Determined 2016 Financial & Operational Highlights

Annual Report 2016

Revenues Adjusted EBITDA1 Total Debt Net Debt1 (in millions of Canadian dollars) (in millions of Canadian dollars) (in millions of Canadian dollars) (in millions of Canadian dollars)

2016 2016 2016 2016 $818.0M $235.2M$402.2M $384.9M

(1.4%) (9.8%) (19.2%) (10.6%)

$829.8M $260.7M $497.8M $430.6M 2015 2015 2015 2015

1 Adjusted EBITDA, Adjusted EBITDA margin, Free Cash Flow and Net Debt are not performance or financial measures defined under IFRS. They do not have a standardized meaning and are therefore not likely to be comparable with similar measures used by other publicly traded companies. We define Adjusted EBITDA as revenues less operating costs, as shown in Yellow Pages Limited’s consolidated income statements. Adjusted EBITDA margin is defined as the percentage of Adjusted EBITDA to revenues. Free cash flow is defined as cash flows from operating activities, as reported in accordance with IFRS, less an adjustment for capital expenditures. We define net debt as current portion of long-term debt plus long-term debt and exchangeable debentures (Total Debt), less cash, as presented in Yellow Pages Limited’s consolidated statements of financial position. Please refer to the “Definitions Relative to Understanding Our Results” section of the Company’s Management’s Discussion and Analysis for the complete definitions of these terms.

2016

Adjusted EBITDA Cash Flows from Free Cash Flow1 Digital Revenues Margin1 Operating Activities (in millions of Canadian dollars) (in millions of Canadian dollars) (in millions of Canadian dollars) 28.8% $158.1M $94.6M $555.8M

Table of contents

Management’s Independent Consolidated Consolidated Discussion and Auditor’s Statements of Income Analysis Report Financial Position Statements

5 34 35 36 Digital Revenue (in millions of Canadian dollars)

2016 $555.8M 71% Digital Revenues

(as a percentage of total revenues, for the fourth quarter ended December 31, 2016)

$486.3M 2015

2 Total digital visits measures the number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, C411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of the Company’s application syndication partners.

Customer Count Customer Acquisition Digital-Only Customers Total Digital Visits2

241,500 41,100 32% 464.7M

Consolidated Statements Consolidated Consolidated Notes to the of Comprehensive Statements of Statements of Consolidated (Loss) Income Changes in Equity Cash Flows Financial Statements

37 38-39 40 41-72

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 1 Message to Shareholders

We’re now into the second half of our Return to cash on hand to acquire JUICE, enabling us to Growth plan, a ﬁve-year corporate strategy expand our footprint in the mobile performance designed to transform Yellow Pages into the media ecosystem. Net debt amounted to roughly leading local digital company in Canada and return $385M at the end of 2016, down from the the company to revenue growth and proﬁtability. approximately $800M at the end of 2012.

By the end of 2016, approximately 70% of our Now, after having significantly deleveraged our revenue came from digital products and services. balance sheet, successfully built a customer Digital revenues totalled $556M in 2016 and have acquisition engine, and diversified our business to steadily grown each year. preserve growth potential, we need to take a closer look at how we translate these accomplishments We continued to make good progress in 2016 into Adjusted EBITDA stabilization. on several other fronts. We beat our customer acquisition targets, welcoming 41,100 new small While 2016 had its fair share of successes, we business customers who chose Yellow Pages as acknowledge that the year did not end as we their digital media and marketing solutions provider would have liked. We’re encountering dynamics of choice. This equals 33% more customers than that indicate that a return to growth in profitability we acquired last year. We are on the cusp of may take longer than previously anticipated. stabilizing our customer base with a net decline of That being said, the root causes of the only 3,500 customers year-over-year, compared profitability pressures we’re experiencing have with a net decline of 30,000 customers before we been identified. These are due to unfavourable launched our Return to Growth plan. changes in our product mix as top line revenues are shifting to lower margin products. This is Traffic to our media properties remains strong. We applying pressure to our bottom line, however, finished 2016 with roughly 465M total digital visits we are working diligently to address and resolve to our network and experienced a 26% surge in this dynamic. traffic year-over-year during the fourth quarter of 2016. This stemmed from key traffic partnerships Looking forward, we know that our margins will we hold with Google and Apple, to name a few. continue to be under pressure due to the shifting Partnerships like these are powerful endorsements spends to reseller offerings in our product mix. This of the value that our data and content provides to is a structural shift in response to an evolving Canadians in managing their daily needs. landscape and we are currently in the process of updating and refining our strategy to reflect the Also a key accomplishment is the significant pace of change in the industry and best position deleveraging of our balance sheet. This has allowed the business to address it. us the financial flexibility to invest in strengthening our business operations, technologies, and product We need to be looking more closely at how we’ve offering. Thanks to our strong free cash flow structured our sales conversations and approach. We generation, we’ve successfully repaid $490M on need to be appropriately counselling our customers our Senior Secured Notes since their inception in on their purchases. Truly acting more as advisors, and 2012. In 2016 alone, we repaid over $97M of debt equipping our customer-facing teams with the right on the Notes, bringing the outstanding balance to systems, data and tools, to help them understand just under $310M. This is despite having also used which solutions they truly need and which ones will

2 YELLOW PAGES LIMITED 2016 ANNUAL REPORT allow them to grow and nurture their business, as company’s future. Their resolve is an advantage and a opposed to just a product/pricing conversation. strength that is essential in this journey. To the almost quarter-million Canadian businesses that choose to We will also continue to seek cost efficiencies with do business with Yellow Pages, we also say thank the goal of optimizing our cost structure. you. Every day, we will seek to do better for you.

This is a part of what we’re currently looking at in Finally, to our shareholders, while we navigated a our review of our business strategy. Of course, we challenging period in the tail-end of 2016, we have already actioned some key operational areas continue to believe and have conﬁdence in the in order to help address this issue. We’ve already growth potential of this company. When we look at started rolling out new tools and training to our the accomplishments of the entire year and those sales teams to have value-based as opposed to prior, there has been a clear path of progress that budget-based conversations with customers. we will continue to build upon. Some of the elements we’re also evaluating are product offering, pricing and contracting, sales Know that we tackle the days and years ahead structure effectiveness, additional upsell channels with a sense of urgency and determination to and cost structure. create long-term value for each of you.

We’ll be sharing the full outcome of our review and business strategy in May.

In the end, it’s a simple question. We must ask ourselves where in the Canadian digital advertising market can we deliver the most value for our customers, our users, and our shareholders, and then we must focus our efforts there.

I want to thank all Yellow Pages employees for the JulienJ li Billot Bill t hard work and determination they employ each day President and in overcoming current challenges to build this Chief Executive Officer

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 3 Board of Directors Executive Team

Robert F. MacLellan Julien Billot Director and Chairman of the Board President and Chief Executive Officer

Julien Billot Dany Paradis President and Chief Executive Officer Senior Vice-President, Operations & Chief Human Resources Officer Craig Forman François D. Ramsay Director, Corporate Governance and Nominating Committee Senior Vice-President, Corporate Affairs and General Counsel Susan Kudzman Pascal Thomas Director, Chair of the Human Resources and Compensation Committee Senior Vice-President, Chief Digital Officer David A. Lazzarato Dominique Vallée Director, Chair of the Audit Committee Senior Vice-President, Sales and Customer Care David G. Leith Director, Chair of the Corporate Governance Franco Sciannamblo and Nominating Committee Vice-President, Corporate Controller Judith A. McHale Director, Corporate Governance and Nominating Committee

Donald H. Morrison Director, Human Resources and Compensation Committee

Martin Nisenholtz Director, Human Resources and Compensation Committee

Kalpana Raina Director, Audit Committee

Michael G. Sifton Director, Audit Committee

4 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

MANAGEMENT’S DISCUSSION AND ANALYSIS

February 14, 2017

This management’s discussion and analysis (MD&A) is intended to help the reader understand and assess trends and significant changes in the results of operations and financial condition of Yellow Pages Limited and its subsidiaries for the years ended December 31, 2016 and 2015 and should be read in conjunction with our Audited Consolidated Financial Statements and accompanying notes for the years ended December 31, 2016 and 2015. Quarterly reports, the Annual Report, Supplemental Disclosure and the Annual Information Form (AIF) can be found on SEDAR at www.sedar.com and under the “Investor Relations - Reports & Filings” section of our corporate website: http://corporate.yp.ca.

The financial information presented herein has been prepared on the basis of International Financial Reporting Standards (IFRS) for financial statements and is expressed in Canadian dollars, unless otherwise stated. The audited IFRS-related disclosures and values in this MD&A have been prepared using the standards and interpretations currently issued and effective at the end of our reporting period, December 31, 2016.

Our reporting structure reflects how we manage our business and how we classify our operations for planning and for measuring our performance.

In this MD&A, the words “we”, “us”, “our”, the “Company”, the “Corporation”, “Yellow Pages” and “YP” refer to Yellow Pages Limited and its subsidiaries (including Yellow Pages Digital & Media Solutions Limited, 411 Local Search Corp. (411.ca), Yellow Pages Homes Limited (Yellow Pages NextHome), YPG (USA) Holdings, Inc. and Yellow Pages Digital & Media Solutions LLC (the latter two collectively YP USA), Bookenda Limited (Bookenda), YP Dine Solutions Limited (YP Dine), 9059-2114 Québec Inc. and ByTheOwner Inc. (the latter two collectively ComFree/DuProprio), Juice DMS Advertising Limited and Juice Mobile USA LLC (the latter two collectively JUICE), and 9778748 Canada Inc. (Totem)).

FORWARD-LOOKING INFORMATION This MD&A contains assertions about the objectives, strategies, financial condition, results of operations and businesses of YP. These statements are considered “forward-looking” because they are based on current expectations of our business, on the markets we operate in, and on various estimates and assumptions.

Forward-looking information and statements are based on a number of assumptions which may prove to be incorrect. In making certain forward-looking statements, we have made the following assumptions: • that general economic conditions in Canada will not materially deteriorate beyond currently anticipated levels; • that investments in branding will evolve legacy perceptions and boost awareness of our digital media platforms and marketing solutions; • that we will be able to acquire new customers at the currently anticipated rate and currently anticipated Average Revenue per Customer (ARPC); • that customer renewal rates, as well as our ability to upsell renewing customers, will not be materially lower than currently anticipated; • that print decline rates remain stable; • that we will be able to introduce, sell and provision new products and services that will generate the anticipated return on investment (ROI) for customers;

• that revenues and profitability across its subsidiaries will not be materially lower than anticipated; • that investments in new content and digital experiences across our owned and operated properties will protect digital audiences; • that the revenue mix between our digital owned and operated, services and resale solutions will not materially change from currently anticipated levels; • that exposure to foreign exchange risk arising from foreign currency transactions will remain insignificant; • that we will be able to realize efficiency gains; and • that we will be able to attract and retain key personnel in key positions.

Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the anticipated or expected results described in the forward-looking information and statements will occur.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 5 MANAGEMENT’S DISCUSSION AND ANALYSIS

When used in this MD&A, such forward-looking statements may be identified by words such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goal”, “intend”, “objective”, “may”, “plan”, “predict”, “seek”, “should”, “strive”, “target”, “will”, “would” and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as at the date of this MD&A. The Corporation assumes no obligation to update or revise them to reflect new events or circumstances, except as may be required pursuant to securities laws. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future results or performance, and will not necessarily be accurate indications of whether or not such results or performance will be achieved. A number of factors could cause actual results or performance to differ materially from the results or performance discussed in the forward-looking statements and could have a material adverse effect on the Corporation, its business, results from operations and financial condition, including, but not limited to, the following risk factors discussed under the “Risks and Uncertainties” section of this MD&A, and those described in the “Risk Factors” section of our AIF: • Substantial competition could reduce the market share of the Corporation; • A prolonged economic downturn in principal markets of the Corporation; • A higher than anticipated rate of decline in print revenue resulting from changes in preferences and consumer habits; • The inability of the Corporation to attract, retain and upsell customers; • The inability of the Corporation to successfully enhance and expand its offering of digital and new media products; • The inability of the Corporation to supply the relationships and technologies required to appropriately service the needs of its national customers; • A higher than anticipated proportion of revenues coming from the Corporation’s digital products with lower margin, such as services and resale; • The Corporation’s business depends on the usage of its online and mobile properties and failure to protect traffic across the Corporation’s digital properties could impair its ability to grow revenues and expand its business; • The inability of the Corporation to develop information and technology systems and platforms required to execute the Corporation’s Return to Growth Plan; • The inability of the Corporation to execute on or delays in the execution of its Return to Growth Plan could impair its ability to grow revenues and expand its business; • The Corporation might be required to record additional impairment charges; • The Corporation’s inability to realize cost savings; • Failure by either the Corporation or the Telco Partners to fulfill their obligations set forth in the agreements between the Corporation and the Telco Partners; • Failure by the Corporation to adequately protect and maintain its brands and trademarks, as well as third party infringement of such;

• Work stoppages and other labour disturbances; • The Corporation’s inability to attract and retain key personnel; • Challenge by tax authorities of the Corporation’s position on certain income tax matters; • The loss of key relationships or changes in the level or service provided by internet portals, search engines and individual websites; • The failure of the Corporation’s computers and communications systems; • Declines in, or changes to, the real estate industry; • The inability of the Corporation to generate sufficient funds from operations, debt financings, equity financings or refinancing transactions; • The Corporation’s amount of debt and compliance with the covenants applicable under its debt instruments could adversely affect its efforts to refinance; and • Incremental contributions by the Corporation to its pension plans.

6 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

DEFINITIONS RELATIVE TO UNDERSTANDING OUR RESULTS Income from Operations before Depreciation and Amortization, Impairment of Intangible Assets and Restructuring and Special Charges (Adjusted EBITDA) We report on our Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (Adjusted EBITDA). Adjusted EBITDA is not a performance measure defined under IFRS and is not considered an alternative to (loss) income from operations or net (loss) earnings in the context of measuring Yellow Pages’ performance. Adjusted EBITDA does not have a standardized meaning and is therefore not likely to be comparable with similar measures used by other publicly traded companies. Adjusted EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, income taxes, interest payments, pension funding, capital expenditures, business acquisitions, debt principal reductions and other sources and uses of cash, which are disclosed on page 23 of this MD&A.

We define Adjusted EBITDA as revenues less operating costs, as shown in Yellow Pages Limited’s consolidated income statements. We use Adjusted EBITDA to evaluate the performance of our business as it reflects its ongoing profitability. We believe that certain investors and analysts use Adjusted EBITDA to measure a company’s ability to service debt and to meet other payment obligations or as a common measurement to value companies in the media and marketing solutions industry as well as to evaluate the performance of a business. Adjusted EBITDA is also one component in the determination of short-term incentive compensation for all management employees.

Free cash flow Free cash flow is a non-IFRS financial measure generally used as an indicator of financial performance. It should not be seen as a substitute for cash flow from operating activities. Free cash flow is defined as cash flows from operating activities, as reported in accordance with IFRS, less an adjustment for capital expenditures. Free cash flow is not a standardized measure and is not comparable with that of other publicly traded companies. We consider free cash flow to be an important indicator of the performance of our business as it shows how much cash is available to repay debt and to make sound investment decisions. We believe that certain investors and analysts use free cash flow to value a business and its underlying assets as well as to evaluate a company’s performance. The most comparable IFRS financial measure is cash flows from operating activities. Please refer to Section 4 – Free Cash Flow for a reconciliation of cash flows from operating activities to free cash flow.

Net debt Net debt is a non-IFRS financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other publicly traded companies. We define net debt as current portion of long-term debt plus long-term debt and exchangeable debentures, less cash, as presented in Yellow Pages Limited’s consolidated statements of financial position. We consider net debt to be an important indicator of our financial leverage as it represents the amount of debt that is not covered by available cash. We believe that certain investors and analysts use net debt to determine a company’s financial leverage. Net debt has no directly comparable IFRS financial measure; it is calculated using certain asset and liability categories from consolidated statements of financial position. Please refer to Section 3 – Liquidity and Capital Resources for a reconciliation of long-term debt, net of cash, to net debt.

This MD&A is divided into the following sections:

1. Our Business and Strategy and Capability to Deliver Results 2. Results 3. Liquidity and Capital Resources 4. Free Cash Flow 5. Critical Assumptions 6. Risks and Uncertainties 7. Controls and Procedures

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 7 MANAGEMENT’S DISCUSSION AND ANALYSIS

1. OUR BUSINESS AND STRATEGY AND CAPABILITY TO DELIVER RESULTS

OUR BUSINESS Yellow Pages is one of Canada’s leading digital media and marketing solutions companies, providing local businesses, national brands and consumers with the necessary tools to interact and transact within today’s digital economy.

Customer Offerings

Yellow Pages offers small and medium-sized enterprises (SMEs) across Canada full-serve access to one of the country’s most comprehensive suites of digital and traditional marketing solutions, notably online and mobile priority placement on Yellow Pages’ owned and operated media, content syndication, search engine solutions, website fulfillment, social media campaign management and digital display advertising, as well as video production and print advertising. The Company’s in-house network of close to 1,000 sales professionals are committed to providing effective digital marketing campaigns for local businesses across Canada, while also assisting the Company’s customer base of 241,500 SMEs.

Yellow Pages’ marketing solutions extend beyond SMEs to also focus on the national advertising needs of brands and publishers. The acquisition of JUICE in March 2016, a premium mobile advertising technology company, in conjunction with the Company’s Mediative division, positions the Company as a desktop and mobile national advertising agency. JUICE’s proprietary Programmatic Direct and Real-Time Bidding platforms facilitate the automatic buying and selling of mobile advertising between brands and publishers and by leveraging these proprietary programmatic technologies as well as a database of high-intent consumer data, a publisher network and strong relationships established with a number of large national advertisers, Yellow Pages’ national digital advertising programs allow brands and publishers to maximize revenue and reach across both desktop and mobile platforms.

Yellow Pages continues to actively strengthen its market positioning by introducing digital solutions that address the targeted needs of SMEs and consumers within key verticals.

ComFree/DuProprio (CFDP), acquired in July 2015, has established Yellow Pages as a leader in the Canadian consumer- to-consumer real estate marketplace, by providing homeowners with trusted media as well as expertise to sell their homes in a proven and cost-effective manner. Approximately 20% of all real estate listings and sales in Quebec are represented through CFDP, and various initiatives are currently underway to grow adoption of the platform in Ontario.

Through Bookenda, the Company is enhancing its value proposition to local restaurant owners. Bookenda’s reservation management system offers restaurants a comprehensive solution allowing them to effectively manage reservations and orders, grow market visibility and boost customer loyalty, all at a competitive cost.

Consumer Offerings

Yellow Pages’ owned and operated media, which include desktop, mobile and print properties, continue to serve as effective marketplaces for Canadian local merchants, brands and consumers. Helping Canadians discover their neighbourhoods, the Company’s network of media properties is becoming increasingly specialized across the services, real estate, dining and retail verticals. A description of the Company’s existing digital media properties is found below:

• YP™ – Available both online at YP.ca and as a mobile application, YP allows users to discover and transact within their local neighbourhoods through comprehensive merchant profiles, relevant editorial content, reviews and booking functionalities; • Canada411 (C411) – One of Canada’s most frequented and trusted online and mobile destinations for personal and local business information;

• RedFlagDeals.com™ – Canada’s leading provider of online and mobile promotions, deals, coupons and shopping forums;

• ComFree/DuProprio – Currently Quebec’s leading real estate digital destination and one of the top five most- visited networks of real estate digital properties in Canada, CFDP offers homeowners a professional and cost- effective service to market and sell their homes; • YP Dine™ – A digital property allowing users to discover, search for and book local restaurants based on time of day, mood, purpose and expert suggestions, in addition to offering online ordering capabilities;

• Yellow Pages NextHome – Provides Canadians with helpful information in making informed home buying, selling, and/or renting decisions. Digital properties operating under the Yellow Pages NextHome umbrella include YP NextHome Rent and YP NextHome New Construction; • Bookenda.com – A leading online transaction platform for users and merchants to interact and manage bookings and orders;

8 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

• dine.TO – Provides users in the Greater Toronto Area with an extensive database of online local restaurant listings, reviews, deals, playlists and events;

• YP Shopwise™ – A mobile application offering geo-localized deals and flyers, as well as access to product catalogues from local and national retailers; and

• 411.ca – A digital directory service to help users find and connect with people and local businesses.

STRATEGY AND CAPABILITY TO DELIVER RESULTS The Return to Growth Plan (the Plan), which was introduced in early 2014, sets out three main objectives to promote Yellow Pages’ growth into a leading Canadian digital company: (1) enhance its value proposition to local merchants and national brands as it relates to effective digital marketing, (2) grow consumer awareness and usage of its network of digital media properties, and (3) strengthen the Company’s digital brand perception among Canadians. Since the introduction of the Plan, we have achieved sustained progress, namely, the onset of a certain level of stabilization of the customer base and consolidated revenues, as well as growth in customer acquisition as we transition to a digital-first company. In addition, we have substantially deleveraged our balance sheet.

As we continue to focus on the execution of the Plan, we have initiated a review of our business strategy and management outlook with the purpose of supporting the continued long-term success of our digital-first business. The areas of focus include marketing offers, the customer journey, sales structure, operational platforms and the subsequent effects on long-term revenue, Adjusted EBITDA growth and capital allocation policy. The Company anticipates communicating the outcomes of this exercise and the accompanying strategy in May 2017.

Key highlights on the implementation and execution of Yellow Pages’ Plan for the full year and fourth quarter ended December 31, 2016 include:

• Digital Revenues – Consolidated digital revenues grew 14.3% year-over-year to reach $555.8 million in 2016, representing 67.9% of consolidated revenues. For the fourth quarter ended December 31, 2016, digital revenues grew 10.8% year-over-year to total $143.1 million, representing 70.6% of consolidated revenues;

• Adjusted EBITDA – Adjusted EBITDA totalled $235.2 million, or 28.8% of revenues in 2016, relative to $260.7 million or 31.4% of revenues in 2015. Adjusted EBITDA for the fourth quarter ended December 31, 2016, totalled $57.4 million or 28.3% of revenues, as compared to $64.5 million or 30.9% of revenues for the same period last year;

• Customer Count – The Company’s customer count was 241,500 customers as at December 31, 2016, as compared to 245,000 customers as at December 31, 2015. This represents a net customer count decline of 3,500 year-over- year, a significant improvement when compared to 11,000 net customers lost during the same period last year;

• Digital Visits – Total digital visits (TDV) totalled 464.7 million in 2016, as compared to 464 million in 2015. Total digital visits measures the number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, C411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of the Company’s application syndication partners; and

• Debt Repayment – The Company made principal mandatory redemption payments of $97.1 million in 2016 on its 9.25% senior secured notes, bringing the total repayment to $490.3 million since inception of the senior secured notes on December 20, 2012.

Enhancing its Customer Value Proposition The Company’s customer count totalled 241,500 customers as at December 31, 2016, as compared to 245,000 customers as at December 31, 2015. This represents a net customer count decline of 3,500 year-over-year, a significant improvement from 11,000 net customers lost during the same period last year.

Growth in the customer count remains a critical driver in the Company’s ability to deliver sustainable revenue and Adjusted EBITDA growth. Yellow Pages successfully acquired 41,100 new customers during the year ended December 31, 2016, exceeding the acquisition of 30,800 new customers during the same period last year, representing a 33% increase year-over-year. In 2016, the Company focused on promoting lead generation and optimizing conversion rates within the Company’s sales force to grow customer acquisition and stabilize the customer count. In conjunction, various initiatives and tools were implemented throughout the year, including the introduction of a dialer across Yellow Pages’ call centers to automate the qualification and assignment of incoming customer leads. The dialer, which also acts as a leads management system, enabled the sales force to target leads by segment, launch meaningful campaigns at the optimal times of the year, and ultimately contributed to overall improvements in the conversion rate.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 9 MANAGEMENT’S DISCUSSION AND ANALYSIS

The customer renewal rate was 82% for the year ended December 31, 2016, as compared to a renewal rate of 85% last year. While this continues to represent strong customer loyalty for the industry, the customer renewal rate remains under pressure due to accelerated levels of customer acquisition as new customer cohorts churn at higher rates than older customer cohorts. In an effort to protect customer renewal rates, Yellow Pages continues to grow specialized onboarding teams and increase retention efforts across sales and customer care channels. Digital-only customers grew to 76,800, or 32% of the customer base as at December 31, 2016, up from 54,500, or 22% of the customer base as at the same period last year. With new platforms and processes being implemented, the Company is actively growing the efficiency and productivity of its customer-facing and digital fulfillment operations.

CUSTOMER ACQUISITION AND RENEWAL1 For the years ended December 31, 2016 2015

Customer count² 241,500 245,000 New customers 41,100 30,800 Customer renewal rate 82% 85%

1 YP only, excludes the contribution of Mediative, JUICE, 411.ca, Yellow Pages NextHome, CFDP and Totem. 2 As at December 31.

Strengthening its Media Assets

Total digital visits (TDV) totalled 464.7 million for the year ended December 31, 2016, as compared to 464 million during the same period last year. TDV performance in 2016 remained stable year-over-year with an increase of 26% in traffic in the fourth quarter of 2016 compared to the same period last year, attributable to the Company’s strong partnership network, syndicating Yellow Pages listings and content.

Extending its Brand Promise

Over the course of 2016, the Company launched a range of multimedia campaigns to enhance the digital brand relevancy and perception of Yellow Pages media and marketing solutions across Canada and raise adoption of the Company’s digital media properties, as well as to boost the level of investment of current and prospective customers in the Company’s marketing solutions.

Yellow Pages launched a campaign comprised of digital mobile and online advertising to promote the Company’s NetSync product, a product allowing merchants to create their online business listing. This campaign successfully generated quality leads for our sales force that ultimately contributed to the customer acquisition target achievement and underscored the need among Canadian small and medium-sized businesses.

On the consumer front, Yellow Pages launched a digital advertising campaign to increase awareness and adoption of the Company’s dining application, YP Dine that can be viewed at the Company’s dedicated YP Dine Facebook page: https://www.facebook.com/ypdine/videos. Also in 2017, Yellow Pages specifically targeted ethnic markets in Toronto and Vancouver. This campaign has yielded positive results, with business owners demonstrating an interest in YP Dine products and services across demographics.

10 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

2. RESULTS

This section provides an overview of our financial performance in 2016 compared to 2015 and 2014. We present several metrics to help investors better understand our performance. Some of these metrics are not measures recognized by IFRS. Definitions of these financial metrics are provided on page 7 of this MD&A and are important aspects which should be considered when analyzing our performance.

OVERALL

• Revenues decreased by $11.8 million or 1.4% to $818 million compared to the previous year.

• Digital revenues grew 14.3% year-over-year to reach $555.8 million in 2016. For the year ended December 31, 2016, digital revenues represented 67.9% of consolidated revenues, up from 58.6% for the same period in 2015.

• Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (Adjusted EBITDA) decreased by $25.5 million or 9.8% to $235.2 million for the year ended December 31, 2016 compared to the same period in 2015.

HIGHLIGHTS (IN THOUSANDS OF CANADIAN DOLLARS– EXCEPT PER SHARE AND PERCENTAGE INFORMATION)

For the years ended December 31, 2016 2015 Revenues $ 817,979 $ 829,771 Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (Adjusted EBITDA) $ 235,191 $ 260,687 Adjusted EBITDA margin 28.8% 31.4% Impairment of intangible assets $ 600,000 $ Net (loss) earnings $ (403,705) $ 61,055 Basic (loss) earnings per share $ (15.23) $ 2.29 Cash flows from operating activities $ 158,113 $ 197,566 Free cash flow $ 94,607 $ 122,145

REVENUES (1.4%) ADJUSTED EBITDA (9.8%) (IN MILLIONS OF CANADIAN DOLLARS) (IN MILLIONS OF CANADIAN DOLLARS)

2016 $818.0 2016 $235.2

2015 $829.8 2015 $260.7

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 11 MANAGEMENT’S DISCUSSION AND ANALYSIS

CONSOLIDATED OPERATING AND FINANCIAL RESULTS (IN THOUSANDS OF CANADIAN DOLLARS – EXCEPT PER SHARE INFORMATION)

For the years ended December 31, 2016 2015 2014 Revenues $ 817,979 $ 829,771 $ 877,528 Operating costs 582,788 569,084 561,552 Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges 235,191 260,687 315,976 Depreciation and amortization 104,882 80,837 78,076 Impairment of intangible assets 600,000 Restructuring and special charges 22,961 30,834 18,359 (Loss) income from operations (492,652) 149,016 219,541 Financial charges, net 56,130 60,922 72,116 (Loss) earnings before income taxes and (loss) earnings from investments in associates (548,782) 88,094 147,425 (Recovery of) provision for income taxes (145,517) 27,039 (40,937) Loss (earnings) from investments in associates 440 (178) Net (loss) earnings $ (403,705) $ 61,055 $ 188,540

Basic (loss) earnings per share $ (15.23) $ 2.29 $ 6.95 Diluted (loss) earnings per share $ (15.23) $ 2.05 $ 5.81

As at December 31, 2016 2015 2014 Total assets $ 1,099,937 $ 1,710,627 $ 1,749,560 Long-term debt (including current portion, excluding exchangeable debentures) $ 310,028 $ 407,353 $ 507,911 Exchangeable debentures $ 92,174 $ 90,478 $ 88,959

ANALYSIS OF CONSOLIDATED OPERATING AND FINANCIAL RESULTS

FISCAL YEAR 2016 VERSUS 2015

Revenues Revenues for the year ended December 31, 2016 decreased by 1.4% year-over-year and amounted to $818 million in 2016 as compared to $829.8 million for the same period last year. Revenue decline is due to lower print revenues. Included in revenues for the year were revenues generated from our acquired businesses, CFDP and JUICE on July 1, 2015 and March 17, 2016, respectively. On a pro forma basis, which adjusts revenues for the full inclusion of CFDP and JUICE in 2015 as well as for the full inclusion of JUICE during the first quarter of 2016, revenues decreased 6.2% year-over-year.

Digital revenues grew 14.3% year-over-year to reach $555.8 million in 2016, or 67.9% of revenues. This compares to $486.3 million, or 58.6% of revenues, for the same period last year. On a pro forma basis, digital revenues for the year ended December 31, 2016 increased approximately 5% year-over-year. Yellow Pages’ local operations contributed favourably to pro forma digital revenue growth, a result of accelerated customer acquisition and an increase in digital spending among the Company’s renewing customer base. Pro forma digital revenue growth was also favourably impacted by CFDP’s growing network of home sellers and buyers in Quebec and Ontario, as well as by revenue growth in our national advertising operations (JUICE and Mediative), despite a softer than anticipated performance. For the year ended December 31, 2016, 47% of renewing customers experienced a year-over-year increase in annual spending, as compared to 44% of customers over the same period last year.

Print revenues decreased 23.6% year-over-year and amounted to $262.2 million in 2016, adversely impacted by a decline in the number of print customers and the migration of print marketing spending to digital.

12 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

CUSTOMER PENETRATION1 As at December 31, 2016 2015 Print 68% 78% Owned and Operated Digital Media2 70% 66% Online priority placement 61% 60% Mobile priority placement 26% 27% Digital Services3 10% 10%

SPENDING DYNAMICS¹ For the years ended December 31, 2016 2015 Amongst Renewing Customers1 Increase in spending4 Customer distribution 47% 44% % of revenues 32% 32% Stable spending5 Customer distribution 36% 39% % of revenues 27% 27% Decrease in spending6 Customer distribution 17% 17% % of revenues 41% 41% Average Revenue per Customer (ARPC) $ 2,689 $ 2,930

OPERATIONAL INDICATORS As at December 31, 2016 2015 Digital-only customers1 76,800 54,500 Digital revenues (in thousands of Canadian dollars)7 $ 555,772 $ 486,346 Digital revenues as a percentage of total revenues7 67.9% 58.6%

1 YP only, excludes the contribution of Mediative, JUICE, 411.ca, Yellow Pages NextHome, CFDP and Totem. 2 Percentage of YP customers purchasing at least one Online Priority Placement, Mobile Priority Placement, NetSync, Content, Video, and/or Legacy product. 3 Percentage of YP customers purchasing at least one PresenceExtended, Website, Search Engine Optimization (SEO), Search Engine Marketing (SEM), Facebook Solution, and/or Smart Digital Display product. 4 Renewing YP customers experiencing an increase in spending of over 5%, on a year-over-year basis. 5 Renewing YP customers experiencing an increase in spending between 0% and 5%, on a year-over-year basis. 6 Renewing YP customers experiencing a decrease in spending on a year-over-year basis. 7 For the years ended December 31.

Adjusted EBITDA Adjusted EBITDA decreased by $25.5 million to $235.2 million during 2016, compared with a decline of $55.3 million to $260.7 million during 2015. This represents a year-over-year decline of 9.8% during 2016, as compared to a year-over-year decline of 17.5% the year prior. Our Adjusted EBITDA margin for 2016 was 28.8% compared to 31.4% for 2015. The decrease in Adjusted EBITDA and Adjusted EBITDA margin for the year ended December 31, 2016 was mostly impacted by lower print revenues and a change in product mix, partly offset by cost saving initiatives. The decline in the Adjusted EBITDA margin was also impacted by the acquisitions of CFDP and JUICE, which operate at a lower Adjusted EBITDA margin relative to Yellow Pages prior to the acquisitions.

Cost of sales increased by $14.6 million to $335.2 million in 2016, as compared to $320.6 million for the same period in 2015. The increase for the year is due principally to the acquisitions of CFDP and JUICE on July 1, 2015 and March 17, 2016, respectively, as well as a change in product mix, partly offset by cost saving initiatives.

Gross profit margin decreased to 59% in 2016 compared to 61.4% in 2015. The decrease is primarily due to a change in product mix and the acquisitions of CFDP and JUICE, which operate at a lower gross profit margin relative to Yellow Pages prior to the acquisitions, partly offset by operational efficiencies.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 13 MANAGEMENT’S DISCUSSION AND ANALYSIS

General and administrative expenses decreased by $0.9 million to $247.6 million during 2016 compared to $248.5 million for the year ended December 31, 2015. The decrease for the year is mainly attributable to cost savings associated with the corporate realignment implemented in the third and fourth quarters of 2015, as well as cost containment initiatives implemented throughout the year, offset by expenses associated with JUICE.

Depreciation and amortization Depreciation and amortization increased to $104.9 million during 2016 compared to $80.8 million in 2015. The increase is due to higher capital expenditures in connection with the deployment of systems and platforms as the Company implements its digital transformation as well as amortization of the intangible assets related to the acquisition of JUICE.

Impairment of intangible assets In the context of its annual impairment testing and as a result of a marked acceleration in an unfavourable change in the product mix during the fourth quarter of 2016 in the Yellow Pages CGU, the Company determined that the recoverability of certain of its assets had to be reviewed for impairment purposes. Consequently, we recorded an impairment loss of $600 million during the fourth quarter related to certain of our intangible assets, namely our trademarks and non- competition agreements. The impairment charge is a non-cash item and does not affect the Company’s debt covenants. In this context, the Company anticipates additional pressure on Adjusted EBITDA in 2017. As it works to address the mix issue, the Company expects stabilization in Adjusted EBITDA in the short to mid-term, post-2017. However, not at the levels previously anticipated.

Restructuring and special charges In 2016, we recorded restructuring and special charges of $23 million associated primarily with internal reorganizations and workforce reductions, as well as transaction costs associated with business acquisitions. In 2015, we recorded restructuring and special charges of $30.8 million associated primarily with workforce reductions related to the corporate realignment, internal reorganizations, transaction costs associated with business acquisitions, and contract termination costs, partially offset by a curtailment gain related to workforce reductions.

Financial charges Financial charges decreased by $4.8 million to $56.1 million during 2016 compared to $60.9 million for 2015. The decrease is due to a lower level of indebtedness, partially offset by sales taxes resulting from the settlement of a sales tax assessment relating to financing costs and foreign currency losses. As at December 31, 2016, the effective average interest rate on our debt portfolio was 8.9% (2015 – 9%).

(Recovery of) provision for income taxes The combined statutory provincial and federal tax rates were 26.9% and 26.7% for the years ended December 31, 2016 and 2015, respectively. The Company recorded a recovery of $145.5 million during 2016, comprised of a recovery of income taxes of $161 million associated with an impairment loss of $600 million on certain of its intangible assets recorded during the fourth quarter of 2016. The recovery of income taxes of $161 million is a non-cash item. The Company recorded an expense of $27 million in 2015. The Company recorded a recovery of 26.5% on the loss for the year ended December 31, 2016 compared to an expense of 30.7% on earnings for the year ended December 31, 2015.

The difference between the effective and the statutory rates in 2016 and 2015 is due to the non-deductibility of certain expenses for tax purposes.

Loss from investment in associate On October 3, 2016, we acquired a 50% ownership in 9778730 Canada Inc., which owns 100% of Coupgon Inc., a digital coupon solutions provider. We recorded a loss from our investment in an associate in the amount of $0.4 million during the year ended December 31, 2016.

Net (loss) earnings

We recorded a net loss of $403.7 million during 2016 compared with net earnings of $61.1 million for 2015. The decrease for the year is principally explained by an impairment of our intangible assets of $600 million as well as lower Adjusted EBITDA and higher depreciation and amortization, mainly resulting from a higher level of capital expenditures in the context of the Company’s digital evolution as well as amortization of intangible assets related to the acquisition of JUICE.

14 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

FISCAL YEAR 2015 VERSUS 2014 Revenues Revenues decreased by 5.4% year-over-year to reach $829.8 million in 2015. This compares to $877.5 million for the same period in 2014. Revenues remained adversely impacted by a lower customer count within Yellow Pages’ core business, in addition to a decrease in print spending among renewing customers.

Digital revenues are a growing contribution of the Company’s consolidated revenue base. Digital revenues grew by 9.8% year-over-year to reach $486.3 million in 2015, or 58.6% of revenues, as compared to $442.8 million, or 50.5% of revenues, in 2014. Growth in digital revenues was principally driven by accelerated customer acquisition and growth in digital spending among the Company’s renewing customers, as well as the acquisition of CFDP on July 1, 2015. Excluding CFDP, digital revenues for the year ended December 31, 2015 grew by approximately 6% year-over-year.

Print revenues decreased 21% year-over-year to reach $343.4 million in 2015, adversely impacted by a decline in the number of print customers and the migration of print marketing spending to digital.

Adjusted EBITDA Adjusted EBITDA decreased by $55.3 million to $260.7 million during 2015, compared with a decline of $100.1 million to $316 million for the same period in 2014. This represents a year-over-year decline of 17.5% during 2015, as compared to a year-over-year decline of 24.1% the year prior. Our Adjusted EBITDA margin for 2015 was 31.4% compared to 36% for 2014. The decrease in Adjusted EBITDA and Adjusted EBITDA margin for the year ended December 31, 2015 is due mainly to lower print revenues and a change in product mix, partly offset by cost saving initiatives and lower employee related expenses. The Adjusted EBITDA margin was also adversely impacted by the Company’s Mediative, 411.ca and CFDP operations, which operate at lower Adjusted EBITDA margins relative to Yellow Pages’ core business.

Cost of sales increased by $13.7 million to $320.6 million in 2015, as compared to $306.9 million for the same period in 2014. The increase for the year is due primarily to the acquisitions of 411.ca and CFDP on June 1, 2014 and July 1, 2015, respectively, and a change in product mix, partly offset by cost savings generated from print optimization initiatives.

Gross profit margin decreased to 61.4% in 2015 compared to 65% in 2014. The decrease is primarily due to a change in product mix and the acquisitions of 411.ca and CFDP.

General and administrative expenses decreased by $5.4 million to $249.3 million during 2015 compared with $254.7 million for the year ended December 31, 2014. The decrease is mainly attributable to cost savings associated with the corporate realignment, employee related expenses and amendments to our pension and post-retirement benefit plans, partly offset by expenses associated with 411.ca and CFDP.

Depreciation and amortization Depreciation and amortization increased to $80.8 million during 2015 compared to $78.1 million in 2014. The increase is due to higher capital expenditures in connection with the deployment of systems and platforms as the Company executes its digital transformation.

Restructuring and special charges In 2015, we recorded restructuring and special charges of $30.8 million associated primarily with workforce reductions related to a corporate realignment, internal reorganizations, transaction costs associated with business acquisitions, and contract termination costs, partially offset by a curtailment gain related to workforce reductions. In 2014, we recorded restructuring and special charges of $18.4 million associated primarily with internal reorganizations and workforce reductions, partially offset by a net curtailment gain related to workforce reductions.

Financial charges Financial charges decreased by $11.2 million to $60.9 million during 2015 compared with $72.1 million for 2014. The decrease is mainly attributable to a lower level of indebtedness. As at December 31, 2015 and 2014, the effective average interest rate on our debt portfolio was 9%.

Provision for (recovery of) income taxes The combined statutory provincial and federal tax rates were 26.70% and 26.56% for the years ended December 31, 2015 and 2014, respectively. The Company recorded an expense of $27 million for the year compared to a recovery of $40.9 million in 2014. The Company recorded an expense of 30.69% on earnings for the year ended December 31, 2015 and a recovery of 27.77% on earnings for the year ended December 31, 2014.

The difference between the effective and the statutory rates in 2015 is due to the non-deductibility of certain expenses for tax purposes. The difference between the effective and the statutory rates in 2014 is primarily due to a recovery of income taxes

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 15 MANAGEMENT’S DISCUSSION AND ANALYSIS

of $84.8 million related to the cancellation of certain income tax liabilities in the fourth quarter of 2014 following the settlement of tax assessments with the Canada Revenue Agency.

Earnings from investments in associates On June 1, 2014, we acquired the remaining 70% interest in 411.ca, whose results are now consolidated within YP. We recorded earnings of $0.2 million for the period from January 1, 2014 up to the acquisition date.

Net earnings

We recorded net earnings of $61.1 million during 2015 compared with $188.5 million for 2014. The decrease for the year is principally explained by lower Adjusted EBITDA and higher restructuring and special charges, in addition to a recovery of income taxes of $84.8 million during the fourth quarter of 2014 related to the cancellation of certain income tax liabilities following the settlement of tax assessments.

SUMMARY OF CONSOLIDATED QUARTERLY RESULTS

QUARTERLY RESULTS (IN THOUSANDS OF CANADIAN DOLLARS – EXCEPT PER SHARE AND PERCENTAGE INFORMATION)

2016 2015 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Revenues $ 202,723 $ 201,142 $ 210,487 $ 203,627 $ 208,505 $ 210,593 $ 204,771 $ 205,902 Operating costs 145,305 144,193 151,556 141,734 144,007 146,783 143,178 135,116 Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (Adjusted EBITDA) 57,418 56,949 58,931 61,893 64,498 63,810 61,593 70,786 Adjusted EBITDA margin 28.3% 28.3% 28.0% 30.4% 30.9% 30.3% 30.1% 34.4% Depreciation and amortization 27,745 26,838 25,440 24,859 20,792 21,161 20,212 18,672 Impairment of intangible assets 600,000 Restructuring and special charges 7,493 9,691 1,519 4,258 17,168 9,113 2,551 2,002 (Loss) income from operations (577,820) 20,420 31,972 32,776 26,538 33,536 38,830 50,112 Net (loss) earnings (431,583) 3,774 10,953 13,151 5,866 13,155 16,510 25,524 Basic (loss) earnings per share $ (16.35) $ 0.14 $ 0.41 $ 0.49 $ 0.22 $ 0.49 $ 0.62 $ 0.95 Diluted (loss) earnings per share $ (16.35) $ 0.14 $ 0.38 $ 0.45 $ 0.21 $ 0.44 $ 0.54 $ 0.81

Revenues decreased throughout the quarters principally impacted by an overall loss of customers, a decline in print spending among renewing customers, partially offset by an increasing number of digital customers. Revenues, starting in the third quarter of 2015, were favourably impacted by the acquisition of CFDP on July 1, 2015. Revenues, starting in the second quarter of 2016, were also favourably impacted by the acquisition of JUICE on March 17, 2016.

The Adjusted EBITDA margin was higher in the first quarter of 2015, given the timing of various investments related to the execution of the Company’s digital evolution as well as a favourable impact related to amendments to our pension and post-retirement benefit plans. Adjusted EBITDA margins remained relatively stable from the second quarter of 2015 to the first quarter of 2016, as print revenue declines, changes in the product mix, investments related to the Plan, and the acquisition of CFDP were offset by cost savings initiatives and lower employee related expenses. The Adjusted EBITDA margin decreased in the second, third, and fourth quarters of 2016 as a result of the acquisition of JUICE.

Depreciation and amortization expense remained relatively stable throughout 2015. Depreciation and amortization expense increased in 2016 in connection with the deployment of platforms and applications related to the Company’s digital evolution. Amortization was further increased in the second, third and fourth quarters of 2016 due to the amortization of intangible assets related to the acquisition of JUICE.

16 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

As the Company advances in the deployment of the Plan and its evolution from a print centric to a digital centric organization, it initiated workforce reductions and cost containment initiatives resulting in restructuring and special charges over the quarters.

Our net loss for the fourth quarter of 2016 was due to an impairment loss of $600 million related to certain of our intangible assets. Our net earnings for the fourth quarter of 2015 and the third quarter of 2016 were negatively impacted by higher restructuring charges resulting from internal reorganizations and workforce reductions.

ANALYSIS OF FOURTH QUARTER 2016 RESULTS Revenues Revenues decreased by 2.8% year-over-year to $202.7 million during the fourth quarter of 2016, as compared to $208.5 million for the same period last year. Revenue decline for the quarter is due to lower print revenues. Included in revenues for the quarter were revenues generated from JUICE. On a pro forma basis, which adjusts revenues for the full inclusion of JUICE during the fourth quarter of 2015, revenues decreased 7.1% year-over-year for the three-month period ended December 31, 2016.

Digital revenues grew 10.8% year-over-year to reach $143.1 million during the fourth quarter of 2016, or 70.6% of revenues. This compares to $129.2 million, or 62% of revenues, for the same period last year. On a pro forma basis, digital revenues for the three-month period ended December 31, 2016 increased approximately 3% year-over-year. Pro forma digital revenue growth was favourably impacted by CFDP’s growing network of home sellers and buyers in Quebec and Ontario, as well as by revenue growth in our national advertising operations (JUICE and Mediative), despite a softer than anticipated performance.

Print revenues decreased 24.8% year-over-year and amounted to $59.6 million during the fourth quarter ended December 31, 2016. Print revenue performance was adversely impacted by a decline in the number of print customers and the migration of print marketing spending to digital.

Adjusted EBITDA Adjusted EBITDA decreased by $7.1 million to $57.4 million during the fourth quarter of 2016, compared to $64.5 million for the same period in 2015. Our Adjusted EBITDA margin for the fourth quarter of 2016 was 28.3% as compared to 30.9% for the same period last year. The decrease in Adjusted EBITDA and Adjusted EBITDA margin for the three-month period ended December 31, 2016 was mostly impacted by lower print revenues and a change in product mix, partly offset by cost saving initiatives. The decline in the Adjusted EBITDA margin was also impacted by the acquisition of JUICE, which operates at a lower Adjusted EBITDA margin relative to Yellow Pages prior to the acquisition.

Cost of sales increased by $4.9 million to $87 million during the fourth quarter of 2016, as compared to $82.1 million during the fourth quarter of 2015. The increase for the fourth quarter of 2016 is mainly due to the acquisition of JUICE on March 17, 2016, partly offset by lower expenses associated with lower revenues.

Gross profit margin decreased to 57.1% for the fourth quarter of 2016 compared to 60.6% for the fourth quarter in 2015. The decrease is primarily due to a change in product mix and the acquisitions of CFDP and JUICE, which operate at a lower gross profit margin relative to Yellow Pages prior to the acquisitions, partly offset by operational efficiencies.

General and administrative expenses decreased by $3.6 million to $58.3 million during the fourth quarter of 2016 compared to $61.9 million for the same period in 2015. The decrease for the quarter is due to cost savings associated with the corporate realignment implemented in the third and fourth quarters of 2015, as well as cost containment initiatives implemented throughout the year, offset by expenses associated with JUICE.

Depreciation and amortization Depreciation and amortization increased to $27.7 million during the fourth quarter of 2016 compared to $20.8 million during the fourth quarter in 2015. The increase is due to higher capital expenditures in connection with the deployment of systems and platforms as the Company implements its digital evolution as well as amortization of the intangible assets related to the acquisition of JUICE.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 17 MANAGEMENT’S DISCUSSION AND ANALYSIS

Restructuring and special charges During the fourth quarter of 2016, we recorded restructuring and special charges of $7.5 million associated primarily with internal reorganizations and workforce reductions, as well as transaction costs associated with business acquisitions. During the fourth quarter of 2015, we recorded restructuring and special charges of $17.2 million associated primarily with workforce reductions related to the corporate realignment and contract termination costs, partially offset by a curtailment gain related to the workforce reductions.

Financial charges Financial charges decreased by $2.6 million to $12.7 million during the fourth quarter of 2016 compared to $15.3 million for the same period in 2015. The decrease is due to a lower level of indebtedness.

(Recovery of) provision for income taxes The combined statutory provincial and federal tax rates were 26.9% and 26.7% for the three-month periods ended December 31, 2016 and 2015, respectively. During the fourth quarter of 2016, the Company recorded a recovery of $159.3 million, comprised of a recovery of income taxes of $161 million associated with an impairment loss of $600 million on certain of its intangible assets. The recovery of income taxes of $161 million is a non-cash item. The Company recorded an expense of $5.4 million for the three-month period ended December 31, 2015. The Company recorded a recovery of 27% of the loss for the fourth quarter of 2016 compared to 48% of earnings for the fourth quarter of 2015.

The difference between the effective and the statutory rates for the fourth quarter of 2016 is due to the non-deductibility of certain expenses for tax purposes.

The difference between the effective and the statutory rates for the fourth quarter of 2015 is due to the recognition of previously unrecognized tax attributes on assets of our foreign subsidiaries as well as non-taxable and non-deductible items.

Loss from investments in associates On October 3, 2016, we acquired a 50% ownership in 9778730 Canada Inc., which owns 100% of Coupgon Inc., a digital coupon solutions provider. We recorded a loss from our investment in an associate in the amount of $0.4 million during the fourth quarter of 2016.

Net (loss) earnings We recorded a net loss of $431.6 million during the fourth quarter of 2016 as compared with net earnings of $5.9 million for the same period last year. The decrease for the quarter is principally explained by an impairment of our intangible assets of $600 million as well as lower Adjusted EBITDA and higher depreciation and amortization, mainly resulting from a higher level of capital expenditures in the context of the Company’s digital evolution as well as amortization of intangible assets related to the acquisition of JUICE, offset by lower restructuring and special charges and financial charges.

18 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

3. LIQUIDITY AND CAPITAL RESOURCES

This section examines the Company’s capital structure, sources of liquidity and various financial instruments including its debt instruments.

FINANCIAL POSITION

CAPITAL STRUCTURE (IN THOUSANDS OF CANADIAN DOLLARS – EXCEPT PERCENTAGE INFORMATION)

As at December 31, 2016 December 31, 2015 Cash $ 17,260 $ 67,253 Senior secured notes $ 309,669 $ 406,733 Exchangeable debentures 92,174 90,478 Obligations under finance leases 359 620 Net debt $ 384,942 $ 430,578 Equity 368,904 759,524 Total capitalization $ 753,846 $ 1,190,102 Net debt to total capitalization 51.1% 36.2%

NET DEBT TO LATEST TWELVE- CAPITAL STRUCTURE (IN MILLIONS OF CANADIAN DOLLARS) MONTH ADJUSTED EBITDA1 RATIO $369 $385

Dec. 31, 2016 1.6 Dec. 31, 2016

Dec. 31, 2015 1.7 Dec. 31, 2015

$760 $431 Total Equity Net Debt

As at December 31, 2016, Yellow Pages had $384.9 million of net debt, compared to $430.6 million as at December 31, 2015.

The net debt to Latest Twelve-Month Adjusted EBITDA1 ratio as at December 31, 2016 was 1.6 times compared to 1.7 times as at December 31, 2015. The decrease is due to a lower level of indebtedness, partially offset by lower Adjusted EBITDA and the acquisition of JUICE which resulted in a cash outflow of $35.3 million during the first quarter of 2016.

Asset-Based Loan In August 2013, the Company, through its subsidiary Yellow Pages Digital & Media Solutions Limited, entered into a five- year $50 million asset-based loan (ABL) expiring in August 2018. The ABL is being used for general corporate purposes. Through the ABL, the Company has access to the funds in the form of prime rate loans, Banker’s acceptance (BA) equivalent loans or letters of credit. The ABL is secured by a first priority lien over the receivables of the Company. Interest is calculated based either on the BA Rate or the Prime Rate plus an applicable margin. The ABL is subject to an availability reserve of $5 million if the Company’s trailing twelve-month fixed charge coverage ratio is below 1.1 times. As at December 31, 2016, the Company had $7.4 million of letters of credit issued and outstanding under the ABL. As such, $42.6 million of the ABL was available as at December 31, 2016.

As at December 31, 2016, the Company was in compliance with all covenants under the loan agreement governing the ABL.

1 Latest twelve-month income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (Latest Twelve-Month Adjusted EBITDA). Latest Twelve-Month Adjusted EBITDA is a non-IFRS measure and may not be comparable with similar measures used by other publicly traded companies. Please refer to page 7 for a definition of Adjusted EBITDA.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 19 MANAGEMENT’S DISCUSSION AND ANALYSIS

Senior Secured Notes On December 20, 2012, the Company, through its subsidiary Yellow Pages Digital & Media Solutions Limited, issued $800 million of 9.25% senior secured notes (the Senior Secured Notes) maturing November 30, 2018. Interest on the Senior Secured Notes is payable in cash, quarterly in arrears, in equal instalments on the last day of February, May, August and November of each year.

The Company repaid a total of $97.1 million in 2016 and $490.3 million since December 20, 2012 of its Senior Secured Notes, thereby reducing the balance from $800 million to $309.7 million as at December 31, 2016.

As at December 31, 2016, the Company was in compliance with all covenants under the indenture governing the Senior Secured Notes.

Mandatory Redemption Pursuant to the indenture governing the Senior Secured Notes, the Company is required to use an amount equal to 75% of its consolidated Excess Cash Flow for the immediately preceding six-month period ending March 31 or September 30, as applicable, to redeem on a semi-annual basis on the last day of May and November of each year, commencing on May 31, 2013, at a redemption price equal to 100% of the principal amount thereof from holders on a pro rata basis, subject to the Company maintaining a minimum cash balance, including availability on the ABL, of $75 million immediately following the mandatory redemption payment, subject to certain conditions. The $75 million minimum cash balance condition is subject to a reduction in certain cases as provided in the indenture governing the Senior Secured Notes. Excess Cash Flow, as defined in the indenture governing the Senior Secured Notes, means the aggregate cash flow from operating activities adjusted for, among other things, payments relating to interest, taxes, long-term employee compensation plans, certain pension plan contribution payments and the acquisition of property and equipment and intangible assets. For purposes of determining the consolidated Excess Cash Flow, deductions for capital expenditures and information systems/information technology expenses are each subject to an annual deduction limit of $50 million. Under other circumstances, the Company may also have to make additional repayments on the Senior Secured Notes (refer to the indenture governing the Senior Secured Notes).

Optional Redemption The Company may redeem all or part of the Senior Secured Notes at its option, upon not less than 30 nor more than 60 days prior notice, at a redemption price equal to: • In the case of a redemption occurring prior to May 31, 2017, 105% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date; or • In the case of a redemption occurring on or after May 31, 2017, 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.

Exchangeable Debentures On December 20, 2012, the Company, through its subsidiary Yellow Pages Digital & Media Solutions Limited, issued $107.5 million of senior subordinated exchangeable debentures (the Exchangeable Debentures) due November 30, 2022.

Interest on the Exchangeable Debentures accrues at a rate of 8% per annum if, for the applicable interest period, it is paid in cash or 12% per annum, for the applicable interest period, if the Company makes a Payment in Kind election to pay interest in respect of all or any part of the then outstanding Exchangeable Debentures in additional Exchangeable Debentures. Interest on the Exchangeable Debentures is payable semi-annually in arrears in equal instalments on the last day of May and November of each year.

As at December 31, 2016, the Company was in compliance with all covenants under the indenture governing the Exchangeable Debentures.

Exchange Option The Exchangeable Debentures are exchangeable at the holder’s option into common shares at any time at an exchange price per common share equal to $19.04, subject to adjustment for specified transactions. Optional Redemption The Company may, at any time on or after the date on which all of the Senior Secured Notes have been repaid in full, redeem all or part of the Exchangeable Debentures at its option, upon not less than 30 nor more than 60 days’ prior notice, at a redemption price equal to: • In the case of a redemption occurring prior to May 31, 2021, 110% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date; or

• In the case of a redemption occurring on or after May 31, 2021, 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.

20 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

CREDIT RATINGS

DBRS LIMITED STANDARD AND POOR’S RATING SERVICES B (high)/Issuer rating – stable outlook B/Corporate credit rating – stable outlook BB (low)/Credit rating for Senior Secured Notes BB-/Credit rating for Senior Secured Notes B (low)/Credit rating for Exchangeable Debentures CCC+/Credit rating for Exchangeable Debentures

Liquidity The Company’s principal source of liquidity is cash generated from operations and cash on hand. The Company expects to generate sufficient liquidity to fund capital expenditures, working capital requirements and current obligations, and service its outstanding debt obligations. As at February 13, 2017, the Company had approximately $15.1 million of cash and $42.8 million available under the ABL.

Options On December 20, 2012, as part of the implementation of Yellow Pages’ recapitalization transaction, a new stock option plan (the Stock Option Plan) was adopted. The Stock Option Plan is intended to attract and retain the services of selected employees (the Participants) of Yellow Pages who are in a position to make a material contribution to the successful operation of the business, provide meaningful incentive to management to lead Yellow Pages through the transition and transformation of its business and to more closely align the interests of management with those of the shareholders of Yellow Pages Limited. A maximum of 1,290,612 stock options may be granted under the Stock Option Plan.

The stock options expire approximately seven years after the grant date and Participants are required to hold 25% of the common shares received pursuant to the exercise of the stock options until the Participants meet the ownership guidelines which apply to their respective position.

Share data OUTSTANDING SHARE DATA

As at February 14, 2017 December 31, 2016 December 31, 2015 Common shares outstanding 28,075,306 28,075,304 28,063,919 Exchangeable Debentures outstanding1 5,624,422 5,624,422 5,624,422 Common share purchase warrants outstanding 2,995,486 2,995,488 2,995,498 Stock options outstanding² 630,950 630,950 522,950

1 As at February 14, 2017, Yellow Pages had $107.1 million principal amount of Exchangeable Debentures outstanding, which amount is exchangeable into 5,624,422 common shares of Yellow Pages Limited at an exchange price of $19.04, subject to adjustment for specified transactions pursuant to the indenture governing the Exchangeable Debentures. 2 Included in the stock options outstanding balance of 630,950 as at February 14, 2017 and December 31, 2016 are 366,500 and 186,550 stock options exercisable as at those respective dates. Included in the stock options outstanding balance of 522,950 as at December 31, 2015 are 78,000 stock options exercisable as at that date.

Contractual Obligations and Other Commitments CONTRACTUAL OBLIGATIONS (IN THOUSANDS OF CANADIAN DOLLARS)

Payments due for the years following December 31, 2016 Total 1 year 2 – 3 years 4 – 5 years After 5 years Long-term debt1,2 $ 309,669 $ 75,018 $ 234,651 $ $ Obligations under finance leases1 359 143 216 Exchangeable Debentures1 107,089 107,089 Operating leases 294,020 21,417 36,720 33,386 202,497 Other 59,677 31,835 21,517 3,806 2,519 Total contractual obligations $ 770,814 $ 128,413 $ 293,104 $ 37,192 $ 312,105

1 Principal amount. 2 The repayment of the Senior Secured Notes may vary subject to the Excess Cash Flow under the indenture governing the Senior Secured Notes as well as the minimum cash balance requirement post Mandatory Redemptions under the indenture governing the Senior Secured Notes.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 21 MANAGEMENT’S DISCUSSION AND ANALYSIS

Obligations under finance leases We enter into finance lease agreements for office equipment and software. As at December 31, 2016, minimum payments under these finance leases up to 2019 totalled $0.4 million.

Operating leases We rent our premises and office equipment under various operating leases. As at December 31, 2016, minimum payments under these operating leases up to 2034 totalled $294 million.

Purchase obligations We use the services of outside suppliers to distribute and print our directories and have entered into long-term agreements with a number of these suppliers. These agreements expire between 2017 and 2038. We also have purchase obligations under service contracts for both operating and capital expenditures. As at December 31, 2016, we have an obligation to purchase services for $59.7 million over the next five years and thereafter. Cash from operations will be used to fund these purchase obligations.

Pension Obligations YP sponsors a pension plan registered with the Canada Revenue Agency and the Financial Services Commission of Ontario with defined benefit (DB) for employees hired prior to January 1, 2006, and defined contribution (DC) components for the non-Québec based employees hired on or after January 1, 2006 (the YP Pension Plan) as well as a DC plan registered with the Régie des Rentes du Québec (the YP Québec Plan), for the Québec based employees hired on or after January 1, 2006. Both plans together cover substantially all employees of the Company.

As at December 31, 2016, the DB component of the YP Pension Plan’s assets totalled $505.2 million and were invested in a diversified portfolio of Canadian fixed income securities and Canadian and international equity securities. Its rate of return on assets was 8.7% for 2016, 0.6% above our benchmark portfolio.

The most recent actuarial valuation of the defined benefit component of the YP Pension Plan for funding purposes was performed as at December 31, 2015. The December 2015 valuation resulted in a solvency deficit of $59 million to be funded over a five-year period. The next actuarial valuation will be as at December 31, 2016.

In 2016, the Company made annual contributions equivalent to the current service cost (the Annual Employer Cost) of $26.8 million, including $13.6 million to fund the deficit. Total cash payments are expected to amount to $26.7 million for 2017, of which $12.8 million will be to fund the deficit.

22 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

SOURCES AND USES OF CASH (IN THOUSANDS OF CANADIAN DOLLARS)

For the years ended December 31, 2016 2015 Cash flows from operating activities Cash flows from operations $ 167,547 $ 208,270 Change in operating assets and liabilities (9,434) (10,704) $ 158,113 $ 197,566 Cash flows used in investing activities Additions to intangible assets $ (50,787) $ (69,190) Additions to property and equipment (12,719) (6,231) Business acquisitions (35,271) (51,063) Investment in associate (1,597) Other (50) $ (100,424) $ (126,484) Cash flows used in financing activities Repayment of long-term debt $ (97,325) $ (100,650) Purchase of restricted shares (10,472) (6,838) Issuance of common shares upon exercise of stock options 115 883 $ (107,682) $ (106,605)

Cash flows from operating activities Cash flows from operations Cash flows from operations decreased by $40.7 million from $208.3 million for the year ended December 31, 2015 to $167.5 million for the same period in 2016. Cash flows from income taxes generated a net outflow of $1.8 million for the year ended December 31, 2016 compared to net income taxes received of $46.7 million during the same period last year as a result of a tax settlement covering prior years. Cash flows from operations in 2016 were also impacted by lower cash Adjusted EBITDA of $16.1 million.

Change in operating assets and liabilities The change in operating assets and liabilities for the year ended December 31, 2016 generated an outflow of $9.4 million compared to $10.7 million for the same period last year. The outflow for the year ended December 31, 2016 is explained by a higher level of trade receivables associated primarily with longer collection cycles in the national advertising industry, lower deferred revenues mainly due to declining revenues, and a decrease in trade payables, partially offset by the receipt of a settlement of sales tax assessments of $16.6 million. The outflow for the year ended December 31, 2015 is due principally to the increased level of payment of variable compensation, partially offset by lower deferred publication costs resulting from a new print distribution model implemented in 2015.

Cash flows used in investing activities Cash used in investing activities amounted to $100.4 million for the year ended December 31, 2016 compared with $126.5 million for the same period last year. During the year ended December 31, 2016, we invested in software development and ISIT equipment in the amount of $50.8 million and $12.7 million, respectively, as compared to $69.2 million and $6.2 million, respectively, during the same period last year. Capital expenditures incurred in 2015 and 2016 are related to investments required to maintain the integrity of our infrastructure as well as the development and implementation of new technologies and software aimed at accelerating our evolution into Canada’s leading local digital company. The level of investments is decreasing year-over-year as we are progressing in our evolution. During the first quarter of 2016, we acquired the net assets of JUICE for a purchase price of $35.3 million. During the third quarter of 2015, we acquired all the shares of the CFDP network for a purchase price of $50.2 million.

Cash flows used in financing activities Cash used in financing activities amounted to $107.7 million during the year ended December 31, 2016 compared to $106.6 million for the same period last year. During the year, we repaid $97.1 million of the Senior Secured Notes compared to $100.3 million during the same period last year. During the year, we purchased common shares of Yellow Pages Limited on the open market to fund the Restricted Share Unit and Performance Share Unit Plan at a cost of $10.5 million compared to $6.8 million during the same period last year.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 23 MANAGEMENT’S DISCUSSION AND ANALYSIS

FINANCIAL AND OTHER INSTRUMENTS (See Note 22 of the Audited Consolidated Financial Statements of the Company for the years ended December 31, 2016 and 2015).

The Company’s financial instruments primarily consist of cash, trade and other receivables, trade and other payables, long- term debt, Exchangeable Debentures and derivatives designated as cash flow hedges.

There is no carrying value of embedded derivatives as at December 31, 2016. The carrying value is calculated, as is customary in the industry, using discounted cash flows based on quarter-end market rates.

4. FREE CASH FLOW

(IN THOUSANDS OF CANADIAN DOLLARS)

For the three-month periods and years ended December 31, 2016 2015 2016 2015 Cash flows from operating activities $ 27,874 $ 42,417 $ 158,113 $ 197,566 Capital expenditures 20,036 17,168 63,506 75,421 Free cash flow $ 7,838 $ 25,249 $ 94,607 $ 122,145

5. CRITICAL ASSUMPTIONS

When we prepare our consolidated financial statements in accordance with IFRS, we must make certain estimates and assumptions about our business. These estimates and assumptions in turn affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the financial statements.

In this section, we provide detailed information on these important estimates and assumptions which are under continuous evaluation by the Company.

Intangible assets, goodwill and property and equipment The values associated with identifiable intangible assets and goodwill involve significant estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates and asset lives. These significant estimates require considerable judgment which could affect Yellow Pages’ future results if the current estimates of future performance and fair values change. These determinations may affect the amount of amortization expense on identifiable intangible assets recognized in future periods and impairment of goodwill, intangible assets and property and equipment.

Yellow Pages assesses impairment by comparing the recoverable amount of an identifiable intangible asset or goodwill with its carrying value. The determination of the recoverable amount involves significant management judgment.

Yellow Pages performed its annual test for impairment of goodwill and indefinite life intangible assets in accordance with the policy described in Note 3.12 of the Audited Consolidated Financial Statements of Yellow Pages Limited for the years ended December 31, 2016 and 2015.

The recoverable amount of the cash generating units (CGUs) was determined based on the value-in-use approach using a discounted cash flow model which relies on significant key assumptions, including after-tax cash flows forecasted over an extended period of time, terminal growth rates and discount rates. We use published statistics or seek advice where possible when determining the assumptions we use. Details of Yellow Pages’ impairment reviews are disclosed in Note 4 of the Audited Consolidated Financial Statements of Yellow Pages Limited for the years ended December 31, 2016 and 2015.

Employee future benefits The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. Determination of the benefit expense requires assumptions such as the expected return on assets available to fund pension obligations, the discount rate to measure obligations, the projected age of employees upon retirement, the expected rate of future compensation and the expected healthcare cost trend rate. For the purpose of calculating the expected return on plan assets, the assets are valued at fair value. Actual results may differ from results which are estimated based on assumptions.

Income taxes Estimation of income taxes includes evaluating the recoverability of deferred tax assets based on an assessment of Yellow Pages’ ability to utilize the underlying future tax deductions against future taxable income before they expire. Yellow Pages’ assessment is based upon existing tax laws and estimates of future taxable income. If the assessment of

24 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

Yellow Pages’ ability to utilize the underlying future tax deductions changes, Yellow Pages would be required to recognize more or fewer of the tax deductions as assets, which would decrease or increase the income tax expense in the period in which this is determined.

Yellow Pages is subject to taxation in numerous jurisdictions. Significant judgment is required in determining the consolidated provision for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Yellow Pages maintains provisions for uncertain tax positions that it believes appropriately reflect its risk with respect to tax matters under active discussion, audit, dispute or appeal with tax authorities, or which are otherwise considered to involve uncertainty. These provisions for uncertain tax positions are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. Yellow Pages reviews the adequacy of these provisions at each statement of financial position date. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

ACCOUNTING STANDARDS The following revised standards are effective for annual periods beginning on January 1, 2016 and their adoption has not had any impact on the amounts in our consolidated financial statements but may affect the accounting for future transactions or arrangements:

Amendments to IAS 16 Property, Plant and Equipment, and IAS 38 – Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization In May 2014, the International Accounting Standards Board (IASB) issued Amendments to International Accounting Standard (IAS) 16 – Property, Plant and Equipment and IAS 38 – Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization to clarify that the use of revenue-based methods to calculate depreciation is not appropriate as revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the related asset. The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption may be rebutted in certain limited circumstances. These amendments must be applied prospectively for annual periods beginning on or after January 1, 2016.

IAS 1 Presentation of financial statements In December 2014, the IASB issued amendments to IAS 1 – Presentation of financial statements as part of its initiative to improve presentation and disclosure in financial reports. The amendments to IAS 1 clarify the existing presentation and disclosure requirements as they relate to materiality, order of the notes, subtotals, accounting policies and disaggregation. The amendments also provide additional guidance on the application of professional judgment to disclosure requirements when preparing the notes to the financial statements.

Certain new standards, interpretations and amendments to existing standards have been published and are mandatory for Yellow Pages Limited’s accounting periods beginning on or after January 1, 2017. The new standards which are considered to be relevant to Yellow Pages Limited’s operations are as follows:

IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 – Revenue from Contracts with Customers. This new standard outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. It supersedes the IASB’s current revenue recognition standards, including IAS 18 – Revenue and related interpretations. The core principle of IFRS 15 is that revenue is recognized at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services, applying the following five steps: • Identify the contract with a customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to the performance obligations in the contract; and • Recognize revenue when (or as) the company satisfies a performance obligation. This new standard also provides guidance relating to the accounting for contract costs as well as for the measurement and recognition of gains and losses arising from the sale of certain non-financial assets. Additional disclosures will also be required under the new standard, which is effective for annual reporting periods beginning on or after January 1, 2018, with earlier application permitted. For comparative amounts, companies have the option of using either a full retrospective approach or a modified retrospective approach as set out in the new standard.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 25 MANAGEMENT’S DISCUSSION AND ANALYSIS

On April 12, 2016, the IASB published the final clarifications to IFRS 15. The amendments are effective for annual reporting periods beginning on or after January 1, 2018, with earlier adoption permitted. The amendments do not change the underlying principles of the standard yet clarify how the principles should be applied. Yellow Pages Limited continues to evaluate the impact this standard will have on its consolidated financial statements.

IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 – Financial Instruments. IFRS 9 replaces the requirements in IAS 39 – Financial Instruments: Recognition and Measurement for classification and measurement of financial assets and liabilities. The new standard introduces a single classification and measurement approach for financial instruments, which is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements and results in a single impairment model being applied to all financial instruments. IFRS 9 also modified the hedge accounting model to incorporate the risk management practices of an entity.

Additional disclosures will also be required under the new standard. The new standard will come into effect for annual periods beginning on or after January 1, 2018 with early adoption permitted. Yellow Pages Limited continues to evaluate the impact this standard will have on its consolidated financial statements.

IFRS 16 Leases In January 2016, the IASB issued IFRS 16 – Leases. It supersedes the IASB’s current lease standard, IAS 17, which required lessees and lessors to classify their leases as either finance leases or operating leases and to account for those two types of leases differently. It did not require lessees to recognize assets and liabilities arising from operating leases, but it did require lessees to recognize assets and liabilities arising from finance leases.

IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases. It introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months and for which the underlying asset is not of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments.

IFRS 16 contains disclosure requirements for lessees and lessors. This new standard will come into effect for annual periods beginning on or after January 1, 2019. Earlier application is permitted for companies that apply IFRS 15 – Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. Yellow Pages Limited continues to assess the impact this standard will have on its consolidated financial statements.

Amendments to IAS 7 Statement of Cash Flows In January 2016, the IASB published amendments to IAS 7 – Statement of Cash Flows. The amendments are intended to improve information provided to users of financial statements about an entity’s financing activities, including changes from financing cash flows, changes arising from obtaining or losing control of subsidiaries or other businesses, the effect of changes in foreign exchange rates and changes in fair value. They are effective for annual periods beginning on or after January 1, 2017, applied prospectively, with earlier adoption permitted. The Amendments to IAS 7 are not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

Amendments to IFRS 2 Share-based Payment In June 2016, the IASB published amendments to IFRS 2 Share-based Payment. The amendments clarify that the accounting for the effects of vesting and non-conditions on cash-settled share-based payments follow the same approach as for equity-settled share-based payments. The amendments also clarify the classification of share-based payment transactions with net settlement features as well as requiring additional disclosures for these transactions. They are effective for annual periods beginning on or after January 1, 2018, applied prospectively, with earlier adoption permitted. The amendments to IFRS 2 are not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

IFRIC 22 Foreign Currency Transactions and Advance Consideration In December 2016, the IASB issued an interpretation paper IFRIC 22 – Foreign Currency Transactions and Advance Consideration. This interpretation paper clarifies that the foreign exchange rate applicable to transactions involving advance consideration paid or received is the rate at the date that the advance consideration is paid or received and a non-monetary asset or liability is recorded, and not the later date at which the related asset or liability is recognized in the financial statements. This interpretation is applicable for annual periods beginning on or after January 1, 2018, and can be applied either prospectively or retrospectively, at the option of the entity. IFRIC 22 is not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

26 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS information does not apply for interests in subsidiaries, associates or joint ventures which are classified, or included in a disposal group that is classified as held for sale in accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. This amendment is effective for annual periods beginning on or after January 1, 2017, with retrospective application. The amendments to IFRS 12 are not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited. 6. RISKS AND UNCERTAINTIES

The following section examines the major risks and uncertainties that could materially affect YP’s future business results.

Understanding and managing risks are important parts of YP’s strategic planning process. The Board requires that our senior management identify and properly manage the principal risks related to our business operations. To understand and manage risks at YP, our Board and senior management analyze risks in three major categories: 1. Strategic risks - which are primarily external to the business; 2. Financial risks - generally related to matters addressed in the Financial Risk Management Policy and in the Pension Statement of Investment Policy and Procedures; and 3. Operational risks - related principally to risks across key functional areas of the organization. YP has put in place certain guidelines in order to seek to manage the risks to which it may be exposed. Please refer to the “Risk Factors” section of our AIF for a complete description of these risk factors. Despite these guidelines, the Company cannot provide assurances that any such efforts will be successful.

Substantial competition could reduce the market share of the Corporation and could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation competes with other directory, advertising media and classified advertising businesses and across various media and platforms. This includes the internet, newspapers, television, radio, mobile telecommunication devices, magazines, billboards and direct mail advertising. In particular, the directories business faces substantial competition due to increased online penetration, through the use of online search engines and social networking organizations. The Corporation may not be able to compete effectively with these online competitors, some of which may have greater resources. The Corporation’s internet strategy and its directories business may be adversely affected if major search engines build local sales forces or otherwise begin to more effectively reach local businesses for local commercial search services. These competitors may reduce their prices to increase their market share or may be able to offer their services at lower costs than the Corporation can.

The Corporation may be forced to reduce its prices or offer and perform other services in order to remain competitive. The Corporation’s failure to compete effectively with its current or future competitors could have a number of impacts such as a reduction in its advertiser base, lower rates and increased costs. This could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

A prolonged economic downturn in principal markets of the Corporation could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation derives revenues principally from the sale of advertising in Yellow Pages print and digital directories across Canada. The Corporation’s advertising revenues, as well as those of directories publishers in general, typically do not fluctuate widely with economic cycles. However, a prolonged economic downturn or recession affecting the Corporation’s markets, or any deterioration in general economic conditions, could have a material adverse effect on the Corporation’s business. The adverse effects of an economic downturn or recession on the Corporation could be compounded by the fact that the majority of the Corporation’s customers are SMEs. Such businesses have fewer financial resources and higher rates of failure than larger businesses, and may be more vulnerable to prolonged economic downturns. Therefore, these SMEs may be more likely to reduce or discontinue advertising with the Corporation, which could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

A higher than anticipated rate of decline in print revenue resulting from changes in preferences and consumer habits could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation could be materially adversely affected if the usage of print telephone directories declines at a rate higher than anticipated. The development of new technologies and the widespread use of internet is causing changes in preferences and consumer habits. The usage of internet-based products providing information, formerly exclusively available in print directories, has increased rapidly. The internet has become increasingly accessible as an advertising medium for businesses of all sizes. Further, the use of the internet, including as a means to transact commerce through mobile devices, has resulted in new technologies and services that compete with traditional advertising mediums. In particular, this has a significant influence on print products, and the decrease in usage gradually leads to lower advertising revenues. References to print business directories may decline faster than expected as users increasingly turn to digital and interactive media delivery devices for local commercial search information.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 27 MANAGEMENT’S DISCUSSION AND ANALYSIS

The inability of the Corporation to attract, retain and upsell customers could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation’s revenues remain adversely impacted by a lower customer count. Failure to provide existing customers with marketing solutions that meet their key marketing objectives and generate return on investment may limit the Corporation’s ability to retain existing customers. In addition, the inability of the Corporation’s customer acquisition strategies and channels to find and attract new customers may limit the Corporation’s ability to grow its total customer count. These events could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

The inability of the Corporation to successfully enhance and expand its offering of digital and new media products could have a material adverse effect on the Corporation, its business, results from operations and financial condition The transition from print to digital causes uncertainties surrounding whether and when new product introductions will compensate for the declining trend in print revenues. If revenue from the Corporation’s digital products does not increase significantly, the Corporation’s cash flow, results of operations and financial condition will be materially adversely affected.

The Corporation expects to derive a greater portion of its total revenue from its digital and other new media products, as directory usage continues to shift from print directories to digital and other new media products.

The Corporation’s transformational expansion towards digital and new media products is subject to a variety of challenges and risks, including the following: • the Corporation may not continue to grow usage on its digital properties at the same rate as other providers or may grow at a slower rate than currently anticipated; • internet usage as a source of information and a medium for advertising may not continue to grow, or may grow at a slower rate than currently anticipated, as a result of factors that the Corporation cannot predict or control; • the Corporation may incur substantial additional costs and expenses related to investments in its information technology, modifications to existing products and development of new products and this may reduce profit margins in the future; • the Corporation may be unable to develop and market new products in a timely and efficient manner, as the Corporation’s markets are characterised by rapidly changing technology, introductions and enhancements to existing products and shifting advertising customer and end-user demands, including technology preferences; • the Corporation may be unable to improve its information technology systems so as to efficiently manage increased levels of traffic on the Corporation’s digital properties and provide new services and products;

• the Corporation may be unable to keep apprised of changes to search engines’ terms of service or algorithms, which could cause the Corporation’s digital properties, or its advertising customers’ digital properties, to be excluded from or ranked lower in search results or make it more difficult or more expensive for the Corporation to provide search engine marketing and search engine optimisation solutions to its advertising customers;

• the Corporation’s advertising customers may be unwilling to grow their investment in digital advertising; and • the Corporation may be unable to increase or maintain the prices of its products and services in the future. If any of the above-mentioned risks were to occur, the Corporation’s digital revenue, as well as its business, results from operations and financial condition could be materially adversely affected.

The inability of the Corporation to supply the relationships and technologies required to appropriately service the needs of its national customers could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation anticipates that it will continue to depend on various third-party relationships in order to grow its business, such as technology and content providers, real-time advertising exchanges and other strategic partners. The Corporation may not be able to maintain such relationships and these third parties may experience disruptions or performance problems, which could negatively affect the Corporation’s efficiency and reputation.

In addition, the Corporation relies heavily on information technology systems to manage critical functions of its digital and mobile marketing solutions. The future success of the Corporation will depend in part upon its ability to continuously enhance and improve its existing solutions in a timely manner with features and pricing that meet changing advertiser needs. As marketing via new digital advertising channels, such as mobile advertising is emerging, it may evolve in unexpected ways, and the failure of the Corporation to adapt successfully to market evolution could have a material adverse effect on the Corporation, its business, results of operations and financial condition.

28 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

The Corporation’s business depends on the usage of its online and mobile properties and failure to protect traffic across the Corporation’s digital properties could impair its ability to grow revenues and expand its business The success of numerous of our customers’ marketing campaigns is dependent on how well they can attract valuable audiences. The Corporation will invest in order to protect digital audiences across its network of online and mobile properties by enhancing the quality, completeness and relevance of the content distributed to its properties, and by providing compelling verticalized sites and applications for local discovery. The Corporation may not be able to protect or grow traffic across its digital properties and such investments may not prove to be cost-effective. There can be no assurance that current traffic or potential growth in traffic across the Corporation’s digital properties may maintain or increase advertising customer renewal rates and/or annual spending, or lead to a measurable increase in advertising customers.

A higher than anticipated proportion of revenues coming from the Corporation’s digital products with lower margins, such as services and resale, could have a material adverse effect on the Corporation’s profitability Digital advertising sold on the Corporation’s owned and operated media currently operate at the highest level of profitability relative to digital service (websites, search engine optimization, content syndication and Facebook) solutions and resale (SEM) solutions. Revenues sourced from digital service and resale solutions that are proportionally materially higher than anticipated may have an adverse impact on the Corporation’s profitability.

The inability of the Corporation to develop information and technology systems and platforms required to execute the Corporation’s Return to Growth Plan could have a material adverse effect on the Corporation, its business, results from operations and financial condition The achievement of the Corporation’s Return to Growth Plan requires the development of its digital media, mobile and online businesses. The customer preference for digital media, mobile and online products will likely accelerate as younger, more technologically savvy advertisers make up a greater portion of the Corporation’s potential customer base. Moreover, the rapid technological evolution in the advertising industry is driving changes in user behaviour as users seek more control over the way in which they consume content. In order to succeed, the Corporation will need to invest significant resources in order to, among other things: • accelerate the evolution of its existing products and services; • develop in a timely manner compelling new digital media, mobile and online products and services that engage users across various platforms; • attract and retain talent for critical positions; • continue to transform its organization and operating model to grow its digital media, mobile and online businesses; • continue to develop and upgrade its technologies and supporting processes to distinguish its products and services offering from those of its competitors; and

• sell advertising in significant markets and be a compelling choice for advertisers on mobile and online. The Corporation cannot assure that it will be successful in achieving these and other necessary objectives or that the Return to Growth Plan will be successful. Failure to adapt to new technology or delivery methods, or the choice of one technological innovation over another, may have an adverse impact on the Corporation’s ability to compete effectively with its competitors or to achieve its Return to Growth Plan, which could have a material adverse effect on the Corporation, its business, results of operations and financial condition.

The inability of the Corporation to execute on or delays in the execution of its Return to Growth Plan could impair its ability to grow revenues and expand its business In early 2014, the Corporation introduced the Return to Growth Plan, which was a five year strategic plan to return to growth in customer count, revenues and profitability. The Corporation’s inability to execute on or delays in the execution of the Plan could impair its ability to grow revenue and expand its business, which might have a material adverse effect on the Corporation, its business, results from operations and financial condition.

The Corporation might be required to record additional impairment charges The Corporation may be subject to impairment losses that would reduce its reported assets and earnings. Economic, legal, regulatory, competitive, contractual and other factors may affect the value of identifiable intangible assets. If any of these factors impair the value of these assets, accounting rules would require the Corporation to reduce their carrying value and recognize an impairment charge, which would reduce the value of the Corporation’s reported assets and earnings of the Corporation in the year the impairment charge is recognized.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 29 MANAGEMENT’S DISCUSSION AND ANALYSIS

The Corporation’s inability to realize cost savings could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Return to Growth Plan is designed to improve operational efficiencies and generate cost savings across the organization. The Corporation will continue to realize efficiencies by decommissioning and replacing legacy systems and ISIT datacenters, while optimizing various customer service and digital fulfillment processes. The Corporation may not be able to complete these projects on time, on budget and/or successfully, placing the realization of anticipated cost savings at risk. Delays and/or disruptions in these projects may have an adverse effect on our business, results from operations and financial condition.

Failure by either the Corporation or the Telco Partners to fulfill their obligations set forth in the agreements between the Corporation and the Telco Partners could result in a material adverse effect on the Corporation, its business, results from operations and financial condition We have a Billing and Collection Services Agreement with Bell Canada (up to 2017), with TELUS (up to 2031), with MTS Inc. (up to 2017) and with Bell Canada Inc. (as successor to Bell Aliant Regional Communications LP) (up to 2037). Through these agreements, our billing is included as a separate line item on the telephone bills of Bell, TELUS, MTS Inc. and Bell Canada Inc. customers who use our services. Bell Canada, TELUS, MTS Inc. and Bell Canada Inc. (the Telco Partners) contract with third parties to conduct monthly billing of customers who use them as their local telephone service providers. In addition, the Telco Partners provide collection services for the Corporation with those customers who are also their customers. Additionally, the Corporation has entered into publishing agreements with each Telco Partner. If the Corporation fails to perform its obligations under these agreements and the agreements are consequently terminated by such Telco Partner, other agreements with such Telco Partners may also be terminated, including the Bell Canada Trademark License Agreement, the TELUS Trademark License Agreement, the MTS Inc. Branding and Trademark Agreement and the Bell Canada Inc. Branding and Trademark Agreement, as well as non-competition covenants we benefit from with such Telco Partners.

We have agreements with outside service suppliers to print and distribute our directories and publications. These agreements are for services that are integral to our business.

The failure of the Telco Partners or any of our other suppliers to fulfill their contractual obligations under these agreements could result in a material adverse effect on our business.

Customers who do not use the Telco Partners as their local telephone provider as well as all new customers are billed directly by the Corporation.

Failure by the Corporation to adequately protect and maintain its brands and trademarks, as well as third party infringement of such, could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation relies heavily on its existing brands and trademarks for a significant portion of its revenues. Failure to adequately maintain the strength and integrity of these brands and trademarks, or to develop new brands and trademarks, could adversely affect our results from operations and our financial condition.

It is possible that third parties could infringe upon, misappropriate or challenge the validity of the Corporation’s trademarks or our other intellectual property rights. This could have a material adverse effect on our business, our financial condition or our operating results. The actions that the Corporation takes to protect its trademarks and other proprietary rights may not be adequate. Litigation may be necessary to enforce or protect the Corporation's intellectual property rights, its trade secrets or to determine the validity and scope of the proprietary rights of others. We cannot ensure that we will be able to prevent infringement of our intellectual property rights or misappropriation of our proprietary information.

Any such infringement or misappropriation could harm any competitive advantage we currently derive, or may derive, from our proprietary rights. Third parties may assert infringement claims against the Corporation. Any such claims and any resulting litigation could subject the Corporation to significant liability for damages. An adverse judgment arising from any litigation of this type could require the Corporation to design around a third party's patent or to license alternative technology from another party. In addition, litigation may be time-consuming and expensive to defend against and could result in the diversion of the Corporation's time and resources. Any claims from third parties may also result in limitations on the Corporation's ability to use the intellectual property subject to these claims.

Work stoppages and other labour disturbances could have a material adverse effect on the Corporation, its business, results from operations and financial condition Certain non-management employees of the Corporation are unionized. Current union agreements range between one to five years in duration and are subject to expiration at various dates in the future. Four of these agreements have expired and are being renegotiated. If the Corporation is unable to renew these agreements as they come up for renegotiation from time to time, it could result in work stoppages and other labour disturbances which could have a material adverse effect on our business. Additionally, if a greater percentage of the Corporation’s workforce becomes unionized, this could have a material adverse effect on our business, results from operations and financial condition.

30 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

The Corporation’s inability to attract and retain key personnel could have a material adverse effect on the Corporation, its business, results from operations and financial condition The success of the Corporation depends on the abilities, experience and personal efforts of senior management of the Corporation, including their ability to retain and attract skilled employees. The Corporation is also dependent on the number and experience of its sales representatives and ISIT employees. The loss of the services of such key personnel could have a material adverse effect on the Corporation, its business, its results from operations and financial condition.

Challenge by tax authorities of the Corporation’s position on certain income tax matters could have a material adverse effect on the Corporation, its business, results from operations and financial condition In the normal course of the Corporation's activities, the tax authorities are carrying out ongoing reviews. In that respect, the Corporation is of the view that all expenses claimed by the different entities of the group are reasonable and deductible and that the cost amount and capital cost allowance claims of such entities' depreciable properties have been correctly determined. There is no assurance that the tax authorities may not challenge these positions. Such challenge, if successful, may have a material adverse effect on the Corporation, its business, results from operations and financial condition.

The loss of key relationships or changes in the level of service provided by mapping applications and search engines could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation has entered into agreements with mapping applications and search engines to promote its online directories. These agreements facilitate access to the Corporation’s content and customer advertising, allow the Corporation to generate a higher volume of traffic than it would on its own as well as generate business leads for its advertisers, while retaining the client relationship. Loss of key relationships or changes in the level of service provided by the mapping applications and search engines could impact performance of the Corporation’s internet marketing solutions. In addition, internet marketing services are provided by many other competitors within the markets the Corporation serves and its clients could choose to work with other, sometimes larger providers of these services, or with other search engines directly. The foregoing could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

The failure of the Corporation’s computers and communications systems could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation’s business activities rely significantly on the efficient and uninterrupted operation of computers and communications systems as well as those of third parties. The Corporation’s media properties, sales and advertising processing, data storage, production, billing, collection and day-to-day operations could be adversely impaired by the failure of such technology, which could in turn have a material adverse effect on the Corporation, its business, results from operations and financial condition.

In addition, the Corporation’s computer and ISIT systems may be vulnerable to damage or interruption from a variety of sources and its disaster recovery systems may be deemed ineffective. Any failure of these systems could impair the Corporation’s business. This could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

Declines in, or changes to, the real estate industry could have a material adverse effect on the Corporation, its business, results from operations and financial condition On July 1, 2015, Yellow Pages acquired CFDP, growing the Corporation into a leading digital real estate marketplace. As a result of the acquisition, the Corporation has a greater presence in the real estate listing business. The CFDP business and financial performance are affected by the health of, and changes to, the real estate industry. Home-buying patterns are sensitive to economic conditions and tend to decline or grow more slowly during economic downturns. A decrease in real estate activities could lead to reductions in the purchase of package offerings by home sellers. CFDP is subject to rules and regulations in the real estate industry, which may change from time to time in a way that may restrict or complicate CFDP’s ability to deliver its products and harm CFDP’s business and operating results. Declines or disruptions in the real estate market could reduce demand for CFDP’s products and could harm its business and operating results. This could have a material adverse effect on the Corporation, its business, results from operations and financial condition.

The inability of the Corporation to generate sufficient funds from operations, debt financings, equity financings or refinancing transactions could have a material adverse effect on the Corporation, its business, results from operations and financial condition The ability of the Corporation to make scheduled payments under its indebtedness will depend on, among other things, its future operating performance. There can be no assurance that the Corporation will be able to generate sufficient cash from its operations to pay its debt obligations. The Corporation’s ability to generate sufficient funds from operations, debt financings, equity financings or refinancing transactions is, to a large extent, subject to economic, financial, competitive, operational and other factors, many of which are beyond the Corporation’s control.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 31 MANAGEMENT’S DISCUSSION AND ANALYSIS

There can be no assurance that the Corporation will continue to be able to obtain on a timely basis sufficient funds on terms acceptable to the Corporation to provide adequate liquidity and to finance the operating and capital expenditures necessary to overcome the challenges associated with the evolution of its business and support its business strategy if cash flows from operations and cash on hand are insufficient.

Failure to generate sufficient funds, whether from operations or debt or equity financings or refinancing transactions, could require the Corporation to delay or abandon some of its anticipated expenditures or to modify its business strategy and could have a material adverse effect on the Corporation, its business, results from operations and financial condition. Furthermore, competitors with greater liquidity or their ability to raise money more easily and on less onerous terms could create a competitive disadvantage for the Corporation.

The Corporation’s amount of debt could adversely affect its efforts to refinance or reduce its indebtedness and could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation’s amount of debt could have material adverse effects on the Corporation, its business, results from operations and financial condition. For example, it could: • increase the Corporation’s vulnerability to adverse economic and industry conditions; • require the Corporation to dedicate a substantial portion of its cash flows from operations to make payments on its debt, thereby reducing funds available for operations, future business opportunities or other purposes; • limit the Corporation’s flexibility in planning for, or reacting to, changes in its business and its industry; • place the Corporation at a competitive disadvantage compared to its competitors that have less debt; and • limit the Corporation’s ability to obtain additional financing, if needed, for working capital, capital expenditures, acquisitions, debt service requirements or other purposes. In addition, the indenture governing the Senior Secured Notes, the indenture governing the Exchangeable Debentures and the ABL contain a number of financial and other restrictive covenants, including restrictions on the incurrence of additional indebtedness, the payment of dividends and other payment restrictions, the creation of liens, sale and leaseback transactions, mergers, consolidations and sales of assets and certain transactions with affiliates and its business activities. A failure to comply with such obligations could result in a default which, if not cured or waived, could permit acceleration of the relevant indebtedness. If the indebtedness under the indenture governing the Senior Secured Notes, the indenture governing the Exchangeable Debentures or the ABL, as the case may be, were to be accelerated, there can be no assurance that the Corporation would have sufficient liquidity or access to capital to repay in full that indebtedness.

Incremental contributions by the Corporation to its pension plans could have a material adverse effect on the Corporation, its business, results from operations and financial condition The Corporation is currently and may be required to make incremental contributions to its pension plans in the future depending on various factors including future returns on pension plan assets, long-term interest rates and changes in pension regulations, which may have a materially negative effect on the Corporation’s liquidity and results from operations. The Corporation is currently making incremental contributions to its pension plans to reduce its actuarial solvency deficits.

The funding requirements of the Corporation’s pension plans, resulting from valuations of its pension plan assets and liabilities, depend on a number of factors, including actual returns on pension plan assets, long-term interest rates, plan demographic and pension regulations. Changes in these factors could cause actual future contributions to significantly differ from the Corporation’s current estimates and could require the Corporation to make incremental contributions to its pension plans in the future and, therefore, could have a materially negative effect on the Corporation’s liquidity, business, results from operations and financial condition.

There is no assurance that the Corporation’s pension plans will be able to earn their assumed rate of return. A material portion of the Corporation’s pension plans’ assets is invested in public equity securities. As a result, the ability of the Corporation’s pension plans to earn the rate of return that management has assumed depends significantly on the performance of capital markets. The market conditions also impact the discount rate used to calculate the Corporation’s solvency obligations and thereby could also significantly affect the Corporation’s cash funding requirements.

32 YELLOW PAGES LIMITED 2016 ANNUAL REPORT MANAGEMENT’S DISCUSSION AND ANALYSIS

7. CONTROLS AND PROCEDURES

As a public entity, we must take every step to ensure that material information regarding our reports filed or submitted under securities legislation fairly presents the financial information of YP. Responsibility for this resides with management, including the President and Chief Executive Officer and the Chief Financial Officer. Management is responsible for establishing, maintaining and evaluating disclosure controls and procedures, as well as internal control over financial reporting.

Disclosure Controls and Procedures (DC&P) The evaluation of the design and effectiveness of DC&P (as defined in National Instrument 52-109) was performed under the supervision of the President and Chief Executive Officer and the Chief Financial Officer. They concluded that the Company’s DC&P were effective, as at December 31, 2016.

Internal Control over Financial Reporting (ICFR) The design and effectiveness of ICFR (as defined in National Instruments 52-109) were evaluated under the supervision of the President and Chief Executive Officer and Chief Financial Officer. Based on the evaluations, they concluded that the Company’s ICFR was effective, as at December 31, 2016.

During the quarter beginning on October 1, 2016 and ended on December 31, 2016, no changes were made to the Company’s ICFR that has materially affected, or is reasonably likely to materially affect, the Company’s ICFR.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 33 INDEPENDENT AUDITOR’S REPORT To the Shareholders of Yellow Pages Limited

We have audited the accompanying consolidated financial statements of Yellow Pages Limited, which comprise the consolidated statements of financial position as at December 31, 2016 and December 31, 2015, and the consolidated income statements, consolidated statements of comprehensive (loss) income, consolidated statements of changes in equity and consolidated statements of cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Yellow Pages Limited as at December 31, 2016 and December 31, 2015, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards.

1 (signed) Deloitte LLP

February 14, 2017

Montréal, Québec

______1 CPA auditor, CA, public accountancy permit No. A120501

34 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(IN THOUSANDS OF CANADIAN DOLLARS)

As at December 31, 2016 December 31, 2015 ASSETS CURRENT ASSETS Cash $ 17,260 $ 67,253 Trade and other receivables (Note 22) 114,854 123,826 Prepaid expenses 8,934 8,728 Deferred publication costs 61,144 61,216 Income taxes receivable (Note 14) 3,057 3,192 TOTAL CURRENT ASSETS 205,249 264,215 NON-CURRENT ASSETS Deferred publication costs 7,936 7,348 Financial and other assets (Note 22) 4,008 4,162 Investment in associate (Note 6) 1,157 Property and equipment (Note 7) 36,194 30,554 Intangible assets (Note 8) 740,932 1,369,781 Goodwill (Notes 4 and 5) 45,342 26,829 Deferred income taxes (Note 14) 59,119 7,738 TOTAL NON-CURRENT ASSETS 894,688 1,446,412 TOTAL ASSETS $ 1,099,937 $ 1,710,627 LIABILITIES AND EQUITY CURRENT LIABILITIES Trade and other payables (Note 9) $ 79,493 $ 73,627 Provisions (Note 10) 53,010 67,641 Deferred revenues 18,927 23,386 Current portion of long-term debt (Note 12) 75,161 98,530 TOTAL CURRENT LIABILITIES 226,591 263,184 NON-CURRENT LIABILITIES Provisions (Note 10) 4,327 4,451 Deferred credits (Note 21) 11,821 6,538 Deferred income taxes (Note 14) 7,081 94,970 Post-employment benefits (Note 11) 154,172 182,659 Long-term debt (Note 12) 234,867 308,823 Exchangeable debentures (Note 13) 92,174 90,478 TOTAL NON-CURRENT LIABILITIES 504,442 687,919 TOTAL LIABILITIES 731,033 951,103 CAPITAL AND RESERVES 6,597,891 6,600,966 DEFICIT (6,228,987) (5,841,442) TOTAL EQUITY 368,904 759,524 TOTAL LIABILITIES AND EQUITY $ 1,099,937 $ 1,710,627

The accompanying notes are an integral part of these consolidated financial statements.

Approved on behalf of Yellow Pages Limited by

Robert F. MacLellan, Director David A. Lazzarato, Director

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 35

CONSOLIDATED INCOME STATEMENTS

(IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE AND PER SHARE INFORMATION) For the years ended December 31, 2016 2015

Revenues $ 817,979 $ 829,771 Operating costs (Note 18) 582,788 569,084 Income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges 235,191 260,687 Depreciation and amortization (Notes 7 and 8) 104,882 80,837 Impairment of intangible assets (Note 4) 600,000 Restructuring and special charges (Note 10) 22,961 30,834 (Loss) income from operations (492,652) 149,016 Financial charges, net (Note 19) 56,130 60,922 (Loss) earnings before income taxes and loss from investment in associate (548,782) 88,094 (Recovery of) provision for income taxes (Note 14) (145,517) 27,039 Loss from investment in associate 440 Net (loss) earnings $ (403,705) $ 61,055

Basic (loss) earnings per share $ (15.23) $ 2.29

Weighted average shares outstanding – basic (loss) earnings per share (Note 16) 26,500,861 26,688,369

Diluted (loss) earnings per share $ (15.23) $ 2.05

Weighted average shares outstanding – diluted (loss) earnings per share (Note 16) 26,500,861 33,466,228

The accompanying notes are an integral part of these consolidated financial statements.

36 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(IN THOUSANDS OF CANADIAN DOLLARS)

For the years ended December 31, 2016 2015

Net (loss) earnings $ (403,705) $ 61,055

Other comprehensive income:

Items that will be reclassified subsequently to net (loss) earnings Net change in fair value of derivatives designated as cash flow hedges (Note 22) 1,125 Reclassification to (loss) earnings of derivatives designated as cash flow hedges (Note 22) (129) Income taxes relating to items that will be reclassified subsequently to net (loss) earnings (267) 729

Items that will not be reclassified subsequently to net (loss) earnings Actuarial gains (Note 11) 22,101 18,447 Income taxes relating to items that will not be reclassified subsequently to net (loss) earnings (5,941) (4,946) 16,160 13,501 Other comprehensive income 16,889 13,501 Total comprehensive (loss) income $ (386,816) $ 74,556

The accompanying notes are an integral part of these consolidated financial statements.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 37

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(IN THOUSANDS OF CANADIAN DOLLARS) For the years ended December 31,

Shareholders’ Compound Capital Restricted Warrants Financial (Note 15) Shares (Note 15) Instruments1 Balance, December 31, 2015 $ 4,031,528 $ (24,965) $ 1,456 $ 3,619 Other comprehensive income − − − − Net loss − − − − Total comprehensive income (loss) − − − − Restricted shares settled − 3,589 − − Restricted shares (Note 17) − (10,472) − − Stock options granted (Note 17) − − − − Exercise of stock options (Note 17) 157 − − − Balance, December 31, 2016 $ 4,031,685 $ (31,848) $ 1,456 $ 3,619

Shareholders’ Compound Capital Restricted Warrants Financial (Note 15) Shares (Note 15) Instruments1 Balance, December 31, 2014 $ 4,030,325 $ (18,981) $ 1,456 $ 3,619 Other comprehensive income − − − − Net earnings − − − − Total comprehensive income − − − − Restricted shares settled − 854 − − Restricted shares (Note 17) − (6,838) − − Stock options granted (Note 17) − − − − Exercise of stock options (Note 17) 1,203 − − − Balance, December 31, 2015 $ 4,031,528 $ (24,965) $ 1,456 $ 3,619

1 The equity component of the exchangeable debentures presented above is net of income taxes of $1.3 million (2015 - $1.3 million).

The accompanying notes are an integral part of these consolidated financial statements.

38 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

2016

Stock-based Compensation Reduction of Total Capital and and Other Reserves Capital Reserve Reserves Deficit Total Equity $ 132,275 $ 2,457,053 $ 6,600,966 $ (5,841,442) $ 759,524 729 − 729 16,160 16,889 − − − (403,705) (403,705) 729 − 729 (387,545) (386,816) (3,589) − − − − 5,578 − (4,894) − (4,894) 975 − 975 − 975 (42) − 115 − 115 $ 135,926 $ 2,457,053 $ 6,597,891 $ (6,228,987) $ 368,904

2015

Stock-based Compensation Reduction of Total Capital and Other Reserves Capital Reserve and Reserves Deficit Total Equity $ 126,706 $ 2,457,053 $ 6,600,178 $ (5,915,998) $ 684,180 − − − 13,501 13,501 − − − 61,055 61,055 − − − 74,556 74,556 (854) − − − − 5,915 − (923) − (923) 828 − 828 − 828 (320) − 883 − 883 $ 132,275 $ 2,457,053 $ 6,600,966 $ (5,841,442) $ 759,524

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 39

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS OF CANADIAN DOLLARS) For the years ended December 31, 2016 2015

OPERATING ACTIVITIES Net (loss) earnings $ (403,705) $ 61,055 Adjusting items Depreciation and amortization 104,882 80,837 Impairment of intangible assets 600,000 Restructuring and special charges (Note 10) 22,961 30,834 Stock-based compensation expense 7,974 6,731 (Recovery of) provision for income taxes recognized in net (loss) earnings (145,517) 27,039 Loss from investment in associate 440 Financial charges recognized in net (loss) earnings 56,130 60,922 Past service costs (Note 11) (6,618) Other non-cash items 9,967 8,420 Change in operating assets and liabilities (9,434) (10,704) Funding of post-employment benefit plans in excess of costs (13,165) (26,629) Lease incentives received 8,145 Restructuring and special charges paid (Note 10) (33,885) (26,464) Income taxes (paid) received, net (1,815) 46,664 Interest paid (44,865) (54,521) 158,113 197,566 INVESTING ACTIVITIES Additions to intangible assets (50,787) (69,190) Additions to property and equipment (12,719) (6,231) Business acquisitions (Note 5) (35,271) (51,063) Investment in associate (Note 6) (1,597) Other (50) (100,424) (126,484) FINANCING ACTIVITIES Repayment of long-term debt (97,325) (100,650) Purchase of restricted shares (Note 17) (10,472) (6,838) Issuance of common shares upon exercise of stock options (Note 17) 115 883 (107,682) (106,605) NET DECREASE IN CASH (49,993) (35,523) CASH, BEGINNING OF YEAR 67,253 102,776 CASH, END OF YEAR $ 17,260 $ 67,253 Supplemental disclosure of cash flow information (Note 20)

The accompanying notes are an integral part of these consolidated financial statements.

40 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

1. DESCRIPTION

Yellow Pages Limited, through its subsidiaries, offers local and national businesses access to digital and print media and marketing solutions to reach consumers in all the provinces and territories of Canada. References herein to Yellow Pages Limited (or the “Company”) represent the financial position, financial performance, cash flows and disclosures of Yellow Pages Limited and its subsidiaries on a consolidated basis.

Yellow Pages Limited’s registered head office is located at 16, Place du Commerce, Montreal, Québec, Canada, H3E 2A5 and the common shares of Yellow Pages Limited are listed on the Toronto Stock Exchange (“TSX”) under the symbol “Y”.

The Board of Directors (the “Board”) approved the consolidated financial statements for the years ended December 31, 2016 and 2015 and authorized their publication on February 14, 2017.

2. REVISED STANDARDS

STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS ADOPTED WITH NO EFFECT ON THE CONSOLIDATED FINANCIAL STATEMENTS

The following revised standards are effective for annual periods beginning on January 1, 2016 and their adoption has not had any impact on the amounts reported in these consolidated financial statements but may affect the accounting for future transactions or arrangements:

Amendments to IAS 16 Property, Plant and Equipment, and IAS 38 Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization In May 2014, the International Accounting Standards Board (“IASB”) issued Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets: Clarification of Acceptable Methods of Depreciation and Amortization to clarify that the use of revenue-based methods to calculate depreciation is not appropriate as revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the related asset. The IASB also clarified that revenue is generally presumed to be an inappropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. This presumption may be rebutted in certain limited circumstances. These amendments must be applied prospectively for annual periods beginning on or after January 1, 2016.

IAS 1 Presentation of Financial Statements In December 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements as part of its initiative to improve presentation and disclosure in financial reports. The amendments to IAS 1 clarify the existing presentation and disclosure requirements as they relate to materiality, order of the notes, subtotals, accounting policies and disaggregation. The amendments also provide additional guidance on the application of professional judgment to disclosure requirements when preparing the notes to the financial statements.

STANDARDS, INTERPRETATIONS AND AMENDMENTS TO PUBLISHED STANDARDS THAT ARE ISSUED BUT NOT YET EFFECTIVE

IFRS 15 Revenue from Contracts with Customers In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers. This new standard outlines a single comprehensive model for companies to use when accounting for revenue arising from contracts with customers. It supersedes the IASB’s current revenue recognition standards, including IAS 18 Revenue and related interpretations. The core principle of IFRS 15 is that revenue is recognized at an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services, applying the following five steps: • Identify the contract with a customer; • Identify the performance obligations in the contract; • Determine the transaction price; • Allocate the transaction price to the performance obligations in the contract; and • Recognize revenue when (or as) the company satisfies a performance obligation.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

This new standard also provides guidance relating to the accounting for contract costs as well as for the measurement and recognition of gains and losses arising from the sale of certain non-financial assets. Additional disclosures will also be required under the new standard, which is effective for annual reporting periods beginning on or after January 1, 2018 with earlier adoption permitted. For comparative amounts, companies have the option of using either a full retrospective approach or a modified retrospective approach as set out in the new standard.

IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments. IFRS 9 replaces the requirements in IAS 39 Financial Instruments: Recognition and Measurement for classification and measurement of financial assets and liabilities. The new standard introduces a single classification and measurement approach for financial instruments, which is driven by cash flow characteristics and the business model in which an asset is held. This single, principle-based approach replaces existing rule-based requirements and results in a single impairment model being applied to all financial instruments. IFRS 9 also modified the hedge accounting model to incorporate the risk management practices of an entity.

IFRS 16 Leases In January 2016, the IASB issued IFRS 16 Leases. It supersedes the IASB’s current lease standard, IAS 17, which required lessees and lessors to classify their leases as either finance leases or operating leases and to account for those two types of leases differently. It did not require lessees to recognize assets and liabilities arising from operating leases, but it did require lessees to recognize assets and liabilities arising from finance leases.

IFRS 16 contains disclosure requirements for lessees and lessors. This new standard will come into effect for annual periods beginning on or after January 1, 2019. Earlier application is permitted for companies that apply IFRS 15 Revenue from Contracts with Customers at or before the date of initial application of IFRS 16. Yellow Pages Limited continues to assess the impact this standard will have on its consolidated financial statements.

Amendments to IAS 7 Statement of Cash Flows In January 2016, the IASB published amendments to IAS 7 Statement of Cash Flows. The amendments are intended to improve information provided to users of financial statements about an entity’s financing activities, including changes from financing cash flows, changes arising from obtaining or losing control of subsidiaries or other businesses, the effect of changes in foreign exchange rates and changes in fair value. They are effective for annual periods beginning on or after January 1, 2017, applied prospectively, with earlier adoption permitted. The Amendments to IAS 7 are not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

42 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION) applied either prospectively or retrospectively, at the option of the entity. IFRIC 22 is not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

Amendments to IFRS 12 Disclosure of Interest in Other Entities In December 2016, the IASB issued amendments to IFRS 12 – Disclosure of Interest in Other Entities as part of its 2014- 2016 Annual Improvements Cycle. The amendment clarifies that the requirement to disclose summarised financial information does not apply for interests in subsidiaries, associates or joint ventures which are classified, or included in a disposal group that is classified as held for sale in accordance with IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations. This amendment is effective for annual periods beginning on or after January 1, 2017, with retrospective application. The amendments to IFRS 12 are not expected to have a significant impact on the consolidated financial statements of Yellow Pages Limited.

3. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

3.1 STATEMENT OF COMPLIANCE

These consolidated financial statements of Yellow Pages Limited and its subsidiaries were prepared by management in accordance with IFRS. These financial statements have been prepared in accordance with the following significant accounting policies which have been applied consistently to all periods presented throughout the consolidated entities.

3.2 BASIS OF MEASUREMENT The consolidated financial statements have been prepared on the historical cost basis except for the revaluation of certain assets and liabilities (including derivative instruments) at fair value as explained in the policies below.

3.3 FUNCTIONAL AND PRESENTATION CURRENCY The consolidated financial statements are presented in Canadian dollars, which is the functional and presentation currency of Yellow Pages Limited.

3.4 BASIS OF CONSOLIDATION 3.4.1 Subsidiaries Subsidiaries that are directly controlled by Yellow Pages Limited or indirectly controlled through other consolidated subsidiaries are fully consolidated. Subsidiaries are all entities over which Yellow Pages Limited exercises control.

Subsidiaries are fully consolidated from the effective date of acquisition up to the effective date of disposal. Intercompany assets and liabilities and transactions between fully consolidated companies are eliminated. Gains and losses on internal transactions with controlled companies are fully eliminated. Accounting policies and methods are modified where necessary to ensure consistency of accounting treatment at the Yellow Pages Limited level.

3.4.2 Associates Associates are all entities over which Yellow Pages Limited has a significant influence over the entity’s management and operating and financial policy, without exercising control, and generally implies holding 20% to 50% of the voting rights.

Investments in associates are accounted for using the equity method and are initially measured at cost. Subsequently, the share in profits or losses of the associate attributable to equity holders of Yellow Pages Limited is recognized in net earnings. Included in the recognized share of net earnings is the amortization of the amortizable assets based on their fair value at the acquisition date.

3.4.3 Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by Yellow Pages Limited in exchange for control of the acquiree. Transaction costs associated with business acquisitions are recognized in the income statement, as incurred.

Where a business combination is achieved in stages, Yellow Pages Limited’s previously held interests in the acquired entity are re-measured to fair value at the acquisition date (the date Yellow Pages Limited attains control) and the resulting gain or loss, if any, is recognized in the income statement.

3.5 CASH Cash consist of funds on deposit and, from time to time, highly liquid investments with a purchased maturity of three months or less.

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3.6 FINANCIAL ASSETS Financial assets are classified into the following specified categories: financial assets “at fair value through profit or loss” (“FVTPL”), “held-to-maturity” investments, “available-for-sale” (“AFS”) financial assets and “loans and receivables”. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Financial assets designated as FVTPL are carried at fair value. Changes in fair value are recorded in the income statement. Held-to-maturity investments and loans and receivables are measured at amortized cost using the effective interest method. AFS financial assets are recorded at fair value on the date of acquisition, and are adjusted to fair value at each reporting date. The corresponding unrealized gains and losses are recorded in other comprehensive income (“OCI”) and are reclassified to other income (expense) in the income statements when realized or when an impairment is determined.

A financial asset is de-recognized if the contractual rights to the cash flows from the financial asset expire or the asset is transferred and the transfer qualifies for de-recognition. Cash and trade and other receivables are included in the loans and receivables category.

3.6.1 Effective interest method The effective interest method is a method of calculating the amortized cost of a financial asset (liability) and of allocating interest (income) expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash flows (including all fees that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset (liability) or, where appropriate, a shorter period.

3.6.2 Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each statement of financial position date. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted.

For certain categories of financial assets, such as trade and other receivables, assets that are assessed not to be impaired individually, are subsequently assessed for impairment on a collective basis.

3.7 DEFERRED PUBLICATION COSTS An intangible asset is recognized for direct and incremental publication costs incurred during the sale, manufacturing and distribution of telephone print directories as well as the sale, provisioning and fulfillment of digital products and services. The intangible asset represents costs that will be recovered in future periods, when the related directories revenues are recognized. An intangible asset is capitalized when the following conditions are met: • Yellow Pages Limited has control over the contract for which the costs were incurred; • the control results from past events; • future economic benefits are expected to flow to Yellow Pages Limited; and • the asset is identifiable, non-monetary and without physical substance.

Deferred publication costs are initially measured at cost and are amortized over the same period in which the related revenues are recognized.

3.8 PROPERTY AND EQUIPMENT Property and equipment are recognized at cost less accumulated depreciation and impairment losses. The various components of property and equipment are depreciated separately based on their estimated useful lives and therefore, their depreciation periods are significantly different. The cost of an asset includes the expenses that are directly attributable to its acquisition. All other borrowing costs are recognized in the income statement in the period in which they are incurred. Yellow Pages Limited has not capitalized any borrowing costs during the periods presented.

Subsequent costs are included in the carrying value of the asset or recognized as a separate component, where necessary, if it is probable that future economic benefits will flow to Yellow Pages Limited and the cost of the asset can be reliably measured. All other repair and maintenance costs are expensed in the year they are incurred.

Depreciation is calculated using the straight-line method, based on the capitalized costs, less any residual value over a period corresponding to the useful life of each asset. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, when shorter, the term of the relevant lease.

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As at December 31, 2016, the expected useful lives are as follows:

Office equipment 10 years Computer equipment 3 years Other equipment 3 – 12 years Leasehold improvements Shorter of term of lease or useful life

The residual value, the depreciation method and the useful life of an asset are reviewed at a minimum, annually.

Property and equipment are tested for impairment when an indication of impairment loss exists. When the asset’s recoverable amount is less than its net carrying value, an impairment loss is recognized. Where an individual asset does not generate independent cash inflows, Yellow Pages Limited determines the recoverable amount of the cash generating units (“CGUs”) or group of CGUs to which the asset belongs.

3.9 LEASING Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognized as assets at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as an obligation under finance lease that is included with long-term debt.

Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to the income statement, unless they are directly attributable to qualifying assets, in which case they are capitalized in accordance with Yellow Pages Limited’s general policy on borrowing costs.

Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

In the event that incentives to enter into operating leases are received, such incentives are recognized as a deferred credit. The aggregate benefit of incentives is recognized as a reduction of rental expense on a straight-line basis.

3.10 INTANGIBLES ASSETS Intangible assets acquired through a business combination are identified and recognized separately from goodwill where they arise from legal or contractual rights or are capable of being separated from the acquiree and sold, transferred, licensed or exchanged. The cost of such intangible assets is deemed to be their fair value at the acquisition date. Intangible assets not acquired through a business combination are reported at cost less accumulated amortization and accumulated impairment losses.

Internally-generated intangible assets, consisting of software used by the Company, are recognized to the extent the criteria in IAS 38 Intangible Assets are met. Development costs for internally-generated intangible assets are capitalized at cost if, and only if, Yellow Pages Limited can demonstrate: • the technical feasibility of completing the asset so that it will be available for use or sale; • the intention to complete the intangible asset and use or sell it; • the ability to use or sell the intangible asset; • how the intangible asset will generate probable future economic benefits; • the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and • the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognized for internally-generated intangible assets is the sum of the expenditures incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally-generated intangible asset can be recognized, development expenditures are charged to the income statement in the period in which they are incurred.

Internally-generated intangible assets include the cost of software tools and licenses used in the development of Yellow Pages Limited’s systems, as well as all directly attributable payroll and consulting costs. These items are not amortized until the assets are available for use.

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Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment loss. Intangibles assets are amortized, unless their useful lives are indefinite, as follows:

Non-competition agreements Straight-line over life of agreement Customer-related intangible assets Pro rata based on related revenues, not exceeding 36 months Trademarks Indefinite Domain names Indefinite or straight-line over 4 – 12 years Software Straight-line over 3 years

The estimated useful life and amortization method are reviewed at the end of each reporting period or annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

An intangible asset is de-recognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from the de-recognition of an intangible asset, measured as the difference between the net disposal proceeds or fair value, as applicable, and the carrying value of the asset, are recognized in the income statement when the asset is de-recognized.

3.11 GOODWILL Goodwill arising on the acquisition of a subsidiary is recognized as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the purchase consideration over the fair value of identifiable net assets acquired.

Goodwill is not amortized. It is reviewed for impairment at least annually or sooner if indicators of impairment exist. Any impairment loss is recognized immediately in the income statement and is not subsequently reversed.

3.12 IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS INCLUDING GOODWILL At each reporting date, Yellow Pages Limited determines whether there are any indications that the carrying values of its tangible and intangible assets are impaired. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, Yellow Pages Limited estimates the recoverable amount of the CGU or group of CGUs to which the asset belongs. A CGU is the smallest identifiable group of assets that generate cash flows that are independent of those from other assets.

Intangible assets with indefinite useful lives, intangible assets not yet available for use and goodwill are tested for impairment annually, and whenever there is an indication that the asset may be impaired. A majority of the Company’s intangible assets do not have cash inflows independent of those from other assets and as such, are tested within their respective CGUs.

The recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset (or CGU) for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying value, the carrying value of the asset (or CGU) is reduced to its recoverable amount. An impairment loss is recognized immediately in the income statement.

For the purpose of impairment testing of goodwill, goodwill is tested at the group of CGUs level which represents the lowest level where goodwill is monitored for internal management purposes. Goodwill is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.

If the recoverable amount of a CGU or group of CGUs is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of goodwill and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. The Company does not reduce the carrying value of an asset below the highest of its fair value less costs of disposal and its value in use.

3.13 TRADE AND OTHER PAYABLES Trade and other payables, including accruals, are recorded when Yellow Pages Limited is required to make future payments as a result of purchases of assets or services. Trade and other payables are carried at amortized cost.

3.14 FINANCIAL LIABILITIES The valuation of financial liabilities depends on their classification. Financial liabilities are classified as either financial liabilities “at FVTPL” or “other financial liabilities”.

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Excluding derivative liabilities and financial liabilities accounted for at FVTPL, Yellow Pages Limited recognizes all financial liabilities, specifically long-term debt, exchangeable debentures, trade and other payables, initially at fair value less transaction costs and subsequently at amortized cost, using the effective interest method.

Financial liabilities designated as FVTPL are carried at fair value. Changes in fair value are recorded in the income statement. Transaction costs incurred in setting up these financial liabilities are recognized immediately as expenses in the income statement.

Yellow Pages Limited de-recognizes financial liabilities when, and only when, Yellow Pages Limited’s obligations are discharged, cancelled or expire.

3.15 PROVISIONS Provisions are recognized when Yellow Pages Limited has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognized as a financial charge.

3.15.1 Onerous contracts Present obligations arising under onerous contracts are recognized and measured as provisions. An onerous contract is considered to exist where Yellow Pages Limited has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

3.15.2 Restructuring A restructuring provision is recognized when Yellow Pages Limited has developed a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the entity.

3.16 LONG-TERM DEBT All long-term debt instruments are initially stated at the fair value of the consideration received after deduction of issue costs. Debt instruments are subsequently measured at amortized cost. Issue costs are charged to the income statement together with the coupon, as finance costs, on a constant-yield basis over the term of the debt instrument, or over a shorter period where the lender can require earlier repayment.

3.17 EMPLOYEE BENEFITS 3.17.1 Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in the income statement when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.

3.17.2 Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. Yellow Pages Limited’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefits that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted from the obligation. The discount rate is the yield at the reporting date on high-quality corporate bonds that have terms to maturity approximating to the terms of the related pension liability adjusted for a spread to reflect any additional credit risk and that are denominated in the currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected benefit method prorated on service.

Yellow Pages Limited recognizes all actuarial gains and losses arising subsequently from defined benefit plans in OCI. Re-measurement, comprising actuarial gains and losses, the effects of changes to the asset ceiling, if applicable, and the return on plan assets, excluding net interest on the defined benefit obligation, is reflected immediately in the statement of financial position with a charge or credit recognized in OCI. Re-measurement recognized in OCI is reflected immediately in retained earnings and will not be classified to the income statement. Past service costs are recognized in the income

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statement in the period a plan amendment is announced to employees. The net interest amount, which is calculated by applying the discount rate to the net defined liability or asset of defined benefit plans, is included within net financial charges while service costs are recorded in operating expenses.

3.17.3 Other long-term employee benefits Yellow Pages Limited’s net obligation in respect of long-term employee benefits other than pension plans is the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and the fair value of any related asset is deducted. The discount rate is the yield at the reporting date on high quality corporate bonds that have terms to maturity approximating the terms of the related obligation. The calculation is performed using the projected unit credit method. Any actuarial gains or losses are recognized in the period in which they arise.

3.17.4 Termination benefits Termination benefits are recognized as an expense when Yellow Pages Limited can no longer withdraw the offer of those benefits, or if earlier, when there is no realistic possibility of withdrawal from a formal detailed plan to either terminate employment before the normal retirement date, or from providing termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognized as an expense if Yellow Pages Limited has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

3.17.5 Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognized for the amount expected to be paid if Yellow Pages Limited has a present legal or constructive obligation to pay this amount as a result of a past service provided by the employee and the obligation can be estimated reliably.

3.17.6 Share-based payment transactions Yellow Pages Limited’s restricted share units, performance share units, deferred share units and stock options granted to employees and directors are measured at the fair value of the equity instruments at the grant date.

The restricted share units, performance share units and deferred share units granted may be settled in cash or equity at the Company’s option. If the restricted share unit and performance share unit plan is funded, eligible employees will receive, upon vesting of the instruments, common shares. The funded portion of these plans is treated as equity-settled instruments and recorded accordingly in equity. In the event these plans are unfunded, Yellow Pages Limited will pay to the eligible employees and directors, upon vesting of the instruments, an amount in cash. The unfunded portion of these plans is treated as cash-settled instruments and recorded as a liability. At each reporting period, the liability is re-measured at fair value with any changes recorded in operating costs.

The fair value determined at the grant date of the share-based instruments is expensed on a straight-line basis over the vesting period, based on Yellow Pages Limited’s estimate of share-based instruments that will eventually vest. At each reporting period, Yellow Pages Limited revises its estimate of the number of share-based instruments expected to vest. The impact of the revision of the original estimate, if any, is recognized in the income statement, with a corresponding adjustment to the reserve.

3.18 EQUITY INSTRUMENTS ISSUED BY YELLOW PAGES LIMITED An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by Yellow Pages Limited are recorded at the proceeds received, net of direct issue costs.

Transaction costs incurred by Yellow Pages Limited in issuing, acquiring or reselling its own equity instruments are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that otherwise would have been avoided.

3.19 OPERATING SEGMENTS Disclosure of segment information is reported in a manner consistent with the internal reports regularly reviewed by Yellow Pages Limited’s Chief Operating Decision Maker in order to assess each segment’s performance and to allocate resources to them. The Chief Operating Decision Maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the President and Chief Executive Officer. The Company currently operates under one segment.

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3.20 REVENUES Yellow Pages Limited’s revenues are measured at the fair value of the consideration received or receivable after deduction of sales allowances and sales taxes.

Print directory advertising is sold in bundles that can include several related online advertising products. Print products are not sold separately. Revenues from print directory advertising as well as revenues from related online products are recognized in the income statement rateably on a monthly basis from the point at which service is first provided over the life of the contract.

Revenues from private and commercial classified advertisements and display advertisements are recognized at the time the advertisements are published either on a weekly or monthly basis. Revenues related to advertisements appearing on multiple occasions are recognized over the period the advertisements are displayed.

3.21 DERIVATIVE FINANCIAL INSTRUMENTS Yellow Pages Limited enters from time to time into a variety of derivative financial instruments to manage interest rate risk on its long-term debt and to manage the risk of fluctuations in the share price of its common shares affecting its stock- based compensation plans.

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently re- measured to their fair value at each statement of financial position date. The resulting gain or loss is recognized in the income statement immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in the income statement depends on the nature of the hedge relationship.

Yellow Pages Limited designates certain derivatives as either hedges of the fair value of recognized assets or liabilities or firm commitments (fair value hedges), hedges of highly probable forecast transactions or hedges of foreign currency risk of firm commitments (cash flow hedges).

3.21.1 Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognized in the income statement.

3.22 BORROWING COSTS Borrowing costs directly attributable to the acquisition or construction of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. The Company currently has not capitalized any borrowing costs.

3.23 TAXATION Income tax expense represents the sum of the current and deferred tax.

3.23.1 Current income tax Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Yellow Pages Limited’s liability for current income tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

3.23.2 Deferred tax Deferred tax is recognized on differences between the carrying values of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and associates, except where Yellow Pages Limited is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

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The carrying value of deferred tax assets is reviewed at each reporting date and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which Yellow Pages Limited expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off tax assets against tax liabilities and when they relate to income taxes levied by the same taxation authority and Yellow Pages Limited intends to settle its tax assets and liabilities on a net basis.

3.23.3 Current and deferred tax for the period Current and deferred taxes are recognized as an expense or income in the income statement, except when they relate to items that are recognized outside net earnings (whether in OCI or directly in equity), in which case the tax is also recognized outside net earnings, or where they arise from the initial accounting for a business combination. In the case of a business combination, the applicable tax effects are taken into account in the accounting for the business combination.

3.24 SIGNIFICANT ESTIMATES AND JUDGMENTS The preparation of consolidated financial statements requires management to make estimates and assumptions that can affect the carrying value of certain assets and liabilities, income and expenses, and the information disclosed in the notes to the consolidated financial statements. Management reviews these estimates and assumptions on a regular basis to ensure their pertinence with respect to past experience and the current economic situation. Items in future financial statements could differ from current estimates as a result of changes in these assumptions. The impact of changes in accounting estimates is recognized during the period in which the change took place and all affected future periods.

The estimates and judgments made by management that are critical to the determination of the carrying value of assets and liabilities are addressed below.

Significant estimates Business acquisitions As a result of the business acquisition in March 2016 of Oriole Media Corp. (doing business as JUICE Mobile), Yellow Pages Limited measured the fair value of JUICE Mobile’s intangible assets, namely its software, using the income approach (refer to Note 5 – Business acquisitions). The measurement at fair value required significant estimation and was based on a discounted cash flow model which maximized the amount of observable market inputs as well as using forecasted cash flows.

As a result of the business acquisition in July 2015 of 9059-2114 Québec Inc., a holding company which owns all of the issued and outstanding shares of ByTheOwner Inc. (collectively “ComFree/DuProprio” (“CFDP”)), Yellow Pages Limited measured the fair value of CFDP’s intangible assets, namely its trademark, using the royalty relief method (refer to Note 5 – Business acquisitions). The measurement at fair value required significant estimation and was based on a discounted cash flow model which maximized the amount of observable market inputs as well as using forecasted cash flows, projected over a five-year period.

Intangible assets and goodwill The valuations associated with measuring the recoverability of identifiable intangible assets and goodwill for impairment analysis purposes involve significant estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates, terminal growth rates and asset lives. These significant estimates could affect Yellow Pages Limited’s future results if the current estimates of future performance and fair values change.

Yellow Pages Limited assesses impairment by comparing the recoverable amount of a CGU or group of CGUs to which an identifiable intangible asset and goodwill belongs, with its carrying value. The determination of the recoverable amount involves significant management estimates.

Yellow Pages Limited performs its annual test for impairment of indefinite life intangible assets and goodwill in the fourth quarter in accordance with the policy described in Note 3.12.

Useful lives of intangible assets and property and equipment Yellow Pages Limited reviews the estimated useful lives of its intangible assets and property and equipment at the end of each reporting period. At the end of the current reporting period, management determined that the useful lives of its intangible assets and property and equipment were adequate.

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Employee future benefits The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating the terms of the related pension liability. Determination of the net benefit costs (recovery) requires assumptions such as the discount rate to measure defined benefit obligations and expected return on plan assets, the projected age of employees upon retirement, the expected rate of future compensation and the expected healthcare cost trend rate. Actual results may differ from results which are estimated based on assumptions.

Income taxes Estimation of income taxes includes evaluating the recoverability of deferred tax assets based on an assessment of Yellow Pages Limited’s ability to utilize the underlying future tax deductions against future taxable income before they expire.

Yellow Pages Limited’s assessment is based upon existing tax laws and estimates of future taxable income. If the assessment of Yellow Pages Limited’s ability to utilize the underlying future tax deductions changes, Yellow Pages Limited would be required to recognize more or fewer of the tax deductions as assets, which would decrease or increase the income tax expense in the period in which this is determined.

Significant judgments Uncertain tax provisions Yellow Pages Limited is subject to taxation in numerous jurisdictions. Significant judgment is required in determining the consolidated provision for taxation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Yellow Pages Limited maintains provisions for uncertain tax positions that it believes appropriately reflect its risk with respect to tax matters under active discussion, audit, dispute or appeal with tax authorities, or which are otherwise considered to involve uncertainty. These provisions for uncertain tax positions are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors.

Yellow Pages Limited reviews the adequacy of these provisions at each statement of financial position date. However, it is possible that at some future date an additional liability could result from audits by tax authorities. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made. 4. IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS As a majority of the intangible assets do not generate cash inflows that are largely independent of those from other assets or group of assets, the Company performs its impairment analysis of its intangible assets at the CGU level. The CGUs of the Company are as follows: Yellow Pages and Other (includes multiple CGUs for which the carrying value of its intangible assets with indefinite useful lives is not significant in comparison with the Company’s total carrying value of intangible assets with indefinite useful lives). Goodwill was tested for impairment at the lowest level within the Company at which the goodwill is monitored for internal management purposes: the Other CGUs.

During the fourth quarters of 2015 and 2016, the Company completed its annual impairment analysis and assessed the recoverability of its assets allocated to its CGUs. The Company calculated the recoverable amounts of its CGUs using valuation methods which were consistent with those used in prior periods. The recoverable amounts were determined based on the value in use approach using a discounted cash flow model. The significant key assumptions included in the forecasted cash flows are based on the Company’s business plan taking into consideration growth and product mix trends.

2016 The cash flows are based on the 2017 budget and projected over a five-year period. Applicable terminal growth rates were applied. The forecasted cash flows also incorporated forecasted print revenue declines per annum between 17% and 20% and online revenue growth rates between 7% and 13% for the Yellow Pages and Other CGUs.

As a result of a marked acceleration in an unfavourable change in the product mix in the Yellow Pages CGU, the Company recorded an impairment loss of $600 million as the Company’s carrying value of if its Yellow Pages CGU exceeded its recoverable amount. The impairment loss was applied to certain intangible assets of the Yellow Pages CGU, namely trademarks and non-competition agreements. The recoverable amount of the Yellow Pages CGU post-impairment is $703.9 million, and represents its value in use. The recoverable amount of the Other CGUs exceeded their carrying values, and accordingly, no impairment was recognized.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

2015 The cash flows were based on the 2016 budget approved by the Board of Directors and projected over a five-year period. Applicable terminal growth rates were applied. The forecasted cash flows also incorporated forecasted print revenue declines per annum between 16% and 22% and online revenue growth rates between 6% and 11% for the Yellow Pages and Other CGUs.

As a result of the impairment analysis, the Company determined that the recoverable amounts of its CGUs exceeded their carrying values and accordingly, no impairment charge was recognized.

Carrying values and other assumptions Cash flows beyond the five-year projections of the plan were extrapolated using the terminal growth rates stated in the table below. The allocation of the carrying value of the intangible assets as at December 31, 2016 and 2015 by CGU or group of CGUs, prior to the impairment charge, and the other key assumptions used for the value in use calculations for the December 31, 2016 and December 31, 2015 impairment analyses are presented below:

December 31, 2016¹ Yellow Pages Other Total Carrying value of intangible assets and goodwill by CGU Trademarks and domain names $ 877,862 $ 30,374 $ 908,236 Trademarks and domain names with finite lives 2,094 3,651 5,745 Non-competition agreements 286,866 1,365 288,231 Customer-related intangible assets 4,944 4,944 Software 122,843 10,933 133,776 Goodwill 45,342 45,342 Total carrying value of intangible assets and goodwill by CGU $ 1,289,665 $ 96,609 $ 1,386,274

1 Prior to the impairment charge of $600 million, as discussed above.

December 31, 2015 Yellow Pages Other Total Carrying value of intangible assets and goodwill by CGU Trademarks and domain names $ 877,862 $ 30,374 $ 908,236 Trademarks and domain names with finite lives 2,356 6,228 8,584 Non-competition agreements 305,124 1,691 306,815 Customer-related intangible assets 2,340 645 2,985 Software 139,468 3,693 143,161 Goodwill 26,829 26,829 Total carrying value of intangible assets and goodwill by CGU $ 1,327,150 $ 69,460 $ 1,396,610

Yellow Pages Other Total Key assumptions : Terminal growth rate December 31, 2016 -15% to 4.5% 1% to 4.5% -15% to 4.5% December 31, 2015 -15% to 4.5% 1.5% to 4.5% -15% to 4.5% Discount rate – post-tax December 31, 2016 8.4% to 13.6% 12.2% to 15% 8.4% to 15% December 31, 2015 9.9% to 15.3% 12.8% 9.9% to 15.3% Discount rate – pre-tax December 31, 2016 15.1% to 20.6% 14.8% to 18.6% 14.8% to 20.6% December 31, 2015 16.3% to 23.1% 15.5% to 17.3% 15.5% to 23.1%

52 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

Sensitivity to changes in assumptions

The table below shows the percentages by which each key assumption must change in isolation in order for the estimated recoverable amount to equal to its carrying value for the Other CGUs:

December 31, 2016 Other Key assumptions : Terminal growth rate -1% Discount rate – post-tax 1% Revenue decline per annum -3%

Yellow Pages Limited has accumulated impairment losses on goodwill, intangible assets and property and equipment in the amounts of $5,847.8 million, $909.6 million and $10.4 million, respectively. There was no impairment loss recorded for the year ended December 31, 2015. 5. BUSINESS ACQUISITIONS 2016 On March 17, 2016, Yellow Pages Limited acquired the net assets of JUICE Mobile, for a purchase price of $35.3 million. The acquisition of JUICE Mobile, a premium advertising technology company whose programmatic platforms facilitate the automatic buying and selling of mobile advertising between brands and publishers, positioned Yellow Pages Limited as a desktop and mobile national advertising agency, expanding the Company’s reach of brands and media publishers. The acquisition was fully funded with cash on hand. Transaction costs of $1.3 million were incurred during the year ended December 31, 2016, and are included in Restructuring and special charges (refer to Note 10 – Provisions).

The following table summarizes the transaction and the purchase price allocation:

March 17, 2016 Fair value of business acquired Trade and other receivables $ 9,003 Other assets 644 Intangible assets 15,220 Goodwill 18,513 Trade and other payables (7,802) Other liabilities (307) $ 35,271

JUICE Mobile’s revenues of $31.8 million and net loss of $6.7 million are included in the consolidated income statement from the date of acquisition. Yellow Pages Limited’s consolidated revenues and net loss for the year ended December 31, 2016 would have been $823.7 million and $405.5 million, respectively, had the JUICE Mobile acquisition occurred on January 1, 2016.

The Company acquired in September 2016 the net assets of 9778748 Canada Inc. (“Totem”), a creative agency specializing in customized content creation and delivery for global brands for a purchase price of $1.2 million, payable over 3 years.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 53

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

2015 In May 2015, Yellow Pages Homes Limited, a wholly-owned subsidiary of the Company, acquired the assets of Western Media Group for a purchase price of $0.9 million. The purchased assets included multi-platform brands in Western Canada, vanmag.com, westernlivingmag.com as well as Western Living Magazine and Vancouver Magazine. These properties generate local lifestyle content specific to the Western Canada region, in the restaurants, real estate and lifestyle categories. The fair value of $0.9 million was mainly comprised of intangible assets.

On July 1, 2015, Yellow Pages Limited acquired all the shares of the CFDP network from Square Victoria Digital Properties Inc. for a purchase price of $50.2 million. The acquisition of CFDP, a leader in connecting home sellers and buyers in Canada, will provide Yellow Pages with an increased presence in the real estate vertical, access to exclusive listings and the platforms required to transact directly with Canadians. The acquisition was fully funded with cash on hand. Transaction costs of $1.3 million were incurred during the year ended December 31, 2015, and were included in Restructuring and special charges (refer to Note 10 – Provisions).

The following table summarizes the transaction and the purchase price allocation:

July 1, 2015 Fair value of business acquired Trade and other receivables $ 1,461 Other assets 851 Property and equipment 1,339 Intangible assets 32,436 Goodwill 26,829 Deferred income tax liabilities, net (6,834) Trade and other payables (2,190) Provisions (2,087) Deferred revenues (1,594) $ 50,211

CFDP’s revenues of $18.2 million and a net loss of $90 thousand for the year ended December 31, 2015, are included in the consolidated income statement from the date of acquisition. Yellow Pages Limited’s consolidated revenues and net earnings for the year ended December 31, 2015 would have been $853.5 million and $61.7 million, respectively, had the CFDP acquisition occurred on January 1, 2015.

6. INVESTMENT IN ASSOCIATE

On October 3, 2016, Yellow Pages Digital & Media Solutions Limited acquired a 50% ownership in 9778730 Canada Inc., which holds 100% of Coupgon Inc., a digital coupon solutions provider, for cash consideration of $1.2 million. Additional investments during the year ended December 31, 2016 amounted to $0.4 million. The difference between the acquisition price and the fair value of the net assets acquired was insignificant. The investment is being accounted for using the equity method.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

7. PROPERTY AND EQUIPMENT

2016 Office Computer Other Leasehold equipment1 equipment equipment improvements Total Cost As at December 31, 2015 $ 32,700 $ 37,425 $ 2,139 $ 33,911 $ 106,175 Business acquisitions 47 159 22 314 542 Additions 4,586 4,180 62 8,961 17,789 Disposals, write-offs and transfers (40) (75) (8) (3) (126) As at December 31, 2016 $ 37,293 $ 41,689 $ 2,215 $ 43,183 $ 124,380 Accumulated depreciation As at December 31, 2015 $ 23,778 $ 25,348 $ 1,384 $ 25,111 $ 75,621 Depreciation expense 1,470 6,499 304 4,411 12,684 Disposals, write-offs and transfers (37) (75) (4) (3) (119) As at December 31, 2016 $ 25,211 $ 31,772 $ 1,684 $ 29,519 $ 88,186 Net book value as at December 31, 2016 $ 12,082 $ 9,917 $ 531 $ 13,664 $ 36,194

2015 Office Computer Other Leasehold equipment1 equipment equipment improvements Total Cost As at December 31, 2014 $ 31,666 $ 34,411 $ 1,908 $ 31,940 $ 99,925 Business acquisitions 296 239 196 698 1,429 Additions 772 2,775 72 1,273 4,892 Disposals, write-offs and transfers (34) (37) (71) As at December 31, 2015 $ 32,700 $ 37,425 $ 2,139 $ 33,911 $ 106,175 Accumulated depreciation As at December 31, 2014 $ 22,250 $ 19,121 $ 1,138 $ 20,985 $ 63,494 Depreciation expense 1,562 6,227 283 4,126 12,198 Disposals, write-offs and transfers (34) (37) (71) As at December 31, 2015 $ 23,778 $ 25,348 $ 1,384 $ 25,111 $ 75,621 Net book value as at December 31, 2015 $ 8,922 $ 12,077 $ 755 $ 8,800 $ 30,554

1 The net book value of office equipment includes $0.3 million of assets held under finance leases (2015 - $0.6 million).

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

8. INTANGIBLE ASSETS

2016 Customer- Trademarks Non- related Total and domain competition intangible Intangible names1 agreements assets Software2 assets Cost As at December 31, 2015 $ 936,085 $ 532,773 $ 6,577 $ 327,695 $ 1,803,130 Business acquisitions (Note 5) 200 6,230 9,720 16,150 Additions 47,457 47,457 Impairment (Note 4) (452,489) (147,511) (600,000) Disposals, write-offs and transfers (3,968) (785) 2 (4,751) As at December 31, 2016 $ 483,596 $ 381,494 $ 12,022 $ 384,874 $ 1,261,986 Accumulated amortization As at December 31, 2015 $ 19,265 $ 225,958 $ 3,592 $ 184,534 $ 433,349 Amortization expense 2,839 18,784 4,009 66,566 92,198 Disposals, write-offs and transfers (3,968) (523) (2) (4,493) As at December 31, 2016 $ 22,104 $ 240,774 $ 7,078 $ 251,098 $ 521,054 Net book value as at December 31, 2016 $ 461,492 $ 140,720 $ 4,944 $ 133,776 $ 740,932

2015 Customer- Trademarks Non- related Total and domain competition intangible Intangible names1 agreements assets Software2 assets Cost As at December 31, 2014 $ 906,694 $ 530,830 $ 5,667 $ 256,486 $ 1,699,677 Business acquisitions (Note 5) 29,391 1,943 910 1,102 33,346 Additions 70,107 70,107 As at December 31, 2015 $ 936,085 $ 532,773 $ 6,577 $ 327,695 $ 1,803,130 Accumulated amortization As at December 31, 2014 $ 16,426 $ 207,273 $ 837 $ 140,174 $ 364,710 Amortization expense 2,839 18,685 2,755 44,360 68,639 As at December 31, 2015 $ 19,265 $ 225,958 $ 3,592 $ 184,534 $ 433,349 Net book value as at December 31, 2015 $ 916,820 $ 306,815 $ 2,985 $ 143,161 $ 1,369,781

1 Trademarks and domain names with indefinite useful lives amounted to $456.8 million (2015 - $908.2 million). 2 Software under development amounted to $10.6 million (2015 - $30 million). 9. TRADE AND OTHER PAYABLES

As at December 31, 2016 December 31, 20151 Trade $ 60,300 $ 53,720 Accrued interest on long-term debt and exchangeable debentures 3,169 3,871 Payroll related 7,075 7,440 Long-term incentive plans 4,667 2,947 Other accrued liabilities 4,282 5,649 $ 79,493 $ 73,627

1 Certain amounts in the prior period were reclassified to conform to this year’s presentation.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

10. PROVISIONS

During the year ended December 31, 2016, Yellow Pages Limited recorded restructuring and special charges of $23 million. The majority of these costs was associated with internal reorganizations and workforce reductions, and transaction costs associated with business acquisitions. During the year ended December 31, 2015, Yellow Pages Limited recorded restructuring and special charges of $30.8 million. The majority of these costs was associated with workforce reductions related to a corporate realignment, internal reorganizations, transaction costs associated with business acquisitions, and contract terminations, partially offset by a curtailment gain of $1.6 million related to workforce reductions (refer to Note 11 – Post-employment benefits).

The provisions for restructuring and special charges represent the present value of the best estimate of the future outflow of economic benefits that will be required to settle the provisions and may vary as a result of new events affecting the severances and charges that will need to be paid.

Other provisions include provisions primarily for vacation and short-term incentive plans.

Provisions for Provisions for Other Total restructuring special charges provisions Provisions As at December 31, 2015 $ 22,601 $ 17,012 $ 32,479 $ 72,092 Charge1 19,198 3,640 27,831 50,669 Payments (28,843) (5,042) (29,258) (63,143) Surplus provision (2,417) (2,417) Reclassifications and other 136 136 As at December 31, 2016 $ 12,956 $ 15,610 $ 28,771 $ 57,337 Less current portion 10,403 13,883 28,724 53,010 Non-current portion $ 2,553 $ 1,727 $ 47 $ 4,327

1 Included in the restructuring and special charges of $23 million on the income statement are net charges of $0.1 million not affecting the provision.

11. POST-EMPLOYMENT BENEFITS Yellow Pages Limited maintains pension plans with defined benefit and defined contribution components which cover substantially all of the employees of Yellow Pages Limited. Yellow Pages Limited maintains unfunded supplementary defined benefit pension plans for certain executives and also maintains other retirement and post-employment benefits (“other benefits”) plans which cover substantially all of its employees. The defined benefit plans typically expose the Company to actuarial risks such as investment, interest rate, longevity and salary risks.

Investment risk The present value of the defined benefit plan obligation is calculated using a discount rate determined by reference to high quality corporate bond yields; if the actual return on plan assets is below the assumed rate, it will create a plan deficit. Currently, the defined benefit plan has a relatively balanced investment in equity securities and debt instruments. Due to the long-term nature of the defined benefit plan obligation, the pension committee considers it appropriate that a reasonable portion of the plan assets should be invested in equity instruments to leverage the return generated by the fund. Interest risk A decrease in the bond interest rate will increase the defined benefit plan obligation, particularly on a solvency basis. Although this will be partially offset by an increase in the return of the defined benefit plan’s investments, the impact may be material as pension liabilities are sensitive to variations in interest rates. Longevity risk The present value of the defined benefit plan liability is calculated based on assumptions regarding mortality rates of plan participants both during and after their employment. An increase in the life expectancy of the plan participants will increase the defined benefit obligation. Salary risk The present value of the defined benefit plan obligation is calculated by reference to the projected salaries of plan participants. As such, a higher salary increase than projected of the plan participants will increase the defined benefit plan’s liability.

The present value of the defined benefit obligation and the related current service cost and past service costs were measured using the projected benefit method prorated on service. This was based on the actuarial valuation of the plan assets and the present value of the defined benefit obligation which was carried out by Morneau Shepell, Fellows of the Canadian Institute of Actuaries and Society of Actuaries, as at December 31, 2015 and extrapolated to December 31, 2016. For funding purposes, an actuarial valuation of the defined benefit component of the Yellow Pages pension plans was also performed as at December 31, 2015.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

The changes in the defined benefit obligations and in the fair value of assets and the reconciliation of the funded status of the defined benefit plans to the amount recorded on the consolidated statements of financial position as at December 31, 2016 and 2015 were as follows:

As at December 31, 2016 December 31, 2015 Pension Other Pension Other Benefits1 Benefits Benefits1 Benefits Fair value of plan assets, beginning of year $ 487,884 $ – $ 474,854 $ – Employer contributions 17,907 2,002 35,224 2,014 Employee contributions 1,486 – 1,502 – Interest income 19,087 – 18,838 – Return on plan assets excluding interest income (actuarial gains) 20,456 – 3,089 – Benefit payments (38,952) (2,002) (44,725) (2,014) Administration costs (955) – (898) – Fair value of plan assets, end of year $ 506,913 $ – $ 487,884 $ –

Accrued benefit obligation, beginning of year $ 632,599 $ 37,944 $ 660,501 $ 41,615 Current service cost 5,526 21 9,737 182 Employee contributions 1,486 – 1,502 – Benefit payments (38,952) (2,002) (44,725) (2,014) Interest cost 24,672 1,479 25,848 1,507 Curtailment gain (28) (15) (1,096) (538) Past service costs – – (2,449) (4,169) Actuarial (gains) losses due to: Experience adjustments (2,010) – (13,516) 1,033 Changes in demographic assumptions – – – (53) Changes in financial assumptions (843) 1,208 (3,203) 381 Defined benefit obligation, end of year $ 622,450 $ 38,635 $ 632,599 $ 37,944 Net defined benefit obligation $ (115,537) $ (38,635) $ (144,715) $ (37,944)

1 Including unfunded supplementary defined benefit pension plans.

While all the plans are not considered fully funded for financial reporting purposes, registered plans are funded in accordance with the applicable statutory funding rules and regulations governing the particular plans.

The significant assumptions adopted in measuring Yellow Pages Limited’s pension and other benefit obligations as at December 31, 2016 and 2015 were as follows:

As at December 31, 2016 December 31, 2015 Pension Other Pension Other Benefits Benefits Benefits Benefits Post-employment benefit obligation Discount rate, end of year 3.75% 3.75% 4.00% 4.00% Rate of compensation increase 2.25% 2.25% 2.95% 2.95% Net benefit plan costs Discount rate (current service cost), end of preceding year 4.25% 4.25% 4.00% 4.00% Discount rate (interest expense), end of preceding year 4.00% 4.00% 4.00% 4.00% Rate of compensation increase 2.95% 2.95% 3.00% 3.00% Weighted average duration (years) 15 13 15 13

For measurement purposes, an 8% annual increase in the per capita cost of covered medical care benefits (the medical care cost trend rate) was assumed in 2016. The rate of increase of the cost of medical care was assumed to decrease to 7.7% in 2017 and gradually decline to 5% by 2026 and to remain at that level thereafter. A 6% annual increase in per capita cost of covered dental care benefits was assumed in 2016. The rate of increase of the cost of covered dental care was assumed to decrease to 5.8% in 2017 and gradually decline to 4% by 2026 and to remain at that level thereafter.

58 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

The following table shows how the defined benefit obligation as at December 31, 2016 would have been affected by changes that were reasonably possible at that date in each significant actuarial assumption:

Pension Other Benefits Benefits Decrease of 0.25% in discount rate, end of year $ 23,808 $ 1,306 Increase of 0.25% in rate of compensation $ 2,696 $ – Increase of 1% in health care cost trend rates $ N/A $ 3,032

The net benefit plan costs included in the income statements are the following components:

For the years ended December 31, 2016 2015 Pension Other Pension Other Benefits Benefits Benefits Benefits Current service cost $ 5,526 $ 21 $ 9,737 $ 182 Administration costs 955 – 898 – Past service costs – – (2,449) (4,169) Service cost1 $ 6,481 $ 21 $ 8,186 $ (3,987) Curtailment gain (Note 10) $ (28) $ (15) $ (1,096) $ (538) Interest cost $ 24,672 $ 1,479 $ 25,848 $ 1,507 Interest income (19,087) – (18,838) – Net interest on the net defined benefit obligation (Note 19) $ 5,585 $ 1,479 $ 7,010 $ 1,507 Net benefit costs (recovery) recognized in the income statement $ 12,038 $ 1,485 $ 14,100 $ (3,018) Actuarial (gains) losses recognized in OCI $ (23,309) $ 1,208 $ (19,808) $ 1,361 Total net benefit plan (recovery) costs for the Yellow Pages (“YP”) defined benefit plans $ (11,271) $ 2,693 $ (5,708) $ (1,657) Net benefit plan costs for the YP defined contribution plans1 7,157 – 7,125 – Total net benefit plan (recovery) costs $ (4,114) $ 2,693 $ 1,417 $ (1,657)

1 Included in operating costs.

As a result of workforce reductions during the years ended December 31, 2016 and 2015, the number of employees covered by the pension plans decreased, and these restructurings gave rise to a curtailment gain as at November 10, 2016, and October 8, 2015, respectively.

During the year ended December 31, 2015, the Company amended the retirement and post-employment benefit plans for certain groups of employees. These amendments were made prospectively and applied only to certain groups of employees and included among other items for the affected employees, the elimination of post-retirement benefits, the elimination of post-retirement indexing for future service, the introduction of employee contributions and the reduction of short-term disability coverage. Certain of these amendments resulted in a recovery of past service costs in the amount of $6.6 million in 2015.

Plan assets include primarily Canadian and foreign equities, government and corporate bonds, debentures and secured mortgages. Plan assets are held in trust and the asset allocation was as follows as at December 31, 2016 and 2015:

(in percentages - %) December 31, 2016 December 31, 2015 Fair value of the plan assets: Canadian bonds and debentures 11.5 27.0 Canadian common stocks 9.5 11.0 Pooled fund units Canadian pooled equity funds 22.5 17.5 Global pooled equity funds 31.5 31.0 Canadian pooled fixed-income funds 24.5 10.0 Pooled mortgage funds – 2.0 Short-term notes and treasury bills – 0.5 Cash and cash equivalents 0.5 1.0

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

As at December 31, 2016 and 2015, the publicly traded equity securities did not directly include any shares of Yellow Pages Limited.

The total cash payments for pension and other benefit plans made by Yellow Pages Limited amounted to $26.8 million for 2016 (2015 – $44.6 million). Total cash payments for pension and other benefit plans expected in 2017 amount to approximately $26.7 million.

Yellow Pages Limited’s funding policy is to make contributions to its pension plans based on various actuarial cost methods as permitted by pension regulatory bodies. Yellow Pages Limited is responsible to adequately fund the plans. Contributions reflect actuarial assumptions concerning future investment returns, salary projections and future service benefits.

In addition, Yellow Pages Limited recorded an expense for provincial, federal and state pension plans of $9.9 million for the year ended December 31, 2016 (2015 – $9 million).

As at December 31, 2016, Yellow Pages Limited had recognized an accumulated balance of $70.1 million, net of income taxes of $23.4 million, in actuarial losses in OCI. 12. LONG-TERM DEBT The long-term debt is comprised of the following:

As at December 31, 2016 December 31, 2015 Senior secured notes $ 309,669 $ 406,733 Obligations under finance leases 359 620 $ 310,028 $ 407,353 Less current portion1 75,161 98,530 Non-current portion $ 234,867 $ 308,823

1 The current portion of the senior secured notes may vary subject to the Excess Cash Flow clause as well as the minimum cash balance requirement post Mandatory Redemptions under the indenture governing the senior secured notes.

Asset-Based Loan In August 2013, the Company, through its subsidiary Yellow Pages Digital & Media Solutions Limited, entered into a five-year $50 million asset-based loan (“ABL”) expiring in August 2018. The ABL is used for general corporate purposes. Through the ABL, the Company has access to the funds in the form of prime rate loans, Banker’s acceptance (“BA”) equivalent loans or letters of credit. The ABL is secured by a first priority lien over the receivables of the Company. The ABL is subject to an availability reserve of $5 million if the Company’s trailing 12-month fixed charge coverage ratio is below 1.1 times. As at December 31, 2016, the Company had $7.4 million of letters of credit issued and outstanding under the ABL. As such, $42.6 million of the ABL was available as at December 31, 2016. Interest is calculated based either on the BA Rate or the Prime Rate plus an applicable margin.

The loan agreement governing the ABL contains restrictive covenants, including restrictions on the incurrence of additional indebtedness, the payment of dividends and other payment restrictions, the creation of liens, sale and leaseback transactions, mergers, consolidations and sales of assets, and certain transactions with affiliates and its business activities.

As at December 31, 2016 and 2015, the Company was in compliance with all covenants under the loan agreement governing the ABL.

Senior Secured Notes On December 20, 2012, the Company through its subsidiary, Yellow Pages Digital & Media Solutions Limited, issued $800 million of 9.25% senior secured notes (“Senior Secured Notes”) maturing November 30, 2018. Interest on the Senior Secured Notes is payable in cash, quarterly in arrears and in equal instalments at 9.25% per annum on the last day of February, May, August and November of each year.

The Senior Secured Notes are unconditionally guaranteed on a senior secured basis by Yellow Pages Limited and all of its Restricted Subsidiaries (as such term is defined in the indenture governing the Senior Secured Notes).

The Senior Secured Notes and each Senior Secured Note guarantee are secured by a first priority lien, subject to certain permitted liens, in the collateral, which consists of all of the property of Yellow Pages Limited and the Restricted Subsidiaries, whether owned on the Effective Date or thereafter acquired, other than certain excluded property.

The indenture governing the Senior Secured Notes contains restrictive covenants, including restrictions on the incurrence of additional indebtedness, the payment of dividends and other payment restrictions, the creation of liens, sale and leaseback transactions, mergers, consolidations and sales of assets, and certain transactions with affiliates and its

60 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION) business activities. The indenture does not contain the obligation to maintain financial ratios. Financial ratio restrictions only apply upon incurrence of additional indebtedness and other transactions.

As at December 31, 2016 and 2015, the Company was in compliance with all covenants under the indenture governing the Senior Secured Notes.

Mandatory Redemption

Pursuant to the indenture governing the Senior Secured Notes, the Company is required to use an amount equal to 75% of its consolidated Excess Cash Flow for the immediately preceding six-month period ending March 31 or September 30, as applicable, to redeem on a semi-annual basis on the last day of May and November of each year, commencing on May 31, 2013, at a redemption price equal to 100% of the principal amount thereof from holders on a pro rata basis, subject to the Company maintaining a minimum cash balance, including availability on the ABL, of $75 million immediately following the mandatory redemption payment subject to certain conditions. Excess Cash Flow, as defined in the indenture governing the Senior Secured Notes, means the aggregate cash flow from operating activities adjusted for, among other things, payments relating to interest, taxes, long-term employee compensation plans, certain pension plan contribution payments and the acquisitions of property, plant, equipment and intangible assets. For purposes of determining the consolidated Excess Cash Flow, deductions for capital expenditures and information systems/ information technology expenses are each subject to an annual deduction limit of $50 million. Under other circumstances, the Company may also have to make additional repayments on the Senior Secured Notes (refer to the indenture governing the Senior Secured Notes).

Optional Redemption The Company may redeem all or part of the Senior Secured Notes at its option at any date, upon not less than 30 nor more than 60 days prior notice, at a redemption price equal to: • In the case of a redemption occurring prior to May 31, 2017, 105% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date; or • In the case of a redemption occurring on or after May 31, 2017, 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.

Obligations under finance leases The Company entered into several lease agreements with third parties for office equipment and for software. The obligations under finance leases are secured by a moveable hypothec on the office equipment leased.

The following table provides a reconciliation of our minimum future lease payments to the present value of our finance lease obligations as at December 31, 2016:

Future minimum Present value of minimum lease payments Interest lease payments 2017 $ 152 $ 9 $ 143 2018 and 2019 221 5 216 $ 373 $ 14 $ 359

13. EXCHANGEABLE DEBENTURES

As at December 31, 2016 December 31, 2015 Face value of exchangeable debentures $ 107,089 $ 107,089 Less unaccreted interest 14,915 16,611 $ 92,174 $ 90,478

On December 20, 2012, the Company through its subsidiary Yellow Pages Digital & Media Solutions Limited, issued $107.5 million of senior subordinated exchangeable debentures (“Exchangeable Debentures”) due November 30, 2022. Interest on the Exchangeable Debentures accrues at a rate of 8% per annum if for the applicable interest period, it is paid in cash, or 12% per annum if the Company makes a Payment in Kind (“PIK”) election to pay interest in respect of all or any part of the then outstanding Exchangeable Debentures in additional Exchangeable Debentures. Interest on the Exchangeable Debentures is payable semi-annually in arrears, and in equal instalments on the last day of May and November of each year. The initial fair value on December 20, 2012 of the Exchangeable Debentures was $91.6 million.

The Exchangeable Debentures are senior subordinated and unsecured obligations of Yellow Pages Digital & Media Solutions Limited. The Exchangeable Debentures are unconditionally guaranteed on a subordinated unsecured basis by

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

Yellow Pages Limited and all of its Restricted Subsidiaries (as such term is defined in the indenture governing the Exchangeable Debentures).

The indenture governing the Exchangeable Debentures contains restrictive covenants, including restrictions on the incurrence of additional indebtedness, the payment of dividends and other payment restrictions, the creation of liens, sale and leaseback transactions, mergers, consolidations and sales of assets and certain transactions with affiliates. The indenture does not contain the obligation to maintain financial ratios. Financial ratio restrictions only apply upon incurrence of indebtedness and other transactions.

As at December 31, 2016 and 2015, the Company was in compliance with all covenants under the indenture governing the Exchangeable Debentures.

Exchange Option

The Exchangeable Debentures are exchangeable at the holder’s option into common shares at any time at an exchange price per common share equal to $19.04, subject to adjustment for specified transactions. The conversion option was valued at $3.6 million, net of income taxes of $1.3 million, at the date of issuance and is included in Equity. The liability portion is being accreted such that the liability at maturity equals the principal amount less exchanges.

Optional Redemption

The Company may, at any time on or after the date on which all of the Senior Secured Notes have been paid in full, redeem all or part of the Exchangeable Debentures at its option at a redemption price equal to:

• in the case of a redemption occurring prior to May 31, 2021, 110% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date; or • in the case of a redemption occurring on or after May 31, 2021, 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date.

The redemption option for cash is an embedded derivative and is recorded at fair value on the consolidated statements of financial position with changes in fair value recognized in financial charges. The fair value was $0.1 million as at December 31, 2016 (2015 – $0.5 million). 14. INCOME TAXES A reconciliation of income taxes at Canadian statutory rates with reported income taxes is as follows:

For the years ended December 31, 2016 2015 (Losses) earnings before income taxes and loss from investment in associate $ (548,782) $ 88,094 Combined Canadian federal and provincial tax rates1 26.88% 26.70% Income tax (recovery) expense at statutory rates $ (147,509) $ 23,521 Increase (decrease) resulting from: Non-deductible expenses for tax purposes 1,354 1,120 Settlement of tax assessments 273 1,045 Other 365 1,353 (Recovery of) provision for income taxes $ (145,517) $ 27,039

1 The combined applicable statutory tax rate increased by 0.18% resulting mainly from the provincial allocation of revenues earned and the increase in the Alberta, New Brunswick and Newfoundland statutory tax rates.

(Recovery of) provision for income taxes includes the following amounts:

For the years ended December 31, 2016 2015 Current $ 89 $ 254 Deferred (145,606) 26,785 $ (145,517) $ 27,039

62 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

Deferred income tax (assets) liabilities are attributable to the following items:

Deferred Property and Exchang- income tax Deferred Non-capital Post- equipment eable liabilities financing losses carry Deferred employment Accrued and lease Deben- Intangible (assets), costs forward revenues benefits liabilities incentives tures assets net December 31, 2015 $ (4,521) $ (15,988) $ (5,610) $ (52,113) $ (10,923) $ 10,919 $ 4,581 $ 160,887 $ 87,232 Business acquisitions – – – – – – – 128 128 Expense (benefit) to income statement 3,947 (10,686) 1,571 171 2,679 6,736 (477) (149,547) (145,606) Expense to OCI – – – 6,208 – – – – 6,208 December 31, 2016 $ (574) $ (26,674) $ (4,039) $ (45,734) $ (8,244) $ 17,655 $ 4,104 $ 11,468 $ (52,038)

Deferred Property and Exchang- income tax Deferred Non-capital Post- equipment eable liabilities financing losses carry Deferred employment Accrued and lease Deben- Intangible (assets), costs forward revenues benefits liabilities incentives tures assets net December 31, 2014 $ (34) $ (10,826) $ (7,607) $ (64,226) $ (10,520) $ 1,525 $ 4,987 $ 135,368 $ 48,667 Business acquisitions – (1,383) – – – (156) – 8,373 6,834 (Benefit) expense to income statement (5,052) (3,060) 1,997 7,167 (403) 9,550 (406) 16,992 26,785 Expense to OCI – – – 4,946 – – – – 4,946 Other 565 (719) – – – – – 154 – December 31, 2015 $ (4,521) $ (15,988) $ (5,610) $ (52,113) $ (10,923) $ 10,919 $ 4,581 $ 160,887 $ 87,232

As at December 31, 2016, the Company had not recognized deferred income tax assets with respect to foreign operating losses of $161.4 million which expire from 2028 to 2036, Canadian capital losses of $10.3 million which can be utilized indefinitely, and deductible temporary differences of $153.8 million.

As at December 31, 2016, the Company and its subsidiaries had non-capital losses totalling approximately $96.4 million that may be applied against future taxable income. These non-capital losses expire gradually between 2027 and 2036. The Company recognized a deferred income tax asset on non-capital losses because it is probable that sufficient taxable profit will be available from current operations in the near future. 15. SHAREHOLDERS’ CAPITAL Common shares

For the year ended December 31, 2016 Number of Shares Amount Balance, December 31, 2015 28,063,919 $ 4,031,528 Exercise of stock options (Note 17) 11,375 157 Exchange of common share purchase warrants 10 – Balance, December 31, 2016 28,075,304 $ 4,031,685

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

For the year ended December 31, 2015 Number of Shares Amount Balance, December 31, 2014 27,976,661 $ 4,030,325 Exercise of stock options (Note 17) 87,250 1,203 Exchange of common share purchase warrants 8 – Balance, December 31, 2015 28,063,919 $ 4,031,528

Warrants On December 20, 2012, the Company issued 2,995,506 common share purchase warrants (“Warrants”).

During the years ended December 31, 2016 and 2015, 10 and 8 Warrants, respectively, were exercised in exchange for 10 and 8 common shares of Yellow Pages Limited, respectively. As at December 31, 2016 and 2015, the Company had a total of 2,995,488 and 2,995,498 Warrants outstanding, respectively.

Each Warrant is transferable and entitles the holder to purchase one common share of Yellow Pages Limited at an exercise price of $28.16 per Warrant payable in cash at any time on or prior to December 20, 2022. The fair value of the Warrants on December 20, 2012 was $1.5 million.

The fair value of the Warrants was calculated using a binomial option pricing model with the following assumptions:

Risk free interest rate 2.27% Expected life 10 years Expiry date December 20, 2022 Expected volatility 33.5%

16. EARNINGS PER SHARE

The following table reconciles the weighted average number of shares outstanding used in computing basic earnings per share to the weighted average number of shares outstanding used in computing diluted earnings per share as well as net earnings used in the computation of basic earnings per share to net earnings adjusted for any dilutive effect:

For the years ended December 31, 2016 2015 Weighted average number of shares outstanding used in computing basic (loss) earnings per share 26,500,861 26,688,369 Dilutive effect of restricted share units and performance share units – 1,082,187 Dilutive effect of stock options – 71,250 Dilutive effect of Exchangeable Debentures – 5,624,422 Weighted average number of shares outstanding used in computing diluted (loss) earnings per share 26,500,861 33,466,228

For the years ended December 31, 2016 2015 Net (loss) earnings used in the computation of basic (loss) earnings per share $ (403,705) $ 61,055 Impact of assumed conversion of Exchangeable Debentures, net of applicable taxes – 7,393 Net (loss) earnings adjusted for dilutive effect used in the computation of diluted (loss) earnings per share $ (403,705) $ 68,448

17.

Yellow Pages Limited did not calculate the diluted loss per share for the year ended December 31, 2016 as the conversion of the restricted share units, performance share units, stock options and Exchangeable Debentures would not be dilutive to the loss. For the year ended December 31, 2015, the diluted earnings per share calculation did not take into consideration the potential dilutive effect of the Warrants (refer to Note 15 – Shareholders’ capital) as well as certain stock options that are not in the money as they are not dilutive.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

17. STOCK-BASED COMPENSATION PLANS

Yellow Pages Limited’s stock-based compensation plans consist of restricted share units, performance share units, deferred share units and stock options of Yellow Pages Limited.

Restricted Share Unit and Performance Share Unit Plan On May 6, 2013, Yellow Pages Limited adopted a restricted share unit and performance share unit plan (the “RSU and PSU Plan”) to reward key employees and officers of Yellow Pages Limited (the “Participants”). Following the implementation of the RSU and PSU Plan, Yellow Pages Limited granted to Participants a number of restricted share units (“RSUs”) and/or performance share units (“PSUs”), as applicable, based on the volume weighted average trading price of the common shares for the five days immediately preceding the grant date. The RSUs are time-based awards and will vest upon the continuous employment of the Participants for a period of 36 months starting from the date of the grant or such other period not exceeding 36 months determined by the Board of Directors. The PSUs are performance-based awards and will vest upon confirmation by the Board of Directors of the achievement of specified performance targets and upon the continuous employment of the Participants for a period of 36 months starting from the date of the grant or such other period not exceeding 36 months determined by the Board of Directors. The PSUs for which the performance targets have not been achieved shall automatically be forfeited and cancelled.

Pursuant to the terms of the RSU and PSU Plan, if the RSU and PSU Plan is funded, Participants will receive, upon vesting of the RSUs and PSUs, common shares of the Company acquired on the open market. In the event the RSU and PSU Plan is unfunded, Yellow Pages Limited will pay to the Participant an amount in cash, equivalent to the number of RSUs or PSUs that have vested.

The number of PSUs that vest could potentially reach up to one-and-a-half times the actual number of PSUs awarded if the actual performance reaches the maximum level of performance targets.

During the year ended December 31, 2016, 553,709 common shares of Yellow Pages Limited (2015 – 417,669) were purchased on the open market of the TSX by the trustee appointed under the RSU and PSU Plan at a cost of $10.5 million (2015 – $6.8 million) and are restricted for the purpose of funding of the RSU and PSU Plan. The total number of common shares of Yellow Pages Limited held by the trustee for the purpose of funding the RSU and PSU Plan amounted to 1,686,505 as at December 31, 2016.

The following table summarizes the status of the RSU and PSU grants during the years ended December 31:

2016 2015 Number of RSUs PSUs¹ RSUs PSUs¹ Outstanding, beginning of period 464,924 520,117 399,238 363,290 Granted 199,427 327,137 265,716 360,843 Additional payout related to achievement of performance targets² – 26,259 – – Settled (159,398) (85,947) (58,517) – Forfeited (60,598) (191,452) (141,513) (204,016) Outstanding, end of period 444,355 596,114 464,924 520,117 Weighted average remaining life 1.1 1.1 1.1 1.4

1 The outstanding number of PSUs represents a payout of 100%. In addition, the potential payout in excess of 100% and limited to a maximum payout of 150% pursuant to the achievement of certain performance targets, amounted to 297,990 common shares as at December 31, 2016 (2015 – 259,997 common shares). 2 The additional payout is related to the achievement of certain performance targets in excess of 100% and amounted to an additional 44% for the year ended December 31, 2016 (2015 – nil).

During the years ended December 31, 2016, an expense of $5.6 million (2015 – $5.9 million) was recorded in the consolidated income statement in operating costs in relation to the RSU and PSU Plan.

Deferred Share Unit Plan On June 12, 2013, Yellow Pages Limited adopted a deferred share unit plan (the “DSU Plan”). The DSU Plan was amended in October 2013 to provide for the participation by eligible employees as designated by the Board of Directors. The Company shall settle the vested DSUs in cash or in common shares of Yellow Pages Limited acquired on the open market at the discretion of the Company when a Director leaves the Board of Directors or an eligible employee ceases employment with the Company.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 65

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

The following table summarizes the status of the deferred share unit (“DSU”) grants during the years ended December 31:

2016 2015 Number of DSUs Liability¹ Number of DSUs Liability¹ Outstanding, beginning of period 192,964 $ 2,947 151,141 $ 2,959 Granted 53,928 825 41,823 800 Variation due to change in stock price – 596 – (812) Outstanding and vested, end of period 246,892 $ 4,368 192,964 $ 2,947

1 The liability related to the DSU Plan is recorded in trade and other payables, and the expense related to the units vested and the variation due to changes in stock price is included in operating costs.

Stock options On December 20, 2012, as part of the implementation of Yellow Pages Limited’s Recapitalization transaction, a new stock option plan (the “Stock Option Plan”) was adopted. The Stock Option Plan is intended to attract and retain the services of selected employees of Yellow Pages Limited who are in a position to make a material contribution to the successful operation of the business, provide meaningful incentive to management to lead Yellow Pages Limited through the transformation of its business and to more closely align the interests of management with those of the shareholders of Yellow Pages Limited. A maximum of 1,290,612 stock options may be granted under the Stock Option Plan.

The following table summarizes the status of the stock option grants under the Stock Option Plan during the years ended December 31:

2016 2015 Weighted average Weighted average exercise price per exercise price per Number of options option Number of options option Outstanding, beginning of period 522,950 $ 16.38 480,200 $ 15.10 Granted 251,700 $ 17.83 243,300 $ 16.50 Exercised (11,375) $ 10.12 (87,250) $ 10.12 Forfeited (132,325) $ 17.99 (113,300) $ 16.05 Outstanding, end of period 630,950 $ 16.73 522,950 $ 16.38 Exercisable, end of period 186,550 $ 15.38 78,000 $ 10.12

The following table provides additional information about Yellow Pages Limited’s Stock Option Plan as at December 31:

2016 2015 Number of options Weighted average Number of options Weighted average Exercise price outstanding remaining life outstanding remaining life $10.12 167,375 3.3 178,750 4.4 $16.44 166,050 5.2 195,900 6.2 $17.83 163,000 6.2 $17.96 4,600 5.4 9,200 6.4 $19.61 7,700 4.5 7,700 5.5 $20.33 4,900 4.4 4,900 5.4 $24.65 117,325 4.2 126,500 5.2 Outstanding, end of period 630,950 4.8 522,950 5.3 Exercisable, end of period 186,550 3.6 78,000 4.4

Stock options were valued using a binomial option pricing model. Expected volatility is based on the historical share price volatility over the average expected life of the options granted. The following table shows the key inputs into the valuation model for the years ended December 31:

2016 2015 Weighted average grant date share price $ 18.28 $ 15.90 Exercise price $ 17.83 $ 16.50 Expected volatility 35% 38% Option life 7 years 7 years Risk-free interest rate 1.02% 1.44% Weighted average remaining life 6.16 years 6.16 years

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

An expense of $1.0 million was recorded during the year ended December 31, 2016 (2015 – $0.8 million) in relation to the Stock Option Plan. 18. OPERATING COSTS

For the years ended December 31, 2016 2015 Salaries, commissions and benefits $ 300,310 $ 295,628 Supply chain and logistics1,3 143,487 125,995 Other goods and services2,3 80,538 88,600 Information systems 45,624 47,679 Bad debt expense (Note 22) 12,829 11,182 $ 582,788 $ 569,084

1 Supply chain and logistics costs relate to external supplier costs for manufacturing and distribution of our print and online products.

2 Other goods and services include promotion and advertising costs, real estate, office services, consulting services including contractors and professional fees. Operating leases recognized in operating costs during the year amounted to $22.5 million (2015 - $20.4 million).

3 Certain expenses within other goods and services in the prior period were reclassified to supply chain and logistics to conform to this year’s presentation. 19. FINANCIAL CHARGES, NET

The significant components of the financial charges are as follows:

For the years ended December 31, 2016 2015 Interest on long-term debt and Exchangeable Debentures $ 43,776 $ 53,111 Net interest on the defined benefit obligations (Note 11) 7,064 8,517 Sales taxes on tax assessment relating to financing costs 2,372 – Other, net 2,918 (706) $ 56,130 $ 60,922

20. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

The following are non-cash transactions:

For the years ended December 31, 2016 2015 Additions to property and equipment included in trade and other payables $ 5,525 $ 462 Additions to intangible assets included in trade and other payables $ 2,405 $ 5,516 Additions to property and equipment under finance leases $ $ 102

21. COMMITMENTS AND CONTINGENCIES a) As at December 31, 2016, Yellow Pages Limited has commitments under various leases for premises, equipment, purchase and service contract obligations for both operating and capital expenditures for each of the next five years and thereafter, and in the aggregate of:

Operating leases Other Total commitments 2017 $ 21,417 $ 31,835 $ 53,252 2018 18,898 16,318 35,216 2019 17,822 5,199 23,021 2020 17,137 2,551 19,688 2021 16,249 1,255 17,504 Thereafter 202,497 2,519 205,016 $ 294,020 $ 59,677 $ 353,697

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 67

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

Under certain lease agreements, incentives for leasehold improvements exist. These lease incentives are accounted for in deferred credits and amount to $11.8 million.

b) Yellow Pages Limited has four billing and collection services agreements. The term of the Billing and Collection Services Agreement with Bell Canada (“Bell”) expires on December 31, 2017. The agreement with TELUS Communications Inc. (“TELUS”) expires in 2031. The agreement with MTS Inc. expires on December 31, 2017. The agreement with Bell Canada Inc. (as successor to Bell Aliant Regional Communications LP) expires on April 30, 2017, with two automatic renewal periods for ten years.

Pursuant to publication agreements with each of Bell, TELUS, MTS Inc. and Bell Canada Inc., Yellow Pages Limited produces alphabetical listing telephone directories for each of these companies in order for them to meet their regulatory obligations.

The Company also entered into several other agreements with Bell, TELUS, MTS Inc. and Bell Canada Inc., providing for the use of listing information and trademarks for the publications of directories. If the Company materially fails to perform its obligations under the publication agreements mentioned above and as a result these publication agreements are terminated in accordance with their terms, these other listing information and trademark licenses with Bell, TELUS, MTS Inc. or Bell Canada Inc., as the case may be, may also be terminated. These other agreements with Bell, TELUS, MTS Inc. and Bell Canada Inc. will terminate between 2017 and 2037.

c) Yellow Pages Limited entered into directory printing agreements with its printing suppliers to print, bind and furnish alphabetical, classified and combined directories as well as other publications. It also entered into distribution agreements.

d) Yellow Pages Limited is subject to various claims and proceedings which have been instituted against it during the normal course of business for which certain of the claims are provided for and included in trade and other payables, and provisions based on management’s best estimate of the likelihood of the outcome. Management believes that the disposition of the matters pending or asserted is not expected to have any material adverse effect on the financial position, financial performance or cash flows of Yellow Pages Limited. 22. FINANCIAL RISK MANAGEMENT

Credit Risk Credit risk stems primarily from the potential inability of a customer or counterparty to a financial instrument to meet its contractual obligations. Yellow Pages Limited is exposed to credit risk with respect to cash and trade receivables from customers. The carrying value of financial assets represents Yellow Pages Limited’s maximum exposure.

Credit risk associated with cash is minimized substantially by ensuring that these financial assets are placed with creditworthy counterparties. An ongoing review is performed to evaluate changes in the status of counterparties.

Yellow Pages Limited’s extension of credit to customers involves judgment. Yellow Pages Limited has established internal controls designed to mitigate credit risk, including a formal credit policy managed by its credit department. New customers, customers increasing their advertising spend by a certain threshold and customers not respecting payment terms are subject to a specific vetting and approval process.

Yellow Pages Limited considers that it has limited exposure to concentration of credit risk with respect to trade receivables from customers due to its large and diverse customer base operating in numerous industries and its geographic diversity. There are no individual customers that account for 1% or more of revenues and there are no trade receivables from any one individual customer that exceeds 5% of the total balance of trade receivables at any point in time during the year.

Bell, TELUS, MTS Inc. and Bell Canada Inc. provide Yellow Pages Limited with customer collection services with respect to advertisers who are also their customers. As such, they receive money from customers on behalf of Yellow Pages Limited. Yellow Pages Limited retains the ultimate collection risk on these receivables.

Allowance for doubtful accounts and past due receivables are reviewed by management at each statement of financial position date. Yellow Pages Limited updates its estimate of the allowance for doubtful accounts based on the evaluation of the recoverability of trade receivable balances of each customer taking into account historic collection trends of past due accounts and current economic conditions. Trade receivables are written off once determined not to be collectible. Subsequent recoveries of amounts previously written off are credited to the income statement.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

The components of trade and other receivables are as follows:

As at December 31, 2016 December 31, 2015 Trade receivables Current $ 66,517 $ 65,147 Past due less than 180 days 30,620 26,801 Past due over 180 days 5,243 4,901 Trade receivables $ 102,380 $ 96,849 Other receivables1 $ 12,474 $ 26,977 Trade and other receivables $ 114,854 $ 123,826

1 Other receivables as at December 31, 2015 and 2016 included a loan receivable associated with a forward contract. The balance as at December 31, 2015 also included sales tax receivables of $16.6 million collected in 2016.

Yellow Pages Limited’s trade receivables are stated after deducting an allowance for doubtful accounts. The movements in the allowance for doubtful accounts were as follows:

As at December 31, 2016 December 31, 2015 Balance, beginning of year $ 12,683 $ 19,247 Bad debt expense, net of recovery 12,829 11,182 Written-off (11,631) (17,746) Balance, end of year $ 13,881 $ 12,683

Market Risk (i) Interest Rate Risk Yellow Pages Limited is exposed to interest rate risks resulting from fluctuations in interest rates on its ABL with rates which are generally based on the Prime rate or Canadian BA rate. Yellow Pages Limited does not use derivative instruments to reduce its exposure to interest rate risk. The Company manages its interest rate risk by maximizing the interest income earned on excess funds while maintaining the necessary liquidity to conduct its day-to-day operations.

Yellow Pages Limited may also be exposed to fluctuations in long-term interest rates relative to the refinancing of its debt obligations upon their maturity. The interest rate on new long-term debt issuances will be based on the prevailing rates at the time of the refinancing, and will also depend on the tenor of the new debt issued. There are no upcoming maturities that will require refinancing. Changes in interest rates will also affect the fair value of future cash flows of Yellow Pages Limited’s fixed rate debt. As interest rates on the Senior Secured Notes and Exchangeable Debentures are fixed, the Company is not exposed to interest rate fluctuation risk.

(ii) Foreign Exchange Risk Yellow Pages Limited is exposed to foreign exchange risk arising from various currency transactions, which are not significant. Foreign exchange transaction risk arises primarily from commercial transactions that are denominated in a currency that is not the functional currency of Yellow Pages Limited’s business unit that is party to the transaction. Yellow Pages Limited is exposed to fluctuations in the U.S. dollar. The effect on net earnings from existing U.S. dollar exposures of a one point increase or decrease in the Canadian/U.S. dollar exchange rate is not significant. The Company’s expenditures, net of revenues, denominated in U.S. dollars were approximately $33 million for the year ended December 31, 2016. In 2016, Yellow Pages Limited entered into foreign currency contracts to hedge this risk.

Liquidity Risk Liquidity risk is the exposure of Yellow Pages Limited to the risk of not being able to meet its financial obligations as they become due.

Yellow Pages Limited manages this risk by maintaining detailed cash forecasts and long-term operating and strategic plans. The management of liquidity requires a constant monitoring of expected cash inflows and outflows which is achieved through a detailed forecast of the Company’s liquidity position to ensure adequate and efficient use of cash resources.

The Company is required to use an amount equal to 75% of its consolidated Excess Cash Flow to redeem on a semi-annual basis the Senior Secured Notes. This requirement is being met through internally-generated cash and cash on hand.

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 69

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

The following are the contractual maturities of the financial liabilities and related capital amounts:

Payments due for the years following December 31, 2016 Total 1 year 2 – 3 years 4 – 5 years After 5 years Non-derivative financial liabilities Long-term debt1,2 $ 309,669 $ 75,018 $ 234,651 $ – $ – Obligations under finance leases1 359 143 216 – – Exchangeable Debentures1 107,089 – – – 107,089 Trade and other payables 79,493 79,493 – – – Provisions 57,337 53,010 4,327 – – Total $ 553,947 $ 207,664 $ 239,194 $ – $ 107,089

1 Principal amount. 2 The repayment of the Senior Secured Notes may vary subject to the Excess Cash Flow clause under the indenture governing the Senior Secured Notes as well as the minimum cash balance requirement post Mandatory Redemptions under the indenture governing the Senior Secured Notes.

Fair values The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

The fair value of cash, trade and other receivables, and trade and other payables is approximately equal to their carrying values due to their short-term maturity. The fair value of the Senior Secured Notes and the Exchangeable Debentures is evaluated based on quoted market prices as at the statement of financial position date.

The following schedule represents the carrying values and the fair values of financial instruments not measured at fair value in the consolidated statement of financial position as at December 31, 2016:

Level Carrying Value Fair Value Current portion of long-term debt 1 $ 75,161 $ 77,483 Non-current portion of long-term debt 1 $ 234,867 $ 242,129 Exchangeable Debentures 1 $ 92,174 $ 119,672

Fair value hierarchy The three levels of fair value hierarchy are as follows: • Level 1 – inputs are unadjusted quoted prices of identical instruments in active markets. • Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. • Level 3 – inputs used in a valuation technique are not based on observable market data in determining fair values of the instruments. Determination of fair value and the resulting hierarchy requires the use of observable market data whenever available. The classification of a financial instrument in the hierarchy is based upon the lowest level of input that is significant to the measurement of fair value.

The following table summarizes the financial instruments measured at fair value in the consolidated statements of financial position, classified using the fair value hierarchy:

As at Level December 31, 2016 December 31, 2015 Financial asset or liability Investment – available-for-sale 3 $ 3,520 $ 3,520 Foreign currency forward contracts 2 $ 996 $ –

Yellow Pages Limited’s available-for-sale investment is comprised of a privately held equity security and is carried at fair value based on estimates on market rates prevailing at the statement of financial position date. The available-for-sale investment is presented in financial and other assets in the consolidated statements of financial position.

In order to mitigate foreign exchange risk, Yellow Pages Limited entered into foreign currency forward contracts and designated them as cash-flow hedges for accounting purposes. The foreign currency forward contracts are presented in prepaid expenses in the consolidated statement of financial position as at December 31, 2016.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

23. CAPITAL DISCLOSURES

Yellow Pages Limited’s objective in managing capital is to ensure sufficient liquidity to cover financial obligations and investment requirements. Reducing debt and associated interest charges is one of the Company’s primary financial goals which will improve its financial flexibility and support the implementation of its strategic objectives.

Yellow Pages Limited monitors its capital structure and makes adjustments based on the objectives described above in response to changes in economic conditions and the risk characteristics of the underlying assets and the Company’s working capital requirements.

The primary measure used by Yellow Pages Limited to monitor its financial leverage is its ratio of net debt to Latest Twelve Month Adjusted EBITDA1. Yellow Pages Limited also uses other financial metrics to monitor its financial leverage including Fixed Charge Coverage Ratio and net debt to total capitalization.

Yellow Pages Limited’s capital is comprised of net debt, Exchangeable Debentures and equity attributable to shareholders of Yellow Pages Limited as follows:

As at December 31, 2016 December 31, 2015 Cash $ 17,260 $ 67,253 Senior Secured Notes (Note 12) $ 309,669 $ 406,733 Exchangeable Debentures (Note 13) 92,174 90,478 Obligations under finance leases (Note 12) 359 620 Net debt $ 384,942 $ 430,578 Equity attributable to shareholders 368,904 759,524 Total capitalization $ 753,846 $ 1,190,102 Net debt to total capitalization 51.1% 36.2%

For the years ended December 31, 2016 2015 Latest Twelve Month Adjusted EBITDA¹ $ 235,191 $ 260,687 Net debt to Latest Twelve Month Adjusted EBITDA ratio¹ 1.6 1.7

1 Latest twelve month income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (“Latest Twelve Month Adjusted EBITDA”). Latest Twelve Month Adjusted EBITDA is a non-IFRS measure and may not be comparable with similar measures used by other publicly traded companies. 24. GUARANTEES

In the normal course of operations, Yellow Pages Limited has entered into agreements which are customary in the industry that provide for indemnifications and guarantees to counterparties in transactions involving business acquisitions, business dispositions and sale of assets. Yellow Pages Limited has entered into agreements which contain indemnification of its directors and officers indemnifying them against expenses (including legal fees), judgments, fines and any amount actually and reasonably incurred by them in connection with any action, suit or proceeding in which the directors and/or officers are sued as a result of their service, if they acted honestly and in good faith with a view to the best interests of Yellow Pages Limited. Yellow Pages Limited benefits from directors’ and officers’ liability insurance which it has purchased. No amount has been accrued in the consolidated statements of financial position as at December 31, 2016 and 2015 with respect to these indemnities.

The nature of these guarantees prevents Yellow Pages Limited from making a reasonable estimate of the maximum potential amount it could be required to pay to counterparties. 25. SEGMENTED INFORMATION

The Company operates in a single business segment which is to provide Canadians with digital and print media and marketing solutions.

As at December 31, 2016, Yellow Pages Limited had non-current assets, other than deferred tax assets, held in a foreign country (United States of America) of $1.6 million (2015 - $2.4 million).

YELLOW PAGES LIMITED 2016 ANNUAL REPORT 71

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – DECEMBER 31, 2016 (ALL TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS, EXCEPT SHARE INFORMATION)

26. LIST OF SUBSIDIARIES

Principal activity Proportion of ownership As at December 31, Canada 2016 2015 Yellow Pages Digital & Media Solutions Limited Digital and print media marketing solutions provider 100% 100% Yellow Pages Homes Limited Publisher of locally-targeted real estate listings 100% 100% 411 Local Search Corp. Digital media marketing solutions provider 100% 100% 9059-2114 Quebec Inc. Holding company 100% 100% ByTheOwner Inc. Real estate and related services provider 100% 100% Juice DMS Advertising Limited¹ Digital media marketing solutions provider 100% – YP Dine Solutions Limited Local digital restaurant guides provider 100% 100% Bookenda Limited Booking and reservation management system provider 100% 100% 9778748 Canada Inc.² Publisher 100% – USA YPG (USA) Holdings, Inc. Holding company 100% 100% Yellow Pages Digital & Media Solutions, LLC Operational support services provider 100% 100% Juice Mobile USA LLC¹ Digital media marketing solutions provider 100% –

1 On March 17, 2016, Yellow Pages Limited acquired the consolidated net assets of Oriole Media Corp. (doing business as JUICE Mobile). Oriole Media Corp. was subsequently renamed Juice DMS Advertising Limited (refer to Note 5 – Business acquisitions). 2 On September 26, 2016, Yellow Pages Homes Limited acquired the net assets of 9778748 Canada Inc. (doing business as Totem. Refer to Note 5 – Business acquisitions).

27. RELATED PARTY DISCLOSURES

Key management personnel compensation Yellow Pages Limited’s key management personnel have authority and responsibility for planning, directing and controlling the Company’s activities and consist of Yellow Pages Limited’s executive team and the Board of Directors.

Total compensation expense for key management personnel, and the composition thereof, is as follows:

For the years ended December 31, 2016 2015 Salary, fees and other short-term employee benefits $ 5,354 $ 5,107 Post-employment benefits 437 364 Stock-based compensation 4,306 3,608 Termination benefits 1,350 – $ 11,447 $ 9,079

1 During 2016, management reassessed its key management personnel. The prior period has been revised to reflect this change in composition.

72 YELLOW PAGES LIMITED 2016 ANNUAL REPORT

Head Office 16 Place du Commerce Verdun, Quebec H3E 2A5

Investor Relations Telephone: 1 877 YLO-2003 (1 877 956-2003) E-mail: [email protected]

Auditor Deloitte LLP

TSX Symbols Y Common Shares YPG.DB Senior Subordinated Unsecured Exchangeable Debentures Y.WT Warrants

Transfer Agent CST Trust Company 2001 Boul. Robert-Bourassa, Suite 1600 Montreal, Quebec H3A 2A6 Telephone: 1 800 387-0825 E-Mail Inquiries: [email protected]

For further information on Yellow Pages Limited, visit our corporate website at corporate.yp.ca This annual report is printed on Rolland Enviro 100, the environmentally responsible choice, because it is processed chlorine free, accredited Eco-Logo and 100% post-consumer. In other words, C132107 no new trees have been cut to produce this paper, and all the ﬁbre comes from recycling bins. Notice of annual meeting of shareholders and management proxy circular Wednesday, May 10, 2017, Montreal, Québec March 22, 2017

Dear Shareholders: On behalf of the Board of Directors and management of Yellow Pages Limited (the “Corporation”), we cordially invite you to attend the annual general meeting of shareholders (the “Annual Meeting”), a valuable opportunity to review the performance of the Corporation alongside the Board of Directors and to vote your shares. This year’s Annual Meeting will be held in Suite 6.300 of the offices of the Corporation located at Le Nordelec, 1751 Richardson Street, Montreal, Québec on Wednesday, May 10, 2017, at 11:00 a.m. (Eastern Time). The Annual Meeting will cover the progress to date of our digital evolution, our business strategy and financial performance. The other items to be considered at this meeting, namely the election of Directors and the appointment of auditors, are described in the accompanying Notice of Annual Meeting of Shareholders and management proxy circular. The contents and filing of this proxy circular have been approved by the Board of Directors. We hope you find that this year’s proxy circular contains all the information you require in order to make well-informed decisions. We take our disclosure obligations seriously and we invite you to read the entire proxy circular carefully. This year, the Corporation is using notice-and-access to send the Notice of Annual Meeting of Shareholders and management proxy circular to beneficial owners and registered holders of its common shares. Your participation in the affairs of the Corporation is important to us and we encourage you to exercise your voting right. If you are unable to attend the Annual Meeting in person, you may complete and return the proxy form or voting instructions form in the envelope provided for this purpose. It is also possible for you to vote directly online by following the instructions on the proxy forms. A live webcast of the meeting will be available on the Corporation’s website at corporate.yp.ca. Please note, however, that you will not be able to ask questions nor vote via the webcast. Finally, we would like to thank you for your continued confidence and support of Yellow Pages Limited. We look forward to your participation at the meeting.

Sincerely, Robert F. MacLellan Chair

YELLOW PAGES LIMITED PROXY CIRCULAR 1 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

PLEASE TAKE NOTICE that the annual meeting (the “Meeting”) of holders of common shares (“Shareholders”) of Yellow Pages Limited (the “Corporation”) will be held in Suite 6.300 of the offices of the Corporation located at Le Nordelec, 1751 Richardson Street, Montreal, Québec on Wednesday, May 10, 2017, at 11:00 a.m. (Eastern Time) to consider and take action on the following matters: 1. To receive the consolidated financial statements of the Corporation for the year ended December 31, 2016, together with the notes thereto and the independent auditor’s report thereon (the “Financial Statements”); 2. To elect the Directors of the Corporation for the ensuing year; 3. To appoint the auditors of the Corporation for the ensuing year; and 4. To transact such other business as may properly come before the Meeting or any adjournment thereof. The accompanying management proxy circular of the Corporation dated March 22, 2017, together with all schedules thereto, distributed to Shareholders in connection with the Meeting (the “Proxy Circular”) provides additional information relating to the matters to be dealt with at the Meeting. This year, as permitted by Canadian securities regulators, the Corporation is using notice-and-access to deliver this Proxy Circular to Shareholders. This means that the Proxy Circular is being posted online to access, rather than being mailed out. Notice-and-access substantially reduces the Corporation’s printing and mailing costs and is environmentally friendly as it reduces paper and energy consumption. Shareholders will still receive a form of proxy or a voting instruction form in the mail so they can vote their shares but, instead of receiving a paper copy of this Proxy Circular, they will receive a notice with information about how they can access the Proxy Circular electronically and how to request a paper copy. A Shareholder who is unable to be present at the Meeting and who wishes to appoint some other person (who need not be a Shareholder) to represent him, her or it at the Meeting may do so either by striking out the names set forth in the form of proxy and by inserting such person’s name in the blank space provided therein or by completing another proper form of proxy, and, in either case, by returning the completed form of proxy in the pre-addressed return envelope provided for that purpose to CST Trust Company, no later than 4:00 p.m. (Eastern Time) on May 8, 2017, or if the meeting is adjourned, by no later than 48 hours prior to the time of such adjourned meeting (excluding Saturdays, Sundays and holidays). The time limit for the deposit of proxies may be waived or extended by the Chair of the Meeting without notice. Shareholders are invited to attend the Meeting, where there will be an opportunity to ask questions and meet management of the Corporation (the “Management”). At the Meeting, the Corporation will also report on its 2016 and first quarter 2017 operational and financial results. For those Shareholders who cannot attend the Meeting in person, the Corporation has made arrangements to provide a live webcast of the Meeting. Details on how Shareholders may view the webcast will be found at corporate.yp.ca and will also be provided in a media release prior to the Meeting. Nonetheless, Shareholders viewing the webcast will not be permitted to ask questions or to vote through the webcast facilities. For any questions relating to the Meeting, Shareholders may contact Kingsdale Partners LP by telephone toll-free in North America at 1-855-682-2013 or at (416) 867-2272 outside of North America (collect calls accepted) or by email at [email protected].

DATED in Montreal, Québec, this 22nd day of March 2017. BY ORDER OF THE BOARD OF DIRECTORS

(signed) François D. Ramsay Secretary of Yellow Pages Limited

2 YELLOW PAGES LIMITED PROXY CIRCULAR MANAGEMENT PROXY CIRCULAR

TABLE OF CONTENTS

General Information ...... 4 Forward-looking Statements ...... 4 Questions and Answers on Voting ...... 4 How do I vote if I am a Registered Shareholder? ...... 5 How do I vote if I am a Non-Registered Shareholder? ...... 5 Business of the Meeting ...... 6 Outstanding Shares and Principal Shareholders ...... 6 Presentation of Financial Statements ...... 6 Election of the Board of Directors ...... 7 Number and Election of Directors ...... 7 Nominees ...... 7 Voting Results of 2016 Annual Meeting ...... 13 Board and Committee Meetings ...... 13 Board Independence ...... 14 Director Service on Other Boards and Board Interlocks ...... 14 Director Tenure ...... 15 Evaluation of Board and Committee Performance ...... 15 Orientation and Continuing Education ...... 16 Compensation of Directors ...... 16 Board and Committees ...... 20 Corporate Governance and Nominating Committee ...... 20 Human Resources and Compensation Committee ...... 21 Audit Committee ...... 22 Executive Compensation – Executive Summary ...... 24 Executive Compensation – Discussion and Analysis ...... 29 Determining Compensation ...... 29 Share Ownership Guidelines for Executives ...... 30 Executive Compensation Clawback Policy ...... 31 Compensation Consultant ...... 31 Compensation Philosophy and Objectives ...... 32 Total Compensation Components ...... 36 Performance Graph ...... 48 Summary Compensation Table ...... 50 Incentive Plan Awards ...... 51 Comparison of Target, Realizable and Realized Compensation ...... 52 Pension Plan and Supplemental Pension Benefits ...... 54 Employment Agreements and Change of Control Benefits ...... 56 Indebtedness of Directors and Executive Officers ...... 60 Directors’ Liability Insurance ...... 60 Interest of Informed Persons in Material Transactions ...... 60 Interest of Certain Persons and Companies in Matters to be Acted Upon ...... 60 Appointment of Auditors ...... 60 Audit Fees ...... 61 General ...... 61 Shareholder Proposals for the 2018 Annual General Meeting ...... 61 Additional Information ...... 61 Approval of Directors ...... 61 Schedule “A”: Disclosure of Corporate Governance Practices ...... 62 Corporate Governance Guidelines ...... 62 Role of the Board ...... 62 Board Structure and Operations ...... 62 Position Description ...... 63 Majority Voting Policy ...... 63 Recruitment of Directors ...... 64 Code of Ethics ...... 64 Executive Succession Planning ...... 64 Committees of the Board ...... 65 Risk oversight ...... 66 Strategic Planning Oversight ...... 66

YELLOW PAGES LIMITED PROXY CIRCULAR 3 GENERAL INFORMATION

This Proxy Circular is furnished in connection with the solicitation of proxies by and on behalf of Management for use at the Meeting. The information contained herein is given as at March 22, 2017, except where otherwise indicated. In this Proxy Circular, the words “we”, “us”, “our”, the “Company”, the “Corporation”, “Yellow Pages” and “YP” refer to Yellow Pages Limited (formerly Yellow Media Limited) and its subsidiaries (including Yellow Pages Digital & Media Solutions Limited, which is the amalgamated entity resulting from the vertical short-form amalgamation of Yellow Pages Group Corp. and YPG Financing Inc., wholly-owned subsidiaries of the Corporation, on January 1, 2015).

FORWARD-LOOKING STATEMENTS This Proxy Circular may include forward-looking statements within the meaning of applicable securities laws. These statements relate to analysis and other information that are based on forecasts of future results or events and estimates of amounts not yet determinable. The statements may involve, but are not limited to, comments relating to strategies, expectations, planned operations or future actions. These forward-looking statements are identified by the use of terms such as “aim”, “anticipate”, “believe”, “could”, “estimate”, “expect”, “goal”, “guidance”, “intend”, “objective”, “may”, “plan”, “predict”, “seek”, “should”, “strive”, “target”, “will”, “would”, and similar terms and phrases, including references to assumptions. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such performance or results will be achieved. A number of factors could cause actual results to differ materially from the performance or results discussed in the forward-looking statements, including, but not limited to, the factors discussed under “Risk Factors” in the Annual Information Form of the Corporation dated March 23, 2017, in respect of the Corporation’s financial year ended December 31, 2016 (the “AIF”), which are incorporated by reference in this cautionary statement. The AIF is available on SEDAR at www.sedar.com and on our corporate website at corporate.yp.ca. Additional risks and uncertainties not currently known to Management or that are currently deemed to be immaterial may also have a material adverse effect on the Corporation’s business, financial position or financial performance. Although the forward-looking statements contained in this Proxy Circular are based upon what Management believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements and cautions readers not to place undue reliance on them. These forward-looking statements are made as at the date of this Proxy Circular, and the Corporation assumes no obligation to update or revise them to reflect new events or circumstances, except as required under applicable securities laws.

QUESTIONS AND ANSWERS ON VOTING The following questions and answers provide guidance on how to vote your common shares of the Corporation (the “Shares”). WHO CAN VOTE? Only Shareholders of record as at the close of business on March 14, 2017 (the “Record Date”) are entitled to receive notice of and to vote at the Meeting, and no person becoming a Shareholder after the Record Date shall be entitled to receive notice of and to vote at the Meeting or any adjournment thereof. The failure of any Shareholder to receive notice of the Meeting does not deprive the Shareholder of the right to vote at the Meeting. WHAT WILL I BE VOTING ON? Shareholders will be voting: (i) to elect the Directors of the Corporation (the “Directors”) for the ensuing year; (ii) to appoint the auditors of the Corporation for the ensuing year; and (iii) on any other business matter as may properly come before the Meeting and that may require the vote of the Shareholders. HOW WILL THESE MATTERS BE DECIDED AT THE MEETING? A simple majority of the votes cast by Shareholders, in person or by proxy, will constitute approval of these matters. WHO IS SOLICITING MY PROXY? Management is soliciting your proxy. It is expected that the solicitation will be made primarily by mail but proxies may also be solicited by telephone, over the Internet, in writing or in person, by Directors, officers or regular employees of the Corporation, who will receive no other compensation therefore in addition to their regular remuneration. The Corporation has also retained Kingsdale Partners LP (“Kingsdale”) as its proxy solicitation agent to assist the Corporation in soliciting proxies and has agreed to pay a fee of $40,000 for proxy solicitation services plus additional fees for other services provided. The Corporation may also reimburse brokers and other persons holding Shares in their name or in the name of nominees for their costs incurred in sending proxy materials to their principals in order to obtain their proxies. Such costs are expected to be nominal. WHO CAN I CALL WITH QUESTIONS? If you have questions about the information contained in this Proxy Circular or require assistance in completing your form of proxy, please call Kingsdale toll-free in North America at 1-855-682-2031 or at (416) 867-2272 outside of North America (collect calls accepted) or email at [email protected]. You may also call CST Trust Company, the Corporation’s transfer agent, toll-free at 1-800-387-0825. HOW DO I VOTE? If you are eligible to vote and you are a Shareholder of record as at the close of business on the Record Date, you can vote your Shares in person at the Meeting or by proxy, as explained below. If your Shares are held in the name of a depositary or a nominee such as a trustee, financial institution or securities broker, please see the instructions below under “How do I vote if I am a Non-Registered Shareholder?”

4 YELLOW PAGES LIMITED PROXY CIRCULAR GENERAL INFORMATION

HOW DO I VOTE IF I AM A REGISTERED SHAREHOLDER? 1. VOTING BY PROXY If you are eligible to vote you may appoint someone else to vote for you as your proxy holder by using the form of proxy. The persons named in the form of proxy are Robert F. MacLellan and Julien Billot. Each Shareholder is entitled to appoint a person other than the individuals named in the form of proxy to represent such Shareholder at the Meeting. A Shareholder who wishes to appoint some other person (who need not be a Shareholder) to represent him, her or it at the Meeting may do so either by striking out the names set forth in the form of proxy and by inserting such person’s name in the blank space provided therein or by completing another proper form of proxy. WHERE DO I SEND MY FORM OF PROXY AND WHAT IS THE DEADLINE FOR RECEIVING THE FORM OF PROXY? You can return the completed form of proxy in the pre-addressed return envelope provided for that purpose to CST Trust Company no later than 4:00 p.m. (Eastern Time) on May 8, 2017, or if the meeting is adjourned, by no later than 48 hours prior to the time of such adjourned meeting (excluding Saturdays, Sundays and holidays). HOW WILL MY SHARES BE VOTED IF I GIVE MY PROXY? The Shares represented by the form of proxy will be voted or withheld from voting in accordance with the instructions of the Shareholder on any show of hands or ballot that may be called for and, if the Shareholder specifies a choice with respect to any matter to be acted upon, the Shares will be voted accordingly. If no specification has been made with respect to the matters described in items 2 and 3 of the accompanying Notice of Annual Meeting (the “Notice of Meeting”), the persons named in the form of proxy intend to cast the votes represented by such proxy IN FAVOUR of such matters. The form of proxy confers discretionary authority upon the person named therein with respect to amendments or variations to matters identified in the Notice of Meeting and other matters which may properly come before the Meeting. At the date of this Proxy Circular, the Directors know of no such amendments, variations or other matters. If matters which are not known at the date hereof should properly come before the Meeting, the proxy will be voted on such matters in accordance with the best judgment of the person named in the proxy. IF I CHANGE MY MIND, HOW CAN I REVOKE MY PROXY? A Shareholder who has given a proxy has the power to revoke it as to any matter on which a vote shall not already have been cast pursuant to the authority conferred by such proxy and may do so: (i) by depositing an instrument in writing executed by the Shareholder or by the Shareholder’s legal representative authorized in writing or, if the Shareholder is a corporation, under the corporate seal or by an officer or legal representative thereof duly authorized: (a) at the registered office of the Corporation at any time up to and including the last business day preceding the day of the Meeting, or any adjournment thereof, at which the proxy is to be used; or (b) with Robert F. MacLellan, the Chairman of the Meeting, before the start of the Meeting, or any adjournment thereof; or (iii) in any other manner permitted by law. The registered office of the Corporation is located at 16 Place du Commerce, Nuns’ Island, Verdun, Québec, Canada H3E 2A5. 2. VOTING IN PERSON If you wish to vote in person, you may present yourself to a representative of CST Trust Company at the registration table at the Meeting. Your vote will be taken and counted at the Meeting.

HOW DO I VOTE IF I AM A NON-REGISTERED SHAREHOLDER? All of the Shares beneficially owned by a non-registered Shareholder (a “Non-Registered Shareholder”) are registered in the name of a depositary or a nominee such as a trustee, financial institution or securities broker. For example, Shares listed in an account statement provided by the broker of a Shareholder are not registered in the Shareholder’s name. There are two ways, listed below, for Non-Registered Shareholders to vote their Shares. 1. GIVING YOUR VOTING INSTRUCTIONS Applicable securities laws require Shareholders’ nominees to seek voting instructions from them in advance of the Meeting. Accordingly, Shareholders will receive or have already received from their nominees a request for voting instructions for the number of Shares they beneficially own. Every nominee has its own mailing procedures and provides its own signature and return instructions, which should be carefully followed by Non-Registered Shareholders to ensure that their Shares are voted at the Meeting. 2. VOTING IN PERSON If Non-Registered Shareholders wish to vote in person at the Meeting, they have to insert their own name in the space provided on the request for voting instructions provided by their nominee to appoint themselves as a proxy holder and follow the signature and return instructions of their nominee. Non-Registered Shareholders who appoint themselves as proxy holders should present themselves to a representative of CST Trust Company at the registration table at the Meeting. Such Shareholders do not otherwise have to complete the request for voting instructions sent to them as they will be voting at the Meeting.

YELLOW PAGES LIMITED PROXY CIRCULAR 5 GENERAL INFORMATION

BUSINESS OF THE MEETING As part of the business set out in the Notice of Meeting, the Financial Statements will be placed before Shareholders by the Corporation and Shareholders will be asked to consider and vote on: (i) the election of the Directors for the ensuing year; (ii) the appointment of the auditors of the Corporation for the ensuing year; and (iii) such other business as may be properly brought before the Meeting or any adjournment or postponement thereof.

OUTSTANDING SHARES AND PRINCIPAL SHAREHOLDERS Pursuant to the articles of the Corporation, the Corporation is authorized to issue an unlimited number of Shares. As at March 22, 2017, 28,075,306 Shares were outstanding, each carrying the right to one vote on all matters to come before the Meeting.

As at March 22, 2017, other than Canso Investment Counsel Ltd., GoldenTree Asset Management LP and Polar Asset Management Partners Inc., no person or company, to the knowledge of the Directors or executive officers of the Corporation, owned beneficially or exercised control or direction over, directly or indirectly, 10% or more of the Shares. Based on the Alternative Monthly Report filed under National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues (“NI 62-103”) dated January 7, 2015, as at December 31, 2014, Canso Investment Counsel Ltd. had control over 6,560,664 Shares of the Corporation, representing, as at March 22, 2017, approximately 23.37% of the Shares, and $32,145,639 principal amount of senior subordinated exchangeable debentures of Yellow Pages Digital & Media Solutions Limited due November 30, 2022, which are exchangeable into an additional 1,688,321 Shares of the Corporation. In addition, Canso Investment Counsel Ltd. had control over $299,334,132 principal amount of the 9.25% senior secured notes of Yellow Pages Digital & Media Solutions Limited due November 30, 2018. Based on the Alternative Monthly Report filed under NI 62-103 dated December 2, 2015, as at November 30, 2015, GoldenTree Asset Management LP had control over 4,566,696 Shares of the Corporation, representing, as at March 22, 2017, approximately 16.27% of the Shares. Based on the Initial Report filed under NI 62-103 dated March 1, 2017, Polar Asset Management Partners Inc. had control over 2,996,646 Shares of the Corporation, representing, as at March 22, 2017, approximately 10.67% of the Shares.

PRESENTATION OF FINANCIAL STATEMENTS The Financial Statements to be placed before Shareholders are included in the Corporation’s 2016 Annual Report and are available on SEDAR at www.sedar.com and on our corporate website at corporate.yp.ca. Copies of such statements will also be available at the Meeting.

6 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

NUMBER AND ELECTION OF DIRECTORS The Articles of the Corporation provide for a minimum of three and a maximum of twelve (12) Directors. The Board has fixed to ten (10) the number of Directors to be elected at the Meeting. Directors are elected annually. Each Director elected at the Meeting will hold office until the next annual meeting of Shareholders unless the Director resigns or the Director’s office becomes vacant for any reason.

NOMINEES The persons named in the form of proxy intend to vote FOR the election of the nominees whose names are set forth below, all of whom are now Directors, and have been since the dates indicated below. Shareholders may vote for each Director individually. In addition, the Corporation has adopted a majority voting policy. See “Schedule “A” Disclosure of Corporate Governance Practices – Majority Voting Policy”. The following charts provide detailed information on the nominees proposed for election as Directors and show the date on which each nominee first became a Director of the Corporation.

JULIEN BILLOT PRESIDENT AND CHIEF EXECUTIVE OFFICER, YELLOW PAGES LIMITED Julien Billot has been President and Chief Executive Officer of the Corporation since January 1, 2014. Prior to his appointment, he was Executive Vice-President, Head of Media and a Member of the Executive Committee of Solocal Group, the publicly traded and incumbent local search business in France. Mr. Billot joined Solocal Group in 2009, overseeing its media properties, including web, mobile and print. Before 2009, Mr. Billot led a digital transformation during his tenure as Chief Executive Officer of the digital and new business group of Lagardère Active, a multimedia branch of Lagardère Group holding brands such as Elle Magazine. Mr. Billot also spent 13 years in senior management positions at France Telecom, notably as Chief Marketing Officer for Orange, the company’s mobile subsidiary. Mr. Billot has also sat on the Board of Directors for leading Age 49 Québec, Canada media groups such as Sporever Group, Telekom Polska, Newsweb, Doctissimo, Le Monde Interactif, NOT INDEPENDENT Lagardère Active, and for digital industry associations in France such as Mobile Marketing Association France, Fondation Télécom, Conseil Stratégique des TICs, and Prix des Technologies de l’Information. He Director since January 1, 2014 currently serves on the Boards of Turf Editions and Canadian Partnership Against Cancer. AREAS OF EXPERTISE: Mr. Billot is a graduate of École Polytechnique (Paris) and of Telecom Paris Tech. He also holds a ▪ Senior Executive Leadership postgraduate diploma (DEA) in Industrial Economics from the University of Paris-Dauphine. ▪ Strategic Planning BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Human Resources ENTITY INDUSTRY POSITION ▪ Industry Specific Experience Board of Directors 8 of 8 100% n/a n/a n/a ▪ Sales

▪ Marketing SECURITIES HELD ▪ Information Technology TOTAL NUMBER AND VALUE OF SHARES, RESTRICTED DEFERRED RESTRICTED SHARE UNITS AND SHARES SHARE UNITS (1) SHARE UNITS (1) DEFERRED SHARE UNITS (1)

(#) ($) (#) ($) (#) ($) (#) ($) As at March 17, 2017 (1) 40,717 $332,251 39,702 $323,968 14,196 $115,839 99,615 $772,058

(1) The value is calculated based on the closing price of the Shares of the Corporation on the Toronto Stock Exchange (“TSX”) on the Record Date, being March 14, 2017 which was $8.16. The same method was used for all Directors.

YELLOW PAGES LIMITED PROXY CIRCULAR 7 ELECTION OF THE BOARD OF DIRECTORS

CRAIG FORMAN PRESIDENT AND CHIEF EXECUTIVE OFFICER OF THE MCCLATCHY COMPANY Craig Forman is President and Chief Executive Officer of McClatchy Company, a Sacramento, California- based news and information company since January 2017. Mr. Forman had previously been Executive Chairman of the Board of mobile advertising technology company Appia, Inc. from August 2011 until its acquisition in March 2015 by Digital Turbine Inc., on whose Board Mr. Forman served until January 2017. He also served as Executive Chairman of WHERE, Inc., a location-based media company which was acquired by eBay, from 2010 to 2011. Previously, from 2006 to 2009, Mr. Forman served as Executive Vice-President and President, Access and Audience and Chief Product Officer at EarthLink, Inc., an Atlanta- based Internet services provider. Mr. Forman is a technology executive with over 20 years of experience in Age 55 the internet, media and communications industries. He has served as a senior executive at Yahoo! Inc., California, U.S.A. Time Warner Inc. and Dow Jones & Co. Mr. Forman also serves as a Director on the Boards of several INDEPENDENT private companies. Director since January 26, 2012 Mr. Forman has an undergraduate degree in Public and International Affairs from the Woodrow Wilson School of Public and International Affairs of Princeton University and a Master’s degree in law from AREAS OF EXPERTISE: Yale Law School. Mr. Forman has completed the Directors’ Consortium executive education program ▪ Senior Executive Leadership at Stanford University, and the Program Making Corporate Boards More Effective at Harvard Business ▪ Financial School. ▪ Strategic Planning Mr. Forman is a member of the Corporate Governance and Nominating Committee. ▪ Industry Specific Experience ▪ Information Technology BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Legal ENTITY INDUSTRY POSITION ▪ Public Policy and Corporate Relations Board of Directors 8 of 8 100% McClatchy Company News and information Director (2013 – present) provider

Corporate Governance and 5 of 5 100% Digital Turbine Inc. Media and mobile Director Nominating Committee (2015 – 2017) communications YuMe, Inc. Digital video brand Director (2015 – 2016) advertising solutions

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 4,000 $32,640 23,583 $192,437 27,583 $225,077

SUSAN KUDZMAN EXECUTIVE VICE PRESIDENT, CHIEF RISK OFFICER AND CORPORATE AFFAIRS, LAURENTIAN BANK OF CANADA Susan Kudzman has been Executive Vice-President, Chief Risk Officer and Corporate Affairs of Laurentian Bank since October 2015. She previously served as Senior Vice-President, Human Resources from March 2014 to October 2015. Ms. Kudzman was formerly a partner at Mercer (Canada) Limited where she directed the risk management practice from 2011 to 2014. Before that time, Ms. Kudzman was Executive Vice-President and Chief Risk Officer at Caisse de dépôt et placement du Québec where she was responsible for risk management, depositor services, performance calculation and analysis and strategic planning. Ms. Kudzman currently serves on the Board of Directors, the Human Resources Committee and Age 54 the Risk and Governance Committee of Transat A.T. Inc., an international tour operator and airline. She is Québec, Canada a member of the Board of Directors and Chair of the Human Resources Committee of the Montreal Heart INDEPENDENT Institute Foundation. Director since October 15, 2014 Ms. Kudzman holds a Bachelor’s degree in Actuarial Science and the titles of Fellow of the Canadian AREAS OF EXPERTISE: Institute of Actuaries (FCIA), Fellow of the Society of Actuaries (FSA) and Certified Enterprise Risk Analyst ▪ Senior Executive Leadership (CERA). ▪ Financial Ms. Kudzman is the Chair of the Human Resources and Compensation Committee. ▪ Strategic Planning ▪ Human Resources BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Legal ENTITY INDUSTRY POSITION ▪ Public Policy and Corporate Relations Board of Directors Transat A.T. Inc. International tour Director and Member of the Human 8 of 8 100% (2014 – present) operator and airline Resources, Risk and Governance Committees

Human Resources and 8 of 8 100% AtmanCo, Inc. Online employee Director and Member of the Audit Compensation Committee (2013 – 2015) assessment Committee

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 33,676 $274,796 33,676 $274,796

8 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

DAVIDA.LAZZARATO,FCA,ICD.D CORPORATE DIRECTOR David A. Lazzarato is a media/broadcast industry consultant who assists companies in the areas of strategy development, mergers and acquisitions and financing. Mr. Lazzarato was Senior Vice-President, Finance at Bell Canada in 2010 and 2011. Prior to that, Mr. Lazzarato was Chief Executive Officer of Craig Wireless Systems in 2008. Prior to joining Craig Wireless Systems, Mr. Lazzarato served as Executive Vice-President and Chief Financial Officer of Alliance Atlantis Communications Inc. and Chairman of Motion Picture Distribution from 2005 to 2007. From 1999 to 2004, Mr. Lazzarato served as Executive Vice-President and Chief Financial Officer of Allstream Inc. (formerly, AT&T Canada Inc.) and was Age 61 Chief Corporate Officer of MTS Allstream Inc. in 2004. Mr. Lazzarato is past Chair of the Ontario, Canada INDEPENDENT McMaster University Board of Governors and Chair of the Council of Chairs of Ontario Universities. Director since December 20, 2012 Mr. Lazzarato serves on the Board of Directors of Amaya, Inc. Mr. Lazzarato earned a Bachelor of Commerce degree from McMaster University and is a Chartered AREAS OF EXPERTISE: Accountant, having received the FCA designation from the Ontario Institute of Chartered Accountants in ▪ Senior Executive Leadership 2006. Mr. Lazzarato received the ICD.D certification from the Institute of Corporate Directors in 2008 and ▪ Financial has also completed the Senior Executive Program at the Massachusetts Institute of Technology. ▪ Strategic Planning Mr. Lazzarato is the Chair of the Audit Committee. ▪ Industry Specific Experience

▪ Information Technology BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Human Resources ENTITY INDUSTRY POSITION ▪ Legal Board of Directors 8 of 8 100% Amaya Inc. Gaming and online Director and Chair of the Audit ▪ Public Policy and Corporate Relations (2016 – present) gambling company Committee Audit Committee 7 of 7 100%

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 23,583 $192,437 23,583 $192,437

DAVID G. LEITH CORPORATE DIRECTOR David G. Leith serves as Chair of the Investment Management Corporation of Ontario (IMCO). Prior to this, Mr. Leith acquired over 25 years of equity, debt, government finance and mergers and acquisition experience with CIBC World Markets and its predecessors and last served until February 2009 as Deputy Chairman of CIBC World Markets and as Managing Director and Head of CIBC World Markets’ Investment, Corporate and Merchant Banking activities. Mr. Leith serves on the Board of Directors of Hudson’s Bay Company, is its Lead Director, and is a member of its Audit and Corporate Governance and Nomination Committees and serves as Director of Sinai Health System. Mr. Leith also served as Chair of Age 57 Manitoba Telecom Services Inc. from 2009 to 2017. Ontario, Canada INDEPENDENT Mr. Leith holds a Bachelor of Arts degree from the University of Toronto and a Master of Arts degree from Director since February 9, 2012 Cambridge University. Mr. Leith is the Chair of the Corporate Governance and Nominating Committee. AREAS OF EXPERTISE: ▪ Senior Executive Leadership BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Financial ENTITY INDUSTRY POSITION ▪ Strategic Planning Corporate Governance and 5 of 5 100% Hudson’s Bay Company Retail Lead Director, Member of the Audit Nominating Committee (2012 – present) and Corporate Governance and ▪ Public Policy and Corporate Relations Nomination Committees

Board of Directors 8 of 8 100% Manitoba Telecom Services Inc. Telecommunications Chairman of the Board (2009 – 2017) TransGlobe Apartment Real estate investment Trustee, Member of Governance, Real Estate Investment Trust Compensation and Nominating (2010 – 2012) Committee, Member of Investment Committee and Chair of Special Committee

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 24,795 $202,327 24,795 $202,327

YELLOW PAGES LIMITED PROXY CIRCULAR 9 ELECTION OF THE BOARD OF DIRECTORS

ROBERT F. MACLELLAN, CA CORPORATE DIRECTOR Robert F. MacLellan has been the Chairman of Northleaf Capital Partners, Canada’s leading independent global private equity and infrastructure fund manager and advisor since November 2009. From 2003 to November 2009, Mr. MacLellan served as Chief Investment Officer of TD Bank Financial Group, where he was responsible for overseeing the management of investments for The Toronto Dominion Bank, its Employee Pension Fund, TD Mutual Funds, and TD Capital Group. Mr. MacLellan has been an independent Director of T. Rowe Price since 2010, is Chair of its Executive Compensation Committee and serves on its Audit Committee. Mr. MacLellan is the Board Chair of Right to Play, a non-profit organization that helps Age 62 children build essential life skills and better futures through sports and games. Ontario, Canada INDEPENDENT Mr. MacLellan holds an MBA from Harvard University, a Bachelor of Commerce from Carleton University Director since December 20, 2012 and is a Chartered Accountant. Mr. MacLellan is Chairman of the Board and an ex-officio member of all committees of the Board. AREAS OF EXPERTISE: BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Senior Executive Leadership ENTITY INDUSTRY POSITION ▪ Financial Board of Directors T. Rowe Price Financial services Director, Chair of Executive ▪ Strategic Planning 8 of 8 100% (2010 – present) Compensation Committee and ▪ Human Resources Member of Audit Committee ▪ Public Policy and Corporate Relations ACE Aviation Holdings Inc. Investment holding Director, member of the Audit and (2009 – 2012) services including Human Resources Committees aviation

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 40,000 $326,400 56,195 $458,551 96,195 $784,951

DONALD H. MORRISON CORPORATE DIRECTOR Donald H. Morrison retired in July 2011 from Research in Motion Limited, now Blackberry Limited (“Blackberry”) where he had served since September 2000 as Chief Operating Officer with a mandate to strengthen Blackberry’s international operations and help build a world-class service organization. During his tenure, Blackberry expanded to more than 175 countries around the world and Blackberry’s fiscal year revenues grew from approximately $200 million to nearly $20 billion. Before joining Blackberry, Mr. Morrison held a number of senior leadership positions in Canada, Europe and the United States with AT&T and Bell Canada. Mr. Morrison is the founder and Chairman of The Ontario Global 100, a not-for- Age 64 profit organization established to accelerate the growth of Ontario’s most promising companies through Ontario, Canada globalization and serves as Director and member of the Audit Committee of the Mastercard Foundation. INDEPENDENT Mr. Morrison also founded and serves as Chairman of New Seeds: The Thomas Merton Center, an Director since March 20, 2013 organization created to foster interreligious dialogue on matters of spirituality and chairs the Dalai Lama Center for Ethics and Transformative Values at the Massachusetts Institute of Technology (MIT). AREAS OF EXPERTISE: ▪ Senior Executive Leadership Mr. Morrison holds an MBA and Bachelor of Arts degrees from the University of Toronto and also ▪ Strategic Planning participated in the Executive Program at the University of Virginia, Darden Business School. ▪ Sales Mr. Morrison is a member of the Human Resources and Compensation Committee. ▪ Marketing ▪ Human Resources BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ENTITY INDUSTRY POSITION Board of Directors 8 of 8 100% n/a n/a n/a Human Resources and 8 of 8 100% Compensation Committee

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 23,583 $192,437 23,583 $192,437

10 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

MARTIN NISENHOLTZ PROFESSOR, BOSTON UNIVERSITY Martin Nisenholtz has been a professor of digital communication practice at the College of Communication of Boston University since January 2015. He is also a Venture Partner at FirstMark Capital. Mr. Nisenholtz served as Senior Advisor for The New York Times Company through 2015 and was a Fellow at the Shorenstein Center at Harvard University. In December 2011, Mr. Nisenholtz retired from The New York Times Company where he had served since February 2005 as Senior Vice-President, Digital Operations and was responsible for the strategy development, operations and management of its digital properties. From 1999 to 2005, Mr. Nisenholtz was Chief Executive Officer Age 62 of New York Times Digital. In June 2001, Mr. Nisenholtz founded the Online Publishers Association Massachusetts, U.S.A. (OPA), an industry trade organization that represents the interests of high-quality online publishers. INDEPENDENT Mr. Nisenholtz currently serves on the Boards of Real Match, LLC and Purch Group Inc. and also Director since May 9, 2006 served on the Board of Directors, Compensation and Pension Committee and Digital Oversight AREAS OF EXPERTISE: Committee of Postmedia Network Canada Corp. ▪ Senior Executive Leadership Mr. Nisenholtz holds a Bachelor in Psychology degree from the University of Pennsylvania and an ▪ Strategic Planning MA in Communications from the University of Pennsylvania Annenberg School of Communication. ▪ Industry Specific Experience ▪ Sales Mr. Nisenholtz is a member of the Human Resources and Compensation Committee. ▪ Marketing BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Information Technology ENTITY INDUSTRY POSITION ▪ Human Resources Board of Directors Postmedia Network Canada News Media Director and Chair of Digital 8 of 8 100% Corp. (2014 – 2016) Oversight Committee, Member of the Compensation and Pension Committee

Human Resources and 8 of 8 100% Compensation Committee

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS (#) ($) (#) ($) (#) ($) As at March 17, 2017 250 $2,040 24,236 $197,766 24,486 $199,806

KALPANA RAINA MANAGING PARTNER, 252 SOLUTIONS, LLC (CONSULTING FIRM) Kalpana Raina is Managing Partner of 252 Solutions, LLC, a consulting firm. Ms. Raina was formerly with The Bank of New York (the “BNY”) from 1988 to 2006, where she last served as Executive Vice-President. Ms. Raina’s client portfolio at the BNY included clients in the media and telecommunications, healthcare, retailing, and hotels and leisure industries. Throughout her tenure, she served on numerous committees including the BNY’s Credit and Risk and Planning committees. Ms. Raina currently serves on the Board of Directors of John Wiley & Sons, Inc., a provider of content and content-enabled digital services to customers worldwide. She also serves on the Board of Directors of Information Services Group, Inc., a leading technology insight, market intelligence and advisory services company. Previously, she was on the Board of Age 61 Directors, the Audit Committee and Chair of the Nominating and Corporate Governance Committee of New York, U.S.A. RealNetworks, Inc. and on the Board of Directors of the World Policy Institute. INDEPENDENT Ms. Raina holds a Master’s degree in English Literature from McMaster University and undergraduate and Director since December 20, 2012 graduate degrees from Panjab University, India.

AREAS OF EXPERTISE: Ms. Raina is a member of the Audit Committee.

▪ Financial BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Strategic Planning ENTITY INDUSTRY POSITION ▪ Industry Specific Experience Board of Directors 8 of 8 100% John Wileys & Sons, Inc. Publishing and digital Director, Member of the Audit ▪ Human Resources (2009 – present) content services Committee ▪ Public Policy and Corporate Relations Audit Committee 7 of 7 100% Information Services Group, Technology consulting Director, Member of Compensation Inc. (2009 – present) Committee, Audit Committee and the Nominating and Corporate Governance Committee RealNetworks, Inc. Internet media software Director, Member of the Audit (2001 – 2013) Committee and Chair of the Nominating and Corporate Governance Committee

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS

(#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 23,583 $192,437 23,583 $192,437

YELLOW PAGES LIMITED PROXY CIRCULAR 11 ELECTION OF THE BOARD OF DIRECTORS

MICHAEL G. SIFTON CHIEF EXECUTIVE OFFICER OF DATA COMMUNICATIONS MANAGEMENT CORP. (DOCUMENT MANAGEMENT AND MARKETING SOLUTIONS FIRM) Michael G. Sifton is Chief Executive Officer of Data Communications Management Corp., a document management and marketing solutions firm. Prior to that, Mr. Sifton served as Managing Partner of Beringer Capital, an investment and advisory firm focused on the marketing services and specialty media industry since September 2009. Mr. Sifton spent his career in the media business, with over 20 years of direct experience in the Canadian newspaper industry. Prior to joining Beringer Capital, he was President and Chief Executive Officer of Sun Media, Canada’s largest newspaper publisher by household penetration and reach. In 2001, Mr. Sifton led the formation of Osprey Media Group, which Age 57 was later acquired by Sun Media in 2007. Prior to forming Osprey Media Group, Mr. Sifton was Ontario, Canada President of Hollinger Canadian Newspaper G.P. and President and Chief Executive Officer of family- INDEPENDENT owned Armadale Communications. Mr. Sifton is a former Chairman of The Canadian Press and a former Director since December 20, 2012 Director of the Canadian Newspaper Association and the Newspaper Audience Databank. Mr. Sifton also served as Chairman of the Board of Governors of St. Andrew’s College in Aurora, Ontario. AREAS OF EXPERTISE: ▪ Senior Executive Leadership Mr. Sifton holds a Bachelor of Commerce (Honours) from Queen’s University. ▪ Financial Mr. Sifton is a member of the Audit Committee. ▪ Strategic Planning BOARD/COMMITTEE MEMBERSHIP ATTENDANCE OTHER PUBLIC BOARD MEMBERSHIP DURING LAST FIVE YEARS ▪ Industry Specific Experience ENTITY INDUSTRY POSITION ▪ Human Resources Board of Directors 8 of 8 100% Data Communications Communications President and Chief Executive Officer ▪ Public Policy and Corporate Relations Management and Director (2015 – present) Audit Committee 7 of 7 100%

SECURITIES HELD

DEFERRED TOTAL NUMBER AND VALUE OF SHARES AND SHARES SHARE UNITS DEFERRED SHARE UNITS

(#) ($) (#) ($) (#) ($) As at March 17, 2017 Nil 23,583 $192,437 23,583 $192,437

To the knowledge of the Corporation: (i) no Director is, at the date of this Proxy Circular, or has been, in the ten (10) years prior to the date of this Proxy Circular, a Director, chief executive officer or chief financial officer of any company, that: (a) while the Director was acting in that capacity, was subject of a cease trade or similar order or an order that denied the company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days; or (b) after the Director ceased to act in that capacity, was subject of a cease trade or similar order or an order that denied the company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days because of an event which occurred while the Director was acting in that capacity; or (ii) no Director of the Corporation is, at the date of this Proxy Circular, or has been, in the ten (10) years prior to the date of this Proxy Circular, a Director or an executive officer of any company, that while the Director was acting in that capacity, or in the year after the Director ceased to act in that capacity, became bankrupt, made a proposal under any bankruptcy or insolvency legislation, was subject to any proceedings, arrangement or compromise with creditors or instituted any proceedings against the same, or had a receiver, receiver-manager, Director in bankruptcy or trustee appointed to hold its assets; or (iii) no Director of the Corporation, in the ten (10) years prior to the date of this Proxy Circular, became bankrupt, made a proposal under any bankruptcy or insolvency legislation, was subject to any proceedings, arrangement or compromise with creditors or instituted any proceedings against the same, or had a receiver, receiver-manager or Director in bankruptcy appointed to hold his or her assets, except for Messrs. Craig Forman, David G. Leith and Martin Nisenholtz who were Directors of Yellow Pages Digital & Media Solutions Limited for varying periods of time immediately prior to the implementation on December 20, 2012 of the recapitalization transaction (the “Recapitalization”) in accordance with a court-approved Plan of Arrangement under the Canada Business Corporations Act pursuant to which the former securities of Yellow Pages Digital & Media Solutions Limited and all entitlements relating thereto, were exchanged and cancelled for, as applicable, cash and common shares and warrants of the Corporation, and new senior secured notes and new senior subordinated exchangeable debentures of Yellow Pages Digital & Media Solutions Limited. In addition, Mr. Nisenholtz was Director of Postmedia Network Canada Corp. at the time of the implementation on October 5, 2016 of the recapitalization transaction in accordance with a court-approved Plan of Arrangement under the Canada Business Corporations Act pursuant to which the first lien senior secured notes issued by Postmedia Network Inc. were extended by approximately four years and reduced with a cash repayment at par, and the second lien senior secured notes issued by Postmedia Network Inc. were exchanged for voting shares and variable voting shares of Postmedia Network Canada Corp.

12 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

VOTING RESULTS OF 2016 ANNUAL MEETING The voting results at the 2016 annual meeting of shareholders of the Corporation were as follows:

ITEM VOTED UPON ELECTION OF DIRECTORS 1. Election of Directors Name For Withhold #%#%

Julien Billot 23,438,321 99.89 26,290 0.11 Craig Forman 23,426,769 99.84 37,842 0.16 Susan Kudzman 22,864,465 97.44 600,146 2.56 David A. Lazzarato 23,437,702 99.89 26,909 0.11 David G. Leith 23,437,438 99.88 27,173 0.12 Robert F. MacLellan 22,864,520 97.44 600,091 2.56 Judith A. McHale (1) 23,427,011 99.84 37,600 0.16 Donald H. Morrison 23,437,227 99.88 27,384 0.12 Martin Nisenholtz 23,438,303 99.89 26,308 0.11 Kalpana Raina 23,437,443 99.88 27,168 0.12 Michael G. Sifton 23,437,791 99.89 26,820 0.11

(1) Judith McHale is not seeking re-election at the Meeting.

2. Appointment of Deloitte LLP as auditors of the Corporation For Withhold #%#%

23,410,726 99.77 53,885 0.23

BOARD AND COMMITTEE MEETINGS The Board held eight meetings in 2016. Overall attendance at these meetings, as well as the attendance at Committee meetings, was 98%. The combined overall attendance at both the Board and Committee meetings was 98%.

SUMMARY OF BOARD AND COMMITTEE MEETINGS HELD AND ATTENDANCE BY MEETING IN 2016 Number of Meetings Attendance Record

Board of Directors 8 98% Audit Committee 7 100% Human Resources and Compensation Committee 8 100% Corporate Governance and Nominating Committee 5 93%

The following table sets forth the attendance record by the Directors at Board and Committee meetings for the fiscal year ended December 31, 2016.

CORPORATE HUMAN RESOURCES GOVERNANCE AUDIT & COMPENSATION & NOMINATING OVERALL BOARD OF DIRECTORS COMMITTEE COMMITTEE COMMITTEE ATTENDANCE (1) (8 Meetings) (7 Meetings) (8 Meetings) (5 Meetings) Names (#) (%) (#) (%) (#) (%) (#) (%) (#) (%)

Julien Billot 8 100% ------8 100% Craig Forman 8 100% - - - - 5 100% 13 100% Susan Kudzman 8 100% - - 8 100% - - 16 100% David A. Lazzarato 8 100% 7 100% - - - - 15 100% David G. Leith 8 100% - - - - 5 100% 13 100% Robert F. MacLellan (2) 8 100% ------8 100% Donald H. Morrison 8 100% - - 8 100% - - 16 100% Martin Nisenholtz 8 100% - - 8 100% - - 16 100% Kalpana Raina 8 100% 7 100% - - - - 15 100% Michael G. Sifton 8 100% 7 100% - - - - 15 100%

(1) Judith McHale who will not be seeking re-election at the Meeting attended 77% of all meetings. (2) Robert MacLellan is an ex-officio member of all Committees of the Board. As an ex-officio member of these other Committees, Mr. MacLellan may attend and vote at any Committee meeting or a portion of any Committee meeting, however his attendance is not mandatory.

YELLOW PAGES LIMITED PROXY CIRCULAR 13 ELECTION OF THE BOARD OF DIRECTORS

BOARD INDEPENDENCE Following a detailed review conducted by the Corporate Governance and Nominating Committee of the Corporation, the Board has • Nine (9) of ten (10) Directors are independent determined that nine (9) of the ten (10) Directors, representing all of • All Committee members are independent the Directors other than Mr. Julien Billot, the President and Chief Executive Officer of the Corporation, are independent as such term is defined in National Instrument 52-110 – Audit Committees of the Canadian Securities Administrators (“CSA”) and do not have a material relationship with the Corporation. All Committee members are independent. The following table indicates the status of each Director of the Corporation in terms of their independence, as well as the composition of each Committee of the Board.

STATUS COMMITTEES Corporate Governance and Nominating Human Resources and Director Independent Not Independent Audit Committee Committee Compensation Committee

Julien Billot ✓ Mr. Billot is the President and Chief Executive Officer of the Corporation. Craig Forman ✓✓ Susan Kudzman ✓ Chair David A. Lazzarato ✓ Chair David G. Leith ✓ Chair Robert F. MacLellan ✓ Donald H. Morrison ✓ ✓ Martin Nisenholtz ✓ ✓ Kalpana Raina ✓✓ Michael G. Sifton ✓✓

DIRECTOR SERVICE ON OTHER BOARDS AND BOARD INTERLOCKS To ensure our Board remains strongly independent and that all Directors are able to properly discharge their duties to act effectively • All Directors comply with the Corporation’s guidelines on maximum directorships and audit committee memberships and in the best interest of the Corporation, the Board actively reviews the number of outside Boards on which any one Director sits. • No members of the Board serve together on the Board of any other Specifically, the Board has determined that: public company

– Maximum directorships: Directors should limit the number of Boards of Directors on which they serve to no more than four public company Boards, including the Corporation. – Maximum audit committee memberships: Members of the Audit Committee of the Corporation shall not simultaneously serve on the audit committees of more than three public companies, including the Corporation’s Audit Committee. All the proposed nominees, who are the current Directors, currently meet the foregoing guidelines. The Board is fully satisfied that each Director has sufficient time, attention and ability to devote the time required to be a high-performing contributor to the Board. Each Director has demonstrated the necessary commitment to do so as is evidenced by the attendance record. The Corporate Governance Guidelines of the Corporation provide that: (i) before accepting any new outside Board assignment (or any new private company or government Board assignment which involves a meaningful time commitment), Directors must formally inform the Chairman of the Corporate Governance and Nominating Committee to ensure that such new Board assignment will not create a conflict of interest with his or her position as a Director; (ii) any new public company Board assignment on which another Director already serves is subject to the approval of the Corporate Governance and Nominating Committee to limit the number of Board and committee interlocks to no more than two instances where two of the Corporation’s Directors could generally serve on the same outside Board or outside Board committees; (iii) any outside Board assignment of the President and Chief Executive Officer of the Corporation is subject to the prior approval of the Board; and (iv) no officer of the Corporation shall serve as a Director of a company to which an independent Director of the Corporation is an officer. The directorships of the Directors in other public companies in a Canadian or foreign jurisdiction are included under “Election of the Board of Directors – Nominees”. As at March 22, 2017, none of the members of the Board served together on the Board of any other public company.

14 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

DIRECTOR TENURE The following chart indicates the number of years the Directors seeking election or re-election have served on the Corporation’s Board:

10% Between Two and Three Years: 1 Director Ten Years: 1 Director 10% 10% Three Years: 1 Director

Five Years: 2 Directors 20%

50% Four Years: 5 Directors

As at March 22, 2017, the Corporation’s average Board tenure for Directors seeking re-election is 4.3 years.

EVALUATION OF BOARD AND COMMITTEE PERFORMANCE The Corporate Governance and Nominating Committee annually conducts a formal assessment with respect to performance and effectiveness of the Board, its Committees, Board and Committee chairs and individual Directors. The comprehensive annual evaluation process includes three primary components. Online Survey: Each Director is required to complete a comprehensive online survey of approximately fifty (50) questions that deal with a wide range of Board-related matters including effectiveness, composition and monitoring of the Board and its committees, oversight of senior management, Director education and risk oversight. One-on-One Meetings: The Chair of the Corporate Governance and Nominating Committee together with the Chair of the Board hold “one-on-one” meetings with each of the individual Directors to obtain feedback on Board and Committee performance. Preliminary discussion points are circulated before the meeting to frame the discussion with each Director. These discussion points relate to the performance of the Board and Committees, the Chair and the Chief Executive Officer, effectiveness of communication at the Board, performance and personal contribution of each Director and suggestions for improvement. The resulting information is compiled and analyzed by the Chairman of the Corporate Governance and Nominating Committee which in turn reports to the Board. The assessment of the Board is scheduled in a manner such as to allow for issues raised over strategic matters through the assessment or otherwise to be addressed by Management at its next following strategic session. Skills Matrix: The Corporate Governance and Nominating Committee maintains a “skills matrix” for the Board. Each Director is asked to indicate his or her experience and expertise which are compiled into the matrix. The skills matrix allows the Board to easily review the Board skill composition to ensure the Board’s expertise is well rounded. The results are reviewed, analyzed and discussed, as necessary, by the full Board. The content of the skills matrix for Directors seeking election or re-election is as follows:

Director Age Location Diversity Number of Boards Tenure Retired Skills Matrix Male Legal Sales Senior 51—60 61—70 Female Industry Financial (Including Marketing 50 or under Public Policy Other Boards Publicly Traded Province/State Yes (Y) /No (N) Number of Years Human Resources Strategic Planning Time Commitments Specific Experience Executive Leadership Yellow Pages Limited) Information Technology That Involve Meaningful and Corporate Relations

Julien Billot ✓ 49 QC ✓ 123N✓ ✓ ✓ ✓✓✓✓ Craig Forman ✓ 55 CA ✓ 2—5N✓✓✓✓ ✓ ✓✓ Susan Kudzman ✓ 54 QC ✓ 212N✓✓✓ ✓✓✓ David A. Lazzarato ✓ 61 ON ✓ 2—4Y✓✓✓✓ ✓✓✓✓ David G. Leith ✓ 57 ON ✓ 325Y✓✓✓ ✓ Robert F. MacLellan ✓ 62 ON ✓ 214Y✓✓✓ ✓ ✓ Donald H. Morrison ✓ 64 ON ✓ 124Y✓✓ ✓✓✓ Martin Nisenholtz ✓ 62 MA ✓ 2 3 10 N ✓ ✓ ✓ ✓✓✓✓ Kalpana Raina ✓ 61 NY ✓ 304N✓✓✓✓ ✓ Michael G. Sifton ✓ 57 ON ✓ 204N✓✓✓✓ ✓ ✓

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ORIENTATION AND CONTINUING EDUCATION The Corporate Governance and Nominating Committee is responsible for developing and reviewing the Corporation’s orientation and continuing education programs for Directors. New Directors are provided with an extensive information package on the Corporation’s business, its strategic and operational plans, its governance system and its financial position (including analyst reports), Director and officer liability insurance coverage information as well as copies of minutes of meetings of the Board and of the Committees held during the previous year. New Directors also meet with the President and Chief Executive Officer and the Chief Financial Officer of the Corporation as well as other officers as necessary to discuss and review these matters and familiarize themselves with the function, significant risks, priorities, opportunities and most substantial challenges of the Corporation and the industry in which it operates. Members of senior Management periodically make presentations at Board and Committee meetings to communicate and keep Directors informed of developments regarding the Corporation, its operations and financial condition as well as on industry developments. Directors also regularly receive up-to-date analyst studies, industry studies and benchmarking information. At each regular Board meeting, Directors are provided with updates with respect to the Corporation, short summaries of relevant information, articles and publications of interest, and the Board receives reports from the deliberations and decisions of each of the Committees on their work at their previous meetings. Additionally, Board members are encouraged to share the best practices they observe on other Boards they sit on. The Corporation also encourages its Board members to attend Director education programs offered by leading institutions of higher education and bears the cost of such attendance to the extent reasonable. The Board and its Committees received a number of presentations in 2016 focused on deepening Directors’ knowledge of the Corporation’s business, the industry in which it operates and the key risks and opportunities that it is facing. The following table outlines examples of continuing education events attended by Directors in 2016:

TOPIC DIRECTOR IN ATTENDANCE HOSTED/PRESENTED BY: Cybersecurity – Engaging with the Board of Directors All Directors Deloitte LLP Straight from the Source, A Day of Discussion between Directors and Investors Martin Nisenholtz Hugessen Consulting Inc. Board and Strategy Susan Kudzman Women Corporate Directors Foundation Co-op Governance Susan Kudzman Women Corporate Directors Foundation Chief Risk Officers 2016 Panel Discussion and Luncheon Susan Kudzman Ernst & Young LLP The Added Value of Women’s Contribution to the Finance Lecturer Susan Kudzman Association de la retraite et des avantages sociaux du Québec Growing the Diversity Dividend: Diversity for Better Decision-Making in the Boardroom Susan Kudzman Women Corporate Directors Foundation GRI Summit 2016 – Risk & Reward Susan Kudzman Global Risk Institute in Financial Services

COMPENSATION OF DIRECTORS The objectives of the Corporation’s Director compensation program are to attract and retain highly qualified Board members and align their interests with those of Shareholders. In 2016, the Corporate Governance and Nominating Committee reviewed Director compensation and retained Hugessen Consulting Inc. (“Hugessen”) which benchmarked the Corporation’s Director compensation within a peer group consisting of Canadian and U.S. media and software services companies. U.S. companies were considered given the Corporation’s specific circumstances, the very limited number of peers with a comparable size, scope and operation in Canada and the unique challenges associated with the Corporation’s digital evolution. The inclusion of U.S. companies also allows for a broader and more appropriate representation of the relevant talent pool because U.S. peers are closer industry matches, and therefore, provide a better context for Directors’ experience and expertise. Thus, two comparator groups were used to benchmark the compensation of Directors by the Corporate Governance and Nominating Committee based on the following criteria:

CRITERIA CANADIAN PROXY GROUP – DETAILED CRITERIA U.S. PROXY GROUP – DETAILED CRITERIA Type Public, TSX listed Public, NYSE, NASDAQ listed Location Head office in Canada Head office in the U.S. Revenue Size 1/3 – 3x of the Corporation’s revenue 1/2 – 2x of the Corporation’s revenue Total Enterprise Value (“TEV”) Size (1) 1/3 – 3x of the Corporation’s TEV 1/2 – 2x of the Corporation’s TEV Industry Media (publishing, advertising, broadcasting, movies and entertainment, Media (publishing and advertising) cable and satellite) Software and services Software and services

(1) Total Enterprise Value means the market capitalization plus debt, net of cash.

16 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

The actual companies included in each peer group reflected the • Total Director compensation positioning policy aligned between the comparator group used for the executive compensation benchmarking median of the Canadian Proxy Group and the median of the US Proxy in 2016 (see “Executive Compensation – Discussion and Analysis – Group Compensation Philosophy and Objectives – Benchmarking Practices • Director compensation is 43% equity-based to align with and Comparator Groups”). Upon finalizing their review, Hugessen Shareholders’ interests concluded that the Corporation’s Director compensation was generally positioned above the median of the Canadian peer group (the “Canadian Proxy Group”) and below the median of the U.S. peer comparator groups. Considering that Director compensation was group (the “US Proxy Group”), and that the compensation for the between the median of the Canadian Proxy Group and the median of Chairman of the Board was positioned above the median of both the US Proxy Group, Director compensation remained unchanged. Each Director who is not a salaried officer of the Corporation or any of its subsidiaries (a “Non-Executive Director”) receives compensation for serving on the Board consisting of a cash retainer and an annual equity retainer payable in deferred share units, as well as cash payments for serving as chair on a Board Committee, if applicable. In addition, upon his or her appointment, each Director is awarded a one-time deferred share unit grant of $75,000 for serving on the Board. See “Election of the Board of Directors – Compensation of Directors – Deferred Share Units Plan” for a description of the deferred share unit plan adopted by the Corporation. The table below highlights the annual Director compensation structure:

DIRECTOR CHAIRMAN ANNUAL BOARD COMPENSATION STRUCTURE AMOUNT AMOUNT

Cash board retainer $ 85,000 $170,000 Equity board retainer (in the form of deferred share units) $ 65,000 $130,000 Total $150,000 $300,000

COMMITTEE ANNUAL COMPENSATION

Chair of Audit Committee $20,000 Chair of Human Resources and Compensation Committee $15,000 Chair of Corporate Governance and Nominating Committee $10,000 Member of Audit Committee - Member of Human Resources and Compensation Committee - Member of Corporate Governance and Nominating Committee - Travel Fee (more than 1,000 km) $1,500

There are no meeting fees payable to the Directors. Directors required to travel more than 1,000 kilometers to attend Board and Committee meetings receive a $1,500 travel fee for in-person meetings. The Corporation also reimburses out-of-pocket expenses incurred by the Directors to attend Board and Committee meetings. DEFERRED SHARE UNIT PLAN The deferred share unit plan of the Corporation was adopted on June 12, 2013 and subsequently amended and restated effective as of October 20, 2013 (the “DSU Plan”). The objective of the DSU Plan is to promote a greater alignment of interests between Eligible Participants (defined below) and Shareholders. Deferred share units (“DSUs”) are a notional unit granted or credited to an Eligible Participant’s account that, subject to the provisions of the DSU Plan, entitles an Eligible Participant to receive, on a deferred basis, a Share (purchased on the secondary market) or the cash equivalent thereof, at the discretion of the Corporation, upon redemption, unless such deferred share unit expires prior to being settled. DSUs may be granted to any Director (an “Eligible Director”) or employee of the Corporation (or any subsidiary of the Corporation) designated by the Board (an “Eligible Employee”, and together with an Eligible Director, an “Eligible Participant”). Eligible Directors may elect to receive up to 100% of their annual retainer for service on the Board, but no less than $65,000 in the case of Directors and $130,000 in the case of the Chairman, in the form of DSUs. Eligible Employees may elect to receive up to 100% of their annual base compensation and short-term incentive plan payment in the form of DSUs. DSUs are not assignable or transferable other than by will or the laws of descent and distribution. The DSU Plan does not limit insider participation, nor does the DSU Plan provide for a maximum number of DSUs which may be issued to an Eligible Participant. As at March 22, 2017, an aggregate of 294,596 DSUs had been granted to Eligible Directors (none of which had been cancelled or redeemed), representing 1.05% of the issued and outstanding Shares of the Corporation on a non-diluted basis. The number of DSUs issued to each Eligible Participant who elects to receive DSUs is determined by dividing the amount of the Eligible Participant’s annual retainer or annual base compensation and short-term incentive plan payment to be provided in DSUs, if applicable, by the volume weighted average trading price of the Shares on the TSX for the five trading days ending on the trading day immediately preceding the date of grant. Except as otherwise provided in an Eligible Participant’s grant agreement or any other provision of the DSU Plan, all DSUs granted under the DSU Plan are credited to an Eligible Participant’s account on the date of grant, provided that: (i) in respect of an Eligible Director, such individual is an Eligible Director throughout the fiscal year to which the grant relates; and (ii) no Eligible Director will have any right to receive any benefit under

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the DSU Plan until they cease to be an Eligible Director (and is not at that time an employee of the Corporation or any of its affiliates) or Eligible Employee, as the case may be, as a result of: (a) the termination (with or without cause, as such term is defined in the DSU Plan) of his or her employment with the Corporation or any of its affiliates; or (b) the termination (with or without cause) of his or her membership on the Corporation’s or an affiliate’s Board of Directors for any reason, in each such cases including by death, disability, retirement or resignation. Unless otherwise determined by the Board in its sole discretion, in the event that an Eligible Participant that was an Eligible Director ceases to be an Eligible Director (and is not at that time an employee of the Corporation or any of its affiliates) before the last day of such fiscal year, one-twelfth (1/12th) of the DSUs granted in respect of such fiscal year (including the associated DSUs following payment of a dividend on the Shares) shall vest and be acquired for each completed month of active employment prior to the Eligible Participant’s termination date in that fiscal year, and all remaining DSUs shall expire and be cancelled on his or her termination date. In the case of any Eligible Participant who is considered to be a “US Participant” under the DSU Plan, all DSUs held by such Eligible Participant will be redeemed ninety (90) days from such Eligible Participant’s termination date (as defined in the DSU Plan). The Board may amend, suspend or terminate the DSU Plan, or any portion thereof, at any time. SHARE OWNERSHIP GUIDELINES FOR NON-EXECUTIVE DIRECTORS The Corporation’s share ownership guidelines require that Non-Executive Directors hold equity interest in the Corporation representing the value of three times the annual Director Board retainer, being currently $450,000, to be achieved within five years from the later of their appointment as a Director and July 1, 2013 (the date the current compensation structure was implemented). The Director’s respective share ownership is calculated using the value of the equity interest, including Shares and DSUs held by a Director. For purposes of share ownership guidelines for Non-Executive Directors, the value of Shares is calculated based on the value which is the higher of: (i) the value of the Shares based on their respective purchase price; and (ii) the market value of the Shares based on the closing price of the Shares on the TSX on the calculation date. The value of DSUs is calculated based on the value which is the higher of (a) the award value based on the value of the underlying Shares on the date of the grant as defined in the DSU Plan, and (b) the market value of the DSUs based on the closing price of the Shares on the TSX on the calculation date. The ownership guidelines for Non-Executive Directors also provide that in the event there is an increase in the annual cash retainer payable to Directors during a financial year, the Directors will have to comply with the corresponding increase in the minimum share ownership within a reasonable period of time. Directors are prohibited from hedging the value of the Corporation’s securities that they hold. The table below illustrates the percentage of attainment of the ownership guidelines by the Non-Executive Directors as at December 31, 2016, except for Judith A. McHale who will not be seeking re-election at the Meeting.

SHARE OWNERSHIP BY NON-EXECUTIVE DIRECTORS 2016 Board Minimum Value of Actual Percentage Minimum Retainer Ownership Ownership of Minimum Ownership Requirement Interest (1) Ownership Requirement (Shares and Requirement Date DSUs) Director Name ($) ($) ($) (%)

Craig Forman $150,000 $450,000 $367,050 82% June 30, 2018 Susan Kudzman $150,000 $450,000 $446,983 99% October 14, 2019 David A. Lazzarato $150,000 $450,000 $367,050 82% June 30, 2018 David G. Leith $150,000 $450,000 $367,050 82% June 30, 2018 Robert F. MacLellan $300,000 $450,000 $900,216 200% June 30, 2018 Donald H. Morrison $150,000 $450,000 $367,050 82% June 30, 2018 Martin Nisenholtz $150,000 $450,000 $383,024 85% June 30, 2018 Kalpana Raina $150,000 $450,000 $367,050 82% June 30, 2018 Michael G. Sifton $150,000 $450,000 $367,050 82% June 30, 2018

(1) The value of ownership interest is calculated based on the higher of the closing price of the Shares on the TSX on December 31, 2016 (which was $17.69) and the applicable purchase price of the Shares or the value of the Shares underlying the DSU awards on the applicable date of grant of such awards.

18 YELLOW PAGES LIMITED PROXY CIRCULAR ELECTION OF THE BOARD OF DIRECTORS

SHARE-BASED AWARDS – VALUE VESTED DURING THE YEAR The following table shows the number of DSUs that vested during the year ended December 31, 2016, the number of underlying Shares retained after vesting of the DSUs, and the value of DSUs vested during the year for all Non-Executive Directors.

SHARE-BASED AWARDS Number of Deferred Share Units Vested and Underlying Value Vested Shares Retained After Vesting During the Year (1)(2) Name (#) ($)

Craig Forman 4,249 $64,882 Susan Kudzman 10,785 $164,687 David A. Lazzarato 4,249 $64,882 David G. Leith 4,249 $64,882 Robert F. MacLellan 8,498 $129,764 Judith A. McHale 4,249 $64,882 Donald H. Morrison 4,249 $64,882 Martin Nisenholtz 4,902 $74,854 Kalpana Raina 4,249 $64,882 Michael G. Sifton 4,249 $64,882

(1) This value was calculated using the closing price on the TSX of the Shares underlying the DSUs on January 1, 2016, the date of grant, which was $15.27 for all Directors. (2) In accordance with the terms of the DSU Plan, no Eligible Director will have any right to receive any payment or other benefit in respect of their outstanding DSUs under the DSU Plan, including the amounts disclosed in the column “Value vested during the year”, until he or she ceases to be an Eligible Director (and is not at that time an employee of the Corporation or any of its affiliates) as a result of the termination (with or without cause) of his or her membership on the Corporation’s or an affiliate’s Board of Directors for any reason, including by death, disability, retirement or resignation. OUTSTANDING SHARE-BASED AWARDS The following table indicates for each of the Non-Executive Directors, all DSU awards outstanding at the end of the fiscal year ended December 31, 2016. Non-Executive Directors are not eligible to receive stock options (“Options”) or other option-based awards.

SHARE-BASED AWARDS Market or Market or Payout Number of Payout Value of Value of Vested Shares or Units Share-based Share-based of Shares That Awards That Awards not Paid Have not Vested Have not Vested Out or Distributed (1) Name (#) ($) ($)

Craig Forman Nil Nil $351,589 Susan Kudzman Nil Nil $429,230 David A. Lazzarato Nil Nil $351,589 David G. Leith Nil Nil $351,589 Robert F. MacLellan Nil Nil $862,901 Judith A. McHale Nil Nil $351,589 Donald H. Morrison Nil Nil $351,589 Martin Nisenholtz Nil Nil $363,140 Kalpana Raina Nil Nil $351,589 Michael G. Sifton Nil Nil $351,589

(1) The market or payout value of the DSUs was determined by multiplying the number of DSUs vested but not paid out or distributed as at December 31, 2016 by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. In accordance with the terms of the DSU Plan, no Eligible Director will have any right to receive any payment or other benefit in respect of their outstanding DSUs under the DSU Plan, including the amounts disclosed in the column “Market or payout value of vested share-based awards not paid out or distributed”, until he or she ceases to be an Eligible Director (and is not at that time an employee of the Corporation or any of its affiliates) as a result of the termination (with or without cause) of his or her membership on the Corporation’s or an affiliate’s Board of Directors for any reason, including by death, disability, retirement or resignation.

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TOTAL COMPENSATION OF NON-EXECUTIVE DIRECTORS The following table provides the total compensation earned for the fiscal year ended December 31, 2016 by each Non-Executive Director who was a Director of the Corporation during the fiscal year ended December 31, 2016. Please see “Election of the Board of Directors – Compensation of Directors – Yearly Board Compensation Structure” for a description of the Board and Committee retainers.

COMPENSATION – NON-EXECUTIVE DIRECTORS Fees Earned – Non-Executive Directors Allocation of Total Fees Human Resources Corporate and Governance Audit Compensation and Nominating Board Committee Committee Committee Share-Based All Other DSU Retainer Retainer Retainer Retainer Awards (1) Compensation (2) Total In Cash In DSUs Portion Name ($) ($) ($) ($) ($) ($) ($) ($) ($) (%)

Craig Forman 150,000 - - - - 7,500 (3) 157,500 92,500 65,000 41% Susan Kudzman (4) 150,000 - 15,000 - - - 165,000 - 165,000 100% David A. Lazzarato 150,000 20,000 - - - - 170,000 105,000 65,000 38% David G. Leith 150,000 - - 10,000 - - 160,000 95,000 65,000 41% Robert F. MacLellan 300,000 - - - - 1,500 (3) 301,500 171,500 130,000 43% Judith A. McHale (5) 150,000 - - - - - 150,000 85,000 65,000 43% Donald H. Morrison 150,000 - - - - - 150,000 85,000 65,000 43% Martin Nisenholtz (4) 150,000 - - - - - 150,000 75,000 75,000 50% Kalpana Raina 150,000 - - - - - 150,000 85,000 65,000 43% Michael G. Sifton 150,000 - - - - - 150,000 85,000 65,000 43%

(1) Non-Executive Directors do not receive Options, restricted or performance share units. A one-time DSU award in the amount of $75,000 is awarded to a Director upon his or her appointment to the Board (see “Election of the Board of Directors – Compensation of Directors”). No such grant of DSUs was made in 2016. (2) There are no option-based awards, non-equity incentive plan compensation or pension for Non-Executive Directors. (3) All such compensation consists of travel fees. (4) Ms. Kudzman elected to receive 100% of her Director compensation in the form of DSUs, including her fees as Chair of the Human Resources and Compensation Committee. Mr. Nisenholtz elected to receive 50% of his Director compensation in the form of DSUs. (5) Ms. McHale is not seeking re-election at the Meeting.

BOARD AND COMMITTEES The role of the Board is to oversee the conduct of the Corporation’s business and to supervise Management. The Board also establishes the overall policies for the Corporation, monitors and evaluates the Corporation’s strategic direction and retains plenary power for those functions not specifically delegated by it to its committees or to Management. In 2016, the Board held eight meetings and attendance at the meetings of the Board was 98%. The Board discharges its responsibilities either directly or through its three committees (each, a “Committee”), being the Corporate Governance and Nominating Committee, the Human Resources and Compensation Committee and the Audit Committee. A more detailed description of the role of the Board and its Committees is detailed under “Schedule “A” Disclosure of Corporation Governance Practices”. The following is a report of the work completed by each Committee in 2016.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE The number of members of the Corporate Governance and Nominating Committee is set at three. In 2016, David G. Leith (Chairman), Craig Forman and Judith A. McHale served on such Committee. Since Ms. McHale is not seeking re-election at the Meeting, her position as a member of the Corporate Governance and Nominating Committee will be filled at the end of her service by the Board having considered the recommendation of such Committee. The table below sets out the experience Messrs. Leith and Forman who will continue to serve on the Corporate Governance and Nominating Committee following the date of the Meeting.

COMMITTEE MEMBER EXPERIENCE ACQUIRED THROUGH ROLE

David G. Leith Mr. Leith served with CIBC World Markets for over 25 years and last served as Deputy Chairman and Managing Director. Mr. Leith also serves as Chair of the Board of Investment Management Corporation of Ontario (IMCO), as Lead Director on the Board of Hudson’s Bay Company and is a member of its Corporate Governance and Nomination Committee. Mr. Leith served from 2009 to 2017 as Chairman of the Board of Manitoba Telecom Services Inc. and was ex-officio a member of all its Committees, including its Governance and Nominating Committee. He also served as a trustee of TransGlobe Apartment Real Estate Investment Trust where he was a member of its Governance, Compensation and Nominating Committee. Craig Forman Craig Forman acquired experience in corporate governance by serving as Executive Chairman of the Board of Appia, Inc. and WHERE, Inc. and as Executive Vice-President and President, Access and Audience and Chief Product Officer at EarthLink, Inc., an Atlanta-based Internet services provider. Mr. Forman is President and Chief Executive Officer of the McClatchy Company, a news and information provider, and serves as a Director on its Board. Mr. Forman also serves on the Board of Digital Turbine Inc., a media and mobile communications company. He also served as Director on the Boards of several private companies. Mr. Forman has a Master’s degree in law from Yale Law School and completed the Director’s Consortium executive education program from Stanford University in 2012 which included modules on corporate governance.

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In 2016, the Corporate Governance and Nominating Committee held five meetings. Attendance at the meetings of the Corporate Governance and Nominating Committee was 93%. In 2016, the Corporate Governance and Nominating Committee: • Recommended the nominees for election as Directors at the Annual General Meeting. • Reviewed the composition of Committees. • Oversaw the annual assessment process on the performance and effectiveness of the Board consisting in an online survey, a one-on-one meeting with the Chair of the Corporate Governance and Nominating Committee and the Chair of the Board and the preparation of a skills matrix. • Reviewed the charter of the Board, the charters of the Corporate Governance and Nominating Committee, the Human Resources and Compensation Committee and the Audit Committee. • Reviewed the compensation of the Board. • Approved the annual revisions of the Code of Ethics and the Corporation’s Insider Trading Policy. • Reviewed the Corporation’s system of corporate governance to ensure compliance with applicable legal and regulatory requirements. • Reviewed the amendments to the corporate governance guidelines of the Corporation required in connection with the updated Code of Ethics. • Reviewed and approved the Corporation’s disclosure on corporate governance in the Proxy Circular in respect of the 2016 annual meeting of Shareholders. • Reviewed the framework for the update to the corporate social responsibility program of the Corporation which currently aims to support small businesses and local economies. • Reviewed the Corporation’s compliance with its Diversity Policy. • Reviewed the process for communication of comments or concerns to the Board, the Corporate Secretary or the Ethics Committee. • Met privately without Management present at each meeting of the Committee.

HUMAN RESOURCES AND COMPENSATION COMMITTEE The number of members of the Human Resources and Compensation Committee is set at three and Susan Kudzman (Chair), Donald H. Morrison and Martin Nisenholtz currently serve on such Committee. The Board believes that the Human Resources and Compensation Committee collectively has the knowledge, experience and background required to fulfill its mandate and to make the right decisions on the suitability of the Corporation’s compensation policies. All of the Human Resources and Compensation Committee members held or currently hold senior management positions. In these roles, the members of the Human Resources and Compensation Committee acquired direct experience related to the management of executive compensation, making day-to-day decisions concerning executive pay, and designing short and long-term incentive plans with objectives tied to sustained shareholder value creation. The table below sets out the experience of the members of the Human Resources and Compensation Committee.

DIRECT COMMITTEE MEMBER EXPERIENCE EXPERIENCE ACQUIRED THROUGH ROLE

Susan Kudzman Yes Ms. Kudzman is Executive Vice-President, Chief Risk Officer and Corporate Affairs of Laurentian Bank. In this capacity, Ms. Kudzmanis responsible for all aspects of human resources. She has also acquired extensive human resource experience through various other executive positions in human resources over her career. She was HR consultant and actuary at Mercer (Canada) Limited and Towers Watson and was thereafter named partner at Mercer (Canada) Limited, where she directed the risk management practice from 2011 to 2014. She served as Chief Human Resources Officer at BCE Emergis and as Senior Vice-President, Human Resources of Laurentian Bank of Canada. As Chief Risk officer of the Caisse de dépôt et placement du Québec, she was also involved in overseeing and developing compensation plans. She is a member of the Board of Directors and the Human Resources Committee of Transat A.T. Inc. and the Chair of the Human Resources Committee of the Montreal Heart Institute Foundation. Ms. Kudzman holds a Bachelor’s degree in Actuarial Science and the titles of Fellow of the Canadian Institute of Actuaries (FCIA), Fellow of the Society of Actuaries (FSA) and Certified Enterprise Risk Analyst (CERA). Donald H. Morrison Yes Mr. Morrison served from 2000 to 2011 as Chief Operating Officer of Blackberry, and his responsibilities included oversight of human resources. Prior to that, he held a number of senior leadership positions in Canada, Europe and the United States. Prior to joining Blackberry, Mr. Morrison held a number of senior leadership positions with AT&T and Bell Canada. Throughout his career, he garnered more than 25 years of direct experience in creating, managing and measuring compensation systems in Canada and globally. Mr. Morrison holds a MBA from the University of Toronto and also participated in the Executive Program at the University of Virginia, Darden Business School, which both have modules on strategies with respect to human resources, leading change and organizations. Martin Nisenholtz Yes With over 25 years of experience as an executive participating in the design and implementation of executive compensation plansas Senior Vice-President, Digital Operations of The New York Times Company and Chief Executive Officer of New York Times Digital, Mr. Nisenholtz acquired broad experience in the development and implementation of competitive executive compensation programs. He also served on the Human Resources and Compensation Committee of the Corporation from May 2006 to May 2009 and has served thereon since October 2011, and serves on the Human Resources and Compensation Committee of Purch Group, Inc. He also served on the Human Resources and Compensation Committee of Postmedia Network Canada Corp. from 2014 to 2016.

In 2016, the Human Resources and Compensation Committee held eight meetings. Attendance at the meetings of the Human Resources and Compensation Committee was 100%.

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In 2016, the Human Resources and Compensation Committee: • Reviewed and approved the report on the results of the 2015 short-term incentive plan and 2013 performance share units payouts compared to targets for the performance cycle ended on December 31, 2015. • Reviewed the annual performance assessments for the senior executives and approved their base compensation. • Retained Hugessen as its independent compensation advisor. • Reviewed and approved the targets under the 2016 Short-Term Incentive and Long-Term Incentive Plans and recommended the award of Options, performance and restricted share units to senior management, and awards of performance and restricted share units to selected members of management. • Reviewed and approved organizational changes, including a corporate realignment and the renewal of the executive team with the appointment of senior executives in the digital, marketing, technology, strategy and partnerships, transformation and operations targets. • Reviewed compensation philosophy for senior management and reviewed Hugessen’s and Willis Towers Watson Canada Inc.’s executive compensation benchmarking exercises. • Reviewed and approved the Compensation Discussion and Analysis in the Proxy Circular in respect of the 2016 annual meeting of Shareholders. • Reviewed the Corporation’s succession plan. • Reviewed the results of the employee engagement survey. • Reviewed the charter of the Human Resources and Compensation Committee. • Received various updates and recommendations in relation with labour matters of the Corporation. • Reviewed recommendations for long-term incentive plan design for executives of acquired companies. • Met privately without Management present at each meeting of the Committee. For a more comprehensive discussion of the activities conducted in 2016 by the Human Resources and Compensation Committee, see “Executive Compensation – Discussion and Analysis”.

AUDIT COMMITTEE The number of members of the Audit Committee is set at three. The Audit Committee is composed of David A. Lazzarato (Chairman), Kalpana Raina and Michael G. Sifton. The Board believes that the Audit Committee has the knowledge and background required to oversee the financial reporting and disclosure controls and procedures, accounting systems and internal controls over financial reporting of the Corporation. All the members of the Audit Committee are financially literate as defined under applicable securities law, which means that they have the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity that can reasonably be expected to be raised by the Corporation’s financial statements. The table below sets out the experience of the current members of the Audit Committee. FINANCIAL COMMITTEE MEMBER LITERACY EXPERIENCE ACQUIRED THROUGH ROLE

David A. Lazzarato Yes Mr. Lazzarato has acquired extensive accounting, corporate finance and mergers and acquisition experience through his roles as Senior Vice-President, Finance of Bell Canada, Chief Executive Officer of Craig Wireless Systems Ltd., Chief Financial Officer of Alliance Atlantis Communications Inc., Chief Corporate Officer of MTS Allstream Inc., Executive Vice-President and Chief Financial Officer of Allstream (formerly, AT&T Canada), Senior Vice-President and Chief Financial Officer of BCE Mobile Communications Inc., Vice-President and Comptroller of BCE Inc. and Senior Vice-President, Finance and Administration of CAE Electronics Ltd. Mr. Lazzarato is a Fellow Chartered Accountant, holds a Bachelor of Commerce Degree and completed the Director’s Education Program of the Institute of Corporate Directors which has a module on monitoring financial strategy, risks and disclosure. Kalpana Raina Yes During the 18 years she served at the Bank of New York, a global financial services institution, Ms. Raina had broad exposure to accounting, corporate finance and credit risk issues, specifically in her role as Executive Vice-President and as manager of its offices in France, Spain, Italy, Belgium and Germany. Ms. Raina is also a Director and a member of the Audit Committee of Information Services Group, Inc. and John Wileys & Sons, Inc., and previously served as Director and member of the Audit Committee of RealNetworks, Inc. Michael G. Sifton Yes Over the course of over 30 years as President and Chief Executive Officer of Sun Media Corporation, President, Chief Executive Officer and Director of Osprey Media Group, President of Hollinger Canadian Newspaper G.P., President and Chief Executive Officer of Armadale Communications Limited, President and Chief Executive Officer of Praxis Technologies Inc. and now Chief Executive Officer of Data Communications Management Corp., Mr. Sifton acquired significant experience in accounting and corporate finance issues. Mr. Sifton also holds a Bachelor of Commerce Degree (Honours).

The Audit Committee held seven meetings during 2016. Attendance at the meetings of the Audit Committee was 100%. In 2016, the Audit Committee: • Recommended for approval by the Board the annual and quarterly consolidated financial statements and related Management’s Discussion and Analysis and press releases. • Reviewed the auditor’s engagement letter, including scope of audit and fees, and confirmed its independence. • Oversaw the management of liabilities in connection with the long-term incentive plan for Management and DSU Plan for Directors and Management. • Reported to the Board on oversight and receipt of certificates from Management confirming compliance with debt covenants, withholdings, deductions and remittances. • Reviewed management’s computations pertaining to the redemption of outstanding debt.

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• Reviewed quarterly reports relating to treasury. • Reviewed quarterly reports from the Ethics Committee. • Reviewed reports from internal audit including with respect to Canadian anti-spam legislation control, cybersecurity and Transformation Office, and monitored implementation of recommendations from the internal auditor and approved the internal audit budget. • Reviewed pension reports and approved actuarial valuations and financial statements for the pension plans. • Monitored and approved changes to the investment strategy for the Corporation’s defined benefit and defined contribution pension plans. • Received and reviewed reports from Management on internal controls over financial reporting and on disclosure controls and procedures. • Approved amendments to the Corporation’s Disclosure Policy, Financial Risk Management Policy and the Policy on Reporting of Concerns. • Reviewed the Audit Committee’s Charter to reflect certain changes to the pension plans. • Recommended for approval the AIF for the year ended December 31, 2015, as well as the Proxy Circular in respect of the 2016 annual meeting of Shareholders. • Met quarterly in private and separately with each of the external auditors, internal auditors and Management.

YELLOW PAGES LIMITED PROXY CIRCULAR 23 EXECUTIVE COMPENSATION – EXECUTIVE SUMMARY

Dear Shareholders:

TheReturntoGrowthPlan(the“Plan”), which was introduced in early 2014, Grow adoption and usage of sets out three main objectives to promote Yellow Pages’ growth into a leading the Corporation’s network of Canadian digital company: (1) enhance its value proposition to local digital media properties merchants and national brands, (2) grow consumer awareness and usage of its network of digital media properties, and (3) strengthen the Corporation’s digital brand perception among Canadians. Since the introduction of the Plan, Return to Yellow Pages has continued to make progress as the Corporation transitions Growth to a digital-first company. Key highlights on the implementation and execution Plan of the Plan for the year ended December 31, 2016 include growth in consolidated digital revenues of 14.3% year-over-year to $555.8 million, representing 67.9% of consolidated revenues; acquisition of 41,100 new Enhance the Corporation’s Improve the Corporation’s customers in 2016, exceeding both the target for the year of 38,000 as well value proposition to local and brand perception among as new customers acquired in 2015 of 30,800; repayment of debt of national merchants Canadians $97.1 million in 2016 on its 9.25% senior secured notes (the “Notes”), bringing the total repayment to $490.3 million since inception of the Notes in December 2012; and reduction of Net Debt (as defined below) from $430.6 million as at December 31, 2015 to $384.9 million as at December 31, 2016. As the Corporation continues to focus on the execution of the Plan, it has initiated a review of its business strategy and management outlook with the purpose of supporting the long-term success of its digital-first business. The areas of focus include marketing offers, the customer journey, sales structure, operational platforms and the subsequent effects on long-term revenue, Adjusted EBITDA (as defined below) growth and capital allocation policy. The Corporation anticipates communicating the outcome of this exercise and the accompanying strategy in May 2017.

Strengthening its Media Assets: Total digital visits, which measures the number of visits made across the YP, YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda and dine.TO online and mobile properties, as well as visits made across the properties of the Corporation’s application syndication partners, totalled 464.7 million in 2016 as compared to 464 million in 2015. Total digital visits performance in 2016 remained stable year-over-year with an increase of 26% in traffic in the fourth quarter of 2016 compared to the same period last year, attributable to the Corporation’s strong partnership network, syndicating Yellow Pages listings and content.

Enhancing its Customer Value Proposition: Growth in customer count remains a critical driver in the Corporation’s ability to deliver sustainable revenue and Adjusted EBITDA (as defined below) growth. The Corporation’s customer count reached 241,500 customers as at December 31, 2016 as compared to 245,000 customers as at December 31, 2015. This represents a net decline of 3,500 customers in 2016, an improvement from the 11,000 and 20,000 net customers lost in 2015 and 2014, respectively. Yellow Pages acquired 41,100 new customers during the year ended December 31, 2016, exceeding internal targets and the acquisition of 30,800 new customers during the same period last year. In 2016, the Corporation focused on promoting leads generation and optimizing conversion rates within the Corporation’s sales force to grow customer acquisition and stabilize the customer count. In conjunction therewith, various initiatives and tools were implemented throughout the year. The renewal rate among customers was 82% for the year ended December 31, 2016, as compared to a renewal rate of 85% last year. While this continues to represent strong customer loyalty for the industry, the customer renewal rate remains under pressure due to accelerated levels of customer acquisition, as new customer cohorts churn at higher rates than older customer cohorts. In an effort to protect customer renewal rates, Yellow Pages continues to grow specialized onboarding teams and increase retention efforts across sales and customer care channels. Total Digital Visits (in mil.) Customer Acquisition (in ,000)

464 464.7 41.1

424 30.8 22.1

2014 Actual 2015 Actual 2016 Actual 2014 Actual 2015 Actual 2016 Actual

24 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – EXECUTIVE SUMMARY

Extending its Brand Promise: Over the course of 2016, the Corporation launched a range of multimedia campaigns to enhance the digital CONTENTS brand relevancy and perception of Yellow Pages’ media and Determining Compensation Page 29 marketing solutions across Canada and raise adoption of the Share Ownership Guidelines for Executives Page 30 Corporation’s digital media properties. In an effort to raise awareness Executive Compensation Clawback Policy Page 31 of Yellow Pages’ digital marketing programs, the Corporation opened Compensation Consultant Page 31 its own small business, The Lemonade Stand, in the Beaches Compensation Philosophy and Objectives Page 32 neighbourhood of Toronto, Ontario. The Corporation grew Total Compensation Components Page 36 The Lemonade Stand from a nonexistent business using only Performance Graph Page 48 Yellow Pages digital marketing solutions. The Lemonade Stand was Summary Compensation Table Page 50 transformed into a national multimedia campaign and improved the Incentive Plan Awards Page 51 perception of Yellow Pages as a credible supplier of digital and Comparison of Target, Realizable and Realized marketing solutions. The Corporation also launched a campaign Compensation Page 52 comprised of digital mobile and online advertising to promote Pension Plan and Supplemental Pension Benefits Page 54 Yellow Pages’ NetSync product, which led to the generation of quality Employment Agreements and Change of Control Benefits Page 56 leads for the Corporation’s sales force that ultimately contributed to exceeding the customer acquisition target. On the consumer front, the Corporation launched a digital campaign to increase awareness and adoption of Yellow Pages’ dining application, YP Dine.

CHANGES IMPLEMENTED IN 2016 In 2016, we continued with the review of all of the Corporation’s executive compensation programs to ensure they remained aligned with the Return to Growth Plan, as well as with the current dynamics facing the Corporation. While we experience strong competition from the other digital media companies, we continue to make progress in our digital evolution. We have continued to improve our financial situation by reducing our debt. We remain dedicated to reducing our debt and to invest in our transformation and the Return to Growth Plan as well as to attract and retain the right digital talent. Therefore, in 2016, we brought certain changes to the compensation framework to align it with the Return to Growth Plan. To improve the focus on the priorities under our Return to Growth Plan, we have revised one of the three operational key performance indicators (“KPIs”) used in the annual short-term incentive plan (“STIP”), replacing Customer Penetration of the Yellow Pages 360° Solution with Total Customer Count. We believe this new measure better ensures focus not only on new customer acquisition but also customer retention, with the objective of slowing down the net customer decline and supporting the Corporation’s strategy of future customer count growth. The threshold payout multiplier for the Total Digital Visits was decreased from 60% to 40% reducing the payout when achieving threshold level to reflect the importance of achieving this measure (see section “Executive Compensation – Discussion and Analysis – Total Compensation Components – Annual Short- Term Incentive Plan” for details). The 2016 STIP also continued to reward exceptional individual performance and achievements. 2016 CORPORATE SCORECARD The following financial and operational KPIs were used in the 2016 Corporate Scorecard for the STIP: FINANCIAL METRICS (50%)

OPERATIONAL KPIs (50%)

Adjusted EBITDA (70% weighting) Total Customer Count (33.3% weighting) Represents income from operations Represents the total number of customers before depreciation and amortization, 17% purchasing Yellow Pages products impairment of intangible assets and restructuring and special charges 35% Customer Acquisition (33.3% weighting) Represents the number of new customers 17% acquired during the year

Total Digital Visits (33.3% weighting) Reported Revenue (30% weighting) Represents the number of visits made across the YP, Represents overall consolidated YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda revenue reported in the annual and dine.TO online and mobile properties, as well as visits financial statements 15% 17% made across the properties of the Corporation’s application syndication partners, but excludes ComFree/DuProprio, 411 Local Search Corp. and Yellow Pages Homes Limited

2016 LTIP Similarly, while we decided to maintain the design and the KPIs previously used in the 2015 long-term incentive plan (“LTIP”), in order to better align the interests of our executives with those of our Shareholders towards long-term value creation, we adjusted the weightings of the performance share units (the “PSUs”) by reducing the weighting of Net Debt to 30% while increasing the weighting of Compound Annual Growth Rate (“CAGR”) of Digital Revenue targets to 70%, from the prior weighting of 50%-50% respectively. See “Executive Compensation – Discussion and Analysis – Total Compensation Components – Long-term Incentive Programs – 2016 LTIP” for details.

YELLOW PAGES LIMITED PROXY CIRCULAR 25 EXECUTIVE COMPENSATION – EXECUTIVE SUMMARY

The 2016 LTIP award mix and metrics consisted of the following components: 2016 PSU METRICS

Stock Options 30% Net Debt 30%

Performance 50% Compound Annual Growth Rate of Total Share Units 70% Digital Revenue 20% Restricted Over 3 Years Share Units

In 2016, the HR and Compensation Committee reviewed the Corporation’s incentive plans and made the following modifications: • For STIP, the operational KPI of Customer Penetration of the Yellow Pages 360° Solution was replaced with Total Customer Count. The threshold payout multiplier for the Total Digital Visits was decreased from 60% to 40%, thus reducing the payout when achieving threshold level • For LTIP, weighting of KPIs for PSUs changed to 70% CAGR of Total Digital Revenue Over 3 Years and 30% Net Debt

2016 CORPORATION PERFORMANCE AND EXECUTIVE PAY Revenues in 2016 decreased by 1.4% year-over-year and amounted to Net Debt (in million $) 533.1 $818 million, as compared to a year-over-year decrease of 5.4% to 494.1 430.6 $829.8 million in 2015 and a year-over-year decrease of 9.7% to 384.9 $877.5 million in 2014. For the year ended December 31, 2016, digital revenues grew 14.3% year-over-year to reach $555.8 million, representing 67.9% of revenues. This compares to $486.3 million, or 58.6% of revenues, in 2015 and $442.8 million, or 50.5% of revenues, December 31, December 31, December 31, December 31, in 2014. 2013 2014 2015 2016

Adjusted EBITDA totalled $235.2 million during 2016 relative to $260.7 million in 2015 and $316 million in 2014. Adjusted EBITDA represents income from operations before depreciation and amortization, impairment of intangible assets and restructuring and special charges (“Adjusted EBITDA”). Adjusted EBITDA is not a performance measure defined under IFRS and is not considered an alternative to (loss) income from operations or net (loss) earnings in the context of measuring the Corporation’s performance. Adjusted EBITDA does not have a standardized meaning and is therefore not likely to be comparable to similar measures used by other publicly traded companies. Management uses Adjusted EBITDA to evaluate the performance of its business as it reflects its ongoing profitability. Management believes that certain investor and analysts use Adjusted EBITDA to measure a company’s ability to service debt and meet other payment obligations or to value companies in the media and marketing solutions industry as well as to evaluate the performance of a business. Adjusted EBITDA should not be used as an exclusive measure of cash flow since it does not account for the impact of working capital changes, income taxes, interest payments, pension funding, capital expenditures, business acquisitions, debt principal reductions and other sources and uses of cash. In addition, Yellow Pages repaid $97.1 million of its 9.25% senior secured notes in 2016, bringing the total repayment to $490.3 million since the issuance of the senior secured notes on December 20, 2012. As at December 31, 2016, the Corporation had Net Debt of $384.9 million, compared to $430.6 million at the end of 2015 and $494.1 million at the end of 2014. Net Debt is a non-IFRS financial measure and does not have any standardized meaning under International Financial Reporting Standards (“IFRS”). Therefore, it is unlikely to be comparable to similar measures presented by other publicly traded companies. We define Net Debt as current portion of long-term debt plus long-term debt and exchangeable debentures, less cash, as presented in Yellow Pages Limited’s consolidated statements of financial position (“Net Debt”). We consider Net Debt to be an important indicator of our financial leverage as it represents the amount of debt that is not covered by available cash. We believe that certain investors and analysts use Net Debt to determine a company’s financial leverage. Net Debt has no directly comparable IFRS financial measure; it is calculated using certain asset and liability categories from consolidated statements of financial position.

26 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – EXECUTIVE SUMMARY

The Corporation did not achieve the 2016 threshold for the revenue target. However, it achieved 98% of the Adjusted EBITDA target under the annual STIP. With respect to the operational KPIs, the Corporation exceeded the target for Customer Acquisition, met the Total Digital Visits target and achieved 72% of the Total Customer Count target. Considering these results, the 2016 Corporate Scorecard Payout Factor was 81%. Further, to determine individual STIP payouts for 2016, performance and achievements of each Named Executive Officer were reviewed and the final STIP amount determined accordingly (see section “Executive Compensation – Discussion and Analysis – Total Compensation Components – Annual Short-Term Incentive Plan – 2016 STIP Payout” for details).

OPERATIONAL KPIs 2016 2015 % CHANGE

Total Customer Count (1) 241,500 n/a n/a Customer Acquisition (number of new customers) 41,100 30,800 33% Total Digital Visits (in millions) 464.7 464.0 0.15%

(1) YP core business excludes Mediative, 411 Local Search Corp. (411.ca), and ComFree/DuProprio Inc. and its subsidiaries (“CFDP”). CEO PERFORMANCE AND COMPENSATION In 2016, we continued to focus on the priorities identified in the Return to Growth Plan. The Corporation continued to strengthen its financial profile and also made operational progress. The Board of Directors, together with the President and Chief Executive Officer, Julien Billot, determined Mr. Billot’s key objectives at the beginning of 2016, which included delivering on set financial objectives such as a strong cash-flow generation, repayment of debt and delivery of Adjusted EBITDA results. In addition to delivering on his objectives, Mr. Billot was also instrumental in delivering the Juice DMS Advertising Limited and Juice Mobile USA LLC (the latter two collectively “JUICE”) acquisition, which closed in March 2016. As a result of Mr. Billot’s achievements, the Committee reviewed and recommended an overall individual performance rating of 100% which allowed for a payout of 81% percent of his STIP target.

2016 STIP Payout – Julien Billot

STIP at Target $875,000 Corporate Scorecard Payout Factor 81% Individual Multiplier 100% Final STIP Payout (1) $708,100 Calculation Details [$875,000 x (81% x 100%)]

(1) The STIP payout was calculated based on the actual base salary earned by the executive during 2016. In accordance with the 2016 LTIP, Mr. Billot received 30% of his LTIP target award in stock options, 20% in restricted share units (“RSUs”) and 50% in PSUs (see “Executive Compensation – Discussion and Analysis – Total Compensation Components – 2016 LTIP” for details).

2016 LTIP Award – Julien Billot Value Number Granted Underlying Share Exercise Price

Performance Share Units (at Target) $875,000 49,088 $17.8250 Restricted Share Units $350,000 19,635 $17.8250 Stock Options $525,000 100,000 $17.8250 Total Award at Target $1,750,000

YELLOW PAGES LIMITED PROXY CIRCULAR 27 EXECUTIVE COMPENSATION – EXECUTIVE SUMMARY

2014 PERFORMANCE AND RESTRICTED SHARE UNIT PLAN PAYOUT In 2014, the Corporation granted RSUs and PSUs to certain Named Executive Officers under the Corporation’s Restricted Share Unit and Performance Share Unit Plan adopted on May 6, 2013 (the “RSU&PSU Plan”). Pascal Thomas, Senior Vice-President and Chief Digital Officer, did not receive such awards as he joined the Corporation in October of 2014. The vesting of the RSUs was contingent on a three-year time- based vesting condition, to be confirmed at the time of the approval of the December 31, 2016 financial statements for the year ended December 31, 2016. The vesting of the PSUs was tied 50% to the achievement of a predetermined level of Net Debt on December 31, 2016 and 50% on the achievement of the CAGR of the total digital revenue target as at December 31, 2016. Given the progress of the ongoing digital evolution and the Corporation’s efforts on debt repayment, the Corporation’s Net Debt as at December 31, 2016 was reduced to $384.9 million, above the set Net Debt target of $350 million and the CAGR of Total Digital Revenue amounted to 9.9% exceeding the established 8% target. As such, the 2014 PSUs vested with a payout multiplier of 1.12 of the target award for the Named Executive Officers eligible (see section “Executive Compensation – Discussion and Analysis – Long-term Incentive Programs – 2014 Performance Share Unit Plan Payout” for details). YELLOW PAGES IN 2016 • Continued progress on the Return to Growth Plan • Digital revenues grew 14.3% to reach $555.8 million • Net Debt reduced to $384.9 million compared to $430.6 million in 2015 • Revenue target under the annual STIP was not achieved and the Adjusted EBITDA target was slightly below • Two operational KPIs under the annual STIP were at or exceeded their targets, while the third was below target

2016 EXECUTIVE COMPENSATION • The 2016 Corporate Scorecard was achieved at 81% • Based on 2016 achievements and an individual multiplier of 100%, the payout for the President and Chief Executive Officer was at 81% of his STIP target • The STIP payout for other Named Executive Officers reflected their 2016 achievements, and resulted in an achievement of 81% of their respective STIP targets, once the individual multiplier at 100% was taken into account

IN CONCLUSION We believe that the Company’s executive compensation policy and programs are designed to ensure proper alignment between the Company’s long-term strategy, its business plan and executive rewards, thus encouraging appropriate behaviour. The executive compensation program is also designed to be competitive, in order to attract, retain and motivate executive talent while providing for appropriate risk control features. A significant proportion of executive incentive compensation is therefore tied to key corporate objectives that play a critical role in driving the organization’s short and long-term profitability and return on investment for Shareholders. Our focus on growing revenues, acquiring new customers and improving the Corporation’s profitability, as well as the growing competition from other digital media companies, must be taken into consideration, specifically when designing pay-for-performance programs.

The Human Resources and Compensation Committee Susan Kudzman (Chair) Donald H. Morrison Martin Nisenholtz

28 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

This section provides details on the Corporation’s executive compensation philosophy, approach and components, and explains in greater detail the process followed by the Human Resources and Compensation Committee (the “HR and Compensation Committee”) regarding executive pay.

DETERMINING COMPENSATION HUMAN RESOURCES AND COMPENSATION COMMITTEE The 2016 compensation of executive officers of the Corporation, including the President and Chief Executive Officer, the Senior Vice-President and Chief Financial Officer and the three next most highly compensated executive officers of the Corporation or its Subsidiaries (collectively, the “Named Executive Officers”), was determined by the Board following the recommendation of the HR and Compensation Committee. All the members of the HR and Compensation Committee are independent Directors. The HR and Compensation Committee collectively has the knowledge, experience and background required to fulfill its mandate and to make the right decisions on the suitability of the Corporation’s compensation policies, as discussed in “Election of the Board of Directors – Human Resources and Compensation Committee”. The HR and Compensation Committee fully understands the long-term implications and limitations of the key elements of compensation described in “Executive Compensation – Discussion and Analysis – Compensation Philosophy and Objectives”.

All Members of the HR and Compensation Committee are Independent Directors with Executive Compensation Experience.

See “Elections of the Board of Director – Human Resources and Compensation Committee” and “Schedule “A” Disclosure of Corporate Governance Practices – Committees of the Board – Human Resources and Compensation Committee” for a description of meetings held and matters undertaken in 2016 by the HR and Compensation Committee. COMPENSATION DECISION PROCESS AND RISK MANAGEMENT The HR and Compensation Committee aims at designing and developing compensation programs that support the Corporation’s objective of becoming the leading local digital company in Canada. The HR and Compensation Committee reviews the Corporation’s compensation philosophy, plan design and competitive pay levels on an annual basis. In 2016, the HR and Compensation Committee reviewed the Corporation’s short and long-term incentive plans to ensure they support the Return to Growth Plan and focus on long-term Shareholder value creation. The HR and Compensation Committee further assessed the achievement of performance measures set for the Named Executive Officers and other executives to determine appropriate incentive awards reflecting the level of the Corporation’s performance under the annual short-term incentive plan and the achievement of the vesting targets for the 2014 LTIP. When making decisions about executive pay, the HR and Compensation Committee considers a number of factors, both quantitative and qualitative.

YELLOW PAGES LIMITED PROXY CIRCULAR 29 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

While quantitative analysis and best practices are important factors FACTORS CONSIDERED WHEN MAKING EXECUTIVE that the HR and Compensation Committee relies on when analyzing COMPENSATION DECISIONS executive pay, discretion, judgment and prior compensation experience are instrumental in delivering programs that are in the

best interest of the Corporation. COMPENSATION PHILOSOPHY The HR and Compensation Committee follows a rigorous process AND OBJECTIVES ACHIEVEMENT CORPORATION’S when establishing objectives for different pay-at-risk programs. The OF FINANCIAL STRATEGY AND AND OPERATIONAL objectives assigned to executives to allow for a payout under both the PRIORITIES OBJECTIVES short and long-term incentive plans are derived from the annual operational and long-term strategic business plans of the Corporation. To receive an incentive payout, executives have to meet ALIGNMENT COMPETITIVE objectives that are considered challenging. Payment is made at the WITH MARKET AND SHAREHOLDERS’ end of the performance period provided the actual achievement BEST PRACTICES EXECUTIVE INTERESTS exceeds the threshold or minimum level of performance required. The COMPENSATION Board also maintains discretion over final payout, regardless of the DECISIONS achievement of specific performance metrics. Numerous measures have been implemented to encourage GOOD RISK EXECUTIVE continuous improvement of financial performance year-over-year, and MANAGEMENT INDIVIDUAL PRACTICES PERFORMANCE to mitigate the undesired outcome of having executives take excessive risks when managing the Corporation. Such measures JUDGMENT include having multiple performance metrics that need to be met to ADVICE OF AND PRIOR INDEPENDENT COMPENSATION allow a payout under the pay-at-risk programs, capping the maximum ADVISOR EXPERIENCE payout multiplier at 1.5 for the PSUs, requiring the executives to hold Shares underlying a minimum of 25% of their exercised Options until they achieve their minimum share ownership guidelines, having executive compensation clawback and anti-hedging policies, as well as share ownership guidelines, setting a payout cap to 150% of target under the Corporate Scorecard for the STIP, and requiring the Adjusted EBITDA target to be achieved to allow overall STIP payout above 100% of target. The HR and Compensation Committee also tested the STIP and LTIP under a variety of performance and related payout scenarios to ensure that the program will deliver the desired outcomes and that there is a link between performance and payouts.

CURRENT RISK MANAGEMENT PRACTICES IN PLACE • Share ownership guidelines, executive compensation clawback and anti-hedging policies ✓ • Rigorous process of reviewing and decision-making by the HR and Compensation Committee ✓ • Committee use of an independent compensation advisor ✓ • Various financial and operational performance metrics must be achieved to earn 100% of the incentive award ✓ • STIP Corporate Scorecard payout capped at 150% of target award ✓ • Requirement of Adjusted EBITDA target to be achieved to allow overall STIP payout above 100% of target ✓ • Maximum number of PSUs to vest capped at 1.5 payout multiplier ✓ • Executives are required to hold Shares underlying 25% of the Options exercised until they reach their share ownership guidelines ✓ • Testing the incentive programs under a variety of performance scenarios ✓

SHARE OWNERSHIP GUIDELINES FOR EXECUTIVES In May 2013, the HR and Compensation Committee reviewed and implemented new share ownership guidelines for the Named Executive Officers and other executives of the Corporation. The purpose of the guidelines is to promote the ownership of the Corporation’s Shares by the executives to align their interests with those of the Corporation’s Shareholders.

30 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Under the guidelines, the executives are required to hold a certain value, equal to a multiple of their base salary (the “Minimum Share Ownership”), in Shares, DSUs or RSUs. The executives must achieve the Minimum Share Ownership within the later of five years from May 2013 or their appointment. The extent to which the Minimum Share Ownership is achieved is evaluated annually. The executives’ Minimum Share Ownership is calculated using the value of Shares, DSUs and RSUs held by an executive, as detailed below. The value of the Options, PSUs or warrants is not included in the calculation of the Minimum Share Ownership. Executives are prohibited from hedging the value of the Corporation’s securities that they hold and must retain Shares underlying a minimum of 25% of their exercised stock options until they achieve their minimum share ownership guidelines. Executives are also prohibited from granting charges (such as hypothecs or pledges) on their Shares.

• Executive share ownership guidelines adopted in 2013 • Includes Shares, DSUs and RSUs but excludes Options, PSUs and Warrants • Compliance to be achieved within 5 years and status evaluated on an annual basis • Anti-hedging and prohibition on encumbering Shares included

For the purposes of the share ownership guidelines, the value of Shares, DSUs or RSUs is calculated based on the value which is the higher of (A) the value of the Shares (or underlying Shares in the case of DSUs or RSUs) based on their respective purchase price or award price, and (B) the market value of the Shares (or underlying Shares in the case of DSUs or RSUs) based on the closing price of the Shares on the TSX on December 31 of the last year then ended. The table below shows the Minimum Share Ownership requirements for each executive level: EXECUTIVE LEVEL MINIMUM SHARE OWNERSHIP REQUIREMENT

President and Chief Executive Officer 4 times base salary Senior Vice-Presidents (or other equivalent position) 2 times base salary Vice-Presidents (or other equivalent position) 1 time base salary

The table below shows the level of achievement of the Minimum Share Ownership of the Named Executive Officers as at December 31, 2016. SHARE OWNERSHIP BY NAMED EXECUTIVE OFFICERS Minimum Share Value of Ownership Interest (1) Actual Percentage Minimum Ownership Name 2016 Base Salary Ownership Requirement (Shares, DSUs and RSUs) of Ownership Requirement Requirement Date

Julien Billot $875,000 $3,500,000 $1,334,956 38% January 2019 Ginette Maillé $450,000 $900,000 $427,382 47% May 2018 Douglas A. Clarke $415,000 $830,000 $311,272 38% May 2018 François Ramsay $340,000 $680,000 $441,683 65% May 2018 Pascal Thomas $350,000 $700,000 $114,357 16% December 2019

(1) Value of ownership interest is calculated based on the higher of the closing price of the Shares on the TSX on December 31, 2016 (which was $17.69) and the applicable purchase price of the Shares or the value of the Shares underlying the DSU awards on the applicable date of grant of such awards or the RSU award value based on the respective unit reference price as shown on the award participation agreement of such awards.

EXECUTIVE COMPENSATION CLAWBACK POLICY The Board of Directors adopted an executive compensation clawback policy concerning awards made under the Corporation’s annual and long- term incentive plans. Under this policy, which applies to all executive officers, including the Named Executives Officers, the Board of Directors may, in its sole discretion, to the full extent permitted by governing laws and to the extent it determines it is in the best interests of the Corporation to do so, require reimbursement of all or a portion of annual or long-term incentive compensation previously received by an executive. The Board of Directors may seek reimbursement of full or partial compensation from an executive or former executive officer in situations where: (a) the amount of a bonus or incentive compensation was calculated based upon, or contingent on, the achievement of certain financial results that were subsequently the subject of or affected by a restatement of all or a portion of the Corporation’s financial statements; (b) the executive officer engaged in gross negligence, intentional misconduct or fraud that caused or partially caused the need for the restatement; and (c) the amount of the bonus or incentive compensation that would have been awarded to or the profit realized by the executive officer had the financial results been properly reported would have been lower than the amount actually awarded or received. The compensation clawback provisions have been communicated to all executive officers, including the Named Executive Officers, as part of their total compensation statements and are part of their award agreements.

COMPENSATION CONSULTANT As provided in its charter, the HR and Compensation Committee has the authority to retain and does retain, from time to time, the services of executive compensation consultants to provide advice on executive compensation matters. Executive compensation services, as well as other services provided by such executive compensation consultants at the request of Management, must be pre-approved by the HR and Compensation Committee. The HR and Compensation Committee also has the authority to determine and approve the fees of its consultants. In addition, the Corporate Governance and Nominating Committee has the authority to retain and does retain, from time to time, the services of compensation consultants to provide advice on director compensation matters.

YELLOW PAGES LIMITED PROXY CIRCULAR 31 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Since 2013, the HR and Compensation Committee and the Corporate Governance and Nominating Committee have retained the services of Hugessen, an independent executive and director compensation consulting firm. Hugessen reports directly to the Chair of the HR and Compensation Committee with respect to executive compensation and to the Chair of the Corporate Governance and Nominating Committee for Director Compensation. In 2016, Hugessen’s mandate covered the following: • Review of short and long-term incentive plan design for the Named Executive Officers and other employees of the Corporation, including the review of the performance targets under each plan; • Refresh the Corporation’s peer groups and pay benchmarking of the positions of the President and Chief Executive Officer, Senior Vice-President and Chief Financial Officer, and the top three Named Executive Officers; • Review of the Report on Executive Compensation section of the Corporation’s 2015 management proxy circular; • Review compensation arrangements proposed for executives of subsidiaries of the Corporation; and • Review of the governance and market developments in executive compensation. Hugessen also conducted a review of the Director’s compensation on behalf of the Corporate Governance and Nominating Committee in 2016. An engagement letter documented the key elements of the reporting relationships, including how and to whom Hugessen communicated information and recommendations. The HR and Compensation Committee and the Corporate Governance and Nominating Committee were satisfied that the advice received from Hugessen was objective and independent. The HR and Compensation Committee’s and the Corporate Governance and Nominating Committee’s decisions with regards to the compensation programs of the Corporation were its sole responsibility and may have reflected factors and information other than information and recommendations provided by Hugessen. During 2016, the Corporation retained Willis Towers Watson Canada Inc. (“Towers”) to conduct the compensation benchmarking for the Named Executive Officers and other executive positions of the Corporation as part of the review of the Corporation’s pay positioning policy and benchmarking practices. This benchmarking exercise was previously performed by Management in 2015. The following table sets forth the fees paid to Hugessen and Towers for compensation-related services as well as other fees for fiscal 2016 and 2015: HUGESSEN TOWERS Percentage of Percentage of Percentage of Percentage of 2016 Fees 2016 Fees 2015 Fees 2015 Fees 2016 Fees 2016 Fees 2015 Fees 2015 Fees ($) (%) ($) (%) ($) (%) ($) (%)

Executive Compensation Related Fees (1) 82,600 93 125,816 100 55,000 100 Nil Nil All Other Fees 6,200 (2) 7 Nil Nil Nil Nil 11,854 (3) 100 Total Fees 88,800 100 125,816 100 55,000 100 11,854 100

(1) Such fees were for HR and Compensation Committee mandates. (2) Other fees paid to Hugessen consisted of Director Compensation benchmarking. (3) Other fees paid to Towers consisted of a purchase of the Towers salary survey reports in 2015 and custom compensation benchmarking for certain non-executive positions in 2016.

COMPENSATION PHILOSOPHY AND OBJECTIVES The objectives of the Corporation’s executive compensation philosophy are to deliver programs that attract and retain highly qualified executives, motivate their performance, and align their interests with those of Shareholders. Therefore, the compensation philosophy provides that the Corporation’s executives receive total compensation that: • Supports the Corporation’s digital evolution; • Pays for performance; and • Is competitive compared to the Corporation’s comparator groups. The HR and Compensation Committee reinforces the pay-for-performance philosophy by allocating a significant portion of total compensation to pay-at-risk components. As discussed under “Executive Compensation – Discussion and Analysis – Determining Compensation – Compensation Decision Process and Risk Management”, the HR and Compensation Committee typically reviews the appropriateness of the Corporation’s compensation philosophy and objectives on an annual basis. CEO TOTAL COMPENSATION MIX NAMED EXECUTIVE OFFICERS’ TOTAL COMPENSATION MIX

4% 10%

24% Base Salary Pay-at-Risk 55% 35% 72% Benefits, Pension & Perks

32 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Historically, the Corporation’s pay positioning for the pay-at-risk programs, i.e., the short and long-term incentive targets, were at the 75th percentile of the respective comparator group for all executives. In 2014, the HR and Compensation Committee revised the pay positioning for all other executives, including the Named Executive Officers, to set the pay-at-risk component targets between median and the 75th percentile of the respective comparator groups, thus bringing total direct compensation to slightly above the median.

POSITION REVISED POLICY EFFECTIVE 2014 Pay-at-risk Total Direct Compensation

President and Chief Executive Officer Between median and 75th percentile Slightly above median All Other Executives Between median and 75th percentile Slightly above median

BENCHMARKING PRACTICES AND COMPARATOR GROUPS The HR and Compensation Committee typically reviews the competitiveness of the Corporation’s executive compensation on an annual basis. The analysis usually includes the review of base salary, target annual short-term incentive, target total cash, target long-term incentive, and target total direct compensation (i.e., total target cash plus long-term incentives) for each executive position.

Executive compensation benchmarking is typically conducted annually

In 2015, Hugessen reviewed and made recommendations concerning the composition of the Corporation’s comparator groups when analyzing and benchmarking the total compensation for the position of the President and Chief Executive Officer. Given a very limited number of peers with a comparable size, scope and operations in Canada and the unique challenges associated with the Corporation’s digital evolution, Hugessen recommended to also include U.S. companies as more U.S. peers were closer industry matches and therefore provided a more appropriate context for key operational executive roles. Thus, two comparator groups were selected based on the following criteria:

CRITERIA CANADIAN PROXY GROUP — DETAILED CRITERIA US PROXY GROUP — DETAILED CRITERIA

Type Public, TSX listed Public, NYSE, NASDAQ listed Location Head office in Canada Head office in the U.S. Revenue Size 1/3 – 3x of the Corporation’s revenue 1/2 – 2x of the Corporation’s revenue Total Enterprise Value (TEV) Size (1) 1/3 – 3x of the Corporation’s TEV 1/2 – 2x of the Corporation’s TEV Industry Media (publishing, advertising, broadcasting, movies and Media (publishing and advertising) entertainment, cable and satellite) Software and services Software and services

(1) Total Enterprise Value is defined as a corporation’s market capitalization plus debt, net of cash. The HR and Compensation Committee approved the following comparator groups and compensation data sources to be used when benchmarking the Corporation’s executive positions. COMPARATOR GROUPS AND DATA SOURCE

• Canadian Proxy Group President and Chief Executive Officer • US Proxy Group

Senior Vice-President and Chief Financial Officer • Canadian Proxy Group • Named Executive Officers: • Primary data source: Canadian Proxy Group (pay-rank basis) • Some operational roles: US Proxy Group, if needed • Secondary data source: Survey data (companies with $300M – $3B revenue size) CEO Direct Reports • Staff roles: Canadian General Autonomous Industry (excluding financial services/oil/gas) • Operational roles: Canadian Media/Publishing/High Tech • Other executives: Survey data: companies with $300M – $3B revenue size • Staff roles: Canadian General Autonomous Industry (excluding financial services/oil/gas) • Operational roles: Canadian Media/Publishing/High Tech; US as needed

• Survey data: companies with $300M – $3B revenue size Other Vice-Presidents • Staff roles: Canadian General Autonomous Industry (excluding financial services/oil/gas) • Operational roles: Canadian Media/Publishing/High Tech; U.S. as needed

The benchmarking of all executive positions was conducted at the end of 2015 and was reviewed by the HR and Compensation Committee in January 2016. The comparator groups used for the benchmarking were developed based on the criteria above, established by the HR and Compensation Committee based on recommendations made by Hugessen in 2013. Hugessen conducted the proxy benchmarking analysis using the Canadian Proxy Group and US Proxy Group for the position of the President and Chief Executive Officer and the Canadian Proxy Group for the position of the Senior Vice-President and Chief Financial Officer and other Named Executive Officers. The data obtained using the Canadian Proxy Group served as a primary source of data for the three highest paid Named Executive Officers. These three officers were benchmarked on a pay rank basis (e.g. the highest paid non-Chief Executive Officer and non-Chief Financial Officer of the Corporation were benchmarked against the highest paid non-Chief Executive Officer and non-Chief Financial Officer roles in the peer group). To ensure the positions of the three highest paid Named Executive Officers after the President and Chief Executive Officer and Senior Vice-President and

YELLOW PAGES LIMITED PROXY CIRCULAR 33 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Chief Financial Officer were also benchmarked based on their scope and responsibilities, secondary benchmarking using a survey data was conducted. Such benchmarking was conducted by Management as part of the overall benchmarking of all executive positions (with the exception of the President and Chief Executive Officer and Senior Vice-President and Chief Financial Officer), using Towers General and High Tech Industry Executive Surveys. For certain roles, the data was limited and as such, Management increased the data sample to include companies with a wider revenue range or in additional industries to provide a market reference point for a comparison. 2015 PROXY GROUP REFRESH In October 2015, Hugessen reviewed and updated the companies included in both the Canadian and US Proxy Groups. Once the screening criteria were applied, only three of the current peers fell within the screen. Therefore, the TEV selection criterion was removed and several companies were added. Based on this, a group of fourteen (14) peer companies in the Canadian Proxy Group was selected. When the 2013 screening criteria were applied to the US Proxy Group, twenty-six (26) companies were identified by the screen. However, only four of these companies were from the 2013 US Proxy Group. Hugessen revised the screen to capture the US companies in nominal US dollars and the screening criteria were updated as follows. Two analyses were conducted. The first analysis reviewed the publishing and advertising industries. The second analysis reviewed companies that had an Internet and application software business, with a focus on companies with mobile application development and digital marketing. Based on these two screens and some adjustments, a group of twenty-one (21) companies was selected. The actual companies included in each comparator group used by Hugessen are shown below:

CANADIAN PROXY GROUP US PROXY GROUP (1) Company Primary Industry Company Primary Industry Aimia Inc. Advertising Bankrate, Inc. Internet Software and Services Cineplex Inc. Movies and Entertainment Dex Media Inc. Publishing Constellation Software Inc. Application Software GoDaddy Inc. Internet Software and Services Corus Entertainment Inc. Broadcasting Harte-Hanks Inc. Advertising Cogeco Cable Inc. Cable and Satellite HomeAway, Inc. Internet Software and Services DH Corporation Data Processing and Outsourced Lee Enterprises, Inc. Publishing Services Meredith Corp. Publishing MacDonald Dettwiler & Ass. Ltd. Aerospace and Defense Monster Worldwide Inc. Internet Software and Services Mood Media Corporation Movies & Entertainment National CineMedia, Inc. Advertising Points International Ltd. Internet Software and Services New Media Investment Group Inc. Publishing Postmedia Network Canada Corp. Publishing ReachLocal Inc. Advertising Sirius XM Canada Holdings Inc. Cable and Satellite RealPage, Inc. Application Software Torstar Corporation Publishing Rocket Fuel Inc. Internet Software and Services Transcontinental Commercial Printing Scholastic Corporation Publishing TVA Group Inc. Broadcasting The McClatchy Company Publishing The New York Times Company Publishing Tribune Publishing Company Publishing Web.com Group, Inc. Internet Software & Services WebMD Health Corp. Internet Software & Services Yelp Inc. Internet Software & Services Zillow Group, Inc. Internet Software & Services

(1) The US Proxy Group applies primarily for the position of the President and Chief Executive Officer or as a potential secondary source of data for operational (non-corporate) executive roles if no Canadian data is available. In 2015, the U.S. data was only used for the position of the President and Chief Executive Officer.

34 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

REVENUE AND TEV RANGE CANADIAN PROXY GROUP

TEV Peer 25th Yellow Pages Peer 50th Peer 75th STATISTICS TEV Percentile TEV TEV Percentile TEV Percentile

$0.6B $0.7B $0.8B $1.0B $1.9B $2.1B $3.7B

Peer 25th Peer 50th Peer 75th REVENUE Yellow Pages Revenue Revenue Revenue STATISTICS Revenue Percentile Percentile Percentile

U.S. PROXY GROUP

TEV Yellow Pages Peer 25th Peer 50th Peer 75th STATISTICS TEV TEV Percentile TEV Percentile TEV Percentile

$0.7B $0.8B $1.0B $1.1B $1.9B $2.1B $2.6B

Peer 25th Yellow Pages Revenue Peer 75th REVENUE Revenue Revenue STATISTICS Percentile Peer 50th Revenue Percentile Percentile

The actual companies included in each comparator group from the Towers Executive survey used by Management are shown below.

PUBLICLY TRADED COMPARATOR GROUP (CANADIAN GENERAL AUTONOMOUS INDUSTRY COMPARATOR GROUP (CANADIAN MEDIA/PUBLISHING/HIGH TECH COMPANIES) (1) COMPANIES) Company Primary Industry Company Primary Industry Algonquin Power & Utilities Energy Services and Utilities Acceo Solutions Inc. Software Products and Services Canexus Chemicals Amazon.com E-Commerce Services Capital Power Corporation Energy Services and Utilities Bell Canada Telecommunications Catalyst Paper Corporation Forestry and Paper Products BuildDirect E-Commerce Services Cineplex Media and Entertainment Canadian Broadcasting Corp. Media and Entertainment Cogeco Cable Telecommunications Cineplex Entertainment Media and Entertainment Crombie Properties Real Estate Holdings, Cisco Systems Telecommunications Development & Trusts Cogeco Cable Canada GP Inc. Telecommunications Dollarama Discounters/Mass Gesca (La Presse) Media and Entertainment Merchandisers/Off-Price Retailers IBM Software Products and Services Genworth Financial Other Insurance Companies Quebecor Media and Entertainment Great Canadian Gaming Corporation Leisure and Hospitality Verizon Telecommunications Indigo Books Music & Café Big Box (Speciality Club and Videotron Telecommunications General Merchandise) Vision Critical/Angus Reid Strategies Software Products and Services Lululemon Athletica Apparel MacDonald Dettwiler & Associates Aerospace and Defense Penn West Energy Trust Energy Services and Utilities Riocan Management Inc. Real Estate Holdings, Development & Trusts Ritchie Brothers Auctioneers Business Support Services ShawCor Industrial Manufacturing Stantec Business & Technical Consulting Services Tembec Forestry and Paper Products TMX Group Limited Finance (Excl. Banking and Insurance) TransAlta Corporation Energy Services & Utilities Transcontinental Consumer Products – Nondurable

(1) Excludes companies in the oil and gas industries and financial services.

YELLOW PAGES LIMITED PROXY CIRCULAR 35 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

REVENUE AND TEV RANGE PUBLICLY TRADED COMPARATOR GROUP (CANADIAN GENERAL AUTONOMOUS COMPANIES)

Peer 25th Peer 50th Peer 75th REVENUE Yellow Pages Revenue Revenue Revenue STATISTICS Revenue Percentile Percentile Percentile

$0.6B $0.8B $1.2B $2.1B

INDUSTRY COMPARATOR GROUP (CANADIAN MEDIA/PUBLISHING/HIGH TECH COMPANIES) As revenue information was not available for each company included in the Towers Industry Comparator Group, no overall revenue statistics are provided. However, the revenue percentile statistics were available for each position benchmarked and was reviewed by the HR and Compensation Committee.

TOTAL COMPENSATION COMPONENTS The 2016 total compensation of the Named Executive Officers consisted of base salary, annual short-term incentive, long-term incentive programs, and benefits, pension and perquisites. COMPONENT DESCRIPTION LINK TO SHAREHOLDER VALUE CREATION

Base Salary Pays for role and responsibilities

Pays for the achievement

Annual Incentive Annual financial and operational performance PAY-AT-RISK COMPONENTS of annual financial (Short-term Incentive Plan) impacts short-term Share price developments and operational objectives TOTAL TARGET CASH COMPENSATION

• Payout linked to measures of the Corporation’s business TOTAL TARGET DIRECT COMPENSATION Long-term Incentive Program transformation; thus motivating and driving executives

TOTAL COMPENSATION • Stock Options Aligns Management’s behaviours to successfully deliver on the transformational strategy • Restricted Share Units with Shareholders’ interests • Long-term financial performance impacts long-term • Performance Share Units Share price appreciation, the Corporation’s viability and positive return on investment

Benefits, Pension Plan and Perquisites Provide elements of financial security

36 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The historical pay positioning policy of the Corporation was to align base salary and the value of benefits, pension and perquisites with the median (50th percentile) of the competitive market, and short and long-term incentive targets with the 75th percentile of the competitive market if the Corporation achieved specific performance targets. In 2014, the HR and Compensation Committee reviewed the compensation philosophy and reset the pay positioning policy of the pay-at-risk components (i.e., short and long-term incentives) to align closer to the median of the respective comparator group, specifically to be between the median and the 75th percentile. The total direct compensation (i.e., base salary, and short and long-term incentives) thus would be targeted slightly above the median. Following the benchmarking conducted at the end of 2015, the overall positioning of the Named Executive Officers compared to the policy is shown below. While not specifically benchmarked during the year, the size and mix of the Corporation’s benefits, pension and perquisites are considered to be consistent with market practices.

CURRENT POSITIONING COMPARED TO RESPECTIVE COMPARATOR GROUP Compared to Short-term Compared to Long-term Compared to Total Direct Compared to Position Base Salary Policy Incentive Policy Incentive Policy Compensation Policy Between 25th President and Chief At median Aligned At median Aligned percentile and Below At median Aligned Executive Officer median Senior Vice- Between 25th Between 25th Between 25th Above 75th President and Chief percentile and Below percentile and Below Above percentile and Below percentile Financial Officer median median median Senior Vice- Between 25th Between 25th Between Between 25th President and Chief percentile and Below percentile and Below median & 75th Aligned percentile and Below Operating Officer median median percentile median Senior Vice- Between 25th Between median Between median President Corporate Above 75th percentile and Below and 75th Aligned Above and 75th Aligned Affairs and General percentile median percentile percentile Counsel Senior Vice- Between 25th Between median Between Between President and Chief percentile and Below and 75th Aligned median & 75th Aligned median and 75th Aligned Digital Officer median percentile percentile percentile

COMPENSATION MIX AT TARGET AND AT-RISK PAY In 2016, as in prior years, the pay-at-risk components represented a significant portion of total compensation as can be seen in the table below, which was consistent with the compensation philosophy of the HR and Compensation Committee.

Short-term Long-Term Incentives at Target Incentives at Target Benefits, Pension (At-Risk Pay) (At-Risk Pay) and Perquisites Level Base Salary (%) (%) (%) (%)

President and Chief Executive Officer 24% 24% 48% 4% Direct Reports to the President and Chief Executive Officer 35% 17% 38% 10% Vice-Presidents 41% 17% 31% 11%

BASE SALARY The HR and Compensation Committee determines the base salary for executives of the Corporation, including the Named Executive • Base salaries are set based on the job’s market rate, executive Officers, based on recommendations from Management considering performance, skills and expertise the appropriate market data for each position. The base salaries • Salaries are typically benchmarked and reviewed on an annual basis have been targeted to align with or be close to the median (also called the 50th percentile) of the market. The actual individual base salary is a function of the going market rate, individual executive performance compared to assigned individual and corporate objectives for the year, and skills and expertise. In 2016, the HR and Compensation Committee adjusted the base salary of Messrs Billot and Thomas, to maintain a market competitive compensation. The base salaries of Ms. Maillé, Mr. Clarke and Mr. Ramsay were also adjusted to reflect the latest benchmark review and a reduction of their LTIP target in line with the Corporation’s long-term incentive compensation philosophy established in 2014, as detailed below. These changes were also consistent with the compensation policy of the Corporation. ANNUAL SHORT-TERM INCENTIVE PLAN All of the Corporation’s executives, including the Named Executive Officers, participate in the Corporation’s annual STIP. The STIP aims to reward executives for their effectiveness in achieving the short-term financial success of the Corporation and meeting key operational KPI targets. The STIP pays for the achievement of specific annual objectives set by the Board.

YELLOW PAGES LIMITED PROXY CIRCULAR 37 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Each Named Executive Officer has an annual STIP target award expressed as a percentage of base salary. The respective 2016 STIP target awards for the Corporation’s executives are detailed in the table below:

Annual STIP Target award Maximum Payout Position (% of Base Salary) (% of Base Salary)

President and Chief Executive Officer (1) 100% 200% Senior Vice-Presidents (or other equivalent positions) 50% 100% Vice-Presidents (or other equivalent positions) 40% 80%

(1) As per the terms of the President and Chief Executive Officer’s employment agreement. In 2016, the HR and Compensation Committee reviewed the STIP for executives, including the Named Executive Officers, to ensure that • The STIP target awards are set as a percentage of base salary the indicators used represent key drivers of the Corporation’s Return • The STIP rewards executives for achieving the Corporation’s short-term to Growth Plan by driving the right behaviors. Following this review, financial and operational performance targets the HR and Compensation Committee decided to revise one of the three operational KPIs, replacing Customer Penetration of the Yellow Pages 360o Solution with the Total Customer Count measure. Moreover, the threshold payout multiplier for the Total Digital Visits was decreased from 60% to 40% reducing the payout when achieving threshold level. In order to allow an overall STIP payout above 100% of target, the Adjusted EBITDA target must be achieved. The HR and Compensation Committee nonetheless maintained discretion to adjust the final payout based on the Corporation’s overall financial performance. The HR and Compensation Committee maintained the targets and maximum payouts under the STIP as a percentage relative to base salary. Further, the HR and Compensation Committee reviewed the individual performance of the Named Executive Officers when determining the final STIP payouts to allow for recognition of exceptional achievements. As was the case in 2015, the 2016 STIP was based on a Corporate Scorecard which consisted of financial targets (having 50% weighting) and operational KPIs (having 50% weighting). The 2016 Corporate Scorecard and respective metrics and weighting for all eligible employees, including the Named Executive Officers were as follows:

2016 CORPORATE PERFORMANCE SCORECARD Financial Measures (50%) Weighting Operational KPIs (50%) Weighting

Reported Revenue (1) 30% Total Customer Count 33.3% Adjusted EBITDA (2) 70% Customer Acquisition 33.3% Total Digital Visits 33.3%

(1) Revenue reported in accordance with IFRS as disclosed in the annual financial reports. (2) See section “Executive Compensation – Executive Summary” for the Adjusted EBITDA definition. The three operational KPIs reflect the Corporation’s Return to Growth Plan priorities, thus ensuring the Named Executive Officers and other executives of the Corporation focus on the key pillars of the Corporation’s digital evolution.

Total Digital Visits The Corporation is focused on delivering Total Customer Count qualified audiences to its customers. Total digital visits This KPI represents the total number of customers represents the number of visits made across the YP, purchasing Yellow Pages products and ensures focus YP Shopwise, YP Dine, RedFlagDeals, Canada411, Bookenda is not only on new customer acquisition but also and dine.TO online and mobile properties, as well as visits customer retention, thus slowing down the net customer made across the properties of the Corporation’s decline and supporting the Corporation’s strategy application syndication partners but excludes of future customer count growth. CFDP, 411 Local Search Corp. and Yellow Pages Homes Limited. Customer Acquisition The customer is the Corporation’s most important asset. Customer acquisition is a measure of success in attracting customers through relevant media and marketing solutions. Building a customer base is a key requirement to ensure content strategy and completeness in the Corporation’s platforms, enabling sustainable revenue and Adjusted EBITDA growth.

The corporate financial and operational KPI targets were intended to ensure that the annual STIP rewards executives for their effectiveness in improving the operations of the Corporation and advancing its evolution to a leading digital company in Canada. Executives were also provided key individual objectives (the individual multiplier) which were fully aligned with the Corporation’s strategic objectives. The individual multiplier factor was also intended to reward the demonstration of key leadership competencies that supported the Corporation’s organizational culture transformation. The maximum payout factor could go up to 200% if all individual objectives reached their maximum level and the Corporate

38 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Scorecard reached up to 150%. If the objectives were not achieved at target but reached or exceeded the applicable minimum thresholds for payout, the annual STIP payout was proportionately lower. The annual STIP payout is calculated as follows:

Corporate Individual Annual STIP STIP Scorecard Payout Contribution Base Salary Payout =XXXTarget Factor Multiplier

Maximum Payout Maximum Payout Maximum Payout 200% 150% 200%

The targets established for 2016 for both reported revenue and Adjusted EBITDA reflected the targets set in the Corporation’s annual financial budget. All Named Executive Officers of the Corporation were measured based on revenue and Adjusted EBITDA.

2016 CORPORATE SCORECARD – FINANCIAL TARGETS AND RELATED PAYOUT Metric Weighting Threshold Target Maximum

Reported Revenue (1) 30% $790 million $810 million $835 million Adjusted EBITDA (2) 70% $230 million $240 million $255 million Payout 60% 100% 150%

(1) Revenue reported in accordance with IFRS as disclosed in the annual financial reports. (2) See section “Executive Compensation – Executive Summary” for the Adjusted EBITDA definition.

2016 CORPORATE SCORECARD – OPERATIONAL KPI TARGETS AND RELATED PAYOUT Metric Weighting Threshold Target Maximum

Total Customer Count (in ‘000) 33.3% 240,000 245,000 250,000 Customer Acquisition 33.3% 34,000 38,000 42,000 Total Digital Visits 33.3% 425 million 465 million 490 million Payout (Total Digital Visits) 40% 100% 150% Payout (Other KPIs) 60% 100% 150%

2016 STIP PAYOUT The targets for the purposes of the 2016 STIP were approved in February 2016. Following the end of the 2016 fiscal year, the Corporation reported total revenue of $818 million and Adjusted EBITDA of $235.2 million. Reported revenue and Adjusted EBITDA included partial year results from the acquisition of JUICE, which were not included in the STIP targets for 2016. As such, when calculating the achievement of both reported revenue and Adjusted EBITDA for purposes of the STIP, the JUICE results were excluded, thereby reducing revenues and Adjusted EBITDA for purposes of calculating the STIP to $785 million and $236 million, respectively. Reported revenue was below the threshold and resulted in a 0% payout. The Adjusted EBITDA was slightly below target, resulting in a payout factor of 83.8%. Two of the operational KPIs achieved results near the target and one exceeded the target resulting in an overall payout of 103% for the combined operational KPIs. The table below details the respective achievement of each measure and related payout.

2016 CORPORATE PERFORMANCE SCORECARD RESULTS Financial Metrics (50%) Key Operational Performance Targets (50%) Weighted Weighted Weight Target Actual Achievement Payout Payout Weight Target Actual Achievement Payout Payout

Reported Revenue 30% $810M $785M (1) 97% 0% 0% Total Customer Count (3) 33.3% 245,000 241,500 99% 71.8% 23.9% Adjusted EBITDA 70% $240M $236M (2) 98% 83.8% 58.6% Customer Acquisition 33.3% 38,000 41,100 108% 138.7% 46.2% Total Digital Visits 33.3% 465M 464.7M 99% 99.6% 33.2% 58.6% 103.4% Payout (50% x 58.6% = 29.3%) (50% x 103.40% = 51.7%) Final STIP Corporate Scorecard Payout Factor (rounded down) 81%

(1) Adjusted to exclude JUICE revenues. (2) Adjusted to exclude JUICE Adjusted EBITDA. (3) Total Customer Count excluding Mediative, 411.ca and CFDP.

In addition, the HR and Compensation Committee reviewed individual performance and key accomplishments and deliverables of each Named Executive Officer for 2016 and determined respective individual multipliers for each Named Executive Officer as detailed below.

YELLOW PAGES LIMITED PROXY CIRCULAR 39 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

As a result, the final 2016 STIP payouts to the Named Executive officers were as follows: Corporate Scorecard Named Executive Officer 2016 STIP Target Payout Factor Individual Multiplier 2016 STIP Payout

Julien Billot $875,000 81% 100% $708,100 Ginette Maillé (1) $225,000 81% 100% $181,700 Douglas A. Clarke (1) $207,500 81% 100% $167,500 François Ramsay $170,000 81% 100% $137,500 Pascal Thomas $175,000 81% 100% $139,800

(1) The Individual multiplier for Mr. Clarke and Ms. Maillé were set at 100% under their retirement and separation agreement. See “Executive Compensation – Discussion and Analysis – Employment Agreement, Termination and Change of control Benefits.”

2016 STIP PAYOUT • Based on 2016 financial and operational KPIs, the Corporate Scorecard Payout Factor was calculated and approved at 81% • Individual performance multiplier was set at 100% resulting in an overall payout range of 81% of STIP targets recognizing the cohesive effort of the executives during the year in meeting the KPIs relating to the transformation

LONG-TERM INCENTIVE PROGRAMS In 2014, the HR and Compensation Committee reviewed the LTIP programs in the context of the Corporation’s transformation and further revised their structure to ensure the plan focuses the executives on long-term Shareholder value creation. The LTIP design implemented in 2014 was reviewed in 2015 and again in 2016, and the HR and Compensation Committee determined it continued to align with the interests of the Corporation’s Named Executive Officers and other executives with those of the Corporation’s Shareholders, and focused on long-term shareholder value creation. As such, the design was maintained. The annual LTIP awarded to the executives and key management employees of the Corporation is designed to: • Support the Corporation’s transformation • Encourage long-term Shareholder value creation • Provide executives with line of sight between performance indicators they could directly impact and their compensation • Attract and retain executives • Help build executive equity ownership Each Named Executive Officer has an annual LTIP target award expressed as a percentage of base salary. Historically, the policy provided that the LTIP target award would be aligned with the 75th percentile of the competitive market. In 2014, the HR and Compensation Committee revised the pay positioning policy for newly hired and promoted executives to set the LTIP targets between the median and the 75th percentile of the respective comparator group. In 2016, the long-term incentive targets for Ms. Maillé, Mr. Clarke and Mr. Ramsay (who joined the Corporation before 2014) were adjusted as part of an alignment of their total compensation resulting in an adjustment of their base salary. As a result, with the renewal of the executive team throughout 2015 and 2016, and the application of the new policy, the average LTIP target award at the executive level in 2016 are as follows: Average LTIP Target Average LTIP Target Average LTIP Target Level Prior to 2015 End of 2015 End of 2016

CEO Direct Reports 120% 106% 103%

VPs 84% 83% 67%

2014 LTIP The 2014 LTIP annual grant consisted of a combination of Stock Options, RSUs and PSUs awarded to designated executives and • 2014 LTIP Programs used a mix of Stock Options, RSUs, PSUs senior management employees. The mix between different LTIP • 50% of the total 2014 LTIP award was performance-based instruments varied by executive level to align with best market practices and ensure executive retention. For Named Executive • Maximum number of PSUs to vest capped at a 1.5-time Officers, Stock Options, PSUs and RSUs were weighted 30%, 50% payout multiplier and 20% of the total long-term incentive award value. The Performance base award represented 50% of the total LTIP award and the rest were subject to a time-based vesting condition. To follow the Corporation’s risk management practices, the maximum number of PSUs that can vest was capped at a 1.5-time payout multiplier. 2014 MIX OF LTIP COMPONENTS PER EXECUTIVE LEVEL Mix of 2014 LTIP Instruments Performance Share Restricted Share Stock Options Units Units

Named Executive Officers and other Direct Reports to the President and Chief Executive Officer 30% 50% 20% Vice-Presidents Nil 50% 50%

40 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

2014 RESTRICTED AND PERFORMANCE SHARE UNIT PLAN In 2014, the Corporation granted RSUs and PSUs to certain executives under the RSU&PSU Plan. Mr. Thomas, Senior Vice-President and Chief Digital Officer, did not receive such awards as he joined the Corporation in October 2014.

The RSUs granted to the executives were contingent on a three-year time-based vesting condition to be confirmed at the time of the approval of the December 31, 2016 financial statements.

The PSUs granted to the executives were to vest and be paid based on the Corporation’s Net Debt and CAGR of Total Digital Revenue on December 31, 2016 as per established targets specified below. Given the progress of the ongoing digital transformation and the Corporation’s efforts on debt repayment, the Corporation’s Net Debt as at December 31, 2016 was reduced to $384.9 million, and the CAGR of Total Digital Revenues amounting to 9.9% exceeding the 8% target. As such, the 2014 PSUs vested with a payout multiplier of 1.12 of the target award for the Named Executive Officers who had received such grants. Vesting for the performance cycle ended December 31, 2016 was confirmed on February 14, 2017 and the plan push out was completed at a Share price of $8.01 on March 8, 2017.

2014 PSUs PERFORMANCE TARGET AT DECEMBER 31, 2016 2016 ACTUAL Threshold Target Maximum ACHIEVEMENT

Net Debt reduction (1) $425 million $350 million $275 million $384.6 million CAGR of Total Digital Revenue in table 6% 8% 10% 9.9% Payout Multiplier 0.5 1.0 1.5 1.12

(1) See section “Executive Compensation – Executive Summary” for the Net Debt definition.

The following table indicates the amounts (in dollars or Share value) for RSUs and PSUs received by the eligible Named Executive Officers in the 2014 LTIP plan push out:

2014 LTIP Grant Named Executive Officer Date Value Awarded(1) 2014 LTIP Payout(2)

Julien Billot $1,253,960 $464,668 Ginette Maillé $410,360 $152,063 Douglas A. Clarke $370,741 $137,387 François Ramsay $341,974 $126,722

(1) This value was calculated by multiplying the number of RSUs and PSUs awarded at the time of grant to each of the eligible Named Executive Officer, by the volume weighted average price of such RSUs and PSUs being $24.6547 and $20.6934, respectively. (2) This payout was calculated by multiplying the number of RSUs and PSUs to which each of the eligible Named Executive Officers was entitled by $8.01, which was the volume weighted average price of the sale of the Shares during the pushout period, which was completed on March 8, 2017. 2016 LTIP The LTIP design implemented in 2015 was reviewed in 2016 and the HR and Compensation Committee determined it appropriately aligned the interests of the Corporation’s Named Executive Officers and other executives with those of the Corporation’s shareholders, and focused on long- term shareholder value creation. As such, the design was maintained and consisted of a mix of RSUs and PSUs under the Corporation’s RSU&PSU Plan and a grant of Options under the 2012 Stock Option Plan for the Named Executive Officers. The mix between different LTIP instruments varied by executive level.

MIX OF LTIP COMPONENTS PER EXECUTIVE LEVEL

Annual LTIP Annual LTIP Mix of 2016 LTIP Instruments Target – Grandfathered Target – Performance Share Restricted Share Position Executives New Policy Stock Options Units Units

President and Chief Executive Officer n/a 200% 30% 50% 20% Named Executive Officers and other Executives who directly report to the 150% 85%–130% 30% 50% 20% President and Chief Executive Officer Vice-Presidents 125% 40%–100% Nil 50% 50%

To align with best practices, 50% of the total 2016 LTIP award was performance based and the remainder subject to a time-based employment vesting condition. To follow the Corporation’s compensation risk management practices, the maximum number of PSUs that can vest was capped at a 1.5-time payout multiplier.

YELLOW PAGES LIMITED PROXY CIRCULAR 41 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The performance metrics under the 2016 PSU grant remained as they were in 2015, specifically Net Debt and CAGR Rate of Total Digital Revenues. The Total Digital Revenue includes digital reported revenue from all digital operations as disclosed in the Corporation’s financial reports. In order to better align the interests of our executives with those of our Shareholders towards long-term value creation, we adjusted the weightings of the PSUs reducing the weighting of Net Debt to 30% while increasing the weighting of CAGR of Total Digital Revenue to 70%, from the prior weighting of 50%-50%.

2016 PSU Metric Weight Yellow Pages long-term shareholder value creation

(1) Net Debt 30% Net Debt

Transform value from debt holders to shareholders CAGR of Total Digital Revenue CAGR of Total Digital Re-acquire revenue growth 70% Revenue (2) Return to sustainable growth in cash

Impacts EBITDA multiple

(1) See section “Executive Compensation – Executive Summary” for the Net Debt definition. (2) Total digital revenue coming from all digital operations of the Corporation.

• 2016 LTIP Programs used a mix of Options, RSUs, and PSUs for the Named Executive Officers • 50% of the total 2016 LTIP award was performance-based and awarded in PSUs – PSUs were tied 30% to the Net Debt and 70% to the CAGR of Total Digital Revenue • Maximum number of PSUs to vest capped at a 1.5-time payout multiplier

2016 LTIP PROGRAM FOR NAMED EXECUTIVE OFFICERS PERFORMANCE/ WEIGHT OBJECTIVE VESTING PERFORMANCE CONDITION VESTING PERIOD

• Focuses on digital revenue — • 30% Net Debt as of measure of successful Date when the Board December 31, 2018 Performance Share business transformation and approves 2018 50% debt repayment — measure • 70% CAGR Total Digital 3 years Units of long-term financial financial results (February 2019) Revenue as of December suntainability 31, 2018 • Executive retention PERFORMANCE-BASED COMPONENT • Alignment with Shareholders’ interests Date when the Board Restricted Share approves 2018 20% through share None 3 years Units price appreciation financial results (February 2019) • Executive retention

• Alignment with Shareholders’ interests 50% Feb 12, 2018 Stock Options 30% through share 25% Feb 12, 2019 None 4 years price appreciation 25% Feb 12, 2020 • Executive retention

42 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

2014 – 2016 LTIP VESTING SCHEDULE AND CONDITIONS SUMMARY The following tables provide an overview of the vesting of various LTIP instruments granted to the Named Executive Officers since 2014.

2014 2015 2016 20172018 2019 Performance Share Units 2014 Grant Net Debt (50%) and CAGR Digital Revenue (50%) Payout can range from Net Debt (50%) and CAGR Total Digital Revenue (50%) 2015 Grant 0 to 1.5 of target award

based LTIP 2016 Grant Net Debt (30%) and CAGR Total Digital Revenue (70%) Performance-

Stock Options 2014 Grant 50% in Feb. 2016, 25% in Feb. 2017 and 25% in Feb. 2018 2015 Grant 50% in Feb. 2017, 25% in Feb. 2018 and 25% in Feb. 2019 2016 Grant 50% in Feb. 2018, 25% in Feb. 2019 and 25% in Feb. 2020

Restricted Share Units 2014 Grant 100% in Feb. 2017 Time-based LTIP 2015 Grant 100% in Feb. 2018 2016 Grant 100% in Feb. 2019

All LTIP grants summarized above have been granted pursuant to the 2012 Stock Option Plan and the RSU&PSU Plan, described in the sections below. 2012 STOCK OPTION PLAN The 2012 Stock Option Plan was adopted on December 20, 2012. This long-term incentive plan is intended to: (i) attract and retain the services of selected employees of the Corporation who are in a position to make a material contribution to the successful operation of the business; (ii) provide a meaningful incentive to Management to lead the Corporation through the transition and transformation of its business; and (iii) more closely align the interests of Management with those of the Shareholders.

The 2012 Stock Option Plan makes available up to • 1,290,612 Shares are authorized for issuance, which represents 1,290,612 Shares for issuance pursuant to the exercise of Options. a potential dilution of approximately 4.6% The following additional limitations apply to grants under the 2012 Stock Option Plan: (i) the number of Shares issuable to insiders, at any time, under the 2012 Stock Option Plan and any other share compensation arrangements of the Corporation, shall be less than five percent (5%) of the issued and outstanding Shares; (ii) the number of Shares issued to insiders, within any one year period, under the 2012 Stock Option Plan and any other share compensation arrangements of the Corporation, shall be less than five percent (5%) of the issued and outstanding Shares; and (iii) the maximum aggregate number of Shares with regard to which awards may be made to any one participant under the 2012 Stock Option Plan and under any other share compensation arrangements of the Corporation, shall be less than five percent (5%) of the Shares issued and outstanding. The term of outstanding stock options under the 2012 Stock Option Plan (the “Option Period”) may not exceed ten (10) years. However, should the Option Period expire during a period imposed by the Corporation during which Directors and certain employees of the Corporation shall not be permitted to trade in securities of the Corporation (a “Blackout Period”), or within ten (10) trading days after the expiration of the Blackout Period applicable to the relevant participant, the term shall be automatically extended and shall expire on the tenth (10th) trading day after the end of the applicable Blackout Period. Under the terms of the 2012 Stock Option Plan, the Board or a Committee shall prescribe the date or dates upon which all or a portion of an Option becomes exercisable and may establish any performance criteria which must be met by a participant, the Corporation and/or any affiliated entity thereof in order for all or a portion of any Options to become exercisable.

YELLOW PAGES LIMITED PROXY CIRCULAR 43 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The 2012 Stock Option Plan includes the following provisions:

Exercise Price The exercise price is equal to the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the grant date (the “Fair Market Value”). Grant Date The grant date of an Option may be the date on which the Option is granted or, if determined by the Board at the time of grant, after the date the Board resolves to grant the Option, in order to ensure, among other things, that the Fair Market Value of the Option is calculated based on trading days outside of a Blackout Period. Transfer / Assignment of Stock Options Stock options may be transferred by will and laws of succession. Circumstances under which an individual is no longer entitled to • Resignation or Termination Without Cause – Except upon a resignation for good reason following a participate Change of Control, (i) each exercisable Option then held by the participant shall remain exercisable for a period of three calendar months from the date of such cessation or termination, but not later than the end of the Option Period, and thereafter any such Option shall expire; and (ii) each non- exercisable Option then held by a participant shall expire immediately. • Termination for Cause – Unless the Board or a Committee otherwise provides, if a participant is dismissed for cause: (i) each exercisable Option then held by the participant shall remain exercisable for a period of one calendar month from the date of such dismissal, but not later than the end of the Option Period, and thereafter any such Option shall expire; and (ii) each non- exercisable Option then held by a participant shall expire immediately. • Long-Term Disability or Death – Each exercisable Option then held by the participant shall remain exercisable for a period of twelve (12) calendar months from the date of the long-term disability or death, but not later than the end of the Option Period, and thereafter any such Option shall expire; and (ii) each non-exercisable Option then held by a participant shall become exercisable on the date it would have been exercisable as if the participant had not ceased to be employed by the Corporation or an affiliated entity thereof and shall remain exercisable up to the earlier of twelve (12) calendar months from the date of the long-term disability or death or the end of the Option Period and thereafter any such Option shall expire. • Retirement – If a participant retires and has reached the age of sixty (60) years old at the date of retirement: (i) each exercisable Option then held by the participant shall remain exercisable for a period of thirty-six (36) calendar months from the date of retirement, but not later than the end of the Option Period, and thereafter any such Option shall expire; (ii) each non-exercisable Option then held by the participant shall become exercisable as if the participant had not ceased to be employed by the Corporation or an affiliated entity thereof and shall remain exercisable up to the earlier of thirty-six (36) calendar months from the date of retirement or the end of the Option Period and thereafter any such Option shall expire. If a participant retires prior to the end of the Option Period and has not reached the age of sixty (60) years old at the date of retirement, (i) each exercisable Option then held by the participant shall remain exercisable for a period of twelve (12) calendar months from the date of retirement, but not later than the end of the Option Period, and thereafter any such Option shall expire; and (ii) each non-exercisable Option then held by the participant shall expire immediately. Change of Control Definition Change of Control shall mean: (i) a sale of all or substantially all of the assets of the Corporation; (ii) a sale, directly or indirectly, resulting in more than 50% of the voting securities of the Corporation being held, directly or indirectly, by another person; or (iii) a merger or consolidation of the Corporation into another person resulting in the members of the Board before such merger or consolidation no longer constituting a majority of the Directors of the resulting entity. Change of Control If a Change of Control occurs, unless otherwise determined by the Board, each Option, which is not converted into or substituted by an Alternative Award (as defined below) of a successor entity, shall become exercisable immediately prior to the consummation of the transaction constituting a Change of Control. An alternative award must, in the opinion of the Board: (i) be based on shares that are traded on an established Canadian or U.S. securities market; (ii) provide the participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Options, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment; and (iii) have substantially equivalent economic value to such Options (determined at the time of the Change of Control) (an “Alternative Award”). If Alternative Awards are available and a participant is terminated without cause or submits a resignation for good reason within twenty-four (24) calendar months after a Change of Control: (i) each exercisable Alternative Award then held by such participant shall remain exercisable for a period of twenty-four (24) calendar months from the date of termination or resignation, but not later than the end of the Option Period, and thereafter any such Alternative Award shall expire; and (ii) each non-exercisable Alternative Award then held by the participant shall become exercisable upon such termination or resignation and shall remain exercisable for a period of twenty-four (24) calendar months from the date of such termination or resignation, but not later than the end of the Option Period, and thereafter any such Alternative Award shall expire. The Board nonetheless may, in its sole discretion, accelerate the exercisability or vesting of all or any portion of the outstanding Options which are not then exercisable immediately prior to the consummation of the transaction constituting a Change of Control. Plan Amendments The Board or the HR and Compensation Committee, as provided in the 2012 Stock Option Plan or pursuant to a specific delegation, may, in addition to its powers under the 2012 Stock Option Plan, amend any of the provisions of the 2012 Stock Option Plan or suspend or terminate the plan or amend the terms of any then outstanding award of Options under the 2012 Stock Option Plan; provided, however, that the Corporation shall obtain Shareholder approval for: (a) any amendment to the maximum number of Shares issuable under the plan; (b) any increase to the number of Shares that may be issued to insiders or to any one participant under the plan, in both cases subject to certain adjustments in the case of reorganization of the share capital;

44 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

(c) any amendment which would allow non-employee Directors of the Corporation or of an affiliated entity to be eligible for awards of Options under the plan; (d) any amendment which would permit any Option granted under the plan to be transferable or assignable other than by will or pursuant to succession laws (estate settlements); (e) the addition of a cashless exercise feature, payable in cash or Shares, which does not provide for a full deduction of the number of underlying Shares from the plan reserve; (f) the addition of provisions which results in participants receiving Shares while no cash consideration is received by the Corporation; (g) any reduction in the exercise price of an Option after the Option has been granted to a participant or any cancellation of an Option and the substitution of that Option by a new Option with a reduced exercise price granted to the same participant, subject to certain adjustments in the case of reorganization of the share capital; (h) any extension to the term of an Option beyond the original expiry date, except in a case of a Blackout Period; (i) the addition in the plan of any form of financial assistance and any amendment to a financial assistance provision which is more favourable to participants; and (j) any amendment to the amendment provision of the plan other than amendments of a “housekeeping” or clerical nature. The Board or the HR and Compensation Committee, as provided in the 2012 Stock Option Plan or pursuant to a specific delegation, may, subject to receipt of requisite regulatory approval, where required, in its sole discretion, make all other amendments to the plan or awards of Options under the plan that are not contemplated above, including, without limitation, the following: (a) amendments of a “housekeeping” or clerical nature as well as any amendment clarifying any provision of the plan; (b) a change to the vesting provisions of an Option or of the plan; (c) a change to the termination provisions of an Option or the plan which does not entail an extension beyond the original expiry date; and (d) in the event that the Shares are subdivided, consolidated, converted or reclassified by the Corporation, or that any other action of a similar nature affecting such Shares is taken by the Corporation, the adjustment of (i) the Options held by each participant and (ii) the number of Shares reserved for issuance under the plan in the same manner. Financial Assistance No financial assistance is provided by the Corporation to participants under the 2012 Stock Option Plan.

2016 STOCK OPTION AWARDS Under the 2016 LTIP, a total of 251,700 Options were granted at an exercise price of $17.83 with a term of 7 years in accordance with • Executives must hold 25% of the Shares underlying Options exercised the 2012 Stock Option Plan. Such Options have the following vesting until they meet their Minimum Share Ownership requirement to schedule: 50% vests in February 2018, an additional 25% vests in further align their interest with those of Shareholders through the February 2019 and the remaining 25% vests in February 2020. ownership of the Corporation’s Shares All executive officers are required to hold 25% of the Shares • At the end of 2016, 630,950 Options were outstanding, for a underlying exercised options until they meet their Minimum Share maximum dilution of 4.60% Ownership requirement. This measure was implemented to help the executives build equity ownership in the Corporation to further align their interests with those of the Shareholders. The awards are also subject to the Corporation’s clawback policy. As at December 31, 2016, there were 630,950 Options outstanding under the 2012 Stock Option Plan. The following table highlights the maximum dilution since the inception of the Stock Option Plan as at December 31, 2016: resulting in the following maximum dilution of the Shares at year-end:

DILUTION 2012 2013 2014 2015 2016

Total Reserve Approved 1,290,612 1,290,612 1,290,612 1,290,612 1,290,612 Options Issued and Outstanding Nil 376,000 480,200 522,950 630,950 Options Exercised Nil Nil Nil 87,250 11,375 Options Remaining Available for Issuance 1,290,612 914,612 810,412 767,662 659,662 Shares Outstanding at Year-End 27,955,077 27,955,077 27,976,661 28,063,919 28,075,304 Maximum Dilution Possible (1) 4.62% 4.62% 4.61% 4.60% 4.60% Actual Dilution (2) 0% 1.35% 1.72% 1.86% 2.25%

(1) The maximum possible dilution is calculated by dividing (i) the total number of Options remaining available for issuance plus the total number of Options issued and outstanding by (ii) the number of Shares outstanding at year end. (2) The actual dilution is calculated by dividing the number of Options outstanding by the number of Shares outstanding at year end.

YELLOW PAGES LIMITED PROXY CIRCULAR 45 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

RESTRICTED SHARE UNIT AND PERFORMANCE SHARE UNIT PLAN The RSU&PSU Plan was adopted and implemented in 2013 to provide eligible participants with compensation opportunities to enhance the Corporation’s ability to attract, motivate and retain key employees, to reward the participants for significant performance and associated growth in the value for the Shareholders, and to align the interest of the participants with those of the Shareholders. The Board has discretion to determine which employees of the Corporation will participate in the RSU&PSU Plan, the incentive amount granted under the RSU&PSU Plan, the split between RSUs and PSUs and related vesting conditions. The RSU&PSU Plan provides grants of either RSUs or PSUs.

RSU&PSU Plan Features Restricted Share Units (“RSU”) Performance Share Units (“PSU”) Description RSU award that allows the participant to obtain PSU award that allows the participant to obtain the number of the number of underlying Shares of the underlying Shares subject to the achievement of performance-based Corporation subject to achievement of a time- vesting conditions that must be met over a specific predetermined based employment vesting condition, determined performance period. by the Board, i.e., the participant must be employed by the Corporation for a specific period of time. Performance Measure None Established by the Board Vesting / Term Maximum thirty-six (36) months from the grant date. Amount and Price The Board determines the incentive amount, expressed either as a fixed dollar amount or a fixed number of units. If a fixed dollar amount is granted, to determine the number of underlying share units to be awarded to a participant, the fixed dollar amount is divided by the volume weighted average trading price of the Shares on the TSX for the five trading days immediately preceding the date of grant by the Board, or if such grant is made during a Blackout Period as provided for in the Corporation’s insider trading policy, then the price is determined as the volume weighted average trading price of the Shares on the TSX for the five trading days preceding the sixth full trading day immediately following the end of the Blackout Period. Funding The RSU&PSU Plan provides the Board with discretion to fund the grant, with underlying Shares being purchased on the open market or to have the grant unfunded, with notional restricted share units credited to each participant’s account. The 2016 grant was fully funded and as such is non-dilutive as Shares underlying awards were purchased on the open market. Resignation or Termination For The participant ceases to be eligible for participation under the RSU&PSU Plan and all unvested RSUs and PSUs are cancelled. Cause Retirement, Termination RSUs vest on a pro-rata basis with the numerator All unvested PSUs are cancelled. Without Cause, Long-Term being the number of complete performance Disability or Death periods by the participant, and the denominator being the total number of performance periods, not exceeding three. Change of Control Vesting of all outstanding RSUs and PSUs at target upon the occurrence of a change of control, whether or not such RSUs and PSUs have met the vesting conditions to the extent no alternative awards, as defined in the RSU&PSU Plan, are made following such change of control. If such alternative award is available and a participant is terminated without cause or resigns for good reason, as defined in the RSU&PSU Plan, within twenty-four (24) months after such change of control, each alternative award held by the participant shall vest. In such cases, participants have an option to receive the Share awards as actual Shares or as a cash payment, net of taxes.

2016 RSU AND PSU AWARDS RSUs were granted to the Named Executive Officers and other executives and key management employees of the Corporation throughout the year according to the RSU&PSU Plan. There is no performance condition for these RSUs to vest. The RSUs will vest upon confirmation of the approval of the financial statements as at December 31, 2018 which is expected to occur in February 2019. Each Named Executive Officer was awarded a fixed dollar incentive amount granted in RSUs. The number of RSUs awarded to each Named Executive Officer was determined by dividing the dollar incentive amount with the volume weighted average trading price of the Shares on the TSX for the five trading days preceding the sixth full trading day immediately following the end of the applicable Blackout Period. The actual number of RSUs granted to the Named Executive Officers is shown in the Outstanding Share-based Awards and Option-based Awards table in the section “Executive Compensation – Discussion and Analysis – Incentive Plan Awards”. All provisions of the RSU&PSU Plan with regards to the vesting of RSUs and termination of employment apply. The PSUs were granted throughout the year to the Named Executive Officers and other executives of the Corporation according to the RSU&PSU Plan. The vesting of these PSUs is tied 30% to the achievement of a predetermined level of Net Debt on December 31, 2018 and 70% to CAGR of Total Digital Revenue on December 31, 2018.

2016 PSU METRICS WEIGHTING

Net Debt (1) 30% Compound Annual Growth Rate (CAGR) of Total Digital Revenue (2) 70%

(1) See section “Executive Compensation – Executive Summary” for the Net Debt definition. (2) Total digital revenue coming from all digital operations of the Corporation.

46 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The PSUs will vest on the date when the Board of Directors approves the financial results of the Corporation for the period ending on December 31, 2018 and confirms the achievement of the targets, which is expected to occur in early February 2019. The HR and Compensation Committee has set a threshold amount, target amount and maximum level of both Net Debt and CAGR of • 2016 PSUs awarded contingent 30% on Net Debt and 70% on CAGR Total Digital Revenue which will determine the number of PSUs that of Total Digital Revenue targets as at December 31, 2018 can vest depending on actual performance compared to the set • Maximum number of PSUs to vest set at a multiplier of 1.5 targets, being nil for the threshold, 1.0 multiplier for the target amount and 1.5 multiplier for the maximum amount. The actual achievement of Net Debt and CAGR of Total Digital Revenue between the threshold and target or target and maximum levels will be approved by the HR and Compensation Committee on a straight-line pro-rated basis. Each Named Executive Officer was awarded a fixed dollar incentive amount granted in PSUs. The number of PSUs awarded to each Named Executive Officer was determined in accordance with the terms of the Plan by dividing the dollar incentive amount with the volume weighted average trading price of the Shares on the TSX for the five trading days preceding the sixth full trading day immediately following the end of the applicable Blackout Period. The actual number of PSUs granted to the Named Executive Officers is shown in the Outstanding Share-based Awards and Option-based Awards table in the section “Executive Compensation – Discussion and Analysis – Incentive Plan Awards”. All provisions of the RSU&PSU Plan with regards to the vesting of PSUs and termination of employment apply. BENEFITS, PENSION AND PERQUISITES Benefit and pension plans provide elements of financial and health security to the Named Executive Officers. The Named Executive Officers participate in the same flexible benefits program as other employees of the Corporation receiving additional dollar credits to obtain enhanced or maximum coverage if required. The flexible benefits program includes medical and dental coverage, life and disability insurance and a health spending account. The perquisites program offers perquisites typically provided to senior executives in the market, such as a company car or car allowance, club memberships, annual medical examinations and home security services. The Named Executive Officers and other executive officers who joined the Corporation before January 1, 2006 participate in the • The Corporation’s benefit and pension plans provide elements Corporation’s Defined Benefit Pension Plans with supplemental of financial and health security pension benefits. Messrs. Billot and Thomas and other executive • Executives participate in the same group benefits and pension officers who joined the Corporation on or after January 1, 2006 programs as all other employees participate in the Corporation’s Defined Contribution Plan. • Executive perquisite program is aligned with market practices and See “Executive Compensation – Discussion and Analysis – Pension includes a company car or a car allowance, club memberships, annual Plan and Supplemental Pension Benefits” for a detailed description medical examinations, and home security services of the plans.

The value of the benefits under the pension plans, as well as the other relevant provisions thereof, is taken into account when determining the total compensation of the Named Executive Officers.

YELLOW PAGES LIMITED PROXY CIRCULAR 47 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

PERFORMANCE GRAPH The following graphs and tables compare the total cumulative return on $100 invested on the first day of the five-year period in Shares (including common shares of the predecessor to Yellow Pages Limited, being YPG Financing Inc., between December 31, 2011 and December 20, 2012 and Yellow Pages Limited between December 21, 2012 and December 31, 2016) with the cumulative total return on the S&P/TSX Composite Total Return Index (assuming in both cases reinvestment of dividends and trust distributions (as applicable) as of the date of payment of same) and the Named Executive Officers’ total compensation, as described in more detail below. The graph and table below reflect that no long-term incentive awards were made to the Named Executive Officers in 2011 and 2012. In addition, said graph and table do not include any compensation for the President and Chief Executive Officer for the year 2013 given that Messrs. Robert F. MacLellan and Douglas A. Clarke were assuming these responsibilities on an interim basis. Julien Billot was appointed President and Chief Executive Officer effective January 1, 2014. For 2014, compensation reflects one-time signing bonuses for onboarded Named Executive Officers and the DSU grant awarded to Julien Billot. $400

$350

$300

$250

$200

$150

$100

$50

$0 December 31, 2011 December 31, 2012 December 31, 2013 December 31, 2014 December 31, 2015 December 31, 2016

Y TSX Compensation

December 31, December 31, December 31, December 31, December 31, December 31, 2011 2012 2013 2014 (1) 2015 (1) 2016

Yellow Pages Limited $100 $20.33 $63.72 $60.68 $47.32 $54.82 S&P/TSX Composite Index $100 $104.91 $118.53 $131.03 $120.12 $145.45

(1) Performance data for Yellow Pages Limited has been adjusted for the Recapitalization implemented on December 20, 2012, pursuant to which each holder of 100 common shares of the predecessor of Yellow Pages Limited received 0.500178 Shares and 0.285816 warrants of the Corporation. In the calculation of the above returns, it is assumed that the warrants of the Corporation were sold and reinvested into common shares of the Corporation at their respective closing prices on December 20, 2012. The following table illustrates the changes in the total compensation (excluding pension value) paid to the Named Executive Officers for the period from December 31, 2011 to December 31, 2016, but excluding same for the former President and Chief Executive officer for 2013 as detailed above.

December 31, December 31, December 31, December 31, December 31, December 31, 2011 2012 2013 2014 2015 2016

Compensation Paid to the Named Executive Officers (1) $100.00 $141.51 $180.74 $349.16 $312.24 $325.25

(1) The total amount of compensation (excluding pension value) paid to Named Executive Officers, for the fiscal year 2011 has been attributed a value of $100 and the values disclosed in the above chart for the subsequent fiscal years were calculated as follows: the amount of total compensation paid to the Named Executive Officers (as disclosed in the Summary Compensation Table excluding pension value) for each following fiscal year has been multiplied by $100 and divided by the amount of the compensation paid to the Named Executive Officers (excluding pension value) for 2011. The trend in the above performance graphs shows a sharp decline in the cumulative total return of an investment in the Shares from 2011 to 2012, and an increase beginning after the Recapitalization at the end of 2012. With respect to return on an investment in the Shares, the Corporation’s level of indebtedness and the decline in print revenues severely impacted the Share price prior to the implementation of the Recapitalization in 2012, which led to a $1.5 billion reduction in debt, including preferred shares. During 2013 to 2016, the Corporation strengthened its capital structure by reducing its Net Debt from $781.7 million at the end of 2012 to $384.9 million at the end of 2016 and continued to make progress on its digital evolution. Similarly, from 2010 to 2012, total compensation of the Named Executive Officers followed the same downward trend, decreasing sharply between December 31, 2010 and December 31, 2011, with a slight increase in 2012.

48 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The following graph compares the total cumulative return on $100 invested in Shares of Yellow Pages Limited until December 31, 2016 with the cumulative total return on the S&P/TSX Composite Total Return Index and the Named Executive Officers’ total compensation (excluding pension value) during the same time period, assuming the inclusion of compensation for the former President and Chief Executive Officer for the full year of 2013, including a short-term incentive plan and long-term incentive plan award at target. $150

$100

$50 December 31, 2013 June 30, 2014 December 31, 2014June 30, 2015 December 31, 2015 June 30, 2016 December 31, 2016

Y TSX Compensation

December 31, June 30, December 31, June 30, December 31, June 30, December 31, 2013 2014 2014 2015 2015 2016 2016

Yellow Pages Limited $100.00 $88.52 $95.23 $90.61 $74.27 $89.11 $86.04 S&P/TSX Composite Index $100.00 $112.86 $110.55 $111.55 $101.34 $111.31 $122.71

The following table illustrates the changes in the total compensation (excluding pension value) paid to the Named Executive Officers, excluding the former President and Chief Executive Officer and interim President and Chief Executive Officer, for the period from December 31, 2013 to December 31, 2016.

December 31, December 31, December 31, December 31, 2013 2014 2015 2016

Compensation Paid to the Named Executive Officers (1) $100.00 $96.31 $86.12 $89.71

(1) The total amount of compensation (excluding pension value) paid to the Named Executive Officers for the fiscal year 2013 has been attributed a value of $100 and the 2014, 2015 and 2016 value was calculated as follows: the amounts of total compensation paid to the Named Executive Officers (as disclosed in the Summary Compensation Table excluding pension value) for fiscal years 2014, 2015 and 2016 have been multiplied by $100 and divided by the amount of the compensation paid to the Named Executive Officers for fiscal year 2013 (excluding pension value). In 2013, to align the interests of the Named Executive Officers with those of Shareholders towards long-term value creation, and in the context of a transition to a new President and Chief Executive Officer, the HR and Compensation Committee implemented the transitional 2013 LTIP, 60% tied to achievement of strategic performance measures over a period of two to three years, depending on the instrument. The annual short-term incentive plan was paid out at 100% to reflect the achievement of the Adjusted EBITDA target, and the achievement of the three operational KPIs. In 2014, the slight decrease in total compensation of the Named Executive Officers is mainly due to Mr. Billot joining the Corporation with a lower long-term incentive plan target as there were no significant changes in the total compensation made for the other Named Executive Officers. The annual short-term incentive plan was paid out at 106% to reflect the over achievement on the Adjusted EBITDA target and two out of the three operational KPIs. The annual awards granted under the long-term incentive plan to the Named Executive Officers were at the same grant levels as in 2013. In 2015, the total compensation of the Named Executive Officers decreased slightly in line with the decrease in the cumulative total return of an investment in the Shares of the Corporation from 2014 to 2015. The Corporate Scorecard Payout Factor under the annual STIP was determined at 82% to reflect the over-achievement on the Adjusted EBITDA target and two out of the three operational KPIs, and the STIP paid out from 82% to 100% of the target for the Named Executive Officers considering individual performance and accomplishments. The annual awards granted under the long-term incentive plan to the Named Executive Officers were at the same grant levels as in 2013 and 2014, as no changes were made to the base salaries and long-term incentive targets. In 2016, the total compensation of the Named Executive Officers increased while the cumulative total return of an investment in the Shares of the Corporation decreased between 2013 and 2016. The Corporate Scorecard Payout Factor under the annual STIP was determined at 81% to reflect the achievement on the Adjusted EBITDA target and two out of the three operational KPIs, with a payout for Named Executive Officers at 81% of the target once individual performance and accomplishments were considered. The annual awards granted under the long-term incentive plan to certain Named Executive Officers was reduced from prior years, as changes were made to the base salaries and long-term incentive targets to better align with market practice, as discussed under “Executive Compensation – Discussion and Analysis – Long-Term Incentive Programs”. As the Corporation continues to evolve from a print directory business to a digital company, the HR and Compensation Committee believes the pay-for-performance compensation plans, if well designed and calibrated, can play an important role to motivate the executive team to execute on the Return to Growth Plan and to position the Corporation as a leading local digital company in Canada.

YELLOW PAGES LIMITED PROXY CIRCULAR 49 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

SUMMARY COMPENSATION TABLE The following table provides a summary of the compensation earned in respect of the 2016, 2015 and 2014 fiscal years by each of the Named Executive Officers for services rendered in all capacities to the Corporation.

Non-Equity Incentive Plan Compensation

Annual Long-term Base Share-based Option-based Incentive Incentive Pension All other Total Salary awards (2) awards (3) plans (4) plans value (5) compensation (6) compensation (7) Name and Principal Position Year ($) ($) ($) ($) ($) ($) ($) ($)

Julien Billot 2016 875,000 1,225,000 720,400 708,100 - 84,962 - 3,613,462 President and Chief Executive Officer 2015 825,000 1,155,000 468,097 825,000 - 61,875 - 3,334,972 2014 825,000 1,455,000 535,990 1,039,500 - 61,558 - 3,917,048 Ginette Maillé 2016 450,000 409,500 240,614 181,700 577,700 1,859,514 Senior Vice-President and Chief Financial Officer 2015 360,000 378,000 153,575 180,000 - 57,300 - 1,128,875 2014 360,000 378,000 175,630 190,800 - 48,000 - 1,152,430 Douglas A. Clarke 2016 415,000 378,000 222,604 167,500 738,200 1,921,304 Senior Vice-President and Chief Operating Officer 2015 325,000 341,500 138,832 146,600 - 1,200 - 953,132 2014 325,000 341,500 158,340 172,300 - 5,200 - 1,002,340 François Ramsay 2016 340,000 309,500 181,541 137,500 206,100 1,174,641 Senior Vice-President – Corporate Affairs and 2015 300,000 315,000 127,774 123,000 - 38,600 - 904,374 General Counsel 2014 300,000 315,000 146,510 159,000 - 33,400 - 953,910 Pascal Thomas 2016 345,200 (1) 208,500 122,468 139,800 25,337 841,305 Senior Vice-President and Chief Digital Officer 2015 300,000 178,500 72,487 335,000 - 15,120 35,953 937,060 2014 16,154 - - 187,400 93 37,446 241,093

(1) Mr. Thomas’ annual base salary has been set at $350,000. The amount shown in the Summary Compensation Table for 2016 represents the actual base salary earned in 2016 by Mr. Thomas due to his revised salary being effective as of January 30, 2016. (2) The dollar value disclosed in this column for the year 2016 represents the incentive amount at target for each of Messrs. Billot, Clarke, Ramsay, Thomas, and Ms. Maillé awarded in the form of RSUs and PSUs. The grant date fair value of the 2016 RSUs and PSU awards as disclosed in such column for each of the Named Executive Officers is the same as the accounting fair value of the 2016 RSUs and PSUs. The dollar value disclosed in this column for the year 2015 represents the incentive amount at target for Messrs. Billot, Clarke, Ramsay, Thomas, and Ms. Maillé awarded in the form of RSUs and PSUs. The grant date fair value of the 2015 RSUs and PSU awards as disclosed in such column for each of the Named Executive Officers differs from the accounting fair value of the 2015 RSUs and PSUs as previously forfeited shares are being used to fund the RSU&PSU Plan and additional Shares are being purchased on the open market over a period of time following the grant date. Thus, the accounting fair value for the 2015 RSUs and PSUs is based on a Share price of $16.0917 compared to the grant date Share price of $16.4446. Therefore, the accounting fair value for the 2016 share-based awards is as follows for each Named Executive Officer: $1,130,201 for Mr. Billot (with the difference being $24,799), $369,868 for Ms. Maillé (with the difference being $8,132), $334,144 for Mr. Clarke (with the difference being $7,356), $308,220 for Mr. Ramsay (with the difference being $6,780).and $174,659 for Mr. Thomas (with the difference being $3,841). The dollar value disclosed in this column for the year 2014 represents the incentive amount at target for each of Messrs. Billot, Clarke, Ramsay, and Ms. Maillé awarded in the form of RSUs and PSUs. The grant date fair value of the 2014 RSUs and PSU awards as disclosed in such column for each of the Named Executive Officers differs from the accounting fair value of the 2014 RSUs and PSUs as previously forfeited shares are being used to fund the RSU&PSU Plan and additional Shares are being purchased on the open market over a period of time following the grant date. Thus, the accounting fair value for the 2014 RSUs is based on a Share price of $22.2775 compared to the grant date Share price of $24.6547 and the accounting fair value of the 2014 PSUs is based on a Share price of $21.6990 compared to the grant date Share price of $20.6934. Therefore, the accounting fair value for the 2014 share-based awards is as follows for each Named Executive Officer: $1,163,236 for Mr. Billot (with the difference being $8,236), $380,682 for Ms. Maillé (with the difference being $2,682), $343,938 for Mr. Clarke (with the difference being $2,438), and $317,246 for Mr. Ramsay (with the difference being $2,246). Mr. Thomas was not awarded any RSUs or PSUs in 2014. For Mr. Billot, the amount for the year 2014 also includes a one-time award of $300,000 granted in DSUs upon his hire. The grant date fair value of this DSU grant differs from its accounting fair value since the DSU plan is unfunded and as such the accounting fair value is recalculated as the end of each fiscal period. As at December 31, 2014, the accounting fair value of this one-time grant was $277,958, which was calculated by multiplying the total number of DSUs granted to Mr. Billot (14,196) by the closing price of the Corporation’s Shares on the TSX on December 31, 2014, which was $19.58. (3) The dollar value disclosed in this column represents the grant date fair value calculated as at the applicable grant date using the binomial option pricing model and based on the following factors, key assumptions and plan provisions: - 2014 option grant: (i) Volatility: 30%, (ii) Dividend yield: 0%, (iii) Weighted average remaining life: 6.16 years, (iv) Risk-free interest rate: 2.41%, (v) Vesting: 50% after 2 years and 25% per year afterwards, (vi) an exercise price of $24.6547 and (vii) a grant date price of $25.37, resulting in a grant date fair value per Option of $9.102. - 2015 option grant: (i) Volatility: 38.46%, (ii) Dividend yield: 0%, (iii) Weighted average remaining life: 6.16, (iv) Risk-free interest rate: 1.44%, (v) Vesting: 50% after 2 years and 25% per year afterwards, (vi) an exercise price of $16.4446 and (vii) a grant date price of $15.82, resulting in a grant date fair value per Option of $6.143. - 2016 option grant: (i) Volatility: 35%, (ii) Dividend yield: 0%, (iii) Weighted average remaining life: 6.16, (iv) Risk-free interest rate: 1.02%, (v) Vesting: 50% after 2 years and 25% per year afterwards, (vi) an exercise price of $17.8250 and (vii) a grant date price of $18.28, resulting in a grant date fair value per Option of $7.204. - The accounting fair value of the Options equals their grant date fair value. The binomial model was used to calculate both the grant date fair value and the accounting fair value of the Options as it is the method used by the Corporation in the past. (4) Annual incentive plan amounts are paid in cash in the year following the fiscal year in respect of which they are earned. For 2016, the corporate payout factor amounted to 81% with the individual performance multiplier being 100% for Messrs. Billot, Clarke, Ramsay, Thomas, and Ms. Maillé. The 2014 amount disclosed for Mr. Billot also includes a signing bonus of $165,000 he received upon hire. The amount shown for Mr. Thomas in 2014 includes a signing bonus of $185,000 he received upon hire and the amount shown in 2015 includes a retention bonus of $185,000 paid at the end of 2015, both per his employment terms. (5) Dollar values disclosed in such column correspond to the dollar values in the “Compensatory change” column in the Defined Benefit Plan and in the Defined Contribution Plan tables. The amount disclosed for Messrs. Billot and Thomas also includes the Corporation’s contributions into their Defined Contribution Notional Accounts. See “Executive Compensation – Discussion and Analysis – Pension Plan and Supplemental Pension Benefits” for details. (6) No perquisites are included for the Named Executive Officers other than Mr. Thomas, given that they do not, in the aggregate, exceed the lesser of $50,000 or 10% of the total salary for each of these Named Executive Officers. These perquisites include a company car or car allowance, financial planning, health club memberships, annual medical examinations, home security services and additional dollar credits under the Corporation’s group benefits program. The amount disclosed for Mr. Thomas in 2015 includes a value of $15,902 provided under the Corporation’s car program, $12,411 in relocation assistance, $5,140 provided under the Corporation’s perquisites program, specifically the annual medical examination, home security, and club memberships, and $2,500 in additional flexible dollar credits paid to Mr. Thomas under the Corporation’s group benefits program. The amount disclosed for Mr. Thomas in 2014 includes relocation costs of $33,850, with the remaining amount of $3,596 representing the value provided under the Corporation’s car program, the annual medical examination, and additional flexible dollar credits paid to Mr. Thomas under the Corporation’s group benefits program. (7) See “Executive Compensation – Discussion and Analysis – Comparison of Target, Realizable and Realized Compensation” for actual compensation earned by Named Executive Officers.

50 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

INCENTIVE PLAN AWARDS OUTSTANDING SHARE-BASED AWARDS AND OPTION-BASED AWARDS The following table indicates for each of the Named Executive Officers all awards outstanding at the end of the fiscal year ended December 31, 2016.

Option-based Awards (1) Share-based Awards Number of Market or Payout Securities Value of Value of Vested Underlying Option Option Unexercised Number of Shares Market or Payout Value Share-based Unexercised Exercise Expiration In-the-Money or Units of Shares of Share-based Awards Awards Not Paid Options Price Date Options that Have not Vested (2) that Have not Vested (2) Out or Distributed (3) Name (#) ($) ($) RSU PSU PSU RSU PSU PSU ($) (#) (# at Target) (# at Max) ($) ($ at Target) ($ at Max)

Julien Billot 58,900 24.6547 February 28, 2021 Nil 53,086 139,123 208,685 939,091 2,461,086 3,691,629 1,277,766 76,200 16.4446 February 28, 2022 94,899 100,000 17.8250 February 28, 2023 Nil Ginette Maillé 53,500 10.1187 May 7, 2020 404,995 17,510 45,874 68,811 309,752 811,511 1,217,267 335,968 19,300 24.6547 February 28, 2021 Nil 25,000 16.4446 February 28, 2022 31,135 33,400 17.8250 February 28, 2023 Nil Douglas A. Clarke 53,500 10.1187 May 7, 2020 404,995 15,940 41,775 62,663 281,279 739,000 1,108,500 303,543 17,400 24.6547 February 28, 2021 Nil 22,600 16.4446 February 28, 2022 28,146 30,900 17.8250 February 28, 2023 Nil François Ramsay 49,000 10.1187 May 7, 2020 370,930 14,086 36,953 55,430 249,181 653,699 980,548 279,980 16,100 24.6547 February 28, 2021 Nil 20,800 16.4446 February 28, 2022 25,904 25,200 17.8250 February 28,2023 Nil Pascal Thomas 11,800 16.4446 February 28, 2022 14,696 6,439 16,112 24,168 113,906 285,021 427,532 Nil 17,000 17.8250 February 28, 2023 Nil

(1) The Options were granted to the Named Executive Officers under the 2012 Stock Option Plan. The market or payout value is determined by multiplying the number of Options granted in 2013 by the difference between the closing price of the Shares on the TSX on December 31, 2016 which was $17.69 and the Option exercise price of $10.1187. The market value of all Options granted in 2014 is nil as the Option exercise price was at $24.6547, above the closing price of the Shares on the TSX on December 31, 2016, which was $17.69. The market or payout value of all Options granted in 2015 is determined by multiplying the number of Options granted in 2015 by the difference between the closing price of the Shares on the TSX on December 31, 2016 which was $17.69 and the Option exercise price of $16.4446.The market value of all Options granted in 2016 is nil as the Option exercise price was at $17.8250, above the closing price of the Shares on the TSX on December 31, 2016, which was $17.69. (2) The share-based awards shown for all Named Executive Officers represent PSUs or RSUs granted to the Named Executive Officers under the RSU&PSU Plan. See “Executive Compensation – Discussion and Analysis – Long-Term Incentive Programs – Restricted Share Unit and Performance Share Unit Plan” for a description of the 2014, 2015 and 2016 LTIP. The market or payout value of both PSUs and RSUs is determined by multiplying the number of PSUs and RSUs granted by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. (3) The share-based awards shown for Mr. Billot represent vested DSUs received as part of his Entry Equity Grant upon his hire in January 2014 (14,196 DSUs) and vesting of the 2014 LTIP as detailed below. The market or payout value of the DSUs was determined by multiplying the number of DSUs vested but not paid out or distributed as at December 31, 2016 by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. In accordance with the terms of the DSU Plan, Mr. Billot will not have any right to receive any payment or other benefit in respect of his outstanding DSUs under the DSU Plan until he ceases to be an employee of the Corporation or any of its affiliates as a result of (a) the termination (with or without cause, as such term is defined in the DSU Plan) of his employment with the Corporation or any of its affiliates, or (b) the termination (with or without cause) of his membership on the Corporation’s or an affiliate’s board of directors for any reason, in each such cases including by death, disability, retirement or resignation. The share-based awards shown for Messrs. Billot, Clarke, Ramsay and Ms. Maillé represent the vested RSUs and PSUs received as part of the vested 2014 RSU and PSU grant. The market or payout value of the PSUs was determined by multiplying the number of PSU shares at target by a performance multiplier of 1.12 (see “Executive Compensation – Discussion and Analysis – Long-Term Incentive programs – 2014 Performance Share Unit Plan Payout” for details) and by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. The number of shares that vested was as follows: 58,035 (RSUs 13,384, PSUs 44,651) for Mr. Billot, 18,992 (RSUs 4,380; PSUs 14,612) for Ms. Maillé, 17,159 (RSUs 3,954, PSUs 13,205) for Mr. Clark and 15,827 (RSUs 3,650, PSUs 12,177) for Mr. Ramsay. These shares were paid out or distributed to the eligible Named Executive Officers in February 2017. VALUE VESTED OR EARNED DURING THE FISCAL YEAR ENDED DECEMBER 31, 2016 Non-equity Incentive Plan Compensation – Option-based Awards – Value Share-based Awards – Value Value Earned Vested During the Year (1) Vested During the Year (2) During the Year (3) Name ($) ($) ($)

Julien Billot - 1,026,639 708,100 Ginette Maillé 101,249 335,968 181,700 Douglas A. Clarke 101,249 303,543 167,500 François Ramsay 92,733 279,980 137,500 Pascal Thomas ---

(1) The amount disclosed in this column represents the value of 25% of the 2013 Stock Option grant and 50% of the 2014 Stock Option grant that vested in February 2016. The value was determined by multiplying the number of Options vested by the difference between the closing price of the Shares on the TSX on December 31, 2016 which was $17.69 and the Option exercise price of $10.1187 for 2013 grants and $24.6547 for the 2014 grants. (2) The value shown for Messrs. Billot, Clarke, Ramsay and Thomas, and Ms. Maillé represents the value of the vested RSUs and PSUs received as part of the vested 2014 PSU grant. The market or payout value of the RSUs was determined by multiplying the number of RSU shares by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. The market or payout value of the PSUs was determined by multiplying the number of PSU shares at target by a performance multiplier of 1.12 (see “Executive Compensation – Discussion and

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Analysis – Long-Term Incentive Programs – 2014 Performance Share Unit Plan Payout” for details) and by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. The number of shares that vested was as follows: 58,035 for Mr. Billot, 18,992 for Ms. Maillé, 17,159 for Mr. Clarke, and 15,827 for Mr. Ramsay. These shares were paid out or distributed to the eligible Named Executive Officers in February 2017. (3) The amount disclosed for all Named Executive Officers is the same as the one disclosed in the Summary Compensation Table under the heading “Annual Incentive Plans” for 2016. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS The following table sets forth, as at December 31, 2016, the equity compensation plans pursuant to which equity securities of the Corporation may be issued:

Number of Securities Remaining Available for Future Issuance under Number of Securities to Weighted-Average Equity Compensation Plans be Issued upon Exercise Exercise Price of (excluding Securities of Outstanding Options, Outstanding Options, Reflected in the First Plan Category Warrants and Rights Warrants and Rights Column)

Equity compensation plans approved by security holders (1) 630,950 $16.73 659,662

(1) Represents Shares issuable upon the exercise of Options granted in 2013, 2014, 2015 and 2016 under the 2012 Stock Option Plan. For a description of the 2012 Stock Option Plan, see “Executive Compensation – Discussion and Analysis – Total Compensation Components – 2012 Stock Option Plan”.

COMPARISON OF TARGET, REALIZABLE AND REALIZED COMPENSATION As in prior years, we present a comparison between target, realizable and realized total compensation for each Named Executive Officer for the last three years, specifically 2014, 2015 and 2016. The following assumptions were used when calculating target, realizable and actual realized compensation:

Target Compensation Realizable Compensation Realized Compensation

Base salary Actual earned base salary for the respective year

Short-term Cash Incentive (STIP) Target STIP amount per STIP policy Actual STIP payout earned for the respective Year

Stock Options Grant date fair value as reported in the Value calculated as a difference Realized value of options upon actual exercise Summary Compensation Table between the Share price on December 31 and exercise price multiplied by the number of vested or unvested options

Performance Share Units (PSUs) Target amount granted in dollars Value of share units granted at target using the Realized (actual) value of share units share price on December 31 upon vesting

Restricted Share Units (RSUs) Target amount granted in dollars Value of share units granted using the share price Realized (actual) value of share units on December 31 upon vesting

Long-term Cash Incentive Target award granted for the respective year Actual value of the long-term cash incentive earned

Deferred Share Units (DSUs) Target amount granted in dollars Value of share units granted using the share price Realized (actual) value of share units on December 31 upon termination of employment

Other Cash Compensation Actual amount reported in the Summary Compensation Table plus all non-STIP bonuses payable to the Named Executive officers, such as signing, special bonuses, etc.

2014-2016 CUMULATIVE COMPENSATION

In thousands (rounded) Julien Billot Ginette Maillé Target Realizable Realized Target Realizable Realized (1)

Base Salary $2,525 $2,525 $2,525 $1,170 $1,170 $1,170 Short-term Cash Incentive (STIP) $2,525 $2,408 $2,408 $585 $553 $553 Stock Options $1,724 $95 - $570 $436 - PSUs $2,525 $2,460 $790 $832 $811 $578 RSUs $1,010 $939 $237 $333 $309 $77 DSUs $300 $251 - - - - Long-term Cash Incentive - - - - - $221 Other Cash Compensation $165 $165 $165 - - - Total Compensation $10,774 $8,843 $6,125 $3,490 $3,279 $2,599

(1) The amount shown for Mr. Billot and Ms. Maillé represents the vested RSU and PSUs received under the 2014 LTIP grant. The market or payout value of the RSUs was determined by multiplying the number of Shares underlying the RSUs by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. The market or payout value of the PSUs was determined by multiplying the number of Shares underlying the PSUs at target multiplied by a payout multiplier of 1.12 and then multiplied by the closing price of the Shares on the TSX on December 31, 2016, which was $17.69.

52 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

Douglas A. Clarke François Ramsay Pascal Thomas In thousands (rounded) Target Realizable Realized (1) Target Realizable Realized (1) Target Realizable Realized (1)

Base Salary $1,065 $1,065 $1,065 $940 $1,015 $940 $ 661 $661 $661 Short-term Cash Incentive (STIP) $532 $487 $486 $470 $420 $419 $ 333 $292 $292 Stock Options $520 $433 - $456 $397 - $195 $15 - PSUs $758 $739 $553 $671 $653 $508 $276 $285 - RSUs $304 $282 $77 $268 $250 $64 $111 $114 - Long-term Cash Incentive - - $221 - - $203 - - - Other Cash Compensation ------$370 $370 $370 Total Compensation $3,179 $3,006 $2,402 $2,805 $2,734 $2,135 $1,946 $1,737 $1,324

(1) The amounts shown for Messrs. Clarke and Ramsay represent the vested RSUs and PSUs received under the 2014 LTIP grant. The market or payout value of the RSUs was determined by multiplying the number of Shares underlying the RSUs by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69.The market or payout value of the PSUs was determined by multiplying the number of Shares underlying the PSUs at target multiplied by a payout multiplier of 1.12 and then multiplied by the closing price of the Shares on the TSX on December 31, 2016, which was $17.69. Comparison between Target, Realizable and Realized Total Compensation 2014-2016 (Cumulative)

$12,000

$11,000 $10,774 Thousands $10,000

$9,000 $8,843

$8,000

$7,000 $6,125 $6,000

$5,000

$4,000 $3,490 $3,279 $3,179 $3,006 $2,805 $3,000 $2,599 $2,734 $2,402 $2,135 $1,946 $2,000 $1,737 $1,324 $1,000

$0 Julien Billot Ginette Maillé Douglas A. ClarkeFrançois Ramsay Pascal Thomas

Target Compensation Realizable Compensation Realized Compensation

As the Share price of the Corporation substantially declined since December 31, 2016, the realizable compensation shown in the above comparison would have been significantly lower if a Share price of $8.16, which was the closing price of the Shares on the TSX as at the Record Date, had been used, thus aligning with the Share value decline experienced by Shareholders. During the last three years, the Corporation strengthened its capital structure by reducing its Net Debt to $384.9 million as at December 31, 2016, compared to $781.7 million as at December 31, 2012. The performance of the Corporation’s share price increased from $6.56 at the end of 2012 to $17.69 at the end of 2016. The Corporation has also continued to make operational progress by initiating the Return to Growth Plan, a long-term strategy designed to accelerate the Corporation’s digital evolution. Digital revenue grew 14.3% to reach $555.8 million for 2016 compared to $486.3 million in 2015 and $442.8 million in 2014. In 2016, total digital revenue represented 67.9% of consolidated revenues. To align the interest of the executives with those of Shareholders, under the 2014 LTIP the Named Executive Officers that were with the Corporation at such time were granted Options, RSU & PSUs tied to a specified level of reduction of Net Debt and CAGR total digital revenue over a period of three years, and long-term performance-based cash incentives tied to digital revenues representing a specified target percent of the Corporation’s total revenues over a period of two years. Under the 2015 and 2016 LTIP, the Named Executive Officers were granted Options, RSUs and PSUs tied to a targeted level of reduction of Net Debt and a targeted CAGR of digital revenues over a period of three years. Given the performance with respect to CAGR of total digital revenue, the 2014 PSUs vested at a payout multiplier of 1.12 of the target award but paid out at $8.01 per Share versus an average award price of $21.62. All other PSU and RSU awards granted under the 2015 and 2016 LTIP will start vesting when the financial statements as at December 31, 2017 and 2018, respectively, are approved. Thus, the related value

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has not been realized as at December 31, 2016. The realizable value of the RSUs and PSUs granted in 2015 increased by 7%, as a result of the change in the share price. The realizable value of the RSUs, and PSUs granted in 2016 decreased by 1%. 25% of the 2013 Stock Option grant and 50% of the 2014 Stock Option grant vested as of December 31, 2016. However, none of the Named Executive Officers exercised their Options during 2016, and as such the realized value is nil. All other Options granted in 2014, and 2016 have a nil realizable value as the exercise price exceeds the closing price of the Corporations’ Shares as at December 31, 2016 which was $17.69.

PENSION PLAN AND SUPPLEMENTAL PENSION BENEFITS DEFINED BENEFIT PLANS Ms. Maillé and Messrs. Clarke and Ramsay, and other executive officers of the Corporation who joined the Corporation prior to 2006 • Required contribution of 3% of pensionable earnings participate in the Corporation’s Defined Benefit Pension Plan • Post-retirement pension indexing eliminated on service accrued (the “Defined Benefit Pension Plan”). The annual pension from the after July 1, 2013 Defined Benefit Pension Plan is based on years of service with the Corporation and the best sixty (60) consecutive months of pensionable earnings (“Earnings”) with an annual accrual rate equal to 1% of the Earnings up to the Year Maximum Pensionable Earnings defined by the Canadian government (“YMPE”) and 1.7% of the Earnings above the YMPE. As of July 1, 2013, all management employees of the Corporation participating in the Defined Benefit Pension Plan, including the Named Executive Officers, contribute 3% of their pensionable earnings to the plan. Further, the post-retirement pension indexing on pensionable service accumulated after July 1, 2013 has been eliminated. Pensions are payable during the lifetime of the Named Executive Officer. Assuming termination of employment after having reached age 55, the Corporation provides a supplementary pension allowance for earnings in excess of the maximum allowed under the Defined Benefit Pension Plan. Earnings include salary and short-term incentive awards, up to the target, whether paid in cash or Shares. PENSION BENEFIT TABLE The following table provides, for each Named Executive Officer participating in the Defined Benefit Pension Plan, the number of years of credited service as at December 31, 2016, the annual lifetime benefits payable based on the years of credited service as at December 31, 2016 and, projected at age 65, the accrued obligation at the start of the fiscal year 2016 and as at December 31, 2016 and the difference between these last two amounts being split between compensatory and non-compensatory changes. Named Executive Officers Opening Present Value Closing Present Number of of Defined Non- Value of (1) years of Annual benefits payable Benefit Compensatory compensatory Defined Benefit credited At year end (2) At age Obligation Change (4) change (5) Obligation Name Age service (#) ($) 65 (3) ($) ($) ($) ($) ($)

Ginette Maillé 54 13.3 - 136,800 1,557,100 577,700 139,100 2,273,900 Douglas A. Clarke 52 25.3 - 220,300 2,626,400 738,200 189,600 3,554,200 François Ramsay 52 13.8 - 192,500 1,210,400 206,100 39,500 1,456,000

(1) The benefits are not subject to any deductions for government benefits or other offset amounts. The benefits accumulated before July 1, 2013 is partially indexed annually to increases in the Consumer Price Index but in no case will indexation exceed 4%. Effective July 1, 2013, the post-retirement pension indexing is removed on pensionable service accumulated by the executives after July 1, 2013. (2) Disclosure in such column represents the annual pension benefits payable to Named Executive Officers eligible for an immediate retirement at the end of the year assuming they retire at year-end. Under the Defined Benefit Pension Plan arrangements, Named Executive Officers must be aged 55 and older to be entitled to an immediate retirement. Named Executive Officers have not reached that age yet and are therefore not eligible to an immediate pension at December 31, 2016. As such, no amount has been disclosed. For information purposes, the accrued pension amounts payable based on years of credited service and average pensionable earnings at December 31, 2016; at age 65 to Named Executive Officers who are not eligible to an immediate pension were as follows: - Ginette Maillé $117,700 - Douglas A. Clarke $203,000 - François Ramsay $100,100 (3) The Corporation announced it would enter into a retirement and separation agreements with Ginette Maillé and Douglas A. Clarke on November 10, 2016, effective February 28, 2017. The annual benefits payable at age 65 for Ms. Maillé and Mr. Clarke for 2016 are the annual benefits payable based on the credited service as at February 28, 2019 once payments under their retirement and separation agreements have terminated. (4) The compensatory change reflects the value of the projected pension benefits earned during fiscal year 2016 at a discount rate of 4.25% plus the change in the accrued obligation attributable to the impact of the differences between actual earnings (salary and bonus) for fiscal year 2016, and those assumed in the previous year’s calculations. The announcement of the retirement of Ginette Maillé and Douglas A. Clarke was considered a special event. This event triggered a plan curtailment and termination benefit impact (salary continuance and plan participation maintained during a salary continuance period ending on February 28, 2019) that was reflected in the compensatory change. Therefore, the accrued obligation at at year-end reflects the projected annual pension and retirement date as at February 28, 2019. (5) The non-compensatory change amount represents the change in the accrued obligation attributable to items that are not related to salary and STIP decisions, such as assumptions, the date from which the results are extrapolated and the interest on the accrued obligation at the start of fiscal year 2016.

All assumptions underlying the figures in the above table are the same as those used for financial statement purposes. Pensionable earnings as at December 31, 2016 are expected to increase up to retirement age at an annual rate of 1.75% plus productivity, merit and promotional scale (previously 2.95% the first year and 2.7% thereafter plus merit and promotional scale). Effective January 1, 2016, the split discount rate methodology is being used. The discount rate used to calculate the defined obligation is 3.75% as at December 31, 2016 and 4.00% as at December 31, 2015 and 2014. The discount rate used to calculate the following year service cost is 4.00% as at December 31, 2016, 4.25% as at December 31, 2015 and 4.00% as at December 31, 2014. Those key assumptions and methods used to determine estimated amounts may not be identical to those used by other issuers and as a result, the figures may not be comparable with those of other companies.

54 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

DEFINED CONTRIBUTION PLAN Messrs. Billot and Thomas, as Named Executive Officers, and other executive officers who joined the Corporation on or after January 1, 2006, participate in the Corporation’s Defined Contribution Pension Plan (the “Defined Contribution Pension Plan”). Messrs. Billot and Thomas participate in the Defined Contribution Pension Plan as of their hire date on January 1, 2014 and December 9, 2014, respectively. Effective July 1, 2013, the Corporation’s default contribution for all management employees was set at 2% of pensionable earnings and the employees could receive additional contributions from the Corporation, up to a maximum of 3%, if they also contribute to the Defined Contribution Pension Plan. Each participant has the responsibility to allocate the Corporation’s contributions made in his or her registered account among the investment options offered under the Defined Contribution Pension Plan and the rate of return depends on the performance of such investments. The Corporation’s contributions and any investment returns are immediately vested. The total amount of the employee’s and Corporation’s contributions are limited to the maximum allowed under the Income Tax Act (Canada) for registered pension plans. When the amount of the executive’s and Corporation’s contributions in any given year reaches the limit prescribed under the Income Tax Act (Canada), the executive and Corporation’s contributions cease in the registered account and deemed contributions from the Corporation start to accumulate in the Defined Contribution Notional Account. Deemed contributions are calculated based on the Corporation’s average contribution rate from the first date contributions were made during the calendar year up to the date the tax limits were first reached during the calendar year. Plan members’ contributions are not allowed from that date to the end of the calendar year. The Defined Contribution Notional Account vests only upon reaching age 55 and is credited annually at the rate of return of a Canadian Index Bond Fun. The Defined Contribution Notional Account accumulates until termination, retirement or death, at which point it is paid in cash to the employee or beneficiary. The Defined Contribution Notional Account is not payable when termination, retirement or death occurs prior to age 55. Earnings include salary and short- term incentive awards, up to the target, whether paid in cash or Shares. A defined Contribution Notional Account was established for Mr. Billot in 2014 and 2016 for Mr. Thomas as their earnings during the year exceeded the maximum established by the Income Tax Act (Canada). The following table shows amounts from the Defined Contribution Pension Plan for Messrs. Billot and Thomas subject to their pension arrangement:

Accumulated Value at Compensatory Accumulated Value at Start of Year Change (1) End of Year (2) Name Year ($) ($) ($)

Julien Billot 2016 123,433 84,962 208,395 Pascal Thomas 2016 15,213 25,337 40,550

(1) Represents the Corporation’s contributions paid to the Defined Contribution Pension Plan on behalf of the Named Executive Officer during fiscal 2016. The amounts include contributions paid by the Corporation to the Defined Contribution Notional Account on behalf of: - Julien Billot $68,706 - Pascal Thomas $8,504 (2) Represents the accumulated value of the total contributions by the Corporation to the Named Executive Officer’s account at the end of 2016, excluding interest earned on the Corporation’s contributions.

YELLOW PAGES LIMITED PROXY CIRCULAR 55 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

EMPLOYMENT AGREEMENTS, TERMINATIONS AND CHANGE OF CONTROL BENEFITS EMPLOYMENT AGREEMENT OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER On October 21, 2013, the Corporation announced the appointment of Mr. Julien Billot as the new President and Chief Executive Officer, which became effective on January 1, 2014. The features of Mr. Billot’s employment agreement can be summarized as follows.

Resignation for Resignation without Good Reason (1) or Good Reason or Feature Base Termination without Cause (2) Termination for Cause Change of Control

Salary $875.000 Entitled to two times base salary. Entitled to a lump sum No specific clause. 50% will be paid as salary continuance payment for earned but over a period of twelve (12) months unpaid base salary, unpaid and the remaining 50% will be paid as business expenses and a lump sum at the end of the salary monthly car allowance continuance period. reimbursement and accrued but unused vacation days.

Short-term Cash Target STIP set at 100% of Entitled to STIP at target of two years, Forfeited. If Mr. Billot resigns for Good Reason or is terminated without Cause Incentive (STIP) base salary and maximum payable as follows. 50% will be paid following a change in control, he shall be entitled to his STIP at target. payment fixed at 200% of as salary continuance over a period of 50% will be paid as salary continuance over a period of twelve (12) base salary. twelve (12) months and the remaining months and the remaining 50% will be paid as a lump sum at the end of 50% will be paid as a lump sum at the the salary continuance period. end of the salary continuance period.

Long-term Cash Participation in all of the RSUs All RSUs vest on a pro-rata Ceases to be eligible for All unvested RSUs and PSUs vest immediately to the extent no alternative Incentive (LTIP) Corporation’s executive LTIP basis with the numerator participation under the awards are made following the change in control. If such alternative is composed of stock options, being the number of RSU&PSU Plan and all available and Mr. Billot resigns for Good Reason or is terminated without Restricted Stock Units complete performance unvested RSUs and PSUs Cause within twenty-four (24) months after such change in control, each (RSUs) and Performance periods by Mr. Billot, and the are cancelled. alternative award shall vest and Mr. Billot will have an option to receive Share Units (PSUs). Target denominator being the total the share awards as actual share or as a cash payment, net of taxes. LTIP set at 200% of base number of performance salary. periods, not exceeding three.

PSUs All unvested PSUs are cancelled.

Deferred Share Equity entry grant award of If Mr. Billot had resigned for Good If Mr. Billot had resigned In the event of a change in control, the Board may make such provisions Units (DSUs) DSUs in the amount of Reason or had been terminated without Good Reason or had for the protection of the rights of Mr. Billot as the Board in its discretion $300,000. without Cause within twelve (12) been terminated for Cause considers appropriate in the circumstances, including without limitation, months of his start date, the entry within twelve (12) months of changing the vesting schedule for any DSU or the date on which any DSU grant would have been forfeited. his start date, the entry grant expires or providing for substitute or replacement DSUs of the continuing would have been forfeited. entity (unless substitution or replacement of the replacement DSUs is deemed impossible or impractical by the Board); provided that the plan continuously meets certain tax requirements or any successors to such provisions; provided further for greater certainty, that Mr. Billot shall not be entitled to receive payment for, or in respect of, any DSUs on or before his termination date.

Pension and Participation in all group Entitled to participation in the pension Forfeited. No specific clause. Other Benefits insurance, pension and plan during the salary continuance perquisite plans as other period. The Corporation will continue executives of the to pay for benefit plans and Corporation. perquisites (except disability insurance) until the earlier of: (a) twenty-four (24) months from resignation; or (b) until Mr. Billot becomes covered by another group insurance plan with another employer. At the end of the salary continuance period, the Corporation will pay a lump sum equal to the value of one-year of contributions to the pension plan to a registered pension account. (1) “Good Reason” shall mean the occurrence of any one of the following acts or events without the prior written consent of the executive: (a) a reduction in the executive’s base salary as in effect on the date hereof (or as same may be increased from time to time); (b) any material reduction in the executive’s compensation as in effect on the date hereof (or as the same may be increased from time to time); (c) any change or series of changes in the responsibilities, authority, status or reporting relation of the executive with the Corporation such that immediately after such change or series of changes, the responsibilities, authority, status or reporting relationship of the executive, taken as a whole, are not at least substantially equivalent to those assigned to the executive immediately prior to such change or series of changes, excluding for this purpose an isolated and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after receipt of notice thereof given by the executive; (d) the Corporation fails to pay any amounts due to the executive at the scheduled time for payment, provided that within fifteen (15) days after the executive becomes aware of such occurrence, he provides notice to the Corporation of such occurrence, stating that the Corporation’s failure to remedy within thirty (30) days would constitute ground for resignation for Good Reason and the Corporation then fails to remedy within thirty (30) days after receiving such notice from the executive; or (e) the Corporation requiring the executive to be based anywhere other than 50 km from the executive’s principal place of employment. (2) “Cause” shall mean the occurrence of any one of the following acts or events by or relating to the executive: (a) willful failure of the executive to properly carry out his duties after written notice by the Corporation of the failure to do so and an opportunity for the executive to correct the same within a reasonable period of time from the date of receipt of such written notice from the Corporation; (b) theft, fraud or embezzlement from the Corporation or any other act of dishonesty involving the property or affairs of the Corporation or the carrying out of the executive’s duties; (c) conviction of a crime (other than traffic violations and minor misdemeanors) relating to the executive’s employment or which could cause harm or damage to the Corporation’s public image, reputation or relations with the authorities; (d) habitual inability to carry out functions of employment due to alcohol or drug related causes; (e) any failure by the executive to follow the reasonable and lawful directions of the Board of Directors; (f) behavior of the executive causing harm or damage to the Corporation’s public image or relations with the authorities; or (g) any act or omission of the executive which, pursuant to applicable law, constitutes a serious reason for termination of employment without notice, payment in lieu of notice or any indemnity whatsoever. As part of his employment agreement, Mr. Billot is bound by certain standard restrictive covenants in favour of the Corporation, including non-disclosure, non-solicitation and non-competition provisions for a period of two years following termination of employment.

56 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

EMPLOYMENT AGREEMENTS AND NON-COMPETE/NON-SOLICITATION PROVISIONS The Named Executive Officers other than the President and Chief Executive Officer do not have employment agreements with the Corporation. All Named Executive Officers are bound by certain standard restrictive covenants in favour of the Corporation, including non-disclosure, non- solicitation and non-competition provisions for a period of two years following termination of employment.

2012 EXECUTIVE SEVERANCE POLICY In 2012, given the uncertainty leading up to the implementation of the Recapitalization, the HR and Compensation Committee of the predecessor of the Corporation adopted the 2012 Executive Severance Policy. Thus, severance agreements were put in place for selected executives to ensure they remained focused on the task at hand. Under the severance and change of control agreements (the “Severance Agreements”), in the event that the executive’s employment is terminated without cause or the executive voluntarily terminates his or her employment for Good Reason within twenty-four (24) months of a Change of Control of the Corporation, he or she would be eligible for severance pay corresponding to six weeks of eligible pay (representing base salary and short-term incentive bonus at target) per then completed year of service with a minimum severance of one year of eligible pay and a maximum of two years of eligible pay. In the case of Ms. Maillé and Messrs. Clarke and Ramsay, the severance was set at two years of eligible pay (representing base salary and short-term incentive bonus at target), payable by way of a lump sum upon termination or salary continuance, at the election of the executive. The Corporation would be required to continue to pay for Corporation-sponsored benefit plans and perquisites (except disability insurance) for the duration of the salary continuance period or top up the lump sum by the equivalent value, subject to any terms and conditions of the Corporation’s insurance carrier. If the executive elects to receive the severance payment by way of salary continuance, for the purpose of participation in the Defined Benefit Pension Plan, the executive will be credited with additional years of service for such period, provided he or she is at least 55 years old as of the end of the salary continuance period. As at December 31, 2016, if the employment of Messrs. Clarke and Ramsay had been terminated and they had elected that their severance payment be paid by way of salary continuance, this would not have resulted in any supplementary pension since none of them would have been 55 years old at the end of the salary continuance period. Messrs. Billot and Thomas are not covered by the 2012 Executive Severance Policy. For the purpose of the Severance Agreements, the following definitions apply: “Change of Control” means (i) any event or series of related events, as and from the date of the Severance Agreement, as a result of or following which any person or two or more persons acting jointly or in concert, beneficially owns or exercises control or direction, directly or indirectly, over securities of the Corporation having a right to vote at shareholder meetings (“Voting Securities”) carrying thirty- three (33%) percent or more of the votes attached to all Voting Securities then outstanding; (ii) (A) any one of (1) an event as a result of or following which any person or two or more persons acting jointly or in concert, beneficially owns or exercises control or direction, directly or indirectly, over Voting Securities carrying twenty-five (25%) percent or more of the votes attached to all Voting Securities then outstanding, (2) a merger or consolidation of the Corporation with or into one or more other persons or (3) the announcement or completion of a restructuring, reorganization, arrangement or recapitalization transaction involving any refinancing of the Corporation’s outstanding indebtedness, togetherin any such case with (B) a change in the composition of the Board of Directors such that, at any time within two years following the occurrence of any event described in clause (A) of this paragraph, individuals who were members of the Board of Directors immediately prior to such event cease to constitute a majority of the Board of Directors; (iii) a change in the composition of the Board of Directors, which occurs at a single meeting of the shareholders or upon the execution of a shareholders’ resolution, such that individuals who are members of the Board of Directors immediately prior to such meeting or resolution cease to constitute a majority of the Board of Directors; or (iv) any sale, lease, transfer or other disposition or transaction, or any series of any such related transactions, as and from the date of this Agreement, as a result of or following which the beneficial ownership or control or direction over the assets of the Corporation has decreased by an amount of not less than fifty (50%) percent of the assets of the Corporation (on a consolidated basis), as shown on a consolidated balance sheet for the Corporation at the end of the last completed quarter (prior to the transaction or the first of the series of related transactions) of the then current financial year or as at the end of the last completed financial year if the transaction or the first of the series of related transactions occurs during the first quarter of a financial year; and “Good Reason” means the occurrence of any one of the following acts or events without the prior written consent of the executive: (i) a reduction in the executive’s base salary as in effect on the date hereof (or as same may be increased from time to time); (ii) any material reduction in the executive’s compensation as in effect on the date hereof (or as the same may be increased from time to time) or the level of benefits in effect on the date hereof (or as the same may be increased from time to time) is reduced in any material respect; (iii) any change or series of changes in the responsibilities, authority, status or reporting relation of the executive with the Corporation such that immediately after such change or series of changes, the responsibilities, authority, status or reporting relationship of the executive, taken as a whole, are not at least substantially equivalent to those assigned to the executive immediately prior to such change or series of changes, excluding for this purpose an isolated and inadvertent action not taken in bad faith and which is remedied by the Corporation promptly after receipt of notice thereof given by the executive; (iv) the Corporation fails to pay any amounts due to the executive at the scheduled time for payment, provided that within fifteen (15) days after the executive becomes aware of such occurrence, he provides notice to the Corporation of such occurrence, stating that the Corporation’s failure to remedy within thirty (30) days would constitute ground for resignation for Good Reason and the Corporation then fails to remedy within thirty (30) days after receiving such notice from the executive; or (v) the Corporation requiring the executive to be based anywhere other than 50 km from the executive’s principal place of employment as at the date hereof. A Change of Control, as defined under the Severance Agreements, occurred on December 20, 2012, as a result of the implementation of the Recapitalization.

YELLOW PAGES LIMITED PROXY CIRCULAR 57 EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The following table indicates estimated incremental payments triggered pursuant to a termination of employment or a Change of Control in accordance with the applicable provisions of outstanding employment agreements or change of control provisions under the Severance Agreements for each of the applicable Named Executive Officers as at December 31, 2016.

SEVERANCE VALUE PAYABLE AS PER EMPLOYMENT OR SEVERANCE AGREEMENT UPON A CHANGE OF CONTROL OR TERMINATION WITHOUT CAUSE (1) ($) Equity- Benefits, Based Value Payable Short-term Long-term Pension and upon a Change of Name Base Salary Incentive Incentive Perquisites (2) Total Control (3)

Julien Billot 1,750,000 1,750,000 – 330,495 3,830,495 2,804,194 Ginette Maillé 900,000 450,000 – 329,015 1,679,015 1,249,109 Douglas A. Clarke 830,000 415,000 – 80,101 1,325,101 1,175,590 François Ramsay 680,000 340,000 – 93,776 1,113,776 1,042,802 Pascal Thomas (4) -- -- – -- -- 413,622

(1) The severance value disclosed above for Mr. Billot is payable upon termination without cause or for good reason as defined in his employment contract. The severance value payable upon a Change of Control for Ms. Maillé and Messrs. Clarke and Ramsay is triggered upon a termination without cause or resignation for Good Reason (as defined above) within twenty-four (24) months following the Change of Control. (2) The amounts shown for Mr. Billot, Ms. Maillé and Messrs. Clarke and Ramsay include the value of their benefits and perquisites programs. The value for Mr. Billot also includes the value of his continued participation in the Corporation’s defined contribution pension plan. The value for Ms. Maillé also includes the value of her continued participation in the Corporation’s defined benefit pension plan has she would be 55 years old at the end of the severance period. The amounts disclosed for Messrs. Clarke and Ramsay exclude the value of the pension plan continuation given none of the Named Executive Officers would be 55 years old at the end of the severance period if terminated on December 31, 2016. Messrs. Clarke and Ramsay may elect to receive the severance payment by way of lump sum or salary continuance. In the case of a lump sum payment, the severance amount will include the amounts disclosed above and will not include the pension value ($191,400 for Mr. Clarke and $165,200 for Mr. Ramsay) as pension plan participation would only be available in the event of salary continuance if the executive has reached the age of 55 as at the last day of the salary continuance period. (3) The value disclosed for all Named Executive Officers in this column includes Options and Restricted and Performance Share Units assuming no Alternative Awards are granted according to the 2012 Share Option Plan and RSU&PSU Plan following a change of control. The value disclosed for Mr. Billot also includes the market value as at December 31, 2016 of the DSUs granted to him on January 1, 2014, the date on which his employment became effective. The value for the Options was calculated by multiplying the number of Options granted by the difference between the closing price of the Shares on the TSX on December 31, 2016 which was $17.69 and the Option exercise price of $10.12 for the 2013 Option grant; $24.6547 for the 2014 Option grant ; $16.4446 for the 2015 Option grant and $17.8253 for the 2016 Option grant. The value of the 2014 and 2016 Options grant was nil. The value for the DSUs, RSUs and PSUs was calculated by multiplying the number of DSUs, RSUs or the PSUs granted at target, as the case may be, by the closing price of the Shares on the TSX on December 31, 2016 which was $17.69. (4) Mr. Thomas does not benefit from any contractual severance provisions.

RETIREMENT AND SEPARATION GINETTE MAILLÉ On November 10, 2016, the Corporation announced it would enter into a retirement and separation agreement with Ms. Ginette Maillé effective February 28, 2017. During this period, it was agreed that Ms. Maillé would continue to perform her normal duties as Senior Vice-President and Chief Financial Officer until her separation date. The Corporation agreed to pay Ms. Maillé a sum of $1,350,000 in salary continuance over a period of twenty-four (24) months (in this section, the “Salary Continuance Period”). This sum is equivalent to two times base salary and STIP at target. All outstanding equity at the separation date was treated in accordance with the RSU&PSU Plan and award agreement which is as follows; (1) 100% of the stock options awarded to the Executive in 2013 (53,500 stock options) vested, 75% of the stock options awarded to Ms. Maillé in 2014 (14,475 stock options) vested and 50% of the stock options awarded to Ms. Maillé in 2015 (12,500 stock options) vested, and such options will remain exercisable for a period of twelve (12) calendar months following the separation date, and thereafter shall expire. All other options awarded to Ms. Maillé (including without limitation those that were not vested as at the separation date) expired on the separation date. (2) The RSUs and PSUs awarded to Ms. Maillé in 2014 (4,380 RSUs and 13,047 PSUs) vested; two-thirds of the RSUs awarded to Ms. Maillé in 2015 (4,378 RSUs) vested; and one-third of the RSUs awarded to Ms. Maillé in 2016 (2,188 RSUs) vested. The exercise of these vested RSUs and PSUs and sale of underlying shares proceeded as per the terms and conditions of the applicable grant agreements and the RSU&PSU Plan. All other RSUs or PSUs (including without limitation those that were not vested as at the separation date) were forfeited on the separation date in accordance with the RSU&PSU Plan provisions. (3) The payments of any LTIP awards to Ms. Maillé shall be subject to the Executive Claw Back Compensation Policy of the Corporation. The perquisites will also be maintained during the Salary Continuance Period (consisting in the provision of a company car, annual health assessment, fitness club membership and home security). Other expenses covered by the agreement include professional accounting and membership fees up to 2019. It also includes any mandatory continuing education or professional training activities related to CPA/CA association membership during the Salary Continuance Period with an annual maximum of $3,000 per year. During this period Ms. Maillé will also be entitled to her employee benefit plan coverage (except short and long-term disability insurance) and pension plan contributions maintained. The pension entitlements shall be determined in accordance with the terms of the Defined Benefit Pension Plan (the “Pension Plan”) and the supplementary executive retirement agreement regarding the payment of amounts outside the registered pension plan (the “SERP”). For greater certainty, Ms. Maillé will be credited with two additional years of service as of her termination date for the purposes of the Pension Plan and of the SERP, considering that she has elected to receive the separation payment by way of salary continuance and that she will be at least 55 years old as of the last day of the Salary Continuance Period, the whole subject to the terms and conditions set forth in the Pension Plan and the SERP.

58 YELLOW PAGES LIMITED PROXY CIRCULAR EXECUTIVE COMPENSATION – DISCUSSION AND ANALYSIS

The total retirement and separation agreement is valued at $1,635,995. In return, Ms. Maillé agreed to certain non-compete, non-solicitation and assignment of intellectual property rights agreement covenants for a period of two years. DOUGLAS CLARKE On November 10, 2016, the Corporation announced it would enter into a retirement and separation agreement with Douglas Clarke effective February 28, 2017. During this period it was agreed that Mr. Clarke would continue to perform his duties and provide support on ongoing projects and work towards an effective transition of his activities. The Corporation agreed to pay Mr. Clarke a sum of $1,245,000 in salary continuance over a period of twenty-four (24) months (in this section, the “Salary Continuance Period”). This sum is equivalent to two times base salary and STIP at target. All outstanding equity at the separation date was treated in accordance with the RSU&PSU Plan and award agreement which is as follows; (1) 100% of the stock options awarded to Mr. Clarke in 2013 (53,500 stock options) vested, 75% of the stock options awarded to the Executive in 2014 (13,050 stock options) vested and 50% of the stock options awarded to Mr. Clarke in 2015 (11,300 stock options) vested, and such options will remain exercisable for a period of twelve (12) calendar months following the separation date, and thereafter shall expire. All other options awarded to Mr. Clarke (including without limitation those that were not vested as at the separation date) expired on the separation date. (2) The RSUs and PSUs awarded to Mr. Clarke in 2014 (3,954 RSUs and 11,791 PSUs) vested; two-thirds of the RSUs awarded to Mr. Clarke in 2015 (3,952 RSUs) vested; and one-third of the RSUs awarded to Mr. Clarke in 2016 (2,019 RSUs) vested. The exercise of these vested RSUs and PSUs and sale of underlying shares proceeded as per the terms and conditions of the applicable grant agreements and the RSU&PSU Plan. All other RSUs or PSUs (including without limitation those that were not vested as at the separation date) were forfeited on the separation date in accordance with the RSU&PSU Plan provisions. (3) The payments of any LTIP awards to the Executive shall be subject to the Claw Back Compensation Policy of the Corporation. The perquisites will also be maintained during the Salary Continuance Period (consisting in the provision of a company car, annual health assessment, fitness club membership and home security). During this period Mr. Clarke will also be entitled to his employee benefit plan coverage (except short and long-term disability insurance) and pension plan contributions will be maintained. Mr. Clarke’s pension entitlements shall be determined in accordance with the terms of the Pension Plan and the SERP. For greater certainty, he will be credited with two additional years of service as of his separation date for the purposes of the Pension Plan and of the SERP, considering that he has elected to receive the separation payment by way of salary continuance and that he will be at least 55 years old as of the last day of the Salary Continuance Period, the whole subject to the terms and conditions set forth in the Pension Plan and the SERP.

YELLOW PAGES LIMITED PROXY CIRCULAR 59 INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS None of the Directors or executive officers of the Corporation, nor any associate of such Director or executive officer are to the date hereof, indebted to the Corporation. Additionally, the Corporation has not provided any guarantee, support agreement, letter of credit or similar arrangement or undertaking in respect of any indebtedness of any such person to any other person or entity. Furthermore, the Corporation has adopted a policy prohibiting loans to Directors or executive officers of the Corporation.

DIRECTORS’ LIABILITY INSURANCE The Directors are covered under a Directors and officers’ liability insurance policy. The policy covers the Directors and officers of the Corporation and the Directors and officers of all of its subsidiaries. The insurance contract contains a deductibility provision of $1 million per claim. For fiscal year 2016, the Corporation paid premiums of $292,801 in respect of Directors’ and officers’ liability insurance.

INTEREST OF INFORMED PERSONS IN MATERIAL TRANSACTIONS Management of the Corporation is not aware of any material interests, direct or indirect, of any Director or senior officer of the Corporation or other informed persons of the Corporation, nor of any associate or affiliate of the foregoing persons, in any material transaction since the commencement of the Corporation’s last fiscal year or in any proposed transaction that has materially affected or would materially affect the Corporation or any of its affiliates or subsidiaries.

INTEREST OF CERTAIN PERSONS AND COMPANIES IN MATTERS TO BE ACTED UPON No Director or officer of the Corporation, nor their associates or affiliates, has any material interest, direct or indirect, by way of beneficial ownership of securities or otherwise, in any matter to be acted upon at the Meeting.

APPOINTMENT OF AUDITOR The persons named in the form of proxy intend to vote FOR the reappointment of Deloitte LLP (“Deloitte”), Montreal, as independent auditor of the Corporation to hold office until the next annual meeting of Shareholders or until their successors are appointed, at a remuneration to be determined by the Directors.

60 YELLOW PAGES LIMITED PROXY CIRCULAR AUDIT FEES

During the 2016 and 2015 fiscal years, the Corporation retained its independent auditor, Deloitte, to provide services in the categories and for the approximate amounts that follow:

2016 2015 ($) ($)

Audit fees 1,014,000 902,000 Audit-related fees 80,000 90,000 Tax fees 261,000 282,000 All other fees 80,000 10,000 Total 1,435,000 1,284,000

Audit fees. These amounts represent fees paid for the audit of the Corporation’s annual consolidated financial statements and the review of its quarterly financial statements. They consist of fees also related to services that an independent auditor would customarily provide in connection with statutory requirements, regulatory filings, and similar engagements for the fiscal year, such as comfort letters, consents, and assistance with review of documents filed with securities regulatory authorities. In addition, audit fees included the cost of translation of various continuous disclosure documents of the Corporation. Audit-related fees. Audit-related fees were paid for assurance and related services that are performed by Deloitte and are not reported under the audit fees item above. These fees are for services not required by statute or regulations. These services consisted primarily of employee pension plan audits and other special purpose mandates approved by the Audit Committee. Tax fees. These fees consist of two categories: (i) tax compliance and preparation fees; and (ii) tax advice and planning fees and other special purpose mandates approved by the Audit Committee. All Other Fees. These fees consist of consulting services. The Audit Committee has determined that Deloitte’s provision of non-audit services was compatible with maintaining Deloitte’s independence. The Audit Committee of the Corporation has adopted a policy regarding the engagement of Deloitte for non-audit services. Deloitte provides audit services to the Corporation and is also authorized to provide specific audit-related services as well as tax services. Deloitte may also provide other services provided, however, that all such services are pre-approved by the Chairman of the Audit Committee and that such engagement is confirmed by the Audit Committee at its immediately following meeting. The policy also specifically prohibits the provision of certain services by Deloitte in order to maintain its independence. Additional information relating to the Audit Committee can be found in the section “Audit Committee” of the AIF available on the Corporation’s website at www.corporate.yp.ca and on SEDAR at www.sedar.com.

GENERAL The Directors know of no matter to come before the Meeting other than the matters referred to in the accompanying Notice of the Meeting.

SHAREHOLDER PROPOSALS FOR THE 2018 ANNUAL GENERAL MEETING The Corporation will include proposals from Shareholders that are received by the Corporation within the prescribed time period and that comply with applicable laws in the Management proxy circular for the Corporation’s 2018 annual general meeting. Please send your proposals to the Secretary of the Corporation at 16 Place du Commerce, Nun’s Island, Verdun, Québec, Canada, H3E 2A5 by no later than December 22, 2017.

ADDITIONAL INFORMATION The Corporation is required under applicable Canadian securities laws to file various documents, including an annual information form and annual and quarterly financial statements. Financial information is provided in the Corporation’s comparative financial statements and Management’s discussion and analyses for its most recently completed financial year. Copies of these documents and additional information relating to the Corporation are available on SEDAR at www.sedar.com or may be obtained from the Secretary of the Corporation, upon request at 16 Place du Commerce, Nun’s Island, Verdun, Québec, Canada, H3E 2A5.

APPROVAL OF DIRECTORS The contents and the mailing to the Shareholders of this Proxy Circular have been approved by the Board of Directors. Dated March 22, 2017. By order of the Directors of Yellow Pages Limited

(signed) Robert F. MacLellan Chairman of the Board

YELLOW PAGES LIMITED PROXY CIRCULAR 61 SCHEDULE “A”: DISCLOSURE OF CORPORATE GOVERNANCE PRACTICES

CORPORATE GOVERNANCE GUIDELINES The Corporation is committed to adhering to highly effective standards in its corporate governance practices, to the periodic review of its governance practices and the inclusion of those practices, as constructive and appropriate, in the governance processes of the Corporation. The Board has adopted certain corporate governance guidelines (the “Corporate Governance Guidelines”). The purpose of the Corporate Governance Guidelines is to assist the Board in the exercise of its responsibilities and to serve the best interests of the Corporation and its Shareholders. These Corporate Governance Guidelines are intended to serve as a transparent, flexible and pragmatic framework within which the Board may operate to guide the Corporation in making the right choices. The Corporate Governance Guidelines are available on the Corporation’s website at www.corporate.yp.ca. The Corporation’s corporate governance practices fully comply with the disclosure and listing requirements of the TSX and with applicable Canadian legislation and related regulations of the CSA. The Board annually reviews the Corporate Governance Guidelines with a view to continuously improving the Corporation’s corporate governance practices by assessing their effectiveness and comparing them with evolving best practices, standards identified by leading governance authorities and the Corporation’s changing circumstances and needs. The following constitutes the Corporation’s disclosure of its corporate governance practices and is made pursuant and with reference to National Policy 58-201 – Corporate Governance Guidelines and National Instrument 58-101 – Disclosure of Corporate Governance Practices which have been adopted by the CSA.

ROLE OF THE BOARD The mandate of the Board is to oversee the conduct of the Corporation’s business and to supervise Management. The Board establishes the overall policies for the Corporation, monitors and evaluates the Corporation’s strategic direction and retains plenary power for those functions not specifically delegated by it to its committees or to Management. The Board is the ultimate leadership body which gives direction to the Corporation’s business by striking balances between internal and external factors. As part of its stewardship responsibility, the Board advises Management on significant business issues. The Board discharges its responsibilities either directly or through its three committees (each, a “Committee”). See “Risk Oversight” below. The Board works with Management to develop the strategy of the Corporation and holds a special strategic planning meeting at least once a year. Management and the Board also discuss the main risks facing the Corporation, competitive landscape and corporate opportunities. The charter of the Board is attached herewith as Appendix A and the charter of the Audit Committee is attached as Schedule A to the AIF, which is available on SEDAR at www.sedar.com. These charters, as well as the charters of the Human Resources and Compensation Committee and the Corporate Governance and Nominating Committee, are available on the Corporation’s website at corporate.yp.ca/en/digital-media- company/governance/overview.

BOARD STRUCTURE AND OPERATIONS The Corporate Governance and Nominating Committee is responsible for advising the Board on the appropriate size of the Board and its Committees to ensure effective decision-making as appropriate within the limits of the constituting documents of the Corporation. The Directors are elected annually by the Shareholders and constitute the Board, together with those appointed to fill vacancies or appointed as additional Directors throughout the year. The Board meets at least five times per year and may meet more often if required. Meetings of the Board may be convened at the request of any member of the Board. To the extent feasible, Board meetings are scheduled sufficiently in advance in order to maximize Director participation. Directors are expected to provide sufficient time to devote to the affairs of the Corporation and make themselves available for such meetings and strive for perfect attendance at Board meetings. Directors are expected to attend in person all meetings (other than conference call meetings) of the Board and Committees on which they serve. Additionally, Directors are required to prepare thoroughly for each Board and Committee meeting by reviewing the relevant materials, understanding and remaining up-to-date in connection with the Corporation’s operations and the major trends in the business sector in which the Corporation operates and continually expanding on such knowledge. Directors are asked to notify the Corporation if they are unable to attend, and attendance at meetings is duly recorded. Moreover, the independent Directors have the ability to hold meetings at which non-independent Directors and members of Management are not in attendance. Financial and other relevant information is made available to Directors several days before or sufficiently in advance of scheduled Board and Committee meetings to facilitate Directors’ preparation for meetings. Apart from the President and Chief Executive Officer who is a member of the Board and participates in such capacity, the Board invites other members of Management to attend parts or all of Board meetings (other than during in-camera sessions) for reporting and informational purposes. The independent Directors meet in camera at every Board and Committee meeting without any member of Management present to ensure free and open discussion amongst themselves.

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POSITION DESCRIPTION CHAIRMAN OF THE BOARD AND CHAIRS OF THE BOARD COMMITTEES The Chairman of the Board is appointed by resolution of the Board among the Board members each year for a one-year term (except when a vacancy is being filled) and takes effect immediately following the annual general meeting of Shareholders. Robert F. MacLellan, an independent Director, has been serving as Chairman of the Board since December 20, 2012. It is the Corporation’s policy that the position of Board Chair be separate from that of the President and Chief Executive Officer. The responsibilities of the Chairman of the Board are set out in a position description which provides that the Chairman of the Board, in addition to being an independent Director, is expected to provide leadership to the Board and to set the tone for the Board and the Directors to foster effective, ethical and responsible decision-making by them. Among other things, the Chairman of the Board presides at meetings of the Board and generally oversees Board direction and administration, ensuring that the Board works as a cohesive team, builds a strong governance culture and carries out its duties. The Chairman acts as liaison between the Board and Management, provides advice and counsel to the President and Chief Executive Officer, Committee Chairs and fellow Directors. The Chairman of the Board works with the President and Chief Executive Officer and senior Management to monitor progress on strategic planning and implementation. The Board has also developed written position descriptions for the Chairs of each standing Board Committee. See “Committees of the Board – Corporate Governance and Nominating Committee”, “Committees of the Board – Human Resources and Compensation Committee” and “Committees of the Board – Audit Committee” below.

PRESIDENT AND CHIEF EXECUTIVE OFFICER The Board has developed and approved a position description for the President and Chief Executive Officer. The President and Chief Executive Officer is responsible for providing leadership in setting the vision and developing the strategic plan of the Corporation in conjunction with the Board. Subject to the Board’s approval, the President and Chief Executive Officer also ensures the implementation of the objectives and of the strategic plan adopted by the Board and reports to the Board in a timely manner on deviations from the strategic plan or any parameters established by the Board. The President and Chief Executive Officer is also responsible for leading the transformation of the Corporation into an industry-leading, digitally-focused organization. He must provide operational leadership and vision in the management of the Corporation’s operations with a view of improving its financial performance, related share price appreciation and long-term shareholder value. It is also his duty to run an effective and efficient organization, addressing emerging issues that impact the future direction of the Corporation and preparing it to meet the challenges presented by new trends and development in the market. Finally, he must manage and motivate the Corporation’s executives to achieve the strategic priorities established by the Board, oversee the quality and integrity of the management of the Corporation and “set the tone” for Management to foster ethical and responsible decision making as well as appropriate management and best-in-class corporate governance practices. The President and Chief Executive Officer is also responsible for evaluating the performance of executives for compliance with established policies and the Corporation’s objectives and evaluating their contributions in attaining objectives. Finally, he must communicate effectively the Corporation’s vision, values, strategy and business plan to internal and external stakeholders and ensure that sufficient information is provided to the Board to enable the Directors to form appropriate judgments.

INDEPENDENCE OF THE BOARD In order to maintain an independent Board at all times, it is the policy of the Board that all members other than the President and Chief Executive Officer be independent, as such term is defined in National Instrument 52-110 – Audit Committees of the CSA.

TERM LIMITS AND RETIREMENT The Board endorses the concepts of continuous renewal, the purposeful refreshing of experience, skill, and perspective that stimulates Board discussion and decision and has embedded them within the formal and informal governance processes of the Corporation. It is explicitly discussed as part of the annual assessment of Board effectiveness conducted by the Corporate Governance and Nominating Committee, and it is a continuous current of conversation in the less formal deliberations of the Board. Rather than imposing arbitrary term or age limits, the Board feels this approach provides a more dynamic and effective method for addressing the objective of continuous renewal. The Board does not believe that it is in the best interests of the Corporation to have a retirement policy for Directors at this time.

CHANGE IN DIRECTOR OCCUPATION The Corporate Governance Guidelines of the Corporation provide that a Director facing a material change in his or her professional circumstances should offer his or her resignation to the Corporate Governance and Nominating Committee which will make a recommendation as to whether it should decline or accept such Director’s proposed resignation.

MAJORITY VOTING POLICY The Board has a majority voting policy which requires that any nominee for a Director who receives a greater number of votes withheld than in favour of his or her election shall tender his or her resignation to the Chairman of the Board following the Corporation’s annual meeting. This policy applies only to uncontested elections, meaning elections that do not involve a proxy battle, i.e. where proxy material is circulated in support of one or more nominees who are not part of the Director nominees supported by the Board. The Corporate Governance and Nominating Committee shall be expected to recommend that the Board accept the resignation offer, except in exceptional circumstances. Further, the Board shall act on the Corporate Governance and Nominating Committee’s recommendation within ninety (90) days following the applicable annual meeting and shall accept the resignation offer, except in exceptional circumstances. The Board shall promptly disclose its election decision including the reasons for rejecting the resignation, if applicable, by press release, a copy of which shall be provided to the TSX. If a resignation is accepted, the Board may appoint a new Director to fill the vacancy created by the resignation. The majority voting policy complies with the recommendations issued by the Canadian Coalition for Good Governance on such matter and the rules of the TSX.

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RECRUITMENT OF DIRECTORS The Corporate Governance and Nominating Committee is responsible for developing and reviewing the criteria as well as establishing a process for selecting Directors by considering what competencies and skills the Board, as a whole, should have and by regularly assessing the competencies, skills, personal qualities, business background and diversified experiences of the Board as a whole and of each of the existing Directors. The Corporate Governance and Nominating Committee is also responsible for advising the Board on the appropriate size and composition of the Board and its Committees to ensure effective decision-making. The Board is committed to fostering a culture of diversity, inclusion and respect and has therefore adopted a Diversity Policy. The Board supports having a Board made up of highly qualified Directors from diverse backgrounds and experiences and who reflect the markets in which the Corporation operates, and the Corporation’s evolving customer and employee base. The Board believes that having a diverse Board benefits the Corporation by enabling the Board to consider issues from a variety of perspectives. Diversity can enhance effective decision making and strategic planning and improve productivity, creativity, quality, teamwork and decision making. Diversity and inclusion enrich employee experience, broaden thinking, and help compete, innovate and grow in the ever-evolving digital market. The Diversity Policy states that the Corporate Governance and Nominating Committee will take into account diversity considerations such as gender, age, national origin and ethnicity in addition to business skills, qualifications and career history when assessing potential candidates for nomination to the Board. In accordance with the Diversity Policy, the Corporate Governance and Nominating Committee also sets measurable objectives for achieving diversity and recommends them to the Board for adoption. In particular, through the adoption of the Policy, the Board committed to having women represent at least 30% of its independent members by 2019 and to have women represent at least 30% of the Corporation’s senior management team by 2019. As at March 22, 2017, 2 out of 10 (20%) of the Corporation’s independent Directors were women. As at March 22, 2017, 3 out of 16 members of the Corporation’s senior management team (19%) were women.

Percentage of Women by Percentage of Women as of Diversity Policy Targets 2019 March 22, 2017

Independent Directors of the Board 30% 20% Senior Management 30% 19%

The Board developed and maintains an evergreen list of Director candidates which is updated on a regular basis. When a Director is being recruited, the Corporate Governance and Nominating Committee initiates the process by seeking input and suggestions from the other Directors as to the competencies, skills, business acumen, profile, independence and personal qualities of candidates, including integrity, accountability and leadership and updating the review of the skills, qualities and competencies of the remaining Directors. The Corporate Governance and Nominating Committee, either by itself or with the assistance of the other Directors or a recruiting firm, identifies qualified candidates, assesses their competencies and skills and, after interviewing them, recommends nominees to the Board.

CODE OF ETHICS The Corporation has a Code of Ethics which sets out the guiding principles of the Corporation in all its operations and business practices. The Code of Ethics deals with such matters as personal integrity and ethics, general harassment and discrimination, customer, supplier and competitor relations, shareholder and media relations, integrity of records, the Corporation’s funds and property, outside employment and employment of relatives, confidentiality and intellectual property rights, conflicts of interest, insiders and material undisclosed information and political contributions, and addresses the issues prescribed by the Corporate Governance Guidelines. The Code of Ethics applies to all Directors, officers and employees of the Corporation. Each Director and employee of the Corporation must confirm annually that they have both read and complied with the requirements of the Code of Ethics. Management reports annually to the Corporate Governance and Nominating Committee on the implementation of, and compliance with, the Code of Ethics within the Corporation, and the Corporate Governance and Nominating Committee in turn reviews and reports to the Board on the subject. The Board may grant waivers of any provisions of the Code of Ethics to Directors or officers of the Corporation in certain circumstances provided they are disclosed in compliance with applicable legislation. No such waiver has been granted since the adoption of the Code of Ethics in 2004. A Director or officer of the Corporation must disclose to the Corporation in writing the nature and extent of any interest he or she has in an actual or proposed material contract or transaction and shall not vote on any resolution to approve the contract or the transaction, except in limited circumstances. Each Director must also disclose to the Board any direct or indirect interest he or she has in any entity and which could involve a conflict of interest. A questionnaire is distributed annually to each Director so as to ensure that such interests and conflicts of interests are disclosed, if any. In situations where an entity in which a Director has an interest is either discussed or is the subject of a decision, the Board will request that the Director not partake in any such decision or discussion and refrain from voting. The Code of Ethics is available on the Corporation’s website at corporate.yp.ca/en/digital-media-company/governance/code-of-ethics.Itmay also be obtained upon request from the Secretary of the Corporation at its head office: 16 Place du Commerce, Nuns’ Island, Verdun, Québec, H3E 2A5, telephone: 1-877-440-4849.

EXECUTIVE SUCCESSION PLANNING Each year, the Board formally reviews in detail and discusses executive succession planning extensively with the President and Chief Executive Officer. More particularly, the Board, with assistance from the Human Resources and Compensation Committee, reviews the succession plan status for all executive officers and assesses whether there is readiness to fill potential vacancies, identifies the qualified individuals to fill

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such vacancies on either an immediate or normal course basis, determines whether there are any gaps in readiness as well as how the executive succession planning process can be improved. The Board also focuses specifically on the succession of the President and Chief Executive Officer as well as development considerations for each potential successor candidate and the performance of individual executives in their current roles. In addition, the Board holds an annual in-camera meeting with the President and Chief Executive Officer to review the performance and status of each of the President and Chief Executive Officer’s direct reports. The Board also meets with members of the executive Management team and key staff members through their participation in meetings and presentations to the Board and informally through a few social events during the year, which allows Board members to become familiar and interact with members of Management who are potential future leaders of the Corporation. The Board’s practice is to invite high-potential executives to quarterly Board dinners, which allows advancing the succession planning in a less formal way. As a result of this active succession planning process, in 2016, all of the senior leadership openings were filled by qualified internal candidates who had been developed for the promotions they received.

COMMITTEES OF THE BOARD The Board has three standing Committees: the Corporate Governance and Nominating Committee, the Human Resources and Compensation Committee, and the Audit Committee. The Committees consist only of independent Directors within the meaning of National Instrument 52-110 – Audit Committees of the CSA.

CORPORATE GOVERNANCE AND NOMINATING COMMITTEE The Corporate Governance and Nominating Committee has a formal written charter available on the Corporation’s website at corporate.yp.ca, setting out its structure, its duties and responsibilities. These include, among other things, monitoring the size and composition of the Board and the Committees overseeing compliance with the Corporation’s Diversity Policy, developing and reviewing criteria as well as establishing a process for selecting Directors, identifying candidates qualified to become Directors, developing and monitoring appropriate processes for the periodic performance and effectiveness assessment of the Board, its Committees as well as the Board and Committee chairs and individual Directors, reviewing and making recommendations on Director compensation, developing and reviewing corporate governance principles applicable to the Corporation, developing for approval by the Board and overseeing the disclosure of the Code of Ethics and developing and reviewing orientation and continuing education programs for Directors. The responsibilities of the Chairman of the Corporate Governance and Nominating Committee are set out in a position description which provides that the Chairman of the Committee presides at meetings of the Committee, ensures the efficiency of the Committee and that the Committee carries out its duties. The Chairman of the Corporate Governance and Nominating Committee also acts as liaison between the Committee and the Board.

HUMAN RESOURCES AND COMPENSATION COMMITTEE The Human Resources and Compensation Committee has a formal written charter available on the Corporation’s website at www.corporate.yp.ca, requiring that all of its members have direct experience related to the management of executive compensation and relevant to their responsibilities. Furthermore, the Charter of the Human Resources and Compensation Committee sets out its structure, duties and responsibilities which include, among other things, setting the compensation of the President and Chief Executive Officer of the Corporation and the senior executives of the Corporation, assessing annually the performance of the President and Chief Executive Officer against the specific performance goals and objectives determined by the Board, recommending to the Board the appointment of senior management and reviewing with the President and Chief Executive Officer their annual performance assessment, designing, establishing and overseeing the Corporation’s executive compensation philosophy, ensuring that appropriate processes are in place regarding succession planning, overseeing the long-term incentive plans of the Corporation and reviewing any compensation disclosure before public dissemination. The responsibilities of the Chair of the Human Resources and Compensation Committee are set out in a position description which provides that the Chair of the Committee presides at meetings of the Committee, ensures the efficiency of the Committee and that the Committee carries out its duties. The Chair of the Human Resources and Compensation Committee also acts as liaison between the Committee and the Board. The Human Resources and Compensation Committee is responsible for assisting the Board in discharging its responsibilities relating to the hiring, assessment, compensation and succession planning of executive and other human resources. In addition, the Human Resources and Compensation Committee is responsible for overseeing risks associated with the Corporation’s compensation policies and practices, as further described under the section “Executive Compensation – Discussion and Analysis – Determining Compensation – Compensation Decision Process and Risk Management”.

AUDIT COMMITTEE The Audit Committee has a formal written charter available on the Corporation’s website at corporate.yp.ca, setting out its structure, duties, mandate and responsibilities, and requiring that each member be financially literate as defined in National Instrument 52-110 – Audit Committees as having the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation’s financial statements. Such charter, as well as other information relating to the Audit Committee, can also be found in the section “Audit Committee” of the Corporation’s AIF available on the Corporation’s website at corporate.yp.ca and on SEDAR at www.sedar.com. The responsibilities of the Chairman of the Audit Committee are set out in a position description which provides that the Chairman of the Audit Committee presides at meetings of the Audit Committee, ensures the efficiency of the Audit Committee and that the Audit Committee carries out its duties. The Chairman of the Audit Committee also acts as liaison between the Committee and the Board.

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The Audit Committee oversees the financial reporting, accounting systems and internal controls of the Corporation. As a measure of overseeing and managing risks, the Audit Committee reviews the risk assessment reports conducted by the internal auditor and external consultants. Once the reports are reviewed by the Audit Committee, the list of deficiencies is communicated to business owners, who then are responsible to correct and implement controls to mitigate any negative effect these deficiencies can have on the Corporation. The Internal Auditor is charged with following up and ensuring timely correction of any such deficiencies identified by the internal audit reports. The Audit Committee has established a whistle-blowing policy, the Policy on Reporting of Concerns, which provides for the confidential and anonymous submission to a third party service provider of complaints and concerns regarding improper practices or questionable acts which might adversely affect the integrity of the Corporation, including for auditing, accounting or internal control matters (“Accounting Matters”). Under these procedures, any complaint or concern submitted regarding Accounting Matters will be communicated to the Chairman of the Audit Committee who will be involved in its resolution. The Audit Committee reviews quarterly reports from the Corporation’s Ethics Committee which is responsible for addressing all issues reported through the Policy on Reporting of Concerns, including those not related to Accounting Matters. The Senior Vice-President, Corporate Affairs and General Counsel, the Chief Operating Officer and the Internal Auditor serve on the Ethics Committee of the Corporation.

RISK OVERSIGHT Over the last few years, Management, the Board and Board committees have been devoting time identifying, managing, reporting and mitigating risk. The table below shows how the Board and its committees and Management manage and monitor risk across the organization:

Board of Directors Committees Management Overall responsibility for risk oversight and strategic Audit Committee Overall responsibility for strategic business and business risks operational risks Monitors financial risks, namely through the Financial Risk Policy and the Statement of Investment Policies and Procedures, and with the assistance of the internal auditor through internal audits Human Resources and Compensation Committee Oversees compensation risk, talent management risk and succession risk Corporate Governance and Nominating Committee Oversees governance and supports risk management by establishing policies such as the Code of Ethics

In 2016, Management conducted an enterprise risk assessment that involved a broad, systematic approach to identifying, assessing, reporting and managing the significant risks the Corporation faces in its business and operations. A risk map identifying risk areas was developed. Risk evaluation criteria for the impact and the probability of occurrence were defined in collaboration with risk owners, considering the risk levels appropriate for the Corporation. Finally, an enterprise risk report was prepared to be used as input during strategic planning sessions.

STRATEGIC PLANNING OVERSIGHT The Board works with Management to develop the Corporation’s strategic direction. In 2014, Management developed the Return to Growth Plan, a long-term strategy designed to accelerate the Corporation’s digital transformation and help it gain a leadership position within Canada’s local digital advertising market. The Corporation’s strategic planning process consists of five elements: a) executing upon and monitoring progress on the Return to Growth Plan; b) updating the Return to Growth Plan; c) setting annual corporate objectives; d) establishing annual budgets; and e) reviewing the strategic plan periodically and revising it based on the Corporation’s progress and changing market conditions. Management is responsible for preparing these five elements and presenting it to the Board for discussion and approval. The Board is actively involved in the strategic planning process and holds several strategic planning sessions with Management every year, including quarterly updates and a multi-day session in the Fall for more in-depth discussion and analysis. Management and the Board discuss the main risks facing the Corporation’s business, strategic issues, competitive developments and corporate opportunities. In addition to these special meetings focused on strategic planning, Management also presents strategic issues to the Board throughout the year. The President and Chief Executive Officer updates the Board on the execution of the Corporation’s plan at every regularly-scheduled Board meeting. The Board also raises various issues and topics for discussion as part of the overall process. In November 2016, the Corporation announced that it had initiated a review of its business strategy. The Corporation anticipates communicating the outcome of this exercise and the accompanying strategy in May 2017.

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CHARTER OF THE BOARD OF DIRECTORS (THE “CHARTER”) OF YELLOW PAGES LIMITED (THE “CORPORATION”) AUTHORITY The Board of Directors of the Corporation (the “Board”) establishes the overall policies for the Corporation, monitors and evaluates the Corporation’s strategic direction, and retains plenary power for those functions not specifically delegated by it to its Committees or to management. Accordingly, consistent with the duties of Directors pursuant to the Canada Business Corporations Act, the mandate of the Board is to supervise, the management of the business and affairs of the Corporation with a view to its best interests, and in determining whether it is doing so, the Board may consider the interests of shareholders and other stakeholders. Management’s role is to conduct the day-to-day operations in a way that will meet this objective. From time to time, the Board may formally adopt and review mandates for its Committees and may, in addition, delegate certain tasks to its Committees. However, such mandates and delegation of tasks do not relieve the Board of its overall responsibilities. The Board shall have unrestricted access to the Corporation’s personnel, documents and external auditors and will be provided with the resources necessary to carry out its responsibilities. The Board may engage outside advisors at the expense of the Corporation in order to assist the Board in the performance of its duties and set and pay the compensation for such advisors. Individual Directors may engage outside advisors at the expense of the Corporation to assist them in the performance of their duties with the prior approval of the Chairperson of the Corporate Governance and Nominating Committee of the Board. Nothing contained in this Charter is intended to expand applicable standards of liability under statutory or regulatory requirements for the Directors of the Corporation. Members of the Board are entitled to rely, absent knowledge to the contrary, on: (i) the integrity of the persons and organizations from whom they receive information; and (ii) the accuracy and completeness of the information provided. STRUCTURE 1. Directors are elected annually by the shareholders of the Corporation and together with those appointed to fill vacancies or appointed as additional Directors throughout the year, collectively constitute the Board of Directors of the Corporation. 2. The Board is composed of a majority of individuals who qualify as independent Directors (as defined under applicable securities laws). The composition of the Board, including the qualification of its members, shall otherwise comply with the constituting documents of the Corporation as well as other applicable legislation, rules and regulations. 3. The Chairperson of the Board shall be an independent Director (as defined under applicable securities laws) and be appointed by resolution of the Board having considered the recommendation of the Corporate Governance and Nominating Committee, from among the members of the Board to hold office from the time of his/her appointment until the next annual general meeting of shareholders or until his/her successor is so appointed. The Secretary of the Corporation (or his nominee) will act as the Secretary of the Board. 4. The Board shall meet at least once each quarter and may meet more often if required. Meetings of the Board may be convened at the request of any member of the Board. In addition, a special meeting of the Board shall be held, at least annually, to review the Corporation’s strategic plan. All Board meetings can be held by telephone or by any other means which enables all participants to communicate with each other simultaneously. 5. The independent Directors should hold regularly scheduled meetings at which non-independent Directors and members of management are not in attendance. 6. The provisions of the Articles and By-laws of the Corporation that regulate meetings and proceedings shall govern Board meetings. 7. At each regularly scheduled meeting, the Board shall meet privately and in separate in camera sessions with any other internal personnel or outside advisors, as needed or appropriate. 8. The Board may invite from time to time such persons as it may see fit to attend its meeting and to take part in discussion and consideration of the affairs of the Board. 9. The Chairperson shall approve the agenda for the meetings and ensure that supporting materials are properly prepared and circulated to members with sufficient time for study by Board members prior to meetings. 10. The minutes of the Board meetings shall accurately record the significant discussions of and decisions made by the Board and shall be distributed to the Board members, with copies to the Chief Executive Officer of the Corporation (“CEO”), the Chief Financial Officer of the Corporation and the external auditors.

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RESPONSIBILITIES OF THE BOARD As part of its stewardship responsibility, the Board provides guidance and direction to management on significant business issues and, either directly or through its Committees, is responsible for performing the following duties and shall take into account the recommendations of its Committees, as applicable. 1. Providing independent effective leadership to supervise the management of the Corporation’s business and affairs to grow value responsibly in a profitable and sustainable manner. The Board shall institute procedures to ensure that the Board and the Board Committees function independently of management. 2. Reviewing and approving, at the beginning of each fiscal year, the business plan, capital budget and financial goals of the Corporation, policies and processes generated by management relating to the authorization of major investments and significant allocation of capital, as well as engaging in meaningful review of longer term strategic plans prepared and elaborated by management and, throughout the year, monitoring the achievement of the objectives set and, if advisable, approving any material amendments to, or variances from, these plans. 3. Reviewing, considering and approving, if applicable, recommendations of any special committee of Directors established by the Board. 4. Reviewing and approving all securities continuous disclosure filings such as the Annual Report (including the audited financial statements of the Corporation), Proxy Circular, and Annual Information Form. 5. Ensuring that it is properly informed, on a timely basis, of all important issues (including environmental, cash management and business development issues), emerging trends and other developments involving the Corporation and its business environment. 6. In accordance with the Schedule of Authority of the Corporation, approve all major corporate decisions as well as any transaction out of the ordinary course of business, including proposals on mergers, acquisitions or other major investments or divestitures. 7. Identifying, with management, the principal risks and opportunities related to the Corporation’s business as well as ensuring that systems are put in place and evaluated on a regular basis to manage these risks and exploit these opportunities in a timely fashion. 8. Satisfying itself as to the integrity of the CEO and other senior officers and that the CEO and other senior officers create a culture of integrity throughout the Corporation. 9. Reviewing periodically the relationship between management and the Board, particularly in connection with a view to ensuring effective communication and the provision of information to Directors in a timely manner. 10. Receiving reports from the Corporate Governance and Nominating Committee regarding breaches of the Code of Ethics of the Corporation and reviewing investigations and any resolutions of complaints received under the Code of Ethics of the Corporation. 11. Considering what competencies and skills the Board as a whole should possess, assessing what competencies and skills each existing Director possesses and considering the appropriate size of the Board. These specific responsibilities may be delegated by the Board to the Corporate Governance and Nominating Committee. 12. Choosing the CEO and otherwise ensuring proper succession planning, including appointing, training and monitoring of the Chairperson and senior executives. 13. Reviewing, considering and approving, if applicable, recommendations of any of its Committees, including the Human Resources and Compensation Committee’s assessment of the performance of the CEO and senior executives. 14. Adopting and reviewing at least annually, including with reference to the guidance set out in National Policy 51-201 – Disclosure Standards,the Corporation’s overall policy with respect to disclosure and communication, including measures for receiving feedback from the Corporation’s stakeholders, and management’s compliance with such policy. 15. Monitoring investor relations programs and communications with analysts, the media and the public. 16. Developing the Corporation’s approach to corporate governance, including adopting and enforcing good corporate governance principles and practices. 17. Ensuring the integrity of the Corporation’s internal controls over financial reporting, management information systems, disclosure controls and procedures and financial disclosure. 18. With the help of the Corporate Governance and Nominating Committee, approving the list of Board nominees for election by shareholders and overseeing the development and implementation of the Director orientation program and continuing education program. 19. Establishing Board Committees and defining their mandates to assist the Board in carrying out its duties and responsibilities. 20. Adopting measures including any of those referred to herein, for receiving feedback from and communicating with shareholders and other stakeholders and providing for appropriate disclosure of the measures as may be required by law or regulation. 21. Reviewing this Charter annually and recommending and implementing changes as appropriate. The Board shall ensure that processes are in place to annually evaluate the performance of the Board, the Committees and individual Directors with a view to the effectiveness, contribution and independence of the Board and its members. 22. Reviewing annually the Charters for each Committee of the Board, together with the position descriptions of each of the Chairperson, the CEO and the chairs of each Board Committee, to ensure the compliance with any applicable rules or regulations and approving any modifications to such items as considered advisable.

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COMMUNICATION WITH THE BOARD Shareholders and other stakeholders may communicate with the Board and individual members by contacting the office of the Secretary as it is otherwise provided on the website of Yellow Pages Limited (www.corporate.yp.ca). Such process shall allow any shareholder and other stakeholder to communicate directly by mail, facsimile or e-mail. The Secretary shall report periodically to the Board or any Committee to which this responsibility is delegated on any valid concerns expressed by shareholders and other stakeholders. RESPONSIBILITIES OF DIRECTORS The following constitutes a non-exhaustive list of the personal competencies and values that are expected of each Director of the Corporation and which each Director of the Corporation should demonstrate in the performance of his or her duties. 1. Experience, competencies and background in order to make a significant contribution to the Board and its Committees and a clear understanding of their role and duties as Directors of a publicly held issuer. 2. Act honestly and in good faith and demonstrate high integrity, ethical and fiduciary standards, in particular those set forth in the Canada Business Corporations Act and the Code of Ethics of the Corporation. 3. Act independently of management including being willing to take a stand, even if it is contrary to prevailing opinion. 4. Ability to express their point of view in an objective, logical and persuasive manner and to propose new ideas in line with the strategies and objectives of the Corporation. 5. Ability and willingness to work as a team with all Board and Committees members in an effective and productive manner. 6. Provide independent judgment and wise and thoughtful advice on a wide range of issues. 7. Provide sufficient time to devote to the affairs of the Corporation and make all reasonable efforts to attend all Board meetings and any meetings of Committees of which he or she is a member, and where attendance is not possible, make reasonable efforts to inform themselves of significant matters dealt with at such meetings. 8. Prepare thoroughly for each Board and Committee meeting by reviewing the materials provided and request, as appropriate, clarification or additional information in order to fully participate in Board deliberations, make informed business judgments and exercise effective oversight. 9. Understand the Corporation’s current corporate governance policies and practices, this Charter, Board policies and the Charters of Committees of the Board on which he or she serves, within a reasonable time of joining the Board. 10. Understand the Corporation’s operations and the major trends in the business sector in which the Corporation operates, within a reasonable time of joining the Board and continually expand this knowledge. 11. A high level of financial literacy, including the ability to read financial statements and use financial ratios and other indices to evaluate the Corporation’s performance. 12. Maintain agreed upon level of equity investment in the Corporation to ensure proper alignment with its long-term interests. RESPONSIBILITIES OF THE CHAIRPERSON OF THE BOARD The Chairperson’s responsibilities include the following, in addition to the Chairperson’s responsibilities pursuant to applicable legislation and the Corporation’s Articles and By-laws as well as those which may be assigned to him/her from time to time by the Board: 1. presiding at meetings of shareholders and of the Board; 2. providing leadership to enhance Board effectiveness and focus and ensuring that the Board’s agenda will enable it to successfully carry out its duties; 3. acting as liaison between the Board and management; 4. assisting in representing the Corporation to external groups; and 5. acting as liaison between the Board and its Committees. In addition, the Chairman of the Board is an ex officio member of all Committees of the Board.

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RESPONSIBILITIES OF THE PRESIDENT AND CHIEF EXECUTIVE OFFICER The CEO’s responsibilities include the following, in addition to the CEO’s responsibilities pursuant to the Corporation’s Articles and By-laws as well as those which may be assigned to him/her from time to time by the Board: 1. Provide leadership in setting the vision and developing the strategic plan of the Corporation in conjunction with the Board and subject to the Board’s approval; 2. Ensure the implementation of the objectives and strategic plan adopted by the Board and report to the Board in a timely manner on deviations from the strategic plan or any parameters established by the Board; 3. Lead the transformation of Yellow Pages Digital & Media Solutions Limited (“YP”) into an industry-leading, digitally-focused media and marketing solutions organization; 4. Provide operational leadership and vision in the management of YP’s operations with a view of improving the Corporation’s financial performance, related share price appreciation and long-term shareholder value; 5. Run an effective and efficient organization, addressing emerging issues that impact the future direction of YP and preparing YP to meet the challenges presented by new trends and development in the market; 6. Manage and motivate the Corporation’s executives to achieve the strategic priorities established by the Board; 7. Oversee the quality and integrity of the management of the Corporation and “set the tone” for management to foster ethical and responsible decision making as well as appropriate management and best-in-class corporate governance practices; 8. Evaluate performance of executives for compliance with established policies and the Corporation’s objectives and evaluate their contributions in attaining objectives; 9. Communicate effectively the Corporation’s vision, values, strategy and business plan to internal and external stakeholders; and 10. Ensure that sufficient information is provided to the Board to enable the Directors to form appropriate judgments.

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