taxes Act 1988 (ICTA) provided they are listed on a recognised stock exchange within the meaning of section 841 of ICTA. The Luxembourg Stock Exchange is currently a recognised stock exchange for these purposes. Accordingly, once the Notes are listed on the Luxembourg Stock Exchange (and provided they remain so listed), payments of interest on the Notes may be made without withholding on account of UK income tax.

Interest on the Notes constitutes UK source income for UK tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding except in the hands of a holder who is exempt from UK income tax under the terms of an applicable double taxation treaty or otherwise. However, interest on a UK source received without deduction or withholding on account of UK tax will not be chargeable to UK tax in the hands of a holder of Notes who is not resident for tax purposes in the United Kingdom unless that holder of Notes carries on a trade, profession or vocation in the United Kingdom through a UK branch or agency in connection with which the interest is received or to which the Notes are attributable. There are exemptions for interest received by certain categories of agents (such as brokers and investment managers).

Accrued Income Scheme-Individual Noteholders

For the purposes of the provisions known as the Accrued Income Scheme, a transfer of a Note by a holder who is resident or ordinarily resident in the United Kingdom or a holder who carries on a trade in the United Kingdom through a branch or agency to which the Note is attributable, may give rise to a charge to tax on income in respect of an amount as is just and reasonable.

Taxation of Chargeable Gains-Individual Noteholders

For the purposes of United Kingdom taxation of chargeable gains, Notes which are denominated in Sterling are expected to be treated as qualifying corporate bonds by the UK Inland Revenue. Accordingly, for UK chargeable gains tax purposes, no chargeable gain or allowable loss should arise on the disposal of Notes which are so denominated.

Notes which are denominated in Euro will not be qualifying corporate bonds for the purposes of United Kingdom taxation of chargeable gains. Accordingly, a holder of Notes which are so denominated who is resident or ordinarily resident in the United Kingdom, or who carries on a trade in the United Kingdom to which the holding of the Notes is attributable, may realise a chargeable gain or allowable loss on the disposal of their holding of Notes, including a gain or loss which is attributable to currency exchange differences.

UK Corporation Tax Payers

Holders of the Notes within the charge to UK corporation tax will not be subject to the methods of taxation set out in Accrued Income SchemeIndividual Noteholders. Any profits and gains (including interest) and profits or gains arising from currency fluctuations arising from the Notes in the hands of those holders will generally be charged to tax as income in each accounting period on a basis reflecting the treatment in the statutory accounts of the holders, calculated in accordance the holders authorized accounting methods.

Stamp Duty and Stamp Duty Reserve Tax

No stamp duty or stamp duty reserve tax is payable on the issuance or transfer of the Notes.

UK Corporation Taxpayers

In respect of holders of Notes which are within the charge to UK corporation tax will not be subject to the methods of taxation set out in Accrued Income SchemeIndividual Noteholders. Any returns, profits or gains (including interest and discount) arising from the notes or any fluctuation in their value (whether attributable to currency fluctuations or otherwise) will generally be charged to tax as income in each accounting period on a basis reflecting the treatment in the statutory accounts of such holders, calculated in accordance with the holders authorised accounting method.

Stamp Duty and Stamp Duty Reserve Tax

No stamp duty or stamp duty reserve tax is payable on the issue or transfer of the Notes.

Prospective purchasers of the Notes who are in any doubt as to their tax position or who may be subject to tax in other jurisdictions should consult their own tax advisers.

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), applicable to foreign private issuers and fulfill the obligation with respect to such requirements by filing reports with the United States Securities and Exchange Commission (the SEC). You may read and copy any document we file with the SEC without charge at the SECs public reference room at 450 Fifth Street, N.W., Washington, DC 20549. Copies of such material may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates. Please call the SEC at l-800-SEC-0330 for further information on the public reference room.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we are not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as US companies whose securities are registered under the Exchange Act. A copy of each report submitted in accordance with applicable US securities laws is available for public review at our principal executive offices.

I. Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market-related Risks

Interest is payable under our senior credit facilities at a variable rate. We could, therefore, be adversely affected if interest rates were to rise significantly. Under the senior credit facilities agreement dated 8 July 2003 we are required to have fixed or capped interest on at least 50% of net interest payments during the 21 months following each month end. This requirement ceases once net debt falls below 3.5 times EBITDA, as defined in the credit facilities agreement. We have fixed interest on nearly 55% of the indebtedness under the senior credit facilities using interest rate swaps falling to 50% over the period to March 2006, with a review of this strategy on a quarterly basis. When combined with the fixed rate senior notes, we have fixed our interest rates on approximately 64% of our total gross debt until March 2006, falling to approximately 30% thereafter. At 31 March 2004, we had £3.2 million net unrecognised losses on these instruments that will be recognised when the interest is paid.

All of these instruments are entered into for hedging purposes and, under UK GAAP, gains and losses on these instruments are deferred and only recognised in income when the underlying transaction is recorded. Such instruments have not been designated and do not qualify for hedge accounting under the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No 133 Accounting for Derivative Instruments and Hedging Activities for US GAAP purposes.

All significant cash inflows and outflows associated with our operations in the United Kingdom are denominated in pounds sterling, and all significant cash inflows and outflows associated with our operations in the United States are denominated in US dollars. However, our financial statements are presented in pounds sterling, and changes in the exchange rate between the US dollar and pounds sterling will affect the translation of the results of our operations into pounds sterling. The composition of our debt partially hedges exchange rate fluctuations, because 37.2% of our net third-party debt and 30.7% of our net interest expense are denominated in US dollars, thereby reducing our US EBITDA exposure by approximately 30%. We do not currently intend to hedge any foreign exchange translation rate risk relating to US dollar-denominated notes or other US financial liabilities, although we will continue to review this practice.

At 31 March 2004, we had £462.0 million of borrowings denominated in US dollars net of deferred financing fees, and £941.6 million of borrowings, also net of deferred financing fees, that accrue interest at variable rates, before taking into account hedging arrangements. The following examples illustrate the effect certain changes in foreign exchange rates and interest rates would have had in the 2004 financial year. The following discussion of estimated amounts generated from the sensitivity analysis is forward-looking and involves risks and uncertainties. If the amount or mix of long-term borrowings is different, then the following examples may not be indicative of the effects of changing exchange rates and interest rates.

If the variable interest rates had been a full percentage point higher or lower with no change in foreign exchange rates, then the interest payable with respect to our variable-rate indebtedness in the 2004 financial year would have been £4.5 million higher or lower, respectively, taking into account our hedging arrangements, or £9.9 million higher or lower, respectively, without taking into account hedging arrangements.

If the average exchange rate of the US dollar as measured against the pound sterling had been 10% higher or lower, with no change in variable rates of interest, then the interest payable in the 2004 financial year would have been approximately £3.2 million lower or £3.9 million higher, respectively.

Our exposure to interest rate fluctuations will depend on the amount of variable-rate indebtedness that we have outstanding and the extent of any hedging arrangements that we put in place. Similarly, our exposure to currency fluctuations will depend on the mix of US dollar and pounds sterling-denominated indebtedness and the extent of any hedging arrangements.

For further information on financial instruments and our risk management see note 17 of the notes to the financial statements.

Not applicable.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on their review as of the end of the period covered by this annual report of the Groups disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the Groups current disclosure controls and procedures are effective to ensure that material information regarding the Group is recorded, processed, summarised and reported in a timely manner and that the information is accumulated and communicated to management to allow timely decisions regarding required disclosure.

Change in Internal Control over Financial Reporting

During the period covered by this annual report, based on the assessment of management, there were no changes in the Groups internal control over financial reporting or in other factors that could significantly affect this control that materially affected, or that are reasonably likely to materially affect, the Groups internal control over financial reporting. Nor has management identified any material weaknesses in the Groups internal control over financial reporting.

ITEM 16. [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that John Coghlan is an audit committee financial expert as defined in Item 16A of the SECs Form 20-F.

ITEM 16B. CODE OF ETHICS

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Our finance code of ethics is filed as Exhibit 14.1 to this annual report.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following fees were paid or are payable to the Yell Groups auditors for the years ended 31 March 2003 and 31 March 2004:

Consolidated (Successor) Year ended Year ended 31 March 31 March 2003 2004 £ £

Audit-related fees 0.1 0.2

Tax fees 0.3 1.1

All other fees(a) 5.2 4.3

Total auditors remuneration 6.2 6.2

(a) Fees in relation to accounting and tax advice of our parent companys postponed IPO in the year ended 31 March 2003 (£4.3 million) and the global offer in the year ended 31 March 2004 (£3.6 million) were approved and incurred prior to the parent companys flotation. Certain other fees in relation to due diligence totalling £0.5 million were approved and incurred in the year ended 31 March 2004 prior to our parent companys flotation.

Prior to the acquisition on 22 June 2001, the audits of the combined financial statements of the operations comprising the Yell Group were carried out in connection with a proposed demerger of the Yell Group by BT. The costs of these audits (£0.7 million) was borne by BT and are not included in the auditors remuneration disclosed above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASER

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS

We have responded to Item 18. Financial Statements in lieu of this item.

ITEM 18. FINANCIAL STATEMENTS

Our combined and consolidated financial statements, together with the reports thereon by the independent auditors, are filed as part of this annual report as pages F-2 to F-64. An index to these pages is given on page F-1.

ITEM 19. EXHIBITS

The exhibits filed with or incorporated by reference into this annual report are listed below.

1.1 Deed of Incorporation of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.1 to Yell Finance B.V.s Registration Statement on Form F-4 filed with the United States Securities and Exchange Commission on August 29, 2001, declared effective on August 30, 2001 (the Exchange Offer Registration Statement)).*

1.2 Articles of Association of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.2 to the Exchange Offer Registration Statement).*

1.3 Memorandum of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.3 to the Exchange Offer Registration Statement).*

1.4 Articles of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.4 to the Exchange Offer Registration Statement).*

2.1 Indenture relating to 10 ¾% Senior Sterling Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Exchange Offer Registration Statement).*

2.2 Indenture relating to 10 ¾% Senior Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.2 to the Exchange Offer Registration Statement).*

2.3 Indenture relating to 13 ½% Senior Discount Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.3 to the Exchange Offer Registration Statement).*

2.4 Registration Rights Agreement, dated August 6, 2001, between Yell Finance B.V. and Yellow Pages Limited, as Guarantor, and Merrill Lynch International, Deutsche Bank AG London, CIBC World Markets plc, and the other Initial Purchasers as listed on Schedule A of the Purchase Agreement, as Initial Purchasers (incorporated herein by reference to Exhibit 4.4 to the Exchange Offer Registration Statement).*

2.5 Subordination Agreement, dated August 6, 2001, between Yell Finance B.V., Yell Group Limited, as Parent and The Bank of New York, as Trustee (incorporated herein by reference to Exhibit 4.5 to the Exchange Offer Registration Statement).*

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (The Intercreditor Deed and amendment prior to November 11, 2002 incorporated herein by reference to Exhibit 2.6 to Yell Finance B.V.s annual report on Form 20-F filed with the United States Securities and Exchange Commission on July 19, 2002 (the 2002 Annual Report)* and the amendment of November 11, 2002.*

2.7 Form of Sterling Note (incorporated herein by reference to Exhibit 4.7 to the Exchange Offer Registration Statement).*

2.8 Form of Dollar Note (incorporated herein by reference to Exhibit 4.8 to the Exchange Offer Registration Statement).*

2.9 Form of Discount Dollar Note (incorporated herein by reference to Exhibit 4.9 to the Exchange Offer Registration Statement).*

2.10 Form of Guarantee (included in Exhibits 2.7, 2.8 and 2.9) (incorporated herein by reference to Exhibits 4.7, 4.8 and 4.9 to the Exchange Offer Registration Statement).*

2.11 First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 ¾% Senior Sterling Notes due 2011 incorporated herein by reference to Exhibit 4.1 to the Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.11 to the 2002 Annual Report).*

2.12 First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 ¾% Senior Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.2 to the Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.12 to the 2002 Annual Report).*

2.13 First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 13 ½% Senior Discount Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.3 to the Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.13 to the 2002 Annual Report).*

4.1 Senior Facilities Agreement dated 8 July 2003 (as amended and restated on 12 August 2003 and as further amended and restated on 26 August 2003) among, inter alios, Yell Group plc, the subsidiaries identified therein as borrowers and guarantors, ABN AMRO Bank N.V. and HSBC Bank plc as joint mandated lead arrangers, the financial institutions named therein as lenders and HSBC Bank plc as facility agent and security trustee.**

4.2 Security Agreement, dated June 22, 2001, between Yasmin Two (US) Inc. (now known as Yellow Book Holdings, Inc.), Yasmin One (US), Inc. (now known as Yellow Book Group Inc.), Yellow Book USA, Inc., Yellow Book GP, LLC, Yellow Book of Florida Directories, L.P., Yellow Book of Illinois, LLC, Yellow Book Mid-Atlantic, L.P., Yellow Book of New York, Inc., Yellow Book Southern Directories, LLC, Yellow Book of Pennsylvania, Inc., and Yellow Book Delaware Inc. (incorporated herein by reference to Exhibit 10.2 to the Exchange Offer Registration Statement).*

4.3 Keep-Well Agreement, dated August 6, 2001 as amended and restated on April 6, 2002, between Yell Group Limited and Yell Finance B.V. (incorporated herein by reference to Exhibit 10.3 to the Exchange Offer Registration Statement) (incorporated herein by reference to Exhibit 4.3 to the 2002 Annual Report).*

4.4 Yellow Book Last Acquisition Agreement dated January 19, 2002 among McLeodUSA Inc. as Parent, Yell Group Limited (now Yell Group plc) and McLeodUSA Holdings, Inc as Seller (incorporated herein by reference to Exhibit 4.8 to the 2002 Annual Report).*

4.5 McLeod Operating Agreement dated April 16, 2002 (as amended and restated April 28, 2003) among Yell Group Limited (now Yell Group plc), McLeodUSA Inc. and McLeodUSA Telecommunications Services, Inc (incorporated herein by reference to Exhibit 4.9 to the 2002 Annual Report)* and the amendment and restatement of April 28, 2003 filed herewith.*

4.6 Directors Service Contract, dated 10 July 2003, between John Condron and Yell Group plc. **

4.7 Directors Service Contract, dated 10 July 2003, between John Davis and Yell Group plc. **

4.8 Stock Sale Agreement, dated as of December 10, 2002, by and among NDC Holdings II, Inc., The Stockholders of NDC Holdings II, Inc., Three Cities Research, Inc., as Sellers Representative and Yellow Book USA, Inc.*

8.1 Subsidiaries of Yell Finance B.V. (please see list of principal subsidiaries under Item 4.C. Information on the CompanyOrganizational Structure of this annual report on Form 20-F on pages 36).

12.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Condron dated June 8, 2004.**

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 12.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Davis dated June 8, 2004.**

13.1 Chief Executive Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

13.2 Chief Financial Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

14.1 Code of Ethics for the Chief Executive and Senior Financial Officers.**

* Incorporated by reference. ** Filed herewith.

100

SIGNATURES

Each registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.

YELL FINANCE B.V.

/s/ JOHN CONDRON By:

John Condron Director and Chief Executive Officer

YELL FINANCE B.V.

/s/ JOHN DAVIS By:

John Davis Director and Chief Financial Officer

YELLOW PAGES LIMITED

/s/ JOHN CONDRON By:

John Condron Director and Chief Executive Officer

YELLOW PAGES LIMITED

/s/ JOHN DAVIS By:

John Davis Director and Chief Financial Officer

Date: June 8, 2004

101

INDEX TO FINANCIAL STATEMENTS

Page

YELL GROUP

Statement of Managements Responsibilities and Reports of Independent Auditors F-2

Audited Combined and Consolidated Financial Statements

Combined Profit and Loss Accounts for the period from 1 April 2001 to 22 June 2001, and the Consolidated Profit and Loss Accounts for the period from 22 June 2001 to 31 March 2002, the years ended 31 March 2003 and 2004 F-4

Combined Cash Flow Statements for the period from 1 April 2001 to 22 June 2001, and the Consolidated Cash Flow Statements for the period from 22 June 2001 to 31 March 2002, the years ended 31 March 2003 and 2004 F-5

Consolidated Balance Sheets at 31 March 2003 and 2004 F-6

Notes to the Financial Statements F-7

F-1

YELL GROUP

STATEMENT OF MANAGEMENTS RESPONSIBILITIES

The following statement, which should be read in conjunction with the Reports of Independent Auditors set out below, is made with a view to distinguishing for shareholders the respective responsibilities of the Management and of the Independent Auditors in relation to the combined and consolidated financial statements.

It is the responsibility of the Management to prepare financial statements for each period which present fairly the state of affairs of the Yell Group as at the end of the financial period and the profit or loss for that period. The Management confirm that applicable accounting standards have been followed, and that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the financial statements. They are also responsible for maintaining adequate accounting records, for safeguarding the assets of the Yell Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of the Yell Group.

We have audited the accompanying consolidated balance sheets of the Yell Group at 31 March 2003 and 2004 and the related consolidated profit and loss accounts, statements of total recognised gains and losses and cash flow statements for the period from 22 June 2001 to 31 March 2002 and for the years ended 31 March 2003 and 31 March 2004, all expressed in pounds sterling. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Yell Group at 31 March 2003 and 2004 and the consolidated results of its operations and its cash flows for the period from 22 June 2001 to 31 March 2002 and the years ended 31 March 2003 and 31 March 2004 in conformity with accounting principles generally accepted in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 27 to the financial statements.

PricewaterhouseCoopers LLP London, England 8 June 2004

F-2

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of the Yell Group.

We have audited the accompanying combined profit and loss accounts, statements of total recognised gains and losses and cash flow statements of the Yell Group, as defined in note 1 to the financial statements, for the period from 1 April 2001 to 22 June 2001, all expressed in pounds sterling. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.

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

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined results of operations and cash flows of the Yell Group for the period from 1 April 2001 to 22 June 2001 in conformity with accounting principles generally accepted in the United Kingdom.

Accounting principles generally accepted in the United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of combined profit expressed in pounds sterling for the period from 1 April 2001 to 22 June 2001 to the extent summarised in note 27 to the financial statements.

As described in note 1 to these financial statements, during the period from 1 April 2001 to 22 June 2001, the combined revenues and expenses of the Yell Group have been carved out of British Telecommunications plc. The Yell Group further had significant transactions and relationships with British Telecommunications plc and its affiliates during the period from 1 April 2001 to 22 June 2001. Accordingly, the combined results of operations and cash flows of the Yell Group reflected in the accompanying financial statements for the period from 1 April 2001 to 22 June 2001 are not necessarily indicative of those that would have resulted had the Yell Group operated on a separate, stand- alone basis.

PricewaterhouseCoopers London, England 15 July 2002

F-3

YELL GROUP

COMBINED AND CONSOLIDATED PROFIT AND LOSS ACCOUNTS

Continuing Operations

Combined (Predecessor) Consolidated (Successor) 22 June 2001 1 April to to Year ended Year ended 22 June 31 March 31 March 31 March Notes 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Turnover 2 169.1 696.3 1,114.0 1,186.9

Cost of sales (71.1 ) (315.9 ) (509.9 ) (552.9 )

Gross profit 98.0 380.4 604.1 634.0

Distribution costs (5.5 ) (18.5 ) (36.0 ) (34.5 )

Administrative costs

Ongoing activities (56.6 ) (243.2 ) (369.7 ) (359.0 )

Exceptional items 4 (3.0 ) (15.0 ) (90.1 )

(59.6 ) (243.2 ) (384.7 ) (449.1 )

Operating profit 2, 3 32.9 118.7 183.4 150.4

Net interest payable

Ongoing activities (5.8 ) (158.6 ) (236.6 ) (136.1 )

6 (5.8 ) (158.6 ) (236.6 ) (194.5 )

Profit (loss) on ordinary activities before taxation 27.1 (39.9 ) (53.2 ) (44.1 )

Tax (charge) credit on profit (loss) on ordinary activities

Before exceptional items (11.3 ) (7.3 ) 10.3 (44.2 )

On exceptional items 4 2.3 37.2

Taxation 7 (11.3 ) (7.3 ) 12.6 (7.0 )

Profit (loss) for the financial period 20 15.8 (47.2 ) (40.6 ) (51.1 )

The capital structure of the Yell Group changed as a result of the Yell acquisition on 22 June 2001, and, consequently, net interest payable and goodwill amortisation are significantly different in periods following that date when compared to periods prior to that date.

STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES

Combined (Predecessor) Consolidated (Successor) 1 April to 22 June 2001 Year ended Year ended 22 June to 31 March 31 March 31 March Notes 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Profit (loss) for the financial period 15.8 (47.2 ) (40.6 ) (51.1 )

Currency movements 20 0.8 (3.7 ) (34.0 ) (65.0 )

Total recognised gains (losses) for the financial period 16.6 (50.9 ) (74.6 ) (116.1 )

The accompanying notes form an integral part of these financial statements.

YELL GROUP

COMBINED AND CONSOLIDATED CASH FLOW STATEMENTS

Combined (Predecessor) Consolidated (Successor) 22 June 2001 to 1 April to 31 Year ended Year ended 22 June March 31 March 31 March Notes 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Net cash inflow from operating activities 37.6 158.7 309.1 253.5

Returns on investments and servicing of finance

Net interest paid (8.8 ) (85.9 ) (139.5 ) (141.8 )

Redemption premium paid (19.7 )

Finance fees paid (49.4 ) (16.1 ) (16.4 )

Net cash outflow from returns on investments and servicing of finance (8.8 ) (135.3 ) (155.6 ) (177.9 )

Taxation (0.4 ) (9.7 ) (13.7 )

Capital expenditure and financial investment

Purchase of tangible fixed assets (5.2 ) (9.7 ) (16.0 ) (24.5 )

Purchase of shares in parent company (5.8 )

Payment for assets transferred from BT (11.7 )

Net cash outflow for capital expenditure and financial investment (16.9 ) (8.6 ) (16.0 ) (30.3 )

Acquisitions

Purchase of subsidiary undertakings, net of cash acquired 8 (1,906.4) (470.9 ) (108.9 )

Net cash outflow for acquisitions (1,906.4) (470.9 ) (108.9 )

Net cash inflow (outflow) before financing 11.9 (1,892.0) (343.1 ) (77.3 )

Financing

Issue of ordinary share capital 20 1.0 0.1 304.4

New loans issued 12.4 2,531.1 485.7 1,082.5

Borrowings repaid (540.0 ) (211.9 ) (1,318.4 )

Net cash inflow from financing 12.4 1,992.1 273.9 68.5

Increase (decrease) in net cash in the period 24.3 100.1 (69.2 ) (8.8 )

Decrease (increase) in net debt resulting from cash flows 9 11.9 (1,841.6) (326.9 ) 162.9

Combined (Predecessor) Consolidated (Successor) 22 June 1 April to 2001 to Year ended Year ended 22 June 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Total operating profit 32.9 118.7 183.4 150.4

Depreciation 4.4 15.8 22.5 22.9

Goodwill amortisation 5.4 65.3 98.4 96.7

(Increase) decrease in stocks (12.1 ) 7.4 (23.0 ) (19.5 )

Decrease (increase) in debtors 3.4 (52.8 ) (35.0 ) (3.8 )

Increase (decrease) in creditors 3.6 3.8 58.4 (3.7 )

Other 0.5 4.4 10.5

Net cash inflow from operating activities 37.6 158.7 309.1 253.5

The accompanying notes form an integral part of these financial statements.

F-5

YELL GROUP

CONSOLIDATED BALANCE SHEETS

At 31 At 31 March March Notes 2003 2004 £ £ (in millions)

Fixed assets

Intangible assets 10 1,824.1 1,725.3

Tangible assets 11 47.1 45.9

Investment 12 1.9 7.6

Total fixed assets 1,873.1 1,778.8

Current assets

Stocks 13 145.8 151.9

Debtors 14 461.4 460.6

Cash at bank and in hand 30.0 18.4

Total current assets 637.2 630.9

Creditors: amounts falling due within one year

Loans and other borrowings 16 (112.8 ) (127.7 )

Total creditors: amounts falling due within one year (348.7 ) (358.7 )

Net current assets 288.5 272.2

Total assets less current liabilities 2,161.6 2,051.0

Creditors: amounts falling due after more than one year

Loans and other borrowings 16 (2,286.0) (1,987.1)

Total creditors: amounts falling due after more than one year (2,286.0) (1,987.1)

Net (liabilities) assets (124.4 ) 63.9

Capital and reserves

Called up share capital 19 0.1 0.1

Share premium account 20 1.0 305.4

Deficit 20 (125.5 ) (241.6 )

Equity shareholders (deficit) funds (124.4 ) 63.9

The accompanying notes form an integral part of these financial statements.

F-6

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation, combination and consolidation, and accounting policies

Basis of preparation, combination and consolidation

Presentations in the profit and loss account and cash flow statement for the year ended 31 March 2002 of certain immaterial amounts related to an investment have been reclassified to conform with the presentations in the 2003 and 2004 financial periods.

The principal activity of the Yell Group is publishing classified advertising directories in the United Kingdom and the United States.

The Yell Group comprises a number of legal entities. The principal entities included within the financial statements are reflected on the next page.

Intra-group transactions which have been eliminated on consolidation of the Yell Group have not been disclosed, as permitted by FRS 8 Related Party Disclosures.

On 22 June 2001, the Yell Group and its subsidiaries acquired from British Telecommunications plc (BT) the net assets of the Yellow Pages business unit of BT, which had been transferred to a separate legal entity, Yell Limited, on 6 March 2001, Yellow Pages Sales Limited and General Art Services Limited (collectively Yellow Pages) and Yellow Book USA, Inc. and its subsidiary undertakings (Yellow Book East).

The predecessor combined financial statements of the Yell Group for the period from 1 April to 22 June 2001 represent an aggregation of the historical financial statements of Yellow Pages and of Yellow Book, as if the Yell Group had been formed as a discrete operation throughout that period. The capital structure of the Yell Group and its interest charges, goodwill amortisation, administration costs, pension costs and tax charges for the period up to 22 June 2001 are significantly different from those that have existed since the acquisition from BT. The successor consolidated financial statements of the Yell Group represent a consolidation of the financial statements of Yell Finance B.V. and its subsidiaries after the acquisition from 22 June 2001. The capital structure of the Yell Group and its interest charges, goodwill amortisation, administrative expenses, pension costs and tax charges during the periods up to 22 June 2001 are significantly different from those that have existed since the acquisition from BT.

Substantially all funding of the Yell Groups businesses was financed via BTs net investment and loans issued by BT up until 22 June 2001. Subsequently, all funding is financed by a number of shareholder and third-party debt facilities as detailed in note 16.

Up until the acquisition of the Yell Group from BT on 22 June 2001, Yell Group management regarded BT as the ultimate controlling party of the Yell Group. Thereafter and up until 15 July 2003, management regarded funds managed or advised by Apax Partners & Co. and Hicks, Muse, Tate & Furst Incorporated, together purchased the Yell Group, as the ultimate controlling parties. On 15 July 2003, Yell Group plc, our parent company, completed raising £433.6 million in gross proceeds through a global offer of shares to institutional investors in an initial public offering. From that date, Yell Group plc has been the ultimiate controlling party of the Group.

Turnover and operating profits in respect of acquisitions shown separately in the profit and loss account relate to four minor acquisitions in the period from 22 June 2001 to 31 March 2002, the McLeod acquisition together with four minor acquisitions in the year ended 31 March 2003 and six minor acquisitions in the year ended 31 March 2004. The results of the existing Yell Group acquired from BT on 22 June 2001 have been shown as continuing operations in the period from 22 June 2001 to 31 March 2002. Details of the acquisition from BT on 22 June 2001 and other acquisitions are given in note 8.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Where the financial statements of subsidiary undertakings do not conform with the Yell Groups accounting policies, appropriate adjustments are made on combination and consolidation in order to present the Yell Group combined and consolidated financial statements on a consistent basis. All companies within the Yell Group during the period of ownership have coterminous financial years. All transactions between the Yell Groups businesses have been eliminated in the preparation of these combined and consolidated financial statements. The results of companies and businesses acquired during the year are included in the financial information from their respective dates of acquisition.

F-7

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

1. Basis of preparation, combination and consolidation, and accounting policies (continued)

Basis of preparation, combination and consolidation (continued)

The preparation of the combined and consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenditure during the reporting period. Actual results could differ from those estimates. Estimates are used principally when accounting for provision for doubtful debts, depreciation, employee pension and management incentive schemes and taxes.

Subsidiary undertakings

Brief details of principal subsidiary undertakings at each year end (except where noted), all of which are unlisted, are as follows:

Group interest in Activity allotted capital(a) Country of operation(b)

Yell Limited(c) Classified directory publisher 100% ordinary United Kingdom

Yellow Pages Sales Limited Provision of sales services 100% ordinary United Kingdom

Yellow Book USA, Inc. Classified directory publisher 100% common United States of America

(a) The proportion of voting rights held corresponds to the aggregate interest percentage held by the holding company and subsidiary undertakings, unless otherwise stated. (b) Incorporated in its country of operation. (c) Company formed for the acquisition from BT on 22 June 2001.

Accounting policies

Accounting convention

The financial statements have been prepared under the historical cost convention, in accordance with applicable accounting standards in the United Kingdom and the Companies Act 1985. These differ significantly from those in the United States and a reconciliation to generally accepted accounting principles in the United States (US GAAP) is provided in note 27. A summary of the more important Yell Group accounting policies, which have been consistently applied, is set out below.

(a) Turnover

Group turnover, after deduction of sales allowances, value added tax and other sales taxes, comprises the value of products provided by the Yell Group undertakings. Turnover from classified directories, Business Pages and other directories, mainly comprising advertising revenue, is recognised in the profit and loss account upon completion of delivery to the users of the directories. Other turnover, principally from Yellow Pages 118 24 7 and online services, is recognised from the point at which service is first provided over the life of the contract.

(b) Cost of sales

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Cost of sales are the costs incurred in producing directories and other group products, including costs of the sales force and certain sales overheads dedicated to the sale of advertising. Charges for doubtful debts are also included within cost of sales. Such costs are charged to the profit and loss account as a percentage of turnover based upon the actual bad debt experience as a proportion of total billings.

F-8

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

1. Basis of preparation, combination and consolidation, and accounting policies (continued)

Accounting policies (continued)

The Yell Group expenses the costs of advertising its own products and services as the costs are incurred.

(d) Interest

Interest payable is charged as incurred on an accruals basis.

(e) Foreign currencies

On combination and consolidation, the assets and liabilities of foreign undertakings are translated into sterling at year-end exchange rates. The results of foreign undertakings are translated into sterling at average rates of exchange for the period.

Exchange differences arising from the retranslation at period-end exchange rates of the net investment in foreign undertakings, less exchange differences on borrowings that finance or provide a hedge against those undertakings, are taken through the statement of total recognised gains and losses to reserves and are disclosed in note 20.

All other exchange gains or losses are dealt with through the profit and loss account.

(f) Intangible fixed assets

Goodwill arising from the purchase of subsidiary undertakings represents the excess of the fair value of the purchase consideration over the fair value of the net assets acquired and is amortised on a straight-line basis from the time of the acquisition over its estimated useful economic life. Estimated useful life is determined after taking into account such factors as the nature and age of the business, as well as the typical life span of the acquired products to which goodwill attaches. Goodwill in respect of all acquired businesses is amortised over 20 years.

(g) Tangible fixed assets

Tangible fixed assets are stated at historical cost less depreciation. Cost comprises the purchase price and any other costs of bringing an asset into use. Depreciation is provided on tangible fixed assets on a straight-line basis from the time they are available for use, so as to write off their costs over their estimated useful economic lives taking into account any expected residual values. The lives assigned to significant tangible fixed assets range from two to six years.

(h) Asset impairment

Intangible and tangible fixed assets are tested for impairment when an event that might affect asset values has occurred. An impairment loss is recognised to the extent that the carrying amount cannot be recovered either by selling the asset or by the discounted future earnings from operating the assets. Goodwill is subject to an impairment review at the end of the first full year following an acquisition and at any other time when the directors believe that an impairment may have occurred.

(i) Investments

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Parent company shares are held at cost and are reviewed annually for impairment in value. The shares are held in an ESOP trust for the benefit of certain employees.

F-9

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

1. Basis of preparation, combination and consolidation, and accounting policies (continued)

Accounting policies (continued)

(j) Leased assets

Rentals in respect of operating leases, under which substantially all the benefits and risks of ownership remain with the lessor, are charged to the profit and loss account on a straight-line basis over the life of the lease.

Assets held under finance leases where substantially all the benefits and risks of ownership are transferred to the Yell Group are capitalised as tangible fixed assets and depreciated over their useful economic lives. The capital element of the future obligations under the leases is included as a liability in the combined and consolidated balance sheets, classified as appropriate as a creditor due within or after one year. Lease payments are split between capital and interest elements using the annuity method and the interest is then charged to the profit and loss account.

(k) Stocks

Stocks are stated at the lower of cost and net realisable value. Directories in progress mainly comprise sales force costs, artwork and other directory production costs, including appropriate overheads, pending completion of delivery of the relevant directories. Other stock represents paper stock held by the US business.

(l) Pension schemes

The Yell Group currently operates a defined benefit pension scheme for its UK employees employed before 1 October 2001 and operates defined contribution pension schemes for its UK employees employed subsequent to 1 October 2001 and its US employees.

All pension schemes are independent of the Yell Groups finances. Actuarial valuations of the defined benefit scheme are carried out as determined by the trustees at intervals of not more than three years, the rates of contribution payable and the pension cost being determined on the advice of the actuaries, having regard to the results of these valuations. In any intervening years, the actuaries review the continuing appropriateness of the contribution rates. The cost of providing pensions is charged against profits over employees working lives with the Yell Group using the projected unit method.

Payments to the Yell Groups defined contribution schemes are charged against profit as incurred.

The transitional arrangements of FRS 17 Retirement Benefits have been applied in the preparation of these financial statements with the relevant disclosures shown in note 23.

(m) Employee share schemes

The cost of employee share options, except for options in Inland Revenue approved Sharesave schemes, is measured at the intrinsic value of the options granted on the date of grant and is charged to the profit and loss over the vesting period. The Group takes advantage of available exemptions in respect of accounting for discounts arising on the grant of options in Inland Revenue approved Sharesave schemes. When the ESOP trust acquires and holds shares of our parent company, we present them as an investment in parent company shares.

F-10

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

1. Basis of preparation, combination and consolidation, and accounting policies (continued)

Accounting policies (continued)

(n) Taxation

The charge (credit) for taxation is based on the profit (loss) for the period and takes into account deferred taxation. Provision is made in full for deferred tax liabilities that arise from timing differences where transactions or events that result in an obligation to pay more tax in the future have occurred by the balance sheet date. Deferred tax assets are recognised to the extent that they are regarded more likely than not to be recoverable.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted.

A substantial portion of the Yellow Pages operation was not a separate taxable entity for corporation tax purposes prior to 22 June 2001 and the results of the Yellow Pages operation were included in the UK corporation tax returns of BT. In the financial statements for the periods prior to 22 June 2001, Yellow Pages has provided for corporation taxes as if it were a separate taxpayer in the United Kingdom.

(o) Financial instruments

All borrowings are initially stated at the fair value of consideration received after deduction of issue costs. Issue costs are charged to the profit and loss account together with the coupon, as finance costs, on a constant-yield basis over the term of the borrowings, or over a shorter period where the lender can require earlier repayment.

The Yell Group considers its derivative financial instruments to be hedges when certain criteria are met. For interest rate derivatives, the instrument must be related to assets or liabilities or a probable commitment and must also change the interest rate or the nature of the interest rate by converting a variable rate to a fixed rate or vice versa. Interest differentials under interest rate swap agreements are recognised by adjustment of interest payable.

See note 17 for further details on the Groups financial instruments.

2. Segmental analysis

The Yell Group is a publisher of classified advertising directories in the United Kingdom and the United States. Turnover is principally derived from the sale of advertising in such publications. The geographical analysis is stated on the basis of origin of operations, although it would not be different had it been stated on the basis of customer origin.

The segmental information presented is based on the segmental operating results regularly reviewed by the Yell Groups chief operating decision maker (the CEO).

The Groups operations are split geographically between the United Kingdom and the United States and have been managed on this basis. For the purposes of exercising day-to-day managerial and budgetary control, the UK management accounts are divided internally by product but these divisions are not self-standing businesses. For the purpose of managing the UK business, most common costs are allocated entirely to classified directories. Control is exercised by comparing performance against budgets that are agreed in advance.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The CEO reviews the turnover and Earnings before interest, tax, depreciation and amortisation (EBITDA) before and after exceptional items within geographic segments. EBITDA, before exceptional items, together with turnover, are key financial measures that we use to assess the success of our people in achieving growth in the business and operational efficiencies. Segmental information is provided below in respect of UK and US businesses.

F-11

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Segmental analysis (continued)

Turnover

1 April 22 June 2001 to to Year ended Year ended 22 June 2001 31 March 2002 31 March 2003 31 March 2004 £ £ £ £ (in millions) (in millions)

UK printed directories 118.5 422.0 573.7 593.9

Other products and services 8.3 32.5 41.2 41.0

Total UK turnover 126.8 454.5 614.9 634.9

US printed directories:

US printed directories at constant exchange rate 42.3 241.8 499.1 605.0

Exchange impact (53.0 )

Total US turnover 42.3 241.8 499.1 552.0

Group turnover 169.1 696.3 1,114.0 1,186.9

F-12

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Segmental analysis (continued)

Profit and loss information Combined (Predecessor) Consolidated (Successor) 1 April 22 June 2001 to to Year ended Year ended 22 June 2001 31 March 2002 31 March 2003 31 March 2004 £ £ £ £ (in millions) (in millions)

UK operations

Turnover 126.8 454.5 614.9 634.9

UK printed directories operating profit 46.8 117.2 146.6 127.2

Other products and services operating profit (loss) (4.4 ) (9.2 ) (4.3 ) 2.6

UK Operating profit 42.4 108.0 142.3 129.8

Depreciation and amortisation(a) 2.6 57.4 69.2 69.4

UK operations EBITDA 45.0 165.4 211.5 199.2

Exceptional items 14.7 33.9

UK operations EBITDA before exceptionals 45.0 165.4 226.2 233.1

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document UK operations EBITDA before exceptionals as % of turnover 35.5 % 36.4 % 36.8 % 36.7 %

US operations

Turnover 42.3 241.8 499.1 552.0

Operating profit (9.5 ) 10.7 41.1 20.6

Depreciation and amortisation 7.2 23.7 51.7 50.2

US operations EBITDA (2.3 ) 34.4 92.8 70.8

Exceptional items and non-recurring restructuring charges in 2003 4.0 56.2

Exchange impact 11.4

US operations EBITDA before exceptionals at constant exchange rate (2.3 ) 34.4 96.8 138.4

Exchange impact (11.4 )

US operations EBITDA before exceptionals (2.3 ) 34.4 96.8 127.0

US operations EBITDA before exceptionals as % of turnover (5.4 %) 14.2 % 19.4 % 23.0 %

Group

Turnover 169.1 696.3 1,114.0 1,186.9

Depreciation and amortisation 9.8 81.1 120.9 119.6

Group EBITDA 42.7 199.8 304.3 270.0

Exceptional items and non-recurring restructuring charges in 2003 3.0 18.7 90.1

Exchange impact 11.4

Group EBITDA before exceptionals at constant exchange rate 45.7 199.8 323.0 371.5

Exchange impact (11.4 )

Group EBITDA before exceptionals 45.7 199.8 323.0 360.1

Group EBITDA before exceptionals as % of turnover 25.3 % 28.7 % 29.0 % 30.3 %

Group EBITDA before exceptionals 45.7 199.8 323.0 360.1

Exceptional items and non-recurring restructuring charges in 2003 (3.0 ) (18.7 ) (90.1 )

Group EBITDA 42.7 199.8 304.3 270.0

Depreciation and amortisation (9.8 ) (81.1 ) (120.9 ) (119.6 )

Net interest payable (5.8 ) (158.6 ) (236.6 ) (194.5 )

Profit (loss) for the financial year 15.8 (47.2 ) (40.6 ) (51.1 )

(a) In the year ended 31 March 2004, £66.6 million (2003-£66.0 million; period from 22 June 2001 to 31 March 2002-£55.4 million; period from 1 April to 22 June 2001-£2.0 million) of depreciation and amortisation was allocated to UK printed directories and £2.8 million (2003-£3.2 million; period from 22 June to 31 March 2002-£2.0 million; period from 1 April to 22 June 2001-£0.6 million) was allocated to other products and services in the UK.

F-13

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

2. Segmental analysis (continued) At 31 March At 31 March 2003 2004 £ £ (in millions)

Fixed assets

1,085.7 United Kingdom 1,033.7 787.4 United States 745.1

1,873.1 Group total 1,778.8

Net operating assets

1,265.9 United Kingdom 1,190.9 1,008.5 United States 987.8

2,274.4 Group total 2,178.7

Net (liabilities) assets

(815.7 ) United Kingdom (603.1 ) 691.3 United States 667.0

Total assets

1,418.5 United Kingdom 1,336.9 1,091.8 United States 1,072.8

2,510.3 Group total 2,409.7

Net operating assets comprise total assets less creditors, excluding loans and other borrowings. The majority of UK net operating assets relate to the UK printed directories business. The majority of external loans are included in the UK segment.

3. Operating profit

Operating profit for the Yell Group is stated after charging: Combined (Predecessor) Consolidated (Successor) 1 April to 22 June to Year ended Year ended 22 June 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions) 299.0 Staff costs (note 5) 74.3 157.9 311.4 46.4 Advertising costs 7.1 26.6 53.1 13.2 Operating leases, excluding plant and equipment hire 2.4 14.6 14.0 1.2 Plant and equipment hire 0.1 0.5 1.0 22.0 Depreciation of owned tangible fixed assets 4.2 15.3 22.7 0.5 Depreciation of tangible fixed assets held under finance leases 0.2 0.5 0.2 98.4 Goodwill amortisation 5.4 65.3 96.7

Exceptional administrative costs:

Management incentive scheme costs (note 5) 3.0

IPO costs 15.0 90.1 (a) The restructuring changes were incurred for the closure of a production site as part of the integration of the former McLeod directories.

F-14

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

3. Operating profit (continued)

The auditors remuneration has been disclosed in note 26.

4. Results before and after exceptional items Profit (loss) Taxation Profit (loss) Distribution Administrative Operating Net interest before (charge) for the Gross Profit costs costs profit (loss) payable taxation credit period £ £ £ £ £ £ £ £

Combined (Predecessor) (in millions)

1 April to 22 June 2001

Ongoing activities 98.0 (5.5 ) (56.6 ) 35.9 (5.8 ) 30.1 (11.3 ) 18.8

Exceptional items (3.0 ) (3.0 ) (3.0 ) (3.0 )

Total 98.0 (5.5 ) (59.6 ) 32.9 (5.8 ) 27.1 (11.3 ) 15.8

Consolidated (Successor)

22 June to 31 March 2002

Ongoing activities 380.4 (18.5 ) (243.2 ) 118.7 (158.6 ) (39.9 ) (7.3 ) (47.2 )

Exceptional items

Total 380.4 (18.5 ) (243.2 ) 118.7 (158.6 ) (39.9 ) (7.3 ) (47.2 )

Ongoing activities 604.1 (36.0 ) (369.7 ) 198.4 (236.6 ) (38.2 ) 10.3 (27.9 )

Exceptional items (15.0 ) (15.0 ) (15.0 ) 2.3 (12.7 )

Total 604.1 (36.0 ) (384.7 ) 183.4 (236.6 ) (53.2 ) 12.6 (40.6 )

Year ended 31 March 2004

Ongoing activities 634.0 (34.5 ) (359.0 ) 240.5 (136.1 ) 104.4 (44.2 ) 60.2

Exceptional items (90.1 ) (90.1 ) (58.4 ) (148.5 ) 37.2 (111.3 )

Total 634.0 (34.5 ) (449.1 ) 150.4 (194.5 ) (44.1 ) (7.0 ) (51.1 )

Exceptional administrative costs in the year ended 31 March 2004 relate to costs incurred in connection with our parent companys global offer, including £57.0 million for employee incentive plans contingent upon IPO and £33.1 million of transaction costs. Of the £90.1 million exceptional administrative costs, £33.9 million relates to our UK business and £56.2 million to our US business. Exceptional administrative costs in the year ended 31 March 2003 relate to costs incurred in connection with our parent companys initial public offering withdrawn in July 2002. Of the £15.0 million exceptional administrative costs, £14.7 million was charged to our UK business and £0.3 was charged to our US business. The exceptional interest payable in the year ended 31 March 2004 comprises £19.7 million senior note redemption premium and £36.4 million accelerated amortisation of financing fees on our debt repaid in July and August 2003 and £2.3 million for arrangement fees for the withdrawn revolving credit facility. The exceptional tax credits in the year ended 31 March 2004 represent the effective tax on the exceptional items before tax. The £3.0 million exceptional cost in the period to June 2001 is discussed in note 5.

F-15

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

5. Employees

Year ended 31 March 2002 2003 2004 Average monthly number of employees in the Yell Group (including executive directorssee note 22 for separate disclosures):

United Kingdom 3,271 3,319 3,414

United States 2,050 4,350 4,668

Total employees 5,321 7,669 8,082

Marketing and sales 4,097 5,631 4,913

Other 1,224 2,038 3,169

Total employees 5,321 7,669 8,082

Combined (Predecessor) Consolidated (Successor) 1 April 22 June 2001 Year ended Year ended to to 31 March 31 March 22 June 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Staff costs for the Yell Group during the year

Wages and salaries 68.4 139.0 268.5 274.2

Other pension costs (note 23) 1.9 6.4 9.9 10.7

Total staff costs 74.3 157.9 299.0 311.4

Employee incentive plans

Certain of the Yellow Book management were awarded units under an incentive plan, the charge for which amounted to £3.0 million for the period up to 22 June 2001. Prior to 22 June 2001 no payments were made under this plan. Effective on the sale of the Yell Group, this plan was terminated and payments aggregating £44.7 million were made to management in settlement of all obligations agreed under this plan by BT. The amount of £24.1 million over and above that already accrued was agreed and funded by BT and, accordingly, was not charged to the Yell Group profit and loss account.

Pursuant to the acquisition of the Yell Group from BT, a new incentive scheme (the Phantom DDB Plan) was established for certain Yellow Book management. Under this scheme the participants as a group were treated economically as if they had invested £32 million in the Yell Group in the same manner as the funds advanced by the owners before the initial public offering. In satisfaction of these obligations, the plan participants exchanged their interests in the plan for equity in the company.

The Yell Groups employees in the United Kingdom were eligible to participate in BTs employee share schemes up to the date of the acquisition from BT. Following the acquisition, the Yell Groups employees had to exercise existing options before 12 December 2001. None of the BT shares or options issued to employees of the Yell Group were converted into equity of the Yell Group, nor was there any charge on the Yell Group for the cost of these options.

See note 25 for a discussion of the employee stock option plans.

F-16

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

6. Net interest payable

Combined (Predecessor) Consolidated (Successor) 1 April to 22 June 2001 to Year ended Year ended 22 June 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Senior credit facilities 61.5 87.6 68.2

Senior sterling and dollar notes(a) 36.4 55.4 43.3

Subordinated parent company loan(a) 46.3 70.1 21.3

Bridging facilities 7.0 10.3

Loans from BT 5.8

Other 0.2 0.6 0.3

Amortisation of finance costs 9.5 15.0 5.2

Exceptional interest and write off of financing fees 58.4

Total interest payable 5.8 160.9 239.0 196.7

Interest receivable (2.3 ) (2.4) (2.2)

Net interest payable 5.8 158.6 236.6 194.5

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a) Interest on the senior discount dollar notes rolls up into the principal balance and is not due until the maturity or repayment of the respective loan. Yell Group settled 35% of the amounts outstanding on 18 August 2003.

7. Tax charge (credit) on profit (loss) on ordinary activities

Combined (Predecessor) Consolidated (Successor) 22 June Year ended Year ended 1 April 2001 31 March 31 March to to 22 June 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

UK corporation tax at 30% 13.4 8.6 6.6 22.0

Foreign taxes 0.5 1.1

Total current tax 13.4 8.6 7.1 23.1

Origination and reversal of timing differences

UK (2.1 ) (1.3 ) (2.5 ) (1.8 )

Foreign (17.2 ) (14.3 )

Total deferred tax (2.1 ) (1.3 ) (19.7 ) (16.1 )

Tax charge (credit) on profit (loss) on ordinary activities 11.3 7.3 (12.6 ) 7.0

F-17

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

7. Tax charge (credit) on profit (loss) on ordinary activities (continued)

The effective tax rate for each period is different from the standard rate of corporation tax in the United Kingdom (30%) as explained below:

Combined (Predecessor) Consolidated (Successor) 1 April 22 June 2001 Year ended Year ended to to 31 March 31 March 22 June 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Profit (loss) on ordinary activities before taxation 27.1 (39.9 ) (53.2 ) (44.1 )

Profit (loss) on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom (30%) 8.2 (12.0 ) (16.0 ) (13.2 )

Effects of:

Adjustments from prior years (0.3 ) 0.4

Non-deductible goodwill amortisation 13.5 20.9 22.6

Higher tax rates on overseas earnings (3.2 ) (0.8 ) (0.3 ) (1.9 )

Other expenses not deductible for tax purposes 0.4 1.4 4.0 12.9

US tax losses (used) created in the year 1.5 8.7 (2.7 ) 0.7

Other timing differences 6.5 (2.2 ) 1.5 1.6

Total current tax 13.4 8.6 7.1 23.1

Recognition of deferred tax assets on prior year US tax losses (17.2 ) (14.3 )

Net tax charge (credit) 11.3 7.3 (12.6 ) 7.0

F-18

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

8. Acquisitions

Acquisition in 2004

In the year ended 31 March 2004, the Yell Group acquired yellow pages directories businesses in the United States totalling $198.9 million (£108.6 million) plus expenses of $0.5 million (£0.3 million). The purchases were accounted for as acquisitions. The purchase prices were allocated to the acquired assets and liabilities as follows:

Fair value Book value(a) adjustments(b) Fair value £ £ £ (in millions)

Fixed assets

Tangible assets 1.2 1.2

Total fixed assets 1.2 1.2

Current assets

Stocks 2.1 2.1

Debtors 15.6 (4.9 ) 10.7

Cash at bank and in hand

Total current assets 17.7 (4.9 ) 12.8

Creditors: amounts falling due within one year (5.9 ) 0.4 (5.5 )

Net current assets 11.8 (4.5 ) 7.3

Goodwill 100.4

Total cost 108.9

Consideration:

Cash 108.9

(a) Translated from US dollars to pounds sterling at the exchange rate on the date of acquisition. (b) The fair value adjustments principally comprise a revaluation of fixed assets to estimated fair market value, and an alignment of accounting policies for revenue recognition.

The effect of acquisitions in the year on Yell Groups cash flows before financing were as follows:

Year ended 31 March 2001 £ (in millions)

Net cash inflow from operating activities 0.1

Returns on investments and servicing of finance

Taxation paid

Investing activities

Net cash flow before financing 0.1

F-19

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

8. Acquisitions (continued)

Acquisition of McLeod

On 16 April 2002, the Yell Group acquired McLeod for an aggregate purchase price of $600.0 million (£417.0 million) plus expenses of $10.0 million (£6.9 million). The purchase was accounted for as an acquisition. The purchase price was allocated to the assets and liabilities of McLeod as follows:

Fair value Book value(a) adjustments(b) Fair value £ £ £ (in millions)

Fixed assets

Tangible assets 24.4 (1.4 ) 23.0

Total fixed assets 24.4 (1.4 ) 23.0

Current assets

Stocks 37.5 (5.1 ) 32.4

Debtors 67.1 1.1 68.2

Cash at bank and in hand 0.5 0.5

Total current assets 105.1 (4.0 ) 101.1

Creditors: amounts falling due within one year (28.5 ) (1.7 ) (30.2 )

Net current assets 76.6 (5.7 ) 70.9

Goodwill 330.0

Total cost 423.9

Consideration:

Cash 423.9

(a) Translated from US dollars to pounds sterling at the exchange rate on the date of acquisition. (b) The fair value adjustments principally comprise an impairment in the value of fixed assets following an impairment review, and an alignment of accounting policies for directories in progress and revenue recognition.

The operating results of McLeod during the year ended 31 December 2001 and the period from 1 January 2002 to 16 April 2002 were:

1 January Year ended to 16 31 December April 2001 2002 £ £ (in millions)

Turnover 207.2 66.0

Total operating (loss) profit (c) (15.6 ) 7.0

(Loss) profit before taxation (15.5 ) 6.9

Taxation (0.1 ) (0.1 )

(Loss) profit for the financial period (15.6 ) 6.8

(c) Operating profit for the year ended December 2001 is stated after charging £25.1 million of management fees from the previous owner.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Results for the year ended 31 December 2001 were extracted from the latest published financial statements. Results for the period to 16 April 2002 were obtained from management accounts.

F-20

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

8. Acquisitions (continued)

The impact of the McLeod acquisition on the Groups cashflows before financing was as follows:

Year ended 31 March 2003 (£ in millions)

Net cash inflow from operating activities 35.8

Returns on investments and servicing of finance

Taxation paid (1.0 )

Investing activities (3.8 )

Net cash inflow before financing 31.0

The Group made other US acquisitions in the year ended 31 March 2003 for cash of £47.4 million to acquire net assets with a book value of £16.0 million. These acquisitions gave rise to goodwill of £31.4 million recorded in the year.

F-21

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

8. Acquisitions (continued)

Acquisition of Yell Group from BT

The Yell Group was acquired from BT on 22 June 2001 for an aggregate price of £2,007.6 million. The purchase was accounted for as an acquisition. The purchase price was allocated to the assets and liabilities of the Yell Group as follows:

Debt and other Book Fair value liabilities value adjustments(a) extinguished(b) Fair value £ £ £ £ (in millions)

Fixed assets

Tangible assets 42.6 42.6

Investment 2.1 2.1

Total fixed assets 44.7 44.7

Current assets

Stocks 100.2 (2.3 ) 97.9

Debtors 275.0 (0.8 ) 274.2

Cash at bank and in hand 8.3 8.3

Total current assets 383.5 (3.1 ) 380.4

Creditors: amounts falling due within one year

Other creditors (112.7) (6.0 ) (118.7 )

Total creditors: amounts falling due within one year (223.2) (6.0 ) 109.7 (119.5 )

Net current assets 160.3 (9.1 ) 109.7 260.9

Total assets less current liabilities 205.0 (9.1 ) 109.7 305.6

Creditors: amounts falling due after more than one year

Loans and other borrowings (222.8) 222.4 (0.4 )

Other creditors (21.3 ) 20.6 (0.7 )

Total creditors: amounts falling due after more than one year (244.1) 243.0 (1.1 )

Identifiable net (liabilities) assets (39.1 ) (9.1 ) 352.7 304.5

Goodwill 1,703.1

Total cost 2,007.6

Consideration:

Cash 1,907.6 (c)

Total consideration 2,007.6

(a) The fair value adjustments principally comprise a write down of directories in progress at the date of acquisition and accruals for unprovided liabilities at the date of acquisition. These adjustments to stocks and other creditors relate to matters affecting a number of years and the impact on any individual year is insignificant.

(b) Debt extinguished reflects the repayment on the date of acquisition of loans due to BT, loan notes due to senior management of Yellow Book and amounts previously accrued and payable under the Yellow Book management incentive plan. Additional amounts payable under this incentive plan on the change of ownership were funded by BT.

The Group made other acquisitions in the year ended 31 March 2002 for cash of £7.1 million. These acquisitions gave rise to goodwill of £7.1 million recorded in the year.

F-22

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

8. Acquisitions (continued)

Reconciliation of cash paid to the cash flow statement

Combined (Predecessor) Consolidated (Successor) 22 June Year 1 April 2001 ended Year to to 31 March ended 22 June 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Cash consideration for:

Acquisition of Yell Group from BT 1,907.6

Acquisition of McLeod 423.9

Other acquisitions 7.1 47.4 108.9

Less:

Cash acquired with subsidiaries (8.3 ) (0.4 )

Cash paid for purchase of subsidiary undertakings, net of cash acquired 1,906.4 470.9 108.9

The effect of the acquisitions on the results of the Yell Group during the year of the acquisitions includes the following for the years ended 31 March 2003 and 2004:

Year ended 31 March 2003 2004 £ £

Turnover 200.4 0.7

Cost of sales (110.7) (0.4)

Gross profit 89.7 0.3

Distribution costs (11.9 )

Administrative costs (70.9 ) (0.2)

Operating profit 6.9 0.1

F-23

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

9. Movements in net debt

Reconciliation of movement in net debt Debt due Total within one cash less year Debt due bank excluding after overdraft overdraft one year Net debt £ £ £ £ (in millions)

At 31 March 2001 (Predecessor) 24.8 (97.2 ) (221.8 ) (294.2 )

Cash inflow before acquisitions and financing 11.9 11.9

Cash inflow from financing 12.4 (12.4 )

Other non-cash items (223.0 ) 223.0

Currency movements (0.5 ) (1.3 ) (1.8 )

At 22 June 2001 (Predecessor) 49.1 (333.1 ) (0.1 ) (284.1 )

At 22 June 2001 (Successor)

Cash inflow before acquisitions and financing 63.8 63.8

Cash inflow from financing:

on acquisition 2,029.9 (592.8 ) (1,436.1) 1.0

after acquisition 502.2 (502.2 )

Cash outflow on acquisitions (1,914.7) (1,914.7)

Balances assumed on acquisitions 8.3 (0.6 ) (0.1 ) 7.6

Subordinated parent company loan (100.0 ) (100.0 )

Finance fees paid (49.4 ) 49.4

Interest and amortised fees (65.0 ) (65.0 )

Other non-cash items 1.4 1.4

Currency movements 1.9 1.9

At 31 March 2002 (Successor) 100.1 (53.4 ) (2,050.7) (2,004.0)

Cash inflow less interest and taxation paid and capital expenditures 143.9 143.9

Cash inflow from financing:

for acquisitions 408.8 (408.7 ) 0.1

after acquisitions 77.0 (77.0 )

Cash outflow on acquisitions (470.9 ) (470.9 )

Reclass of long-term to short-term debt (286.5 ) 286.5

Borrowings repaid (211.9 ) 211.9

Finance fees paid (16.1 ) 16.1

Currency movements (0.9 ) 15.2 50.7 65.0

At 31 March 2003 (Successor) 30.0 (112.8 ) (2,286.0) (2,368.8)

Cash inflow from operating activities less interest paid and redemption premium and taxation paid and capital expenditures 48.0 19.4(a) 67.4

Cash outflow on acquisitions (108.9 ) (108.9 )

Net proceeds from shares issued 304.4 304.4

Reclass of long-term to short-term debt (41.9 ) 41.9

Borrowings repaid (1,318.4) 112.8 1,205.6

New loans acquired 1,082.5 (85.8 ) (996.7 )

Finance fees paid (16.4 ) 16.4

Non-cash charges (66.9 ) (66.9 )

Currency movements (2.8 ) 79.2 76.4

At 31 March 2004 (Successor) 18.4 (127.7 ) (1,987.1) (2,096.4)

(a) The £141.8 million of interest paid in the year included £19.4 million of interest that had been capitalised as long-term debt.

F-24

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

9. Movements in net debt (continued)

Reconciliation of net cash flow to movements in net debt

Combined (Predecessor) Consolidated (Successor) 1 April 22 June Year ended Year ended to 2001 to 31 March 31 March 22 June 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Increase (decrease) in net cash in the period 24.3 100.1 (69.2 ) (8.8)

Net cash (inflow) outflow from increase (decrease) in debt (12.4 ) (1,941.7) (257.7 ) 171.7

Decrease (increase) in net debt resulting from cash flows 11.9 (1,841.6) (326.9 ) 162.9

Balances assumed on acquisitions (0.7 )

Subordinated parent company loan (100.0 ) 100.0

Interest and amortised fees (65.0 ) (102.9 ) (66.9 )

Other non-cash items 1.4

Currency movements (1.8 ) 1.9 65.0 76.4

Decrease (increase) in net debt in the period 10.1 (2,004.0) (364.8 ) 272.4

Net debt at beginning of the period (294.2 ) (2,004.0 ) (2,368.8 )

F-25

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

10. Intangible assets

Goodwill

£ (in millions)

Cost

Balance at 31 March 2002 1,705.8

Additions 361.4

Fair value adjustment(a) (0.7 )

Currency movements (81.4 )

Total cost at 31 March 2003 1,985.1

Amortisation

Balance at 31 March 2002 65.3

Charge for the year 98.4

Currency movements (2.7 )

Total amortisation at 31 March 2003 161.0

Net book value at 31 March 2003 1,824.1

Balance at 31 March 2003 1,985.1

Additions 100.4

Fair value adjustment 3.3

Currency movements (117.3)

Total cost at 31 March 2004 1,971.5

Amortisation

Balance at 31 March 2003 161.0

Charge for the year 96.7

Currency movements (11.5)

Total amortisation at 31 March 2004 246.2

Net book value at 31 March 2004 1,725.3

(a) The fair value adjustment to goodwill was due to the finalisation of transaction costs in respect of acquisitions in the year ended 31 March 2002.

The acquisitions of the Yell Group from BT on 22 June 2001 and the McLeod acquisition on 16 April 2002 are detailed in note 8. The other goodwill arose on several small acquisitions. The goodwill arising on the acquisitions is being amortised on a straight-line basis over its estimated useful life of 20 years.

F-26

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

11. Tangible fixed assets

Tangible fixed assets, comprising primarily computers and office equipment, are summarised as follows:

£ (in millions)

Cost

Balance at 31 March 2002 36.8

Acquisitions(a) 23.8

Additions 19.2

Disposals (8.1 )

Currency movements (3.1 )

Total cost at 31 March 2003 68.6

Depreciation

Balance at 31 March 2002 6.8

Charge for the year 22.5

Disposals (8.1 )

Currency movements 0.3

Net book value at 31 March 2003 47.1

Cost

Balance at 31 March 2003 68.6

Acquisitions(a) 1.2

Additions 24.8

Disposals (9.0 )

Currency movements (5.2 )

Total cost at 31 March 2004 80.4

Depreciation

Balance at 31 March 2003 21.5

Charge for the year 22.9

Disposals (8.4 )

Currency movements (1.5 )

Total depreciation at 31 March 2004 34.5

(a) Fixed assets acquired comprised computers and office equipment.

The net book value of fixed assets included amounts of £0.8 million (2003-£0.2 million, 2002-£0.7 million) in respect of assets held under finance leases.

F-27

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

12. Investments

At At 31 March 31 March 2003 2004 £ £ (in millions)

Shares in parent company 5.8

Other investments 1.9 1.8

1.9 7.6

13. Stocks

At At 31 March 31 March 2003 2004 £ £ (in millions)

Directories in progress 143.5 147.2

Other 2.3 4.7

Total stocks 145.8 151.9

14. Debtors

At At 31 March 31 March 2003 2004 £ £ (in millions)

Other debtors 8.2 8.7

Accrued income(a) 7.6 4.7

Prepayments 10.2 10.6

Deferred tax asset (note 15) 23.1 34.7

Total debtors 461.4 460.6

(a) The Yell Groups trade debtors and accrued income are stated after deducting a provision of £113.1 million at 31 March 2004 (2003£105.5 million) for doubtful debts and sales allowances. The amount charged to the Yell Group profit and loss account for doubtful debts for the year ended 31 March 2004 was £71.1 million (year ended 31 March 2003£67.6 million; periods ended 22 June 2001 to 31 March 2002 and 1 April to 22 June 2001£43.4 million and £9.8 million, respectively);

All amounts above fall due within one year except for the deferred tax asset, which may fall due after more than one year.

F-28

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

15. Deferred taxation

Deferred tax asset Year ended Year ended 31 March 31 March 2003 2004 £ £ (in millions)

Balance at beginning of the year 3.4 23.1

Amount credited to profit and loss account 19.7 16.1

Adjustments relating to acquisitions (1.9 )

Currency movements (2.6 )

Balance at end of the year 23.1 34.7

The deferred tax assets are included in debtors (note 14). The elements of all net deferred tax assets not recognised in the accounts, including the cumulative unrecognised effect of net operating losses arising from operations in the United States, were as follows: At 31 March 2003 2004 £ £ (in millions) Tax effect of timing differences due to: Amortisation and depreciation (5.7 ) (12.2)

Bad debt provisions 17.3 22.7

Recognised tax net operating losses 17.2 40.0

Stocks valuation (16.8) (22.6)

Other temporary differences 3.2 (3.0 )

Recognised net deferred tax assets 23.1 34.7

Unrecognised deferred tax assets relating to tax net operating losses from US operations 27.2 7.7

These unrecognised net deferred tax assets are available to offset against future operating profits in the United States and are recognised when it is considered to be more likely than not that the US operations will become tax profitable. An amount of £127.0 million is available to use against taxable income in the United States in future years. The benefits available in respect of tax net operating losses arising from US operations expire between 2018 and 2024 if not used.

F-29

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

16. Loans and other borrowings

At 31 At 31 Interest March March rate 2003 2004 % £ £ (in millions)

Amounts falling due within one year

Senior credit facilities(a)(b) 5.30 111.8 80.0

Revolving loan under senior credit facilities 5.70 5.0

Net obligations under finance leases 1.0 0.8

Subordinated parent company loan 41.9

Total amounts falling due within one year 112.8 127.7

Amounts falling due after more than one year

Senior credit facilities(a)(b) 5.30 990.3 856.6

Senior notes:

Senior sterling notes(c) 10.75 242.0 158.1

Senior dollar notes(d) 10.75 122.2 68.1

Senior discount dollar notes(e) 13.95 114.8 73.1

Total amounts falling due after more than one year 2,286.0 1,987.1

Net loans and other borrowings 2,398.8 2,114.8

(a) Facilities comprise two term loans of £624.0 million and $596.0 million which are due in 2008. The senior credit facilities were drawn upon IPO to refinance in part loans drawn in June 2001. In addition to the term loans, the senior credit facilities include a revolving credit facility of £200.0 million. At 31 March 2004, £5.0 million was outstanding under the revolving credit facility. The senior credit facilities including the revolving credit facility have first priority security over substantially all of the Yell Groups assets.

(b) The terms of the senior credit facilities require the Yell Group and its consolidated subsidiaries to maintain specified consolidated financial ratios for senior debt to Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA as defined in the senior credit facilities), EBITDA to net cash interest payable and, until 31 March 2005, total net senior debt to EBITDA. Certain of these financial ratios have to be prepared for the preceding 12-month period and reported to the providers of the senior credit facilities on a six-monthly basis from 31 March 2004. The Yell Group has reported that it has maintained the financial ratios for the year ended 31 March 2004 in compliance with these debt covenants. (c) This represents a £162.5 million aggregate principal amount of 10.75% senior sterling notes due 2011. Interest is payable on 1 February and 1 August of each year. The notes are unsecured and rank equally with each other and existing and future senior debt. (d) This represents a $130.0 million aggregate principal amount of 10.75% senior dollar notes due 2011. Interest is payable on 1 February and 1 August of each year. The notes are unsecured and rank equally with each other and existing and future senior debt. (e) This represents a $187.4 million aggregate principal amount of 13.50% senior discount dollar notes due 2011 discounted from 1 August 2006. The issue price of each senior discount dollar note was $521.3 per $1,000.0 principal amount at maturity. Cash interest will not accrue on the senior discount dollar notes until 1 August 2006, at which time interest is payable on 1 February and 1 August of each year, beginning 1 February 2007. The notes are unsecured and rank equally with each other and existing and future senior debt. The 13.96% interest rate represents the rate of return from inception on the notes including the unwinding of the discount.

F-30

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

16. Loans and other borrowings (continued)

These balances are shown net of unamortised deferred finance costs, which have been allocated as follows:

At 31 March 2004 Principal Deferred Net amount finance costs balance £ £ £ (in millions)

Senior credit facilities 947.8 (11.2 ) 936.6

Senior notes:

Senior sterling notes 162.5 (4.4 ) 158.1

Senior dollar notes 70.6 (2.5 ) 68.1

Senior discount dollar notes 75.1 (2.0 ) 73.1

Subordinated parent company loan 873.1 873.1

Revolving loan under senior credit facilities 5.0 5.0

Other 0.8 0.8

Total loans and borrowings 2,134.9 (20.1 ) 2,114.8

Repayments fall due as follows:

At 31 March 2003 At 31 March 2004 £ £ (in millions)

Between one and two years 110.4 90.0

Between two and three years 134.4 100.0

Between three and four years 116.4 50.0

Between four and five years 122.4 627.8

After five years 1,841.7 1,139.4

Total due for repayment after more than one year 2,325.3 2,007.2

Total repayments due 2,438.1 2,134.9

Deferred finance costs (39.3 ) (20.1 )

Total loans and other borrowings 2,398.8 2,114.8

17. Financial instruments and risk management

Treasury policy

The Yell Group treasury functions primary role is to fund investments and to manage liquidity and financial risk, including risk from volatility in currency and interest rates and counterparty credit risk. The treasury function is not a profit centre and its objective is to manage risk at optimum cost.

The board of directors sets the treasury functions policy and its activities are subject to a set of controls commensurate with the magnitude of the investments and borrowings under its management.

Counterparty credit risk is closely monitored and managed within controls set by the board of directors. Derivative financial instruments, including forward foreign exchange contracts, are used only for hedging purposes.

The principal financing and treasury exposures faced by the Yell Group arise from working capital management, the financing of acquisitions and tangible fixed assets, the management of interest rate positions and the investment of surplus cash. The treasury function

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document manages those exposures with the objective of remaining within ratios covenanted with the senior lenders. The Yell Group has not purchased or issued any derivative contracts for trading or hedging purposes, except as referred to below.

F-31

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Financial instruments and risk management (continued)

The Yell Group financed its operations prior to 22 June 2001 primarily by a mixture of BTs net investment and loans. Subsequent to 22 June 2001 and up until the initial public offering on 15 July 2003, the Yell Group financed its operations primarily by long-term debt. Details of the Yell Groups borrowings are disclosed in note 16. Subsequent to the initial public offering, the Yell Group funds the business largely from cash flows generated from operations.

All significant cash inflows and outflows associated with the Yell Groups operations in the United Kingdom are denominated in pounds sterling, and all significant cash inflows and outflows associated with operations in the United States are denominated in US dollars. However, the financial statements are presented in pounds sterling, and changes in the exchange rate between the US dollar and pounds sterling will affect the translation of the results of our operations in the United States into pounds sterling. The composition of our debt partially hedges exchange rate fluctuations, because 37% of our third party debt and 31% of our net interest expense are denominated in US dollars. The Group does not intend to hedge any foreign exchange rate risk relating to US dollar-denominated notes, although we will continue to review this practice.

The Yell Group borrows at both fixed and floating rates of interest and, in order to achieve the objective of managing interest rate risk, partially hedges its risk through the use of interest-rate derivative instruments. Interest is payable under the senior credit facilities at a variable interest rate. Under our previous senior facilities, we were required to hedge at least 50% of the variable rate indebtedness for a duration of two years. Under our new senior facilities agreement we are required to have fixed interest on at least 50% of all interest payments during the 21 months following each month end. This requirement ceases once the Group leverage ratio falls below 3.5 times. We have fixed interest on at least 50% of the indebtedness under the senior credit facilities using interest rate swaps over the period to March 2006, with a review of this strategy on a quarterly basis.

During the year ended 31 March 2004, as set out in note 9, net debt decreased from £2,368.8 million to £2,096.4 million, primarily as a result of financings and their associated costs, foreign currency movements in the period and repaying borrowings on the initial public offering.

Other financial instruments

The Yell Group has short-term debtors and creditors which arise in the normal course of business and have been excluded from the disclosures which follow.

There has been no change in the role that financial instruments have in creating or changing the Yell Groups risk between 31 March 2004 and the date of these financial statements.

F-32

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Financial instruments and risk management (continued)

Currency risk profile

The interest rate profile of the Yell Groups financial assets and liabilities was:

Sterling US dollar Total £ £ £ (in millions)

Floating rate 22.6 7.4 30.0

Total financial assets at 31 March 2003 22.6 7.4 30.0

Fixed rate (1,735.3 ) (458.4 ) (2,193.7 )

Floating rate (81.7 ) (123.4 ) (205.1 )

Total financial liabilities at 31 March 2003 (1,817.0 ) (581.8 ) (2,398.8 )

Net financial liabilities at 31 March 2003 (1,794.4 ) (574.4 ) (2,368.8 )

Floating rate 7.5 10.9 18.4

Total financial assets at 31 March 2004 7.5 10.9 18.4

Fixed rate (1,386.6) (295.7) (1,682.3)

Total financial liabilities at 31 March 2004 (1,664.6) (470.3) (2,134.9)

Net financial liabilities at 31 March 2004 (1,657.1) (459.4) (2,116.5)

Details of currency denomination, interest and maturity profiles of specific borrowings are given in note 16. There are no material monetary assets or liabilities denominated in currencies other than local reporting currencies.

Interest rate profile

Details of year-end interest rates on borrowings are set out in note 16. The Yell Group has entered into interest rate forward rate agreements and swaps for the purpose of hedging future floating interest rate movements. The Yell Group has fixed interest rates on at least 50% of the interest rate exposure on the indebtedness under the senior credit facilities using interest rate swaps over the period to March 2006.

For the fixed-rate financial liabilities, the average interest rates and the average periods for which the rates are fixed are:

Total Sterling US dollar borrowings

At 31 March 2003

Weighted average interest rate (%) 9.2 9.8 9.3

Weighted average period for which rate is fixed (years) 9.1 4.9 8.2

At 31 March 2004

Weighted average interest rate (%) 7.1 8.5 7.3

Weighted average period for which rate is fixed (years) 3.0 4.2 3.4

The floating-rate financial liabilities bear interest at rates fixed in advance for periods ranging from one month to six months by reference to LIBOR.

Borrowing facilities and liquidity risk

Since 22 June 2001, the Yell Group has maintained committed banking facilities to mitigate any liquidity risk it may face. There were committed senior debt facilities at 31 March 2004 of £200.0 million (2003£100.0 million) of which £5.0 million had been drawn down at 31 March 2004 (2003-£nil). These facilities expire on 7 July 2008.

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

17. Financial instruments and risk management (continued)

Fair values of financial assets and liabilities

The following table reflects the carrying amount and fair value of the Yell Groups financial instruments at 31 March 2003 and 2004. The fair values of the financial instruments are the amounts at which the instruments could be exchanged in a current transaction between willing parties, other than in forced liquidation or sale.

Book value at Fair value at Book value at Fair value at 31 March 31 March 31 March 31 March 2003 2003 2004 2004 £ £ £ £ (in millions)

Non-derivatives:

Assets

Cash at bank and in hand 30.0 30.0 18.4 18.4

Liabilities

Short-term borrowings(a) 112.8 112.8 127.7 127.7

Long-term borrowings(b) 2,286.0 2,302.2 1,987.1 1,987.1

Derivatives:

Interest rate swaps (25.0 ) (3.2 )

Forward foreign exchange contracts 0.1 (a) The fair value of short-term borrowings approximated to carrying value due to the short maturity of the instruments.

(b) The fair value of the Yell Groups notes and other long-term borrowings has been estimated on the basis of quoted market prices for the same or similar issues with the same maturities where they existed, and on calculations of the present value of future cash flows using the appropriate discount rates in effect at the balance sheet dates, where market prices of similar issues did not exist.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Gains and losses on instruments used for hedging are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains and losses on the interest rate derivative instruments are as follows:

At 31 March 2004 Gains Losses Net losses £ £ £ (in millions)

Unrecognised gains and losses on hedges at 31 March 2004, of which: 1.1 (4.2 ) (3.2 )

Expected to be recognised in the year to 31 March 2005 0.2 (3.2 ) (3.0 )

Expected to be recognised after 31 March 2005 0.8 (1.0 ) (0.2 )

The Yell Group had no derivatives in any period prior to 22 June 2001.

18. Other creditors

Amounts falling due within one year At 31 March At 31 March

2003 2004 £ £ (in millions)

Trade creditors 34.9 26.0

Corporation tax 6.2 16.2

Other taxation and social security 24.7 22.9

Other creditors 5.7 4.4

Accrued expenses 90.4 89.7

Deferred income 74.0 71.8

Total other creditors falling due within one year 235.9 231.0

F-34

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

19. Called up share capital

At 31 March At 31 March 2003 2004 £ £ (in millions)

Authorised

900 shares of 100 euro each 0.1 0.1

Allotted, called up and fully paid

350 shares issued to Yell Group plc (2003 - 300 shares) 0.1 0.1

20. Changes in equity shareholders funds (deficit)

BTs net investment in the Yell Group (pre-22 June 2001)

BTs net Called up Share Profit and investment share capital premium loss account Total £ £ £ £ £ (in millions)

Balance at 31 March 2001 (Predecessor) 394.3 394.3

Profit from 1 April to 22 June 2001 15.8 15.8

Currency movements(a) 0.8 0.8

Balance at 22 June 2001 (Predecessor) 410.9 410.9

Cash retained by BT on acquisition (40.8 )

Identifiable net assets sold by BT 387.2

Elimination of BT invested capital on acquisition from BT (387.2)

Balance at 22 June 2001 (Successor)

(a) The cumulative foreign currency translation adjustment was £25.1 million at 22 June 2001 (year ended 31 March 2001£24.3 million, year ended 31 March 2000£1.6 million).

F-35

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

20. Changes in equity shareholders funds (deficit) (continued)

Reconciliation of movement in the consolidated equity shareholders deficit (post-22 June 2001)

Share Share Profit and capital premium loss account Total £ £ £ £ (in millions)

Issuance of share capital (ordinary shares)(a) 0.1 0.9 1.0

Loss for the period from 22 June 2001 to 31 March 2002 (47.2 ) (47.2 )

Currency movements (3.7 ) (3.7 )

Balance at 31 March 2002 (Successor) 0.1 0.9 (50.9 ) (49.9 )

Issuance of share capital (ordinary shares)(b) 0.1 0.1

Loss for the year (40.6 ) (40.6 )

Currency movements(c) (34.0 ) (34.0 )

Balance at 31 March 2003 (Successor) 0.1 1.0 (125.5 ) (124.4)

Issuance of share capital (ordinary shares)(d) 304.4 304.4

Loss for the year (51.1 ) (51.1 )

Currency movements(c) (65.0 ) (65.0 )

(a) 180 shares of 100 euro each were issued on incorporation at par value, and a further 20 shares were issued on 28 November 2001 for £971,000. (b) 100 shares of 100 euro each were issued on 16 April 2002 for £111,600. (c) The cumulative foreign currency translation adjustment was a £102.7 million loss at 31 March 2004 (31 March 2003£37.7 million loss, 31 March 2002£3.7 million loss). (d) 50 shares of 100 euro each were issued on 15 July 2003 for £304,401,000.

21. Financial commitments and contingent liabilities

At 31 March At 31 March 2003 2004 £ £ (in millions)

Operating lease payments payable within one year of the balance sheet date were in respect of leases expiring:

Within one year 8.7 2.0

Between one and five years 5.2 11.1

After five years 7.3 5.8

Total payable within one year 21.2 18.9

F-36

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

21. Financial commitments and contingent liabilities (continued)

Future minimum operating lease payments for the Yell Group at 31 March 2004 are as follows:

£ (in millions)

Payable in the year ending 31 March:

2005 18.9

2006 15.8

2007 11.9

2008 8.9

2009 8.2

Thereafter 27.2

Total future minimum operating lease payments 90.9

Operating lease commitments are principally in respect of leases of land and buildings.

On 22 January 2004 Verizon filed suit in New York alleging that sales and marketing communications published by Yellow Book USA are misleading and have caused Verizon to lose revenue. We believe that the complaint is without merit and we will vigorously resist any claim for relief. We believe that a material adverse outcome to the company is considerably less than likely.

There are no contingent liabilities or guarantees other than those referred above and on page 56 of the Operating and Financial Review and those arising in the ordinary course of the Yell Groups business.

No material losses are anticipated on liabilities arising in the ordinary course of business.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Group does not believe that there are any pending legal proceedings which would have a material adverse effect on the financial position or results of operations of the Group.

22. Directors remuneration

The emoluments of the directors and the benefits including those received under the long-term incentive plans were:

Year to 31 March 2002 2003 2004 £ £ £ (in thousands)

Salary 706 795 890

Other benefits 77 48 69

Performance-related bonus 723 795 890

Non-executive directors fees and share benefits 6 197 933

Additional payments by BT following the acquisition on 22 June 2001(a) 3,800

Aggregate emoluments 5,312 1,835 2,782

Aggregate gains made on the exercise of share options 20 2,714

Aggregate amounts receivable under long-term incentive plans 132 46

5,464 1,881 5,496

(a) This amount included primarily an agreed settlement with BT to terminate the UK management incentive plan.

Two directors (2003: two, 2002: two) had retirement benefits accruing under a defined benefit pension scheme.

F-37

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

22. Directors remuneration (continued)

Directors detailed remuneration

John Condron John Davis Year to 31 March Year to 31 March 2002 2003 2004 2002 2003 2004 £ £ £ £ £ £ (in thousands) (in thousands)

Salary 416 485 550 290 310 340

Other benefits 29 27 47 48 21 22

Performance-related bonus 426 485 550 297 310 340

Additional payments by BT following the acquisition on 22 June 2001(a) 3,300 500

Aggregate emoluments 4,171 997 1,147 1,135 641 702

Gains made on exercise of share options 20 1,422 1,292

Amounts receivable under long-term incentive plans 132 46

4,323 1,043 2,569 1,135 641 1,994

(a) This amount included primarily an agreed settlement with BT to terminate the UK management incentive plan.

Non-executive directors fees

The non-executive directors, except Lord Powell of Bayswater, who held office between 22 June 2001 and 31 March 2002 were appointed to the board of the Yell Group as representatives of Apax Partners Managing Entities and Hicks Muse. Monitoring fees charged to the Yell Group by these companies are detailed in note 24.

During the year ended 31 March 2003, additional non-executive directors were appointed.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document No fees were paid directly to non-executive directors who were representatives of Apax Partners Managing Entities or Hicks Muse prior to the flotation of our parent company. Fees were paid to the following non-executive directors.

Year to 31 March 2002 2003 2004 £ £ £ (in thousands)

Robert Scott 38 129

Charles Carey 38 57

John Coghlan 39 64

Joachim Eberhardt 38 63

Lydon Lea 45

Lord Powell of Bayswater 6 44 50

F-38

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

22. Directors remuneration (continued)

Retirement benefits

John Condron John Davis At 31 March At 31 March 2002 2003 2004 2002 2003 2004 £ £ £ £ £ £ (in thousands) (in thousands)

Cumulative accrued annual pension 146 195 229 9 17 27

Cumulative accrued lump sum 439 584 686

Transfer value of increase in accrued benefit in excess of inflation less member contributions 817 659 426 25 35 54

Transfer value of accrued benefits at year end 2,018 2,923 3,647 59 119 207

Change in transfer value over year less member contributions 876 691 45 73

Beneficial and non-beneficial interests

The interests of directors and their families in Yell Group ordinary shares are shown below:

At 31 March 2003 (restated)(a) 2004 Number Number

John Condron 8,219,048 6,549,853

John Davis 3,424,603 2,901,379

(a) Number of shares restated for share split.

F-39

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Pensions

SSAP 24Accounting for Pension Costs

Pension costs in respect of the Yell Pension Plan (YPP), the BT Pension Scheme (BTPS) and the defined contribution schemes were:

Combined (Predecessor) Consolidated (Successor) 22 June 1 April to 22 2001 to Year ended Year ended June 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions)

Amounts expensed for YPP (defined benefit section) 1.0 4.7 (a) 8.0 (a) 8.3

Amounts charged from BTPS 0.5 0.9 (b)

Amounts expensed for defined contribution schemes 0.4 0.8 1.9 2.4

Total 1.9 6.4 9.9 10.7

(a) From 1 November 2001 includes cost in respect of the members transferred from the BTPS.

(b) For the period 1 April 2001 to 1 November 2001.

Yell Pension Plan (YPP)Defined benefit Section

With effect from 1 October 2001, a defined contribution section was established in the YPP and the defined benefit sections were closed to new entrants.

The pension costs for the year ended 31 March 2002 in respect of the defined benefit sections of the YPP were based on the valuation at 6 April 1999. The pension cost for the year ended 31 March 2003 was based on the valuation at 5 April 2002. The valuations, carried out by professionally qualified independent actuaries, used the projected unit method in conjunction with a discounted value of assets at 6 April 1999 and market value of assets in the 5 April 2002 valuation. The principal assumptions used and the results of the valuations are set out below:

6 April 5 April 1999 2002

Valuation method Projected Projected unit unit

Return on existing and future assets 8.0 6.0 to 6.5

Average increase in retail price index 4.0 2.7

Average future increases in wages and salaries 6.0 4.2

Average increase in pensions 3.8 2.7

Dividend growth 4.8

At 5 April 2002 (the last valuation date) the market value of assets was £102.7 million. The results of the valuation show that the assets of the scheme were sufficient to cover 102% of the benefits that had accrued to members by that date after allowing for expected future increases in salaries. The date for the next valuation is expected to be no later than 5 April 2005.

For the year ended 31 March 2004, the Yell Group made regular contributions totalling £8.5 million to the defined benefit section (year ended 31 March 2003£7.9 million; 1 April to 22 June 2001£1.0 million; 22 June 2001 to 31 March 2002£4.7 million). In addition, a contribution of £0.9 million (2003£0.1 million) in respect of benefit improvements was made of which £0.8 million was accrued in the 2003 financial year. There are no provisions or prepayments held on the balance sheet in respect of this plan at 31 March 2004 or 2003. The group has a prepayment of £0.3 million at 31 March 2004 (2003£nil).

F-40

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 23. Pensions (continued)

The YPP assets are invested in UK and overseas equities, fixed interest and index linked securities, deposits and short-term investments. The assets are held in separate trustee administered funds.

Defined contribution schemes

In addition to the defined contribution section Four of the YPP, the Group sponsors a 401(k) plan for the majority of Yellow Book employees in the United States. The plan allows employees to contribute a portion of their pre-tax and/or after-tax income in accordance with specified guidelines. Yellow Book matches a percentage of the employee contributions up to certain limits. The assets of the plan are held separately from those of Yellow Book in an independently administered fund.

The pension cost in respect of these schemes represents contributions payable to the funds and amounted to £2.4 million in the year ended 31 March 2004 (year ended 31 March 2003£1.9 million; periods from 22 June 2001 to 31 March 2002 and 1 April to 22 June 2001£0.8 million and £0.4 million respectively). Outstanding contributions amounted to £nil million as at 31 March 2003 (2003£0.3 million). These are included in other creditors (note 18).

FRS 17Retirement benefits

A valuation of the YPP for the purposes of FRS 17 was carried out at 31 March 2002 and updated to 31 March 2003 and 2004 by a qualified independent actuary. The following key assumptions were used:

At 31 March 2002 At 31 March 2003 At 31 March 2004 % % % per annum per annum per annum

Discount rate 6.0 5.4 5.4

Salary increases 4.2 4.0 4.4

Pension increases 2.7 2.5 2.9

Inflation rate 2.7 2.5 2.9

The assets in the YPP and the annual expected rates of return were:

At 31 March 2002 At 31 March 2003 At 31 March 2004 % £ % £ % £ (in millions) (in millions) (in millions)

Equities 7.6 38.6 7.8 49.9 7.7 66.4

Gilts n/a 4.8 28.4 4.7 52.3

Property 7.1 1.6 n/a n/a

Other 3.5 3.5 n/a n/a

Bulk transfer receivable from BTPS 7.6 52.9 n/a n/a

Total 103.0 94.1 122.4

The following amounts as at 31 March 2002, 2003 and 2004 were measured in accordance with the requirements of FRS 17 and show the net balance sheet liability at the year end if FRS 17 had been adopted:

At 31 March 2002 2003 2004 £ £ £ (in millions)

Total market value of assets 103.0 94.1 122.4

Present value of scheme liabilities (104.6) (141.2) (188.8)

Deficit in the scheme (1.6 ) (47.1 ) (66.4)

Related deferred tax asset, based on 30% rate of tax 0.5 14.1 19.9

Net balance sheet liability (1.1 ) (33.0 ) (46.5)

F-41

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 23. Pensions (continued)

The following amounts explain the change in the deficit in the scheme for the years ended 31 March 2003 and 2004 if FRS 17 had been adopted:

Year ended 31 March 2003 2004 £ £ (in millions)

Deficit in scheme at beginning of year (1.6 ) (47.1)

Movement in year:

Current service cost (8.8 ) (10.4)

Contributions 8.0 9.4

Past service costs (0.3 ) (0.8 )

Other finance income (costs) 1.3 (1.5 )

Actuarial loss (45.7) (16.0)

Deficit in scheme at 31 March 47.1 (66.4)

The full actuarial valuation at 5 April 2002 updated to 31 March 2003 showed a deficit of £47.1 million. Improvements in benefits costing £0.8 million were made in the year ended 31 March 2004 and contributions of £8.5 million (13.05% of pensionable earnings), plus an additional contribution of £0.1 million in respect of the benefit improvement, were made. A further additional contribution of £0.1 million in respect of the benefit improvement was made on 1 April 2003. In the year ended 31 March 2003, the Yell Group made contributions at an average rate of 13.05% of pensionable earnings inclusive of expenses and life assurance premiums. Yell Groups trustees have agreed that contributions for the next two years will be at the same rate with an evaluation of future contribution rates after the next evaluation.

As the scheme is closed to new members, under the projected unit method, the current service cost will increase as the members of the scheme approach retirement.

Year ended 31 March 2003 2004

Difference between the expected and actual return on scheme assets

(loss) gain (£ in millions) (27.4) 11.4

(loss) gain (% of scheme assets) (29%) 9%

Experience gains and losses on scheme liabilities

loss (£ in millions) (4.7 ) (8.4 )

loss (% of present value of scheme liabilities) (3% ) (4% )

Total amount to be recognised in the statement of total recognised gains and losses upon full adoption of FRS 17

loss (£ in millions) (45.7) (15.9)

loss (% of present value of scheme liabilities) (32%) (8% )

F-42

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 23. Pensions (continued)

If the above amounts had been recognised in the financial statements, the Yell Groups net liabilities and profit and loss account deficit at 31 March 2003 and 2004 would have been as follows:

At 31 March 2003 2004 £ £ (in millions)

Net (liabilities) assets excluding pension liability(a) (123.6) 63.6

Pension liability (33.0 ) (46.5 )

Net (liabilities) assets including FRS 17 pension liability (156.6) 17.1

Deficit excluding pension liability (125.5) (241.6)

Pension reserve (33.0 ) (46.5 )

Deficit including FRS 17 pension liability (158.5) (288.1)

(a) Excluding SSAP 24 balance sheet items.

If the above amounts had been recognised in the financial statements, the Yell Groups profit and loss account and statement of total recognised gains and losses for the years ended 31 March 2003 and 31 March 2004 would have included the following:

Amounts charged to operating profit Year ended 31 March 2003 2004 £ £ (in millions)

Current service cost 8.8 10.4

Total operating charge 9.1 11.2

Net amount credited to net interest payable

Year ended 31 March 2003 2004 £ £ (in millions)

Expected return on pension scheme assets 7.9 6.5

Interest on pension scheme liabilities (6.6 ) (8.0 )

Net return on pension scheme 1.3 (1.5 )

Amount recognised in statement of total recognised gains and losses

Year ended 31 March 2003 2004 £ £ (in millions)

Actual return less expected return on pension scheme assets (27.4) 11.4

Experience losses arising on the scheme liabilities (4.7 ) (8.4 )

Changes in assumption underlying the present value of the scheme liabilities (13.6) (19.0)

Actuarial loss (45.7) (16.0)

F-43

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

24. Related party transactions

Transactions with BT

Transactions with the Yell Groups former parent, BT, which are not referred to in notes 1, 6, and 22 included the following:

Year ended 31 March 2002 £ (in millions)

Telecommunication services(a) 9.8

Building rental(a) 0.2

Motor vehicles costs(b) 1.8

Data capture(a) 0.3

Commission on BT Phonebooks(a) (3.4 )

Other 4.3

Total transactions with BT 13.0

(a) Transactions are at amounts that would have been incurred had they been purchased from an independent third party.

(b) Transactions are charged on an allocated cost basis.

In addition, prior to 22 June 2001, the Yell Group performed billing services for the BT group on an agency basis. In this capacity, the Yell Group collected and forwarded £9.5 million in the year ended 31 March 2002.

There have been no related party transactions with BT in the years ended 31 March 2003 and 31 March 2004.

Transactions with funds managed or advised by Apax Partners & Co. and Hicks, Muse, Tate and Furst Incorporated (Hicks Muse)

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Funds managed or advised by Apax Partners and Hicks Muse have held deep discount bonds issued by our parent company of £610 million subscribed amount. Details of these bonds are given in note 16. All of the deep discount bonds were redeemed in the year ended 31 March 2004.

Under the arrangement put in place following the acquisition from BT, Apax Partners Managing Entities and affiliates of Hicks Muse charged monitoring fees of £25.8 million for the year ended 31 March 2004 (2003£3.2 million, 2002£1.9 million), of which £nil million (2003£0.9 million, 2002£1.1 million) remained outstanding at the year end.

Transaction costs charged to the Yell Group on 22 June 2001, on the McLeod acquisition and on the NDC acquisition from Apax Partners Managing Entities and affiliates of Hicks Muse were £15.0 million, and £3.1 million and £0.3 million each, respectively.

No transaction or monitoring fees were payable after 15 July 2003, the date of our parent companys initial public offering. Apax Partners Managing Entities and affiliates of Hicks Muse ceased being related parties on 6 January 2004, when they sold their equity interests in our parent company.

F-44

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

25. Employee Share Schemes

Our parent company, Yell Group plc, has various stock option plans for employees and directors. The maximum number of options available for grant under these plans is discussed in Section E, Share Ownership.

Description of schemes

(a) The Yell Group Limited Plans

In March 2002, our parent company introduced three stock option plans, the Yell Group Limited Employee Plan, the Yell Group Limited US Employee Plan and the Yell Group Limited Senior Manager Incentive Plan. The plans were set up to provide employees with option awards for shares that would become exercisable on an exit event (e.g. sale or quotation). The option life under these plans is ten years from date of grant. Under these plans 9,750,735 options were granted in March 2002 at an exercise price of 0.365 pence each. No options were exercised in the year ended 31 March 2003 and 210,615 options lapsed. In the year ended 31 March 2004 2,977,557 options were granted at an exercise price of 0.365 pence each, 5,685,594 options were exercised and 1,409,316 options lapsed. In addition, social security tax liabilities arose in respect of options exercised under these options by employees in the United Kingdom and United States of £1.8m and £0.2m respectively, being 12.8% and 7.65% respectively of the difference between the share price on the date of exercise and the exercise price.

(b) The Yell Group plc Yellow Book (USA) West Management Share Option Scheme

In September 2002, our parent company introduced a stock option plan, the Yell Group plc Yellow Book (USA) West Management Share Option Scheme for certain employees of the former McLeod directories. This plan provided employees with option awards for shares that vest ratably on each anniversary of the grant date over a three-year period. The options could be exercised and sold on the later of the vesting date or the date of an exit event. The option life under the plan is ten years from the date of grant. Under this plan 1,506,805 options were granted at an exercise price of £1.28. As a result there were 1,506,805 options outstanding at 31 March 2003. As a result of the initial public offering, 110,859 of these options were exercised. 40,725 options lapsed in the year ended 31 March 2004. A charge in respect of these schemes arose on the occurrence of the initial public offering.

The Yell Group plc Sharesave Plan (the Sharesave) was established in July 2003. Eligible employees who wish to participate must enter into a savings contract for a period of three or five years under which they will contribute payments of between £5 and £250 per month, and a bonus is added at the end of three, five or seven years. In conjunction with the savings contract, an eligible employee is granted an option to subscribe for Ordinary shares of Yell Group plc, our parent company, out of the repayment made under that contract at the end of three, five or seven years. The exercise price of any option will not be manifestly less than 80% of the market value of the Ordinary shares at the date of grant. The Sharesave Plan is Inland Revenue approved and therefore no charge has been recorded to the profit and loss account in accordance with the exemption available under UITF 17. During the year ended 31 March 2004 3,579,347 options were granted at an exercise price of £2.60 and 113,065 of these had lapsed by the end of the year.

(d) The Yell Group plc 2003 Employee Stock Purchase Plan

The Yell Group plc 2003 Employee Stock Purchase Plan (the US ESPP) was established in July 2003. Eligible employees are entitled to purchase Ordinary shares of Yell Group plc, our parent company (Ordinary shares), at the lower of 85% of the fair market value of the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Ordinary shares on the date the Ordinary shares are offered and 85% of the fair market value of the Ordinary shares on the date ending the offer period when the Ordinary shares are purchased by the employee. All Ordinary shares must be purchased through the savings accumulated during an offer period through payroll deductions. Based on the value at date of offer, 984,617 options were issued in November 2003.

(e) The Yell Group plc Executive Share Option Scheme

The Yell Group plc Executive Share Option Scheme (the UK Option Scheme) was established in July 2003, and contains an unapproved section and a section approved by the Inland Revenue. The price per Ordinary share at which options will be

F-45

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 25. Employee Share Schemes (continued) exercised will be not less than the market value of the Ordinary shares at the date of grant. Options will normally be granted within a period of 42 days commencing on the day after the date on which our parent company releases its quarterly, half- yearly or final consolidated results for any financial period. In most circumstances an objective performance condition must be satisfied before an option can be exercised. Normally options may only be exercised three years after the initial date of grant, with, where appropriate, one re-test of the performance condition at the end of the year. The option life under this plan is ten years from the date of grant. During the year ended 31 March 2004 3,319,043 options were granted at an average price of £2.91.

(f) The Yell Group plc 2003 US Equity Incentive Plan

The Yell Group plc 2003 US Equity Incentive Plan (the US EIP) was established July 2003. It allows our parent company to issue both non-qualified and incentive stock options and Ordinary shares. The Board of our parent company has sole discretion to determine who may receive awards under the US EIP and any performance conditions. The exercise price for incentive stock options will not be less than 100% of the fair market value of the Ordinary shares on the date of grant. The option life under this plan is ten years from the date of grant. Stock awards may be made to officers or employees, and the purchase price, if any, is as established by our parent company. During the year ended 31 March 2004 4,610,281 options were granted at an average exercise price of £2.93.

(g) The Capital Accumulation Plan

The Yell Group plc Capital Accumulation Plan (CAP) was established in March 2004. It allows our parent company to award Ordinary Shares to employees which vest three years from the date of grant. There are no performance criteria attached to the vesting of these shares, which are awarded to employees whom our parent company wishes to retain as key talent within the organization. 1,774,327 ordinary shares were issued under this plan to employees in March 2004.

Options under share schemes

The following table summarises option activity for 2004, 2003 and 2002:

2002 2003 2004 Weighted Weighted Weighted average exercise average exercise average exercise price price price Shares (pence) Shares (pence) Shares (pence)

Outstanding at beginning of year 9,750,735 0.365 11,046,925 18

Granted 9,750,735 0.365 1,506,805 128 15,470,845 226

Exercised (5,796,453 ) 3

Expired or forfeited (210,615 ) (1,563,106 ) 22

Options exercisable at year end 6,777,988 26

Shares available for future grant at year end 23,125,455 23,336,091 57,398,341

Weighted-average fair value of options granted during the year 9,750,735 18 1,506,805 25 15,470,845 69

Weighted-average exercise price equal to fair value of ordinary shares at date of grant 1,506,805 128 9,284,545 268

Weighted-average exercise price greater than fair value of ordinary shares at date of grant 9,540,120 0.365 9,873,666 117

Weighted-average exercise price less than fair value of ordinary shares at date of grant 9,750,735 0.365

F-46

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 25. Employee Share Schemes (continued)

The following table summarises information about stock options outstanding at March 31, 2004:

Options outstanding Options exercisable Weighted Exercise Number average Number price outstanding contractual life exercisable Pence Years

0.365 5,422,767 10 5,422,767

128 1,355,221 10 1,355,221

260 4,450,899 4

285 2,811,403 10

296 5,117,921 10

1 to 296 19,158,211 8.6 6,777,988

26. Auditors remuneration

The following fees were paid or are payable to the Yell Groups auditors for the years ended 31 March 2002, 31 March 2003 and 31 March 2004:

Combined (Predecessor) Consolidated (Successor) 22 June 1 April to 2001 to Year ended Year ended 22 June 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Audit services

Audit-related regulatory reporting 0.1 0.2

Further assurance services 0.6 0.2

Tax services

Compliance services 0.1 0.1

Advisory Services 0.2 1.0

Other services:

Accounting and tax advice on purchase from BT 1.6

Accounting and tax advice on US reporting and bond issuance 0.8

Other services not covered above 0.3 0.3

Total auditors remuneration 3.1 1.9 2.1

In addition to the amounts above, fees in relation to accounting and tax advice in respect of our parent companys postponed IPO in the year ended 31 March 2003 and our parent companys global offer in the year ended 31 March 2004, which were approved and incurred prior to our parent companys IPO, were £4.3 million and £3.6 million respectively. In addition, certain fees in relation to due diligence totalling £0.5 million in the year ended 31 March 2004 were approved and incurred prior to our parent companys IPO.

F-47

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles

The Yell Groups combined and consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP), which differ in certain respects from those applicable in the United States (US GAAP).

I Differences between United Kingdom and United States generally accepted accounting principles

The following are the main differences between UK and US GAAP which are relevant to the Yell Groups financial statements.

(a) Directories in progress

Under UK GAAP, the cost of directories in progress deferred in stock represents direct fixed and variable costs as well as directly attributable overhead costs. Under US GAAP, the deferred costs associated with directories in progress would comprise the production costs and the incremental direct costs associated with selling and creating the directories.

Directories in progress acquired in a business purchase are valued at replacement value under UK GAAP and at fair value under US GAAP. Under UK GAAP this difference is included in goodwill. Under US GAAP, the fair value is charged to the profit and loss upon delivery of the related directories.

(b) Pensions

Under both UK and US GAAP, pension costs are charged against profits over employees working lives. Differences between the UK and US GAAP figures arise from the requirement to use different actuarial methods and assumptions and a different method of amortising surpluses or deficits, when accounting for a single employer scheme.

Under UK GAAP the purchase price of acquisitions is allocated to the fair market value of identifiable acquired tangible assets, with the excess recorded as goodwill with an estimated economic life of 20 years. Under US GAAP the purchase price is allocated to the fair value of identifiable acquired tangible and intangible assets, including acquired customer relationships that are amortised over five to nine years and brand names that are amortised over five or forty years with the excess recorded as goodwill. On April 1, 2002, the Yell Group adopted Statement of Financial Accounting Standards No 142 (SFAS 142) Goodwill and Other Intangible Assets. SFAS 142 eliminates amortisation of goodwill associated with business combinations completed after 30 June 2001 and requires annual impairment tests. During the transition period from 1 July 2001 through 31 March 2002, the Companys goodwill associated with business combinations completed prior to 1 July 2001 continued to be amortised over a period of up to 20 years. Effective 1 April 2002, all goodwill amortisation was discontinued under US GAAP. Upon adoption the Yell Group completed its transitional impairment tests of goodwill as of 1 April 2002 and determined that goodwill balances were not impaired. Also upon adoption the company evaluated its depreciable intangible assets and determined that their remaining useful lives were appropriate. Goodwill impairment tests were also completed at 31 March 2003 and 2004, which determined that goodwill balances were not impaired. The aggregate amortisation expense for the years ended 31 March 2003 and 2004 and the estimated aggregate amortisation expense for the succeeding five years, assuming a constant US dollar exchange rate, are as follows:

£ (in millions)

Aggregate amortisation expense

86.5 For year ended 31 March 2004

Estimated amortisation expense

74.5 For year ending 31 March 2005

60.6 For year ending 31 March 2006

49.9 For year ending 31 March 2007

41.7 For year ending 31 March 2008

35.9 For year ending 31 March 2009

F-48

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)

Goodwill

The changes in the net book value of goodwill for the years ended 31 March 2003 and 31 March 2004 are as follows:

UK US Yell Group £ £ £ (in millions)

Balance as of 1 April 2002 599.4 354.4 953.8

Goodwill acquired during year 299.7 299.7

Reversal of valuation allowance on deferred tax assets acquired (17.2 ) (17.2 )

Currency movements (58.9 ) (58.9 )

Balance as of 31 March 2003 599.4 578.0 1,177.4

Goodwill acquired during year 76.1 76.1

Reversal of valuation allowance on deferred tax assets acquired (8.2 ) (8.2 )

Fair value adjustments(a) 3.3 3.3

Currency movements (85.6 ) (85.6 )

Balance as of 31 March 2004 599.4 563.6 1,163.0

(a) The fair value adjustment to goodwill was due to the finalisation of transaction costs in respect of acquisitions in prior years.

Intangible assets under US GAAP comprise:

Gross book value

Acquired customer relationships 493.4 498.1

Brand names 535.0 511.6

Additional minimum liability 0.3 1.1

Goodwill (net of amortisation to 31 March 2002) 1,177.4 1,163.0

Total gross book value under US GAAP 2,206.1 2,173.8

Accumulated amortisation

Acquired customer relationships (161.1 ) (224.6 )

Brand names (25.6 ) (39.6 )

Total accumulated amortisation under US GAAP (186.7 ) (264.2 )

Net book value in accordance with US GAAP 2,019.4 1,909.6

Net book value in accordance with UK GAAP 1,824.1 1,725.3

Estimated UK to US GAAP adjustments 195.3 184.3

Included in goodwill is £344.9 million of unamortised goodwill relating to purchases made after 1 April 2002.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document In the year 31 March 2004, the remaining £3.1 million asset relating to the Planet Pages brand name was written off as this name, which was acquired in connection with the McLeod business, is no longer used.

Additionally, under US GAAP, the difference between the retail value and net replacement value of directories in progress is included in directories in progress and charged against profits when the directories are delivered. Under UK GAAP the difference is included in goodwill.

F-49

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)

(d) Derivative financial instruments

Certain financial risks are managed through the use of financial instruments, mainly interest rate swaps/collars. These contracts provide economic hedging to the Company; however, they do not qualify as hedges for US GAAP accounting purposes under Statement of Financial Accounting Standards No 133 Accounting for Derivative Instruments and Hedging Activities as amended and interpreted. Derivative financial instruments are recorded on the balance sheet at fair value. Therefore, unrealised gains/losses must be recorded in the profit and loss account at each reporting date. For the interest rate derivative contracts, a gain of £21.7 million would have been recorded for the year ended 31 March 2004 (2003loss of £13.6 million, 2002loss of £11.3 million) under US GAAP, within interest expense. The liability at 31 March 2004 would have been £3.2 million (2003£24.9 million, 2002£11.3 million). These movements reflect fluctuations in the fair value of the US dollar and pounds sterling floating interest rate swaps since the contracts were agreed, and the unwinding of losses previously recognised under US GAAP which have been recorded as expense under UK GAAP.

(e) Management incentive plans

Under UK GAAP, certain incentive payments made by BT to senior management were accounted for as an adjustment to the Yell Group purchase price. Under US GAAP, these payments would be treated as an expense that would be pushed down to the acquired company.

(f) Employee option plans

Under UK GAAP, compensation expense on awards of stock options and other share-based compensation is measured based on the intrinsic value of the awards, if any, at the date of grant. Under US GAAP, compensation expense is measured based on the fair value of the awards at the date of grant. The fair value of each option grant during the period from 1 April 2001 through June 2003 was estimated at the date of grant using the minimum-value method. The fair value of each option grant subsequent to June 2003 was estimated at the date of grant using the Black-Scholes option valuation method. The Group used the following weighted-average assumptions in its estimations of fair value:

Year ended 31 March 2002 2003 2004

Risk free interest rate 4.0% 4.3% 4.4%

Expected dividend yield 0% 0% 3%

Expected volatility 0% 0% 35%

Expected life of option 2.0 years 5.0 years 3.7 years

(g) Closure provisions

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Under UK GAAP, charges relating to employee redundancies and termination of lease or other contracts are recorded as a provision only when there is a present obligation and a reliable estimate can be made of the amount. Under US GAAP, charges relating to employee redundancies are measured when management has committed to a detailed plan of termination that meets specified criteria and has been communicated to the employees and are recorded at that date if future services will not be rendered by the employees or they will be retained only for a minimum retention period. In the event future service by the employees to be terminated is required or the employee will be retained for a period greater than minimum retention period, the charge is recorded ratably over the remaining period the employees provide services. Charges relating to termination of lease or other contracts are recorded under US GAAP at the time the contract is terminated in accordance with the contracts terms and are based on the fair value of the related liability.

F-50

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 27. United States Generally Accepted Accounting Principles (continued)

(h) Deferred taxation

The reconciling adjustment for deferred taxation comprises the tax effects arising from the other UK to US GAAP adjustments listed in the reconciliation below, together with the effect of an adjustment of £8.2 million for the year ended 31 March 2004 (2003£17.2 million) to reverse tax benefits associated with the reversal of a valuation allowance recorded on purchase which under US GAAP results in a reduction to goodwill.

At 31 March 2004, the adjustment to decrease shareholders funds (deficit) of £182.9 million (2003£223.9 million decrease, 2002£235.0 million decrease) included the tax effect of other US GAAP adjustments. This comprised an adjustment increasing current deferred tax assets by £35.7 million (2003£21.1 million, 2002£15.1 million) increasing non-current deferred tax assets by £nil million at 31 March 2004 (2003£14.0 million, 2002£nil) which were net of a £7.7 million (2003£54.6 million, 2002£71.3 million), valuation allowance for deferred tax assets arising from operations in the United States, and £218.6 million (2003£259.0 million, 2002£250.1 million) of non-current deferred tax liabilities. Deferred tax assets arising from operations in the United Kingdom are considered to be recoverable for all years presented.

For the periods from 1 April to 22 June 2001 and 22 June 2001 to 31 March 2002, the US GAAP deferred taxation adjustment to shareholders deficit relates largely to the deferred tax liabilities arising on the intangible assets other than goodwill arising as a result of the acquisition from BT.

(i) Gross profit under US GAAP presentation

Under UK GAAP, doubtful debt expenses are included in cost of sales. Under US GAAP, these expenses do not meet the criteria to be classified as cost of sales and thus would be included in administrative expenses. Additionally, distribution costs would be included in cost of sales under US GAAP.

F-51

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 27. United States Generally Accepted Accounting Principles (continued)

II Profit (loss) and shareholders (deficit) funds reconciliation statements

The following statements summarise estimated adjustments, gross of their tax effect, which reconcile profit (loss) and shareholders (deficit) funds from that reported under UK GAAP to that which would have been reported had US GAAP been applied.

Profit (loss) Combined (Predecessor) Consolidated (Successor) 1 April to 22 June 2001 Year ended Year ended 22 June to 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Profit (loss) for the financial period under UK GAAP 15.8 (47.2 ) (40.6 ) (51.1 )

Adjustment for:

Directories in progress

Deferred costs (6.2 ) 4.3 (23.9 ) (20.8 )

Acquisition accounting(a) (94.1 ) (24.2 )

Pensions (0.4 ) (0.2 ) 0.1 (8.0 )

Goodwill 26.9 98.3 96.7

Other intangible assets (2.0 ) (83.0 ) (106.8 ) (86.5 )

Derivative financial instruments (11.3 ) (13.6 ) 21.7

Employee option costs (1.3 )

Closure provisions 2.9 (0.6 )

Deferred taxation (1.3 ) 56.7 28.7 28.6

Net loss as adjusted for US GAAP (18.2 ) (147.9 ) (79.1 ) (21.3 )

(a) Represents certain adjustments that arose as a result of acquisitions.

Effective 1 April 2002, the Group adopted SFAS 142 for US GAAP reporting purposes which eliminated the requirement to amortise goodwill. The following table presents net loss after eliminating the effect of goodwill amortisation from 1 April 2001.

Adjusted net loss

Combined Consolidated (Predecessor) (Successor) 1 April to 22 June 2001 22 June to 31 March 2001 2002 £ £ (in millions) (in millions)

Reported net loss as adjusted for US GAAP (18.2 ) (147.9 )

Goodwill amortisation, net of tax 1.6 55.6

Adjusted net loss as adjusted for US GAAP (16.6 ) (92.3 )

F-52

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 27. United States Generally Accepted Accounting Principles (continued)

Shareholders (deficit) funds

At 31 March 2003 2004 £ £ (in millions)

Shareholders (deficit) funds under UK GAAP (124.4) 63.9

Adjustment for:

Directories in progress (92.6 ) (103.2)

Pensions 7.7 (0.3 )

Additional minimum pension liability (35.8 ) (37.9 )

Goodwill (646.7) (562.3)

Other intangible assets 842.0 746.6

Derivative financial instruments (24.9 ) (3.2 )

Closure provisions 2.9 2.3

Deferred taxation (223.9) (182.9)

Shareholders deficit as adjusted for US GAAP (295.7) (77.0 )

III Consolidated statements of cash flows

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Under UK GAAP, the Consolidated Statements of Cash Flows are presented in accordance with UK Financial Reporting Standard No 1, Cash Flows Statement (FRS 1). The statements prepared under FRS 1 present substantially the same statements as that required under Statement of Financial Accounting Standards No 95 Statement of Cash Flows (SFAS 95).

Under SFAS 95, cash and cash equivalents include cash and short-term investments with original maturities of three months or less. Under FRS 1, cash comprises cash in hand and at bank and overnight deposits, net of bank overdrafts.

Under FRS 1, cash flows are presented for operating activities; returns on investments and servicing of finance; taxation; capital expenditure and financial investments; acquisitions and disposals; dividends paid to the Companys shareholders; and financing. SFAS 95 requires a classification of cash flows as resulting from operating, investing and financing activities.

Cash flows under FRS 1 in respect of interest and finance fees paid and taxation would be included within operating activities under SFAS 95.

The following statements summarise the statements of cash flows as if they had been presented in accordance with US GAAP.

Combined (Predecessor) Consolidated (Successor) 1 April to 22 June 2001 Year ended Year ended 22 June to 31 March 31 March 2001 31 March 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Net cash provided by operating activities 28.8 48.3 143.8 56.1

Net cash used in investing activities (16.9 ) (1,890.9 ) (486.9 ) (139.2 )

Net cash provided by financing activities 12.4 1,942.7 273.9 74.3

Net increase (decrease) in cash and cash equivalents at end of the period(a) 24.3 100.1 (69.2 ) (8.8 )

Effects of exchange rate changes on cash and cash equivalents (0.9 ) (2.8 )

Cash and cash equivalents at beginning of the period 24.8 100.1 30.0

Cash and cash equivalents at end of the period(a) 49.1 100.1 30.0 18.4

(a) Cash and cash equivalents under US GAAP are the same as cash at bank and in hand under UK GAAP for all periods presented.

F-53

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 27. United States Generally Accepted Accounting Principles (continued)

IV Unaudited pro forma financial information

The following table reflects unaudited condensed pro forma financial information under UK GAAP as if the acquisition of Yell Group from BT and the McLeod and other acquisitions had occurred as of 1 April 2001 and 1 April 2002, respectively, for the years ended 31 March 2002 and 2003.

Year ended 31 March 2002 2003 £ £ (in millions)

Group turnover 865.4 1,126.3

Loss for the year (71.7 ) (38.5 )

V Pensions

The following position for the YPP is computed in accordance with US GAAP pension accounting rules under Statement of Financial Accounting Standards No 87 Employers Accounting for Pensions (SFAS 87), the effect of which is shown in the above reconciliation statements.

The components of the pension cost for the YPP comprised:

Combined (Predecessor) Consolidated (Successor) 1 April to 22 22 June 2001 Year ended Year ended June to 31 March 31 March 31 March 2001 2002 2003 2004 £ £ £ £ (in millions) (in millions)

Service cost 1.4 5.8 9.1 12.6

Interest cost 0.8 4.5 6.6 8.0

Expected return on scheme assets (0.8 ) (5.5 ) (7.9 ) (6.5 )

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Amortisation of net obligation at date of limited application of SFAS 87 0.1 3.1

Recognised losses 0.1

YPP pension costs for the period under US GAAP 1.5 4.8 7.9 17.2

F-54

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)

The information required to be disclosed in accordance with Statement of Financial Accounting Standard No 132 (revised 2003) Employers Disclosures about Pensions and Other Postretirement Benefitsan amendment of FASB Statements No 87, 88 and 106 (SFAS 132 R) concerning the funded status of the YPP at and for the years ended 31 March 2003 and 2004, based on the valuation at 6 April 1999 and 5 April 2002, respectively, is as follows:

At and for the year ended 31 March 2003 2004 £ £ (in millions)

Changes in benefit obligation

Present value of scheme liabilities at the beginning of the year 109.6 147.9

Service cost 9.2 12.6

Interest cost 6.6 8.0

Employees contributions 3.6 3.7

Actuarial movement 19.6 24.6

Benefits paid or payable (1.0 ) (2.7 )

Plan amendments 0.3 0.8

Benefit obligation at the end of the year 147.9 194.9

Year ended 31 March

Amounts recognised in the statement of financial position consist of:

Prepaid pension costs (37.9 )

Intangible asset 1.1

Charge to equity 36.8

Net prepaid pension costs recognised

The accumulated benefit obligation of £160.3 million at 31 March 2004 (2003£122.2 million) was calculated on the assumption that pension increases start immediately. Scheme assets at 31 March 2002 exceeded the accumulated benefit obligations.

At 31 March 2003 2004 £ £ (in millions)

Changes in scheme assets

Market value of scheme assets at the beginning of the year 103.0 94.1

Actual return on scheme assets (19.5 ) 17.8

Employers contributions 8.0 9.5

Employees contributions 3.6 3.7

Benefits paid or payable (1.0 ) (2.7 )

Market value of assets at the end of the year 94.1 122.4

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 27. United States Generally Accepted Accounting Principles (continued)

At 31 March 2003 2004 £ £ (in millions)

Funded status under US GAAP

Projected benefit obligation in excess of scheme assets (53.8) (72.6)

Unrecognised prior service cost (a) 0.3 1.1

Other unrecognised net actuarial losses 61.2 71.5

Prepaid pension costs under US GAAP 7.7

(a) The unrecognised prior service cost is being amortised over 15 years.

The benefit obligation for the main pension scheme was determined using the following assumptions at 1 April 2002, 1 April 2003 and 1 April 2004:

Rates (per annum)% 2002 2003 2004

Discount rate 6.00 5.40 5.40

Rate of future pay increases 4.20 4.00 4.40

Pension increases 2.70 2.50 2.90

Expected return on assets 7.35 6.50 6.35

For US GAAP purposes, multi-employer accounting was applied in respect of past participation in the BTPS for the period until 1 November 2001. Accordingly, the annual pension expense in respect of the BTPS is equal to the annual employer contributions, as is the case under UK GAAP.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Beginning 1 November 2001, the date of the transaction, the participants in the BTPS became participants of YPP, which is a single employer scheme. The SFAS 87 disclosures above for the periods after 1 November 2001 reflect the additional participants as a result of the transaction.

As a result of the acquisition at 22 June 2001, the surplus of £6.1 million (made up of a £3.1 million deficit in the YPP and a £9.2 million surplus in respect of the transfer from the BTPS) was recognised on the balance sheet as part of the purchase price allocation.

F-56

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued)

F-57

28. Valuation and Qualifying Accounts and Reserves

The following table presents the movements in provision and valuation allowances:

Charged to Balance at Charged to other beginning of profit and accounts/ Deductions/ Balance at year loss acquired other end of year £ £ £ £ £ (in millions)

1 April to 22 June 2001

(Predecessor)

Allowance for doubtful debts 60.9 13.5 (18.8 ) 55.6

Provisions for deferred compensation 18.0 3.0 0.7 (21.7 )

Unrecognised net deferred tax assets 22.8 3.5 26.3

22 June 2001 to 31 March 2002

(Successor)

Allowance for doubtful debts 55.6 65.2 (49.4 ) 71.4

Provisions for deferred compensation

Unrecognised net deferred tax assets 26.3 11.4 37.7

(Successor)

Allowance for doubtful debts 71.4 115.9 19.2 (101.0) 105.5

Provisions for deferred compensation

Unrecognised net deferred tax assets 37.7 (10.5 ) 27.2

Year ended 31 March 2004

(Successor)

Allowance for doubtful debts 105.5 72.5 2.3 (67.2 ) 113.1

Provisions for deferred compensation

Unrecognised net deferred tax assets 27.2 (19.5 ) 7.7

29. Supplemental Guarantor Information

The notes issued by Yell Finance B.V. (the Issuer) pursuant to Rule 144A under the US Securities Act 1933 and described in note 16 are guaranteed by Yellow Pages Limited and certain subsidiaries (the Guarantor). Yellow Pages Limited and certain subsidiaries are the wholly owned guarantor subsidiaries of Yell Finance B.V. who jointly and severally, fully and unconditionally guarantee the debt securities that were issued. Yellow Pages Limited has granted a security interest over substantially all of its assets including a fixed charge over certain of its properties, debts, bank accounts, insurances, intellectual property and specified agreements and a floating charge over all of its other undertakings and assets. Substantially all of Yell Finance B.V.s income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet the debt service obligations are provided in large part by distributions or advances from Yellow Pages Limited and its subsidiaries.

Investments in subsidiaries are accounted for at cost; accordingly, entries necessary to consolidate Yell Finance B.V. and the Guarantor and its consolidated subsidiaries are reflected in the eliminations column. Separate complete financial statements of Yell Finance B.V. and the Guarantor would not provide additional material information that would be useful in assessing the financial composition of Yellow Pages Limited and subsidiaries.

YELL GROUP

NOTES TO THE FINANCIAL STATEMENTS (continued) 29. Supplemental Guarantor Information (continued)

The following information sets out the consolidating profit and loss accounts and cash flow statements for the two years ended 31 March 2004 and the period from 22 June 2001 to 31 March 2002 and the consolidating balance sheets at 31 March 2003 and 2004.

The Yell Group has not provided reconciliations from UK GAAP to US GAAP for the columns relating to the guarantor entities as such reconciliations would not materially affect an investors understanding of the nature of the guarantee. All reconciling items as shown in note 27 relate to the Guarantor. Information has not been provided for the period prior to 22 June 2001, as the companies were not incorporated until this date.

YELL GROUP

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

Consolidated (Successor) 22 June 2001 to 31 March 2002 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Group turnover 696.3 696.3

Cost of sales (315.9 ) (315.9 )

Gross profit 380.4 380.4

Distribution costs (18.5 ) (18.5 )

Administrative expenses (243.2 ) (243.2 )

Total operating profit 118.7 118.7

Interest payable (96.2 ) (160.9 ) 96.2 (160.9 )

Net interest payable (158.6 ) (158.6 )

Profit (loss) on ordinary activities before taxation (39.9 ) (39.9 )

Tax on profit (loss) on ordinary activities (0.3 ) (7.0 ) (7.3 )

(Loss) profit for the financial period (0.3 ) (46.9 ) (47.2 )

F-58

YELL GROUP

CONSOLIDATING PROFIT AND LOSS ACCOUNTS

Consolidation (Successor) Year ended 31 March 2003 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Group turnover 1,114.0 1,114.0

Cost of sales (509.9 ) (509.9 )

Gross profit 604.1 604.1

Distribution costs (36.0 ) (36.0 )

Administrative costs (9.9 ) (374.8 ) (384.7 )

Total operating (loss) profit (9.9 ) 193.3 183.4

Interest payable (146.6 ) (239.0 ) 146.6 (239.0 )

Interest receivable 146.6 2.4 (146.6 ) 2.4

Net interest payable (236.6 ) (236.6 )

Loss on ordinary activities before taxation (9.9 ) (43.3 ) (53.2 )

Tax credit on loss on ordinary activities 12.6 12.6

YELL GROUP

CONSOLIDATING PROFIT AND LOSS ACCOUNTS

Consolidation (Successor) Year ended 31 March 2004 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Group turnover 1,186.9 1,186.9

Cost of sales (552.9 ) (552.9 )

Gross profit 634.0 634.0

Distribution costs (34.5 ) (34.5 )

Administrative costs (8.4 ) (440.7 ) (449.1 )

Total operating (loss) profit (8.4 ) 158.8 150.4

Interest payable (100.2 ) (248.6 ) 152.1 (196.7 )

Interest receivable 152.1 2.2 (152.1 ) 2.2

Net interest payable 51.9 (246.4 ) (194.5 )

Profit (loss) on ordinary activities before taxation 43.5 (87.6 ) (44.1 )

Tax credit on loss on ordinary activities (15.2 ) 8.2 (7.0 )

F-59

YELL GROUP

CONSOLIDATED CASH FLOW STATEMENTS

Consolidated (Successor) 22 June 2001 to 31 March 2002 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Net cash inflow from operating activities 158.7 158.7

Returns on investments and servicing of finance

Interest paid (2.8 ) (83.1 ) (85.9 )

Finance fees paid (19.1 ) (30.3 ) (49.4 )

Net cash outflow for returns on investments and servicing of finance (21.9 ) (113.4 ) (135.3 )

Taxation (0.4 ) (0.4 )

Capital expenditure and financial investment

Purchase of tangible fixed assets (9.7 ) (9.7 )

Sale of tangible fixed assets 1.1 1.1

Amounts loaned to subsidiaries (1,019.3 ) 1,019.3

Investment in subsidiary (1.0 ) 1.0

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Net cash (outflow) inflow for capital expenditure and financial investment (1,020.3 ) (8.6 ) 1,020.3 (8.6 )

Acquisitions

Purchase of subsidiary undertakings, net of cash acquired with subsidiary (1,906.4 ) (1,906.4 )

Net cash outflow for acquisitions (1,906.4 ) (1,906.4 )

Net cash (outflow) inflow before financing (1,042.2 ) (1,870.1 ) 1,020.3 (1,892.0 )

Financing

Issue of ordinary share capital 1.0 1.0 (1.0 ) 1.0

Proceeds from third-party borrowings 1,002.2 989.9 1,992.1

Proceeds from parent company borrowings 539.0 1,019.3 (1,019.3 ) 539.0

Third-party borrowings repaid (500.0 ) (40.0 ) (540.0 )

Net cash inflow (outflow) from financing 1,042.2 1,970.2 (1,020.3 ) 1,992.1

Increase in net cash in the period 100.1 100.1

F-60

YELL GROUP

CONSOLIDATING CASH FLOW STATEMENTS

Consolidation (Successor) Year ended 31 March 2003 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Net cash (outflow) inflow from operating activities (28.3 ) 337.4 309.1

Returns on investments and servicing of finance

Interest received (paid) 10.3 (149.8 ) (139.5 )

Finance fees paid (6.2 ) (9.9 ) (16.1 )

Net cash inflow (outflow) for returns on investments and servicing of finance (4.1 ) (159.7 ) (155.6 )

Taxation (9.7 ) (9.7 )

Capital expenditure and financial investment

Purchase of tangible fixed assets (16.0 ) (16.0 )

Amounts loaned to subsidiaries (53.0 ) 53.0

Investment in subsidiary (0.1 ) 0.1

Acquisitions

Purchase of subsidiary undertakings, net of cash acquired with subsidiary (470.9 ) (470.9 )

Net cash outflow for acquisitions (470.9 ) (470.9 )

Net cash (outflow) inflow before financing (77.3 ) (318.9 ) 53.1 (343.1 )

Financing

Issue of ordinary share capital 0.1 0.1 (0.1 ) 0.1

Proceeds from third-party borrowings 173.7 250.7 424.4

Proceeds from parent company borrowings 61.3 53.0 (53.0 ) 61.3

Third-party borrowings repaid (157.8 ) (54.1 ) (211.9 )

Net cash inflow (outflow) from financing 77.3 249.7 (53.1 ) 273.9

Decrease in net cash in the period (69.2 ) (69.2 )

F-61

YELL GROUP

CONSOLIDATING CASH FLOW STATEMENTS

Consolidation (Successor) Year ended 31 March 2004 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Net cash (outflow) inflow from operating activities (15.8 ) 269.3 253.5

Returns on investments and servicing of finance

Interest received (paid) (141.8 ) (141.8 )

Redemption premium paid (19.7 ) (19.7 )

Finance fees paid (16.4 ) (16.4 )

Net cash inflow (outflow) for returns on investments and servicing of finance (19.7 ) (158.2 ) (177.9 )

Taxation (13.7 ) (13.7 )

Capital expenditure and financial investment

Purchase of tangible fixed assets (24.5 ) (24.5 )

Purchase of shares in parent company (5.8 ) (5.8 )

Amounts loaned to subsidiaries (80.8 ) 80.8

Net cash (outflow) inflow for capital expenditure and financial investment (685.2 ) (30.3 ) 685.2 (30.3 )

Acquisitions

Purchase of subsidiary undertakings, net of cash acquired with subsidiary (108.9 ) (108.9 )

Net cash outflow for acquisitions (108.9 ) (108.9 )

Net cash (outflow) inflow before financing (720.7 ) (41.8 ) 685.2 (77.3 )

Financing

Issue of ordinary share capital 304.4 604.4 (604.4 ) 304.4

Proceeds from third-party borrowings 503.1 503.1

Proceeds from parent company borrowings 579.4 80.8 (80.8 ) 579.4

Third-party borrowings repaid (163.1 ) (1,155.3 ) (1,318.4 )

Net cash inflow (outflow) from financing 720.7 33.0 (685.2 ) 68.5

Decrease in net cash in the year (8.8 ) (8.8 )

F-62

YELL GROUP

CONSOLIDATING BALANCE SHEETS

Consolidation (Successor) At 31 March 2003 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Fixed assets

Intangible assets 1,824.1 1,824.1

Tangible assets 47.1 47.1

Investment 1.1 1.9 (1.1 ) 1.9

Total fixed assets 1.1 1,873.1 (1.1 ) 1,873.1

Current assets

Stock 145.8 145.8

Debtors 461.4 461.4

Intercompany debtors 1,306.2 830.7 (2,136.9 )

Cash at bank and in hand 30.0 30.0

Total current assets 1,306.2 1,467.9 (2,136.9 ) 637.2

Loans and other borrowings (14.1 ) (112.8 ) 14.1 (112.8 )

Other creditors (6.4 ) (229.5 ) (235.9 )

Total creditors: amounts falling due within one year (20.5 ) (342.3 ) 14.1 (348.7 )

Net current assets 1,285.7 1,125.6 (2,122.8 ) 288.5

Total assets less current liabilities 1,286.8 2,998.7 (2,123.9 ) 2,161.6

Creditors: amounts falling due after one year

Loans and other borrowings (478.9 ) (1,807.1 ) (2,286.0 )

Intercompany loans (816.7 ) (1,306.1 ) 2,122.8

Total creditors: amounts falling due after one year (1,295.6 ) (3,113.2 ) 2,122.8 (2,286.0 )

Net liabilities (8.8 ) (114.5 ) (1.1 ) (124.4 )

Capital and reserves

Share capital 1.1 1.1 (1.1 ) 1.1

Deficit (9.9 ) (115.6 ) (125.5 )

Equity shareholders deficit (8.8 ) (114.5 ) (1.1 ) (124.4 )

YELL GROUP

CONSOLIDATING BALANCE SHEETS

Consolidation (Successor) At 31 March 2004 Yell Finance B.V. Yellow Pages Limited (Issuer of notes) (Guarantor) Eliminations Consolidated £ £ £ £ (in millions)

Fixed assets

Intangible assets 1,725.3 1,725.3

Tangible assets 45.9 45.9

Investment 605.5 1.8 (605.5 ) 1.8

Total fixed assets 605.5 1,773.0 (605.5 ) 1,773.0

Current assets

Stock 151.9 151.9

Debtors 466.4 466.4

Intercompany debtors 897.8 1,644.8 (2,542.6 )

Cash at bank and in hand 18.4 18.4

Total current assets 897.8 2,281.5 (2,542.6 ) 636.7

Loans and other borrowings (41.8 ) (127.7 ) 41.8 (127.7 )

Other creditors (7.1 ) (219.2 ) (4.7 ) (231.0 )

Total creditors: amounts falling due within one year (48.9 ) (346.9 ) 37.1 (358.7 )

Net current assets 848.9 1,934.6 (2,505.5 ) 278.0

Total assets less current liabilities 1,454.4 3,707.6 (3,111.0 ) 2,051.0

Creditors: amounts falling due after one year

Loans and other borrowings (299.3 ) (1,687.8 ) (1,987.1 )

Intercompany loans (831.2 ) (1,674.3 ) 2,505.5

Total creditors: amounts falling due after one year (1,130.5 ) (3,362.1 ) 2,505.5 (1,987.1 )

Net assets (liabilities) 323.9 345.5 (605.5 ) 63.9

Capital and reserves

Share capital 305.5 605.5 (605.5 ) 305.5

Funds (deficit) 18.4 (260.0 ) (241.6 )

Equity shareholders funds 323.9 345.5 (605.5 ) 63.9

EXHIBIT INDEX

The exhibits filed with or incorporated by reference into this annual report are listed below.

1.2 Articles of Association of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.2 to the Exchange Offer Registration Statement).*

1.3 Memorandum of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.3 to the Exchange Offer Registration Statement).*

1.4 Articles of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.4 to the Exchange Offer Registration Statement).*

2.6 Intercreditor Deed, dated June 22, 2001 (as amended on July 11, 2001, March 13, 2002, April 16, 2002, May 31, 2002 and November 11, 2002), with, amongst others, Yell Group plc and certain of its subsidiaries as Obligors, Yellow Pages Limited as the Guarantor, Yell Finance B.V. as the Issuer of the High Yield Notes. Discount High Yield Notes and Further High Yield Debt, the Institutions named therein as the Senior Finance Parties and the funds managed or advised by Apax Partners and Hicks Muse (the Intercreditor Deed). (The Intercreditor Deed and amendment prior to November 11, 2002 incorporated herein by reference to Exhibit 2.6 to Yell Finance B.V.s annual report on Form 20-F filed with the United States Securities and Exchange Commission on July 19, 2002 (the 2002 Annual Report)* and the amendment of November 11, 2002.*

2.7 Form of Sterling Note (incorporated herein by reference to Exhibit 4.7 to the Exchange Offer Registration Statement).*

2.8 Form of Dollar Note (incorporated herein by reference to Exhibit 4.8 to the Exchange Offer Registration Statement).*

2.9 Form of Discount Dollar Note (incorporated herein by reference to Exhibit 4.9 to the Exchange Offer Registration Statement).*

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.10 Form of Guarantee (included in Exhibits 2.7, 2.8 and 2.9) (incorporated herein by reference to Exhibits 4.7, 4.8 and 4.9 to the Exchange Offer Registration Statement).*

4.6 Directors Service Contract, dated 10 July 2003, between John Condron and Yell Group plc. **

4.7 Directors Service Contract, dated 10 July 2003, between John Davis and Yell Group plc. **

8.1 Subsidiaries of Yell Finance B.V. (please see list of principal subsidiaries under Item 4.C. Information on the CompanyOrganizational Structure of this annual report on Form 20-F on pages 36-37).

12.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Condron dated June 8, 2004.**

12.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Davis dated June 8, 2004.**

13.1 Chief Executive Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

13.2 Chief Financial Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

14.1 Code of Ethics for the Chief Executive and Senior Financial Officers.**

* Incorporated by reference. ** Filed herewith.

C L I F F O R D LIMITED LIABILITY PARTNERSHIP C H A N C E

CONFORMED COPY

DATED 26 AUGUST 2003

YELL LIMITED as Obligors Agent

ABN AMRO BANK N.V. and HSBC BANK PLC As Arrangers

HSBC BANK PLC as Facility Agent

and

HSBC BANK PLC as Security Trustee

SECOND AMENDMENT AND RESTATEMENT AGREEMENT RELATING TO A FACILITY AGREEMENT DATED 8 JULY 2003 AS AMENDED AND RESTATED ON 12 AUGUST 2003

(1) YELL LIMITED (registration number 4205228) acting as Obligors Agent on the terms and conditions set out in clause 38.4 (Obligors) of the Original Facility Agreement (the Obligors Agent);

(2) ABN AMRO BANK N.V. and HSBC BANK plc as joint mandated lead arrangers (whether acting individually or together the Arranger);

(3) THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1 (The Original Lenders) of the Original Facility Agreement as lenders (the Original Lenders);

(4) HSBC BANK plc as Facility Agent of the Lenders (the Facility Agent); and

(5) HSBC BANK plc as Security Trustee for the Secured Parties (the Security Trustee).

IT IS AGREED as follows:

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

Original Facility Agreement means the Facility Agreement dated 8 July 2003 between the Parent, the Original Borrowers, the Original Guarantors, the Arranger, the Original Lenders, the Facility Agent and the Security Trustee as amended and restated on 12 August 2003.

Restated Agreement means the Original Facility Agreement, as amended and restated by this Agreement, the terms of which are set out in Schedule 1 (Restated Agreement).

1.2 Incorporation of Defined Terms

(a) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in this Agreement as in that Finance Document or notice.

(b) The principles of construction set out in the Original Facility Agreement shall have effect as if set out in this Agreement.

1.3 Clauses

(a) In this Agreement any reference to a Clause or Schedule is, unless the context otherwise requires, a reference to a Clause or Schedule of this Agreement.

(b) Clause and Schedule headings are for ease of reference only.

- 2 -

2.1 Restatement of the Original Facility Agreement

With effect from the date of this Agreement, the Original Facility Agreement shall be amended and restated so that it shall be read and construed for all purposes as set out in Schedule 1 (Restated Agreement)

2.2 Finance Document

By their execution of this Agreement, each of the Facility Agent and the Obligors Agent designate this Agreement as a Finance Document.

3. REPRESENTATIONS

The Obligors Agent (on its own behalf and on behalf of each of the Obligors) makes the Repeating Representations as if each reference in those representations to this Agreement or the Finance Documents includes a reference to (a) this Agreement and (b) the Restated Agreement.

4. CONTINUITY AND FURTHER ASSURANCE

4.1 Continuing obligations

The provisions of the Original Facility Agreement shall, save as amended in this Agreement, continue in full force and effect.

4.2 Further assurance

The Obligors Agent shall, at the request of the Facility Agent and at its own expense, do all such acts and things necessary or desirable to give effect to the amendments effected or to be effected pursuant to this Agreement.

5. MISCELLANEOUS

5.1 Incorporation of terms

The provisions of clause 36 (Partial Invalidity), clause 37 (Remedies and waivers), clause 40 (Governing Law), and clause 41 (Enforcement) of the Original Facility Agreement shall be incorporated into this Agreement as if set out in full in this Agreement and as if references in those clauses to this Agreement or the Finance Documents are references to this Agreement.

5.2 Counterparts

This Agreement may be executed in any number of counterparts and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement.

- 3 -

- 4 -

for

YELL GROUP PLC

arranged by

ABN AMRO BANK N.V.

and

HSBC BANK PLC

with

HSBC BANK PLC acting as Facility Agent

and

HSBC BANK PLC acting as Security Trustee

FACILITIES AGREEMENT

- 5 -

Clause Page

1. Definitions And Interpretation 8

2. The Facilities 39

3. Purpose 39

4. Conditions Of Utilisation 40

5. Utilisation Of Loans 42

6. Optional Currencies 43

7. Ancillary Facilities 44

8. Repayment 45

9. Prepayment And Cancellation 46

10. Interest 51

11. Interest Periods And Terms 52

12. Changes To The Calculation Of Interest 53

13. Fees 55

14. Tax Gross Up And Indemnities 56

16. Other Indemnities 62

17. Mitigation By The Lenders 64

18. Costs And Expenses 65

19. Guarantee And Indemnity 68

20. Representations 70

21. Information Undertakings 78

22. Financial Covenants 83

23. General Undertakings 89

24. Events Of Default 101

25. Changes To The Lenders 107

26. Changes To The Obligors And Release Of Security 110

27. Parallel Debt 115

28. Declaration Of Trust 116

29. Role Of The Facility Agent, The Arranger And Others 116

31. Conduct Of Business By The Finance Parties 128

- 6 -

33. Payment Mechanics 131

34. Set-Off 133

35. Application Of Proceeds 133

36. Notices 135

37. Calculations And Certificates 138

38. Partial Invalidity 138

39. Remedies And Waivers 138

40. Amendments And Waivers 138

41. Counterparts 141

42. Governing Law 141

43. Enforcement 141

Schedule 1 THE ORIGINAL PARTIES 142

Part I The Original Obligors 142

Part II The Original Lenders 143

Part I Conditions Precedent To Initial Loan 144

Part II Conditions Precedent Required To Be Delivered By An Additional Obligor 148

Part III Security Documents 150

Part IV Documents Related To The Security Documents 151

Schedule 3 REQUESTS 153

Part I Utilisation Request 153

Part II Selection Notice 154

Schedule 4 MANDATORY COST FORMULAE 155

Schedule 5 FORM OF TRANSFER CERTIFICATE 158

Schedule 6 FORM OF ACCESSION LETTER 160

Schedule 7 FORM OF RESIGNATION LETTER 161

Schedule 8 FORM OF COMPLIANCE CERTIFICATE 162

Schedule 9 TIMETABLES 164

- 7 -

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document THIS AGREEMENT is originally dated 8 July 2003 as amended and restated on 12 August 2003 and on 26 August 2003 and made

BETWEEN:

(1) YELL GROUP plc (registration number 4180320) (the Parent);

(2) THE SUBSIDIARIES of the Parent listed in Part I of Schedule 1 (The Original Obligors) as original borrowers (the Original Borrowers);

(3) THE SUBSIDIARIES of the Parent listed in Part I of Schedule 1 (The Original Obligors) as original guarantors (the Original Guarantors);

(4) ABN AMRO BANK N.V. and HSBC BANK plc as joint mandated lead arrangers (whether acting individually or together the Arranger);

(5) THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1 (The Original Lenders) as lenders (the Original Lenders);

(6) HSBC BANK plc as Facility Agent of the Lenders (the Facility Agent); and

(7) HSBC BANK plc as Security Trustee for the Secured Parties (the Security Trustee).

IT IS AGREED as follows:

SECTION 1 INTERPRETATION

1. DEFINITIONS AND INTERPRETATION

1.1 Definitions

In this Agreement:

Accession Letter means a document substantially in the form set out in Schedule 6 (Form of Accession Letter) or such other form as may be agreed between the Facility Agent and the Obligors Agent.

Accounting Principles means generally accepted accounting principles in the United Kingdom.

Acquisition Assets has the meaning given thereto in the definition of Permitted Acquisitions.

Acquisition Consideration means, in relation to Acquisition Assets, the equivalent in sterling of the aggregate of the consideration (including any non-cash consideration) paid and payable (whether contingent or otherwise) and the gross liabilities in respect of Financial Indebtedness assumed or to be assumed or refinanced or which remain subsisting in respect of such Acquisition Assets following their acquisition.

Additional Borrower means a company which becomes an Additional Borrower in accordance with Clause 26 (Changes to the Obligors and Release of Security).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Additional Cost Rate has the meaning given to it in Schedule 4 (Mandatory Cost Formulae).

Additional Guarantor means a company which becomes an Additional Guarantor in accordance with Clause 26 (Changes to the Obligors and Release of Security).

Additional Obligor means an Additional Borrower or an Additional Guarantor.

Additional Subordinated Loan Stock means the subordinated, unsecured and unguaranteed non-cash interest bearing loan notes in the nominal principal amount of £374,833,032.25 issued by the Parent pursuant to an instrument dated 16 April 2002 and subscribed for by the SLPs.

Affiliate means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company.

Agents Spot Rate of Exchange means the Facility Agents spot rate of exchange for the purchase of the relevant currency with the Base Currency in the London foreign exchange market as of 11:00 a.m. on a particular day.

Agreed Financial Projections means the financial projections in the agreed form delivered to the Facility Agent pursuant to Part I (Conditions Precedent to Initial Loan) of Schedule 2 (Conditions Precedent).

Ancillary Document means each document relating to or evidencing the terms of an Ancillary Facility.

Ancillary Facility means any ancillary facility listed in Clause 7.1 (Type of Facility) made available to a Borrower by an Ancillary Lender in accordance with the terms of an Ancillary Document.

Ancillary Lender means each Lender (or Affiliate of a Lender) which makes available an Ancillary Facility and which executes an Accession Letter to accede to this Agreement.

Ancillary Limit means the maximum aggregate principal amount which may be made available to the Borrowers by way of Ancillary Facilities but excluding any interest rate or foreign exchange hedging provided under the Hedging Agreements, being £50,000,000 (or its equivalent in other currencies).

Approved Bank means any bank which has been approved by notice in writing to the Obligors Agent by the Facility Agent for the purposes of this definition and, except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), which has been given, and has acknowledged, any and all notices required by the Security Documents.

Authorisation means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

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(a) in relation to the Term Facility, the period from and including the date of this Agreement to and including the day falling 90 days after the date of this Agreement; and

(b) in relation to the Revolving Facility, the period from and including the date of this Agreement to and including the date falling one Month prior to the Final Maturity Date.

Available Commitment means, in relation to a Facility, a Lenders Commitment under that Facility minus (subject as set out below):

(a) the Base Currency Amount of its participation in any outstanding Loans under that Facility; and

(b) in relation to any proposed Loan, the Base Currency Amount of its participation in any other Loans that are due to be made under that Facility on or before the proposed Utilisation Date.

For the purposes of calculating a Lenders Available Commitment in relation to any proposed Loan under the Revolving Facility only, the Base Currency Amount of that Lenders participation in any Revolving Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date shall not be deducted from a Lenders Commitment under that Facility.

Available Facility means, in relation to a Facility, the aggregate for the time being of each Lenders Available Commitment in respect of that Facility.

Base Currency means, in relation to Facility A1 and the Revolving Facility, sterling and, in relation to Facility A2, dollars.

Base Currency Amount means, in relation to a Loan under a Facility, the amount specified in the Utilisation Request delivered by a Borrower for that Loan (or, if the amount requested is not denominated in the Base Currency for that Facility, that amount converted into the Base Currency at the Agents Spot Rate of Exchange on the date which is three Business Days before the Utilisation Date or, if later, on the date the Facility Agent receives the Utilisation Request) as adjusted to reflect any repayment, prepayment, consolidation or division of a Loan.

Borrower means an Original Borrower or an Additional Borrower unless it has ceased to be a Borrower in accordance with Clause 26 (Changes to the Obligors and Release of Security).

Break Costs means the amount (if any) by which:

(a) the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

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(b) the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

Business means the business of providing classified information for consumer and business needs in any medium whatsoever, including, without limitation, in the form of printed directories, telephone information services and electronic media, including, without limitation, such business carried out under the names Yellow Pages, Business Pages, Talking Pages, The Business Database, Yell.Com, Planet Pages, The Talking Phone Book and all related activities carried on at the date of this Agreement.

Business Day means a day (other than a Saturday or Sunday) on which banks are open for general business in London and New York and:

(a) (in relation to any date for payment or purchase of a currency other than euro) the principal financial centre of the country of that currency; or

Capital Expenditure has the meaning given to that term in Clause 22.1 (Financial definitions).

Cash Collateral Account means any account with the Facility Agent opened or to be opened in the name of a Borrower into which sums are to be paid in accordance with Clause 9.12 (Prepayments during Interest Periods).

Cash Equivalents means:

(a) securities issued by, or unconditionally guaranteed by, the United Kingdom Government, the United States Government or the government of any Specified Sovereign or issued by any agency thereof and, as the case may be, guaranteed by the United Kingdom Government or backed by the full faith and credit of the United States Government or guaranteed by the government of any Specified Sovereign, in each case maturing within one year of the date of the acquisition thereof;

(b) commercial paper issued by any corporation organised under the laws of the United Kingdom, a state of the United States of America or a Specified Sovereign maturing no more than one year from the date of the acquisition thereof and, at the time of such acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moodys;

(c) certificates of deposit or bankers acceptances issued by any commercial bank organised under (i) the laws of the United Kingdom, (ii) the laws of a state of the United States of America, (iii) the federal laws of the United States of America, or (iv) the laws of a Specified Sovereign, maturing within one year

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document from the date of the acquisition thereof issued by any bank having a long term unsecured debt rating of at least A-1 from S&P or at least P-1 from Moodys;

(d) investments in money market funds which invest substantially all their assets in securities of the types described in paragraphs (a) to (c) above; and

(e) any other cash equivalent securities approved in writing for the purposes of this definition by the Facility Agent.

Cashflow has the meaning given to such term in Clause 22.1 (Financial definitions).

Change of Control has the meaning given in Clause 9.6 (Exit).

Charged Property means all of the assets of the Obligors which from time to time are, or are expressed to be, the subject of the Transaction Security.

Closing Date means the date on which Completion occurs.

Code means, at any date, the US Internal Revenue Code of 1986 (or any successor legislation thereto) as amended from time to time, and the regulations promulgated and rulings issued thereunder all as the same may be in effect as at such date.

Commitment means a Term Commitment or a Revolving Commitment as the context may require.

Completion means receipt by the Parent of the funds from the IPO.

Compliance Certificate means a certificate substantially in the form set out in Schedule 8 (Form of Compliance Certificate) or such other form as may be agreed between the Facility Agent and the Obligors Agent.

Confidentiality Undertaking means a confidentiality undertaking substantially in the recommended form of the LMA or in such other form as may be agreed between the Obligors Agent and the Facility Agent.

Consolidated EBITDA has the meaning given to such term in Clause 22.1 (Financial definitions).

Consolidated Net Senior Debt has the meaning given to such term in Clause 22.1 (Financial definitions).

Consolidated Total Net Debt has the meaning given to such term in Clause 22.1 (Financial definitions).

Default means an Event of Default or any event or circumstance which, with the expiry of a grace period, the giving of notice, the making of any determination or the fulfilment of any condition provided for in Clause 24 (Events of Default) would or could reasonably be expected to constitute an Event of Default.

Deferred Subscription Arrangements means the deferred subscription arrangements and related transactions described in the steps paper delivered to the Facility Agent

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document pursuant to Part I (Conditions Precedent to Initial Loan) of Schedule 2 (Conditions Precedent).

Delegate means any delegate, agent or attorney appointed by the Security Trustee.

Discount High Yield Noteholders means the subscribers for (and any holder from time to time of) the Discount High Yield Notes and any successor, assignee or transferee of any such person.

Discount High Yield Notes means the 13½% senior discount US Dollar notes due 2011 issued by the Issuer.

Discount High Yield Notes Trustee means the trustee appointed on behalf of the Discount High Yield Noteholders.

Dormant Company means a member of the Group which during the most recently ended Financial Year was dormant within the meaning of Section 250(3) of the Companies Act 1985 (which, for the purposes of this definition, shall be deemed to apply to any Subsidiary of the Parent wherever incorporated) and does not have assets with an aggregate value greater than £100,000 (or its equivalent in other currencies).

Environmental Claim means any claim or proceeding commenced before any court or tribunal by any person or investigation by any regulatory authority in respect of any Environmental Law.

Environmental Law means any applicable law or regulation which relates to:

(a) the pollution or protection of the environment; or

(b) the protection of human health or the health of animals or plants to the extent that it relates to environmental protection.

Environmental Permits means any permit, licence, consent, approval and other authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any member of the Group conducted on or from the properties owned or used by any member of the Group.

ERISA means the Employee Retirement Income Security Act of 1974 of the United States of America as amended from time to time and any applicable regulations promulgated thereunder.

ERISA Affiliate means, with respect to any Obligor, any person that for the purposes of Title IV of ERISA is from time to time a member of the controlled group of any Obligor, or under common control with any Obligor within the meaning of Section 414 of the Code.

ERISA Event means (a)(i) the occurrence of a reportable event, within the meaning of Section 4043(c) of ERISA, with respect to any Plan unless the 30-day notice requirement with respect to such event has been waived by the PBGC or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10),

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the application for a minimum funding waiver with respect to a Plan; (c) the provision by the administrator of any Plan or a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d) the cessation of operations at a facility of any Obligor or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (e) the withdrawal by any Obligor or any ERISA Affiliate from a Multiemployer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under Section 302(f) of ERISA shall have been met with respect to any Plan; (g) the adoption of an amendment to a Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan.

EURIBOR means, in relation to any Loan in euro:

(a) the applicable Screen Rate; or

(b) (if no Screen Rate is available for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the European interbank market, as of the Specified Time on the Quotation Day for the offering of deposits in euro for a period comparable to the Interest Period of the relevant Loan.

Event of Default means any event or circumstance specified as such in Clause 24 (Events of Default).

Excluded Group Members means the Parent and the Issuer and, following their acquisition by the Parent pursuant to paragraph (e) of Clause 23.10 (Acquisitions), the SLP Partnership Companies and the SLPs, and Excluded Group Member shall mean any one of them as the context may require.

Excess Cashflow has the meaning given to that term in Clause 22.1 (Financial definitions).

Existing Facility Agreement means the facilities agreement dated 25 May 2001 (as last amended and restated on 11 November 2002 and otherwise as amended, varied or restated from time to time prior to the date of this Agreement) and made between, among others, the Parent and Deutsche Bank AG London as Facility Agent and Security Agent.

Existing Finance Documents shall have the meaning given to Senior Finance Documents set out in the Existing Facility Agreement.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Existing Indebtedness means all amounts (whether of principal, interest, costs, fees or expenses and whether actual or contingent) outstanding under the Existing Finance Documents as at the Closing Date.

Existing Security means all Security granted by any member of the Group as security for the Existing Indebtedness.

External Debt means Financial Indebtedness of any member of the Group raised after the Closing Date as a result of issuing any note, bond or other debt security (whether issued to the public or by means of private placement) and with a maturity of more than one year excluding (i) any Further High Yield Debt which is issued to refinance amounts outstanding under the High Yield Notes or the Discount High Yield Notes but only up to the aggregate amount of such Further High Yield Debt necessary to complete such refinancing, (ii) any issue in the equity capital markets and (iii) Permitted Indebtedness.

Facility means the Term Facility or the Revolving Facility.

Facility A1 means that part of the Term Facility made available under this Agreement as described in paragraph (a)(i) of Clause 2.1 (The Facilities).

Facility A1 Commitment means:

(a) in relation to an Original Lender, the amount in the Base Currency for Facility A1 set opposite its name under the heading Facility A1 Commitment in Part II of Schedule 1 (The Original Lenders) and the amount of any other Facility A1 Commitment transferred to it under this Agreement; and

(b) in relation to any other Lender, the amount in the Base Currency for Facility A1 of any Facility A1 Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.

Facility A1 Loan means a loan made or to be made under Facility A1 or the principal amount outstanding for the time being of that loan.

Facility A1 Repayment Date means each of the dates specified in paragraph (a) of Clause 8.1 (Repayment of Term Loans) as Facility A1 Repayment Dates.

Facility A2 means that part of the Term Facility made available under this Agreement as described in paragraph (a)(ii) of Clause 2.1 (The Facilities).

Facility A2 Commitment means:

(a) in relation to an Original Lender, the amount in the Base Currency for Facility A2 set opposite its name under the heading Facility A2 Commitment in Part II of Schedule 1 (The Original Lenders) and the amount of any other Facility A2 Commitment transferred to it under this Agreement; and

(b) in relation to any other Lender, the amount in the Base Currency for Facility A2 of any Facility A2 Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Facility A2 Loan means a loan made or to be made under Facility A2 or the principal amount outstanding for the time being of that loan.

Facility A2 Repayment Date means the date specified in paragraph (c) of Clause 8.1 (Repayment of Term Loans) as the Facility A2 Repayment Date.

Facility Office means the office or offices notified by a Lender to the Facility Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days written notice) as the office or offices through which it will perform its obligations under this Agreement.

Fee Letter means any letter or letters made between the Arranger and the Parent (or the Facility Agent and the Parent) setting out any of the fees referred to in Clause 13 (Fees).

Final Maturity Date means the date falling five years after the date of this Agreement.

Finance Document means this Agreement, any Fee Letter, the Subordination Agreement, any Accession Letter, any Resignation Letter, any Security Document, any Ancillary Document, any Hedging Agreement and any other document designated as a Finance Document by the Facility Agent and the Obligors Agent.

Finance Party means the Facility Agent, the Arranger, the Security Trustee or a Lender.

Financial Indebtedness means any indebtedness in respect of or arising under or in connection with:

(a) moneys borrowed (including overdrafts); or

(b) money raised including any debenture, bond (other than a performance bond issued in the ordinary course of trading by one member of the Group in respect of the obligations of another member of the Group (other than an Excluded Group Member)), note or loan stock or other similar instrument; or

(d) receivables sold or discounted (otherwise than on a non-recourse basis); or

(e) the acquisition cost of any asset to the extent payable after the time of acquisition or possession by the person liable as principal obligor for the payment thereof where the deferred payment is arranged primarily as a method of raising finance or financing or refinancing the acquisition of the asset acquired; or

(f) the sale price of any asset to the extent paid before the time of sale or delivery by the person liable to effect such sale or delivery where the advance payment is arranged primarily as a method of raising finance or financing or refinancing the manufacture, assembly, acquisition or holding of the asset to be sold; or

(g) finance leases, credit sale or conditional sale agreements (whether in respect of land, buildings, plant, machinery, equipment or otherwise) which are treated as

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document finance leases in accordance with the Accounting Principles (but not including liabilities under operating leases); or

(h) any agreement for managing or hedging currency and/or interest rate and/or commodity risk provided that where such agreement provides for netting to occur this paragraph (h) shall include the net amount of the payment obligation outstanding from the relevant member of the Group thereunder after such netting-off has occurred; or

(i) the amount payable under any put option or other arrangement whereby any member of the Group is liable, at the request of a third party, to purchase share capital or other securities issued by it or any other member of the Group; or

(j) the amount payable by any member of the Group in respect of the redemption of any share capital or other securities issued by it or any other member of the Group (if the share capital or other securities are redeemable at the option of their holder or if the relevant member of the Group is otherwise obliged to redeem them); or

(k) amounts raised under any other transaction required to be accounted for as a borrowing; or

(l) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any indebtedness falling within paragraphs (a) to (k) inclusive of this definition, and so that, where the amount of Financial Indebtedness falls to be calculated, no amount shall be taken into account more than once in the same calculation.

Financial Year means each period ending on 31 March in respect of which audited consolidated financial statements of the Group are required to be prepared.

Funds Flow Statement means the funds flow statement in agreed form delivered to the Facility Agent.

Further Equity Contribution means any cash subscription for equity share capital (not having creditor rights) in the Parent which occurs after the date of this Agreement and the proceeds of which are contributed by way of subscription for share capital through all the relevant intermediate holding companies to the Subordinated Guarantor or any of its Subsidiaries.

Further High Yield Debt means (i) unsecured Financial Indebtedness which is subordinated to, or ranks pari passu with (or, to the extent that such Financial Indebtedness is intended to be used to refinance the High Yield Notes and/or Discount High Yield Notes in full, would have ranked pari passu with), the High Yield Notes and/or the Discount High Yield Notes and which is incurred by the Issuer (and, to the extent guaranteed, guaranteed only by the Subordinated Guarantor) on substantially the same terms as, or on terms not more favourable to the holders or creditors thereof than the terms of the High Yield Notes and/or the Discount High Yield Notes and, in each case, having a scheduled maturity date no earlier than 12 months after the Final Maturity

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Date and being subordinated to all amounts outstanding from time to time under the Finance Documents on terms approved in writing by the Facility Agent acting on the instructions of the Majority Lenders (acting reasonably); and (ii) any other unsecured subordinated Financial Indebtedness the terms of which have been approved in writing by the Facility Agent (acting on the instructions of the Majority Lenders).

Further Intercompany Loan Agreements means intercompany loan agreements or, as the case may be, loan notes, in each case in the agreed form, to be made (in the case of intercompany loan agreements) between the Issuer as lender and the Subordinated Guarantor as borrower, the Subordinated Guarantor as lender and YH2 as borrower and YH2 as lender and other members of the Group (other than the Issuer and the Subordinated Guarantor) as borrowers and otherwise between any other members of the Group (other than the Issuer and the Subordinated Guarantor) or being (in the case of loan notes) issued by the Issuer, the Subordinated Guarantor, YH2 or any other member of the Group pursuant to which the proceeds of any Further Equity Contribution or any Further High Yield Debt are to be advanced to and between members of the Group.

Group means the Parent and its Subsidiaries for the time being and member of the Group means any one of them.

Group Structure Chart means the group structure chart in agreed form delivered to the Facility Agent pursuant to Part I of Schedule 2 (Conditions Precedent to Initial Initialisation).

Guarantor means an Original Guarantor or an Additional Guarantor, unless it has ceased to be a Guarantor in accordance with Clause 26 (Changes to the Obligors and Release of Security).

Hedge Counterparty means a Lender or an Affiliate of a Lender acting as a provider of interest rate or foreign exchange hedging in relation to the Term Facility and which executes an Accession Letter to accede to this Agreement.

Hedging Agreement means any agreement in agreed form entered into or to be entered into by a Borrower and a Hedge Counterparty for the purpose of hedging interest rate or foreign exchange liabilities in relation to the Term Facility.

High Yield Noteholders means the subscribers for the High Yield Notes and any successor, assignee or transferee of any such person.

High Yield Notes means (i) the 10¾% senior Sterling notes due 2011 issued by the Issuer and (ii) the 10¾% senior US Dollar notes due 2011 issued by the Issuer.

High Yield Notes Trustee means the trustee appointed on behalf of the High Yield Noteholders.

Holding Company (save for the purposes of Clause 20.27 (US Government Regulations) or as otherwise defined herein) means in relation to a person, a holding company of such person within the meaning of section 736 of the Companies Act 1985, any parent undertaking of such person within the meaning of section 258 of the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Companies Act 1985 and any Affiliate of such person which controls directly or indirectly, such person.

Information Memorandum means the document in the form approved by the Parent concerning the Original Obligors which, at the request of the Parent and on its behalf is to be prepared in relation to this transaction, approved by the Parent and distributed by the Arranger prior to the Syndication Date in connection with the syndication of the Facilities.

Initial Subordinated Loan Stock means the subordinated, unsecured and unguaranteed non-cash interest bearing loan notes in the principal amount of £549,000,000 issued by the Parent pursuant to an instrument dated 22 June 2001 and subscribed for by the SLPs.

Insufficiency means, with respect to any Plan, the amount, if any, of its unfunded liabilities, as defined in Section 4001(a)(18) of ERISA.

Intellectual Property means all industrial and intellectual property rights whether registered or unregistered including pending applications for registration of such rights and the right to apply for registration of such rights including but not limited to patents, trade marks, service marks, copyrights and rights in the nature of copyright (including, without limitation, rights in computer software), database right, rights in designs, business names, domain names, trade secrets, know-how and all other rights of a like or equivalent nature throughout the world including all rights under any agreements relating to the use or exploitation of any such rights

Intercompany Loan Agreements means intercompany loan agreements or, as the case may be, loan notes existing as at the date of this Agreement and being (in the case of intercompany loan agreements) made between the Issuer as lender and the Subordinated Guarantor as borrower, the Subordinated Guarantor as lender and YH2 as borrower, YH2 as lender and other members of the Group (other than the Issuer and the Subordinated Guarantor) as borrowers and otherwise between any other members of the Group (other than the Issuer and the Subordinated Guarantor) or being (in the case of loan notes) issued by the Issuer, the Subordinated Guarantor, YH2 or any other member of the Group and including those intercompany loan agreements or, as the case may be, loan notes pursuant to which, inter alia, the proceeds of the High Yield Notes and the Discount High Yield Notes were advanced to and between members of the Group.

Interest Period means, in relation to a Loan, each period determined in accordance with Clause 11 (Interest Periods and Terms) and, in relation to an Unpaid Sum, each period determined in accordance with Clause 10.3 (Default interest).

Intra-Group Debt means any indebtedness outstanding under Intercompany Loan Agreements.

IPO means the underwritten public offering by the Parent of its ordinary share capital to be listed on the Official List of the UK Listing Authority and traded on the London Stock Exchange.

IRS means the Internal Revenue Service of the United States of America.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Issuer means Yell Finance B.V., a company incorporated under the laws of the Netherlands and which is a direct wholly-owned subsidiary of the Parent.

Joint Venture means any joint venture entity, whether a company, unincorporated firm, undertaking, association, joint venture or partnership or any other entity.

Legal Opinions means, collectively, (i) the legal opinions delivered to the Facility Agent pursuant to Clause 4.1 (Initial Conditions Precedent) as set out in Part I (Conditions Precedent to Initial Loan) of Schedule 2 (Conditions Precedent), (ii) the legal opinions delivered to the Facility Agent pursuant to Clause 26 (Changes to the Obligors and Release of Security) in respect of Additional Obligors as set out in Part II (Conditions Precedent Required to be Delivered by an Additional Obligor) of Schedule 2 (Conditions Precedent), (iii) the legal opinions delivered to the Facility Agent in connection with the Security Documents as set out in Part IV (Documents Related to the Security Documents) of Schedule 2 (Conditions Precedent) and (iv) any legal opinions delivered pursuant to paragraph (h) of the definition of Permitted Disposal, paragraph (ii) to the proviso to the definition of Permitted Disposal and paragraphs (c) and (d) in Clause 23.10 (Acquisitions).

Legal Reservations means:

(a) the principle that equitable remedies may be granted or refused at the discretion of a court, the limitation of enforcement by laws relating to insolvency, reorganisation and other laws generally affecting the rights of creditors;

(b) the time barring of claims under the Limitation Acts, the possibility that an undertaking to assume liability for or indemnify a person against non-payment of UK stamp duty may be void and defences of set-off or counterclaim; and

Lender means:

(a) any Original Lender; and

(b) any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 25 (Changes to the Lenders), which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

Leverage Ratio means the ratio of Consolidated Total Net Debt to Consolidated EBITDA of the Group as set out in paragraph (c) of Clause 22.2 (Financial condition).

LIBOR means, in relation to any Loan:

(a) the applicable Screen Rate; or

(b) (if no Screen Rate is available for the currency or Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document supplied to the Facility Agent at its request quoted by the Reference Banks to leading banks in the London interbank market, as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Loan and for a period comparable to the Interest Period for that Loan.

Loan means a Term Loan or a Revolving Loan.

LMA means the Loan Market Association.

Majority Lenders means:

2 (a) (if there are no Loans then outstanding) a Lender or Lenders whose Commitments aggregate more than 66 /3 per cent. of the Total 2 Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 /3 per cent. of the Total Commitments immediately prior to that reduction); or

2 (b) at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 66 /3 per cent. of all the Loans then outstanding, provided that, on any vote where Lenders have voted whose Commitments (if there are no Loans then outstanding) aggregate more than 51% of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 51% of the Total Commitments immediately prior to that reduction) or, at any other time, whose participations in the Loans then outstanding aggregate more than 51% of all the Loans then outstanding, Majority Lenders means Lenders whose Commitments (or, as the case may be, participations in the outstanding Loans) upon such vote represent Commitments (or, as the case may be, participations in the outstanding 2 Loans) which equal or exceed at least 66 /3 per cent. of the Commitments (or, as the case may be, participations in the outstanding Loans) of those Lenders who have so voted or who otherwise vote within 15 Business Days of being requested to do so by the Facility Agent (unless such period is extended by the Parent).

Mandatory Cost means the percentage rate per annum calculated by the Facility Agent in accordance with Schedule 4 (Mandatory Cost Formulae).

Market Disruption Event shall have the meaning given to that term in paragraph (e) of Clause 12.2 (Market disruption).

Market Disruption Notice shall have the meaning given to that term in Clause 12.2 (Market disruption).

Margin means 1.50 per cent. per annum, provided that, after 31 March 2004 (being the first date on which the financial covenants set out in Clause 22 (Financial covenants) are tested) and each subsequent financial covenant testing date if:

(a) no Event of Default is continuing; and

(b) the Leverage Ratio is within the ranges set out below,

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document then the Margin for each Loan will be the percentage per annum set out below in the column opposite the appropriate range:

Margin Leverage Ratio % p.a.

1.50 Greater than or equal to 3.75:1

1.25 Less than 3.75:1 but greater than or equal to 3.25:1

1.00 Less than 3.25:1 but greater than or equal to 2.50:1

0.85 Less than 2.50:1 but greater than or equal to 2.00:1

0.70 Less than 2.00:1

(and any adjustment in that Margin shall take effect upon receipt by the Facility Agent of the Compliance Certificate for that testing date pursuant to Clause 21.2 (Compliance Certificate)).

Notwithstanding anything to the contrary herein, if an Event of Default has occurred and is continuing, the Margin shall immediately revert to its original level at the date of this Agreement until such time as any Event of Default is no longer continuing, whereupon the Margin shall be determined in accordance with this definition on the next financial covenant testing date.

Material Adverse Effect means any effect, event, matter or circumstance:

(a) which in the reasonable opinion of the Majority Lenders is materially adverse to:

(i) the business, assets, financial condition or prospects of the Group (taken as a whole); or

(ii) the ability of any member of the Group to perform any of its payment obligations in accordance with their terms under any of the Finance Documents or the ability of the Parent to perform its obligations under Clause 22 (Financial covenants); or

(b) which results in any of the Finance Documents not being legal, valid and binding on and, subject to the Legal Reservations, enforceable against any party thereto and/or in the case of any Security Documents not providing to the Security Trustee security over the assets expressed to be secured under the Security Documents in each case in a manner or to an extent which the Majority Lenders consider to be materially prejudicial to the interests of any Finance Party under the Finance Documents.

Material Group Company means:

(a) each Obligor; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) any other Subsidiary of the Parent (excluding, for this purpose, the SLP Partnership Companies and the SLPs), the (A) earnings before interest, Taxation, depreciation and amortisation, (B) turnover or (C) gross tangible consolidated assets of which exceeds 5% of respectively the Consolidated EBITDA, turnover or gross tangible consolidated assets of the Group, and for this purpose the calculation of earnings before interest, Taxation, depreciation and amortisation, turnover or, as the case may be, gross tangible consolidated assets shall:

(i) be made in accordance with the Accounting Principles;

(ii) in the case of a company which itself has Subsidiaries, be made by using the consolidated earnings before interest, Taxation, depreciation and amortisation, turnover or gross tangible consolidated assets, as the case may be, of it and its Subsidiaries; and

(iii) be made by reference to the latest available semi-annual financial information of the relevant Subsidiary and the Group.

Material Intellectual Property means Intellectual Property which is material to the Business.

Month means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:

(a) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day; and

(b) if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month.

The above rules will only apply to the last Month of any period. Monthly shall be construed accordingly.

Moodys means Moodys Investors Services, Inc. and includes any successors to its rating business.

Multiemployer Plan means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Obligor or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

Net Proceeds means, in relation to any issue of External Debt, the cash proceeds (net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith) received from such issue of External Debt.

Obligor means a Borrower or a Guarantor.

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Offering Circular means the offering circular prepared by the Parent in connection with the IPO.

Optional Currency means a currency (other than a Base Currency) which complies with the conditions set out in Clause 4.3 (Conditions relating to Optional Currencies).

Original Equity Investors means, collectively, (i) investment funds advised by Apax Partners Limited and its Affiliates and (ii) investment funds advised by Hicks, Muse, Tate & Furst Limited and its Affiliates; and Original Equity Investor means any of the foregoing.

Original Financial Statements means:

(a) in relation to the Parent, the audited consolidated financial statements for its Financial Year ended 31 March 2003; and

(b) in relation to each Original Obligor, its audited (or, in circumstances where audited financial statements are not prepared for such Original Obligor, its unaudited) financial statements for its Financial Year ended 31 March 2002 or, if available, 31 March 2003; and

(c) in relation to any Obligor (other than the Original Obligors), its audited (or, in circumstances where audited financial statements are not prepared for such Original Obligor, its unaudited) financial statements delivered to the Facility Agent (if available, as required by Clause 26 (Changes to the Obligors and Release of Security)).

Original Obligor means an Original Borrower or an Original Guarantor.

Participating Member State means any member state of the European Communities that adopts or has adopted the euro as its lawful currency in accordance with legislation of the European Community relating to Economic and Monetary Union.

Party means a party to this Agreement.

PBGC means the Pension Benefit Guaranty Corporation (or any successor).

Permitted Acquisitions means the acquisition by a member of the Group (other than an Excluded Group Member) of a business (whether by way of shares or assets) (Acquisition Assets) of any company which carries on a business which is similar or related to the Business where:

(a) the aggregate of the Acquisition Consideration in respect of Acquisition Assets is not, when aggregated with all other Acquisition Consideration in any Financial Year, greater than £200,000,000 (or its equivalent in other currencies) plus the cash element of any proposed Acquisition Consideration provided by (i) Further Equity Contributions and (ii) Excess Cashflow (in each case as described in paragraph (b) below); and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) the cash element of any proposed Acquisition Consideration is provided by any one or more of the following (i) Further Equity Contributions, (ii) Excess Cashflow for each previous Financial Year following the Closing Date after deducting any mandatory payments made or to be made under Clause 9.7 (Excess Cash) and any amount of such Excess Cashflow used in a previous acquisition or to fund other Capital Expenditure or otherwise used to fund a Permitted Acquisition, (iii) Permitted Indebtedness under paragraph (i) of the definition thereof or (iv) Revolving Loans; and

(c) the proposed Acquisition Assets, for the period of the twelve months prior to the date of their acquisition, had EBITDA (utilising the definition of Consolidated EBITDA (amended, in the case of an acquisition of assets, to reflect the fact that EBITDA, for the purposes of this paragraph (c), shall not be calculated on a consolidated basis) contained in Clause 22.1 (Financial definitions) but with references to Group being replaced with references to the Acquisition Assets together with any appropriate adjustments) which was:

(ii) positive; or

(iii) negative, but if negative, then notwithstanding anything to the contrary in this Agreement the Acquisition Consideration paid in respect of such Acquisition Assets (when aggregated with the Acquisition Consideration paid in respect of other Acquisition Assets which had negative EBITDA in such Financial Year) shall not exceed £10,000,000.

The Parent shall notify the Facility Agent of the amount of such EBITDA and aggregate EBITDA by a certificate signed by the chief executive officer or the finance director of the Parent (on behalf of the Parent and without personal liability for the signatories) and supported by such evidence as the Facility Agent may reasonably request; and

PROVIDED THAT, with respect to each of the foregoing:

(a) at least 5 Business Days prior to entering into any acquisition for which the Acquisition Consideration is greater than £50,000,000 (or its equivalent in other currencies), the Facility Agent shall have received from the Parent revised financial projections, reflecting the proposed Acquisition Assets therein (including, without limitation, the incurrence or assumption of any Financial Indebtedness in connection with, or as a result of, the acquisition of such Acquisition Assets) which demonstrate that none of the financial covenants in Clause 22 (Financial covenants) will be breached prior to the Final Maturity Date and that no Event of Default will arise under Clause 24 (Events of Default), accompanied by a certificate signed by the chief executive officer or the finance director of the Parent confirming (on behalf of the Parent and without personal liability for the signatories) that they believe that the assumptions (upon which the forecasts and projections in such revised financial projections are based) taken as a whole, and those forecasts and projections, are fair and reasonable and confirming that, in making those assumptions and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document forming those forecasts and projections the Parent has taken full and proper account of all contingent liabilities relating to the Acquisition Assets to be acquired pursuant to the proposed acquisition and the Parent has, where it is considered that such contingent liabilities may become actual liabilities attributed a proper amount to such contingent liabilities in forming those forecasts and projections; and

(b) at least 5 Business Days prior to entering into any acquisition for which the Acquisition Consideration is greater than £50,000,000 (or its equivalent in other currencies) there has been provided to the Facility Agent copies of all accountants, environmental and other reports obtained by any member of the Group in respect of such Acquisition Assets; and

(c) in respect of any acquisition for which the Acquisition Consideration is £50,000,000 (or its equivalent in other currencies) or less, the Parent certifies that no Event of Default will arise under Clause 24 (Events of Default) as a result of the proposed acquisition of the Acquisition Assets,

PROVIDED FURTHER THAT:

(1) if any acquisition requires the approval of the shareholders of the Parent then, notwithstanding anything to the contrary contained in this definition of Permitted Acquisition, the acquisition shall also require the approval of the Majority Lenders; and

(1) the limit contained in paragraph (a) above shall be increased to £350,000,000 (or its equivalent in other currencies) if:

(i) (both prior to and after completion of the relevant acquisition), the Leverage Ratio (calculated on a pro forma basis following completion of the relevant acquisition) shall be equal to or less than 3.50:1; and

(ii) prior to completion of any such acquisition, the Parent shall have achieved external credit ratings of a minimum of BBB- from S&P and Baa3 from Moodys (with, in each case, a stable outlook or better),

provided that the limit (whether £200,000,000 or, as the case may be, £350,000,000) shall be reduced by investments in Permitted Joint Ventures described in paragraph (b) of the definition thereof.

Permitted Disposal means:

(a) disposals of assets (other than shares in any member of the Group) in the ordinary course of trading;

(b) the disposal of cash and Cash Equivalents in the ordinary course of business to the extent not otherwise prohibited by the Finance Documents;

(c) the exchange of assets (other than shares in any member of the Group) for other assets of a similar nature and value;

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) any disposal of assets (other than shares in any member of the Group) by a member of the Group to an Obligor;

(e) any disposal of assets (other than shares in any member of the Group) which are obsolete for the purpose for which such assets are normally utilised or which are no longer required for the purpose of the relevant persons business or operations;

(f) disposals of assets between wholly-owned Subsidiaries of the Parent neither of which is an Obligor or an Excluded Group Member;

(g) any disposal of shares in any member of the Group which is a Subsidiary of YH2 by a member of the Group to YH2 or an Obligor which is a Subsidiary of YH2;

(h) the disposal of all the assets of YS (including all of the shares owned by YS in Yellow Book Group, Inc.) to YHL immediately prior to and in contemplation of any proposed solvent liquidation of YS provided that, immediately following such disposal, except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), YHL enters into Security Documents (to the extent required) in form and substance reasonably satisfactory to the Security Trustee for the purpose of creating Security over all such assets in favour of the Security Trustee and takes all steps reasonably necessary to maintain, create, perfect and register such Security and shall deliver to the Security Trustee such evidence as the Security Trustee shall reasonably require of the due execution of any such Security Documents, together with legal opinions to the extent reasonably necessary in form and substance satisfactory to the Security Trustee;

(i) disposals (other than in accordance with sub-paragraphs (a) to (h) above) to persons not being members of the Group of assets (other than Material Intellectual Property which would be required to conduct the Business following such disposal or shares of any member of the Group which owns any such Material Intellectual Property), where the gross value of all assets disposed of after the date hereof does not exceed £45,000,000 (or its equivalent in other currencies) in any Financial Year and in aggregate does not exceed £125,000,000 (or its equivalent in other currencies) prior to repayment or prepayment of all the Facilities. For the purposes of this sub-paragraph (i) the value of an asset means the higher of its book value and its fair market value (in the latter case determined by reference to the cash and/or fair market value of any assets received as consideration for the disposal). Any disposal made pursuant to this sub-paragraph must be made at full market value, provided that:

(i) disposals under sub-paragraphs (d), (g), (h) and (i) above will only be permitted so long as no Default has occurred and is continuing; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (ii) any asset disposed of in accordance with sub-paragraph (d) above whether or not subject to a Security at the time of disposal shall be, except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), subject to security under a Security Document following disposal to the relevant Obligor and the relevant Obligor shall take all steps necessary to create, perfect and register such security, and shall deliver to the Security Trustee such evidence as the Security Trustee shall require of the due execution of the relevant Security Document together with legal opinions to the extent reasonably necessary in form and substance satisfactory to the Security Trustee.

Permitted Indebtedness means:

(a) Financial Indebtedness arising under the Finance Documents;

(b) Financial Indebtedness permitted by Clauses 23.16 (Guarantees), 23.17 (Loans), 23.22 (Hedging Strategy) and 23.26 (Structural Subordination) and 23.30 (Leasing Arrangements);

(c) unsecured overdraft and working capital facilities in respect of which a letter of credit or bank guarantee in an amount equal to the maximum principal amount of such facilities has been issued under any Ancillary Facility or Facilities;

(d) daylight overdraft facilities required to be put in place in connection with the Deferred Subscription Arrangements;

(e) Financial Indebtedness of Yellow Book USA, Inc. under the YBUS Loan Notes;

(f) Further High Yield Debt;

(g) (up to the Closing Date) the Existing Indebtedness;

(h) Financial Indebtedness arising solely as a result of gross exposure (which is zero on a net balance basis) under netting arrangements between accounts with the same Lender or the same Approved Bank, or any other netting arrangements that are approved by the Majority Lenders;

(i) other Financial Indebtedness in an aggregate principal amount not to exceed £100,000,000 (or its equivalent in other currencies), or following the operation of the events described in the further proviso set out in paragraph (2) of the definition of Permitted Acquisitions, £250,000,000 (or its equivalent in other currencies); and

(j) Financial Indebtedness arising in respect of the Subordinated Loan Stock.

Permitted Joint Venture means:

(a) investments in any Joint Venture or similar arrangement subsisting with any person (which is not an Affiliate) existing as at the date of this Agreement; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) investments in Joint Ventures not exceeding an aggregate amount of the lower of (i) £50,000,000 (or its equivalent in other currencies) for the Group in any Financial Year and (ii) the amount of the allowance of £200,000,000 or, as the case may be, £350,000,000 (or its equivalent in other currencies) for Permitted Acquisitions which is not utilised for Permitted Acquisitions in that Financial Year provided that (aa) each Joint Venture is in a business which is the same or related to the Business; (bb) each Joint Venture entity is incorporated with limited liability and there is no recourse to a member of the Group other than for the relevant investment permitted in accordance with this definition; (cc) the interest of the relevant member of the Group in each Joint Venture entity constitutes not less than 20% or more than 50% of the total interests therein; (dd) the relevant member of the Group has management control over each Joint Venture entity; and (ee) the Facility Agent is provided with a copy of the Joint Venture agreement and evidence satisfactory to it (acting reasonably) as to the proposed investment amount.

Permitted Payments means the payment, prepayment or repayment of any Intra-Group Debt other than to any holding company of the Subordinated Guarantor provided that any such payment, prepayment or repayment shall not in any event be permitted if an Event of Default is continuing.

Permitted Security Interest means:

(a) liens arising solely by operation of law and in the ordinary course of its trading activities and not as a result of any default or omission on the part of any member of the Group;

(b) rights of set-off existing in the ordinary course of trading activities between any member of the Group and its respective suppliers or customers;

(c) rights of set-off or netting arising by operation of law or by contract by virtue of the provision to any member of the Group of clearing bank facilities or overdraft facilities permitted under this Agreement;

(d) any retention of title to goods supplied to any member of the Group where such retention is required by the supplier in the ordinary course of its trading activities and on customary terms and the goods in question are supplied on credit;

(e) Security Interests (except floating charges) arising under finance leases, hire purchase, conditional sale agreements or other agreements for the acquisition of assets on deferred payment terms permitted under Clause 23.30 (Leasing Arrangements ) and only to the extent such Security Interests are granted by the relevant member of the Group over assets comprised within or constituted by such arrangements or were in existence at the date of this Agreement;

(f) Security Interests arising under the Security Documents;

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (g) rights over cash deposits granted in favour of a landlord for the purposes of securing performance of rent and service charge obligations under licences, subleases or leases of real property permitted under this Agreement;

(h) statutory liens imposed by (i) any taxing authority of the United States or any political subdivision thereof in respect of taxes, assessments or levies which are not yet due and payable or which are being contested in good faith by appropriate proceedings, provided that adequate reserves for such contested taxes are maintained on the books of the appropriate members of the Group in conformity with the Accounting Principles; and (ii) the taxing authorities of any other applicable jurisdiction in respect of any taxes, assessments or levies which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect of such contested taxes are maintained on the books of the appropriate members of the Group in conformity with the Accounting Principles;

(i) Security Interests arising pursuant to an order of attachment or injunction restraining disposal of assets or similar legal process arising in connection with court proceedings which are contested by any member of the Group in good faith by appropriate proceedings with a reasonable prospect of success;

(j) the Existing Security provided that it is discharged within 60 days of the date of Completion; and

(k) Security Interests on (and limited solely to) any Acquisition Assets existing at the time of, and not created for the purpose of or in contemplation of, such acquisition and securing any Financial Indebtedness which is permitted under paragraph (i) of the definition of Permitted Indebtedness provided that (A) the principal amount secured does not exceed the acquisition cost of such Acquisition Assets and may not be increased; (B) such Financial Indebtedness is or was incurred by a member of the Group; and (C) the aggregate principal amount of all such Financial Indebtedness which is so secured may not exceed £15,000,000 (or its equivalent in other currencies).

Plan means a Single Employer Plan or a Multiemployer Plan.

Qualifying Lender has the meaning given to that term in Clause 14 (Tax gross-up and indemnities).

Quotation Day means, in relation to any period for which an interest rate is to be determined:

(a) (if the currency is sterling) the first day of that period;

(b) (if the currency is euro) two TARGET Days before the first day of that period; or

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Facility Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

Receiver means a receiver or receiver and manager or administrative receiver of the whole or any part of the Charged Property or the equivalent thereof in any Relevant Jurisdiction.

Reference Banks means the principal London offices of ABN AMRO Bank N.V., and HSBC Bank plc and/or such other banks as may be appointed by the Facility Agent in consultation with the Obligors Agent.

Relevant Interbank Market means in relation to euro, the European interbank market, and, in relation to any other currency, the London interbank market.

Relevant Jurisdiction means, in relation to an Obligor:

(a) its jurisdiction of incorporation;

(b) any jurisdiction where any asset subject to or intended to be subject to the Transaction Security to be created by it is situated;

(d) the jurisdiction whose laws govern the perfection of any of the Security Documents entered into by it.

Repayment Date means each of the Facility A1 Repayment Dates and the Facility A2 Repayment Date.

Repayment Installment means each installment for repayment of the Term Loans referred to in Clause 8.1 (Repayment of Term Loans).

Repeating Representations means each of the representations set out in Clauses 20.1 (Status) to Clause 20.6 (Governing law and enforcement) (other than Clause 20.4 (Power and Authority) but including paragraph (c) of Clause 20.4 (Power and Authority)), Clause 20.9 (No Defaults), paragraph (e) of Clause 20.14 (No misleading information), paragraph (c) of Clause 20.15 (Financial statements), Clause 20.19 (Ranking) to Clause 20.21 (Good Title to Assets), Clause 20.22 (Legal and beneficial ownership), Clause 20.27 (US Government Regulations) and Clause 20.29 (Material Adverse Change).

Resignation Letter means a letter substantially in the form set out in Schedule 7 (Form of Resignation Letter).

Revolving Commitment means:

(a) in relation to an Original Lender, the amount in the Base Currency for the Revolving Facility set opposite its name under the heading Revolving

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Commitment in Part II of Schedule 1 (The Original Lenders) and the amount of any other Revolving Commitment transferred to it under this Agreement; and

(b) in relation to any other Lender, the amount in the Base Currency for the Revolving Facility of any Revolving Commitment transferred to it under this Agreement, to the extent not cancelled, reduced or transferred by it under this Agreement.

Revolving Facility means the revolving credit facility made available under this Agreement as described in paragraph (b) of Clause 2.1 (The Facilities).

Revolving Loan means a loan made or to be made under the Revolving Facility or the principal amount outstanding for the time being of that loan.

Rollover Loan means one or more Revolving Loans:

(a) made or to be made on the same day that a maturing Revolving Loan is due to be repaid;

(b) the aggregate amount of which is equal to or less than the maturing Revolving Loan;

(c) in the same currency as the maturing Revolving Loan (unless it arose as a result of the operation of Clause 6.2 (Unavailability of a currency)); and

(d) made or to be made to the same Borrower for the purpose of refinancing a maturing Revolving Loan.

S&P means Standard and Poors Rating Services, a division of The McGraw-Hill Companies, Inc. and includes any successor to its ratings business.

Sale has the meaning given to it in Clause 9.6 (Exit).

Screen Rate means:

(a) in relation to LIBOR, the British Bankers Association Interest Settlement Rate for the relevant currency and period; and

(b) in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period, displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or the service ceases to be available, the Facility Agent may specify another page or service displaying the appropriate rate after consultation with the Obligors Agent and the Lenders.

Secured Parties means the Security Trustee, the Facility Agent, each Lender and each Ancillary Lender from time to time party to this Agreement and each Hedge Counterparty from time to time party to this Agreement.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Security means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

Security Documents means each of the following documents:

(a) the charges, pledges and assignments and other security documents in form and substance acceptable to the Security Trustee and the Facility Agent and identified in Part III and IV of Schedule 2 and to be delivered to the Facility Agent pursuant to the terms of Clause 23.33 (Conditions Subsequent); and

(b) any other document entered into by any Obligor creating or expressed to create any Security over all or any part of its assets in respect of the obligations of any of the Obligors under any of the Finance Documents.

Selection Notice means a notice substantially in the form set out in Part II of Schedule 3 (Selection Notice) given in accordance with Clause 11 (Interest Periods and Terms) in relation to the Term Facility.

Single Employer Plan means a single employer plan, as defined in Section 4001(a)(15) of ERISA (subject to Title IV of ERISA), that (a) is maintained for employees of any Obligor or any ERISA Affiliate and no person other than the Obligors and the ERISA Affiliates or (b) was so maintained and in respect of which any Obligor or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

SLP Partnership Companies means the companies identified on the Group Structure Chart which at the date hereof collectively own 100% of the direct partnership interests in the SLPs.

SLPs means the Scottish Limited Partnerships identified on the Group Structure Chart which at the date hereof are subscribers of the Subordinated Loan Stock and SLP means any of them.

Specified Sovereign means any member state of the European Union as comprised on the Closing Date (other than Greece or Portugal).

Specified Time means a time determined in accordance with Schedule 9 (Timetables).

Structure Paper means the structure paper delivered to the Facility Agent pursuant to Part I (Conditions Precedent to Initial Loan) of Schedule 2 (Conditions Precedent).

Subordinated Guarantor means Yellow Pages Limited (formerly known as Seamleigh Limited), a limited liability company incorporated in England and Wales with registered number 4175821 and a direct wholly-owned Subsidiary of the Issuer.

Subordinated Loan Stock means each of the Initial Subordinated Loan Stock and the Additional Subordinated Loan Stock.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Subordination Agreement means the subordination agreement in the agreed form to be made between the Subordinated Guarantor, YH2 and the Security Trustee.

Subsidiary means:

(a) a subsidiary as defined in Section 736 of the Companies Act 1985; and

(b) a subsidiary undertaking as defined in Section 21 of the Companies Act 1989.

Syndication Date means the day which is 120 days after the Closing Date or such earlier date specified by the Arranger as the day on which primary syndication of the Facilities is completed.

TARGET means Trans-European Automated Real-time Gross Settlement Express Transfer payment system.

TARGET Day means any day on which TARGET is open for the settlement of payments in euro.

Tax means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same) (and references to Taxation shall be construed accordingly).

Taxes Act means the Income and Corporation Taxes Act 1988.

Term Commitment means a Facility A1 Commitment or a Facility A2 Commitment.

Term Facility means the term loan facility made available under this Agreement as described in paragraph (a) of Clause 2.1 (The Facilities).

Term Loan means a Facility A1 Loan or a Facility A2 Loan.

Total Commitments means the aggregate of the Total Term Facility Commitments and the Total Revolving Commitments.

Total Facility A1 Commitments means the aggregate of the Facility A1 Commitments of the Lenders.

Total Facility A2 Commitments means the aggregate of the Facility A2 Commitments of the Lenders.

Total Revolving Commitments means the aggregate of the Revolving Commitments of the Lenders.

Total Term Facility Commitments means the aggregate of the Total Facility A1 Commitments and the Total Facility A2 Commitments.

Transaction Costs means the costs, fees and expenses and stamp, registration, notarial and similar Taxes incurred by members of the Group in connection with the IPO and the negotiation, drafting and execution of this Agreement and the other Finance Documents.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Transaction Security means the Security created or expressed to be created in favour of the Security Trustee pursuant to the Security Documents.

Transfer Certificate means a certificate substantially in the form set out in Schedule 5 (Form of Transfer Certificate) with all information required in respect of the New Lender properly completed, or such other form as may be agreed between the Facility Agent and the Obligors Agent.

Transfer Date means, in relation to a transfer, the later of:

(a) the proposed Transfer Date specified in the Transfer Certificate; and

(b) the date on which the Facility Agent executes the Transfer Certificate.

UK Group means Yell Limited and each of its Subsidiaries incorporated in any part of the United Kingdom and member of the UK Group means any one of them.

UK Obligor means any Obligor incorporated in any part of the United Kingdom.

US Group means Yellow Book Group, Inc. and each of its Subsidiaries incorporated or established in the United States of America and member of the US Group means any one of them.

US Obligor means any Obligor incorporated in any part of the United States of America.

Unpaid Sum means any sum due and payable but unpaid by an Obligor under the Finance Documents.

Utilisation Date means the date on which a Loan is made.

Utilisation Request means a notice substantially in the form set out in Part I of Schedule 3 (Utilisation Request).

VAT means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

Vendor Loan Note shall have the meaning set out in the Existing Facility Agreement.

Withdrawal Liability has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

YBUS Loan Notes means the rollover loan notes issued by Yellow Book USA, Inc. to management as referred to in the asset purchase agreement dated 23 December 1999 between Tadworth Corporation and Yellow Book USA L.P.

YH2 means Yell Holdings 2 Limited, a limited liability company incorporated in England and Wales with registered number 4180359 and an indirect wholly owned Subsidiary of the Parent.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document YHL means YH Limited, a limited liability company incorporated in England and Wales with registered number 4193755 and an indirect wholly owned Subsidiary of the Parent.

YS means Yell S.a.r.L, a company organised and existing under the laws of Luxembourg and an indirect wholly owned Subsidiary of the Parent.

1.2 Construction

(a) Unless a contrary indication appears a reference in this Agreement to:

(i) the Facility Agent, the Arranger, the Security Trustee, any Finance Party, any Secured Party, any Lender, any Obligor, any Party or any other person shall be construed so as to include its successors in title, permitted assigns and permitted transferees and, in the case of the Security Trustee, any person for the time being appointed as security trustee or security trustees in accordance with Clause 30.21 (Additional Security Trustees) of this Agreement;

(ii) a document in agreed form is a document which is initialled by or on behalf of the Obligors Agent and the Facility Agent or the Arranger or is otherwise a document in form and substance satisfactory to the Majority Lenders;

(iii) assets includes present and future properties, revenues and rights of every description;

(iv) the European interbank market means the interbank market for euro operating in Participating Member States;

(v) a Finance Document or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, varied, supplemented or novated from time to time, subject to compliance with the terms of this Agreement;

(vi) a guarantee includes:

(A) an indemnity; and

(B) any other obligation (whatever called) of any person:

(1) to pay, purchase, provide funds (whether by the advance of money, the purchase of or subscription for shares or other investments, the purchase of assets or services, the making of payments under an agreement or otherwise) for the payment of, indemnify against the consequences of default in the payment of, or otherwise be responsible for, any indebtedness of any other person; or

(2) to be responsible for the performance of any obligations by or the solvency of any other person,

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(vii) indebtedness includes any obligation (whether incurred as principal, guarantor or as surety) for the payment or repayment of money, whether present or future, actual or contingent;

(viii) a participation of a Lender in a Loan means the amount of such Loan which such Lender has made or is to make available and thereafter that part of the Loan which is owed to such Lender;

(ix) a person includes any person, unincorporated association, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having separate legal personality) of two or more of the foregoing;

(x) a regulation includes any regulation, rule, official directive, request or guideline (whether or not having the force of law) of any governmental, intergovernmental or supranational body, agency, department or regulatory, self-regulatory or other authority or organisation;

(xi) a wholly-owned Subsidiary or a wholly-owned member of the Group means a member of the Group the entire share capital of which is owned, directly or indirectly, by the Parent;

(xii) winding-up of any person includes its dissolution and/or termination and/or any equivalent or analogous proceedings under the law of any jurisdiction to which that person is subject;

(xiii) a provision of law is a reference to that provision as amended or re-enacted; and

(xiv) a time of day is a reference to London time.

(b) Section, Clause and Schedule headings are for ease of reference only.

(c) Unless a contrary indication appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement.

(d) A Default (other than an Event of Default) is continuing if it has not been remedied or waived and an Event of Default is continuing if it has not been waived.

1.3 Currency Symbols and Definitions

$ and dollars denote lawful currency of the United States of America, £ and sterling denote lawful currency of the United Kingdom and EUR and euro denote the single currency unit of the Participating Member States.

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(a) Unless expressly provided to the contrary in a Finance Document a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the Third Parties Act) to enforce or enjoy the benefit of any term of this Agreement.

(b) Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

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2. THE FACILITIES

2.1 The Facilities

On and subject to the terms of this Agreement, the Lenders make available to the Borrowers:

(a)

(i) a sterling term loan facility in an aggregate amount equal to the Total Facility A1 Commitments being £664,000,000 at the date of this Agreement;

(ii) a dollar term loan facility in an aggregate amount equal to the Total Facility A2 Commitments being $596,000,000 at the date of this Agreement,

(the term loan facilities described in paragraphs (a)(i) and (ii) above being together the Term Facility); and

(b) a multicurrency revolving credit facility in an aggregate amount equal to the Total Revolving Commitments being £200,000,000 (or its equivalent in other currencies) at the date of this Agreement.

2.2 Finance Parties rights and obligations

(a) The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Finance Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.

(b) The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.

(c) A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.

3. PURPOSE

3.1 Purpose

(a) Each Borrower shall (subject to paragraph (c) below) apply all amounts borrowed by it under the Term Facility towards (i) refinancing the Existing Indebtedness and (ii) redeeming up to 35% of the High Yield Notes and the Discount High Yield Notes for which a notice of redemption was delivered on or about the date of Completion (a copy of the draft of which notice was delivered to the Facility Agent pursuant to sub-paragraph (h) (i) of paragraph 4 of Part I of Schedule 2 (Conditions Precedent)).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Each Borrower shall apply all amounts borrowed by it under the Revolving Facility towards:

(i) refinancing the Existing Indebtedness; and

(ii) the general corporate and working capital purposes of the Group (including acquisitions).

(c) In no circumstances may (i) the purchase price for the shares in Yellow Pages Sales Limited or (ii) any of the associated fees, costs and expenses or stamp, registration, notarial and similar Taxes incurred by any member of the Group in relation to the purchase of any such shares be refinanced from the proceeds of any Loan hereunder.

3.2 Monitoring

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.

4. CONDITIONS OF UTILISATION

4.1 Initial Conditions Precedent

No Borrower may deliver a Utilisation Request unless the Facility Agent has received all of the documents and other evidence listed in Part I (Conditions Precedent to Initial Loan) of Schedule 2 (Conditions Precedent) in form and substance satisfactory to the Facility Agent (or the Facility Agent is satisfied that, subject only to the making of Term Loans hereunder, it will receive such documents). The Facility Agent shall notify the Parent and the Lenders promptly upon being so satisfied.

4.2 Further Conditions Precedent

The Lenders will only be obliged to comply with Clause 5.4 (Lenders participation) if on the date of the Utilisation Request and on the proposed Utilisation Date:

(a) in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan and, in any other case, no Default is continuing or would result from the proposed Loan; and

(b) in relation to any Loan to be made on the Closing Date, all the representations and warranties in Clause 20 (Representations) or, in relation to any other Loan, the Repeating Representations to be made by each Obligor are true and accurate in each case by reference to the facts and circumstances then subsisting and will remain true and accurate immediately after the Loan is made.

4.3 Conditions relating to Optional Currencies

(a) A currency will constitute an Optional Currency in relation to a Revolving Loan if it is dollars or euros or any other currency that:

(i) is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (ii) has been approved by the Facility Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Facility Agent of the relevant Utilisation Request for that Loan.

(b) If the Facility Agent has received a written request from the Obligors Agent for a currency to be approved under paragraph (a)(ii) above, the Facility Agent will confirm to the Obligors Agent by the Specified Time:

(i) whether or not the Lenders have granted their approval; and

(ii) if approval has been granted, the minimum amount (and, if required, integral multiples) for any subsequent Loan in that currency.

4.4 Maximum number of Loans

(a) A Borrower (or the Obligors Agent) may not deliver a Utilisation Request if as a result of the proposed Loan:

(i) more than ten Term Loans would be outstanding; or

(ii) more than ten Revolving Loans would be outstanding.

(b) A Borrower may not request that a Term Loan be divided if, as a result of the proposed division, more than ten Term Loans would be outstanding.

(c) Any Loan made by a single Lender under Clause 6.2 (Unavailability of a currency) shall not be taken into account in determining compliance with this Clause 4.4.

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5. UTILISATION OF LOANS

5.1 Delivery of a Utilisation Request

A Borrower or the Obligors Agent on behalf of a Borrower may utilise a Facility by delivery to the Facility Agent of a duly completed Utilisation Request not later than the Specified Time (or such other time as may be agreed by the Lenders and the Obligors Agent in respect of Loans to be made on the Closing Date).

5.2 Completion of a Utilisation Request

(a) Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:

(i) it identifies the Facility to be utilised (and, in the case of the Term Facility, whether the Utilisation Request relates to Facility A1 or Facility A2);

(ii) the proposed Utilisation Date is a Business Day within the Availability Period applicable to that Facility;

(iii) the currency and amount of the requested Loan comply with Clause 5.3 (Currency and amount); and

(iv) the proposed Interest Period complies with Clause 11 (Interest Periods and Terms).

(b) Only one Loan may be requested in each Utilisation Request.

5.3 Currency and amount

(a) The currency specified in a Utilisation Request must be:

(i) in relation to the Term Facility the applicable Base Currency; and

(ii) in relation to the Revolving Facility the Base Currency or an Optional Currency.

(b) The amount of the proposed Loan must be an amount whose Base Currency Amount is not more than the Available Facility and which is (unless otherwise agreed between the Obligors Agent and the Facility Agent):

(i) in the case of a Facility A1 Loan, a minimum of £50,000,000 and if higher, an integral multiple of £1,000,000 and, in the case of a Facility A2 Loan, a minimum of $50,000,000 and, if higher, an integral multiple of $1,000,000 or, if less, (in either case) the full amount of the Available Facility at such time;

(ii) in the case of the Revolving Facility, if the currency selected is the Base Currency, a minimum of £5,000,000 or, if higher, an integral multiple of £1,000,000 or, if less, the full amount of the Available Facility at such time; or

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) in the case of the Revolving Facility, if the currency selected is an Optional Currency, the minimum amount specified by the Facility Agent for the Revolving Facility pursuant to paragraph (b) (ii) of Clause 4.3 (Conditions relating to Optional Currencies) or, if less, the full amount of the Available Facility at such time.

5.4 Lenders participation

(a) If the conditions set out in this Agreement have been met, each Lender shall make its participation in each Loan available on the Utilisation Date through its Facility Office.

(b) The amount of each Lenders participation in each Loan will be equal to the proportion borne by its Available Commitment to the Available Facility immediately prior to making the Loan.

(c) The Facility Agent shall determine the Base Currency Amount of each Revolving Loan which is to be made in an Optional Currency and notify each Lender of the amount, currency and the Base Currency Amount of each Loan and the amount of its participation in that Loan by the Specified Time.

6. OPTIONAL CURRENCIES

6.1 Selection of currency

A Borrower shall select the currency of a Revolving Loan in a Utilisation Request.

6.2 Unavailability of a currency

If before the Specified Time on any Quotation Day:

(a) a Lender notifies the Facility Agent that the Optional Currency requested is not readily available to it in the amount required; or

(b) a Lender notifies the Facility Agent that compliance with its obligation to participate in a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,

the Facility Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day. In this event, any Lender that gives notice pursuant to this Clause 6.2 will be required to participate in the Loan in the Base Currency (in an amount equal to that Lenders proportion of the Base Currency Amount, or in respect of a Rollover Loan, an amount equal to that Lenders proportion of the Base Currency Amount of the Rollover Loan that is due to be paid) and its participation will be treated as a separate Loan denominated in the Base Currency during that Interest Period.

6.3 Facility Agents calculations

Each Lenders participation in a Loan will be determined in accordance with paragraph (b) of Clause 5.4 (Lenders participation).

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7.1 Type of Facility

An Ancillary Facility may be by way of:

(a) an overdraft facility;

(b) a guarantee, bonding, documentary or stand-by letter of credit facility;

(d) a derivative facility;

(e) a foreign exchange facility; or

(f) any other facility or accommodation required in connection with the business of the Group and which is agreed to by the Obligors Agent with an Ancillary Lender.

7.2 Availability

The Borrowers shall be permitted to incur indebtedness under an Ancillary Facility provided that:

(a) each Ancillary Facility is provided by an Ancillary Lender which accedes to this Agreement by executing an Accession Letter and delivering it to the Facility Agent; and

(b) the maximum aggregate amount of indebtedness under the Ancillary Facilities shall not exceed the Ancillary Limit,

and each relevant Borrower shall provide a copy of any Ancillary Document to which it is a party to the Facility Agent within five Business Days of the date of such document.

7.3 Security for Ancillary Facilities

The Lenders acknowledge that, until the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), the Ancillary Lenders shall be entitled to share pari passu (up to the Ancillary Limit) in the proceeds of the security granted pursuant to the Security Documents.

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8. REPAYMENT

8.1 Repayment of Term Loans

(a) The Borrowers shall repay the aggregate Facility A1 Loans in instalments by repaying on each Facility A1 Repayment Date the Base Currency Amount set out opposite each Facility A1 Repayment Date below:

Facility A1 Repayment Date Repayment Instalment

31 March 2004 £40,000,000

30 September 2004 £40,000,000

31 March 2005 £40,000,000

30 September 2005 £45,000,000

31 March 2006 £45,000,000

30 September 2006 £50,000,000

31 March 2007 £50,000,000

30 September 2007 £50,000,000

Final Maturity Date All outstanding Facility A1 Loans

(b) On the Final Maturity Date the Borrowers shall repay all other amounts then outstanding and unpaid under Facility A1.

(c) The Borrowers shall repay the Facility A2 Loans in full in one Repayment Instalment on the Final Maturity Date (such date being the Facility A2 Repayment Date).

(d) The Borrowers may not reborrow any part of the Term Facility which is repaid.

8.2 Repayment of Revolving Loans

Each Borrower which has drawn a Revolving Loan shall repay that Loan on the last day of its Interest Period. All Revolving Loans shall be repaid in full on the Final Maturity Date.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8.3 Effect of Prepayment and Cancellation on Scheduled Repayments and Reductions

Subject to the provisions of Clause 9.11 (Prepayment elections):

(a) If the Obligors Agent cancels the whole or any part of the Term Commitments in accordance with Clause 9.5 (Right of repayment and cancellation in relation to a single Lender) or if the Term Commitment of any Lender is reduced under Clause 9.1 (Illegality in respect of a Lender) then the amount of each Repayment Instalment for each Repayment Date falling after that cancellation will reduce pro rata by the amount cancelled.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) If the Obligors Agent cancels the whole or any part of the Term Commitments in accordance with Clause 9.2 (Voluntary cancellation) then the amount of each Repayment Instalment for each Repayment Date falling after that cancellation will reduce pro rata by the amount cancelled.

(c) If any of the Term Loans is prepaid in accordance with Clause 9.1 (Illegality in respect of a Lender) or Clause 9.5 (Right of repayment and cancellation in relation to a single Lender) then the amount of each Repayment Instalment for each Repayment Date falling after that prepayment will reduce pro rata by the amount of the Term Loan prepaid.

(d) If any of the Term Loans are prepaid in accordance with Clause 9.3 (Voluntary Prepayment of Term Loans) then the amount of each Repayment Instalment for each Repayment Date falling after that prepayment will reduce pro rata by the amount of the Term Loan prepaid.

9. PREPAYMENT AND CANCELLATION

9.1 Illegality in respect of a Lender

If, at any time after the date of this Agreement as a result of the introduction of or any change in (or in the interpretation, administration or application of) any applicable law or regulation, it becomes unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to make, fund, issue or maintain its participation in any Loan that Lender shall promptly notify the Facility Agent upon becoming aware of that event and upon the Facility Agent notifying the Obligors Agent:

(a) that Lender shall not thereafter be obliged to participate in any Loan and the Commitments of that Lender shall immediately be reduced to zero and cancelled; and

(b) each Borrower shall (and the Parent shall procure that each Borrower shall), on such date as the Facility Agent shall have specified, repay that Lenders participation in the Loans made to that Borrower together with accrued interest on and all other amounts owing to that Lender under the Finance Documents (such specified date being no earlier than the last day of any applicable grace period permitted by law).

9.2 Voluntary cancellation

The Obligors Agent may, if it gives the Facility Agent not less than five Business Days (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being, in the case of Facility A1 and the Revolving Facility, a minimum amount of £25,000,000 or, if higher, an integral multiple of £5,000,000 or, in the case of Facility A2, $25,000,000 or, if higher, an integral multiple of $5,000,000) of an Available Facility. Any cancellation under this Clause 9.2 shall reduce rateably the Commitments of the Lenders under that Facility.

9.3 Voluntary prepayment of Term Loans

(a) Any Borrower may, if it gives the Facility Agent not less than five Business Days (or such shorter period as the Majority Lenders may agree) prior notice,

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document prepay the whole or any part of a Term Loan borrowed by it (but, if in part, being an amount that reduces the Base Currency Amount of that Term Loan by a minimum amount of, in the case of Facility A1, £25,000,000 or, if higher, an integral multiple of £5,000,000 or, in the case of Facility A2, $25,000,000 or, if higher, an integral multiple of $5,000,000).

(b) A Term Loan may only be prepaid after the last day of the Availability Period (or, if earlier, the day on which the relevant Available Facility is zero).

9.4 Voluntary prepayment of Revolving Loans

The Borrower to which a Revolving Loan has been made may, if it or the Obligors Agent gives the Facility Agent not less than five Business Days (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Revolving Loan (but if in part, being an amount that reduces the Base Currency Amount of the Revolving Loan by a minimum amount of £5,000,000 or, if higher, an integral multiple of £1,000,000).

9.5 Right of repayment and cancellation in relation to a single Lender

(a) If:

(i) any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 14.2 (Tax gross-up);

(ii) any Lender claims indemnification from the Parent or an Obligor under Clause 14.3 (Tax indemnity) or Clause 15.1 (Increased costs); or

(iii) any Lender notifies the Facility Agent of its Additional Cost Rate under paragraph 3 of Schedule 4 (Mandatory Cost Formulae),

the Obligors Agent may, whilst (in the case of paragraphs (i) and (ii) above) the circumstance giving rise to the requirement or indemnification continues or whilst (in the case of paragraph (iii) above) that Additional Cost Rate is greater than zero, give the Facility Agent notice of cancellation of the Commitments of that Lender and its intention to procure the repayment of that Lenders participation in the Loans.

(b) On receipt of a notice from the Obligors Agent referred to in paragraph (a) above, the Commitments of that Lender shall immediately be reduced to zero.

(c) On the last day of each Interest Period which ends after the Obligors Agent has given notice under paragraph (a) above (or, if earlier, the date specified by the Obligors Agent in that notice), each Borrower to which a Loan is outstanding shall repay that Lenders participation in that Loan.

9.6 Exit

(a) For the purpose of this Clause 9.6:

Change of Control means any person or group of persons acting in concert (other than the Original Equity Investors) gains control of the Parent.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document For the purposes of the definition of Change of Control in this Clause 9.6 control means:

(i) the power (whether by way of ownership of shares, proxy, contract, agency or otherwise) to:

(A) cast, or control the casting of, more than one-half of the maximum number of votes that may be cast at a general meeting of the Parent; or

(B) appoint or remove all, or the majority, of the directors or other equivalent officers of the Parent; or

(C) give directions with respect to the operating and financial policies of the Parent which the directors or other equivalent officers of the Parent are obliged to comply with; or

(ii) the holding of more than one-half of the issued share capital of the Parent (excluding any part of that issued share capital that carries no right to participate beyond a specified amount in a distribution of either profits or capital); and

acting in concert means a group of persons who, pursuant to an agreement or understanding (whether formal or informal), actively co-operate, through the acquisition by any of them, either directly or indirectly, of shares in the Parent, to obtain or consolidate control of the Parent.

(b) Upon the occurrence of:

(i) the sale or disposal (whether in a single transaction or a series of related transactions) of the whole or substantially the whole of the Groups business and/or assets (a Sale) (other than the IPO); or

(ii) a Change of Control,

if the Majority Lenders so require (by written notice to the Obligors Agent) the Facilities shall, on not less than five Business Days notice, be cancelled in full and the Term Loans and the Revolving Loans shall be prepaid in full together with interest thereon and all other amounts accrued and owing by each of the Obligors under the Finance Documents.

9.7 Excess cash

Commencing with the Financial Year ending 31 March 2004, the Borrowers shall (and the Parent shall procure that the Borrowers shall) prepay Term Loans in an aggregate amount equal to 50% of the Excess Cashflow for any Financial Year of the Parent provided that:

(a) if the Leverage Ratio is equal to or less than 3.50:1 but greater than 3.00:1, the percentage of Excess Cashflow for such Financial Year to be used in prepayment in accordance with this Clause 9.7 shall be reduced to 25%; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) if the Leverage Ratio is equal to or less than 3.00:1, no Excess Cashflow shall be required to be used in prepayment pursuant to this Clause 9.7.

The prepayment shall be made within five Business Days of delivery of the annual consolidated accounts of the Parent for that Financial Year under paragraph (a)(i) of Clause 21.1 (Financial statements). The prepayment shall be applied in accordance with Clause 9.9 (Application of prepayments). Commencing with the Financial Year ending 31 March, 2004, the Parent will procure that its auditors will deliver, together with the audited consolidated financial statements to be delivered to the Facility Agent pursuant to Clause 21.1 (Financial Statements), a certificate confirming the amount of the Excess Cashflow (if any) for the relevant Financial Year together with a calculation of how that amount has been determined.

9.8 Debt Issues

If the Parent or any member of the Group raises any External Debt then the Parent shall (or shall procure that the relevant member of the Group shall) prepay Term Loans in an aggregate amount equal to 100% of the Net Proceeds received by the Parent or, as the case may be, the relevant member of the Group from the issue of such External Debt provided that if:

(a) the Leverage Ratio is equal to or less than 3.50:1; and

(b) the Parent has achieved external ratings of a minimum of BBB- from S&P and Baa3 from Moodys (with, in each case, stable outlook or better),

the percentage of Net Proceeds of any issue of External Debt to be used in prepayment of the Term Loans in accordance with the provisions of this Clause shall be reduced to 50%. The prepayment shall be made within five Business Days of receipt by the Parent or such other member of the Group of such Net Proceeds. The prepayment shall be applied in accordance with Clause 9.9 (Application of prepayments).

9.9 Application of prepayments

A prepayment made under Clause 9.7 (Excess cash) or Clause 9.8 (Debt Issues) shall prepay each Repayment Instalment in amounts which reduce those Repayment Instalments pro rata unless the Parent elects otherwise pursuant to Clause 9.11 (Prepayment elections).

9.10 Restrictions

(a) Any notice of cancellation or prepayment given by any Party under this Clause 9 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.

(b) Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) Unless a contrary indication appears in this Agreement, any part of the Revolving Facility which is prepaid may be reborrowed in accordance with the terms of this Agreement.

(e) The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.

(f) No amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.

(g) If the Facility Agent receives a notice under this Clause 9 it shall promptly forward a copy of that notice to either the Parent, the Obligors Agent or the affected Lenders, as appropriate.

9.11 Prepayment elections

Notwithstanding anything to the contrary herein, the first £45,000,000 aggregate principal amount to be applied in prepayment of the Term Loans pursuant to Clause 9.3 (Voluntary Prepayment of Term Loans), Clause 9.7 (Excess Cash) or Clause 9.8 (Debt Issues) may be applied in such order of maturity (whether chronological, inverse chronological or on a pro rata basis) as the Obligors Agent may select, by giving not less than 3 Business Days (or such shorter period as the Majority Lenders may agree) prior written notice to the Facility Agent. If no such selection is made, prepayments shall be made as otherwise set out in Clause 9.9 (Application of Prepayments).

9.12 Prepayments during Interest Periods

Where any amount required to be prepaid under Clause 9.7 (Excess Cash) or Clause 9.8 (Debt Issues) is received by the Facility Agent during an Interest Period, the Obligors Agent may by notice in writing to the Facility Agent to be received not less than three Business Days prior to payment of the relevant amount to the Facility Agent, request such amount to be placed in a Cash Collateral Account in which event such amount shall be paid to the credit of a Cash Collateral Account and shall be thereafter applied by the Facility Agent against the relevant Loan or Loans at the expiry of the relevant Interest Period. The interest earned on such account will be paid by the Facility Agent to the relevant Borrower at the time the relevant amount is applied in repayment of the relevant Loan unless an Event of Default is continuing, in which case the interest earned will also be applied in repayment of the relevant Loan.

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10. INTEREST

10.1 Calculation of interest

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the:

(a) applicable Margin;

(b) LIBOR or, in relation to any Loan in euro, EURIBOR for that Loan for that Interest Period; and

10.2 Payment of interest

(a) The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if any Interest Period is longer than six Months, on the dates falling at six Monthly intervals after the first day of that Interest Period).

(b) If any annual audited financial statements delivered under paragraph (a) of Clause 21.1 (Financial Statements) demonstrate that the Margin:

(i) should have been varied in accordance with the table set out in the definition of Margin when it has not been; or

(ii) should not have been varied in accordance with the table set out in the definition of Margin when it has been,

in either case by reason of an inaccuracy in the relevant semi-annual consolidated financial statements, payments of interest shall upon receipt of the relevant audited financial statements by the Facility Agent be adjusted (downwards or, as the case may be, upwards), but without retrospective effect, by such amount as the Facility Agent shall determine is necessary to give effect to the correct variation in the Margin as demonstrated by the audited financial statements. The Facility Agents determination of the adjustments payable under this Clause 10.2 shall, save in the case of manifest error, be conclusive and the Facility Agent shall provide the Obligors Agent with reasonable details of the calculation of such adjustments.

10.3 Default interest

(a) If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on such Unpaid Sum from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is one per cent higher than the rate which would have been payable if such Unpaid Sum had, during the period of non- payment, constituted a Loan in the currency of the Unpaid Sum for successive Interest Periods, each of a duration selected by the Facility Agent (acting reasonably).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Any interest accruing under this Clause 10.3 shall be immediately payable by the Obligor on demand by the Facility Agent.

(b) If any Unpaid Sum consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:

(i) the first Interest Period for that Unpaid Sum shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and

(ii) the rate of interest applying to the Unpaid Sum during that first Interest Period shall be one per cent. higher than the rate which would have applied if the Unpaid Sum had not become due.

(c) Default interest (if unpaid) arising on an Unpaid Sum will be compounded with the Unpaid Sum at the end of each Interest Period applicable to that Unpaid Sum but will remain immediately due and payable.

10.4 Notification of rates of interest

The Facility Agent shall promptly notify the Lenders and the relevant Borrower (or the Obligors Agent) of the determination of a rate of interest under this Agreement.

11. INTEREST PERIODS AND TERMS

11.1 Selection of Interest Periods and Terms

(a) A Borrower (or the Obligors Agent on behalf of a Borrower) may select an Interest Period for a Loan in the Utilisation Request for that Loan or (if the Loan is a Term Loan and has already been borrowed) in a Selection Notice.

(b) Subject to this Clause 11, a Borrower (or the Obligors Agent) may select an Interest Period of one, two, three or six Months or any other period agreed between the Obligors Agent and the Facility Agent (acting on the instructions of all the Lenders).

(c) Each Selection Notice is irrevocable and must be delivered to the Facility Agent by the Borrower (or the Obligors Agent on behalf of the Borrower) to which that Term Loan was made not later than the Specified Time.

(d) If a Borrower (or the Obligors Agent) fails to deliver a Selection Notice to the Facility Agent in accordance with paragraph (c) above, the relevant Interest Period will, subject to Clause 11.2 (Changes to Interest Periods), be three Months.

(e) An Interest Period for a Loan shall not extend beyond the Final Maturity Date.

(f) Each Interest Period for a Term Loan shall start on the Utilisation Date or (if a Loan has already been made) on the last day of its preceding Interest Period.

(g) A Revolving Loan has one Interest Period only.

(h) Prior to the Syndication Date, Interest Periods shall be one month or such other period as the Facility Agent and the Obligors Agent may agree and any Interest

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Period which would otherwise end during the month preceding or extend beyond the Syndication Date shall end on the Syndication Date.

11.2 Changes to Interest Periods

(a) Prior to determining the interest rate for a Term Loan, the Facility Agent may shorten an Interest Period for any Term Loan to ensure that there are sufficient Term Loans (with an aggregate Base Currency Amount equal to or greater than the Repayment Instalment) which have an Interest Period ending on a Repayment Date for the Borrowers to make the Repayment Instalment due on that date.

(b) If the Facility Agent makes any of the changes to an Interest Period referred to in this Clause 11.2, it shall promptly notify the Obligors Agent and the Lenders.

11.3 Consolidation and division of Term Loans

(a) Subject to paragraph (b) below, if two or more Interest Periods:

(i) relate to Facility A1 Loans or, as the case may be, Facility A2 Loans;

(ii) end on the same date; and

(iii) are made to the same Borrower,

those Facility A1 Loans or, as the case may be, Facility A2 Loans will, unless that Borrower (or the Obligors Agent on its behalf) specifies to the contrary in the Selection Notice for the next Interest Period, be consolidated into, and treated as, a single Facility A1 Loan or, as the case may be, Facility A2 Loan on the last day of the Interest Period.

(b) Subject to Clause 4.4 (Maximum number of Utilisations), if a Borrower (or the Obligors Agent on its behalf) requests in a Selection Notice that a Term Loan be divided into two or more Term Loans, that Term Loan will, on the last day of its Interest Period, be so divided with Base Currency Amounts specified in that Selection Notice, being an aggregate Base Currency Amount equal to the amount of the Term Loan immediately before its division.

12. CHANGES TO THE CALCULATION OF INTEREST

12.1 Absence of quotations

Subject to Clause 12.2 (Market disruption), if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Bank(s).

12.2 Market disruption

(a) If a Market Disruption Event occurs in relation to a Loan for any Interest Period, the Facility Agent shall promptly notify the Obligors Agent and the Lenders of that event (such notice being a Market Disruption Notice).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) If a Market Disruption Notice applies to a proposed Loan, that Loan shall not be made. Instead, the Facility Agent and the Obligors Agent shall immediately enter into negotiations for a period of not more than 30 days with a view to agreeing a substitute basis for calculating the interest rate for the Loan or for funding the Loan. Any substitute basis agreed by the Facility Agent (with the consent of all the Lenders) and the Obligors Agent shall take effect in accordance with its terms and be binding on all of the Parties.

(i) the Obligors Agent and the Facility Agent shall immediately enter into negotiations for a period of not more than 30 days with a view to agreeing a substitute basis for calculating the rate of interest for the Loan or for funding the Loan;

(ii) any substitute basis agreed under paragraph (c)(i) of this Clause 12.2 by the Facility Agent (with the consent of all the Lenders) and the Obligors Agent shall take effect in accordance with its terms and be binding on all the Parties;

(iii) if no substitute basis is agreed under paragraph (c)(i) of this Clause 12.2, then, subject to paragraph (d) below, each Lender (through the Facility Agent) shall certify before the last day of the Interest Period to which the Market Disruption Notice relates a substitute basis for maintaining its participation in the Loan which shall reflect the costs to such Lender of funding its participation in such Loan from whatever sources it may reasonably select plus the Margin and (if applicable, and if not reflected in the Lenders cost of funding) the Mandatory Cost, if any; and

(iv) each substitute basis so certified shall be binding on the relevant Borrower and the certifying Lender and treated as part of this Agreement.

(d) If no substitute basis is agreed under paragraph (c)(i) of this Clause 12.2 then, so long as the circumstances giving rise to the Market Disruption Notice continue and subject to the Obligors Agent giving the Facility Agent not less than 5 Business Days prior notice (which shall be irrevocable), the relevant Borrower may prepay the Loan to which the Market Disruption Notice applies together with accrued interest on the amount prepaid.

(e) In this Agreement Market Disruption Event means:

(i) at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate not being available and none or only one of the Reference Banks supplying a rate to the Facility Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and Interest Period; or

(ii) before close of business in London on the Quotation Day for the relevant Interest Period, the Facility Agent receiving notifications from a Lender or Lenders (whose participations in a Loan exceed 50 per cent. of that Loan)

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.

12.3 Break Costs

(a) Each Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.

(b) Each Lender shall, as soon as reasonably practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.

13. FEES

13.1 Commitment fee

(a) The Parent shall pay to the Facility Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of:

(i) 50 per cent. of the Margin from time to time on that Lenders Available Commitment under the Term Facility for the Availability Period applicable to the Term Facility;

(ii) 50 per cent. of the Margin from time to time on that Lenders Available Commitment under the Revolving Facility for the Availability Period applicable to the Revolving Facility.

(b) The accrued commitment fee is payable:

(i) on the last day of each successive period of three Months which ends during the relevant Availability Period;

(ii) on the last day of the relevant Availability Period; and

(iii) on the cancelled amount of the relevant Lenders Commitment at the time the cancellation is effective.

13.2 Arrangement fee

The Parent shall pay to the Arranger an arrangement fee in the amount and at the times agreed in a Fee Letter.

13.3 Agency fee

The Parent shall pay to (or procure payment to) the Facility Agent (for its own account) an agency fee in the amount and at the times agreed in a Fee Letter.

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14. TAX GROSS UP AND INDEMNITIES

14.1 Definitions

In this Clause 14:

Protected Party means a Finance Party which is or will be, for or on account of Tax, subject to any liability or required to make any payment in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

Qualifying Lender means:

(i) in respect of a payment made by a UK Obligor, a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:

(A) a Lender:

(1) which is a bank (as defined for the purpose of section 349 of the Taxes Act) making an advance under a Finance Document; or

(2) in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 349 of the Taxes Act) at the time that that advance was made,

and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

(B) a Lender which is:

(1) a company resident in the United Kingdom for United Kingdom tax purposes;

(2) a partnership each member of which is a company resident in the United Kingdom for United Kingdom tax purposes; or

(3) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a branch or agency and which brings into account interest payable in respect of that advance in computing its chargeable profits (within the meaning given by section 11(2) of the Taxes Act); or

(ii) in respect of a payment made by a member of the US Group which would be required under the Code to pay United States source interest in connection with this Agreement, a Lender which is:

(A) created or organised under the laws of the United States of America or of any state (including the District of Columbia) thereof; or

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (B) a Treaty Lender with respect to the United States of America that is entitled to receive payments under the Finance Documents without deduction or withholding of any United States federal income Taxes, provided such Lender has delivered (in a timely fashion and without undue delay) to the Facility Agent for transmission to the member of the US Group making such payment two original copies of IRS Form W-8BEN (or any successor form) certifying that it is a resident of a foreign country with which the United States of America has an income tax treaty; or

(C) entitled to receive payments under the Finance Documents without deduction or withholding of any United States federal income Taxes as a result of such payments being effectively connected with the conduct by such Lender of a trade or business within the United States of America, provided such Lender has delivered (in a timely fashion and without undue delay) to the Facility Agent for transmission to the member of the US Group making such payment two original copies of either (1) IRS Form W-8ECI (or any successor form) certifying that the payments made pursuant to the Finance Documents are effectively connected with the conduct by that Lender of a trade or business within the United States of America or (2) such other applicable form prescribed by the IRS certifying as to such Lenders entitlement to exemption from United States withholding tax with respect to all payments to be made to such Lender under the Finance Documents; or

(iii) in respect of a payment made by an Obligor incorporated in a jurisdiction other than the United Kingdom or the United States of America, any Treaty Lender.

Tax Confirmation means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:

(a) a company resident in the United Kingdom, or a partnership each member of which is a company resident in the United Kingdom, for United Kingdom tax purposes; or

(b) a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a branch or agency and that interest payable in respect of that advance falls to be brought into account in computing the chargeable profits of that company for the purposes of section 11(2) of the Taxes Act.

Tax Credit means a credit against, relief or remission for, or repayment of, any Tax.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Tax Deduction means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

Tax Payment means either the increased payment made by an Obligor to a Finance Party under Clause 14.2 (Tax gross-up) or a payment under Clause 14.3 (Tax indemnity).

Treaty Lender means a Lender which:

(a) is treated as a resident of a Treaty State for the purposes of a Treaty;

(b) does not carry on a business in the United Kingdom, the United States of America or, as the case may be, the jurisdiction in which the Obligor is resident through a permanent establishment with which that Lenders participation in the Loan is effectively connected.

Treaty State means a jurisdiction having a double taxation agreement (a Treaty) with the United Kingdom, the United States of America or, as the case may be, the jurisdiction in which the Obligor is resident which makes provision for full exemption from tax imposed by the United Kingdom, the United States of America or, as the case may be, the jurisdiction in which the Obligor is resident, on interest.

UK Non-Bank Lender means where a Lender becomes a Party to this Agreement after the day on which this Agreement is entered into, a Lender which gives a Tax Confirmation in the Transfer Certificate which it executes on becoming a Party to this Agreement.

Unless a contrary indication appears, in this Clause 14 a reference to determines or determined means a determination made in the absolute discretion of the person making the determination.

14.2 Tax gross-up

(a) Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.

(b) The Obligors Agent shall promptly upon becoming aware that an Obligor must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Facility Agent accordingly. Similarly, a Lender shall notify the Facility Agent promptly on becoming so aware in respect of a payment to that Lender. If the Facility Agent receives such notification from a Lender it shall promptly notify the Obligors Agent and that Obligor.

(c) Subject to paragraph (d) below, if a Tax Deduction is required by law to be made by an Obligor the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.

(d) An Obligor is not required to make an increased payment to a Lender under paragraph (c) above for a Tax Deduction in respect of tax imposed by the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document United Kingdom or the United States of America on a payment of interest on a Loan, if on the date on which the payment falls due:

(i) the payment could have been made to the relevant Lender without a Tax Deduction if it was a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant taxing authority; or

(ii) (in relation to payments to be made by a UK Obligor):

(A) the relevant Lender is a UK Non-Bank Lender, or would have been a UK Non-Bank Lender were it not for any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or concession of any relevant taxing authority; and

(B) the Board of the Inland Revenue has given (and not revoked) a direction under section 349C of the Taxes Act (as that provision has effect on the date on which the relevant Lender became a party to this Agreement) which relates to that payment and that Obligor has notified that UK Non-Bank Lender of the precise terms of that notice; or

(iii) (in relation to payments to be made by a UK Obligor) the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under paragraph (g) below.

(e) If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f) Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Facility Agent for the Finance Party entitled to the payment evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

(g) A Treaty Lender and each UK Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that UK Obligor to obtain authorisation to make that payment without a Tax Deduction.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (h) A UK Non-Bank Lender which becomes a Party on the day on which this Agreement is entered into gives a Tax Confirmation to the UK Obligors by entering into this Agreement.

(i) A UK Non-Bank Lender shall promptly notify the Facility Agent who shall notify the UK Obligors if there is any change in the position from that set out in the Tax Confirmation.

14.3 Tax indemnity

(a) The Parent shall (within three Business Days of demand by the Facility Agent) pay (or procure payment) to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.

(b) Paragraph (a) above shall not apply:

(i) with respect to any Tax assessed on a Finance Party:

(A) under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or

(B) under the law of the jurisdiction in which that Finance Partys Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; and

(ii) to the extent a loss, liability or cost:

(A) is compensated for by an increased payment under Clause 14.2 (Tax gross-up); or

(B) would have been compensated for by an increased payment under Clause 14.2 (Tax gross-up) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 14.2 (Tax gross-up) applied.

(c) A Protected Party making, or intending to make a claim pursuant to paragraph (a) above shall promptly notify the Facility Agent of the event which will give, or has given, rise to the claim, following which the Facility Agent shall notify the Obligors Agent.

(d) A Protected Party shall, on receiving a payment from an Obligor under this Clause 14.3, notify the Facility Agent.

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If an Obligor makes a Tax Payment and the relevant Finance Party determines that:

(a) a Tax Credit is attributable either to an increased payment of which that Tax Payment forms part, or to that Tax Payment; and

(b) that Finance Party has obtained, utilised and retained that Tax Credit on an affiliated group basis,

the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been made by the Obligor.

14.5 Stamp Taxes

The Parent shall pay and, within three Business Days of demand, indemnify each Secured Party and each Arranger against any cost, loss or liability that Secured Party or that Arranger incurs in relation to all stamp duty, registration and other similar Taxes or fees payable in respect of any Finance Document.

14.6 Value Added Tax

(a) All consideration expressed to be payable under a Finance Document by any Party to a Finance Party shall be deemed to be exclusive of any VAT. If VAT is properly chargeable on any supply made by any Finance Party to any Party in connection with a Finance Document, that Party shall pay to the Finance Party (in addition to and at the same time as paying the consideration) an amount equal to the amount of the VAT.

(b) Where a Finance Document requires any Party to reimburse a Finance Party for any costs or expenses, that Party shall also at the same time pay and indemnify that Finance Party against all VAT incurred by the Finance Party in respect of the costs or expenses to the extent that the Finance Party reasonably determines that it is not entitled to credit or repayment of the VAT.

15. INCREASED COSTS

15.1 Increased costs

(a) Subject to Clause 15.4 (Exceptions) the Parent shall, within three Business Days of a demand by the Facility Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.

(b) In this Agreement Increased Costs means:

(i) a reduction in the rate of return from a Facility or on a Finance Partys (or its Affiliates) overall capital;

(ii) an additional or increased cost; or

(iii) a reduction of any amount due and payable under any Finance Document,

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitments or funding or performing its obligations under any Finance Document.

15.2 Increased cost claims

(a) A Finance Party intending to make a claim pursuant to Clause 15.1 (Increased costs) shall notify the Facility Agent of the event giving rise to the claim, following which the Facility Agent shall promptly notify the Obligors Agent.

(b) Each Finance Party shall, as soon as practicable after a demand by the Facility Agent, provide a certificate confirming the amount of its Increased Costs.

15.3 Requirement to Notify

(a) If a Lender does not notify the Facility Agent of its intention to claim pursuant to this Clause 15 within ninety days after the date on which that Lender becomes aware of the relevant increased cost, reduction, payment or foregone interest or other return, that Lender shall not be entitled to claim indemnification for such increased costs, reduction, payment or foregone interest or other return in respect of any period more than ninety days before the date on which that Lender does notify the Facility Agent of its intention to make such a claim.

(b) No Finance Party shall be entitled to make any claim pursuant to this Clause 15 on any date falling later than nine months after the discharge of the obligations (both actual and contingent) of the Obligors under this Agreement and the cancellation of the Commitments in full.

15.4 Exceptions

(a) Clause 15.1 (Increased costs) does not apply to the extent any Increased Cost is:

(i) attributable to a Tax Deduction required by law to be made by an Obligor;

(ii) compensated for by Clause 14.3 (Tax indemnity) (or would have been compensated for under Clause 14.3 (Tax indemnity) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 14.3 (Tax indemnity) applied);

(iii) compensated for by the payment of the Mandatory Cost; or

(iv) attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.

(b) In this Clause 15.4 reference to a Tax Deduction has the same meaning given to the term in Clause 14.1 (Definitions).

16. OTHER INDEMNITIES

16.1 Currency indemnity

(a) If any sum due from an Obligor under the Finance Documents (a Sum), or any order, judgment or award given or made in relation to a Sum, has to be

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document converted from the currency (the First Currency) in which that Sum is payable into another currency (the Second Currency) for the purpose of:

(i) making or filing a claim or proof against that Obligor; or

(ii) obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Secured Party and the Arranger to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.

(b) Each Obligor waives any right it may have in any jurisdiction to pay any amount under the Finance Documents in a currency or currency unit other than that in which it is expressed to be payable.

16.2 Other indemnities

(a) The Parent shall (or shall procure that an Obligor will), within three Business Days of demand, indemnify each Secured Party and the Arranger against any cost, loss, expense or liability (excluding loss of profit) incurred by that Secured Party or that Arranger as a result of:

(i) the occurrence of any Event of Default;

(ii) a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 32 (Sharing among the Finance Parties);

(iii) funding, or making arrangements to fund, its participation in a Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone);

(iv) a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower, the Obligors Agent or the Parent.

(b) The Parent shall (or shall procure that an Obligor will), within three Business Days of demand, indemnify each Finance Party and in each case each of their Affiliates and each of their respective officers, directors, employees, agents, advisors, and representatives (each, an Indemnified Party) from and against any and all claims, damages, losses, liabilities, costs and expenses (including, without limitation, reasonable and properly documented fees and disbursements of legal counsel), joint or several, that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or relating to any investigation, litigation or proceeding or the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document preparation of any defence with respect thereto, arising out of or in connection with or relating to the Finance Documents or the transactions contemplated by the Finance Documents or any use made or proposed to be made of the proceeds of the Facilities, whether or not such investigation, litigation or proceeding is brought by a member of the Group, any shareholder or creditor of any member of the Group, an Indemnified Party or any other person, except to the extent that such claim, damage, loss, liability, cost or expense is found in a final, non-appealable judgement by a court of competent jurisdiction to have resulted from such Indemnified Partys bad faith, gross negligence or wilful misconduct. Any third party referred to in this paragraph (b) may rely on this Clause 16.2 subject to Clause 1.4 (Third Party Rights) and the provisions of the Third Parties Act.

16.3 Indemnity to the Facility Agent

The Parent shall (or shall procure that an Obligor will) promptly indemnify the Facility Agent against any cost, loss or liability incurred by the Facility Agent (acting reasonably) as a result of:

(a) investigating any event which it reasonably believes is a Default;

(b) entering into or performing any foreign exchange contract for the purposes of paragraph (b) of Clause 33.9 (Change of Currency); or

(c) acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.

16.4 Indemnity to the Security Trustee

(a) Each Obligor shall promptly indemnify the Security Trustee and every Receiver and Delegate against any cost, loss or liability incurred by any of them as a result of:

(i) the taking, holding, protection or enforcement of the Transaction Security,

(ii) the exercise of any of the rights, powers, discretions and remedies vested in the Security Trustee and each Receiver and Delegate by the Finance Documents or by law; and

(iii) any default by any Obligor in the performance of any of the obligations expressed to be assumed by it in the Finance Documents.

(b) The Security Trustee may, in priority to any payment to the Secured Parties, indemnify itself out of the Charged Property in respect of, and pay and retain, all sums necessary to give effect to the indemnity in this Clause 16.4 and shall have a lien on the Transaction Security and the proceeds of the enforcement of the Transaction Security for all monies payable to it.

17. MITIGATION BY THE LENDERS

17.1 Mitigation

(a) Each Finance Party shall, in consultation with the Parent, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Clause 9.1 (Illegality in respect of a Lender), Clause 14 (Tax Gross-up and Indemnities) or Clause 15 (Increased Costs) or paragraph 3 of Schedule 4 (Mandatory Cost Formulae) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.

(b) Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.

17.2 Limitation of liability

(a) The Parent shall (or shall procure that an Obligor will) indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 17.1 (Mitigation).

(b) A Finance Party is not obliged to take any steps under Clause 17.1 (Mitigation) if, in the opinion of that Finance Party (acting reasonably), to do so might have an adverse effect upon its business, operations or financial condition or cause it to incur liabilities or obligations (including, without limitation, tax liabilities) other than those of a minor or administrative nature.

18. COSTS AND EXPENSES

18.1 Transaction expenses

The Parent shall promptly on demand pay (or shall procure that an Obligor will pay) the Facility Agent, the Arranger and the Security Trustee the amount of all reasonable and properly documented costs and expenses (including legal fees) incurred by any of them in connection with the negotiation, preparation, printing, execution, syndication and perfection of:

(a) this Agreement and any other documents referred to in this Agreement and the Transaction Security; and

(b) any other Finance Documents executed after the date of this Agreement.

18.2 Amendment costs

If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 33.9 (Change of currency), the Parent shall, within three Business Days of demand, reimburse (or procure reimbursement of) each of the Facility Agent and the Security Trustee for the amount of all reasonable and properly documented costs and expenses (including legal fees) incurred by the Facility Agent and the Security Trustee in responding to, evaluating, negotiating or complying with that request or requirement.

18.3 Enforcement and preservation costs

The Parent shall, within three Business Days of demand, pay (or procure payment) to each Secured Party and the Arranger the amount of all costs and expenses (including legal fees) incurred by that Secured Party or Arranger in connection with the enforcement of or the preservation of any rights, powers and remedies under any Finance Document and the Transaction Security and any proceedings instituted by or against the Security Trustee as a consequence of taking or holding the Transaction Security or enforcing these rights, powers and remedies.

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19. GUARANTEE AND INDEMNITY

19.1 Guarantee and indemnity

Each Guarantor irrevocably and unconditionally jointly and severally:

(a) guarantees to each Secured Party punctual performance by each other Obligor of all that Obligors obligations under the Finance Documents;

(b) undertakes with each Secured Party that whenever another Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c) indemnifies each Secured Party immediately on demand against any cost, loss or liability suffered by that Secured Party if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal. The amount of the cost, loss or liability shall be equal to the amount which that Secured Party would otherwise have been entitled to recover,

provided that subject to Clause 19.10 (Limitation on Guarantees), the amount to be recovered from Yellow Pages Limited, YH2, YHL, YS, Yellow Book Group Inc. and Yellow Book/McLeod Holdings Inc. shall be limited in each case to the principal amount of £957,000,000 (or its equivalent in other currencies) in relation to the Term Facilities and £100,000,000 (or its equivalent in other currencies) in relation to the Revolving Facility provided that such limitation on the amount recoverable shall not operate so as to release any Guarantor from its obligations under this Clause 19.

19.2 Continuing Guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.

19.3 Reinstatement

If any payment by an Obligor or any discharge given by a Secured Party (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

(a) the liability of each Obligor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

(b) each Secured Party shall be entitled to recover the value or amount of that security or payment from the Obligor, as if the payment, discharge, avoidance or reduction had not occurred.

19.4 Waiver of defences

The obligations of each Guarantor under this Clause 19 will not be affected by any act, omission, matter or thing which, but for this Clause 19, would reduce, release or

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document prejudice any of its obligations under this Clause 19 (without limitation and whether or not known to it or any Secured Party) including:

(a) any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b) the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;

(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e) any amendment (however fundamental) or replacement of a Finance Document or any other document or security;

(f) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g) any insolvency or similar proceedings.

19.5 Immediate recourse

Each Guarantor waives any right it may have of first requiring any Secured Party (or any Security Trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 19. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

19.6 Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Secured Party (or any Security Trustee or agent on its behalf) may:

(a) refrain from applying or enforcing any other monies, security or rights held or received by that Secured Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and

(b) hold in an interest-bearing suspense account any monies received from any Guarantor or on account of any Guarantors liability under this Clause 19.

19.7 Deferral of Guarantors rights

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Facility Agent otherwise directs, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents:

(a) to be indemnified by an Obligor;

(b) to claim any contribution from any other Guarantor of any Obligors obligations under the Finance Documents; and/or

(c) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Secured Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Secured Party.

19.8 Release of Guarantors right of contribution

If any Guarantor ceases to be a Guarantor in accordance with the terms of the Finance Documents for the purpose of any sale or other disposal of that Guarantor:

(a) that Guarantor shall be released by each other Guarantor from any liability (whether past, present or future and whether actual or contingent) to make a contribution to any other Guarantor arising by reason of the performance by any other Guarantor of its obligations under the Finance Documents; and

(b) each other Guarantor shall waive any rights it may have by reason of the performance of its obligations under the Finance Documents to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Secured Parties under any Finance Document or of any other security taken pursuant to, or in connection with, any Finance Document by all or any of the Secured Parties.

19.9 Additional security

This guarantee is in addition to and is not in any way prejudiced by any other guarantee or security now or subsequently held by any Secured Party.

19.10 Limitation on Guarantees

(a) Each of the parties to this Agreement hereby confirms that it is the intention of all such persons that the obligations of each Guarantor organised under the laws of any state of the United States of America (a U.S. Guarantor) under this Clause 19 (Guarantee and Indemnity) do not constitute a fraudulent transfer or conveyance for the purposes of any proceeding of the type referred to in Clause 24.7 (Insolvency) or Clause 24.8 (Insolvency Proceedings) or Title 11, U.S. Code, or any similar foreign, federal or state law for the relief of debtors, the United States Uniform Fraudulent Conveyance Act, the United States Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to the obligations of a U.S. Guarantor under this Clause 19 (Guarantee and Indemnity). To effect the foregoing intention, the Facility Agent, the Arranger, the Lenders and the Guarantors hereby irrevocably agree that the obligations of each U.S. Guarantor at any time shall be limited to the maximum amount as will result in the obligations of such U.S. Guarantor under this Clause 19 (Guarantee and Indemnity) not constituting a fraudulent transfer or conveyance.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) The liability of each Guarantor incorporated under the laws of Luxembourg (a Luxembourg Guarantor) under this Clause 19 (Guarantee and Indemnity) and under any indemnities contained elsewhere in this Agreement:

(i) shall not include any obligation which, if incurred, would constitute the provision of financial assistance (as defined in article 49-6 of the Luxembourg Company Act of 10 August 1915 on Commercial Companies, as amended), whether directly or indirectly, for the subscription for, or the acquisition or the refinancing of the acquisition of, its own shares; and

(ii) shall not exceed at any time the greater of:

(A) the principal amount (if any) borrowed by such Luxembourg Guarantor from another member of the Group and financed directly or indirectly by a borrowing under the Finance Documents;

(B) such Luxembourg Guarantors net worth (capitaux propres) (as referred to in article 214 of the Luxembourg Company Act of 10 August 1915 on Commercial Companies, as amended) as reflected in its then most recent annual accounts approved at a general meeting of its shareholders as at the date on which a claim under this Guarantee is brought against such Luxembourg Guarantor; and

(C) such Luxembourg Guarantors net worth (capitaux propres) (as referred to in article 214 of the Luxembourg Company Act of 10 August 1915 on Commercial Companies, as amended) as reflected in its then most recent annual accounts approved at a general meeting of its shareholders as at the date of this Agreement.

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20. REPRESENTATIONS

Each Obligor makes the following representations and warranties to each Finance Party at the times specified in Clause 20.30 (Times on which representations are made):

20.1 Status

(a) It and each of its Subsidiaries is a limited liability corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.

(b) It and each of its Subsidiaries has the power to own its assets and carry on its business as it is being conducted.

20.2 Binding obligations

Subject to the Legal Reservations, the obligations expressed to be assumed by it in each Finance Document to which it is a party at the date on which this representation is made or deemed made are legal, valid, binding and enforceable obligations.

20.3 Non-conflict with other obligations

The entry into and performance by it of, and the transactions contemplated by, the Finance Documents to which it is a party on the date on which this representation is made or deemed made and the granting of the Transaction Security granted by it on or prior to the date on which this representation is made or deemed made do not:

(a) conflict with any law, regulation, directive, judgment or order applicable to which it or any of its Subsidiaries is subject;

(b) contravene its and each of its Subsidiaries constitutional documents; or

(c) breach in any material respect any material agreement or instrument binding upon it or any of its Subsidiaries or any of its or any Subsidiaries assets.

20.4 Power and authority

(a) It has the power to enter into and has taken (or, as the case may be, will take prior to execution thereof) all necessary action to authorise its entry into the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.

(b) No limit on its powers will be exceeded as a result of the borrowing, granting of security or giving of guarantees or indemnities contemplated by the Finance Documents to which it is or will be a party

(c) It has the power to perform and deliver and has taken (or, as the case may be, will take prior to execution thereof) all necessary action to authorise its performance and delivery of the Finance Documents to which it is or will be a party and the transactions contemplated by those Finance Documents.

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(a) All Authorisations required or desirable:

(i) to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is or will be a party; and

(ii) to make the Finance Documents to which it is or will be a party admissible in evidence in its Relevant Jurisdictions,

have been obtained or effected and are in full force and effect except any Authorisation referred to in Clause 20.8 (No filing or stamp taxes) or any Authorisation in respect of the Security Documents, which Authorisations will be promptly obtained or effected after the date of this Agreement and, in the case of the Authorisations required in respect of the Security Documents, will be obtained or effected prior to the execution and delivery of such Security Documents to which they relate.

(b) All Authorisations necessary for the conduct of the business, trade and ordinary activities of members of the Group have been obtained or effected and are in full force and effect except to the extent failure to obtain or effect those Authorisations could not reasonably be expected to have a Material Adverse Effect.

20.6 Governing law and enforcement

(a) Subject to the Legal Reservations, the choice of English law as the governing law of the Finance Documents (other than those Security Documents expressed to be governed by a law other than English law) will be recognised and enforced in its Relevant Jurisdictions.

(b) Subject to the Legal Reservations, the choice of the relevant governing law of the Security Documents to which it is a party expressed to be governed by a law other than English law will be recognised and enforced in its Relevant Jurisdictions.

(c) Subject to the Legal Reservations, any judgment obtained in England in relation to a Finance Document in respect of which the English courts are expressed to have jurisdiction to hear disputes thereunder will be recognised and enforced in its Relevant Jurisdictions.

(d) Subject to the Legal Reservations, in relation to those Security Documents to which it is a party expressed to be governed by a law other than English law, any judgment obtained in the courts that are expressed to have jurisdiction to hear disputes under such Security Documents will be recognised and enforced in its Relevant Jurisdictions.

20.7 Insolvency

Other than (A) in connection with any solvent reorganisation undertaken with the consent of the Facility Agent (acting on the instructions of the Majority Lenders), and (B) any winding-up or liquidation of the SLP Partnership Companies or the SLPs as

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document contemplated by the Structure Paper in connection with the collapse of the Subordinated Loan Stock, no:

(a) corporate action, legal proceeding or other procedure or step described in paragraph (a) of Clause 24.8 (Insolvency proceedings); or

(b) creditors process described in Clause 24.9 (Creditors process),

has been taken or, to the knowledge of the Parent, threatened in relation to a member of the Group and none of the circumstances described in Clause 24.7 (Insolvency) applies to a Material Group Company.

20.8 No filing or stamp taxes

Except as may be specified in any Legal Opinion, under the laws of the Relevant Jurisdictions it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in each such jurisdiction or that any stamp, registration, notarial or similar Taxes or fees be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents except any filing, recording or enrolling or any tax or fee payable in relation to the Security Documents which is referred to in any legal opinion delivered to the Facility Agent in connection therewith or under Clause 26 (Changes to the Obligors and Release of Security), and which will be made or paid promptly after the date the relevant Security Document is entered into.

20.9 No Defaults

(a) No Default has occurred and is continuing or might reasonably be expected to result from the making of any Loan.

(b) No other event has occurred and is continuing which constitutes a default, and no other event has occurred and is continuing which, with the giving of notice or the lapse of time or making of any determination or fulfilment of any condition in each case as provided for in the agreement concerned is reasonably likely to constitute a default, under any agreement to which it or any of its Subsidiaries is party and which, in any case, has or could reasonably be expected to have a Material Adverse Effect.

20.10 Litigation

No litigation, arbitration, administrative, regulatory or similar proceeding is current, pending or, to its knowledge, threatened:

(a) to restrain its entry into, the exercise of its rights under and performance and compliance with its obligations under, or the enforcement of, any of the Finance Documents or the carrying out of the transactions contemplated by the Finance Documents; or

(b) which has, or if adversely determined is reasonably likely to have, by itself or together with any other such proceedings, a Material Adverse Effect.

20.11 Pari passu ranking

Its payment obligations under the Finance Documents (other than the Security Documents) rank at least pari passu with the claims of all its other unsecured and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally. Its payment obligations under the Security Documents will, when such Security Documents are executed, rank ahead of the claims of all its other secured creditors, except for obligations mandatorily preferred by law applying to companies generally.

20.12 Offering Circular

The Offering Circular (as at the date thereof) contains all such information as investors and their professional advisers would reasonably require, and reasonably expect to find there, to make an informed assessment of the assets and liabilities, financial position, profits and losses and prospects of the Group taken as a whole and does not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

20.13 Ownership by the Parent

Each Obligor and each Material Group Company is a direct or indirect wholly-owned Subsidiary of the Parent.

20.14 No misleading information

(a) Any factual information contained in the Information Memorandum was true and accurate in all material respects as at the date of the relevant report or document containing the information.

(b) Any financial projections or forecasts contained in the Information Memorandum have been prepared on the basis of recent historical information and on the basis of assumptions which are believed to be reasonable at the date of the relevant report or document containing the projection or forecast.

(c) The expressions of opinion or intention provided by or on behalf of an Obligor for the purposes of the Information Memorandum were arrived at after careful consideration and were fair and based on reasonable grounds as at the date on which they are stated to have been given.

(d) No event or circumstance has occurred or arisen and no information has been omitted from the Information Memorandum and no information has been given or withheld that results in the information, opinions, intentions, forecasts or projections contained in the Information Memorandum being untrue or misleading or other than fair and reasonable in any material respect (it being acknowledged by the Finance Parties that such forecasts and projections are subject to uncertainties and contingencies, many of which are beyond the Obligors control, and that they may differ from actual results).

(e) All other written information provided by any member of the Group (including its advisers) was true, complete and accurate in all material respects as at the date it was provided and is not misleading in any material respect.

The representations and warranties made with respect to the Information Memorandum are made by each Obligor in this Clause 20.14 only so far as it is aware, after making due and careful enquiries.

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(a) Its Original Financial Statements were prepared in accordance with the Accounting Principles consistently applied.

(b) Its audited Original Financial Statements give a true and fair view of its financial condition and operations during the relevant Financial Year.

(c) The most recently delivered set of financial statements delivered pursuant to Clause 21.1 (Financial statements) give a true and fair view of (in the case of audited financial statements) or fairly represent (in the case of unaudited financial statements) its financial condition and operations as at the date at which those financial statements were drawn up.

20.16 Environmental and other laws

(a) Each member of the Group is in compliance with Clause 23.3 (Environmental compliance) and, to its knowledge, no circumstances have occurred which would prevent continued compliance except for non-compliance that could not reasonably be expected to have a Material Adverse Effect.

(b) No Environmental Claim has been commenced or (to its knowledge) is threatened against any member of the Group where that claim could reasonably be expected, if determined against that member of the Group, to have a Material Adverse Effect.

(c) No member of the Group is in breach of any other Environmental Law in a manner or to an extent which could reasonably be expected to have a Material Adverse Effect.

20.17 Tax Liabilities

No claims are being, or are reasonably likely to be, asserted against it or any of its Subsidiaries with respect to Taxes which are reasonably likely to be determined adversely against it or against such Subsidiary and which, if so adversely determined, would have or be reasonably likely to have a Material Adverse Effect and all reports and returns on which Taxes for which a member of the Group may have a liability are required to be shown have been filed within any applicable time limits and all taxes required to be paid have been paid within any applicable time limit save, in each case, to the extent that failure to do so does not have and could not reasonably be expected to have a Material Adverse Effect.

20.18 Security and Financial Indebtedness

(a) No Security exists over all or any of the present or future assets of any member of the Group other than any Permitted Security Interest.

(b) No member of the Group has any actual or contingent Financial Indebtedness outstanding other than Permitted Indebtedness.

20.19 Ranking

Subject to the Legal Reservations (to the extent relevant in representations of fact), upon execution and delivery thereof the Transaction Security will, following the discharge of the Existing Security in accordance with the terms of Clause 23.33 (Conditions

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Subsequent) have first ranking priority and it is not, otherwise than as expressed in this Clause 20.19, subject to any prior ranking or pari passu ranking Security except for obligations mandatorily preferred by law applying to companies generally in the Relevant Jurisdiction or otherwise permitted by this Agreement.

20.20 Transaction Security

Subject to the Legal Reservations and except to the extent that the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), each Security Document to which it is a party validly creates the Security which is expressed to be created by that Security Document and evidences the Security it is expressed to evidence.

20.21 Good Title to Assets

It and each of it Subsidiaries has a good, valid and marketable title to, or valid leases or licences of, and all appropriate Authorisations to use, the assets necessary to carry on its business as presently conducted except in circumstances where failure to have good, valid and marketable title, valid leases or licences or any such Authorisations could not be reasonably expected to have a Material Adverse Effect.

20.22 Legal and beneficial ownership

It and each of its Subsidiaries is the absolute legal and beneficial owner of the assets subject to the Transaction Security that are expressed therein to be legally or beneficially owned by it.

20.23 Shares

The shares of any member of the Group which are subject to the Transaction Security are (except for any shares to be issued under Deferred Subscription Arrangements) fully paid and not subject to any option to purchase or similar rights. The constitutional documents of companies whose shares are subject to the Transaction Security do not restrict or inhibit any transfer of those shares on creation or on enforcement of the Transaction Security.

20.24 Intellectual Property

(a) The Material Intellectual Property:

(i) is legally and beneficially owned by or licensed to the Obligors free from any licences or obligations to grant any licences and free from any assignments or obligations to grant any assignments to third parties which are materially prejudicial to the use of that Material Intellectual Property and will in either case not be materially adversely affected by the transactions contemplated by the Finance Documents;

(ii) has not lapsed or been cancelled in any respect which could be reasonably expected to have a Material Adverse Effect and all steps have been taken to protect and maintain such Material Intellectual Property, including, without limitation, paying renewal fees where failure to do so would have or could be reasonably expected to have a Material Adverse Effect.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) None of the Material Intellectual Property is being or has been infringed where such infringement could reasonably be expected to have a Material Adverse Effect.

(c) The Business carried on by it and its Subsidiaries does not infringe any intellectual property rights of any third party and where the Material Intellectual Property required in order to conduct the Business is subject to any right, permission to use or licence granted to or by any member of the Group, such agreement has not been breached in any way and no member of the Group has received or is aware of a notice of termination being served by any party thereto to the extent such infringement, breach or termination would have or could be reasonably expected to have a Material Adverse Effect.

20.25 Group structure

The Group Structure Chart delivered to the Facility Agent pursuant to Part I of Schedule 2 (Conditions Precedent to Initial Loan) is true, complete and accurate and shows all members of the Group, including current name and company registration number, its jurisdiction of incorporation and/or establishment, all intercompany loans from the Issuer and the Subordinated Guarantor to any member of the Group, a list of shareholders and indicating whether or not a company is a Dormant Company.

20.26 Obligors

The earnings before interest, tax, depreciation and amortisation (calculated on the same basis as Consolidated EBITDA), gross tangible assets and turnover of the Guarantors on the Closing Date (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 80% of Consolidated EBITDA, gross tangible consolidated assets and turnover of the Group.

20.27 US Government Regulations

(a) Neither it nor any of its Subsidiaries is an investment company, or an affiliated person of, or promoter or principal underwriter for, an investment company, as such terms are defined in the Investment Company Act of 1940, as amended. Neither the making of any Loan, nor the application of the proceeds or repayment thereof by any Obligor, nor the consummation of the other transactions contemplated hereby, will violate any provision of such act or any rule, regulation or order of the Securities and Exchange Commission thereunder.

(b) Neither it nor any of its Subsidiaries is a holding company, or a subsidiary company of a holding company, or an affiliate of a holding company or of a subsidiary company of a holding company, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

(c) No Obligor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States of America) as in effect from time to time, and no proceeds of any Loan will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.

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(a) No ERISA Event has occurred or is reasonably expected to occur that has resulted in or is reasonably expected to result in a material liability of any Obligor or any ERISA Affiliate.

(b) Schedule B (Actuarial Information) to the most recent annual report (Form 5500 Series) for each Plan, copies of which have been filed with the Internal Revenue Service of the United States of America, is complete and accurate and fairly represents the funding status of such Plan, and since the date of such Schedule B there has been no material adverse change in such funding status.

(c) Neither any Obligor nor any ERISA Affiliate has incurred or is reasonably expected to incur any Withdrawal Liability to any Multiemployer Plan to the extent such incurrence would have or be reasonably likely to have a Material Adverse Effect.

(d) Neither any Obligor nor any ERISA Affiliate has been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganisation or has been terminated, within the meaning of Title IV of ERISA, and no such Multiemployer Plan is reasonably expected to be in reorganisation or to be terminated, with in the meaning of Title IV of ERISA.

(e) With respect to each scheme or arrangement mandated by a government other than the United States of America (a Foreign Government Scheme or Arrangement) and with respect to each employee benefit plan maintained or contributed to by any Obligor or any Subsidiary of any Obligor that is not subject to United States law (a Foreign Plan):

(i) any employer and employee contributions required by law or by the terms of any Foreign Government Scheme or Arrangement or any Foreign Plan have been made, or, if applicable, accrued, in accordance with normal accounting practices, save to the extent that failure to make or accrue such contributions would not have or would not be reasonably likely to have a Material Adverse Effect;

(ii) the fair market value of the assets of each funded Foreign Plan, the liability of each insurer for any Foreign Plan funded through insurance or the book reserve established for any Foreign Plan, together with any accrued contributions, is sufficient to procure or provide for the accrued benefit obligations, as of the date hereof, with respect to all current and former participants in such Foreign Plan according to the actuarial assumptions and valuations most recently used to account for such obligations in accordance with applicable generally accepted accounting principles save to the extent that any such insufficiency, whether individually or in the aggregate, would not have or would not be reasonably likely to have a Material Adverse Effect; and

(iii) each Foreign Plan required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document save to the extent where failure to make or maintain any such registrations would not have or would not be reasonably likely to have a Material Adverse Effect.

20.29 Material Adverse Change

Since the date of the latest audited financial statements delivered to the Facility Agent pursuant to Clause 21.1 (Financial Statements) (or, prior to any such statements being delivered, 31 March 2003), there has been no development or event which has had, or could reasonably be expected to have, a Material Adverse Effect.

20.30 Times on which representations are made

(a) All the representations and warranties in this Clause 20 are made to each Finance Party on the date of this Agreement except for the representations and warranties set out in Clause 20.14 (No misleading information) relating to the Information Memorandum which are deemed to be made by each Obligor on the date that the Information Memorandum is approved by the Parent and on the Syndication Date.

(b) All the representations and warranties in this Clause 20 are deemed to be made by each Obligor to each Finance Party on the Closing Date.

(c) The Repeating Representations are deemed to be made by each Obligor to each Finance Party on the date of each Utilisation Request and on the first day of each Interest Period and, in addition, the representations and warranties contained in Clause 20.29 (Material Adverse Change) shall be repeated on each date on which a Compliance Certificate is delivered pursuant to Clause 21.2 (Compliance Certificate).

(d) All the representations and warranties in this Clause 20 except Clause 20.12 (Offering Circular), Clause 20.14 (No misleading information), Clause 20.25 (Group structure) and Clause 20.29 (Material Adverse Change) are deemed to be made by each Additional Obligor to each Finance Party on the day on which it becomes an Additional Obligor.

(e) Each representation or warranty deemed to be made after the date of this Agreement shall be made by reference to the facts and circumstances existing at the date the representation or warranty is made.

21. INFORMATION UNDERTAKINGS

The undertakings in this Clause 21 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

In this Clause 21:

Annual Financial Statement means a financial statement for a Financial Year delivered pursuant to paragraph (a) of Clause 21.1 (Financial statements).

Six-Monthly Financial Statement means a financial statement delivered pursuant to paragraph (b) of Clause 21.1 (Financial statements).

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The Parent shall supply to the Facility Agent in sufficient copies for all the Lenders:

(a) as soon as they are available, but in any event within 120 days after the end of each of its Financial Years:

(i) the audited consolidated financial statements of the Group for that Financial Year (the Annual Financial Statements);

(ii) the audited (or to the extent that audited financial statements are not prepared for such Obligor, unaudited) financial statements (consolidated if appropriate) of each Obligor for that Financial Year; and

(iii) the audited (or to the extent that audited financial statements are not prepared for such Material Group Company, unaudited) financial statements of any other Material Group Company for that Financial Year if requested by the Facility Agent.

(b) as soon as they are available, but in any event within 90 days after the end of the first half of each of its Financial Years (commencing with the first half year ending after the date of this Agreement) its unaudited consolidated financial statements (in a form that complies with the relevant requirements of the London Stock Exchange) for such period (the Six-Monthly Financial Statements).

21.2 Compliance Certificate

(a) The Parent shall supply a Compliance Certificate to the Facility Agent with each set of its Annual Financial Statements and each set of its Six-Monthly Financial Statements.

(b) Each Compliance Certificate shall:

(i) set out (in reasonable detail) computations as to compliance with Clause 21.8 (Financial Covenants) (and, in the case of the Annual Financial Statements, Clause 9.7 (Excess cash)) and the Margin computations set out in the definition of Margin as at the date as at which those financial statements were drawn up; and

(ii) confirm that no Default has occurred and is continuing or, if a Default has occurred, what Default has occurred and the steps being taken to remedy that Default.

(c) Each Compliance Certificate shall be signed by two directors of the Parent and, if required to be delivered with the consolidated Annual Financial Statements of the Parent certified (as to financial matters and details only) by the Parents auditors, subject to agreeing the form and content of any engagement letter required by such auditor.

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(a) Each set of financial statements delivered pursuant to Clause 21.1 (Financial statements):

(i) shall be certified by a director of the relevant company as giving a true and fair view (in the case of Annual Financial Statements) or fairly representing (in other cases) its financial condition and operations as at the date as at which those financial statements were drawn up;

(ii) shall be prepared using the Accounting Principles, accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for the Parent,

unless, in relation to any set of financial statements, the Parent notifies the Facility Agent that there has been a change in the Accounting Principles, the accounting practices or reference periods and its auditors deliver to the Facility Agent:

(A) a description of any change necessary for those financial statements to reflect the Accounting Principles, accounting practices and reference periods upon which the Original Financial Statements were prepared; and

(B) sufficient information, in form and substance as may be reasonably required by the Facility Agent, to enable the Lenders (w) to determine whether Clause 22 (Financial covenants) has been complied with, (x) to determine the Margin as set out in the definition of Margin, (y) to make an accurate comparison between the financial position indicated in those financial statements and the Original Financial Statements and (z) (in the case of the Annual Financial Statements) to determine the amount of any prepayments to be made from Excess Cashflow under Clause 9.7 (Excess cash).

(b) If the Parent notifies the Facility Agent of a change in accordance with paragraph (a) above then the Parent and Facility Agent shall enter into negotiations in good faith with a view to agreeing:

(i) whether or not the change might result in any material alteration in the commercial effect of any of the terms of this Agreement; and

(ii) if so, any amendments to this Agreement which may be necessary to ensure that the change does not result in any material alteration in the commercial effect of those terms,

and if any amendments are agreed they shall take effect and be binding on each of the Parties in accordance with their terms.

If no such agreement is reached within 30 days of that notification of change, the Facility Agent shall (if so requested by the Majority Lenders) instruct the auditors of the Parent or independent accountants (approved by the Parent or, in the absence of such approval within 5 Business Days of request by the Facility Agent of such approval, a firm with recognised expertise) to determine any amendment to Clause 22 (Financial covenants), the Margin computations set out in the definition of Margin, Clause 9.7 (Excess cash) and any other terms

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of this Agreement which those auditors or, as the case may be, accountants (acting as experts and not arbitrators) consider appropriate to ensure the change does not result in any material alteration in the commercial effect of the terms of this Agreement. Those amendments shall take effect when so determined by those auditors, or as the case may be, accountants. The cost and expense of those auditors or accountants shall be for the account of the Parent.

Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.

(c) The Parent shall procure that each set of Annual Financial Statements shall be audited by an internationally recognised firm of independent auditors licensed to practice in the jurisdiction of incorporation of the relevant member of the Group.

21.4 Group Companies

The Parent shall, at the request of the Facility Agent (acting reasonably) but not more frequently than semi-annually, supply to the Facility Agent a report issued by its auditors stating which of its Subsidiaries are Material Group Companies and confirming that the earnings before interest, tax, depreciation and amortisation (calculated on the same basis as Consolidated EBITDA), gross tangible consolidated assets or turnover of the Guarantors (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 80% of the Consolidated EBITDA, gross tangible consolidated assets or turnover of the Group.

21.5 Year-end

No alteration may be made to the Financial Year end of the Parent unless the Parent and the Facility Agent shall have agreed such changes to the financial covenants and such other provisions contained in this Agreement as will fairly reflect such alteration and the Parent shall procure that the Financial Year end of each of its Subsidiaries shall be the same as its own.

21.6 Information: miscellaneous

The Parent shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):

(a) all documents dispatched by the Parent to its shareholders (or any class of them) on a publicly available basis or dispatched by the Parent or any Obligor to its creditors generally at the same time as they are dispatched;

(b) promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which could reasonably be expected, if adversely determined, to have a Material Adverse Effect;

(c) promptly upon the issuance thereof, copies of all reports, if any, to or other documents filed by any member of the Group with the Securities and Exchange Commission under the United States Securities Act of 1933 or the United States

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securities Exchange Act of 1934 (other than on Form S-8 or 8-A or similar forms) including for the avoidance of doubt the Group 20F SEC Filings; and

(d) promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Facility Agent) may reasonably request, subject to any legal or regulatory restriction applicable to any member of the Group.

21.7 Notification of default

(a) Each Obligor shall notify the Facility Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

(b) Promptly upon a request by the Facility Agent, the Parent shall supply to the Facility Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it).

21.8 ERISA-Related Information

The Parent shall supply to the Facility Agent (in sufficient copies for all the Lenders, if the Facility Agent so requests):

(a) promptly and in any event within fifteen days after any member of the US Group or any ERISA Affiliate files a Schedule B (or such other schedule as contains actuarial information) to IRS Form 5500 in respect of an Employee Plan with Unfunded Pension Liabilities, a copy of such IRS Form 5500 (including the Schedule B);

(b) promptly and in any event within thirty days after any member of the US Group or any ERISA Affiliate knows or has reason to know that any ERISA Event which, individually or when aggregated with any other ERISA Event, would reasonably be expected to have a Material Adverse Effect has occurred, the written statement of the Chief Financial Officer of such member of the US Group or ERISA Affiliate, as applicable, describing such ERISA Event and the action, if any, which it proposes to take with respect thereto and a copy of any notice filed with the PBGC or the IRS pertaining thereto; providing that, in the case of ERISA Events under paragraph (d) of the definition thereof, the 15-day period set forth above shall be a 10-day period, and, in the case of ERISA Events under paragraph (b) of the definition thereof, in no event shall notice be given later than the occurrence of the ERISA Event; and

(c) promptly, and in any event within thirty days, after becoming aware that there has been (A) an increase in Unfunded Pension Liabilities which increase is reasonably likely to have a Material Adverse Effect, taking into account only Employee Plans with positive Unfunded Pension Liabilities; (B) an increase in potential withdrawal liability under Section 4201 of ERISA which increase is reasonably likely to have a Material Adverse Effect, if the Parent and its ERISA Affiliates were to completely or partially withdraw from all Multiemployer

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Plans; (C) the adoption of, or the commencement of contributions to, any Employee Plan subject to Title IV of ERISA by any Obligor or any ERISA Affiliate; or (D) the adoption of any amendment to an Employee Plan subject to Title IV of ERISA which results in a material increase in contribution obligations of any Obligor, the detailed written description thereof from the Chief Financial Officer of each affected member of the US Group or ERISA Affiliate, as applicable.

22. FINANCIAL COVENANTS

22.1 Financial definitions

Unless the context requires otherwise the following expressions shall have the following meanings, and each of the expressions shall refer to the position of the Group on a consolidated basis, unless the context otherwise requires:

Capital Expenditure means expenditure of the Group which should be treated as capital expenditure in accordance with the Accounting Principles;

Cashflow means, in respect of the Relevant Period, and without double counting, Consolidated EBITDA for that period:

(a) minus any tax paid in cash during that period and plus any tax rebate actually received in cash;

(b) minus all Capital Expenditure (but which shall include, without limitation, any Capital Expenditure in respect of any Permitted Acquisition) paid in cash by members of the Group during that period and for this purpose to the extent that any such Capital Expenditure is financed:

(iii) by finance lease, hire purchase or similar arrangement the amount included in Capital Expenditure shall be the amount which would have been included had such Capital Expenditure not been so financed but after including the principal amount financed under such financing arrangement as a cash inflow;

(iv) by Excess Cashflow (as described in paragraph (b)(ii) of the definition of Permitted Acquisitions), Permitted Indebtedness (as described in paragraph (b)(iii) of the definition of Permitted Acquisitions) or Further High Yield Debt, the amount included in such Capital Expenditure shall be the amount which would have been included had such Capital Expenditure not been so financed but after including the amount of such Excess Cashflow or such Permitted Indebtedness or the cash proceeds received by the Group through such Further High Yield Debt, in each case to the extent such Capital Expenditure is financed thereby, as a cash inflow;

(d) minus any extraordinary or exceptional items paid in cash during that period;

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) minus the amount of the increase or plus the amount of the decrease (as the case may be) in Working Capital during that period other than any increase or decrease in Working Capital of any member of the US Group;

(f) plus, to the extent not already included in determining Consolidated EBITDA, the amount of any dividends or other profit distributions (net of tax) received in cash by any member of the Group during that period from companies which are not members of the Group;

(g) minus the amount of any profit of any Subsidiary of the Parent taken into account in Consolidated EBITDA for that period which whether by law or for any other reason cannot be distributed by way of dividend, loan or other means to the Parent;

(h) plus, to the extent not already included as an exceptional item or otherwise included in determining Consolidated EBITDA, any Net Proceeds received or recovered as cash or Cash Equivalents during such Financial Year arising on the disposal of any assets (not being stock disposed of in the ordinary course of trading);

(i) plus (to the extent not already included) any amount of additional available cash resulting from the release of pension surpluses; and

(j) plus (to the extent not already included) the amount subscribed in cash as Further Equity Contributions;

Cash Interest Payable means, in respect of the Relevant Period, the amount of Interest Payable during that period excluding any such Interest Payable which is capitalised or rolled-up or otherwise not currently payable in respect of the period under the terms of the High Yield Notes, the Discount High Yield Notes or the Further High Yield Debt or the Subordinated Loan Stock (and not paid or becoming due for payment in that period) and, for the avoidance of doubt, payment blockage provisions (if any) in relation to the High Yield Notes, the Discount High Yield Notes or the Further High Yield Debt (or their operations) shall not be treated as resulting in Interest Payable thereon being treated as not currently payable;

Consolidated EBITDA means, in respect of the Relevant Period, the consolidated profit on ordinary activities of the Group for such period:

(a) before any deduction for or on account of corporation tax or other taxes on income or gains;

(b) before any deduction for Interest Payable or any deduction for the discount element or interest accrual on the Subordinated Loan Stock;

(d) excluding extraordinary or exceptional items;

(e) after deducting (to the extent otherwise included) the amount of profit (or adding back the loss) of any member of the Group (other than the Parent) which

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is attributable to any third party (not being a member of the Group) which is a shareholder or partner in such member of the Group;

(f) after deducting (to the extent otherwise included) any gain over book value arising in favour of a member of the Group on the disposal of any business or assets (not being any disposals made in the ordinary course of trading) during such period and any gain arising on any revaluation of any business or asset during such period;

(g) after adding back (to the extent otherwise deducted) any loss against book value incurred by a member of the Group on the disposal of any business or asset (not being any disposals made in the ordinary course of trading) during such period;

(h) adding back the Transaction Costs to the extent deducted; and

(i) adding back depreciation of fixed assets and amortisation of goodwill or intangible assets during that period, to the extent deducted;

Consolidated Net Senior Debt means the aggregate outstanding principal amount of all Financial Indebtedness under the Facilities;

Consolidated Total Net Debt means, at any time, the aggregate outstanding principal or capital amount of all Financial Indebtedness of the Group calculated on a consolidated basis excluding any Financial Indebtedness between any member of the Group provided that:

(a) in the case of finance leases referred to in the definition of Financial Indebtedness, only the capitalised value of any items falling thereunder as determined in accordance with the Accounting Principles shall be included;

(b) in the case of guarantees referred to in the definition of Financial Indebtedness, any items falling thereunder shall not be included to the extent relating to indebtedness of another member of the Group already included in this calculation; and

(c) freely available cash balances of the Group at that time held with a Lender or an Approved Bank shall be deducted from the amount of such Financial Indebtedness (save to the extent already taken into account in the calculation of Consolidated Total Net Debt);

Excess Cashflow means, in respect of any Financial Year commencing with the Financial Year ending 31 March, 2004, Cashflow for that Financial Year (as determined from the annual audited consolidated accounts of the Parent):

(a) less Net Cash Interest Payable for that Financial Year;

(b) less all scheduled repayments of the Term Facility made during that Financial Year;

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) less the aggregate amount of prepayments of the Term Loans made pursuant to Clause 9.3 (Voluntary Prepayment of Term Loans) and applied in accordance with Clause 9.9 (Application of Prepayments) during that Financial Year;

(d) less all scheduled repayments and all prepayments (whether voluntary or mandatory) of principal under the terms of any other Financial Indebtedness of any member of the Group (excluding (i) any scheduled repayments or prepayments in relation to Financial Indebtedness between any member of the Group and any other member of the Group, (ii) any scheduled repayments or prepayments, in relation to the Subordinated Loan Stock, the High Yield Notes, the Discount High Yield Notes or any Further High Yield Debt and (iii) any amount paid in relation to the Facilities save as referred to in (a), (b) or (c) above) falling due during that Financial Year:

(i) including, without limitation, all capital payments falling due in respect of any Financial Indebtedness falling within paragraph (g) of the definition of that term; and

(ii) excluding any repayment or prepayment of any overdraft or revolving credit facility (including, without limitation, the Revolving Loans) falling due during that period and capable of being simultaneously redrawn under the terms of the relevant facility;

(e) less the amount of any dividends lawfully declared by the Parent;

(f) excluding, to the extent otherwise included, amounts deposited in a Cash Collateral Account for the purposes of a prepayment in accordance with Clause 9.12 (Prepayment during Interest Periods);

(g) less amounts included in the definition of Cashflow under paragraph (i) thereof; and

(h) less the amount of the increase or plus the amount of the decrease (as the case may be) in Working Capital of any member of the US Group during that Financial Year;

Interest means interest and amounts in the nature of interest paid or payable in respect of any Financial Indebtedness of any member of the Group excluding (i) any interest paid or payable on Financial Indebtedness between any member of the Group and any other member of the Group and (ii) any interest paid or payable under any interest rate hedging arrangements existing at the Closing Date which are closed out within 25 Business Days of the Closing Date but including, without limitation:

(a) the interest element of finance leases;

(b) discount and acceptance fees payable (or deducted) in respect of any Financial Indebtedness;

(c) fees payable in connection with the issue or maintenance of any bond, letter of credit, guarantee or other assurance against financial loss which constitutes

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Financial Indebtedness and is issued by a third party on behalf of a member of the Group;

(d) repayment and prepayment premiums payable or incurred in repaying or prepaying any Financial Indebtedness; and

(e) commitment, utilisation and non-utilisation fees payable or incurred in respect of Financial Indebtedness (but excluding any fees payable in relation to any borrowing for arranging such borrowing and which are paid at the commencement of such borrowing);

Interest Payable means, in respect of the Relevant Period, the aggregate of:

(a) Interest accrued (whether or not paid or capitalised) during that testing period; and

(b) the amount of the discount element of any Financial Indebtedness amortised during such period; in each case, as an obligation of any member of the Group during that period and calculated on the basis that:

(a) the amount of Interest accrued will be increased by an amount equal to any amount payable by members of the Group under Hedging Agreements in relation to that testing period;

(b) the amount of Interest accrued will be reduced by an amount equal to any amount payable to members of the Group under Hedging Agreements in relation to that testing period;

(d) amortisation of Transaction Costs to the extent amortised, will be excluded;

Interest Receivable means, in respect of the Relevant Period, the amount of Interest (which for this purpose shall include all payments of the type described in the definition of Interest above) accrued due to members of the Group (other than by other members of the Group) during such period whether or not paid;

Net Cash Interest Payable means, in respect of the Relevant Period, Cash Interest Payable less Interest Receivable;

Relevant Period means, subject to paragraph (b) of Clause 22.3 (Financial Testing), each period of twelve months ending on the last day of the Parents Financial Year and each period of twelve months ending on the last day of each half of the Parents Financial Year;

Working Capital means trade and other debtors in respect of operating items plus prepayments and stock less trade and other creditors in respect of operating items and less accrued expenses and accrued costs (but excluding the Transaction Costs).

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The Parent shall ensure that:

(a) Net Cash Interest Cover: The ratio of Consolidated EBITDA to Net Cash Interest Payable in respect of any Relevant Period specified in Column 1 below shall not be less than the ratio set out in Column 2 below opposite that Relevant Period.

Column 1 Column 2 Relevant Period Ratio

Relevant Period expiring on or about 31 March 2004 2.75:1

Relevant Period expiring on or about 30 September 2004 3.50:1

Relevant Period expiring on or about 31 March 2005 3.50:1

Relevant Period expiring on or about 30 September 2005 3.75:1

Relevant Period expiring on or about 31 March 2006 and thereafter 4.00:1

(b) Senior Debt Cover: The ratio of Consolidated Net Senior Debt on or about each date set out in Column 1 below to Consolidated EBITDA in respect of any Relevant Period ending on or about such date shall not exceed the ratio set out in Column 2 below opposite such date.

Column 1 Column 2 Relevant Period Ratio

Relevant Period expiring on or about 31 March 2004 3.75:1

Relevant Period expiring on or about 30 September 2004 3.50:1

Relevant Period expiring on or about 31 March 2005 3.50:1

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Debt Cover: The ratio of Consolidated Total Net Debt on or about each date set out in Column 1 below to Consolidated EBITDA in respect of any Relevant Period ending on or about such date shall not exceed the ratio set out in Column 2 below opposite such date (the Leverage Ratio).

Column 1 Column 2 Relevant Period Ratio

Relevant Period expiring on or about 31 March 2004 4.75:1

Relevant Period expiring on or about 30 September 2004 4.50:1

Relevant Period expiring on or about 31 March 2005 4.00:1

Relevant Period expiring on or about 30 September 2005 and thereafter 3.75:1

22.3 Financial testing

The financial covenants set out in Clause 22.2 (Financial condition) shall be tested:

(a) by reference to each of the financial statements and/or each Compliance Certificate delivered pursuant to Clause 21.2 (Compliance Certificate) with the first test date being 31 March 2004; and

(b) semi-annually on a rolling twelve months basis other than the Net Cash Interest Cover covenant which, for the initial test periods falling within twelve months of the date of Completion, shall not look back beyond the date of Completion,

and, where a company or business is acquired or disposed of during a Relevant Period, the contribution of that company or business to the Consolidated EBITDA of the Group for the purposes of the financial covenants set out in Clause 22.2 (b) and (c) only (Financial condition) shall be included on a pro forma basis as if the acquisition or disposal had been made on the first day of the Relevant Period.

23. GENERAL UNDERTAKINGS

The undertakings in this Clause 23 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.

23.1 Authorisations

Each Obligor shall promptly:

(a) obtain, comply with and do all that is necessary to maintain in full force and effect; and

(b) supply certified copies to the Facility Agent of,

any Authorisation required under any law or regulation of a Relevant Jurisdiction to:

(i) enable it to perform its obligations under the Finance Documents;

(ii) ensure the legality, validity and, subject to the Legal Reservations, enforceability or admissibility in evidence of any Finance Document; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) enable it to own its property and assets and to carry on its business, trade and ordinary activities as currently conducted,

except to the extent failure to obtain or comply with those Authorisations could not reasonably be expected to have a Material Adverse Effect.

23.2 Compliance with laws

Each Obligor shall comply in all respects with all laws, rules, regulations and orders to which it may be subject if failure so to comply would, or could reasonably be expected to have, a Material Adverse Effect.

23.3 Environmental compliance

(a) Each Obligor shall (and the Parent shall ensure that each member of the Group shall):

(i) comply with all Environmental Permits and all Environmental Laws to which it or its Subsidiaries may from time to time be subject;

(ii) obtain and maintain and ensure compliance with any Environmental Permits;

(iii) comply with all other covenants, conditions, restrictions or agreements directly or indirectly concerned with any contamination, pollution or waste or the release or discharge of any toxic or hazardous substance in connection with any real property which is or was at any time owned, leased or occupied by any member of the Group or on which any member of the Group has conducted any activity; and

(iv) take all reasonable steps in anticipation of known or expected future changes to or obligations under Environmental Law or Environmental Permits,

where, in each case, failure to do so could reasonably be expected to have a Material Adverse Effect.

23.4 Environmental claims

Each Obligor shall (through the Obligors Agent) inform the Facility Agent in writing as soon as reasonably practicable upon obtaining knowledge of the same:

(a) if any Environmental Claim has been commenced or (to an Obligors knowledge) is threatened against any member of the Group; or

(b) of any facts or circumstances which will or are reasonably likely to result in any Environmental Claim being commenced or threatened against any member of the Group,

where, in each case, the claim could reasonably be expected, if determined against that member of the Group, to have a Material Adverse Effect.

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Each Obligor will, and will procure that each of its Subsidiaries will, ensure that its payment obligations under each of the Finance Documents rank and will at all times rank at least pari passu in right and priority of payment with all its other present and future unsecured and unsubordinated indebtedness (actual or contingent) except indebtedness preferred solely by operation of law.

23.6 Insurances

(a) Each Obligor will, and will procure that each of its Subsidiaries will, maintain insurances or procure the maintenance of insurances at its own expense in respect of all its assets and business of an insurable nature with reputable insurers of good standing. Such insurances must provide cover:

(i) against all risks which are normally insured against by other companies owning, possessing or leasing similar assets and carrying on similar businesses and include, without limitation, cover against loss of profits, product liability, professional indemnity, pollution and public liability, but subject to any exclusions typical for insurances of this type; and

(ii) in such amounts as would in the circumstances be prudent for such companies taking into account the size and nature of the business carried on, and the assets owned, by such companies and the jurisdiction in which such businesses are carried on and assets located.

(b) Each Obligor will, and will procure that each of its Subsidiaries will:

(i) supply to the Facility Agent on request copies of each policy for insurance required to be maintained in accordance with sub-paragraph (a) above together with the current premium receipts relating thereto;

(ii) promptly notify the Facility Agent in writing of any material change to its insurance cover from time to time;

(iii) promptly notify the Facility Agent in writing of any claim or notification under any of its insurance policies which is for, or is reasonably likely to result in a claim under such policy for, an amount in excess of £10,000,000 (or its equivalent in other currencies); and

(iv) procure that the interest of the Security Trustee is noted on each policy of insurance required to be maintained in accordance with sub-paragraph (i) to the extent that such insurance is of a type on which it is possible to so note the interest of the Security Trustee.

23.7 Taxes

Each Obligor will, and will procure that each of its Subsidiaries will, pay within any applicable time limit all Taxes imposed by any agency of any state upon it or any of them or any of its or their assets, income or profits or any transactions undertaken or entered into by it or any of them save in the event of a bona fide dispute with regard to any Tax in respect of which proper provision has, if appropriate, been made in the accounts of the relevant member of the Group.

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Except with the specific consent of the Majority Lenders, no Obligor will, and each Obligor will procure that none of its Subsidiaries will amalgamate, merge or consolidate with or into any other person or be the subject of any reconstruction provided that any Obligor (other than an Excluded Group Member) may effect an amalgamation, merger or consolidation with any of its Subsidiaries if following such amalgamation, merger or consolidation, all obligations of the merging entity under the Finance Documents shall be assumed by the surviving entity, and (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) the shares in the surviving entity and its assets shall continue to be or shall become subject to security under the Security Documents, and the Parent shall ensure that the relevant Obligors or, as the case may be, the surviving entity shall take all reasonable steps necessary to maintain, create, perfect and register such security and shall deliver to the Security Trustee such evidence as the Security Trustee shall require of the due execution of any new Security Documents which may be executed by such Obligors or such surviving entity pursuant to this Clause 23.8 or, as the case may be, the continuing validity of the relevant existing Security Documents and of the assumption of such obligations, together with a legal opinion (if required) satisfactory to the Security Trustee.

23.9 Change of business

The Parent shall procure that no substantial change is made to the general nature of the business of the Parent, the other Obligors or the Group from that carried on at the date of this Agreement. Each Obligor shall do all things necessary to maintain in full force and effect when necessary all contracts or rights that are reasonably necessary or desirable for the conduct of the Business.

23.10 Acquisitions

No Obligor shall (and the Parent shall ensure that no other member of the Group shall) incorporate or acquire a company or acquire (or acquire an interest in) shares or securities or a business or undertaking other than:

(a) Permitted Acquisitions;

(b) any acquisition by a member of the Group as set out in the definition of Permitted Disposal;

(c) the incorporation or acquisition by YH2 or any other Obligor that is a Subsidiary of YH2 of any wholly owned Subsidiary provided that (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) (i) such shares shall be subject to first priority security in favour of the Security Trustee, (ii) such new wholly owned Subsidiary shall create first priority security over all or substantially all of its assets and undertaking pursuant to Security Documents in form and substance satisfactory to the Security Trustee and (iii) the relevant Obligor shall take all steps reasonably necessary to create, perfect and deliver to the Security Trustee such evidence as the Security Trustee may require of the due execution of the relevant Security Document together with legal opinions to

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the extent reasonably necessary in form and substance satisfactory to the Security Trustee;

(d) the subscription by any member of the Group which is a creditor (the Creditor) under an Intercompany Loan Agreement for ordinary shares in any other member of the Group which is a debtor of such Creditor under an Intercompany Loan Agreement to the extent such subscription is funded entirely out of the proceeds of the repayment of such Intercompany Loan Agreement provided that (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) such shares shall be subject to first priority Security in favour of the Security Trustee pursuant to a Security Document in form and substance reasonably satisfactory to the Security Trustee and the Creditor shall take all steps reasonably necessary to maintain, create, perfect and register such Security and shall deliver such evidence as the Security Trustee shall require of the due execution of any such Security Document together with legal opinions to the extent reasonably necessary in form and substance satisfactory to the Security Trustee;

(e) the acquisition by the Parent of all the issued share capital in each of the SLP Partnership Companies at such times and in such manner as is contemplated in the Structure Paper in connection with the collapse of the Subordinated Loan Stock.

23.11 Jointventures

No Obligor shall (and the Parent shall ensure that no member of the Group shall):

(a) acquire (or agree to acquire) any shares, stocks, securities or other interest in any Joint Venture; or

(b) transfer any assets or lend to or guarantee or indemnify or give Security for the obligations of a Joint Venture (or agree to transfer, lend, guarantee, indemnify or give Security for the obligations of a Joint Venture),

other than, in each case, in relation to any Permitted Joint Venture.

23.12 Negativepledge

No Obligor shall (and the Parent shall ensure that no other member of the Group will) create or permit to subsist any Security over any of its assets other than a Permitted Security Interest.

23.13 Disposals

No Obligor will and each Obligor will procure that none of its Subsidiaries will, (whether by a single transaction or a number of related or unrelated transactions and whether at the same time or over a period of time) sell, transfer, lease out, lend or otherwise dispose of any of its assets or all or any part of its undertaking or agree to do so except in connection with a Permitted Disposal.

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(a) Except as permitted by paragraph (b) below, no Obligor shall (and the Parent shall ensure no member of the Group shall) enter into any transaction with any person except on arms length terms.

(b) The following transactions shall not be a breach of this Clause 23.14:

(i) payment of Permitted Payments;

(ii) intra-Group loans permitted under Clause 23.17 (Loans);

(iii) disposals permitted by Clauses 23.13 (Disposals); and

(iv) the acquisitions permitted by paragraph (e) of Clause 23.10 (Acquisitions).

23.15 Indebtedness

No Obligor will, and each Obligor will procure that none of its Subsidiaries will, incur or agree to incur or permit to subsist any Financial Indebtedness other than Permitted Indebtedness.

23.16 Guarantees

No Obligor will, and each Obligor will procure that none of its Subsidiaries will, grant or agree to grant or permit to subsist any guarantee other than:

(a) guarantees, indemnities or performance bonds given (i) in the ordinary course of its trading activities or (ii) in relation to its occupation of leased properties or (iii) specifically in relation to the IPO;

(b) guarantees contained in the Finance Documents and as permitted pursuant to Clause 23.29 (Issue of High Yield Notes and Discount High Yield Notes) and in accordance with the definition of Further High Yield Debt;

(c) guarantees and indemnities given by members of the Group (other than Excluded Group Members) to facilitate the operation of accounts of other members of the Group (other than Excluded Group Members) with the same Approved Bank on a net balance basis with (or without) credit balance and debit balances on the various accounts being netted off; and

(d) any guarantees, where the aggregate amount so guaranteed by all members of the Group at any time when aggregated with all Financial Indebtedness permitted to be outstanding pursuant to paragraph (i) of the definition of Permitted Indebtedness does not exceed the financial limit (or its equivalent in other currencies) set out in paragraph (i) of the definition of Permitted Indebtedness, as the same may be increased pursuant to the terms thereof.

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No Obligor will, and each Obligor will procure that none of its Subsidiaries will, make or agree to make or permit to be outstanding any loans or grant or agree to grant any credit other than:

(a) trade credit given in the ordinary course of its trading activities;

(b) loans and the granting of credit by Obligors to other Obligors which have (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) entered into Security Documents over all or substantially all of their assets;

(d) loans made between members of the Group in order to enable the lawful payment of dividends;

(e) loans to employees and directors of the Group, or to trustee(s) of any employee share option scheme for any member of the Group, provided that the maximum aggregate principal amount of all such loans shall not exceed £15,000,000 (or its equivalent in other currencies) at any time;

(f) loans made pursuant to Further Intercompany Loan Agreements in relation to the on-lending of the proceeds of any Further Equity Contribution or any Further High Yield Debt;

(g) cash deposits placed by members of the Group in accounts held with Approved Banks and/or Ancillary Lenders and which are (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) the subject of security granted under the Security Documents or which do not exceed £25,000,000 (or its Equivalent in other currencies) in aggregate;

(h) investments in Cash Equivalents which are (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) the subject of security granted under the Security Documents, to the extent permitted by this Agreement;

(i) loans and the granting of credit between wholly-owned Subsidiaries of the Parent neither of which is an Obligor or an Excluded Group Member;

(j) loans and the granting of credit by members of the Group which are not Obligors or Excluded Group Members to Obligors which have (except in circumstances where the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal)) entered into Security Documents over all or substantially all of their assets;

(k) loans not otherwise permitted by paragraphs (a) to (j) above in an aggregate outstanding amount not exceeding at any time £15,000,000 (or its equivalent in other currencies) for the Group as a whole.

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Each Obligor shall provide reasonable assistance to the Arranger in the preparation of the Information Memorandum and the primary syndication of the Facility (including, without limitation, by using reasonable efforts to cause members of senior management of the Group to be available during regular business hours to answer questions about the Group and the Business from potential Lenders and for the purpose of making presentations to, or meeting, potential lending institutions) and will comply with all reasonable requests for information from potential syndicate members prior to the Syndication Date.

23.19 Compliancewith ERISA

No Obligor shall:

(a) allow, or permit any of its ERISA Affiliates to allow, (i) any Employee Plan with respect to which any US Group Company or any of its ERISA Affiliates may have any liability to terminate, (ii) any US Group Company or ERISA Affiliates to withdraw from any Employee Plan or Multiemployer Plan, (iii) any ERISA Event to occur with respect to any Employee Plan, or (iv) any Accumulated Funding Deficiency (as defined in Section 302 of ERISA and Section 412 of the Code), whether or not waived, to exist involving any of its Employee Plans; to the extent that any of the events described in (i), (ii), (iii) or (iv), singly or in the aggregate, is reasonably likely to have a Material Adverse Effect;

(b) allow, or permit any of its ERISA Affiliates to allow, (i) an Unfunded Pension Liability (taking into account only Employee Plans with positive Unfunded Pension Liability) or (ii) any potential withdrawal liability under Section 4201 of ERISA, if the Parent and its ERISA Affiliates were to completely or partially withdraw from all Multiemployer Plans or if in either case under (i) or (ii) it would be reasonably likely to have a Material Adverse Effect; or

(c) fail, or permit any of its ERISA Affiliates to fail, to comply in any material respect with ERISA or the related provisions of the Code, if any such non-compliance, singly or in the aggregate, would be reasonably likely to have a Material Adverse Effect.

23.20 PensionSchemes

Each Obligor will, and will procure that each of its Subsidiaries will, if requested by the Facility Agent, deliver to the Facility Agent at such time as those reports are prepared in order to comply with then current statutory or auditing requirements, actuarial reports in relation to the pension schemes for the time being operated by members of the Group, and will ensure that all such pension schemes are fully funded to the extent required by law based on reasonable actuarial assumptions applicable in the jurisdiction in which the relevant pension scheme is maintained.

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Each Obligor will and each Obligor will procure that each of its Subsidiaries will:

(a) observe and comply with all obligations and laws to which it in its capacity as registered proprietor, beneficial owner, user, licensor or licenses of the Material Intellectual Property or any part thereof is subject where failure to do so would have or could be reasonably expected to have a Material Adverse Effect;

(b) do all acts as are necessary to maintain, register, protect and safeguard the Material Intellectual Property or any part thereof or any right of any such Obligor under the Material Intellectual Property where failure to do so would have or could be reasonably expected to have a Material Adverse Effect and not discontinue the use of any of such Intellectual Property nor allow it to be used in such a way that it is put at risk by becoming generic or by being identified as disreputable if in each case to do so would have or could be reasonably expected to have a Material Adverse Effect; and

(c) not assign, sever, licence, dispose of or otherwise part with Material Intellectual Property other than to the extent permitted pursuant to Clause 23.13 (Disposals) or the granting of a licence to any person to use the same, but only in each case if to do so would not have or could not be reasonably expected to have a Material Adverse Effect.

23.22 HedgingStrategy

The Parent shall procure that each Borrower shall comply with a hedging strategy to be agreed between the Parent and the Arranger within 60 days following the Closing Date.

23.23 CashEquivalent

No Obligor shall, and each Obligor shall procure that none of its Subsidiaries shall, acquire Cash Equivalents other than for treasury management purposes.

23.24 GuarantorGroup

The Parent shall ensure that, at all times, the earnings before interest, tax, depreciation and amortisation (calculated on the same basis as Consolidated EBITDA), gross tangible assets and turnover of the Guarantors (calculated on an unconsolidated basis and excluding all intra-Group items and investments in Subsidiaries of any member of the Group) exceeds 80% of the Consolidated EBITDA, gross tangible consolidated assets and consolidated turnover of the Group (respectively).

23.25 NoRestriction on Payment of Dividends and other amounts

The Parent (and each other member of the Group in order to facilitate the payment of dividends by the Parent) may declare or pay, directly or indirectly, any dividends or make any other distribution or pay any interest or other amounts, including without limitation under Further Intercompany Loan Agreements and/or by making payments under the Intercompany Loan Agreements, whether in cash or otherwise, or on or in respect of its share capital or any class of its share capital or set apart any sum for any such purpose provided that such payment is permitted under the terms of the High Yield Notes and the Discount High Yield Notes.

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Notwithstanding any other provision of the Finance Documents, no Obligor will, and each Obligor will procure that none of its Subsidiaries will:

(a) pay any interest or other amount to any Excluded Group Member under or in connection with any loan received from any Excluded Group Member, or pay any amount to or transfer monies to any Excluded Group Member other than (i) to facilitate the payment of dividends permitted by Clause 23.25 (No Restriction on Payment of Dividends and other amounts), (ii) to facilitate the payment of actual out-of-pocket costs and expenses and any tax liabilities that are or may be incurred by the Excluded Group Members and (iii) to facilitate the payment of (1) scheduled interest payments to be made in respect of the High Yield Debt, Discount High Yield Debt and/or Further High Yield Debt and (2) payments of principal in respect of the High Yield Debt and Discount High Yield Debt but only to the extent that such payments are required to redeem up to 35% of the High Yield Notes and the Discount High Yield Notes for which a notice of redemption was delivered on or about the date of Completion (a copy of a draft of which notice was delivered to the Facility Agent pursuant to sub-paragraph (h) (i) of paragraph 4 of Part I of Schedule 2 (Conditions Precedent));

(b) sell, transfer, lease out, lend or otherwise dispose of any asset to any Excluded Group Member; or

(c) grant any guarantee or enter into any participation or purchase arrangements in relation to any obligation of any Excluded Group Member other than (A) the guarantee from the Subordinated Guarantor in respect of the obligations of the Issuer under the Further High Yield Debt or (B) to the extent permitted under the Finance Documents,

or commit to any person to enter into any agreement under which it has any obligation to do any of the foregoing, except as permitted in accordance with the Finance Documents.

23.27 HoldingCompanies

Notwithstanding any other provision of this Agreement or the other Finance Documents, the Parent shall and the Parent shall procure that the Issuer shall:

(a) carry on business solely as an investment holding company of the Group and as finance companies of the Group, and shall not carry on any other business other than the holding of shares in their respective Subsidiaries, the entry into the Finance Documents and the making of loans pursuant to the terms of the Intercompany Loan Agreements and, in the case of the Parent, the incurrence of indebtedness evidenced by the Subordinated Loan Stock;

(b) not own any assets other than shares in its Subsidiaries (provided that the Parent shall not own directly shares in any of its Subsidiaries other than the Issuer and, following the consummation of the acquisition contemplated by paragraph (e) of Clause 23.10 (Acquisitions), the SLP Partnership Companies, and the Issuer shall not own directly shares in any of its Subsidiaries other than the Subordinated Guarantor) and loans made by it pursuant to the Intercompany

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Loan Agreements and monies received by it thereunder and permitted to be received by it under the terms of the High Yield Notes and the Discount High Yield Notes;

(c) not incur or agree to incur or permit to subsist any Financial Indebtedness or grant or agree to grant or permit to subsist any Security Interest other than in each case as otherwise permitted by this Agreement; and

(d) not make any loans to any person other than pursuant to the Intercompany Loan Agreements.

23.28 Redemption or Purchase of High Yield Notes/Discount High Yield Notes/Further High Yield Debt/Subordinated Loan Stock

No Obligor will, and each Obligor will procure that none of its Subsidiaries will:

(a) repay, redeem, prepay (by defeasance or otherwise) or otherwise retire the principal amount of the High Yield Notes, the Discount High Yield Notes, any Further High Yield Debt or any Subordinated Loan Stock;

(b) purchase, repurchase, acquire or agree to acquire (or procure any other person to acquire on its account) all or any part of the High Yield Notes, the Discount High Yield Notes, any Further High Yield Debt or any Subordinated Loan Stock

except (in relation to the High Yield Notes, the Discount High Yield Notes and any Further High Yield Debt):

(i) each Obligor may repay any Intercompany Loan Agreements and any Further Intercompany Loan Agreements but only to the extent required to effect the redemption of up to 35% of the High Yield Notes and the Discount High Yield Notes for which a notice of redemption was delivered on or about the date of Completion (a copy of a draft of which notice was delivered to the Facility Agent pursuant to sub-paragraph (h) (i) of paragraph 4 of Part I of Schedule 2 (Conditions Precedent)); and

(ii) as permitted in accordance with the Finance Documents and (in relation to any Subordinated Loan Stock) as set out in the Structure Paper.

23.29 Issueof High Yield Notes and Discount High Yield Notes

It is agreed that the Issuer may issue Further High Yield Debt provided that the Parent shall procure that the Issuer shall use the proceeds thereof to prepay all of the amounts owing and outstanding under or pursuant to the High Yield Notes and the Discount High Yield Notes.

23.30 LeasingArrangements

No Obligor will, and each Obligor will procure that none of its Subsidiaries will, enter into or permit to subsist any finance lease, hire purchase, conditional sale agreement or other agreement for the acquisition of any asset upon deferred payment terms provided that members of the Group (other than Excluded Group Members) may enter into or permit to subsist such finance leases or other agreements in connection with the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document acquisition of equipment and other items required for the Business and provided further that the aggregate of the capital element of all rentals at any time outstanding under all such finance leases and agreements (determined in accordance with the Accounting Principles) does not exceed £35,000,000 (or its Equivalent in other currencies) in aggregate for all members of the Group.

23.31 Access

While a Default (or where the Facility Agent reasonably suspects a Default) is continuing each Obligor shall (and the Parent shall ensure that each member of the Group shall) permit the Facility Agent and/or the Security Trustee and/or accountants or other professional advisers and contractors of the Facility Agent or Security Trustee free access during regular business hours and on reasonable notice at the cost of the Parent to (a) inspect and take copies and extracts from the books, accounts and records of each member of the Group and (b) view the assets which are the subject of the Transaction Security and the premises of each member of the Group.

23.32 Furtherassurance

(a) Until such time at which the Transaction Security is released pursuant to the provisions of Clause 26.7 (Release of Security otherwise than on a Disposal) each Obligor shall (and the Parent shall procure that each member of the Group shall) promptly do all such acts or execute all such documents (including assignments, transfers, mortgages, charges, notices and instructions) as the Security Trustee may reasonably specify (and in such form as the Security Trustee may reasonably require in favour of the Security Trustee or its nominee(s)):

(i) to perfect the Security created or intended to be created under or evidenced by the Security Documents (which may include the execution of a mortgage, charge, assignment or other Security over all or any of the assets which are, or are intended to be, the subject of the Transaction Security) or for the exercise of any rights powers and remedies of the Security Trustee or the Finance Parties provided by or pursuant to the Finance Documents or by law;

(ii) to confer on the Security Trustee or confer on the Finance Parties Security over any property and assets of that Obligor located in any jurisdiction equivalent or similar to the Security intended to be conferred by or pursuant to the Security Documents; and/or

(iii) to facilitate the realisation of the assets which are, or are intended to be, the subject of the Transaction Security.

(b) Each Obligor shall (and the Parent shall procure that each member of the Group shall) take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Security Trustee or the Finance Parties by or pursuant to the Finance Documents.

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The Parent shall procure that, as soon as reasonably practicable and, in any event, within 60 days of the Closing Date, all of the Existing Security shall be released and all of the Security Documents (together with any ancillary documents in relation thereto) to be executed by the Original Obligors shall be duly executed and delivered to the Facility Agent.

24. EVENTS OF DEFAULT

Each of the events or circumstances set out in Clauses 24.1 (Non-Payment) to 24.18 (Listing) is an Event of Default.

24.1 Non-payment

An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:

(a) its failure to pay is caused by administrative or technical error; and

(b) payment is made within three days of its due date.

24.2 Breach of certain obligations

(a) Any requirement of Clause 22 (Financial covenants) is not satisfied.

(b) An Obligor does not comply with any of the provisions of this Agreement in Clause 23.5 (Pari passu ranking), Clause 23.8 (Merger), Clause 23.12 (Negative pledge), Clause 23.13 (Disposals), Clause 23.10 (Acquisitions), Clause 23.28 (Redemption of the High Yield Bonds) and Clause 23.33 (Conditions Subsequent).

24.3 Other obligations

(a) An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 24.1 (Non- payment) and Clause 24.2 (Breach of certain obligations)).

(b) No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 20 Business Days of the earlier of the Facility Agent giving notice to the Obligors Agent or the Parent or the relevant Obligor or the Obligors Agent or the Parent or any Obligor becoming aware of the relevant matter.

24.4 Misrepresentation

Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or in any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading when made or deemed to be made unless (except in the case of Clause 20.29 (Material Adverse Change) the circumstances giving rise to that default are capable of remedy and are remedied within 20 Business Days of the earlier of the Facility Agent giving notice to the Obligors Agent or the Parent or the relevant Obligor or the Obligors Agent or the Parent or any Obligor becoming aware of the relevant matter.

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(a) Any provision of any Finance Document is or becomes invalid or (subject to Legal Reservations) unenforceable for any reason or shall be repudiated or the validity or enforceability of any provision of any Finance Document shall at any time be contested by any party thereto (other than a Finance Party).

(b) At any time it is or becomes unlawful for any Obligor to perform any of its obligations under any of the Finance Documents in circumstances or to an extent which the Majority Lenders consider to be materially prejudicial to the interests of any Finance Party under the Finance Documents.

(c) At any time any act, condition or thing required to be done, fulfilled or performed in order (A) to enable any Obligor lawfully to enter into, exercise its rights under or perform the obligations expressed to be assumed by it under any of the Finance Documents to which it is party, (B) to ensure that the obligations expressed to be assumed by any Obligor under any Finance Document to which it is party are legal, valid and binding, (C) to make each Finance Document admissible in evidence in the English courts and (D) to create the security constituted by the Security Documents to which any Obligor is party, is not done, fulfilled or performed.

(d) No Event of Default under any of paragraphs (a), (b) or (c) above will occur if the relevant default is capable of remedy and is remedied within 20 Business Days of the earlier of the Facility Agent giving notice to the Parent or the relevant Obligor or the Parent or any Obligor becoming aware of the relevant matter.

24.6 Cross default

(a) Any Financial Indebtedness (other than Financial Indebtedness between members of the Group) of any member of the Group is not paid when due nor within any originally applicable grace period.

(b) Any Financial Indebtedness (other than Financial Indebtedness between members of the Group) of any member of the Group is declared to be or otherwise becomes due and payable (or capable of being due and payable) prior to its specified maturity as a result of an event of default (however described).

(c) Any commitment for any Financial Indebtedness (other than Financial Indebtedness between members of the Group) of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).

(d) Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness (other than Financial Indebtedness between members of the Group) of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).

(e) No Event of Default will occur under this Clause 24.6 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document within paragraphs (a) to (d) above is less than £15,000,000 (or its equivalent in any other currency or currencies).

24.7 Insolvency

(a) Any Obligor or any other Material Group Company is unable or admits inability to pay its debts as they fall due or is deemed to or declared to be unable to pay its debts under applicable law, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness in excess of £15,000,000 in aggregate principal amount, other than, subject to any conditions imposed in connection with such discussions, in furtherance of discussions in which the Lenders are (or any duly appointed representative thereof is) actively participating.

(b) The value of the assets of any Obligor or any other Material Group Company is less than its liabilities (taking into account contingent and prospective liabilities).

24.8 Insolvency proceedings

(a) Any corporate action, legal proceedings or other procedure or step is taken by any Obligor or any other Material Group Company in relation to:

(i) the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of such Obligor or other Material Group Company;

(ii) a composition, compromise, assignment or arrangement with any creditor of such Obligor or other Material Group Company;

(iii) the appointment of a provisional liquidator, a liquidator, receiver, receiver or manager, administrative receiver, administrator, compulsory or interim manager or other similar officer in respect of such Obligor or other Material Group Company or any of its assets; or

(iv) enforcement of any Security over any assets of any member of the Group,

or any analogous procedure or step is taken in any jurisdiction.

(b) Paragraph (a) shall not apply to:

(i) any procedure or step in relation to a Dormant Company;

(ii) any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 20 Business Days of being presented or any other winding-up petition which is contested on bona fide grounds and discharged by the date which is the earlier to occur of (A) 60 Business

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(iii) the proposed solvent liquidation of YS described in paragraph (h) of the definition of Permitted Disposal; or

(iv) a solvent reorganisation previously approved in writing by the Facility Agent (acting on the instructions of the Majority Lenders).

24.9 Creditors process

Any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of any Obligor or any other Material Group Company and is not discharged within 20 Business Days.

24.10 Repudiation

An Obligor repudiates a Finance Document or any of the Transaction Security or evidences an intention to repudiate a Finance Document or any Transaction Security.

24.11 TransactionSecurity

(a) Until such time as the Transaction Security is released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal), any Obligor (or any other relevant party) fails to perform or comply with any of the obligations assumed by it in the Security Documents provided that no Event of Default shall occur under this paragraph (a) if the failure to perform or comply is capable of remedy and is remedied within 5 Business Days (or such later date as may be agreed by the Facility Agent) of the earlier of the Facility Agent giving notice to the Parent, the Obligors Agent or the relevant Obligor, or the Parent, the Obligors Agent or the Relevant Obligor becoming aware of the relevant matter.

(b) At any time (subject to Legal Reservations) any of the Transaction Security is or becomes unlawful or is not, or ceases to be legal, valid, binding or enforceable or otherwise ceases to be effective.

24.12 Cessationof business

Any Obligor or any other Material Group Company ceases (or threatens to cease) to carry on all or a substantial part of its business (other than transfers from a Material Group Company which is not an Obligor to an Obligor).

24.13 SecurityEnforceable

Any guarantee or Security granted by a member or members of the Group securing Financial Indebtedness in aggregate in excess of £15,000,000 (or its equivalent in other currencies) becomes enforceable (whether or not steps are taken to enforce the same).

24.14 CompulsoryAcquisition

All or a substantial part of the assets of an Obligor or a Material Group Company are seized, nationalised, expropriated or compulsorily acquired by, or by the order of, any agency of any state.

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Any litigation, arbitration, or administrative or regulatory proceeding is commenced by or against a member of the Group (other than a proceeding which is frivolous or vexatious or which has been filed for the purpose of harassment) which, if adversely determined (whether by itself or together with any related claims), could reasonably be expected to have a Material Adverse Effect.

24.16 AuditorsQualification

The Auditors qualify their report on the audited consolidated financial statements of the Parent in any manner which is, in the reasonable opinion of the Majority Lenders, materially adverse in the context of the Finance Documents.

24.17 ERISAEvents of Default:

(a) Any ERISA Event shall have occurred and the sum (determined as of the date of occurrence of such ERISA Event) of the Insufficiency of such Plan and the Insufficiency of any and all other Plans with respect to which an ERISA Event shall have occurred and then exist (or the liability of the Obligors and the ERISA Affiliates related to such ERISA Event) exceeds £15,000,000 (or its equivalent in other currencies).

(b) Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Obligors and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), exceeds £15,000,000 (or its equivalent in other currencies) or requires payments exceeding £3,000,000 (or its equivalent in other currencies) per annum.

(c) Any Obligor or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganisation or is being terminated, within the meaning of title IV of ERISA, and as a result of such reorganisation or termination the aggregate annual contributions of the Obligors and the ERISA Affiliates to all Multiemployer Plans that are then in reorganisation or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such reorganisation or termination occurs by an amount exceeding £3,000,000 (or its equivalent in other currencies).

24.18 Listing

The Parent ceases to be listed on any recognised exchange in the United Kingdom or the United States of America.

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On and at any time after the occurrence of an Event of Default which is continuing the Facility Agent may, and shall if so directed by the Majority Lenders, by notice to the Obligors Agent:

(a) cancel the Total Commitments whereupon they shall immediately be cancelled and any fees payable under the Finance Documents in connection with those Commitments shall be immediately due and payable; and/or

(b) declare that all or part of the Loans, together with accrued interest, and all other amounts accrued under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or

(c) declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand; and/or

(d) exercise or direct the Security Trustee to exercise any or all of its rights, remedies, powers or discretions under the Finance Documents.

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25. CHANGES TO THE LENDERS

25.1 Assignments and transfers by the Lenders

Subject to this Clause 25, a Lender (the Existing Lender) may:

(a) assign any of its rights and benefits; or

(b) transfer by novation any of its rights, benefits and obligations,

to another bank or financial institution (the New Lender).

25.2 Conditions of assignment or transfer

(a) The consent of the Parent is required for an assignment or transfer by a Lender, unless:

(i) an Event of Default has occurred and is continuing; or

(ii) the assignment or transfer is to another Lender or an Affiliate of a Lender; or

(iii) the assignment or transfer is made in connection with syndication of the Facilities prior to the Syndication Date.

(b) The consent of the Parent to an assignment or transfer must not be unreasonably withheld or delayed.

(c) Any assignment or transfer by an Existing Lender of all or any part of its Facility A1 Commitment, its Facility A2 Commitment or its Revolving Commitment must, if the assignment or transfer is only of part, be in a minimum aggregate amount of £10,000,000 (in relation to its Facility A1 Commitment or its Revolving Commitment) and $10,000,000 (in relation to its Facility A2 Commitment) or, (in each case) if less, the entire amount of the Existing Lenders Commitment in the relevant Facility.

(d) An assignment will only be effective on receipt by the Facility Agent of written confirmation from the New Lender (in form and substance satisfactory to the Facility Agent) that the New Lender will assume the same obligations to the other Finance Parties and the other Secured Parties as it would have been under if it was an Original Lender.

(e) A transfer will only be effective on receipt by the Facility Agent if the procedure set out in Clause 25.5 (Procedure for transfer) is complied with.

(f) If:

(i) a Lender assigns or transfers any of its rights, benefits or obligations under the Finance Documents or changes its Facility Office; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (ii) as a result of circumstances existing at the date on which the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or the Lender acting through its new Facility Office under Clause 14 (Tax gross-up and indemnities) or Clause 15 (Increased costs),

then the New Lender or the Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or the Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred.

25.3 Assignment or transfer fee

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Facility Agent (for its own account) a fee of £1,250 except no such fee shall be payable in connection with an assignment or transfer to a New Lender upon primary syndication of the Facilities prior to the Syndication Date.

25.4 Limitation of responsibility of Existing Lenders

(a) Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:

(i) the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents, the Transaction Security or any other documents;

(ii) the financial condition of any Obligor;

(iii) the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or

(iv) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

and any representations or warranties implied by law are excluded.

(b) Each New Lender confirms to the Existing Lender, the other Finance Parties and the Secured Parties that it:

(i) has made (and shall continue to make) its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Lender or any other Finance Party in connection with any Finance Document or the Transaction Security; and

(ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities whilst any amount is or may be outstanding under the Finance Documents or any Commitment is in force.

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(i) accept a re-transfer from a New Lender of any of the rights and obligations assigned or transferred under this Clause 25; or

(ii) support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.

25.5 Procedure for transfer

(a) Subject to the conditions set out in Clause 25.2 (Conditions of assignment or transfer) a transfer is effected in accordance with paragraph (b) below when the Facility Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Facility Agent shall, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.

(b) On the Transfer Date:

(i) to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights, benefits and obligations under the Finance Documents and in respect of the Transaction Security each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and in respect of the Transaction Security and their respective rights against one another under the Finance Documents and in respect of the Transaction Security shall be cancelled (being the Discharged Rights and Obligations);

(ii) each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights and benefits against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor or other member of the Group and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;

(iii) the Facility Agent, the Arranger, the Security Trustee, the New Lender, the other Lenders and any relevant Ancillary Lender shall acquire the same rights and assume the same obligations between themselves and in respect of the Transaction Security as they would have acquired and assumed had the New Lender been an Original Lender with the rights, and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Facility Agent, the Arranger, the Security Trustee and any relevant Ancillary Lender and the Existing Lender shall each be released from further obligations to each other under this Agreement; and

(iv) the New Lender shall become a Party as a Lender.

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Nothing in this Agreement shall restrict the ability of a Lender to sub-participate any or all of its rights obligations hereunder provided that (except for any sub-participation arrangement entered into by a Lender with another Lender or an Affiliate of a Lender or any other sub-participation arrangement entered into after, or subsisting at the time of, the occurrence of an Event of Default which is continuing (i) such Lenders obligations under this Agreement (including its Commitments) shall remain unchanged; (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; (iii) the Obligors, the Facility Agent, the Arranger, the Security Trustee and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lenders rights and obligations under this Agreement; and (iv) no participant under any such sub-participation shall have any right to approve any amendment or waiver of any provision of any Finance Document, or any consent to any departure by the Obligors therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, or any fees or other amounts payable hereunder, in each case to the extent subject to such sub-participation or postpone any date fixed for any payment of principal of, or interest on, or any fees or other amounts payable hereunder, in each case to the extent subject to such sub-participation.

25.7 Disclosure of information

(a) Any Lender may disclose to any of its Affiliates and any other person:

(i) to (or through) whom that Lender assigns or transfers (or may potentially assign or transfer) all or any of its rights and obligations under the Finance Documents;

(ii) with (or through) whom that Lender enters into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made by reference to, the Finance Documents or any Obligor; or

(iii) to whom, and to the extent that, information is required to be disclosed by any applicable law or regulation; and

(b) any Finance Party may disclose to a rating agency,

any information about any Obligor, the Group and the Finance Documents as that Lender or, as the case may be, that Finance Party shall consider appropriate but only, in relation to paragraphs (a)(i) and (a)(ii) above, if the person to whom such information is disclosed has entered into a Confidentiality Undertaking.

26. CHANGES TO THE OBLIGORS AND RELEASE OF SECURITY

26.1 Assignment and Transfers by Obligors

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents without the prior consent of the Facility Agent (acting on the instructions of all the Lenders).

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(a) The Parent may request that any of its wholly owned Subsidiaries which is not a Dormant Subsidiary becomes an Additional Borrower. That Subsidiary shall become an Additional Borrower if:

(i) the Majority Lenders approve the addition of that Subsidiary;

(ii) the Obligors Agent delivers to the Facility Agent a duly completed and executed Accession Letter;

(iii) the Obligors Agent confirms that no Default is continuing or would occur as a result of that Subsidiary becoming an Additional Borrower; and

(iv) the Facility Agent has received all of the documents and other evidence listed in Part II (Conditions Precedent Required to be Delivered by an Additional Obligor) of Schedule 2 (Conditions Precedent) and in relation to that Additional Borrower, each in form and substance satisfactory to the Facility Agent.

(b) The Facility Agent shall notify the Parent, the Obligors Agent and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part II (Conditions Precedent Required to be Delivered by an Additional Obligor) and, if applicable, Part III (Security Documents) of Schedule 2 (Conditions Precedent).

26.3 Resignation of an Obligor

In this Clause 26.3 and Clause 26.6 (Resignation and Release of Security on Disposal), Third Party Disposal means the disposal of an Obligor to a person which is not a member of the Group where that disposal is permitted under Clause 23.13 (Disposals) (and the Parent has confirmed that this is the case).

(a) The Parent may request that an Obligor (other than the Parent or the Obligors Agent) ceases to be a Borrower or, as the case may be, a Guarantor by delivering a Resignation Letter to the Facility Agent if:

(i) that Obligor is the subject of a Third Party Disposal;

(ii) any guarantee and Transaction Security provided by that Obligor are not otherwise effected by the resignation; or

(iii) all the Lenders have consented to the resignation of the Obligor.

(b) The Facility Agent shall accept a Resignation Letter and notify the Obligors Agent and the Lenders of its acceptance if:

(i) the Parent has confirmed that no Default is continuing or would result from the acceptance of the Resignation Letter; and

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(A) a Borrower, it is under no actual or contingent obligations as a Borrower under any Finance Documents; or

(B) a Guarantor, no payment is due from a Guarantor under Clause 19.1 (Guarantee and Indemnity); or

(iii) where such Obligor is both a Borrower and a Guarantor the Parent has confirmed that either:

(A) such Obligor is subject to a Third Party Disposal and its obligations in its capacity as Guarantor continue to be legal, valid, binding and enforceable and in full force and effect and the amount guaranteed by it as a Guarantor is not decreased; or

(B) each of the conditions set out in paragraphs (b)(ii) apply.

(c) Subject to paragraph (d) below, upon notification by the Facility Agent to the Obligors Agent of its acceptance of the resignation of a Borrower or a Guarantor, that company shall cease to be a Borrower or a Guarantor and shall have no further rights or obligations under the Finance Documents as a Borrower or a Guarantor.

(d) The resignation of an Obligor which is the subject of a Third Party Disposal shall not be effective until the date of that disposal whereupon that company shall cease to be an Obligor and shall have no further rights or obligations under the Finance Documents as an Obligor.

(e) The Facility Agent may, at the cost and expense of the Parent, require a legal opinion from counsel to the Facility Agent confirming the matters set out in paragraphs (b)(ii), (iii) and (iv) above and the Facility Agent shall be under no obligation to accept a Resignation Letter until it has obtained such opinion.

26.4 Additional Guarantors

(a) The Parent may request that any of its wholly owned Subsidiaries become an Additional Guarantor.

(b) The Parent shall ensure that each member of the Group which becomes an Additional Borrower in accordance with the provisions of Clause 26.2 (Additional Borrowers) as an Additional Obligor shall become an Additional Guarantor and (except to the extent that the Transaction Security has been released pursuant to Clause 26.7 (Release of Security otherwise than on a Disposal) shall execute and deliver the Security Documents required by the Facility Agent on the date such member of the Group becomes an Additional Borrower unless legal counsel to the Facility Agent has confirmed that there is a provision of law prohibiting such member of the Group from becoming an Additional Guarantor and there are no applicable exemptions or exceptions to that prohibition which would permit such member to become an Additional Guarantor.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) The Parent shall ensure that, if at any time, it is in breach of its obligations under Clause 23.24 (Guarantor Group), such other members of the Group which are Material Group Companies shall become Additional Guarantors and grant such Security as the Facility Agent may require in a number sufficient to ensure compliance with the provisions of Clause 23.24 (Guarantor Group) unless legal counsel to the Facility Agent has confirmed there is a provision of law prohibiting such member of the Group becoming an Additional Guarantor and there are no applicable exemptions or exceptions to that prohibition which would permit such member to become an Additional Guarantor. The Parent shall procure that the Group uses reasonable endeavours to overcome that prohibition.

(d) A member of the Group shall become an Additional Guarantor if:

(i) the Obligors Agent delivers to the Facility Agent a duly completed and executed Accession Letter; and

(ii) the Facility Agent has received all of the documents and other evidence listed in Part II (Conditions Precedent Required to be Delivered by an Additional Obligor) of Schedule 2 (Conditions Precedent) in relation to that Additional Guarantor, each in form and substance satisfactory to the Facility Agent.

(e) The Facility Agent shall notify the Obligors Agent and the Lenders promptly upon being satisfied that it has received (in form and substance satisfactory to it) all the documents and other evidence listed in Part II (Conditions Precedent Required to be Delivered by an Additional Obligor) of Schedule 2 (Conditions Precedent).

(f) The Facility Agent may (but shall not be obliged to) agree a limit on the amount of the liability of the potential Additional Guarantor or other changes to the Finance Documents which in the opinion of the Facility Agent, based on the advice of its legal counsel, are necessary to overcome a prohibition referred to in paragraph (c) above or a risk that a guarantee by the potential Additional Guarantor will not be legal, valid, binding, enforceable and effective. The cost of the advice of legal counsel obtained pursuant to this paragraph (f) shall be for the account of the Parent.

26.5 Repetition of Representations

Delivery of an Accession Letter constitutes confirmation by the relevant Additional Obligor that the representations and warranties referred to in paragraph (d) of Clause 20.30 (Times on which representations are made) are true and correct in relation to it as at the date of delivery as if made by reference to the facts and circumstances then existing.

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If an Obligor is or is proposed to be the subject of a Third Party Disposal under Clause 23.13 (Disposals):

(a) where that Obligor created Transaction Security over any of its assets or business in favour of the Security Trustee, or Transaction Security in favour of the Security Trustee was created over the shares (or equivalent) of that Obligor, the Security Trustee may, at the cost and request of the Parent, release those assets, business or shares (or equivalent) and issue certificates of non- crystallisation;

(b) the resignation of that Obligor and related release of Transaction Security referred to in paragraph (a) above shall not become effective until the date of that Third Party Disposal; and

(c) if the Third Party Disposal of that Obligor is not made, the Resignation Letter of that Obligor and the related release of Transaction Security referred to in paragraph (a) above shall have no effect and the obligations of the Obligor and the Transaction Security created or intended to be created by or over that Obligor shall continue in full force and effect.

26.7 Release of Security otherwise than on a Disposal

(a) If, at any time,:

(i) the Leverage Ratio is less than or equal to 3.50:1; and

(ii) the Parent has achieved external credit ratings of a minimum of BBB- from S&P and Baa3 from Moodys (with, in each case, a stable outlook or better),

(iii) the Parent shall be entitled to request that all of the Transaction Security be released and shall notify the Facility Agent in writing confirming that it has complied with the relevant conditions.

(b) Following receipt of the notification described in paragraph (a) above, the Facility Agent shall notify each of the other Secured Parties that a request has been made by the Parent and subject to no Event of Default having occurred which is continuing at the time of the proposed release, the Transaction Security shall be released on the next subsequent test date for the Leverage Ratio set out in Clause 22.2(c) (Debt Cover) provided that, on such test date, the Leverage Ratio continues to be less than or equal to 3.50:1.

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27. PARALLEL DEBT

27.1 Covenant to Pay

YS acknowledges to the Security Trustee the liability of YS in respect of the Finance Documents. YS hereby covenants and undertakes to the Security Trustee that it shall duly and punctually pay and discharge all moneys and liabilities whatsoever arising from the Finance Documents and which from time to time are or become owing, due or payable by it and whether or not the same are owing due or payable as at the date of this Agreement or become owing, due or payable after the date hereof:

(a) to or to the order of the Security Trustee and any Receiver under, pursuant to or in connection with this Agreement or the other Finance Documents; and

(b) to each of the other Secured Parties pursuant to and in accordance with each respective Finance Documents.

27.2 Parallel Debt

YS hereby irrevocably and unconditionally undertakes to pay the Security Trustee amounts equal to any amounts owing by it to the Secured Parties under the Finance Documents as and when the same fall due for payment thereunder and whether or not any such obligations have arisen as at the date of this Agreement or arise after the date hereof, so that the Security Trustee shall be the obligee of such covenant to pay and shall be entitled to claim performance thereof in its own name and not only as agent or trustee acting on behalf of the Secured Parties.

27.3 YS and the Security Trustee acknowledge that for this purpose, such monetary obligations of YS to the Security Trustee are several and are separate and independent from, and without prejudice to, the identical obligations which each Obligor has to the Secured Parties under the Finance Documents.

27.4 To this end and without prejudice to the foregoing, it is agreed that (i) the amounts due and payable by YS under this Clause 27 (the Parallel Debt) shall be decreased to the extent that YS satisfies its obligations under the Finance Documents and vice versa and (ii) the Parallel Debt shall not exceed the aggregate of the corresponding obligations which YS has to the Secured Parties under the Finance Documents at any time. Nothing in this Clause 27 shall in any way negate, affect or increase the obligations which YS or any other Obligor has to the Secured Parties under the Finance Documents.

27.5 For the purpose of this Clause 27 only, the Security Trustee acts in its own name and on behalf of itself and not as agent, representative or trustee of any other party hereto. Any Security granted to the Security Trustee to secure the Parallel Debt is granted to the Security Trustee in its capacity as creditor of the Parallel Debt. The Security Trustee shall apply any amounts received by it pursuant to this Clause in accordance with this Agreement.

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The Security Trustee, by execution and delivery hereof, acknowledges that, without prejudice to the terms of Clause 27 (Parallel Debt), it shall hold all amounts it receives as a result of the enforcement of the rights created pursuant to Clause 27 (Parallel Debt), on trust for the benefit of all present and future Secured Parties on and subject to the terms and conditions contained in this Agreement.

29. ROLE OF THE FACILITY AGENT, THE ARRANGER AND OTHERS

29.1 Appointment of the Facility Agent

(a) Each of the Arranger and the Lenders appoints the Facility Agent to act as its agent under and in connection with the Finance Documents.

(b) Each of the Arranger and the Lenders authorises the Facility Agent to exercise the rights, powers, authorities and discretions specifically given to the Facility Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.

29.2 Duties of the Facility Agent

(a) The Facility Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Facility Agent for that Party by any other Party.

(b) Except where a Finance Document specifically provides otherwise, the Facility Agent is not obliged to review or check the adequacy, accuracy or completeness of any document it forwards to another Party.

(c) If the Facility Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.

(d) If the Facility Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Facility Agent, the Arranger or the Security Trustee) under this Agreement it shall promptly notify the other Finance Parties.

(e) The Facility Agents duties under the Finance Documents are solely mechanical and administrative in nature.

29.3 Role of the Arranger

Except as specifically provided in the Finance Documents, the Arranger has no obligations of any kind to any other Party under or in connection with any Finance Document.

29.4 No fiduciary duties

(a) Nothing in this Agreement constitutes the Facility Agent and/or the Arranger as a trustee or fiduciary of any other person.

(b) The Facility Agent shall not be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.

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The Facility Agent may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.

29.6 Rights and discretions

(a) The Facility Agent may rely on:

(i) any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and

(ii) any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.

(b) The Facility Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:

(i) no Default has occurred (unless it has actual knowledge of a Default arising under Clause 24.1 (Non-payment));

(ii) any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and

(iii) any notice or request made by the Obligors Agent (other than a Utilisation Request or Selection Notice) is made on behalf of and with the consent and knowledge of all the Obligors.

(c) The Facility Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.

(d) The Facility Agent may act in relation to the Finance Documents through its personnel and agents. The Facility Agent shall not be liable for the negligence or misconduct of such agents.

(e) The Facility Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.

(f) Notwithstanding any other provision of any Finance Document to the contrary, none of the Facility Agent or the Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.

29.7 Majority Lenders instructions

(a) Unless a contrary indication appears in a Finance Document, the Facility Agent shall (a) act in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from acting or exercising any right, power, authority or discretion vested in it as Facility Agent) and (b) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with such an instruction of the Majority Lenders.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties other than the Security Trustee.

(c) The Facility Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.

(d) In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Facility Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.

(e) The Facility Agent is not authorised to act on behalf of a Lender (without first obtaining that Lenders consent) in any legal or arbitration proceedings relating to any Finance Document. This paragraph (e) shall not apply to any legal or arbitration proceeding relating to the perfection, preservation or protection of rights under the Security Documents or enforcement of the Transaction Security or Security Documents.

29.8 Responsibility for documentation

None of the Facility Agent, the Arranger or the Security Trustee:

(a) is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Facility Agent, the Arranger, the Security Trustee, an Obligor or any other person given in or in connection with any Finance Document or the Information Memorandum or the transactions contemplated in the Finance Documents; or

(b) is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or the Transaction Security or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document or the Transaction Security.

29.9 Exclusion of liability

(a) Without limiting paragraph (b) below, none of the Facility Agent or the Security Trustee will be liable for any action taken by it under or in connection with any Finance Document or the Transaction Security, unless directly caused by its bad faith, gross negligence or wilful misconduct.

(b) No Party (other than the Facility Agent or the Security Trustee (as applicable)) may take any proceedings against any officer, employee or agent of the Facility Agent or the Security Trustee, in respect of any claim it might have against the Facility Agent or the Security Trustee or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Facility Agent or the Security Trustee may rely on this Clause subject to Clause 1.4 (Third Party Rights) and the provisions of the Third Parties Act.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) The Facility Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Facility Agent if the Facility Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Facility Agent for that purpose.

(d) The Security Trustee will not be liable for any losses to any person or any liability arising as a result of taking or refraining from taking any action in relation to any of the Finance Documents or the Transaction Security or otherwise, whether in accordance with an instruction from the Facility Agent or otherwise;

(e) The Security Trustee will not be liable for (i) the exercise of, or the failure to exercise, any judgment, discretion or power given to it by or in connection with any of the Finance Documents, the Transaction Security or any other agreement, arrangement or document entered into, made or executed in anticipation of, or in connection with the Finance Documents or the Transaction Security or (ii) any shortfall which arises on the enforcement of the Transaction Security.

29.10 Lendersindemnity to the Facility Agent

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Facility Agent, within three Business Days of demand, against any cost, loss or liability incurred by the Facility Agent (otherwise than by reason of the Facility Agents bad faith, gross negligence or wilful misconduct) in acting as Facility Agent under the Finance Documents (unless the Facility Agent has been reimbursed by an Obligor pursuant to a Finance Document).

29.11 Resignationof the Facility Agent

(a) The Facility Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the Lenders and the Parent.

(b) Alternatively the Facility Agent may resign by giving notice to the Lenders and the Obligors Agent, in which case the Majority Lenders may appoint a successor Facility Agent (such successor being a reputable and experienced bank or other financial institution with an office in London) with the consent of the Obligors Agent (such consent not to be unreasonably withheld or delayed and such consent not being required in circumstances where an Event of Default has occurred and is continuing).

(c) If the Majority Lenders have not appointed a successor Facility Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the Facility Agent (after consultation with the Obligors Agent) may appoint a successor Facility Agent (such successor being a reputable and experienced bank or other financial institution with office in London).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) The retiring Facility Agent shall, at its own cost, make available to the successor Facility Agent such documents and records and provide such assistance as the successor Facility Agent may reasonably request for the purposes of performing its functions as Facility Agent under the Finance Documents.

(e) The Facility Agents resignation notice shall only take effect upon the appointment of a successor and at such time as all necessary deeds and documents have been entered into in order to substitute its successor as Facility Agent.

(f) Upon the appointment of a successor, the retiring Facility Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 29.11. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g) After consultation with the Obligors Agent, the Majority Lenders may, by notice to the Facility Agent, require it to resign in accordance with paragraph (b) above. In this event, the Facility Agent shall resign in accordance with paragraph (b) above.

29.12 Confidentiality

(a) In acting as agent for the Finance Parties the Facility Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.

(b) If information is received by another division or department of the Facility Agent, it may be treated as confidential to that division or department and the Facility Agent shall not be deemed to have notice of it.

(c) Notwithstanding any other provision of any Finance Document to the contrary, neither the Facility Agent nor the Arranger are obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.

29.13 Relationship with the Lenders

(a) The Facility Agent may treat each Lender as a Lender, entitled to payments under this Agreement and acting through its Facility Office unless it has received not less than five Business Days prior notice from that Lender to the contrary in accordance with the terms of this Agreement.

(b) Each Lender shall supply the Facility Agent with any information required by the Facility Agent in order to calculate the Mandatory Cost in accordance with Schedule 4 (Mandatory Cost Formulae).

(c) Each Secured Party shall supply the Facility Agent with any information that the Security Trustee may reasonably specify (through the Facility Agent) as being necessary or desirable to enable the Security Trustee to perform its

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document functions as Security Trustee. Each Lender shall deal with the Security Trustee exclusively through the Facility Agent and shall not deal directly with the Security Trustee.

29.14 Credit appraisal by the Secured Parties

Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Secured Party confirms to the Facility Agent, the Arranger and the Security Trustee that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:

(a) the financial condition, status and nature of each member of the Group;

(b) the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and the Transaction Security and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document or the Transaction Security;

(c) whether that Secured Party has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the Transaction Security, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;

(d) the adequacy, accuracy and/or completeness of the Information Memorandum and any other information provided by the Facility Agent, the Security Trustee, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

(e) the right or title of any person in or to, or the value or sufficiency of any part of the Charged Property, the priority of any of the Transaction Security or the existence of any Security affecting the Charged Property.

29.15 Reference Banks

If a Reference Bank (or, if a Reference Bank is not a Lender, the Lender of which it is an Affiliate) ceases to be a Lender, the Facility Agent shall with the consent of the Obligors Agent (such consent not to be unreasonably withheld or delayed) appoint another Lender or an Affiliate of a Lender to replace that Reference Bank.

29.16 Deduction from amounts payable by the Facility Agent

If any Party owes an amount to the Facility Agent under the Finance Documents the Facility Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Facility Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.

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Each Finance Party and each Secured Party confirms that each of the Arranger and the Facility Agent has authority to accept on its behalf the terms of any reliance letter or engagement letters relating to any reports or letters provided by accountants in connection with the Finance Documents or the transactions contemplated in the Finance Documents and to bind it in respect of those reports or letters and to sign such letters on its behalf and further confirms that it accepts the terms and qualifications set out in such letters.

29.18 Accession of Ancillary Lenders and Hedging Lenders

Each of the Parties acknowledges that, following the execution of an Accession Letter by an Ancillary Lender or, as the case may be, a Hedging Lender, such Ancillary Lender or such Hedging Lender shall become a Secured Party for the purposes of the Finance Documents.

30. ROLE OF SECURITY TRUSTEE

30.1 Trust

The Security Trustee declares that it shall hold the Transaction Security on trust for the Secured Parties on the terms contained in this Agreement. Each of the parties to this Agreement agrees that the Security Trustee shall have only those duties, obligations and responsibilities expressly specified in this Agreement or in the Security Documents (and no others shall be implied).

30.2 No Independent Power

The Secured Parties shall not have any independent power to enforce, or have recourse to, any of the Transaction Security or to exercise any rights or powers arising under the Security Documents except through the Security Trustee.

30.3 Security Trustees Instructions

The Security Trustee shall:

(a) unless a contrary indication appears in a Finance Document, act in accordance with any instructions given to it by the Facility Agent and shall be entitled to assume that (i) any instructions received by it from the Facility Agent are duly given by or on behalf of the Majority Lenders or, as the case may be, the Lenders in accordance with the terms of the Finance Documents and (ii) unless it has received actual notice of revocation that any instructions or directions given by the Facility Agent have not been revoked;

(b) be entitled to request instructions, or clarification of any direction, from the Facility Agent as to whether, and in what manner, it should exercise or refrain from exercising any rights, powers and discretions and the Security Trustee may refrain from acting unless and until those instructions or clarification are received by it; and

(c) be entitled to, carry out all dealings with the Lenders through the Facility Agent and may give to the Facility Agent any notice or other communication required to be given by the Security Trustee to the Lenders.

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Subject to the provisions of this Clause 30:

(a) the Security Trustee may, in the absence of any instructions to the contrary, take such action in the exercise of any of its powers and duties under the Finance Documents which in its absolute discretion it considers to be for the protection and benefit of all the Secured Parties; and

(b) at any time after receipt by the Security Trustee of notice from the Facility Agent directing the Security Trustee to exercise all or any of its rights, remedies, powers or discretions under any of the Finance Documents, the Security Trustee may, and shall if so directed by the Facility Agent, take any action as in its sole discretion it thinks fit to enforce the Transaction Security.

30.5 Security Trustees Discretions

(a) The Security Trustee may assume (unless it has received actual notice to the contrary in its capacity as Security Trustee for the Secured Parties) that:

(i) no Default has occurred and no Obligor is in breach of or default under its obligations under any of the Finance Documents; and

(ii) any right, power, authority or discretion vested in any person has not been exercised.

(b) The Security Trustee may, if it receives any instructions or directions from the Facility Agent to take any action in relation to the Transaction Security, assume that all applicable conditions under the Finance Documents for taking that action have been satisfied.

(c) The Security Trustee may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts (whether obtained by the Security Trustee or by any other Secured Party).

(d) The Security Trustee may rely upon any communication or document believed by it to be genuine and, as to any matters of fact which might reasonably be expected to be within the knowledge of a Secured Party or an Obligor, upon a certificate signed by or on behalf of that person.

(e) The Security Trustee may refrain from acting in accordance with the instructions of the Facility Agent or Lenders (including bringing any legal action or proceeding arising out of or in connection with the Finance Documents) until it has received any indemnification and/or security that it may in its absolute discretion require (whether by way of payment in advance or otherwise) for all costs, losses and liabilities which it may incur in bringing such action or proceedings.

30.6 Security Trustees Obligations

The Security Trustee shall promptly inform the Facility Agent of:

(a) the contents of any notice or document received by it in its capacity as Security Trustee from any Obligor under any Finance Document; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) the occurrence of any Default of which the Security Trustee has received notice from any other party to this Agreement.

30.7 Excluded Obligations

The Security Trustee shall not:

(a) be bound to enquire as to the occurrence or otherwise of any Default or the performance, default or any breach by an Obligor of its obligations under any of the Finance Documents;

(b) be bound to account to any other Secured Party for any sum or the profit element of any sum received by it for its own account;

(c) be bound to disclose to any other person (including any Secured Party) (i) any confidential information or (ii) any other information if disclosure would, or might in its reasonable opinion, constitute a breach of any law or be a breach of fiduciary duty;

(d) be under any obligations other than those which are specifically provided for in the Finance Documents; or

(e) have or be deemed to have any duty, obligation or responsibility to, or relationship of trust or agency with, any Obligor.

30.8 No responsibility to perfect Transaction Security Trustee

The Security Trustee shall not be liable for any failure to:

(a) require the deposit with it of any deed or document certifying, representing or constituting the title of any Obligor to any of the Charged Property;

(b) obtain any licence, consent or other authority for the execution, delivery, legality, validity, enforceability or admissibility in evidence of any of the Finance Documents or the Transaction Security;

(c) register, file or record or otherwise protect any of the Transaction Security (or the priority of any of the Transaction Security) under any applicable laws in any jurisdiction or to give notice to any person of the execution of any of the Finance Documents or of the Transaction Security;

(d) take, or to require any of the Obligors to take, any steps to perfect its title to any of the Charged Property or to render the Transaction Security effective or to secure the creation of any ancillary Security under the laws of any jurisdiction; or

(e) require any further assurances in relation to any of the Security Documents.

30.9 Insurance by Security Trustee

(a) The Security Trustee shall not be under any obligation to insure any of the Charged Property, to require any other person to maintain any insurance or to verify any obligation to arrange or maintain insurance contained in the Finance Documents. The Security Trustee shall not be responsible for any loss which

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document may be suffered by any person as a result of the lack of or inadequacy of any such insurance.

(b) Where the Security Trustee is named on any insurance policy as an insured party, it shall not be responsible for any loss which may be suffered by reason of, directly or indirectly, its failure to notify the insurers of any material fact relating to the risk assumed by the insurers or any other information of any kind, unless any Secured Party has requested it to do so in writing and the Security Trustee has failed to do so within fourteen days after receipt of that request.

30.10 Custodians and Nominees

The Security Trustee may appoint and pay any person to act as a custodian or nominee on any terms in relation to any assets of the trust as the Security Trustee may determine, including for the purpose of depositing with a custodian this Agreement or any document relating to the trust created under this Agreement and the Security Trustee shall not be responsible for any loss, liability, expense, demand, cost, claim or proceedings incurred by reason of the misconduct, omission or default on the part of any person appointed by it under this Agreement or be bound to supervise the proceedings or acts of any person.

30.11 Acceptance of Title

The Security Trustee shall be entitled to accept without enquiry, and shall not be obliged to investigate, the right and title as each of the Obligors may have to any of the Charged Property and shall not be liable for or bound to require any Obligor to remedy any defect in its right or title.

30.12 Refrain from Illegality

The Security Trustee may refrain from doing anything which in its opinion will or may be contrary to any relevant law, directive or regulation of any jurisdiction which would or might otherwise render it liable to any person, and the Security Trustee may do anything which is, in its opinion, necessary to comply with any law, directive or regulation.

30.13 Business with the Obligors

The Security Trustee may accept deposits from, lend money to, and generally engage in any kind of banking or other business with any of the Obligors.

30.14 Releases

Upon a disposal or release of any of the Charged Property:

(a) pursuant to the enforcement of the Transaction Security by a Receiver or the Security Trustee; or

(b) if that disposal or release is permitted under the Finance Documents; or

the Security Trustee shall (at the cost of the Obligors) release that property from the Transaction Security and is authorised to execute, without the need for any further

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document authority from the Secured Parties, any release of the Transaction Security or other claim over that asset and to issue any certificates of non-crystallisation of floating charges that may be required or desirable.

30.15 Winding up of Trust

If the Security Trustee, with the approval of the Majority Lenders, determines that (a) all of the Secured Obligations and all other obligations secured by any of the Security Documents have been fully and finally discharged and (b) none of the Secured Parties is under any commitment, obligation or liability (actual or contingent) to make advances or provide other financial accommodation to any Obligor pursuant to the Finance Documents, the trusts set out in this Agreement shall be wound up and the Security Trustee shall release, without recourse or warranty, all of the Transaction Security and the rights of the Security Trustee under each of the Security Documents.

30.16 Perpetuity Period

The perpetuity period under the rule against perpetuities, if applicable to this Agreement, shall be the period of eighty years from the date of this Agreement.

30.17 Powers Supplemental

The rights, powers and discretions conferred upon the Security Trustee by this Agreement shall be supplemental to the Security Trustee Acts 1925 and 2000 and in addition to any which may be vested in the Security Trustee by general law or otherwise.

30.18 Disapplication

Section 1 of the Security Trustee Act 2000 shall not apply to the duties of the Security Trustee in relation to the trusts constituted by this Agreement. Where there are any inconsistencies between the Security Trustee Acts 1925 and 2000 and the provisions of this Agreement, the provisions of this Agreement shall, to the extent allowed by law, prevail and, in the case of any inconsistency with the Security Trustee Act 2000, the provisions of this Agreement shall constitute a restriction or exclusion for the purposes of that Act.

30.19 Resignation of Security Trustee

(a) The Security Trustee may resign and appoint one of its Affiliates as successor by giving notice to the other Parties (or to the Facility Agent on behalf of the Lenders).

(b) Alternatively the Security Trustee may resign by giving notice to the other Parties, in which case the Majority Lenders may appoint a successor Security Trustee with the consent of the Obligors Agent (such consent not to be unreasonably withheld or delayed and such consent not being required in circumstances where an Event of Default has occurred and is continuing) such successor being a reputable and experienced bank or other financial institution with office in London.

(c) If the Majority Lenders have not appointed a successor Security Trustee in accordance with paragraph (b) above within 30 days after notice of resignation was given, the Security Trustee may appoint a successor Security Trustee after consultation with the Facility Agent and the Obligors Agent such successor

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document being a reputable and experienced bank or other financial institution with office in London.

(d) The retiring Security Trustee shall, at its own cost, make available to the successor Security Trustee such documents and records and provide such assistance as the successor Security Trustee may reasonably request for the purposes of performing its functions as Security Trustee under the Finance Documents.

(e) The Security Trustees resignation notice shall only take effect upon (i) the appointment of a successor and (ii) the transfer of all of the Transaction Security to that successor.

(f) Upon the appointment of a successor, the retiring Security Trustee shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of Clause 29 (Role of the Facility Agent, the Arranger and Others) and this Clause 30 (Role of Security Trustee). Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.

(g) The Majority Lenders may, by notice to the Security Trustee, require it to resign in accordance with paragraph (b) above. In this event, the Security Trustee shall resign in accordance with paragraph (b) above.

30.20 Delegation

(a) The Security Trustee may, at any time, delegate by power of attorney or otherwise to any person for any period, all or any of the rights, powers and discretions vested in it by any of the Finance Documents.

(b) The delegation may be made upon any terms and conditions (including the power to sub-delegate) and subject to any restrictions as the Security Trustee may think fit in the interests of the Secured Parties and it shall not be bound to supervise, or be in any way responsible for any loss incurred by reason of any misconduct or default on the part of any delegate or sub-delegate.

30.21 Additional Security Trustees

(a) The Security Trustee may at any time appoint (and subsequently remove) any person to act as a separate security trustee or as a co- security trustee jointly with it (i) if it considers that appointment to be in the interests of the Secured Parties or (ii) for the purposes of conforming to any legal requirements, restrictions or conditions which the Security Trustee deems to be relevant or (iii) for obtaining or enforcing any judgment in any jurisdiction, and the Security Trustee shall give prior notice to the Obligors Agent and the Facility Agent of that appointment.

(b) Any person so appointed shall have the rights, powers and discretions (not exceeding those conferred on the Security Trustee by this Agreement) and the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document duties and obligations that are conferred or imposed by the instrument of appointment.

(c) The remuneration that the Security Trustee may pay to any person, and any costs and expenses incurred by that person in performing its functions pursuant to that appointment shall, for the purposes of this Agreement, be treated as costs and expenses incurred by the Security Trustee.

30.22 Lenders indemnity to the Security Trustee

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Security Trustee, within three Business Days of demand, against any cost, loss or liability incurred by the Security Trustee (otherwise than by reason of the Security Trustees bad faith, gross negligence or wilful misconduct) in acting as Security Trustee under the Finance Documents (unless the Security Trustee has been reimbursed by an Obligor pursuant to a Finance Document).

30.23 Confidentiality

(a) In acting as security trustee for the Secured Parties, the Security Trustee shall be regarded as acting through its security trustee division which shall be treated as a separate entity from any other of its divisions or departments.

(b) If information is received by another division or department of the Security Trustee, it may be treated as confidential to that division or department and the Security Trustee shall not be deemed to have notice of it.

(c) Notwithstanding any other provision of any Finance Document to the contrary, the Security Trustee is not obliged to disclose to any other person (i) any confidential information or (ii) any other information if the disclosure would or might in its reasonable opinion constitute a breach of any law or a breach of a fiduciary duty.

(d) Notwithstanding any of the provisions of this agreement, the Obligors and the Finance Parties hereby agree that each Party and each employee, representative or other agent of each Party may disclose to any and all persons, without limitation of any kind, the US tax treatment and US tax structure of the Facilities and the transactions contemplated hereby and any materials of any kind (including opinions or other tax analyses) that are provided to each of them relating to such US tax treatment and US tax structure other than any information for which non-disclosure is reasonably necessary in order to apply with applicable securities laws.

31. CONDUCT OF BUSINESS BY THE FINANCE PARTIES

No provision of this Agreement will:

(a) interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or

(c) oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.

32. SHARING AMONG THE FINANCE PARTIES

32.1 Payments to Finance Parties

If a Finance Party (a Recovering Finance Party) receives or recovers any amount from an Obligor other than in accordance with Clause 33 (Payment mechanics) or Clause 35 (Application of Proceeds) and applies that amount to a payment due under the Finance Documents then:

(a) the Recovering Finance Party shall, within three Business Days, notify details of the receipt or recovery to the Facility Agent;

(b) the Facility Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Facility Agent and distributed in accordance with Clause 33 (Payment mechanics), without taking account of any Tax which would be imposed on the Facility Agent in relation to the receipt, recovery or distribution; and

(c) the Recovering Finance Party shall, within three Business Days of demand by the Facility Agent, pay to the Facility Agent an amount (the Sharing Payment) equal to such receipt or recovery less any amount which the Facility Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made in accordance with Clause 33.5 (Partial payments).

32.2 Redistribution of payments

The Facility Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 33.5 (Partial payments).

32.3 Recovering Finance Partys rights

(a) On a distribution by the Facility Agent under Clause 32.2 (Redistribution of payments), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.

(b) If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.

32.4 Reversal of redistribution

If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

(a) each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 32.2 (Redistribution of payments) shall, upon request of the

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Facility Agent, pay to the Facility Agent for account of that Recovering Finance Party an amount equal to its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and

(b) that Recovering Finance Partys rights of subrogation in respect of any reimbursement shall be cancelled and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.

32.5 Exceptions

(a) This Clause 32 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause 32, have a valid and enforceable claim against the relevant Obligor.

(b) A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:

(i) it notified the other Finance Parties of the legal or arbitration proceedings; and

(ii) such other Finance Parties had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice or did not take separate legal or arbitration proceedings.

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33. PAYMENT MECHANICS

33.1 Payments to the Facility Agent

(a) On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Facility Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Facility Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.

(b) Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in a Participating Member State or London) with such bank as the Facility Agent specifies.

33.2 Distributions by the Facility Agent

Each payment received by the Facility Agent under the Finance Documents for another Party shall, subject to Clause 33.3 (Distributions to an Obligor) and Clause 33.4 (Clawback), be made available by the Facility Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Facility Agent by not less than five Business Days notice with a bank in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London).

33.3 Distributions to an Obligor

The Facility Agent may (with the consent of the Obligor or in accordance with Clause 34 (Set-Off)) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.

33.4 Clawback

(a) Where a sum is to be paid to the Facility Agent under the Finance Documents for another Party, the Facility Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

(b) If the Facility Agent pays an amount to another Party and it proves to be the case that the Facility Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Facility Agent shall on demand refund the same to the Facility Agent together with interest on that amount from the date of payment to the date of receipt by the Facility Agent, calculated by the Facility Agent to reflect its cost of funds.

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(a) If the Facility Agent receives a payment that is insufficient to discharge all the amounts then due and payable by an Obligor under the Finance Documents, the Facility Agent shall apply that payment towards the obligations of that Obligor under the Finance Documents in the following order:

(i) first, in or towards payment pro rata of any unpaid fees, costs and expenses of the Facility Agent and the Arranger and the Security Trustee under the Finance Documents;

(ii) secondly, in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement and the Ancillary Documents;

(iii) thirdly, in or towards payment pro rata of any principal outstandings due but unpaid under this Agreement; and

(iv) fourthly, in or towards payment pro rata of any other sum due but unpaid under the Finance Documents.

(b) The Facility Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.

33.6 No set-off by Obligors

All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.

33.7 Business Days

(a) Any payment or reduction which is due to be made, or an Interest Period which would otherwise end, on a day that is not a Business Day shall be made or will end, as the case may be, on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).

(b) During any extension of the due date for payment of any principal or an Unpaid Sum under this Agreement interest is payable on the principal at the rate payable on the original due date.

33.8 Currency of account

(a) Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.

(b) A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.

(d) Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.

(e) Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.

33.9 Change of currency

(a) Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:

(i) any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Facility Agent (after consultation with the Parent); and

(ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Facility Agent (acting reasonably).

(b) If a change in any currency of a country occurs, this Agreement will, to the extent the Facility Agent (acting reasonably and after consultation with the Parent) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.

34. SET-OFF

A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

35. APPLICATION OF PROCEEDS

35.1 Order of Application

All monies from time to time received or recovered by the Security Trustee in connection with the realisation or enforcement of all or any part of the Transaction Security shall be held by the Security Trustee on trust to apply them at such times as the Security Trustee sees fit, to the extent permitted by applicable law in the following order of priority:

(a) in discharging any sums owing to the Security Trustee (in its capacity as Security Trustee);

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) in payment to the Facility Agent, on behalf of the Secured Parties, for application towards the discharge of all sums due and payable by any Obligor under any of the Finance Documents in accordance with Clause 33.5 (Partial payments).

(c) if none of the Obligors is under any further actual or contingent liability under any Finance Document, in payment to any person to whom the Security Trustee is obliged to pay in priority to any Obligor; and

(d) the balance, if any, in payment to the relevant Obligor.

35.2 Investment of proceeds

Prior to the application of the proceeds of the Transaction Security in accordance with Clause 35.1 (Order of Application) the Security Trustee may, at its discretion, hold all or part of those proceeds in an interest bearing suspense or impersonal account(s) in the name of the Security Trustee or the Facility Agent with such financial institution (including itself) for so long as the Security Trustee thinks fit (the interest being credited to the relevant account) pending the application from time to time of those monies at the Security Trustees discretion in accordance with the provisions of this Clause 35.

35.3 Currency conversion

(a) For the purpose of or pending the discharge of any of the obligations owed by the Obligors to the Finance Parties under the Finance Documents the Security Trustee may convert any monies received or recovered by the Security Trustee from one currency to another, at the spot rate at which the Security Trustee is able to purchase the currency in which such obligations owed by the Obligors are due with the amount received.

(b) The obligations of any Obligor to pay in the due currency shall only be satisfied to the extent of the amount of the due currency purchased after deducting the costs of conversion.

35.4 Permitted deductions

The Security Trustee shall be entitled (a) to set aside by way of reserve amounts required to meet and (b) to make and pay, any deductions and withholdings (on account of Taxes or otherwise) which it is or may be required by any applicable law to make from any distribution or payment made by it under this Agreement, and to pay all Taxes which may be assessed against it in respect of any of the Charged Property, or as a consequence of performing its duties, or by virtue of its capacity as Security Trustee under any of the Finance Documents or otherwise (except in connection with its remuneration for performing its duties under any Finance Document).

35.5 Discharge of Obligations

(a) Any payment to be made in respect of the obligations owed by the Obligors to the Finance Parties under the Finance Documents by the Security Trustee may be made to the Facility Agent on behalf of the Lenders and that payment shall be a good discharge to the extent of that payment, to the Security Trustee.

(b) The Security Trustee is under no obligation to make payment to the Facility Agent in the same currency as that in which any Unpaid Sum is denominated.

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If any of the Obligors receives any sum which, pursuant to any of the Finance Documents, should have been paid to the Security Trustee, that sum shall promptly be paid to the Security Trustee for application in accordance with this Clause 35.

36. NOTICES

36.1 Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.

36.2 Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:

(a) in the case of the Parent, that identified with its name below;

(b) in the case of each Lender or any other Obligor, that notified in writing to the Facility Agent on or prior to the date on which it becomes a Party; and

or any substitute address or fax number or department or officer as the Party may notify to the Facility Agent (or the Facility Agent may notify to the other Parties, if a change is made by the Facility Agent) by not less than five Business Days notice.

36.3 Delivery

(a) Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:

(i) if by way of fax, when received in legible form; or

(ii) if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 36.2 (Addresses), if addressed to that department or officer.

(b) Any communication or document to be made or delivered to the Facility Agent or the Security Trustee will be effective only when actually received by the Facility Agent or Security Trustee and then only if it is expressly marked for the attention of the department or officer identified with the Facility Agents or Security Trustees signature below (or any substitute department or officer as the Facility Agent or Security Trustee shall specify for this purpose).

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) All notices from or to an Obligor shall be sent through the Facility Agent. The Obligors Agent may make and/or deliver as agent of each Obligor notices and/or requests on behalf of each Obligor.

(d) Any communication or document made or delivered to the Obligors Agent in accordance with this Clause 36.3 will be deemed to have been made or delivered to each of the Obligors.

36.4 Notification of address and fax number

Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 36.2 (Addresses) or changing its own address or fax number, the Facility Agent shall notify the other Parties.

36.5 Electronic communication

(a) Any communication to be made between the Facility Agent or the Security Trustee and a Lender under or in connection with the Finance Documents may be made by electronic mail or other electronic means if the Facility Agent, the Security Trustee and the relevant Lender:

(i) agree that, unless and until notified to the contrary, this is to be an accepted form of communication;

(ii) notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and

(iii) notify each other of any change to their address or any other such information supplied by them.

(b) Any electronic communication made between the Facility Agent and a Lender or the Security Trustee will be effective only when actually received in readable form and in the case of any electronic communication made by a Lender to the Facility Agent or the Security Trustee only if it is addressed in such a manner as the Facility Agent or Security Trustee shall specify for this purpose.

36.6 English language

(a) Any notice given under or in connection with any Finance Document must be in English.

(b) All other documents provided under or in connection with any Finance Document must be:

(i) in English; or

(ii) if not in English, and if so required by the Facility Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.

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(a) The Parent or, as the case may be, the Obligors Agent may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders (the Website Lenders) who accept this method of communication by posting this information onto an electronic website designated by the Obligors Agent and the Facility Agent (the Designated Website) if:

(i) the Facility Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;

(ii) both the Obligors Agent and the Facility Agent are aware of the address of and any relevant password specifications for the Designated Website; and

(iii) the information is in a format previously agreed between the Obligors Agent and the Facility Agent.

If any Lender (a Paper Form Lender) does not agree to the delivery of information electronically then the Facility Agent shall notify the Obligors Agent accordingly and the Obligors Agent shall supply the information to the Facility Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Obligors Agent shall supply the Facility Agent with at least one copy in paper form of any information required to be provided by it.

(b) The Facility Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Obligors Agent and the Facility Agent.

(i) the Designated Website cannot be accessed due to technical failure;

(ii) the password specifications for the Designated Website change;

(iii) any new information which is required to be provided under this Agreement is posted onto the Designated Website;

(iv) any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or

(v) the Obligors Agent becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

If the Obligors Agent notifies the Facility Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by the Obligors Agent under this Agreement after the date of that notice shall be supplied in paper form unless and until the Facility Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (d) Any Website Lender may request, through the Facility Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Obligors Agent shall comply with any such request within ten Business Days.

37. CALCULATIONS AND CERTIFICATES

37.1 Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.

37.2 Certificates and Determinations

Any certification or determination by a Finance Party of a rate or amount under any Finance Document is, in the absence of manifest error, conclusive evidence of the matters to which it relates.

37.3 Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.

38. PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

39. REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of any Finance Party or Secured Party, any right or remedy under the Finance Documents shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

40. AMENDMENTS AND WAIVERS

40.1 Required consents

(a) Subject to Clause 40.2 (Exceptions) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors Agent and any such amendment or waiver will be binding on all Parties.

(b) The Facility Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause 40.

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(a) An amendment or waiver that has the effect of changing or which relates to:

(i) the definition of Majority Lenders in Clause 1.1 (Definitions);

(ii) an extension to the date of payment of any amount under the Finance Documents;

(iii) a reduction in the Margin (otherwise than by virtue of the ratchet contained in the definition thereof) or a reduction in the amount of any payment of principal, interest, fees or commission payable;

(iv) a change in currency of payment of any amount under the Finance Documents;

(v) a change to Clause 19 (Guarantee);

(vi) an increase in or an extension of any Commitment;

(vii) a change to the Borrowers or Guarantors other than in accordance with Clause 26 (Changes to the Obligors and Release of Security);

(viii) any provision which expressly requires the consent of all the Lenders;

(ix) Clause 2.2 (Finance Parties Rights and Obligations), Clause 25 (Changes to the Lenders) or this Clause 40; or

(x) the nature or scope of the Charged Property or any release of any material part of the Transaction Security (other than pursuant to the release of such Transaction Security, as permitted under Clause 26.7 (Release of Security otherwise than on a Disposal) or otherwise as set out in this Agreement) or the manner in which the proceeds of enforcement of the Transaction Security are distributed,

shall not be made without the prior consent of all the Lenders.

(b) An amendment or waiver which relates to the rights or obligations of the Facility Agent, the Arranger or the Security Trustee may not be effected without the consent of the Facility Agent, the Arranger or the Security Trustee at such time.

40.3 Amendments by Security Trustee

Unless the provisions of any Finance Document expressly provide otherwise, the Security Trustee may, if authorised by the Majority Lenders, amend the terms of, waive any of the requirements of, or grant consents under, any of the Security Documents, any such amendment, waiver or consent being binding on all the parties to this Agreement except that:

(a) the prior consent of all of the Lenders is required to authorise any amendment of any Security Document which would affect the nature or the scope of the Charged Property or any release of any material part of the Transaction Security (other than pursuant to the enforcement of such Transaction Security or

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document otherwise as set out in this Agreement) or the manner in which proceeds of enforcement are distributed; and

(b) no waiver or amendment may impose any new or additional obligations on any person without the consent of that person.

40.4 Obligors

Each Obligor irrevocably authorises Yell Limited to act as agent for the Obligors (the Obligors Agent):

(a) to give all notices and instructions and make such agreements expressed to be capable of being given or made by the Obligors Agent on behalf of the Obligors or any of them under this Agreement; and

(b) to agree on behalf of the Obligors or any of them the terms of any consents or waivers given or required under the Finance Documents and all amendments made to any of them (including this Agreement),

notwithstanding in either case that they may affect rights and obligations of such Obligor and in either case without further reference to or the consent of such Obligor and such Obligor shall as regards each of the other parties to this Agreement and the other Finance Documents be bound thereby as though it had itself given such notice of instruction, made such agreement or agreed such consent, waiver or amendment.

40.5 Replacement of a Lender

If:

(a) a Lender does not fund its participation in a Loan in accordance with Clause 5.4 (Lenders participation); or

(b)

(i) a lender refuses to consent to a proposal requiring the consent of all the Lenders; and

(ii) consent to the proposal has been received from the Majority Lenders,

such Lender will, at the request, and the cost, of the Obligors Agent, transfer at par all of its rights and obligations under this Agreement and the other Finance Documents to such other bank which is willing to assume such rights and obligations as the Obligors Agent may nominate. Any such transfer shall be subject to the provisions of Clause 25.2 (Conditions of assignment or transfer).

41. COUNTERPARTS

Each Finance Document may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of the Finance Document.

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GOVERNING LAW AND ENFORCEMENT

42. GOVERNING LAW

This Agreement is governed by English law.

43. ENFORCEMENT

43.1 Jurisdiction of English Courts

(a) The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) (a Dispute).

(b) The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.

(c) This Clause 43.1 is for the benefit of the Finance Parties and Secured Parties only. As a result, no Finance Party or Secured Party shall be prevented from taking proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties and Secured Parties may take concurrent proceedings in any number of jurisdictions.

43.2 Service of process

Without prejudice to any other mode of service allowed under any relevant law, each Obligor (other than an Obligor incorporated in England and Wales):

(a) irrevocably appoints the Obligors Agent at its registered office at Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document (and the Obligors Agent by its execution of this Agreement accepts that appointment); and

(b) agrees that failure by a process agent to notify the relevant Obligor of the process will not invalidate the proceedings concerned.

This Agreement has been entered into on the date stated at the beginning of this Agreement.

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Part I The Original Obligors

Registration number Name of Original Borrower (or equivalent, if any)

Yell Limited 4205228

Yellow Book Holdings, Inc.

Yellow Book USA, Inc.

Yellow Book/McLeod Holdings, Inc.

McLeodUSA Media Group, Inc.

Registration number Name of Original Guarantor (or equivalent, if any)

Yell Limited 4205228

Yellow Book Holdings, Inc.

Yellow Book Group, Inc.

Yellow Book/McLeod Holdings, Inc.

McLeodUSA Media Group, Inc.

Yellow Pages Limited 4175821

Yell SarL.

Yell Holdings 2 Limited 4180359

Yellow Pages Sales Limited 1403041

YH Limited 4193755

Yellow Book USA, Inc.

Yellow Book of New York, Inc.

Yellow Book of Pennsylvania, Inc.

Consolidated Communications Directories, Inc.

McLeodUSA Publishing Company

NDC Holdings II, Inc.

National Directory Company

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Facility A1 Facility A2 Revolving Name of Original Lender Commitment Commitment Commitment £ $ £

ABN AMRO Bank N.V. 332,000,000 298,000,000 100,000,000

HSBC Bank plc 332,000,000 298,000,000 100,000,000

Total 664,000,000 596,000,000 200,000,000

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Part I Conditions Precedent to Initial Loan

1. Obligors

(a) A copy of the constitutional documents (including certificates of incorporation, certificates on change of name and, in relation to each US Obligor, certificates of good standing) of each Original Obligor.

(b) A copy of a resolution of the board of directors of each Original Obligor:

(i) approving the terms of, and the transactions contemplated by, the Finance Documents to which it is a party and resolving that it execute the Finance Documents to which it is a party;

(ii) authorising a specified person or persons to execute the Finance Documents to which it is a party on its behalf;

(iii) authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request and Selection Notice) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party; and

(iv) in the case of an Original Obligor other than Yell Limited, authorising Yell Limited to act as its agent in connection with the Finance Documents.

(c) A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above in relation to the Finance Documents.

(d) If required by their respective constitutional documents, a copy of a resolution signed by all the holders of the issued shares in each Original Guarantor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Original Guarantor is a party.

(e) A certificate of each Original Obligor (signed by a director or other officer) confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, security or similar limit binding on such Original Obligor to be exceeded.

(f) A certificate of an authorised signatory of the relevant Original Obligor certifying that each copy document relating to it specified in this Paragraph 1 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.

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(a) This Agreement executed by the members of the Group party hereto.

(b) The Subordination Agreement executed by the Subordinated Guarantor and YH2.

3. Legal Opinions

The following legal opinions, each addressed to the Facility Agent, the Security Trustee and the Original Lenders.

(a) A legal opinion of Clifford Chance LLP, legal advisers to the Arranger and the Facility Agent in England, as to English law in form and substance satisfactory to the Facility Agent.

(b) A legal opinion of Clifford Chance LLP legal advisers to the Arranger and the Facility Agent, as to New York law in form and substance satisfactory to the Facility Agent.

(c) A legal opinion from Weil Gotshal & Manges LLP in form and substance satisfactory to the Facility Agent confirming that there are no conflicts between, or consents required under, the High Yield Notes or the Discount High Yield Notes or any of the documents related thereto to enable any of the Obligors to enter into the Facility Agreement and perform their obligations thereunder.

(d) A legal opinion from Iowa counsel to the Group in form and substance satisfactory to the Facility Agent as to certain matters of Iowa law regarding the corporate capacity of McLeodUSA Media Group, Inc. and McLeodUSA Publishing Company to enter into the Finance Documents to which they are a party.

(e) A legal opinion from Illinois counsel to the Group in form and substance satisfactory to the Facility Agent as to certain matters of Illinois law regarding the corporate capacity of Consolidated Communications Directories, Inc. to enter into the Finance Documents to which it is a party.

(f) A legal opinion from Luxembourg counsel to the Group in form and substances satisfactory to the Facility Agent as to certain matters of Luxembourg law regarding the corporate capacity of YS. to enter into the Finance Documents to which it is a party.

4. Other Documents and Evidence

(a) A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent considers to be necessary or desirable (if it has notified the Parent accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Evidence that the fees, costs and expenses then due from the Parent pursuant to Clause 13 (Fees), Clause 18 (Costs and Expenses) and Clause 14.5 (Stamp Taxes) have been paid or will be paid by or on the first Utilisation Date.

(i) details of all intercompany loans from (i) the Issuer and (ii) the Subordinated Guarantor to, in each case, any other member of the Group;

(ii) each Subsidiary and the holders of its shares (or the equivalent ownership interest in the Subsidiary) and all joint ventures and partnerships of the Group and any person in which any member of the Group holds shares in its issued share capital (or the equivalent ownership interest in such person);

(iii) which members of the Group are Dormant Companies;

(iv) the name, registered number (where applicable) and jurisdiction of incorporation and/or establishment of each member of the Group;

(v) which members of the Group, if any, other than the Parent have shareholders who are not other members of the Group; and

(vi) which members of the Group, if any, are not limited liability corporations.

(d) A copy, certified by an authorised signatory of the Parent to be a true copy, of the Original Financial Statements of the Parent and each Original Obligor.

(e) A copy of the Agreed Financial Projections.

(f) A copy of the steps paper setting out details of the transactions intended to be consummated as part of the Deferred Subscription Arrangements.

(g) The Funds Flow Statement in a form agreed by the Parent and the Facility Agent detailing the proposed movement of funds on or before the Closing Date.

(h)

(i) A copy of the draft notice of redemption for up to 35% of each of the High Yield Notes and the Discount High Yield Notes;

(ii) A copy of the draft notice of redemption for the Vendor Loan Note;

(i) A notice of prepayment and cancellation in respect of the Existing Facility Agreement duly executed by the Obligors Agent.

(j) A copy, certified by a director of the Parent as being true complete and up-to-date of the latest draft of the Offering Circular.

(k) Evidence from the Reuters Screen confirming that admission to the Official List of the UK Listing Authority of the authorised share capital of the Parent has become effective.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (l) Evidence in form and substance satisfactory to the Facility Agent that the Parent has received or will receive concurrently with the making of the initial Loans hereunder proceeds from the IPO on the Closing Date of not less than £335,000,000.

(m) Notification that proceeds from the IPO have been placed (or will simultaneously with making of the initial Loans hereunder be placed) in an escrow account (to be released on such terms as have been agreed between the Parent and the Facility Agent) in an amount sufficient to redeem (i) the amount of the High Yield Notes and the Discount High Yield Notes set forth in the notice or redemption described in paragraph (f)(i) above and (ii) the Vendor Loan Note.

(n) The Structure Paper.

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1. An Accession Letter executed by the Additional Obligor and the Parent.

2. A copy of the constitutional documents (including certificates of incorporation, certificates on change of name and, in relation to any Additional Obligor which is a member of the US Group, certificates of good standing) of the Additional Obligor.

3. A copy of a resolution of the board of directors of the Additional Obligor:

(a) approving the terms of, and the transactions contemplated by, the Accession Letter and the Finance Documents and resolving that it execute the Accession Letter and any other Finance Document to which it is a party;

(b) authorising a specified person or persons to execute the Accession Letter and other Finance Documents on its behalf; and

(c) authorising a specified person or persons, on its behalf, to sign and/or despatch all other documents and notices (including, in relation to an Additional Borrower, any Utilisation Request or Selection Notice) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party; and

(d) authorising the Obligors Agent to act as its agent in connection with the Finance Documents.

4. A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above.

5. If required by such Additional Obligors constitutional documents or if required by law, a copy of a resolution signed by all the holders of the issued shares of the Additional Guarantor, approving the terms of, and the transactions contemplated by, the Finance Documents to which the Additional Guarantor is a party.

6. A certificate of the Additional Obligor (signed by a director or secretary) confirming that borrowing or guaranteeing or securing, as appropriate, the Total Commitments would not cause any borrowing, guarantee, security or similar limit binding on it to be exceeded.

7. A certificate of an authorised signatory of the Additional Obligor certifying that each copy document listed in this Part II of Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of the Accession Letter.

8. If available, the latest audited financial statements of the Additional Obligor.

9. The following legal opinions, each addressed to the Facility Agent, the Security Trustee and the Lenders:

(a) A legal opinion of the legal advisers to the Facility Agent in England, as to English law in form and substance satisfactory to the Facility Agent.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) If the Additional Obligor is incorporated in a jurisdiction other than England and Wales or executing a Finance Document which is governed by a law other than English law, a legal opinion of the legal advisers to the Facility Agent in the jurisdiction of incorporation of that Additional Obligor or, as the case may be, the jurisdiction of the governing law of that Finance Document (the Relevant Jurisdiction) as to the law of the Relevant Jurisdiction and in form and substance satisfactory to the Facility Agent.

10. If the proposed Additional Obligor is incorporated in a jurisdiction other than England and Wales, evidence that the process agent specified in Clause 43.2 (Service of process), if not an Original Obligor, has accepted its appointment in relation to the proposed Additional Obligor.

11. The Security Documents executed by the Additional Obligor which are required to be furnished to the Facility Agent pursuant to the terms of this Agreement.

12. Any notices or documents required to be given or executed or made under the terms of those Security Documents.

13. A copy of any other Authorisation or other document, opinion or assurance which the Facility Agent considers to be necessary or desirable (if it has notified the Obligors Agent accordingly) in connection with the entry into and performance of the transactions contemplated by the Accession Letter and each Finance Document to which the Additional Obligor is a party or for the validity and enforceability of any Finance Document or of any Transaction Security created or intended to be created by the Additional Obligor.

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1. New York law Security Agreement to be entered into by each US Obligor in favour of the Security Trustee.

2. New York law Intellectual Property Security Agreement to be entered into by each US Obligor in favour of the Security Trustee.

3. New York law Pledge Agreement to be made by YH Limited of shares in Yellow Book Group Inc. in favour of the Security Trustee.

4. English law Debenture to be entered into by each UK Obligor in favour of the Security Trustee.

5. Luxembourg law share pledge agreement to be made by YH Limited of the shares in Yell S.a.r.l. in favour of the Security Trustee.

6. New York law Pledge Agreement to be made by Luxco of shares in Yellow Book Group Inc., stock, other equity interests, indebtedness and other investment property in favour of the Security Trustee.

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1. US Conditions Precedent

(a) executed copies of Financing Statements (Form UCC-1) or appropriate local equivalent in appropriate form for filing under the Uniform Commercial Code of each applicable jurisdiction as may be necessary to perfect the Security Interests purported to be created by each original Security Document (including any assignment of any existing security) entered into by each US Obligor or in respect of shares or indebtedness of any such company (each such Original Security Document as Original US Security Document);

(b) copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date listing all effective Financing Statements that name the Business or any member of the Group or a division or operating unit of any such person, as debtor and that are filed in the jurisdictions referred to in (a) above, together with copies of such Financing Statements in respect of all of which appropriate termination statements executed by the secured lender thereunder shall be delivered to the Facility Agent (except in respect of financing statements related to Permitted Security Interests);

(c) a solvency certificate issued by each US Obligor and addressed to the Facility Agent confirming the solvency of such Obligor immediately following entry by it into any Original US Security Document to which it is a party;

(d) delivery by each US Obligor of stock certificates, instruments and other collateral the delivery of which is required by the Security Agent pursuant to the Original US Security Documents.

2. Security Releases and Financial Indebtedness

Evidence that all Existing Security, including those over Intellectual Property in favour of third parties granted in respect of or by any person comprised within the Business or any part of the assets of the Business (and which are not permitted under the terms of this Agreement) have been released.

3. Consents/Notices in respect of Security Interests

All third party consents which the Security Trustee requires pursuant to the terms of the Security Documents in connection with the creation or registration of any Security contained in any Security Document and all notices of assignment or charge required to be given under the terms of the Security Documents.

4. Share Certificate and Stock Transfers

Share certificates together with stamped (where applicable), executed blank stock transfers or other relevant transfer documents in respect of all shares in members of the Group charged or pledged under the Security Documents.

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Certified copies of any Intercompany Loan Agreements or other intercompany loan documentation between or involving Obligors in relation to any loans which have been made prior to, or are to be made after, the Closing Date.

6. Legal opinions

(1) A legal opinion from Weil Gotshal & Manges LLP in form and substance satisfactory to the Facility Agent confirming that there are no conflicts between, or consents required under, the High Yield Notes or the Discount High Yield Notes or any of the documents related thereto to enable any of the Obligors to enter into the Security Documents and perform their obligations thereunder.

(2) A legal opinion from Luxembourg counsel to the Group in form and substance satisfactory to the Facility Agent regarding the corporate capacity of YS to enter into the Finance Documents to which it is a party.

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Part I Utilisation Request

From: [Borrower] [Obligors Agent]*

To: [Facility Agent]

Dated:

Dear Sirs

Yell Group plc Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. [We wish a Loan to be made on the following terms:

(a) Borrower: [·]

(b) Proposed Utilisation Date: [·] (or, if that is not a Business Day, the next Business Day)

(d) Currency of Loan: [·]

(e) Amount: [·] or, if less, the Available Facility

(f) Interest Period: [·]

2. We confirm that each condition specified in Clause 4.2 (Further Conditions Precedent) is satisfied on the date of this Utilisation Request.

3. [The proceeds of this Loan should be credited to [account]].

4. This Utilisation Request is irrevocable.

5. Terms used in this Request which are not defined in this Request but are defined in the Facilities Agreement shall have the meaning given to those terms in the Facilities Agreement.

Yours faithfully

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document authorised signatory for [the Obligors Agent on behalf of [insert name of relevant Borrower]]/ [insert name of Borrower]

NOTES:

* Amend as appropriate. The Request can be given by the Borrower or by the Obligors Agent.

** Select the Facility to be utilised and delete references to the other Facilities.

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Applicable to a Term Loan

From: [Borrower] [Obligors Agent]*

To: [Facility Agent]

Dated:

Dear Sirs

Yell Group plc - Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. We refer to the following Facility A1 Loans/Facility A2 Loans* with an Interest Period ending on [·]*.

2. [We request that the above Term Loans be divided into Facility A1 Loans/Facility A2 Loans* with the following Base Currency Amounts and Interest Periods:]

3. This Selection Notice is irrevocable.

4. Terms used in this Request which are not defined in this Request but are defined in the Facilities Agreement shall have the meaning given to those terms in the Facilities Agreement.

Yours faithfully

authorised signatory for [the Obligors Agent on behalf of] [insert name of relevant Borrower]/[insert name of Relevant Borrower] *

NOTES:

* Amend as appropriate. The Request can be given by the Borrower or the Obligors Agent.

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1. The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

2. On the first day of each Interest Period (or as soon as possible thereafter) the Facility Agent shall calculate, as a percentage rate, a rate (the Additional Cost Rate) for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Facility Agent as a weighted average of the Lenders Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

3. The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Facility Agent. This percentage will be certified by that Lender in its notice to the Facility Agent to be its reasonable determination of the cost (expressed as a percentage of that Lenders participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.

4. The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Facility Agent as follows:

(a) in relation to a sterling Loan:

AB + C(B D) + E x 0.01

per cent. per annum

100 (A + C)

(b) in relation to a Loan in any currency other than sterling:

E x 0.01

per cent. per annum

300

Where:

A is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.

B is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in paragraph (a) of Clause 10.3 (Default interest)) payable for the relevant Interest Period on the Loan.

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document C is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.

D is the percentage rate per annum payable by the Bank of England to the Facility Agent on interest bearing Special Deposits.

E is designated to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Facility Agent as being the average of the most recent rates of charges supplied by the Reference Lenders to the Facility Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.

5. For the purposes of this Schedule:

(a) Eligible Liabilities and Special Deposits have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;

(b) Fees Rules means the rules on periodic fees contained in the FSA Supervision Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;

(c) Fee Tariffs means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and

(d) Tariff Base has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.

6. In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

7. If requested by the Facility Agent, each Reference Lender shall, as soon as practicable after publication by the Financial Services Authority, supply to the Facility Agent, the rate of charge payable by that Reference Lender to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Lender as being the average of the Fee Tariffs applicable to that Reference Lender for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Lender.

8. Each Lender shall supply any information required by the Facility Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:

(a) the jurisdiction of its Facility Office; and

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Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) any other information that the Facility Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Facility Agent of any change to the information provided by it pursuant to this paragraph.

9. The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Lender for the purpose of E above shall be determined by the Facility Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Facility Agent to the contrary, each Lenders obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.

10. The Facility Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Lender pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.

11. The Facility Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Lender pursuant to paragraphs 3, 7 and 8 above.

12. Any determination by the Facility Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

13. The Facility Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

- 157 -

To: [·] as Facility Agent

From: [The Existing Lender] (the Existing Lender) and [The New Lender] (the New Lender)

Dated:

Yell Group plc Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. We refer to Clause 25.5 (Procedure for transfer):

(a) The Existing Lender and the New Lender agree to the Existing Lender and the New Lender transferring by novation all or part of the Existing Lenders Commitment, rights and obligations referred to in the Schedule in accordance with Clause 25.5 (Procedure for transfer).

(b) The proposed Transfer Date is [·].

(c) The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 36.2 (Addresses) are set out in the Schedule.

2. The New Lender expressly acknowledges the limitations on the Existing Lenders obligations set out in paragraph (c) of Clause 25.4 (Limitation of responsibility of Existing Lenders).

3. This Transfer Certificate is governed by English law.

4. Terms which are used in this Transfer Certificate which are not defined in this Transfer Certificate but are defined in the Facilities Agreement shall have the meaning given to those terms in the Facilities Agreement.

- 158 -

Commitment/rights and obligations to be transferred

[insert relevant details] [Facility Office address, fax number and attention details for notices and account details for payments,]

[Existing Lender] [New Lender]

By: By:

This Transfer Certificate is accepted by the Facility Agent and the Transfer Date is confirmed as [·].

[Facility Agent]

By:

- 159 -

FORM OF ACCESSION LETTER

To: [·] as Facility Agent

From: [Subsidiary] and [Yell Group plc]/[Ancillary Lender]/[Hedging Lender]

Dated:

Dear Sirs

Yell Group plc Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. [Subsidiary] agrees to become an Additional [Borrower]/[Guarantor] and to be bound by the terms of the Facilities Agreement and the other Finance Documents as an Additional [Borrower]/[Guarantor] pursuant to Clause [26.2 (Additional Borrowers)]/[Clause 26.4 (Additional Guarantors)] of the Facility Agreement [Subsidiary] is a company duly incorporated under the laws of [name of relevant jurisdiction] and is a limited liability company and registered number [·].

[Ancillary Lender/Hedging Lender] agrees to become an Ancillary Lender/Hedging Lender and to be bound by the terms of the Facilities Agreement and the other Finance Documents as a [Ancillary Lender/Hedging Lender].

2. [Subsidiarys]/[Ancillary Lenders/Hedging Lenders] administrative details are as follows:

Address:

Fax No.:

Attention:

3. [The Parent confirms that no Default is continuing or would occur as a result of a [Subsidiary] becoming an additional Borrower.]*

4. This letter is governed by English law.

5. Terms which are used in this Accession Letter which are not defined in this Accession Letter but are defined in the Facilities Agreement shall have the meaning given to those terms in the Facilities Agreement.

[This Guarantor Accession Letter is entered into by deed.]**

[Parent] [Subsidiary]/[Ancillary Lender]/[Hedging Lender]

* If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

** Delete if not a Guarantor Accession Letter.

- 160 -

To: [ ] as Facility Agent

From: [resigning Obligor] and [Yell Group plc]

Dated:

Dear Sirs

Yell Group plc - Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. Pursuant to [Clause 26.3 (Resignation of an Obligor)], we request that [resigning Obligor] be released from its obligations as a [Borrower]/[Guarantor] under the Facilities Agreement, the Intercreditor Agreement and the Finance Documents.

2. We confirm that:

(a) no Default is continuing or would result from the acceptance of this request; and

(b) [this request is given in relation to a disposal of [resigning Obligor] which is permitted under Clause 23.13 (Disposals) of the Agreement.]

3. This letter is governed by English law.

4. Terms which are used in this resignation letter which are not defined in this letter but are defined in the Facilities Agreement shall have the meaning given to those terms in the Facilities Agreement.

5. The Parent agrees to indemnify the Finance Parties and Secured Parties for any costs, expenses, or liabilities which would have been payable by [resigning Obligor] in connection with the Finance Documents but for the release set out in paragraph 1 above.

[Parent] [resigning Obligor]

By: By:

- 161 -

To: [·] as Facility Agent

From: Yell Group plc

Dated:

Dear Sirs

Yell Group plc - Senior Facilities Agreement dated [·] 2003 (the Facilities Agreement)

1. We refer to the Facilities Agreement. This is a Compliance Certificate.

2. We confirm that:

(a) in respect of the Relevant Period ending on [·] Consolidated EBITDA for such Relevant Period was [·] and Net Cash Interest Payable for such Relevant Period was [·]. Therefore Consolidated EBITDA for such Relevant Period was [·] times Net Cash Interest Payable for such Relevant Period and the covenant contained in sub-clause (a) of Clause 22.2 (Financial condition) [has/ has not] been complied with;

(b) on the last day of the Relevant Period ending on [·] Consolidated Net Senior Debt was [·] and Consolidated EBITDA for such Relevant Period was [·]. Therefore Consolidated Net Senior Debt at such time [did/did not] exceed [·] times Consolidated EBITDA for such Relevant Period and the covenant contained in sub-clause (b) of Clause 22.3 (Financial covenants) [has/has not] been complied with;

(c) on the last day of the Relevant Period ending on [·] Consolidated Total Net Debt was [·] and Consolidated EBITDA for such Relevant Period was [·]. Therefore Consolidated Total Net Debt at such time [did/did not] exceed [·] times Consolidated EBITDA for such Relevant Period and the covenant contained in sub-clause (c) of Clause 22.3 (Financial Covenants) [has/has not] been complied with;

(d) On the last day of the Relevant Period ending on [·]Consolidated Total Net Debt was [·] and Consolidated EBITDA for such Relevant Period was [·]. Therefore Consolidated Total Net Debt at that time was [greater than or equal to [·] times Consolidated EBITDA for such Relevant Period]/[less than [·] times Consolidated EBITDA for such Relevant Period but greater than or equal to [·] times Consolidated EBITDA for such Relevant Period]/[less than [·] times Consolidated EBITDA for such Relevant Period]

and accordingly the Margin will be []% p.a..

- 162 -

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) Excess Cashflow for the Financial Year of the Group ending [·] was [·]. Therefore the Excess Cashflow to be applied in prepayment pursuant to Clause 9.7 (Excess cash) will be [·].

3. [We confirm that no Default is continuing.]*

We confirm that the aggregate of the earnings before interest, tax, depreciation and amortisation (calculated on the same basis as Consolidated EBITDA) of the Guarantors, the gross tangible consolidated assets or turnover of the Guarantors (in each case calculated on an unconsolidated basis and excluding all intra-group items) represents not less than 80 per cent. of Consolidated EBITDA, the gross tangible consolidated assets and turnover of the Group].

Signed

Director of Yell Group plc Director of Yell Group plc

[insert applicable certification language]

for and on behalf of [name of auditors of the Parent]

NOTES:

* If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

- 163 -

Loans

Loans in Loans in Loans in other euro/dollars sterling currencies

Facility Agent notifies the Parent if a currency is approved as an Optional Currency in U-4 accordance with Clause 4.3 (Conditions relating to Optional Currencies) 11.00 a.m.

Delivery of a duly completed Utilisation Request (Clause 5.1 (Delivery of a Utilisation Request) U-3 U-1 U-3 or a Selection Notice (Clause 11.1 (Selection of Interest Periods and Terms)) 9.30am 9.30am 9.30am

Facility Agent determines (in relation to a Loan) the Base Currency Amount of the Loan, if U-3 U-1 U-3 required under Clause 5.4 (Lenders participation) 11.00 a.m. 11.00 a.m. 11.00 a.m.

Facility Agent notifies the Lenders of the Loan in accordance with Clause 5.4 (Lenders U-3 U-1 U-3 participation) 3.00pm 3.00pm 3.00pm

Facility Agent receives a notification from a Lender under Clause 6.2 (Unavailability of a U-1 U-1 U-1 currency) 5.00pm 5.00pm 5.00pm

Facility Agent gives notice in accordance with Clause 6.2 (Unavailability of a currency) U-2 U U-2 9.30am 9.30am 9.30am

Facility Agent determines amount of the Loan in Optional Currency in accordance with Clause U-3 U U-3 33.9 (Change of currency) 11.00am 11.00am 11.00am

- 164 -

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document LIBOR or EURIBOR is fixed Quotation Quotation Quotation Day as of Day as of Day as 11:00 a.m. 11:00 of 11:00 London a.m. a.m. time in respect of LIBOR and as of 11.00 a.m. Brussels time in respect of EURIBOR

U = date of loan

U - X = X Business Days prior to date of loan

- 165 -

OBLIGORS AGENT

YELL LIMITED

By: JOHN DAVIS

Address: Queens Walk, Oxford Road, Reading RG1 7PT

Fax: 0118 957 5806

Attention: Chris Neale

THE ARRANGER

ABN AMRO BANK N.V.

By: CONRAD HALL

Address: 250 Bishopsgate, London EC2M 4AA

Fax: 020 7678 5194

Attention: Conrad Hall

HSBC BANK PLC

By: MARK HEPTINSTALL

Address: HSBC Bank Plc, 8 Canada Square, London E14 5HQ

Fax: 020 7992 4989

THE FACILITY AGENT

HSBC BANK PLC

By: MARK HEPTINSTALL

Address: HSBC Bank Plc, 8 Canada Square, London E14 5HQ

Fax: 020 7992 4989

Attention: Debt Finance Support and Agency

- 166 -

HSBC BANK PLC

By: MARK HEPTINSTALL

Address: HSBC Bank Plc, 8 Canada Square, London E14 5HQ

Fax: 020 7992 4989

Attention: Debt Finance Support and Agency

THE LENDERS

ABN AMRO BANK N.V.

By: CONRAD HALL

Address: 250 Bishopsgate, London EC2M 4AA

Fax: 020 7678 5194

Attention: Conrad Hall

HSBC BANK PLC

By: MARK HEPTINSTALL

Address: HSBC Bank Plc, 8 Canada Square, London E14 5HQ

Fax: 020 7992 4989

- 167 -

DATED 10 JULY 2003

(1) YELL GROUP PLC

(2) JOHN CONDRON

DIRECTORS SERVICE CONTRACT

WEIL, GOTSHAL & MANGES

ONE SOUTH PLACE, LONDON EC2M 2WG TEL: +44 (0) 20 7903 1000 FAX: +44 (0) 20 7903 0990

WWW.WEIL.COM

PARTIES

(1) YELL GROUP PLC (registered number 4180320) whose registered office is at Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT (the Company); and

(2) JOHN CONDRON whose address is 23 Rosebery Road, Muswell Hill, London N10 2LE (the Director).

1 INTERPRETATION

1.1 In this Agreement the following expressions shall mean:

Associated Company any company or venture in which the Company or a subsidiary has a shareholding or equity participation;

Board the board of directors of the Company or a committee of the board;

Group the Company, its Subsidiaries, its holding company, (as defined in s.736 of the Companies Act 1985 as amended) and subsidiaries of its holding company;

Group Company the Company and any other member of the Group for the time being;

Incapacity any sickness, injury or other like cause incapacitating the Director from performing his duties under this Agreement and incapacitated shall be construed accordingly;

Model Code the Model Code set out in the appendix to Chapter 16 of the United Kingdom Listing Authority Rules issued from time to time;

Recognised Investment Exchange as defined in s.313 of the Financial Services and Markets Act 2000;

Salary £550,000 a year or such higher salary as may be determined by the Board;

Subsidiary and Holding Company any subsidiary or holding company which for the time being is a subsidiary company (as defined in s.736 of the Companies Act 1985 as amended by the Companies Act 1989) of the Company.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1.2 A reference to something being determined, specified or required by the Company includes a determination, specification or requirement from time to time.

1.3 References in this Agreement to statutes shall include any statute modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted or extended by the same.

1.4 Headings are for ease of reference only and shall not be taken into account in the constructions of this Agreement.

2 PERIOD

2.1 Subject to Paragraph 17, this Agreement will commence upon admission of the Companys share capital to the Official List of the UK Listing Authority and to trading on the London Stock Exchange plc and will continue thereafter until either the Company or the Director has given to the other previous written notice of not less than twelve months.

2.2 The date on which the Directors period of continuous employment began is 15 January 1973.

3 DUTIES

3.1 The Company shall employ the Director as a full-time executive director of the Company in the position of Chief Executive Officer.

3.2 The position will initially be based in Reading.

3.3 The Director will perform such duties for the Group and Associated Companies as the Board shall reasonably specify and are consistent with Clause 3.5 below, at such locations in the United Kingdom or overseas, as the Board and the Director shall agree and accordingly, the Company will consult with the Director in advance of any proposed change of his normal place of work.

3.4 The Director will be bound by the Model Code share dealing rules, any other rules specified by the Board and the Companys Articles of Association as altered from time to time.

3.5 The Director shall during his employment under this Agreement:

3.5.1 exercise the powers and perform such duties as are consistent with the role of Chief Executive Officer and are appropriate to his status, qualifications and experience including representing the Company to customers, suppliers, shareholders and generally reporting to the Board on all issues and such other duties as the Board may from time to time properly and reasonably assign to him either in his capacity as Director or in connection with the business of the Company or the business of any one or more Group Company (including serving on the board of or any other executive body or any committee of such Group Company);

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3.5.2 endeavour to promote, develop and extend the business of the Company and of any Group Company; and

3.5.3 comply with the proper and reasonable directions and regulations of the Board and shall, except during holidays and periods of absence due to ill health or other incapacity, or as provided for elsewhere in this Agreement devote his full time and attention to the performance of his duties under this Agreement.

3.6 The Director is exempt from the requirements (save for annual leave) of the Working Time Regulations 1998.

3.7 The Director shall keep the Board properly informed (in writing if reasonably required by the Board) of his conduct of all business on behalf of the Company and any Group Company and shall give to the Board all such information as to the affairs of the Company and the Group as it shall properly and reasonably require.

3.8 The Company shall ensure that the Director shall have available such authority from the Board, such access to information and company records and such assistance from other administrative and managerial employees of the Company, consultants and professional advisors as are necessary for the proper performance of his duties.

3.9 During his employment under this Agreement the Director shall not (without prejudice to the Directors rights and remedies under this Agreement and at common law in circumstances constituting constructive dismissal) do anything that would cause him to be disqualified from continuing to act as a Director of the Company or any other Group Company.

4 CONFLICTS

4.1 The Director will promote, and not do any thing which is harmful or conflicts with, the interests and reputation of the Group.

4.2 The Director will not without obtaining the written consent of the Board:

4.2.1 work for any other person, business, organisation or company; or

4.2.2 hold any shares or interests in any business or company that is likely to compete with the business of the Group.

4.3 Provided that the Director shall be entitled to hold (and receive director fees in respect of) no more than 3 non-executive directorships subject to having obtained the prior approval of the Board before accepting any such appointments and subject also to there being no conflict of interest between the interests of the Company and/or the Group and the interests of the company in respect of which the Director wishes to accept such a directorship.

4.4 The Director shall not hold or otherwise be interested in more than five per cent of any class of shares or securities in any company quoted on a Recognised Investment Exchange. The Director may hold or otherwise be interested in less than five per cent of such shares provided that the Director shall make full and accurate disclosure to the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Board upon request of all shares and securities which he holds or in which he is beneficially interested.

4.5 The Director shall not during the term of this Agreement without the consent of the Board seek or accept from any actual or prospective customer, contractor or supplier of the Company or any Group Company any gift, gratuity or benefit of material value or any hospitality otherwise than properly in the performance of his duties to the Company or any Group Company of a kind and value not lavish, extravagant or inappropriate.

5 SALARY, BONUS AND SHARE SCHEMES

5.1 The Director will be paid the Salary which shall be reviewed annually in twelve equal monthly instalments, payable on the last business day of each month. The Company reserves the right to deduct or withhold from the Directors salary any amounts owing to the Company by the Director provided it will not do so without obtaining the Directors confirmation that amount claimed is properly owing.

5.2 The Director will be eligible to receive a bonus subject to the achievement of performance targets in respect of each financial year of the Company including the financial year in which this Agreement commences. The performance targets will be set annually by the Board (or a committee designated by the Board to set performance targets) having regard to (but without having to adopt or utilise) the performance targets recommended by the Director. The bonus range shall be between 40% and 100% of the Salary. If the Company achieves target earnings (as set by the Board or any designated Committee) (net of the Directors bonus) in any financial year, the Director will be entitled to a bonus of 65% of the Salary (on target bonus) increasing to a maximum of 100% of the Salary if the said performance targets are also met in the relevant financial year.

5.3 In the event that the Directors employment is terminated by the Company (other than lawfully pursuant to Paragraph 17.2), on the termination of the Directors employment he shall be entitled to a pro-rata bonus payment for the period from start of the bonus year to the date on which his employment terminates based on whichever is the greater of the following:

5.3.1 an amount determined at the Boards (or designated committees) discretion, acting in good faith, based on a projection of performance for that year having regard to performance to date in that year and any other factors which the Board (or designated committees) reasonably decides to be relevant; or

5.3.2 on target bonus.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of damages for breach of contract or compensation for loss of office or otherwise to any sum, any shares or other benefits to compensate him for the loss or diminution in value of any actual or prospective rights, benefits or expectations in relation to any scheme.

5.5 The Director shall as soon as reasonably practicable after the date hereof be awarded an initial grant of options under the Yell Group plc Executive Share Option Scheme with an aggregate market value equal to 5 times the Directors Salary, such options to be subject to any performance conditions set the remuneration committee of the Board in relation to such grant.

5.6 The Company proposes to make annual awards or grants of share options under its executive share plans as appropriate. The performance targets and provisions pertaining to each award/grant of options will be determined by a committee designated by the Board to set performance targets in due course.

6 PENSION AND LIFE COVER

The terms of the provision of pension benefits will be advised separately but will be consistent with the Directors current arrangements.

The Director will also be entitled to life assurance cover (either under the said pension arrangements or separately) equivalent to four times annual Salary.

7 HOLIDAY

The Director will be entitled to paid statutory holidays and to 32.5 days paid holiday in each year which accrues rateably each month in arrears, to be taken at times agreed with the Board. Up to ten days leave may be carried over to the following year. Any excess over ten days may be carried over subject to agreement by the Board. On termination of employment, the Director shall be entitled to a payment in lieu of any accrued but untaken holiday entitlement, or if the Director has exceeded his pro-rata entitlement, the Company shall be entitled to deduct the appropriate amount from any payments due to the Director or otherwise require reimbursement from the Director.

8 CAR

The Director will be entitled to a car or to choose a cash alternative. If a car is selected, the make and model will be commensurate with his position as Chief Executive Officer. The Company will meet the cost of maintenance, insurance, motor vehicle tax, petrol and breakdown recovery. The benefit value and cash alternative will be at the discretion of the Board. The initial value will be £25,000 per annum payable in 12 monthly instalments and will be subject to review from time to time. The Company will also provide the Director with the services of a chauffeur who will be available as required by the Director for business and private use.

9 TELECOMMUNICATIONS FACILITIES

9.1 The Company will either (at its election) provide the Director with free home telecommunication services, or will discontinue these arrangements and instead make a one-off cash payment to the Director in lieu of the benefit.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 9.2 The Company will meet the reasonable cost of the Directors membership of such professional bodies as are reasonably necessary for the performance of his duties under this Agreement.

9.3 The Company shall also pay the Directors reasonable membership fees for membership of a health and leisure club.

10 LIABILITY INSURANCE

10.1 The Company has obtained appropriate directors and officers liability insurance for the Directors benefit and will use its reasonable endeavours to maintain such insurance in force for so long as the Director remains a director of the Company. The company will notify the Director in the event that the directors and officers liability insurance referred to above is no longer in place. A copy of the policy document is available from the Company on request.

11 SICK PAY AND HEALTH COVER

11.1 The Director will be entitled to receive full salary and benefits during any period of absence through illness or injury (inclusive of any statutory sick pay) for up to 120 working days and thereafter up to 120 working days at half salary in any period of 12 months, subject to production of medical certificates and to such other requirements as the Company may reasonably request.

11.2 The Company will arrange private health cover for the Director, the Directors spouse and children under the age of 18 (or older if in full-time education) and dental cover for the Director and the Directors spouse, as determined by the Company. Alternatively, the Company may, at the discretion of the Board, meet the cost of the Directors individual arrangements.

11.3 The Company will also arrange long-term disability insurance for the Director providing salary continuance cover at a rate equivalent to 50% of the Salary.

11.4 Benefits under any insurance schemes referred to in Paragraphs 11.2 and 11.3 are subject to the rules of the scheme and the terms of any applicable insurance policy and are conditional on the Director (and, if applicable, the Directors spouse) complying with and satisfying any applicable requirements of the insurer. The Company will not have any liability to pay any benefit to the Director under any insurance scheme unless it receives payment of the benefit from the insurer.

12 MEDICAL EXAMINATION

The Company may, at its expense, require the Director to be examined annually by a medical practitioner of the Companys choice and at such other times as the Company may reasonably require. The Director consents to the medical records and reports arising out of such examination being disclosed to the Company and will provide any necessary consents in respect of such disclosure.

13 EXPENSES

The Company will reimburse authorised expenses properly incurred in the course of the Directors duties including all reasonable travelling (excluding travel to and from

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document work), hotel, entertainment and other out of pocket expenses against receipts or other proof of expenditure.

14 FINANCIAL ADVICE

The Company will pay the cost of personal tax and financial planning advice up to a maximum of £5,000 (excluding VAT) a year, such cost to be reimbursed against receipts.

15 GRIEVANCE PROCEDURE

15.1 If the Director wishes to seek redress of any grievance relating to his employment (other than one relating to a disciplinary decision) he should refer such grievance to the Chairman of the Board and, if the grievance is not resolved by discussion with him, it will be referred to the Board for resolution.

15.2 The Companys disciplinary procedures from time to time in force shall apply to the Director, provided that such procedures are not intended to have contractual effect.

16 OBLIGATION TO PROVIDE WORK

16.1 The Company is under no obligation to provide the Director with work and may:

16.1.1 suspend the Director, if the Board considers this appropriate and upon giving full reasons for any such decision and the intended duration of any such suspension, for up to three months; or 16.1.2 if notice to terminate this Agreement has been given, vary the Directors duties or require the Director to cease performing all duties for up to six months in total (Garden Leave)

in which case the Company may exclude the Director from the premises of the Group but will continue to pay the Salary in accordance with Paragraph 5.1 and provide the benefits under this Agreement until this Agreement terminates.

16.2 During any period of Garden Leave the Director shall:

16.2.1 remain an employee of the Company;

16.2.2 not have any communication or contact with any customer, supplier, or employee, officer, director agent or consultant of the Company or any Group Company; and

16.2.3 keep the Company reasonably informed of his whereabouts so that he can be called upon to perform any appropriate duties as required by the Company.

16.3 Where Paragraph 16.1.2 applies, the Director will at the Companys request promptly resign in writing as a director of the Company (and as a member of any committee of the Board) and of any company of which the Company is a shareholder (if necessary, in accordance with Paragraph 17.5) but this Agreement will not terminate solely by virtue of the Director resigning under this sub- paragraph.

17.1 The employment of the Director under this Agreement shall terminate automatically in the event of his ceasing to be a Director of the Company and in that event the Director shall have no claim for damages against the Company in respect of the loss of his office unless he shall so cease:-

17.1.1 by reason of his not being re-elected as a Director of the Company at any annual general meeting of the Company at which he is to retire by rotation; or

17.1.2 by virtue of a resolution passed by the members of the Company in general meeting to remove him as a Director; or

17.1.3 by virtue of his removal from his office as a Director by notice in writing signed by all his co-Directors served in accordance with the Companys Articles of Association; or

17.1.4 in circumstances where he is either wrongfully or constructively dismissed by the Company

and at the time of such failure to re-elect or of such removal the Company is not otherwise entitled to determine his employment under this Agreement.

17.2 The employment of the Director under the Agreement may be terminated by the Company immediately without notice if:

17.2.1 the Director is or becomes incapacitated under the Agreement for one hundred and twenty (120) working days in aggregate in any period of twelve (12) months provided that the Company shall not be entitled to terminate for so long as such termination would prevent the Director being considered for or receiving any insurance or medical benefits provided or paid for by the Company;

17.2.2 the Director shall be or become of unsound mind or become a patient under the Mental Health Act 1983 or for any purpose of any statute relating to mental health provided that the Company shall not be entitled to terminate for so long as such termination would prevent the Director being considered for or receiving any insurance or medical benefits provided or paid for by the Company; or

17.2.3 the Director shall enter into any compensation or arrangement with or for the benefit of his creditors including a voluntary arrangement under the Insolvency Act 1986; or

17.2.4 the Director shall be made the subject of a bankruptcy order or administration order or shall apply for an interim receiving order under Section 253 of the Insolvency Act 1986; or

17.2.5 the Director shall be determined following a proper disciplinary process to have committed a material act of dishonesty whether relating to the

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company, any Group Company, any employee of the Company or any Group Company or otherwise; or

17.2.6 the Director is guilty or any gross misconduct or commits any serious or persistent breach of any of his obligations to the Company or any Group Company whether under this Agreement or otherwise or refuses or neglects to comply with any lawful orders or directions given to him by the Company consistent with the terms of the Agreement; or

17.2.7 the Director is guilty of any conduct which publicly brings himself, the Company or any Group Company into serious disrepute so as to materially affect the business of the Company and/or the Group; or

17.2.8 the Director is prohibited or disqualified from holding the office which he holds in the Company or any Group Company in which he is concerned or interested or if he resigns from any such office without the prior written consent of the Company or any Group Company of which he has been appointed a Director; or

17.2.9 the Director is convicted of any criminal offence for which a custodial sentence is imposed (other than an offence under the Road Traffic legislation in the United Kingdom or elsewhere for which a time or non-custodial penalty in imposed); or

17.2.10 the Director shall come to be addicted to or habitually under the influence of any drug (not being a drug prescribed for him by a medical doctor for the treatment of a condition other than drug addiction) the possession of which is controlled by law provided that the Company shall not be entitled to terminate in the event that such termination would prevent the Director being considered for or receiving any insurance or medical benefits provided or paid for by the Company; or

17.2.11 the Director is convicted of any offence regarding insider dealing under the Criminal Justice Act 1993 or under any other present or future statutory enactment or regulation relating to insider dealing.

17.3 If this Agreement is terminated:

17.3.1 by the Company (other than lawfully pursuant to clause 2.1 and clause 17.2); or

17.3.2 by the Director in the event of a Constructive Dismissal

then (without prejudice to any other rights of the Director under this Agreement) (a) the Company shall within 7 days of the effective date of the termination of the Directors employment pay to the Director the Prescribed Sum and (b) all conditional awards of shares and all share options held by the Director shall immediately vest and become exercisable to the extent permissible by law and the Company shall exercise, or shall procure the exercise of any discretions capable of being exercised in favour of the Director, to the extent permissible by law, and shall do so in the most beneficial manner permitted under any scheme rules.

17.4.1 a Constructive Dismissal shall (without limitation) include when the Director terminates his employment under this Agreement in consequence of one or both of the following:

17.5.1.1 a material adverse change in the nature of the Directors responsibilities or a material diminution in the Directors status;

17.5.1.2 any material breach by the Company of any of the material terms of this Agreement; and

17.5 For the purposes of this Agreement, the Prescribed Sum shall be a sum equal to 95% (in order to take account of the accelerated receipt of the sum) of the annual value of the Directors Salary, benefits, pension contributions and the on target bonus (reduced pro rata on a daily basis in respect of any part of the notice period served by the Director) and such payment shall be accepted by the Director as being in full and final settlement of any claims the Director may have under his Agreement. For the purposes of this clause benefits means: the replacement value of the club subscriptions, private medical cover, life cover, company car, and permanent health insurance provided to the Director but does not include compensation for loss of the services of a chauffeur.

17.6 The Executive and the Company agree that the payments made under clause 17.3 represent genuine pre-estimates of the losses the Director is likely to incur as a result of the termination of his employment in the specified circumstances. The provisions of these clauses are without prejudice to the Directors accrued rights in respect of Salary, holiday pay, benefits, pro rata bonus and other sums due to him up to the date of termination of his employment.

17.7 Upon termination of this Agreement the Director will at the Companys request promptly resign in writing as a Director of the Company and any Group Company (and as a member of any committee of the Board) and of any company of which the Company is a shareholder, and will promptly deliver to the Company any property of the Company or Group Company including all copies in whatever form then in his possession.

17.8 The Director irrevocably authorises the Company to appoint a person in his name and on his behalf to execute all documents including any letter of resignation and to do all such acts as are necessary on behalf of the Director for the purposes of compliance with this clause if he fails to do so within 7 days of a written request.

17.9 The Director shall not at any time make any untrue statement in relation to the Company or any Group Company, and in particular shall not in the event of termination of his employment under the Agreement wrongfully represent himself as being employed or connected with the Company or any Group Company.

18 CONFIDENTIALITY

18.1 The Director will not disclose any confidential information relating to the Group or any third party which may have been obtained in the course of his employment except

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document with the express written consent of the Board in the proper performance of his duties or in compliance with an order of a competent court.

18.2 This prohibition does not apply to confidential information that comes into the public domain through no act or neglect of the Director.

18.3 The Director shall during his employment under this Agreement use reasonable endeavours to prevent the unauthorised use or disclosure of any Confidential Information by any other officer, employee or agent of the Company or any other Group Company and shall be under an obligation to report to the Board any such unauthorised use or disclosure of any Confidential Information which comes to his knowledge.

19 COPYRIGHT

The copyright in any material arising from or in connection with this employment is assigned to the Company.

20 RESTRICTIONS

The Director will be bound by the provisions of the Schedule to this Agreement.

21 THE MODEL CODE

It shall be a fundamental term of this Agreement that the Director shall comply at all times with The Model Code and codes of conduct of the Company for the time being in force in relation to dealings in shares, debentures or other securities of the Company or any unpublished price sensitive information affecting the securities of any other company.

22 CONTINUATION

Paragraphs 17.4, 17.5 and 18 to 20 inclusive will continue in force after the termination of this Agreement.

23 VARIATION

23.1 The Company may vary Paragraphs 7, 8, 11, 14 and 15 but only with the consent of the Director.

23.2 If the employment of the Director under this Agreement is terminated by reason of the liquidation of the Company for the purposes of reconstruction or amalgamation or other reconstructions of the Company not involving a liquidation and the Director is offered employment with any company, concern or undertaking resulting from the reconstruction or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Director shall be obliged to accept such offer and shall have no claim against the Company in respect of the termination of him employment under this Agreement.

24.1 Any notice or other communication given or made under this Agreement shall be in writing and may be delivered to the relevant party or sent by first class prepaid letter or facsimile to the address of that party specified in this Agreement or to that partys facsimile number thereat or such other address or number as may be notified by that party from time to time for this purpose, and shall be effectual notwithstanding any change of address or number not so notified.

24.2 Unless the contrary shall be proved each such notice or communication shall be deemed to have been given or made and delivered, if by letter, seventy two hours after posting and, if by delivery or facsimile, when respectively delivered or transmitted.

25 THE EMPLOYMENT RIGHTS ACT 1996 (ERA)

This Agreement contains the particulars required to be given under Sections 1 and 3 of the ERA to the intent that, as of the date of this Agreement, the Company shall not be required to deliver to the Director a separate written statement pursuant to Section 1 of the ERA.

26 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

A person who is not a party to this Agreement has no rights under the Contracts (Rights of Third Parties) Act 1999 or otherwise to enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

27 PREVIOUS AGREEMENTS

This Agreement supersedes and replaces all previous agreements, understandings and arrangements (whether verbal or written) between the Company and the Director.

28 RELOCATION

The Company will reimburse the Director for any reasonable relocation expenses incurred in connection with any relocation by the Director of his family out of London nearer to Reading. Such expenses would include legal conveyancing fees, stamp duty and other reasonable moving costs associated with the purchase of domestic property, subject of production of appropriate receipts, invoices or other evidence of expenditure.

29 COLLECTIVE AGREEMENTS

There are no collective agreements directly affecting the Directors employment.

30 GOVERNING LAW

This Agreement shall be governed by and construed in all respects in accordance with English law and the parties agree to submit to the non-exclusive jurisdiction of the English courts as regards any claim or matter arising in respect of this Agreement.

SIGNED BY

for and on behalf of THE COMPANY

SIGNED BY JOHN CONDRON

1. In this Schedule:-

1.1 Expiry Date means the date of termination or expiry of this Agreement for any reason.

1.1.1 in any capacity means on the Directors own behalf or jointly with or on behalf of any person, firm or company.

1.1.2 Confidential Information means confidential information of the Group which would be of value to a competitor or could reasonably enable a competitor to obtain an unfair advantage in trading in competition with the Group.

Business means the business of the Group in providing classified advertising directories and associated products and services including print, internet and telephone based directories and services to businesses and consumers.

2. Since the Director is likely to obtain in the course of his employment with the Group, trade secrets and Confidential Information and personal knowledge of customers and employees of the Group, the Director agrees with the Company that he will be bound by the following covenants for 12 months immediately following the Expiry Date:

1.4.1 The Director will not in any capacity solicit or endeavour to entice away or offer engagement or employment to, or engage or employ or procure any Designated Person, who was an employee of the Company or any Group Company at the Expiry Date, to be engaged or employed in any business which competes or, in the Directors knowledge, is about to compete with the Business.

A Designated Person is a senior employee of the Company or any Group Company with whom the Director has had personal dealings in the 12 months immediately preceding the Expiry Date and who had at the Expiry Date knowledge of trade secrets or Confidential Information or knowledge of and connections or influence with customers of the Company or any Group Company.

1.4.2 The Director will not in any capacity for the purposes of any business which competes or, in the Directors knowledge, is about to compete with the Business, canvass, solicit, deal with or accept business or custom from any person, firm or company:

(a) that was a customer of the Company or any Group Company during the 12 months immediately preceding the Expiry Date (the 12 month period); and

(b) with whom or with which the Director personally had had dealings during the 12 month period in the course of his employment.

1.4.3 The Director will not in any capacity carry on, be engaged or employed or be concerned or interested in any business, or take steps to set up, promote or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document facilitate the establishment of any business which competes or, in the Directors knowledge, is about to compete with the Business.

For the purposes of this Clause 2, any reference to engagement or employment means engagement or employment whether under a contract or otherwise and if under a contract includes a contract of employment, or contract for services or any other form of contract and the terms engage and employ and their derivatives shall be construed in accordance with this definition.

3. The duration of each of the covenants set out in clause 2 above shall be reduced the number of days Garden Leave served by the Director in accordance with clause 15 of the Agreement.

4. For the avoidance of doubt it is expressly agreed that each of the sub-clauses (i)-(iii) in Clause 2 is intended to contain separate and severable restraints and if any one or more of such sub-clauses are for any reason unenforceable in whole or in part, then the other sub- clauses shall nonetheless be and remain effective.

5. The Director acknowledges that the restraints contained in this Schedule and each of them are necessary to protect the legitimate interests of the Group, are no wider than reasonably necessary for that purpose, and are reasonable as between the parties to this Agreement.

6. If any of the restrictions contained in this Schedule shall be adjudged to be void or ineffective or unenforceable for whatever reason but would be adjudged to be valid and effective if part of the wording were deleted or the periods reduced or the area reduced in scope, they shall apply with such modifications as may be necessary to make them valid and effective.

DATED 10 JULY 2003

(1) YELL GROUP PLC

(2) JOHN DAVIS

DIRECTORS SERVICE CONTRACT

WEIL, GOTSHAL & MANGES

ONE SOUTH PLACE, LONDON EC2M 2WG TEL: +44 (0) 20 7903 1000 FAX: +44 (0) 20 7903 0990

WWW.WEIL.COM

PARTIES

(1) YELL GROUP PLC (registered number 4180320) whose registered office is at Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT (the Company); and

(2) JOHN DAVIS whose address is 24 Yeomans Row, London SW3 2AH (the Director).

1 INTERPRETATION

1.1 In this Agreement the following expressions shall mean:

Associated Company any company or venture in which the Company or a subsidiary has a shareholding or equity participation;

Board the board of directors of the Company or a committee of the board;

Group the Company, its Subsidiaries, its holding company, (as defined in s.736 of the Companies Act 1985 as amended) and subsidiaries of its holding company;

Group Company the Company and any other member of the Group for the time being;

Incapacity any sickness, injury or other like cause incapacitating the Director from performing his duties under this Agreement and incapacitated shall be construed accordingly;

Model Code the Model Code set out in the appendix to Chapter 16 of the United Kingdom Listing Authority Rules issued from time to time;

Recognised Investment Exchange as defined in s.313 of the Financial Services and Markets Act 2000;

Salary £340,000 a year or such higher salary as may be determined by the Board;

1.2 A reference to something being determined, specified or required by the Company includes a determination, specification or requirement from time to time.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1.3 References in this Agreement to statutes shall include any statute modifying, re-enacting, extending or made pursuant to the same or which is modified, re-enacted or extended by the same.

1.4 Headings are for ease of reference only and shall not be taken into account in the constructions of this Agreement.

2 PERIOD

2.2 The date on which the Directors period of continuous employment began is 25 September 2000.

3 DUTIES

3.1 The Company shall employ the Director as a full-time executive director of the Company in the position of Chief Financial Officer.

3.2 The position will initially be based in Reading.

3.4 The Director will be bound by the Model Code share dealing rules, any other rules specified by the Board and the Companys Articles of Association as altered from time to time.

3.5 The Director shall during his employment under this Agreement:

3.5.1 exercise the powers and perform such duties as are consistent with the role of Chief Financial Officer and are appropriate to his status, qualifications and experience including representing the Company to customers, suppliers, shareholders and generally reporting to the Board on all issues and such other duties as the Board may from time to time properly and reasonably assign to him either in his capacity as Director or in connection with the business of the Company or the business of any one or more Group Company (including serving on the board of or any other executive body or any committee of such Group Company);

3.5.2 endeavour to promote, develop and extend the business of the Company and of any Group Company; and

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3.6 The Director is exempt from the requirements (save for annual leave) of the Working Time Regulations 1998.

4 CONFLICTS

4.1 The Director will promote, and not do any thing which is harmful or conflicts with, the interests and reputation of the Group.

4.2 The Director will not without obtaining the written consent of the Board:

4.2.1 work for any other person, business, organisation or company; or

4.2.2 hold any shares or interests in any business or company that is likely to compete with the business of the Group.

5.1 The Director will be paid the Salary which shall be reviewed annually in twelve equal monthly installments, payable on the last business day of each month. The Company reserves the right to deduct or withhold from the Directors salary any amounts owing to the Company by the Director provided it will not do so without obtaining the Directors confirmation that amount claimed is properly owing.

5.3.2 on target bonus.

5.4 The Director shall be entitled to participate in any share scheme operated from time to time by the Company in respect of directors, officers or senior management. The Directors rights in relation to this Agreement are separate from and shall not be affected by any participation in any share scheme and his participation shall be subject to the rules of such scheme from time to time. If the Directors employment is terminated for whatever reason whether lawfully or unlawfully, the Director agrees that save as provided for elsewhere in this Agreement he shall not be entitled by way of damages for breach of contract or compensation for loss of office or otherwise to any sum, any shares or other benefits to compensate him for the loss or diminution in value of any actual or prospective rights, benefits or expectations in relation to any scheme.

5.6 The Company proposes to make annual awards or grants of share options under its executive share plans as appropriate. The performance targets and provisions pertaining

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to each award/grant of options will be determined by a committee designated by the Board to set performance targets in due course.

6 PENSION AND LIFE COVER

The terms of the provision of pension benefits will be advised separately but will be consistent with the Directors current arrangements.

The Director will also be entitled to life assurance cover (either under the said pension arrangements or separately) equivalent to four times annual Salary.

7 HOLIDAY

The Director will be entitled to paid statutory holidays and to 25 days paid holiday in each year which accrues rateably each month in arrears, to be taken at times agreed with the Board. Up to ten days leave may be carried over to the following year. Any excess over ten days may be carried over subject to agreement by the Board. On termination of employment, the Director shall be entitled to a payment in lieu of any accrued but untaken holiday entitlement, or if the Director has exceeded his pro-rata entitlement, the Company shall be entitled to deduct the appropriate amount from any payments due to the Director or otherwise require reimbursement from the Director.

8 CAR

The Director will be entitled to a car or to choose a cash alternative. If a car is selected, the make and model will be commensurate with his position as Chief Financial Officer. The Company will meet the cost of maintenance, insurance, motor vehicle tax, petrol and breakdown recovery. The benefit value and cash alternative will be at the discretion of the Board. The initial value will be £15,600 per annum payable in 12 monthly installments and will be subject to review from time to time.

9 TELECOMMUNICATIONS FACILITIES

9.2 The Company will meet the reasonable cost of the Directors membership of such professional bodies as are reasonably necessary for the performance of his duties under this Agreement.

9.3 The Company shall also pay the Directors reasonable membership fees for membership of a health and leisure club.

10 LIABILITY INSURANCE

10.1 The Company has obtained appropriate directors and officers liability insurance for the Directors benefit and will use its reasonable endeavours to maintain such insurance in force for so long as the Director remains a director of the Company. The Company will notify the Director in the event that the directors and officers liability insurance referred to above is no longer in place. A copy of the policy document is available from the Company on request.

11.3 The Company will also arrange long-term disability insurance for the Director providing salary continuance cover at a rate equivalent to 50% of the Salary.

12 MEDICAL EXAMINATION

13 EXPENSES

The Company will reimburse authorised expenses properly incurred in the course of the Directors duties including all reasonable travelling (excluding travel to and from work), hotel, entertainment and other out of pocket expenses against receipts or other proof of expenditure.

14 FINANCIAL ADVICE

The Company will pay the cost of personal tax and financial planning advice up to a maximum of £3,000 (excluding VAT) a year, such cost to be reimbursed against receipts.

15 GRIEVANCE PROCEDURE

15.2 The Companys disciplinary procedures from time to time in force shall apply to the Director, provided that such procedures are not intended to have contractual effect.

16.1 The Company is under no obligation to provide the Director with work and may:

16.1.1 suspend the Director, if the Board considers this appropriate and upon giving full reasons for any such decision and the intended duration of any such suspension, for up to three months; or

16.1.2 if notice to terminate this Agreement has been given, vary the Directors duties or require the Director to cease performing all duties for up to six months in total (Garden Leave)

16.2 During any period of Garden Leave the Director shall:

16.2.1 remain an employee of the Company;

16.2.2 not have any communication or contact with any customer, supplier, or employee, officer, director agent or consultant of the Company or any Group Company; and

16.2.3 keep the Company reasonably informed of his whereabouts so that he can be called upon to perform any appropriate duties as required by the Company.

17 TERMINATION

17.1.1 by reason of his not being re-elected as a Director of the Company at any annual general meeting of the Company at which he is to retire by rotation; or

17.1.2 by virtue of a resolution passed by the members of the Company in general meeting to remove him as a Director; or

17.1.3 by virtue of his removal from his office as a Director by notice in writing signed by all his co-Directors served in accordance with the Companys Articles of Association; or

17.1.4 in circumstances where he is either wrongfully or constructively dismissed by the Company

and at the time of such failure to re-elect or of such removal the Company is not otherwise entitled to determine his employment under this Agreement.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 17.2 The employment of the Director under the Agreement may be terminated by the Company immediately without notice if:

17.2.3 the Director shall enter into any compensation or arrangement with or for the benefit of his creditors including a voluntary arrangement under the Insolvency Act 1986; or

17.2.4 the Director shall be made the subject of a bankruptcy order or administration order or shall apply for an interim receiving order under Section 253 of the Insolvency Act 1986; or

17.2.5 the Director shall be determined following a proper disciplinary process to have committed a material act of dishonesty whether relating to the Company, any Group Company, any employee of the Company or any Group Company or otherwise; or

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 17.2.11 the Director is convicted of any offence regarding insider dealing under the Criminal Justice Act 1993 or under any other present or future statutory enactment or regulation relating to insider dealing.

17.3 If this Agreement is terminated:

17.3.1 by the Company (other than lawfully pursuant to clause 2.1 and clause 17.2); or

17.3.2 by the Director in the event of a Constructive Dismissal

17.4 For the purposes of this Agreement:

17.4.1 a Constructive Dismissal shall (without limitation) include when the Director terminates his employment under this Agreement in consequence of one or both of the following:

17.5.1.1 a material adverse change in the nature of the Directors responsibilities or a material diminution in the Directors status;

17.5.1.2 any material breach by the Company of any of the material terms of this Agreement; and

17.8 The Director irrevocably authorises the Company to appoint a person in his name and on his behalf to execute all documents including any letter of resignation and to do all such

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document acts as are necessary on behalf of the Director for the purposes of compliance with this clause if he fails to do so within 7 days of a written request.

18 CONFIDENTIALITY

18.1 The Director will not disclose any confidential information relating to the Group or any third party which may have been obtained in the course of his employment except with the express written consent of the Board in the proper performance of his duties or in compliance with an order of a competent court.

18.2 This prohibition does not apply to confidential information that comes into the public domain through no act or neglect of the Director.

19 COPYRIGHT

The copyright in any material arising from or in connection with this employment is assigned to the Company.

20 RESTRICTIONS

The Director will be bound by the provisions of the Schedule to this Agreement.

21 THE MODEL CODE

22 CONTINUATION

Paragraphs 17.4, 17.5 and 18 to 20 inclusive will continue in force after the termination of this Agreement.

23 VARIATION

23.1 The Company may vary Paragraphs 7, 8, 11, 14 and 15 but only with the consent of the Director.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or amalgamation on terms and conditions not less favourable than the terms of this Agreement then the Director shall be obliged to accept such offer and shall have no claim against the Company in respect of the termination of him employment under this Agreement.

24 NOTICES

25 THE EMPLOYMENT RIGHTS ACT 1996 (ERA)

26 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

27 PREVIOUS AGREEMENTS

This Agreement supersedes and replaces all previous agreements, understandings and arrangements (whether verbal or written) between the Company and the Director.

28 RELOCATION

29 COLLECTIVE AGREEMENTS

There are no collective agreements directly affecting the Directors employment.

30 GOVERNING LAW

SIGNED BY

for and on behalf of THE COMPANY

SIGNED BY JOHN DAVIS

1. In this Schedule:-

1.1 Expiry Date means the date of termination or expiry of this Agreement for any reason.

1.1.1 in any capacity means on the Directors own behalf or jointly with or on behalf of any person, firm or company.

(a) that was a customer of the Company or any Group Company during the 12 months immediately preceding the Expiry Date (the 12 month period); and

(b) with whom or with which the Director personally had had dealings during the 12 month period in the course of his employment.

1.4.3 The Director will not in any capacity carry on, be engaged or employed or be concerned or interested in any business, or take steps to set up, promote or facilitate the establishment of any business which competes or, in the Directors knowledge, is about to compete with the Business.

Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document form of contract and the terms engage and employ and their derivatives shall be construed in accordance with this definition.

3. The duration of each of the covenants set out in clause 2 above shall be reduced the number of days Garden Leave served by the Director in accordance with clause 15 of the Agreement.

CERTIFICATION

I, John Condron, certify that:

1 I have reviewed this annual report on Form 20-F of Yell Finance B.V. and Yellow Pages Limited.

2 Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report.

3 Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this annual report.

4 The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrants and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this annual report based on such evaluation; and

(c) disclosed in this annual report any change in the registrants internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and

5 The registrants, other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent function):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarise and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

/s/ JOHN CONDRON By:

John Condron Chief Executive Officer of Yell Finance B.V.

John Condron Chief Executive Officer of Yellow Pages Limited.

Date: June 8, 2004

CERTIFICATION

I, John Davis, certify that:

1 I have reviewed this annual report on Form 20-F of Yell Finance B.V. and Yellow Pages Limited.

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.

/s/ JOHN DAVIS By:

John Davis Chief Financial Officer of Yell Finance B.V.

/s/ JOHN DAVIS By:

Date: June 8, 2004

CERTIFICATION PURSUANT TO 18 USC. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John Condron, as Chief Executive Officer of Yell Finance B.V. and Yellow Pages Limited (the Companies), hereby certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.

YELL FINANCE B.V.

/s/ JOHN CONDRON By:

John Condron Chief Executive Officer

YELLOW PAGES LIMITED

/s/ JOHN CONDRON By:

John Condron Chief Executive Officer

Date: June 8, 2004

NB: A signed original of this written statement required by Section 906 has been provided to Yell Finance B.V. and will be retained by Yell Finance B.V. and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION PURSUANT TO 18 USC. SECTION 1350, AS ADOPTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, John Davis, as Chief Financial Officer of Yell Finance B.V. and Yellow Pages Limited (the Companies), hereby certify, pursuant to 18 U.S.C. § 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) the accompanying Annual Report on Form 20-F for the period ending March 31, 2004, as filed with the U.S. Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.

YELL FINANCE B.V.

/s/ JOHN DAVIS By:

John Davis Chief Financial Officer

YELLOW PAGES LIMITED

/s/ JOHN DAVIS By:

John Davis Chief Financial Officer

Date: June 8, 2004

CODE OF ETHICS FOR THE

CHIEF EXECUTIVE AND SENIOR FINANCIAL OFFICERS (SENIOR OFFICERS)

Yell Group plc (Yell) is committed to conducting business to the highest standards of business ethics and in accordance with applicable laws, rules and regulations. We are also committed to full, fair, accurate, timely and understandable disclosures in financial reports and other public documents.

Senior Officers have responsibility to create a culture of high ethical standards, commitment to compliance and honest conduct.

1. Compliance with Laws, Rules and Regulations

Senior Officers are required to comply with all laws, rules and regulations that govern Yell in the conduct of its business and are also required to report any suspected violations of any applicable laws, rules or regulations to the Company Secretary or any member of the Audit Committee.

2. Avoidance of Conflicts of Interest

A conflict of interest may arise in any situation in which an employee engages in any activity that detracts from or interferes with his or her full, loyal and timely performance of services to Yell, or has a financial interest that might influence the employees judgment.

Senior Officers must obtain the written approval of the Yell Board before making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in a manner that could create or appear to create a conflict of interest.

Senior Officers and members of their immediate family may not participate in any joint venture, partnership or other business arrangement or investment with Yell without the approval of the Board.

3. Disclosures

Yells policy is to make full, fair, accurate, timely and understandable disclosure in compliance with all applicable laws and regulations in all of its public communications, particularly including the reports and documents that Yell submits to, or files with, shareholders, the London Stock Exchange, the Securities and Exchange Commission and other regulatory authorities. Senior Officers are required to promote compliance with this policy by all employees.

4. Influence on the Conduct of Audits

Senior Officers must not take any action to fraudulently influence, coerce, manipulate or mislead any accountant performing an audit or review of Yell financial statements.

Any questions about this Code of Ethics should be raised with the Yell Company Secretary. Senior Officers must immediately report any known or suspected violation of applicable laws or regulations or this Code of Ethics to the Yell Company Secretary or any member of the Audit Committee. Senior Officers will not be subject to retaliation because of a good faith report of a suspected violation.

Violations of this Code of Ethics may result in disciplinary action, including dismissal. The Audit Committee or the Board of Directors shall determine, or shall designate appropriate persons to determine, appropriate action in response to violations of this Code.

Yell will waive application of the policies set forth in this Code of Ethics only when circumstances warrant granting a waiver in the judgment of the Audit Committee or Board of Directors. Changes in and waivers of this Code of Ethics may be made only by the Audit Committee or Board of Directors and will be disclosed as required under applicable law and regulations.

I have received and read the Yell Code of Ethics for the Chief Executive and Senior Financial Officers, and I understand its contents. I agree to comply fully with the standards, policies and procedures contained in the Code of Ethics and Yells related policies and procedures. I understand that I have an obligation to report any suspected violations to the Company Secretary or any member of the Audit Committee. I certify that, except as fully disclosed in accordance with the terms of this Code of Ethics, I have not engaged in any transactions or activities that would constitute an actual or apparent conflict with the interests of Yell. I further certify that, except as noted below, I am otherwise in full compliance with the Code of Ethics and any related policies and procedures:

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