##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F



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



Commission file number: 333-13860



YELL FINANCE B.V.

(Registrant)



Yellow Pages Limited

(Additional Registrant)

(Exact name of Registrants as specified in their charters)



THE NETHERLANDS

(Jurisdiction of
incorporation or organization of Registrant)



ENGLAND AND
WALES

(Jurisdiction of incorporation or organization of Additional Registrant)



QUEENS WALK, OXFORD ROAD

READING, BERKSHIRE RG1 7PT

UNITED
KINGDOM

(Address of principal executive offices)



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



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  | None                                     



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

None

(Title of Class)



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

10
3⁄4% Senior Sterling Notes due 2011

10 3⁄4% Senior Dollar Notes due 2011

13 1⁄2% Senior Discount Dollar Notes due 2011

Guarantee relating to the Senior Sterling Notes, Senior Dollar Notes and Senior Discount Dollar Notes

(Title of Class)



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



350 ordinary shares of 100 each



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



x Yes ̈No



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



 ̈Item 17    x Item 18



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TABLE OF CONTENTS



|          |  |                                                                              |  |     
|--------- |  | ---------------------------------------------------------------------------- |  | ----
|          |  |                                                                              |  | Page
|          |  | PART I                                                                       |  |     
|ITEM 1.   |  | Identity of Directors, Senior Management and Advisers                        |  | 2   
|ITEM 2.   |  | Offer Statistics and Expected Timetable                                      |  | 2   
|ITEM 3.   |  | Key Information                                                              |  | 2   
|ITEM 4.   |  | Information on the Company                                                   |  | 14  
|ITEM 5.   |  | Operating and Financial Review and Prospects                                 |  | 40  
|ITEM 6.   |  | Directors, Senior Management and Employees                                   |  | 56  
|ITEM 7.   |  | Major Shareholders and Related Party Transactions                            |  | 81  
|ITEM 8.   |  | Financial Information                                                        |  | 82  
|ITEM 9.   |  | The Offer and Listing                                                        |  | 82  
|ITEM 10.  |  | Additional Information                                                       |  | 83  
|ITEM 11.  |  | Quantitative and Qualitative Disclosures About Market Risk                   |  | 96  
|ITEM 12.  |  | Description of Securities Other than Equity Securities                       |  | 96  
|          |  |                                                                             
|          |  | PART II                                                                      |  |     
|ITEM 13.  |  | Defaults, Dividend Arrearages and Delinquencies                              |  | 97  
|ITEM 14.  |  | Material Modifications to the Rights of Security Holders and Use of Proceeds |  | 97  
|ITEM 15.  |  | Controls and Procedures                                                      |  | 97  
|ITEM 16.  |  | [Reserved]                                                                   |  | 97  
|ITEM 16A. |  | Audit Committee Financial Expert                                             |  | 97  
|ITEM 16B. |  | Code of Ethics                                                               |  | 97  
|ITEM 16C. |  | Principal Accountant Fees and Services                                       |  | 97  
|ITEM 16D. |  | Exemptions from the Listing Standards for Audit Committees                   |  | 98  
|ITEM 16E. |  | Purchases of Equity Securities by the Issuer and Affiliated Purchasers       |  | 98  
|          |  |                                                                             
|          |  | PART III                                                                     |  |     
|ITEM 17.  |  | Financial Statements                                                         |  | 99  
|ITEM 18.  |  | Financial Statements                                                         |  | 99  
|ITEM 19.  |  | Exhibits                                                                     |  | 99  
|          |  | Signatures                                                                   |  | 101 



1



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PART I



ITEM 1.    IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not applicable.



ITEM 2.    OFFER STATISTICS AND EXPECTED TIMETABLE



Not applicable.



ITEM 3.    KEY INFORMATION



BASIS OF PRESENTATION OF INFORMATION



Certain Definitions
and Presentation of Financial and Other Information



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



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



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



| |  |  | Yellow Book East are to Yellow Book LP, with respect to periods prior to and subsequent to BTs acquisition of the assets of Yellow Book USA, LP on 31 August 1999,
or the Yellow Book acquisition;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | NDC are to National Directory Company acquired on 31 December 2002;
| | - |  | ---------------------------------------------------------------------



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



| |  |  | Apax Partners are to each and any of Apax Partners Holding Ltd., its subsidiaries and Apax Partners, Inc;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Hicks Muse are to Hicks, Muse, Tate & Furst Incorporated;
| | - |  | -----------------------------------------------------------



| |  |  | the Former Sponsors are to Apax Partners and Hicks Muse, with respect to the acquisition of Yell from BT;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Former Sponsor Funds are to funds managed or advised by the Former Sponsors;
| | - |  | ------------------------------------------------------------------------------



| |  |  | financial year are to a given 12-month period ended on 31 March of the year; for example, the 2004 financial year refers to the 12 months ended 31 March
2004;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | United Kingdom and UK are to the United Kingdom of Great Britain and Northern Ireland;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | EU are to the European Union;
| | - |  | -------------------------------



| |  |  | United States and US are to the United States of America, its states, territories, possessions and all areas subject to its jurisdiction;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | pound sterling, pounds sterling, sterling and £ are to the lawful currency of the United Kingdom;
| | - |  | ---------------------------------------------------------------------------------------------------------



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



| |  |  | dollar, dollars, US$ and $ are to the lawful currency of the United States.
| | - |  | -----------------------------------------------------------------------------------



2



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



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



Market Share Information



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



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



Cautionary Statement Regarding Forward-Looking Information



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



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



| |  |  | our substantial leverage and our ability to meet our debt obligations;
| | - |  | ----------------------------------------------------------------------



| |  |  | further changes in our regulatory environment in the United Kingdom;
| | - |  | --------------------------------------------------------------------



| |  |  | our ability to continue to attract new advertisers;
| | - |  | ---------------------------------------------------



| |  |  | our ability to compete with other printed directories businesses; and
| | - |  | ---------------------------------------------------------------------



| |  |  | general local and global economic conditions.
| | - |  | ---------------------------------------------



We urge you to read Item 3.D. Key InformationRisk Factors, Item 4. Information on the Company and Item 5. Operating
and Financial Review and Prospects for a more complete discussion of the factors that could affect our future performance and the industries in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking
events described in this annual report may not occur.



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



3



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attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the cautionary
statements referred to above and contained elsewhere in this annual report.



A.    Selected Financial Data



Selected
Yell Group Financial Information



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



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



|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|--------------------------------------------------------------- |  | ------------------------- | - |  | ------------------------ | - |  | --------------------------- | - | ---- | ------------------------ | - | ---- | -------- | - |  | -------- | -
|                                                                |  | Combined (Predecessor)    |   |  | Consolidated (Successor) |  
|                                                                |  | Year ended or at 31 March |   |  | 1 April to22 June2001    |   |  | 22 June2001 to31 March 2002 |   |      | Year ended or at31 March |  
|                                                                |  | 2000                      |   |  | 2001                     |   |  |                             |   | 2003 |                          |   | 2004 |         
|                                                                |  | (in £ millions)           |   |  |                          |  
|UK GAAP                                                         |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Combined and Consolidated Condensed Profit and Loss Information |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Group turnover                                                  |  | 622.2                     |   |  | 774.3                    |   |  | 169.1                       |   |      | 696.3                    |   |      | 1,114.0  |   |  | 1,186.9  |  
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Group operating profit                                          |  | 193.1                     |   |  | 187.5                    |   |  | 32.9                        |   |      | 118.7                    |   |      | 183.4    |   |  | 150.4    |  
|Net interest payable                                            |  | (10.8                     | ) |  | (24.5                    | ) |  | (5.8                        | ) |      | (158.6                   | ) |      | (236.6   | ) |  | (194.5   | )
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Profit (loss) on ordinary activities before taxation            |  | 182.3                     |   |  | 163.0                    |   |  | 27.1                        |   |      | (39.9                    | ) |      | (53.2    | ) |  | (44.1    | )
|Tax (charge) credit on profit (loss) on ordinary activities     |  | (57.7                     | ) |  | (60.3                    | ) |  | (11.3                       | ) |      | (7.3                     | ) |      | 12.6     |   |  | (7.0     | )
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Profit (loss) for the financial year                            |  | 124.6                     |   |  | 102.7                    |   |  | 15.8                        |   |      | (47.2                    | ) |      | (40.6    | ) |  | (51.1    | )
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|EBITDA(1)                                                       |  | 210.8                     |   |  | 222.6                    |   |  | 42.7                        |   |      | 199.8                    |   |      | 304.3    |   |  | 270.0    |  
|                                                                |  |                           |   |  |                          |  
|Combined and Consolidated Condensed Balance Sheet Information   |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Current assets                                                  |  | 289.2                     |   |  | 390.4                    |   |  |                             |   |      | 528.3                    |   |      | 637.2    |   |  | 630.9    |  
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Total assets                                                    |  | 683.2                     |   |  | 864.3                    |   |  |                             |   |      | 2,200.9                  |   |      | 2,510.3  |   |  | 2,409.7  |  
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Creditors: amounts falling due within one year                  |  | (111.6                    | ) |  | (230.2                   | ) |  |                             |   |      | (200.1                   | ) |      | (348.7   | ) |  | (358.7   | )
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Net current assets                                              |  | 177.6                     |   |  | 160.2                    |   |  |                             |   |      | 328.2                    |   |      | 288.5    |   |  | 272.2    |  
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Total assets less current liabilities                           |  | 571.6                     |   |  | 634.1                    |   |  |                             |   |      | 2,000.8                  |   |      | 2,161.6  |   |  | 2,051.0  |  
|Loans and other borrowings falling due after more than one year |  | (206.6                    | ) |  | (239.8                   | ) |  |                             |   |      | (2,050.7                 | ) |      | (2,286.0 | ) |  | (1,987.1 | )
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Net assets (liabilities)/equity shareholders funds (deficit)   |  | 365.0                     |   |  | 394.3                    |   |  |                             |   |      | (49.9                    | ) |      | (124.4   | ) |  | 63.9     |  
|                                                                |  |                           |   |  |                          |   |  |                             |   |      |                          |   |      |          |   |  |          |  
|Other Financial Information Depreciation and amortisation       |  | (17.7                     | ) |  | (35.1                    | ) |  | (9.8                        | ) |      | (81.1                    | ) |      | (120.9   | ) |  | (119.6   | )
|Capital expenditure(2)                                          |  | (10.8                     | ) |  | (23.1                    | ) |  | (16.9                       | ) |      | (8.6                     | ) |      | (16.0    | ) |  | (24.5    | )
|Net cash inflow from operating activities                       |  | 190.6                     |   |  | 194.1                    |   |  | 37.6                        |   |      | 158.7                    |   |      | 309.1    |   |  | 253.5    |  



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|                                                                      |  |                               |   |  |                          |   |  |                             |   |  |                          |   |  |         |  
|--------------------------------------------------------------------- |  | ----------------------------- | - |  | ------------------------ | - |  | --------------------------- | - |  | ------------------------ | - |  | ------- | -
|                                                                      |  | Combined (Predecessor)        |   |  | Consolidated (Successor) |  
|                                                                      |  | Year ended orat 31 March 2001 |   |  | 1 April to22 June2001    |   |  | 22 June 2001to 31 March2002 |   |  | Year ended orat 31 March |  
|                                                                      |  |                               |   |  | 2003                     |   |  | 2004                        |  
|                                                                      |  | (in £ millions)               |  
|US GAAP Combined and Consolidated Profit and Loss Information         |  |                               |   |  |                          |   |  |                             |   |  |                          |   |  |         |  
|Net income (loss)                                                     |  | 84.8                          |   |  | (18.2                    | ) |  | (147.9                      | ) |  | (79.1                    | ) |  | (21.3   | )
|Adjusted net income (loss)(3)                                         |  | 159.9                         |   |  | (16.6                    | ) |  | (92.3                       | ) |  | (79.1                    | ) |  | (21.3   | )
|Combined and Consolidated Balance Sheet Information                   |  |                               |   |  |                          |   |  |                             |   |  |                          |   |  |         |  
|Total assets                                                          |  | 789.0                         |   |  |                          |   |  | 2,361.5                     |   |  | 2,647.4                  |   |  | 2,309.9 |  
|Total shareholders equity (deficit)                                  |  | 319.0                         |   |  |                          |   |  | (150.7                      | ) |  | (295.7                   | ) |  | (77.0   | )
|Other Financial Information Net cash provided by operating activities |  | 176.5                         |   |  | 28.8                     |   |  | 48.3                        |   |  | 143.8                    |   |  | 56.1    |  
|Net cash used in investing activities                                 |  | (72.0                         | ) |  | (16.9                    | ) |  | (1,890.9                    | ) |  | (486.9                   | ) |  | (139.2  | )
|Net cash (used in) provided by financing activities                   |  | (84.7                         | ) |  | 12.4                     |   |  | 1,942.7                     |   |  | 273.9                    |   |  | 74.3    |  



---

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



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



|(3) |  | Effective 1 April 2002, the Group prospectively adopted SFAS 142 for US GAAP reporting purposes, which eliminated the requirement to amortise goodwill. Adjusted net income (loss)
presents the prior periods net income (loss) after eliminating the effect of goodwill amortisation from 1 April 2000.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



5



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##### Table of Contents

Selected Unaudited Yell Group Operational Information



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



|                                                              |  |                          |  |       |  |      
|------------------------------------------------------------- |  | ------------------------ |  | ----- |  | -----
|                                                              |  | Year ended or at31 March
|                                                              |  | 2002                     |  | 2003  |  | 2004 
|Yell Group Operational Information                            |  |                          |  |       |  |      
|UK information                                                |  |                          |  |       |  |      
|Unique advertisers (thousands)(1)                             |  | 438                      |  | 451   |  | 480  
|Directory editions published(2)                               |  | 89                       |  | 94    |  | 99   
|Turnover per unique advertiser (pounds)                       |  | 1,234                    |  | 1,272 |  | 1,237
|Unique advertiser retention rate(%)(4)                        |  | 80                       |  | 78    |  | 77   
|US information                                                |  |                          |  |       |  |      
|Unique advertisers(thousands)(1)(3)                           |  | 166                      |  | 363   |  | 386  
|Directory editions published                                  |  | 272                      |  | 525   |  | 536  
|Turnover per unique advertiser(dollars)                       |  | 2,450                    |  | 2,135 |  | 2,434
|Unique advertiser retention rate (%)(4)                       |  | 70                       |  | 70    |  | 70   
|Other UK products and services                                |  |                          |  |       |  |      
|Yell.com page impressions for March (millions)                |  | 33                       |  | 39    |  | 67   
|Yell.com searchable advertisers as at 31 March (thousands)(5) |  | 56                       |  | 75    |  | 103  

| | 
| | 

| | (1) |  | Number of unique advertisers in printed directories that were recognised for turnover purposes and have been billed. Unique advertisers are counted once only, regardless of the
number of advertisements they purchase or the number of directories in which they advertise.
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



Currency and Exchange Rate Data



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



|                           |  |                 |  |        |  |           
|-------------------------- |  | --------------- |  | ------ |  | ----------
|                           |  | £1.00 = dollars
|Month and year             |  | High            |  | Low    |  | Period end
|November 2003              |  | 1.7219          |  | 1.6693 |  | 1.7219    
|December 2003              |  | 1.7842          |  | 1.7200 |  | 1.7842    
|January 2004               |  | 1.8511          |  | 1.7902 |  | 1.8215    
|February 2004              |  | 1.9045          |  | 1.8182 |  | 1.8575    
|March 2004                 |  | 1.8680          |  | 1.7943 |  | 1.8400    
|April 2004                 |  | 1.8564          |  | 1.7674 |  | 1.7744    
|May 2004                   |  | 1.8369          |  | 1.7544 |  | 1.8330    
|June 2004 (through 4 June) |  | 1.8387          |  | 1.8359 |  | 1.8367    
|                           |  |                 |  |        |  |           



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



|                                  |  |                
|--------------------------------- |  | ---------------
|Year ended 31 March               |  | £1.00 = dollars
|2000                              |  | 1.6084         
|2001                              |  | 1.4737         
|2002                              |  | 1.4320         
|2003                              |  | 1.5541         
|2004                              |  | 1.7051         
|1 April 2004 through 4 June 2004. |  | 1.7987         



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



B.    Capitalisation and Indebtedness



Not applicable.



C.    Reasons for the Offer and Use of Proceeds



Not applicable.



D.    Risk Factors



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



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



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



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



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an earlier distribution of directories during the year could result in recognition of turnover and costs in an earlier period as compared to the prior year,
making year-to-year comparisons more difficult. Finally, due to timing differences among the recognition of revenues and costs, the payment of costs and invoicing our advertisers, operating profit, EBITDA and other financial indicators generally
relied on by investors to evaluate a companys financial performance may not, in our case, reflect actual cash received or expended during a given period. See Operating and Financial Review and Prospects.



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



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



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



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



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



We have expanded in the United States through several acquisitions of classified directory publishers and new directory introductions or launches. As part
of our strategy, we actively evaluate and intend to continue from time to time to evaluate potential acquisitions, some of which may be material. While we currently have no agreement or understanding with any third party with respect to a material
acquisition, any future material acquisition may affect significantly the nature of an investment in our 103/4%
Senior Sterling Notes due 2011, 10 3/4% Senior Dollar Notes due 2011 and 13 1⁄2% Senior Discount Dollar Notes
due 2011 (collectively, the Notes). Further, any future new acquisitions, and recent and future directory launches will require the attention of our management and the diversion of other resources. We cannot assure you that we will be
able to identify, acquire, launch or profitably manage additional classified directory publishers or directory launches or successfully integrate such publishers without substantial costs, delays or other problems, if at all. In addition, we cannot
assure you that any companies acquired or directories launched will be profitable at the time of their acquisition or launch or that they will achieve levels of profitability that will justify the investment we made in them. We cannot assure you in
the case of acquisitions that we will successfully overcome disparities between our corporate strategies and cultures and those of the businesses we acquire in the future. We may also seek to expand into geographic areas where we currently have no
operations and where we may encounter cultural differences. In addition, we expect that we will encounter additional competitors pursuing acquisitions of classified directories businesses. These competitors may include the Regional Bell Operating
Companies, recently divested directory publishing businesses and smaller independent publishers with



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aggressive growth strategies. Our ability to expand our business in the future may be affected if we are unable to identify and consummate acquisitions and
integrate our acquisitions or directory launches successfully.



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



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



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



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



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



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



Additional regulation regarding information technology may increase our costs.



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



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



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



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against us if our data were found to be inaccurate, or if personal data stored by us were improperly accessed and disseminated by unauthorised persons.
Although we have not had any material claims relating to either defamation or breach of privacy to date, we may be party to litigation matters that could have a material adverse effect on our business, financial condition or results of operations or
otherwise distract our management.



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



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



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



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



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



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



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



Our substantial leverage could adversely affect our financial wellbeing.



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



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



| |  |  | our ability to obtain additional financing for working capital, capital expenditures or business opportunities may be impaired;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



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



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



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



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



| |  |  | borrow money;
| | - |  | -------------



| |  |  | use assets as security in other transactions;
| | - |  | ---------------------------------------------



| |  |  | make certain asset dispositions;
| | - |  | --------------------------------



| |  |  | make investments;
| | - |  | -----------------



| |  |  | enter into transactions with subsidiaries other than on arms-length terms; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | pay dividends or make other distributions.
| | - |  | ------------------------------------------



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



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



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



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



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



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



The Company, our parent, the guarantor and most of our subsidiaries are parties to an intercreditor deed with, among others, the lenders under the senior
credit facilities. The intercreditor deed contractually subordinates each of the Companys and the guarantors rights to receive payments from subsidiaries under intercompany loans to the subsidiaries obligations under the senior
credit facilities. In addition, prior to the time the senior credit facilities are repaid, the intercreditor deed prohibits our subsidiaries from making payments to the Company and guarantor except to fund interest due on the Notes, certain
permitted investor payments and administrative expenses. In the case of a default under the senior credit facilities, payments to the Company and guarantor from their



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subsidiaries, including payments under the Companys and the guarantors intercompany loans, will be suspended in the event of a payment default or
in the event of any other default if a blockage notice is issued by the senior facility agent under the senior credit facilities. These payments may be resumed when the default is cured, waived or ceases to exist, when any acceleration has been
rescinded or when the senior facility agent terminates the blockage notice. The intercreditor deed also provides that, in addition to the payment blockage, prior to the time the senior credit facilities are repaid, enforcement action may not be
taken by the Company or guarantor in relation to their intercompany loans without the consent of a majority of lenders under the senior credit facilities.



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



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



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



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



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



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



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



We are organised under the laws of the Netherlands. Dutch
insolvency laws differ significantly from insolvency proceedings in the United States and may make it more difficult for holders of the Notes to effect a restructuring of us or to recover the amount they would have recovered in a liquidation or
bankruptcy proceeding in the United States. There are two primary insolvency regimes under Dutch law; the first, moratorium of payment (surséance van betaling), is intended to facilitate the reorganisation of a debtors debts and
enable the debtor to investigate the possibilities for continuing its business as a going concern. The second, bankruptcy (faillissement), is primarily designed to liquidate and distribute the assets of a debtor to its creditors.



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



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



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



Fraudulent conveyance legislation is also in force in the Netherlands. Portions of the legislation provide generally that certain transactions with a creditor entered into voluntarily by the debtor are subject to
avoidance if both parties to the transaction know or should have known that the transaction would prejudice other creditors or that the debtor has previously made an application for bankruptcy. Knowledge that the transaction would prejudice other
creditors is presumed by law for all transactions performed within one year of the adjudication before bankruptcy or within one year before the date the claim of fraudulent conveyance is made, if it is also established that one of the conditions
mentioned in Article 43 of the Dutch Bankruptcy Act or, respectively, Article 46 of Book 3 of the Dutch Civil Code is fulfilled. These conditions include, but are not limited to, situations in which: (1) the value of the obligation of the debtor
materially exceeds the value of the obligation of the creditor, (2) the debtor pays or grants security for debts that are not yet due, (3) an agreement is made between legal entities or an obligation arises from one legal entity towards another if a
director of one of these legal entities is also a director of the other or (4) an agreement is made or an obligation would arise with a Group company. Accordingly, if a court of competent jurisdiction in a suit by an unpaid creditor of the Company
or a representative of such



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a creditor were to find that the issue of the Notes met the foregoing criteria, the court could avoid the Notes. A consequence of such avoidance could be the
subordination of claims of holders of the Notes to existing and possibly future debt of the Company. We cannot assure you as to what standards a court would apply to determine whether the Company was solvent at the relevant time or whether, whatever
standard was applied, the Notes would not be avoided on another of the grounds set forth above.



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



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



| |  |  | expenses of the relevant insolvency proceedings;
| | - |  | ------------------------------------------------



| |  |  | amounts owed under occupational pension schemes; and
| | - |  | ----------------------------------------------------



| |  |  | amounts owed to employees.
| | - |  | --------------------------



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



ITEM 4.    INFORMATION ON THE COMPANY



A.    History and Development of the Company



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



The Company was incorporated on 19 June 2001 as a private company with limited liability under the laws of the Netherlands with its registered office in Amsterdam, the Netherlands. Our principal offices are located at Queens Walk, Oxford
Road, Reading, Berkshire RG1 7PT, England, our telephone number is +44 (0) 118 959 2111, and our facsimile number is +44 (0) 118 950 9888.



14



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##### Table of Contents

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



Our business originated in 1966, when the General Post Office, a department of the UK Government and the predecessor to

BT, first published a classified advertising book, later to be called Yellow Pages, as part of the Brighton telephone directory.



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



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



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



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



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



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



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



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



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



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##### Table of Contents

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



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



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



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



|B. |  | Business Overview
|-- |  | -----------------



Our activities are organised into the following areas:



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





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



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



| |  |  | Online services.    Yell.com, our online products and service business, is the United Kingdoms leading online classified directory service; it
offers comprehensive directory services and provides access to a database of approximately 1.7 million businesses. Users can also access our services on iDTV and through SMS messaging over mobile phones. Advertisers can buy web links, template
websites (including design and hosting), other online advertising products and services and domain names. We also offer online directory services in the United States through our Yellowbook.com site.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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



Industry Overview



The following are important characteristics of the classified directories business:



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



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



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



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



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



We believe that the following industry trends are important in evaluating
Yells growth potential:



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



| |  |  | High growth rates of independent yellow pages directories in the United States.    Within the classified advertising market in the United States,
the revenues of all telephone directory publishers were approximately $14.3 billion in 2003 and are forecast to continue to grow. These revenues are generated by the incumbent and recently sold directories divisions of telecommunications companies
(85%), independent publishers (13%) and online publishers (around 2%). According to industry sources, US independent telephone directory revenues grew from $1.0 billion in 1998 (representing an 8% share of the overall US telephone directory sector)
to $1.9 billion in 2003 (representing a 13% share). Within the printed sector, the independent segment is the faster growing and is forecast to grow at a compound rate of 9% a year to 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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



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



For a more detailed description of our competitive environment, see
Information on the CompanyCompetition.



Products and
Services



UK Printed Directories



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



|                                 |  |              |  |               
|-------------------------------- |  | ------------ |  | --------------
|                                 |  | Yellow Pages |  | Business Pages
|Directory editions(1)            |  | 90           |  | 9             
|Copies distributed (in millions) |  | 28           |  | 2.2           
|Unique advertisers(2)            |  | 475,000      |  | 22,500        
|Advertisements(3)                |  | 1,133,000    |  | 31,000        

---

|(1) |  | Number of editions that have been recognised for revenue purposes.
|--- |  | ------------------------------------------------------------------

|(2) |  | Number of unique advertisers in printed directories that were recognised for turnover purposes and have been billed. Unique advertisers are counted once only, regardless of the
number of advertisements they purchase or the number of directories in which they advertise.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) |  | This number is not comparable with figures reported prior to 2003 due to an improvement in our systems that now allows us to count all advertisements accounted for in our
directories. The resultant increase in numbers of advertisements is less than 3% above that which we would have reported had the system improvements not been made.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Yellow Pages Directories



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



Businesses are offered a free-line entry, which is a listing on a discretionary basis at no charge in the relevant edition of our Yellow Pages directories. The entry includes only the name, address and telephone number of the
business, which is listed in alphabetical order in the relevant classification in a three-columns-to-a-page format. We maintain the information that forms the basis of these listings as part of our proprietary database, which is derived from raw
data purchased in the United Kingdom from BT, which includes BTs and other telecommunications providers (Telcos) subscriber information and is supplemented with further information we obtain from our field sales and customer
service employees. See OperationsCustomer Service and Credit Control.



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##### Table of Contents

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



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



| |  |  | Bold entriesAn advertisers name is printed in bold text and in a larger font than in free-line entries.
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Semi-displayAn advertisers line entry is separated from surrounding entries in a box format, sometimes including limited additional information and logos.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | Columncovers all or part of one of the three columns on a page.
| | - |  | ----------------------------------------------------------------

| |  |  | Part pagetwo or three columns wide, for greater prominence on the page.
| | - |  | ------------------------------------------------------------------------



| |  |  | Full pagecovers an entire page for greater prominence within a business classification.
| | - |  | ----------------------------------------------------------------------------------------



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



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



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



| |  |  | CoverPremium location advertisements are available on the inside and outside back covers and spines of Yellow Pages directories.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | GuidesA range of unclassified advertising options within the Yellow Pages Guides such as the Late Night Guide and the Wedding Guide.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Branded FillersThe opportunity to display an advertiser logo in filler spaces that are generated at the pagination stage.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



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



Business Pages



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



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



US Printed
Directories



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



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##### Table of Contents

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



Yellow BookDirectory editions

536Copies distributed (in millions)

72Unique advertisers(1)

386,000


---

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



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



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



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



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



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



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



| |  |  | a yellow classified directory section, which contains display advertisements in two columns and listings of businesses under approximately 6,000 available
classifications;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



| |  |  | coupons and advertising inserts.
| | - |  | --------------------------------



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



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##### Table of Contents

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



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



The Acquisition and Integration of McLeod and NDC



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



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



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



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



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



| |  |  | cost savings on the closure of one of three production sites;
| | - |  | -------------------------------------------------------------



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



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



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



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



Other Products and Services



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



21



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##### Table of Contents

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



Online Products and Services



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



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



March 2002

March 2003

March 2004Yell.com page impressions per month (in millions)

33

39

67Yell.com searchable advertisers(1)(in thousands)

56

75

103


---

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



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



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



Yellow Pages 118 24 7



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



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



Yell Data



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



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Service Call



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



Operations



Publishing Cycle



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



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



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



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



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



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



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



Marketing and Sales



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



Brand Awareness



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



We
promote the Yell, Yellow Pages, Yellow Book, Yell.com and Yellowbook.com brand names and our other individual products through a variety of media, including television, newspapers,
billboards, magazines, radio publicity and the internet. Our advertising campaigns are designed to build brand awareness among users of our products and among advertisers that advertise in our directories. In the United Kingdom, in particular, we
have a reputation for clever, amusing advertisements and have won numerous awards for our advertising campaigns.



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



Sales Force



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



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



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



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



Sales Channel Allocation



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



|                           |  |                        |  |                                                            |  |                                                             
|-------------------------- |  | ---------------------- |  | ---------------------------------------------------------- |  | ------------------------------------------------------------
|Sales channel              |  | Number of employees(1) |  | Proportion of accounts covered by respective sales channel |  | Proportion of turnover generated by respective sales channel
|                           |  |                        |  | (%)                                                        |  | (%)                                                         
|United Kingdom Field sales |  | 1,050                  |  | 47.5                                                       |  | 61.9                                                        
|Telephone sales            |  | 662                    |  | 51.5                                                       |  | 10.1                                                        
|National account sales     |  | 140                    |  | 1.0                                                        |  | 28.0                                                        
|                           |  |                        |  |                                                            |  |                                                             
|                           |  | 1,852                  |  | 100.0                                                      |  | 100.0                                                       
|                           |  |                        | 
|United States Field sales  |  | 2,512                  |  | 82.9                                                       |  | 89.1                                                        
|Telephone sales            |  | 163                    |  | 14.3                                                       |  | 3.3                                                         
|National account sales     |  | 13                     |  | 2.8                                                        |  | 7.6                                                         
|                           |  |                        |  |                                                            |  |                                                             
|                           |  | 2,688                  |  | 100.0                                                      |  | 100.0                                                       
|                           |  |                        |  |                                                            |  |                                                             
|                           |  |                        | 
|Total number of employees  |  | 4,540                  |  |                                                            |  |                                                             
|                           |  |                        |  |                                                            |  |                                                             

---

|(1) |  | Approximate number at period end.
|--- |  | ---------------------------------



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



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



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



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



Promotions



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



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



Customer Service and Credit Control



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



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



Our
customer service groups in the United Kingdom are also responsible for billing and collection. We continue to manage our exposure to bad debt through initial credit checking of new advertisers. Our credit check of new advertisers focuses on known
areas of bad debt expense risk, such as certain directory classifications and levels of amounts spent. All new orders for existing advertisers are automatically checked for outstanding debt prior to confirmation. Both internal and external data are
used to arrive at a decision on whether or not to extend credit to an advertiser. Where doubts about an advertisers creditworthiness exist, we require the advertiser to pre-pay part or all of the value of its order.



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



Production, Pre-press and Printing



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



|                    |  |               |  |        |  |                  
|------------------- |  | ------------- |  | ------ |  | -----------------
|Printed directories |  | Editions      |  | Copies |  | Metric tonnage(1)
|                    |  | (in millions)
|Yellow Pages        |  | 90            |  | 27.9   |  | 57,255           
|Business Pages      |  | 9             |  | 2.2    |  | 2,697            
|Yellow Book         |  | 536           |  | 72     |  | 119,024          

---

|(1) |  | Metric tonnage is paper used in the production process. One tonne equals 2,200 lbs.
|--- |  | -----------------------------------------------------------------------------------



Pre-press



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



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

Printing



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



Distribution



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



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routing, mapping, hand-delivery and mailing of directories and also works directly with the US Postal Service to ensure cost-effective mailing methods.



Paper Supplies



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



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



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



Intellectual Property



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



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



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



We are the proprietor of the database rights in the databases we have developed. As the proprietor of the database rights in our databases, we are
entitled to prevent third parties from extracting or re-utilising all or a substantial part of the contents of our databases without our consent. In addition, we believe that we are the proprietor of the copyright in the databases we have developed
to the extent that copyright subsists in them. As the proprietor of copyright in a database, we are entitled to prevent third parties from doing certain things, including copying the database, issuing copies of the database to the public or renting
or lending the database to the public. In the United States, we also have copyrights in each edition of our directories.



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



Competition



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



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



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



Rate comparison: Incumbent vs Independent



|                                      |  |                    
|------------------------------------- |  | -------------------
|Market                                |  | Full-page mono rate
|                                      |  | (in dollars)       
|New York Manhattan (Verizon)          |  | 90,191             
|Manhattan (Yellow Book)               |  | 41,064             
|North Carolina Charlotte (BellSouth)  |  | 60,156             
|Charlotte (Yellow Book)               |  | 25,956             
|Pennsylvania Pittsburgh (Verizon)     |  | 34,260             
|Pittsburgh (Yellow Book)              |  | 18,924             
|Missouri Columbia (Verizon)           |  | 28,010             
|Columbia (Yellow Book)                |  | 13,920             
|Tennessee Jackson (BellSouth)         |  | 18,264             
|Jackson (Yellow Book)                 |  | 6,840              
|Colorado Colorado Springs (Dex Media) |  | 32,640             
|Colorado Springs (Yellow Book)        |  | 15,768             

---



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



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



Regulation



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



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



Competition Laws



UK Competition Laws



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



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



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



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



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until the end of December 2001, the maximum price increase in each annual edition of a Yellow Pages directory was fixed at RPI minus 2%.



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



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



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



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



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



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



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



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



In addition, in the United Kingdom we are required to comply with the UK
Competition Act 1998, the main provisions of which came into force in March 2000. The UK Competition Act 1998 prohibits anti-competitive agreements and concerted practices which may affect trade within the United Kingdom and have as their object or
effect the prevention, restriction or distortion of competition



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



EU Competition Laws



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



US
Competition Laws



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



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



Data Protection



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



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



In the United Kingdom, the Data Protection Act 1998, the main provisions of which came into force on 1 March 2000, affects the Yell Groups
activities. The Data Protection Act 1998 provides that personal data must be: (1) processed fairly and lawfully, usually with the consent of the data subject; (2) obtained only for specified and lawful purposes; (3) adequate, relevant and not
excessive in relation to those purposes; (4) accurate; (5) not kept longer than is necessary for those purposes; (6) processed in accordance with the data subjects rights; (7) protected against accidental loss or destruction by measures
appropriate to the sensitivity of the data concerned and the harm that might result from that loss or destruction; and (8) not transferred to countries without adequate protection.



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



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



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



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



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



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



Protection of Databases



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



Database rights subsist in all databases completed on or after 1 January
1983, provided there has been substantial investment. Under the Directive and the Regulations, where a company has database rights in a database and the database was completed before 1 January 1998, these database rights subsist for a period of
15 years commencing 1 January 1998 or, if the database was completed on or after 1 January 1998, for a period of 15 years from the end of the calendar year in which the database was completed. However, if there is a substantial change to the
contents of the database after its compilation such that the resulting database would be



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considered to be a substantially new investment, in terms of the quantity or quality or a combination of both, then the database rights in that database will
subsist for a period of 15 years from the date on which the substantially new investment was made. We are continually updating our databases and believe that we have made sufficient investment since 1 January 1983 in obtaining, verifying and
presenting the data in its databases for database rights to subsist in them.



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



Advertising



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



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



Telecommunications



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



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



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



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Internet Regulation and E-commerce



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



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



Content Regulation and Content Liability



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



Internet Domain Names



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



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



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



E-commerce and Electronic Signatures



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



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hyperlinks on our Yell.com internet site to external online retailers, and we may expand our offering of online products and services in the future.



At the EU level, Directive 2000/31/EC (the E-Commerce
Directive), is part of a Europe-wide initiative to promote

e-commerce. This has now been implemented in the United Kingdom. Currently in the United
Kingdom, the Electronic Communications Act 2000 creates a legal framework for e-commerce and the use of technology. Directive 1999/93/EC provides a European Community framework for electronic signatures and was adopted on 13 December 1999. It was
implemented in the United Kingdom as the Electronic Signature Regulations 2002, which came into force on 8 March 2002.



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



Consumer Credit



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



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C.    Organizational Structure



The principal subsidiaries of the Company are as follows:



Name and country ofincorporation

Registered office

Class of share capital (issued and fully paid)

Proportion of share capital

Nature of businessYell Limited (England)

Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT

73 ordinary shares of £1 each

100% (indirect)

classified directory publisherYellow Pages Sales Limited(England)

Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT

2 ordinary shares of £1 each

100% (indirect)

provision of sales servicesYellow Book USA, Inc.(Delaware, US)

193 EAB Plaza Uniondale, New York 11556-0193

500 shares of common stock of $0.01 each

100% (indirect)

classified directory publisherYellow Pages Limited(England)

Queens Walk, Oxford Road, Reading, Berkshire RG1 7PT

81 ordinary shares of £1 each

100% (direct)

intermediate holding company




D. Property, Plant and
Equipment



Property



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



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



Location

Tenure

Rent

Term

Approximate floor areaYellow Pages House, Queens Walk,Reading, England

leasehold

£
1,165,500 p.a.

25 years expiring24 March 2009

70,000 sq.ftFirst and Second Floors,Bridge Street,Reading, England

leasehold

£
920,000 p.a.

24 and 25 yearseach expiring24 December 2012

55,000 sq.ftDirectories House,Wellington Street,Slough, England

leasehold

£
1,530,000 p.a.

25 years expiring24 March 2015

56,659 sq.ftSecond and Fourth Floors,Whitefriars, Lewins Mead,Bristol, England

leasehold

£
376,399 p.a.

10 years expiring31 December 2008

33,922 sq.ft




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Location

Tenure

Rent

Term

Approximate floor areaGround, Fourth and Part FourthFloor, Jackson House, Sale,Cheshire, England

leasehold

£
259,470 p.a.

25 years expiring31 August 2005,(together withrevisionary leasefor fourth
floorexpiring12 November 2011)and 10 yearsexpiring12 November 2011

23,112 sq.ftParts of Eighth, Twelfth,Thirteenth and Fourteenth Floors,Edgbaston House, Duchess Place,Birmingham, England

leasehold

£
181,125 p.a.

25 years expiring25 August 2005

25,766 sq.ftBlock C, 54 Hagley Road,Birmingham, England

leasehold

£
306,600 p.a.

25 years expiring23 June 2005 and20 March 2013(together withreversionary leasesfor the seventh,eighth
and twelfthfloors for terms of24 June 2005 to20 March 2013)

23,956 sq.ftSixth, Seventh, Eight, and Ninth floors180 St Vincent StreetGlasgow, Scotland

leasehold

£
458,769 p.a.

15 years and 9months expiring28 February 2018

20,966 sq.ftFourth Floor180 St Vincent StreetGlasgow, Scotland

leasehold

£
124,700 p.a.

18 years and 5months expiring 29May 2017

5,800 sq.ftFourteenth, Fifteenth, Sixteenth andSeventeenth floorsQuayside TowerBroad StreetBirminghamBH1 2HF

leasehold

£
379,728 p.a.from25 August 2004

15 years expiring22 February 2019

21,096 sq.ft2004 Renaissance Blvd, King ofPrussia, Pennsylvania, USA

leasehold

$
669,515 p.a.

10 years expiring31 January 2011

28,490 sq.ft2008 Renaissance Blvd, King ofPrussia, Pennsylvania, USA

leasehold

$
185,215 p.a.

5 years expiring30 April 2009

10,860 sq.ft2540 Renaissance Blvd, King ofPrussia, Pennsylvania, USA

leasehold

$
227,844 p.a.

5 years expiring31 May 2008

14,700 sq.ft2560 Renaissance Blvd, King ofPrussia, Pennsylvania, USA

leasehold

$
878,829 p.a.

10 years expiring30 April 2010

35,000 sq.ft193 EAB Plaza, Uniondale,New York, USA

leasehold

$
953,247 p.a.

5 years expiring31 January 2007

30,375 sq.ftCedar Rapids, IA-Tech Park andIA Distribution, 6300 C Street SW,Cedar
Rapids IA 52406, USA

freehold


N/A

N/A

215,000 sq.ft2201 Willenborg Avenue,Effingham, IL 62401, USA

leasehold

$
649,716 p.a.

expires 15 April2009

56,520 sq.ft




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Location

Tenure

Rent

Term

Approximate floor area3020 North CypressSuite 200 Wichita, Kansas67226, USA

leasehold

$
318,000p.a.

10 yearsexpiring30 July2010

18,000sq.ft/316 Main StreetSpearville, Kansas 67876,USA

owned


n/a

n/a

8,000sq.ft.4314 South Loop 289Suite 100 Lubbock, Texas79413, USA

owned


n/a

n/a

15,000sq.ft.4045 Northwest 64thStreetSuite 400Oklahoma City,Oklahoma 73116, USA

leasehold

$
123,000p.a.

10 yearsexpiring30September2010

12,000sq.ft.4210 Shawnee MissionParkwaySuite 400A Fairway,Kansas 66205, USA

leasehold

$
165,000p.a.

10 yearsexpiring28February2005

10,000sq.ft.




Information Systems



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



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



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



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



We expect to continue to undertake significant expenditures in developing and
integrating our information systems in the future to support continuing operational efficiencies within the Group. In the United Kingdom, we have developed significant expertise in the development and implementation of our information systems and we
intend to facilitate development of our US systems by transferring this expertise on a project-by-project basis.



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Environment



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



ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS



A. Operating Results



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



Factors Affecting Results of Operations



Group Turnover





We are the leading provider of classified
directory advertising and associated products and services in the United Kingdom and the leading independent provider of classified directory advertising in the United States. We currently derive our turnover principally

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



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



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



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



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



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



Cost of Sales



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



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



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



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



Distribution Costs and Administrative Costs



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



Our administrative costs consist principally of amortisation and depreciation, advertising, promotion and marketing expenses, administrative staff
expenses, information technology costs and staff training. Advertising, promotion and marketing expenses represent our most significant discretionary expenses.



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



40



---

##### Table of Contents

Gross Profit Margins



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



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



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



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



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



Group Turnover



Year ended 31 March

Year ended 31 March2003

2004(£ in millions)

(%)(2)

(£ in millions)


(%)(2)UK printed directories

573.7

51.5

593.9


50.0Other UK products and services

41.2

3.7

41.0


3.5Total UK turnover

614.9

55.2

634.9


53.5US printed directories:US printed directories at constant exchange rate(1)

499.1

44.8

605.0


51.0Exchange impact(1)





(53.0
)

(4.5
)Total US turnover

499.1

44.8

552.0


46.5Group turnover

1,114.0

100.0

1,186.9


100.0


---

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

|(2) |  | The percentage of total group turnover.
|--- |  | ---------------------------------------



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



UK turnover



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



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



41



---

##### Table of Contents

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



USturnover



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



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



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



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



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



Cost of Sales



Year ended 31 March

Year ended 31 March2003

2004(£ in millions)

(%)(2)

(£ in millions)


(%)(2)UK printed directories

207.9

36.2

228.0


38.4Other UK products and services

15.0

36.4

12.4


30.2Total UK cost of sales

222.9

36.2

240.4


37.9US printed directories:US printed directories at constant exchange rate(1)

287.0

57.5

343.5


56.8Exchange impact(1)





(31.0
)

(5.8
)Total US cost of sales

287.0

57.5

312.5


56.6Total cost of sales

509.9

45.8

552.9


46.6


---

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

|(2) |  | The percentage of related turnover.
|--- |  | -----------------------------------



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



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



42



---

##### Table of Contents

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



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



Gross Profit and Gross Profit Margin



Year ended 31 March

Year ended 31 March2003

2004(£ in millions)

(%) (2)

(£ in millions)

(%) (2)UK printed directories

365.8

60.5

365.9

57.7Other UK products and services

26.2

4.3

28.6

4.5Total UK gross profit

392.0

64.9

394.5

62.2US printed directories:US printed directories at constant exchange rate(1)

212.1

35.1

261.5

41.3Exchange impact(1)





(22.0)

(3.5)Total US gross profit

212.1

35.1

239.5

37.8Gross profit

604.1

100.0

634.0

100.0Gross profit margin (%)US operations



42.5



43.4UK operations



63.8



62.1Group total (%)



54.2



53.4


---

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

|(2) |  | The percentage of total group profit.
|--- |  | -------------------------------------



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



Distribution Costs and Administrative Costs



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



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



| |  |  | £57.0 million for employee incentive plans;
| | - |  | -------------------------------------------



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



| |  |  | £4.2 million for other costs.
| | - |  | -----------------------------



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



43



---

##### Table of Contents

Group Operating Profit and EBITDA



|                                |  |                    |   |  |                    |   |  |        |  
|------------------------------- |  | ------------------ | - |  | ------------------ | - |  | ------ | -
|                                |  | Year ended31 March |   |  | Year ended31 March |   |  |        |  
|                                |  | 2003               |   |  | 2004               |   |  | Change |  
|                                |  | (£ in millions)    |   |  | (£ in millions)    |   |  | (%)    |  
|UK operations                   |  |                    |   |  |                    |   |  |        |  
|Operating profit                |  | 142.3              |   |  | 129.8              |   |  |        |  
|Depreciation and amortization   |  | 69.2               |   |  | 69.4               |   |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  
|EBITDA(1)                       |  | 211.5              |   |  | 199.2              |   |  | (5.8   | )
|                                |  |                    |   |  |                    |   |  |        |  
|US operations                   |  |                    |   |  |                    |   |  |        |  
|Operating profit                |  | 41.1               |   |  | 20.6               |   |  |        |  
|Depreciation and amortisation   |  | 51.7               |   |  | 50.2               |   |  |        |  
|Exchange impact(2)              |  |                   |   |  | 11.4               |   |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  
|EBITDAat
constant exchange rate |  | 92.8               |   |  | 82.2               |   |  | (11.4  | )
|Exchange impact(2)              |  |                   |   |  | (11.4              | ) |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  
|EBITDA(1)                       |  | 92.8               |   |  | 70.8               |   |  | (23.7  | )
|                                |  |                    |   |  |                    |   |  |        |  
|Group                           |  |                    |   |  |                    |   |  |        |  
|Total operating profit          |  | 183.4              |   |  | 150.4              |   |  |        |  
|Depreciation and amortisation   |  | 120.9              |   |  | 119.6              |   |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  
|Group EBITDA(1)                 |  | 304.3              |   |  | 270.0              |   |  | (11.3  | )
|                                |  |                    |   |  |                    |   |  |        |  
|Depreciation and amortisation   |  | (120.9             | ) |  | (119.6             | ) |  |        |  
|Net interest payable            |  | (236.6             | ) |  | (194.5             | ) |  |        |  
|Taxation                        |  | 12.6               |   |  | (7.0               | ) |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  
|Loss for the financial year     |  | (40.6              | ) |  | (51.1              | ) |  |        |  
|                                |  |                    |   |  |                    |   |  |        |  

---

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

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



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



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



44



---

##### Table of Contents

was 12.8% in the 2004 financial year; excluding exceptional items, the EBITDA margin increased to 23.0%, as we focused on increasing the benefit and yield
from our directory investments. We increased the profitability of our directories by leveraging off our existing operations and administrative cost base to yield additional turnover from our directories without a corresponding increase in costs.



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



Net Interest Payable



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



Taxation



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



Profit (Loss) Before and After Tax



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



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



45



---

##### Table of Contents

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



Group Turnover



Combined(Predecessor)



Consolidated (Successor)

Year ended 31 March

Year ended 31 March1 April to22 June 2001



22 June 2001 to 31 March 2002

2002(1) Aggregated

2003(£ in millions)



(£ in millions)

(£ in millions)

(%)

(£ in millions)


(%)UK printed directories:Yellow Pages

111.2



414.6

525.8

60.8

560.7


50.3Business Pages

7.3



7.4

14.7

1.7

13.0


1.2Total UK printed directories

118.5



422.0

540.5

62.5

573.7


51.5US printed directories:Yellow Book East at constant exchange rates

42.3



241.8

284.1

32.8

324.8
(2)

29.1Exchange impact











(26.1
)(2)

(2.3
)Yellow Book East

42.3



241.8

284.1

32.8

298.7


26.8Yellow Book West(3)











200.4


18.0Total US printed directories

42.3



241.8

284.1

32.8

499.1


44.8Other UK products and services

8.3



32.5

40.8

4.7

41.2


3.7Group turnover

169.1



696.3

865.4

100.0

1,114.0


100.0


---

|(1) |  | Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002.
|--- |  | ------------------------------------------------------------------------------------------------------

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

|(3) |  | Includes results of NDC from 1 January 2003.
|--- |  | --------------------------------------------



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



UK printed directories



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



The growth was primarily the result of:



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



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



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



46



---

##### Table of Contents

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



US printed
directories



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



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



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



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



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



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



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



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



Other products and
services.    Turnover from other products and services increased by £0.4 million, or 1.0%, from £40.8 million in the 2002 financial year to £41.2 million in the 2003 financial year. This was primarily due to
growth in our online directory service, which grew from £14.9 million to £20.3 million during the period. Growth in Yell.com more than offset a decline in turnover from Talking Pages (now replaced by Yellow Pages 118 24 7) and Yell Data
(which has been sold).

---

|(1) |  | Same-market growth is derived by comparing the turnover from directories (including rescoped directories) that we published in a period with turnover from these same directories or
predecessor directories covering substantially the same geographic area published in the previous publishing cycle, which is not necessarily the same period in the prior financial year. Rescoped directories are directories where we redefined the
geographic boundaries covered by one or more directories, which could include replacing one directory with multiple directories or combining multiple directories into fewer directories.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



47



---

##### Table of Contents

Cost of Sales



Combined(Predecessor)



Consolidated(Successor)

Year ended 31 March

Year ended 31 March1 April to22 June 2001



22 June 2001to 31 March2002

2002(1) Aggregated

2003(£ in millions)



(£ in millions)

(£ in millions)

(%)(4)

(£ in millions)


(%)(4)UK printed directories:Yellow Pages

40.8



151.8

192.6

36.6

203.4


36.3Business Pages

2.5



3.1

5.6

38.1

4.5


34.6Total UK printed directories

43.3



154.9

198.2

36.7

207.9


36.2US printed directories:Yellow Book East at constant exchange rates

24.6



147.1

171.7

60.4

191.9
(2)

59.1Exchange impact











(15.6
)(2)

(59.8
)Yellow Book East

24.6



147.1

171.7

60.4

176.3


59.0Yellow Book West(3)











110.7


55.2Total US printed directories

24.6



147.1

171.7

60.4

287.0


57.5Other UK products and services

3.2



13.9

17.1

41.9

15.0


36.4Total cost of sales

71.1



315.9

387.0

44.7

509.9


45.8


---

|(1) |  | Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002.
|--- |  | ------------------------------------------------------------------------------------------------------

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

|(3) |  | Includes results of NDC from 1 January 2003.
|--- |  | --------------------------------------------

|(4) |  | The percentage of related turnover.
|--- |  | -----------------------------------



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



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



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



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



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



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



48



---

##### Table of Contents

Gross Profit and Gross Profit Margin



Combined(Predecessor)



Consolidated(Successor)

Year ended 31 March

Year ended 31 March1 April to22 June 2001



22 June 2001 to31 March 2002

2002(1) Aggregated

2003(£ in millions)



(£ in millions)

(£ in millions)

(%)

(£ in millions)


(%)UK printed directories:Yellow Pages

70.4



262.8

333.2

69.6

357.3


59.1Business Pages

4.8



4.3

9.1

1.9

8.5


1.4Total UK printed directories

75.2



267.1

342.3

71.5

365.8


60.5US printed directories:Yellow Book East at constant exchange rates

17.7



94.7

112.4

23.5

132.9
(2)

22.0Exchange impact











(10.5
)(2)

(1.7
)Yellow Book East

17.7



94.7

112.4

23.5

122.4


20.3Yellow Book West(3)











89.7


14.8Total US printed directories

17.7



94.7

112.4

23.5

212.1


35.1Other UK products and services

5.1



18.6

23.7

5.0

26.2


4.3Gross profit

98.0



380.4

478.4

100.0

604.1


100.0Gross profit margin (%)Yellow Pages

63.3



63.4



63.4




63.7Business Pages

65.8



58.1



61.9




65.4Yellow Book East

41.8



39.2



39.6




41.0Yellow Book West














44.8Other UK products and services

61.4



57.2



58.1




63.6Group total (%)

58.0



54.6



55.3




54.2


---

|(1) |  | Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002.
|--- |  | ------------------------------------------------------------------------------------------------------

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

|(3) |  | Includes results of NDC from 1 January 2003.
|--- |  | --------------------------------------------



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



Distribution Costs and Administrative Expenses



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



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



The increase was largely due to:



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



| |  |  | a £27.7 million increase in the amortisation of goodwill following the full years impact of the Yell Purchase, the McLeod acquisition and the NDC acquisition;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------



49



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##### Table of Contents

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



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



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



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



Group Operating Profit and EBITDA



|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|------------------------------------ |  | ---------------------- | - |  |  |  | ---------------------------- | - |  | ------------------ | - |  | ------------------ | ---- |  | ------
|                                     |  | Combined(Predecessor)  |   |  |  |  | Consolidated(Successor)      |   |  | Year ended31 March |   |  | Year ended31 March |      |  |       
|                                     |  | 1 April to22 June 2001 |   |  |  |  | 22 June 2001 to31 March 2002 |   |  | 2002(1)Aggregated  |   |  | 2003               |      |  | Change
|                                     |  | (£ in millions)        |   |  |  |  | (£ in millions)              |   |  | (£ inmillions)     |   |  | (£ in millions)    |      |  | (%)   
|UK operations                        |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Operating profit                     |  | 42.4                   |   |  |  |  | 108.0                        |   |  | 150.4              |   |  | 142.3              |      |  |       
|Depreciation and amortisation        |  | 2.6                    |   |  |  |  | 57.4                         |   |  | 60.0               |   |  | 69.2               |      |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|EBITDA(2)                            |  | 45.0                   |   |  |  |  | 165.4                        |   |  | 210.4              |   |  | 211.5              |      |  | 0.5   
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Yellow Book East                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Operating (loss) profit              |  | (9.5                   | ) |  |  |  | 10.7                         |   |  | 1.2                |   |  | 34.2               |      |  |       
|Depreciation and amortisation        |  | 7.2                    |   |  |  |  | 23.7                         |   |  | 30.9               |   |  | 30.0               |      |  |       
|Exchange impact                      |  |                       |   |  |  |  |                             |   |  |                   |   |  | 6.0                | (3)  |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|EBITDAat
constant exchange rates     |  | (2.3                   | ) |  |  |  | 34.4                         |   |  | 32.1               |   |  | 70.2               |      |  | 118.7 
|Exchange impact                      |  |                       |   |  |  |  |                             |   |  |                   |   |  | (6.0               | )(3) |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|EBITDA(2)                            |  | (2.3                   | ) |  |  |  | 34.4                         |   |  | 32.1               |   |  | 64.2               |      |  | 100.0 
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Yellow Book West(4)                  |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Operating profit                     |  |                       |   |  |  |  |                             |   |  |                   |   |  | 6.9                |      |  |       
|Depreciation and amortisation        |  |                       |   |  |  |  |                             |   |  |                   |   |  | 21.7               |      |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|EBITDA(2)                            |  |                       |   |  |  |  |                             |   |  |                   |   |  | 28.6               |      |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Group                                |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Total operating profit               |  | 32.9                   |   |  |  |  | 118.7                        |   |  | 151.6              |   |  | 183.4              |      |  |       
|Depreciation and amortisation        |  | 9.8                    |   |  |  |  | 81.1                         |   |  | 90.9               |   |  | 120.9              |      |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Group EBITDA(2)                      |  | 42.7                   |   |  |  |  | 199.8                        |   |  | 242.5              |   |  | 304.3              |      |  | 25.5  
|Depreciation and amortisation        |  | (9.8                   | ) |  |  |  | (81.1                        | ) |  | (90.9              | ) |  | (120.9             | )    |  |       
|Net interest payable                 |  | (5.8                   | ) |  |  |  | (158.6                       | ) |  | (164.4             | ) |  | (236.6             | )    |  |       
|Taxation                             |  | (11.3                  | ) |  |  |  | (7.3                         | ) |  | (18.6              | ) |  | 12.6               |      |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       
|Profit (loss) for the financial year |  | 15.8                   |   |  |  |  | (47.2                        | ) |  | (31.4              | ) |  | (40.6              | )    |  |       
|                                     |  |                        |   |  |  |  |                              |   |  |                    |   |  |                    |      |  |       

---

|(1) |  | Includes the predecessor results through 22 June 2001 and the successor results through 31 March 2002.
|--- |  | ------------------------------------------------------------------------------------------------------

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

|(3) |  | Constant exchange rates state the results of the most recent year presented at the same exchange rate as that used to translate the results of the previous year presented. Exchange
impact is the difference between the results reported at constant exchange rates and the actual results reported using current year exchange rates.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



50



---

##### Table of Contents

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



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



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



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



B. Liquidity and Capital Resources



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



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



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



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



Net cash outflow for capital expenditures and financial investment comprises capital expenditure on fixed assets and
purchases of shares in our parent company to be held in trust for employees. Capital expenditure was £24.5 million in the 2004 financial year compared to £16.0 million in the 2003 financial year. The capital expenditure was
principally in respect of the acquisition of fixed assets to support our sales force and central administrative staff. We continued to augment our growth in the United States with further selective acquisitions totalling £108.9 million in the
2004 financial year.



51



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##### Table of Contents

Capital Resources



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



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



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



Payments due by periodDebt

Within 1 year

1-3years

3-5 years

After 5 years

Total(£ in millions)Long-term loans and other borrowingsTerm Loan A1denominated in sterling

80.0

190.0

354.0



624.0Term Loan A2denominated in US dollars





323.8



323.8Senior notes







308.2

308.2Other

5.8







5.8Total debt owed to third parties

85.8

190.0

677.8

308.2

1,261.8Subordinated parent company loans

41.9





831.2

873.1Total debt, including subordinated parent company loans

127.7

190.0

677.8

1,139.4

2,134.9Unamortised financing costs









(20.1
)Total debt, net of unamortised financing costs









2,114.8Cash at bank









(18.4
)Net debt at end of the period









2,096.4




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



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



Acquisitions



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



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



52



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##### Table of Contents

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



Our Parent Companys Global Offer and Refinancing



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



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



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



Treasury Policy



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



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



Policy and practice on payment of creditors



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



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



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



Significant
Differences Between UK and US GAAP



Our combined and
consolidated financial statements are prepared in accordance with UK GAAP, which differ in certain respects from US GAAP. Differences result primarily from acquisition accounting, which affects the accounting for directories in progress, goodwill
and other intangibles and taxation. Timing differences also arise when recognising certain costs associated with directories



53



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##### Table of Contents

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



New UK Accounting Standards



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



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



International Financial Reporting Standards



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



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



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



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



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



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



Critical Accounting Estimates



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



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



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



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



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



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



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



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



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



Not applicable.



D.    Trend Information



Current Trading and Prospects



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



We have put in place substantial groundwork to
ensure that our growth momentum continues in the current financial year. Our strong cash generation should allow us to continue to finance acquisitions in the US and grow dividends in line with earnings.



E.    Off-balance Sheet Arrangements



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



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F.    Tabular Disclosure of Contractual Obligations



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



|                            |  |                 |  |           |  |           |  |              |  |        
|--------------------------- |  | --------------- |  | --------- |  | --------- |  | ------------ |  | -------
|                            |  | Within1 year    |  | 1-3 years |  | 3-5 years |  | After5 years |  | Total  
|                            |  | (£ in millions)
|Long-term debt              |  | 121.9           |  | 190.0     |  | 677.8     |  | 1,139.4      |  | 2,129.1
|Revolver loan               |  | 5.0             |  |          |  |          |  |             |  | 5.0    
|Operating lease obligations |  | 18.9            |  | 27.7      |  | 17.1      |  | 27.2         |  | 90.9   
|Finance lease obligations   |  | 0.8             |  |          |  |          |  |             |  | 0.8    
|                            |  |                 |  |           |  |           |  |              |  |        
|Total                       |  | 146.6           |  | 217.7     |  | 694.9     |  | 1,166.6      |  | 2,225.8
|                            |  |                 |  |           |  |           |  |              |  |        



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





ITEM 6.     DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



Directors



A.
    Directors and Senior Management



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



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



John
Condron was previously the Managing Director of the Group, when it was a division of BT. He continued as CEO of Yell Group on its sale by BT in 2001. Mr Condron started working for BT in 1973 in the International Finance Division. He
became Strategy Manager for BTs White Pages Division in 1978 before joining the Group in 1980 as New Product Development Manager. In 1987, he became the Marketing and Sales Controller and, in 1992, he assumed the additional responsibility of
Managing Director of Yellow Pages Sales Limited. In January 1994, Mr Condron was appointed as the Managing Director of the Group. Mr Condron is a member of the UK Governments Advisory Committee on Advertising. He is also a director of Yellow
Pages Sales Limited, General Art Services Limited, Yellow Book USA, Inc., Yellow Book of New York, Inc. and Yellow Book of Pennsylvania, Inc. He received an honours degree in Economics from Queens University in Belfast.



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



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



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position with CGU plc and General Accident plc, where he had been director since 1992. He was also chairman of the Association of British Insurers in
2000-2001, having been a board member for four years and a member of the Presidents Committee of the CBI from 1998-2000. He is also a director of Focus Wickes Group Ltd.



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



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



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



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



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



Senior Management



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



Name

Date of  birth

PositionSteve Chambers

29 September 1953

Chief Commercial OfficerEddie Cheng

15 March 1952

eBusiness DirectorAnn Francke

2 December 1958

Chief Marketing OfficerPaul Fry

25 May 1951

Strategy & Business Development DirectorJames Haddad

4 March 1957

Chief Financial Officer USAJohn Satchwell

11 March 1955

Operations DirectorVictoria Sharrar

2 June 1958

Chief Sales Officer USAJoseph Walsh

15 April 1963

Chief Executive Officer USA




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



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



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



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



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



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



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



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



B. Compensation



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



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



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



The remuneration
paid to or on behalf of our highest-paid senior manager or executive director for the 2004 financial year was £37,668,304 in salaries, fees, shares, commissions, bonuses and pensions.



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



|                         |  |             |  |                            |  |                   |  |                   |  |       |  |       |  |       |  |       |  |       |  |      
|------------------------ |  | ----------- |  | -------------------------- |  | ----------------- |  | ----------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|                         |  | Salary/Fees |  | Performance- related bonus |  | Otherbenefits (a) |  | Share benefits(b) |  | Total
|                         |  | 2003        |  | 2004                       |  | 2003              |  | 2004              |  | 2003  |  | 2004  |  | 2003  |  | 2004  |  | 2003  |  | 2004 
|                         |  | £000       |  | £000                      |  | £000             |  | £000             |  | £000 |  | £000 |  | £000 |  | £000 |  | £000 |  | £000
|Executive Directors      |  |             |  |                            |  |                   |  |                   |  |       |  |       |  |       |  |       |  |       |  |      
|John Condron             |  | 485         |  | 550                        |  | 485               |  | 550               |  | 27    |  | 47    |  |      |  |      |  | 997   |  | 1,147
|John Davis               |  | 310         |  | 340                        |  | 310               |  | 340               |  | 21    |  | 22    |  |      |  |      |  | 641   |  | 702  
|Non-executive Directors  |  |             |  |                            |  |                   |  |                   |  |       |  |       |  |       |  |       |  |       |  |      
|Robert Scott             |  | 38          |  | 129                        |  |                  |  |                  |  |      |  |      |  |      |  | 150   |  | 38    |  | 279  
|Charles Carey            |  | 38          |  | 57                         |  |                  |  |                  |  |      |  |      |  |      |  | 150   |  | 38    |  | 207  
|John Coghlan             |  | 39          |  | 64                         |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 39    |  | 139  
|Joachim Eberhardt        |  | 38          |  | 63                         |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 38    |  | 138  
|Lyndon Lea (c)           |  |            |  | 45                         |  |                  |  |                  |  |      |  |      |  |      |  |      |  |      |  | 45   
|Lord Powell of Bayswater |  | 44          |  | 50                         |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 44    |  | 125  

---

|(a) |  | Executive directors benefits mainly comprise company cars, life assurance, private health cover, long-term disability insurance, telecommunications services, health club
membership and allowances for personal tax and financial advice.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Under an arrangement pre-dating our parent companys IPO, non-executive directors subscribed for shares in Yell Group plc at the date of the IPO at a discount to market value.
105,263 ordinary shares were issued for £150,000 to each of Charles Carey and Robert Scott, 52,632 ordinary shares were issued for £75,000 to each of Joachim Eberhardt, John Coghlan, and Lord Powell. Gains made on exercise of share
options by John Condron and John Davis are detailed in Note 22 to the financial statements.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | Lyndon Lea provided non-executive director services to Yell Group plc until 7 January 2004 via Hicks Muse where he is a partner. His fees for the year to 7 January 2004 were
therefore paid to Hicks Muse rather than Mr Lea directly. From 8 January 2004 Mr Leas fees have been paid to him directly.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



Pension Schemes



In the United Kingdom, Yell Group employees participate in the Yell pension plan (the Yell Pension Plan).



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



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



Yell Pension Plan



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



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



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



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



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



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



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



There are no special arrangements for Directors or senior managers within the Yell Pension Plan, with the exception of John
Davis and John Condron. For further information see C. Board PracticesDirectors Service Agreements and Senior Managements Employment Agreements.



Net Pension Liability



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



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



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



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



|                                                 |  |                                                                 |  
|------------------------------------------------ |  | --------------------------------------------------------------- | -
|Years of service completed at previous month end |  | Employer contribution rate (percentage of pensionable earnings) |  
|Up to 5                                          |  | 4                                                               | %
|5-9                                              |  | 6                                                               | %
|10-14                                            |  | 8                                                               | %
|15+                                              |  | 10                                                              | %



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



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



Yellow Book USA Pension Scheme



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



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



C. Board Practices



Please see Item 10.B. Additional InformationMemorandum and
Articles of Association for a description of the provisions regarding directors in the Articles of Association of Yell Group plc.



Board Composition



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



Terms of Office



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



|                         |  |                                   |  |               
|------------------------ |  | --------------------------------- |  | --------------
|Director                 |  | Start date of current appointment |  | Unexpired term
|Robert Scott             |  | 1 July 2003                       |  | 3 months      
|Charles Carey            |  | 1 July 2003                       |  | 27 months     
|John Coghlan             |  | 1 July 2003                       |  | 15 months     
|Joachim Eberhardt        |  | 1 July 2003                       |  | 15 months     
|Lyndon Lea               |  | 1 July 2003                       |  | 27 months     
|Lord Powell of Bayswater |  | 1 July 2003                       |  | 3 months      



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



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Non-Executive Directors Remuneration



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



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



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



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



|                         |  |             |  |                           |  |                   |  |                   |  |       |  |       |  |       |  |       |  |       |  |      
|------------------------ |  | ----------- |  | ------------------------- |  | ----------------- |  | ----------------- |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | -----
|                         |  | Salary/Fees |  | Performance-related bonus |  | Other benefits(a) |  | Share benefits(b) |  | Total
|                         |  | 2003        |  | 2004                      |  | 2003              |  | 2004              |  | 2003  |  | 2004  |  | 2003  |  | 2004  |  | 2003  |  | 2004 
|                         |  | £000       |  | £000                     |  | £000             |  | £000             |  | £000 |  | £000 |  | £000 |  | £000 |  | £000 |  | £000
|NON-EXECUTIVE DIRECTORS  |  |             |  |                           |  |                   |  |                   |  |       |  |       |  |       |  |       |  |       |  |      
|Robert Scott             |  | 38          |  | 129                       |  |                  |  |                  |  |      |  |      |  |      |  | 150   |  | 38    |  | 279  
|Charles Carey            |  | 38          |  | 57                        |  |                  |  |                  |  |      |  |      |  |      |  | 150   |  | 38    |  | 207  
|John Coghlan             |  | 39          |  | 64                        |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 39    |  | 139  
|Joachim Eberhardt        |  | 38          |  | 63                        |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 38    |  | 138  
|Lyndon Lea(c)            |  |            |  | 45                        |  |                  |  |                  |  |      |  |      |  |      |  |      |  |      |  | 45   
|Lord Powell of Bayswater |  | 44          |  | 50                        |  |                  |  |                  |  |      |  |      |  |      |  | 75    |  | 44    |  | 125  

---

|(a) |  | Executive directors benefits mainly comprise car allowance, life assurance, private health cover, long-term disability insurance, telecommunications services, health club
membership and allowances for personal tax and financial advice.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Under an arrangement pre-dating our parent companys IPO, non-executive directors subscribed for shares in Yell Group plc at the date of the IPO at a discount to market value.
105,263 ordinary shares were issued for £150,000 to each of Charles Carey and Robert Scott, 52,632 ordinary shares were issued for £75,000 to each of Joachim Eberhardt, John Coghlan, and Lord Powell.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c) |  | Lyndon Lea provided non-executive director services to the company until 7 January 2004 via Hicks Muse where he is a partner. His fees for the year to 7 January 2004 were therefore
paid to Hicks Muse rather than Mr Lea directly. From 8 January 2004 Mr Leas fees have been paid to him directly.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Audit Committee



The Audit Committee is chaired by John Coghlan and throughout the year the other members were Robert Scott and Joachim Eberhardt. It meets at least four
times a year.



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



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



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



Remuneration
Committee



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



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



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



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



Directors Service Agreements and Senior Managements Employment Agreements



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



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



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



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



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



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



The non-executive
Directors have each been issued with a letter of appointment confirming their appointment for initial periods ranging from one year to three years, unless terminated by either party giving the other three months written notice. The
appointments are subject to the provisions of the Companies Act 1985, as amended and Yell Group plcs articles of association, in particular the need for periodic re-election. Charles Carey, John Coghlan, Joachim Eberhardt, Lyndon Lea and Lord
Powell will each be paid fees for services as a non-executive director of £50,000 per annum (plus VAT if applicable). An additional fee of £10,000 per annum is payable for chairing committees and £5,000 per annum per committee is
payable for membership of committees. Robert Scott receives aggregate fees of £150,000 per annum (plus VAT if applicable) for services as a non-executive director and as Yell Group plcs Chairman. Mr Scott also receives an additional
fee of £10,000 per annum for chairing committees and £5,000 per annum for membership of committees.



63



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



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



D. Employees



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



|                     |  |                |  |               |  |      
|-------------------- |  | -------------- |  | ------------- |  | -----
|                     |  | United Kingdom |  | United States |  | Total
|Full-time employees  |  | 3,030          |  | 4,759         |  | 7,789
|Part-time employees  |  | 461            |  | 15            |  | 476  
|                     |  |                |  |               |  |      
|Total employees      |  | 3,491          |  | 4,774         |  | 8,265
|                     |  |                |  |               |  |      
|Full-time equivalent |  | 3,332          |  | 4,767         |  | 8,099
|                     |  |                |  |               |  |      



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



|                |  |                     |  |       |  |      
|--------------- |  | ------------------- |  | ----- |  | -----
|                |  | Year ended 31 March
|                |  | 2002                |  | 2003  |  | 2004 
|UK employees    |  | 3,271               |  | 3,319 |  | 3,414
|US employees    |  | 2,050               |  | 4,350 |  | 4,668
|                |  |                     |  |       |  |      
|Total employees |  | 5,321               |  | 7,669 |  | 8,082
|                |  |                     |  |       |  |      



|                    |  |                         |  |                  
|------------------- |  | ----------------------- |  | -----------------
|                    |  | Year ended31 March 2004
|                    |  | United Kingdom (%)      |  | United States (%)
|Marketing and sales |  | 60                      |  | 70               
|Other               |  | 40                      |  | 30               

---

|(1) |  | Full-time and full-time equivalent.
|--- |  | -----------------------------------



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



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



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E.    Share Ownership



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



|                         |  |                                    |  |                              
|------------------------ |  | ---------------------------------- |  | -----------------------------
|Name                     |  | Number of£0.01 ordinaryShares held |  | Percentage of share ownership
|                         |  | (restated)                         |  |                              
|John Condron(a)          |  | 6,549,853                          |  | 0.9                          
|John Davis(a)            |  | 2,901,379                          |  | 0.4                          
|Robert Scott             |  | 105,263                            |  | *                            
|Charles Carey            |  | 105,263                            |  | *                            
|John Coghlan             |  | 52,632                             |  | *                            
|Joachim Eberhardt        |  | 52,632                             |  | *                            
|Lyndon Lea               |  | 200,000                            |  | *                            
|Lord Powell of Bayswater |  | 52,632                             |  | *                            

---

|(a) |  | On 9 March 2004, Mourant & Co Trustees Limited, as trustee for the Yell Employee Benefit Trust, (the Trust) acquired in the market, at an average price of
£3.387 per share, a total of 1,735,205 Ordinary Shares in Yell Group plc (the Shares).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The shares will be held by the Trust until they are transferred to participants in Yell Group plcs Capital Accummulation Plan (the Plan). Neither John Condron nor
John Davis is entitled to receive any of the Shares or be granted any benefit under the Plan.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Trust is a discretionary trust and all employees (including John Condron and John Davis) are included in the class of potential beneficiaries. Therefore, John Condron and John
Davis are deemed to be interested in the Shares whilst they are held by the Trust. This interest will cease following distribution of the Shares to the participants in the Plan. Accordingly, the Shares are not included in the table of
Directors interests above.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* |  | Less than one percent of share ownership.
|- |  | -----------------------------------------



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



|             |  |               |     |  |                        |  |                 |  |                   |  |                        |  |               |  |                               |  |                                  |  |               
|------------ |  | ------------- | --- |  | ---------------------- |  | --------------- |  | ----------------- |  | ---------------------- |  | ------------- |  | ----------------------------- |  | -------------------------------- |  | --------------
|             |  | Type ofoption |     |  | At 31March2003(number) |  | Granted(number) |  | Exercised(number) |  | At 31March2004(number) |  | ExercisePrice |  | Marketprice atdate ofexercise |  | Date from whichfirst exercisable |  | Date of expiry
|John Condron |  | SMIP          | (1) |  |                       |  | 1,089,217       |  | 499,455           |  | 589,762                |  | 0.365p        |  | 285p                          |  | 15 July 2003                     |  | 14 July 2013  
|             |  | EXEC          | (2) |  |                       |  | 964,912         |  |                  |  | 964,912                |  | 285p          |  |                              |  | 15 July 2006                     |  | 14 July 2013  
|             |  | SAYE          | (3) |  |                       |  | 3,548           |  |                  |  | 3,548                  |  | 260p          |  |                              |  | 1 November 2006                  |  | 1 May 2007    
|John Davis   |  | SMIP          | (1) |  |                       |  | 453,840         |  | 453,840           |  |                       |  | 0.365p        |  | 285p                          |  | 15 July 2003                     |  | 14 July 2013  
|             |  | EXEC          | (2) |  |                       |  | 596,491         |  |                  |  | 596,491                |  | 285p          |  |                              |  | 15 July 2006                     |  | 14 July 2013  
|             |  | SAYE          | (3) |  |                       |  | 6,096           |  |                  |  | 6,096                  |  | 260p          |  |                              |  | 1 November 2008                  |  | 1 May 2009    

---

The closing market price of an
ordinary share on 31 March 2004 was 322p. During the year the highest and lowest market prices were 340p and 275p respectively.



|(1) |  | SMIP = Yell Group Limited Senior Manager Incentive Plan. Options were granted and became exercisable on admission of Yell Group plcs shares to the London Stock
Exchange on 15 July 2003. The options are not subject to performance conditions but a proportion of the underlying shares are subject to a sale restriction until 15 July 2004.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) |  | EXEC = Yell Group plc Executive Share Option Scheme. Options granted over shares with a value of three times salary will only be exercisable if the adjusted earnings per
share over an initial three year period is at least equal to RPI plus 3% per annum at the end of the period. If the target is not met it may be retested at the end of the fourth year. Options granted over shares with a value of two times salary will
only be exercisable if Yell Group plcs total shareholder return at the end of a three year period exceeds the growth in the total shareholder return of the companies making up the FTSE 100 (as at admission to the London Stock Exchange).
Options will be exercisable in full if the growth in Yell Group plcs total shareholder return would put Yell Group plc at the 25th position or higher (taken from the top) of the FTSE 100. The proportion of options which may be exercised will
be reduced on a straight-line basis to the 50th position of the FTSE 100, at which point 25% of the options may be exercised. If Yell Group plcs total shareholder return at the end of the three year period would placeYell Group plc below the
50th position, no options will be exercisable.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) |  | SAYE = Yell Group plc Sharesave Plan.
|--- |  | -------------------------------------



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



Incentive Schemes



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



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



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



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



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



The Yell Group Limited Employee Plan



The Yell Employee Plan has the following main features:



Eligibility



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



Grant of options



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



Limits



No option to subscribe for ordinary shares may be granted
under the rules of the Yell Employee Plan if, when aggregated with (i) the number of ordinary shares issued on the exercise of (or remaining capable of being issued on the exercise of) options, and (ii) the



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number of ordinary shares issued on the exercise of options (or remaining capable of being issued) pursuant to any other share incentive plan established by
Yell Group plc (excluding any ordinary shares issued or issuable within the limits set out in the Yell Manager Plan and the Yellow Book (USA) West Management Scheme) would exceed two million ordinary shares.



Exercise of options and lapse of options



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



In the event of a Quotation (including Admission):



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



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



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



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



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



Adjustment of option terms



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



Modifications
to the scheme



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



Termination



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



The Yell Group Limited US Employee Plan



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



| | (i) |  | if the option was granted on 14 March 2002, the option may not be exercised until or after the date falling six months after the date of Quotation (as defined in the Yell US
Employee Plan) or such earlier date as the committee may, in its absolute discretion decide;
| | --- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



The Yell Group Limited Senior Manager Incentive Plan



The Yell Manager Plan has the following main features:



Eligibility



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



Grant
of options



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



Limits



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



Exercise of options and lapse of options



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



In the event of a Quotation (including Admission):



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



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



| | (iii) |  | if the Relevant Shareholders are subsequently permitted to sell a proportion of their ordinary shares, then the optionholder shall also be able to sell a proportion of his
Restricted Shares, such proportion being equal to the highest proportion of shares that the Relevant Shareholder is permitted to sell.
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



Adjustment of option terms



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



Modifications to the scheme



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



Termination



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



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



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



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



Eligibility



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



Grant of Options



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



Limits



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



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Exercise of options and lapse of options



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



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



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



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



Modification to the
scheme



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



Termination



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



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



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



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



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



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



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



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



Yellow Book USA Management Bonus Arrangements



In October 2002, Yellow Book USA offered each of the individuals who were granted options under the Yellow Book (USA) West Management Scheme an
opportunity to earn a specified cash bonus (in addition to the options granted to them under the Yellow Book (USA) West Management Scheme on 19 September 2002). A total cash bonus pool of $2,499,950 was paid pursuant to these bonus arrangements on
Admission, and $2,499,950 six months after Admission.



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



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



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



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



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



The Yell Sharesave Plan



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



Eligibility



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



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



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



Exercise price



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



Scheme limits



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



In determining the above limit, any ordinary shares issued or that may be issued to satisfy any options granted by the trustee shall be regarded as
options to subscribe for ordinary shares and no account shall be taken of any ordinary shares where the right to acquire such ordinary shares was released or lapsed without being exercised or was granted pursuant to the Pre-Admission Schemes.



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Rights of exercise and lapse of options



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



Adjustments



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



Alterations



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



Termination



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



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



The Yell Share Option
Scheme



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



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



Section A



Eligibility



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



Grant of options



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



Options will normally be granted within the period of 42 days commencing on the day after the date on which Yell Group plc releases its quarterly, half-yearly or final results for any financial period if the committee
considers that exceptional circumstances justifying the grant of options, options may be granted outside this period.



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



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



Limits on the issue of new shares



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



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



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



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



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



Exercise of option



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



Discharge of option in cash/National Insurance contributions indemnity



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



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



Amendments to the
schemes rules



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



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Section B



The following provisions specifically apply to the Approved Section:



Performance requirements



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



Individual limits



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



Discharge of option in cash



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



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



The Yell SIP



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



The Yell SIP has the following main features:



Eligibility



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



Grant of shares



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



The three features are:



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



| | (ii) |  | up to £1,500 in any tax year can be deducted from an employees salary to buy partnership shares; and/or
| | ---- |  | ----------------------------------------------------------------------------------------------------------



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



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Free shares



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



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



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



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



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



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



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



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



Partnership Shares



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



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



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



Matching shares



Under the terms of the Yell SIP, Yell Group plc can offer matching shares which are shares offered free to employees who have purchased partnership
shares. When matching shares are awarded to an employee they must be offered on the same basis to all employees in a ratio of up to two matching shares for each partnership share purchased.



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



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



Dividend shares



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



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



No options have been granted under the Yell
SIP.



The Yell Incentive Plan



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



The Yell Incentive Plan has the following main features:



Eligibility



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



Giving of Awards



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



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



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



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



The Performance Target



A performance target will apply to awards given under the Yell Incentive Plan, such performance target to be determined by
the committee and notified to the Trustee in advance of the Trustee making an award in any particular year. The performance target shall



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relate to Yell Group plcs performance over a minimum three-year period adjudged according to such objective criteria as the committee may determine
having due regard to the best-practice provisions for long-term incentive schemes, and such other current guidance issued by or on behalf of the London Stock Exchange or institutional shareholders.



Grant of Option



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



The Exercise Price



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



Exercise of Option



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



Limits on the Issue of New Shares



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



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



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



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



Amendments to the Plan Rules



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



No awards have been made under the Yell Incentive Plan.



The Yell US Equity Incentive Plan



The Yell US Equity Incentive Plan allows Yell Group plc to issue both non-qualified and incentive stock options (together, the Stock Options)
and ordinary shares (Stock Awards and together with the Stock Options, the Incentive Plan Awards) to officers and employees of Yell Group plc, its subsidiaries and affiliates.



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Eligibility



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



Stock Options



Option limitations



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



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



Exercise price



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



Change of control



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



Stock Awards



Purchase price



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



Rights as a shareholder



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



Performance-based awards



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



Duration, amendment and termination



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



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



The Yell US Stock Purchase Plan



The Yell US Stock Purchase Plan allows eligible employees of Yell Group plc,
its subsidiaries and affiliates to purchase ordinary shares in Yell Group plc.



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Eligibility



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



Limitations



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



Offerings



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



Employee purchases



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



Purchase price



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



Amendment and termination



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



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



The Yell CAP



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



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



Eligibility



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



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Grant of Options



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



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



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



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



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



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



Allocation of Funds



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



Vesting and Payment of Awards



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



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



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



Amendments to the
Plan Rules



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



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



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



|                                                |  |                                                   |  |                        |      
|----------------------------------------------- |  | ------------------------------------------------- |  | ---------------------- | -----
|Plan                                            |  | Total numberof optionsgranted overordinary shares |  | Exerciseprice pershare
|Yell Manager Plan                               |  | 4,599,304                                         |  | £                      | 0.365
|Yell Employee Plan                              |  | 717,554                                           |  | £                      | 0.365
|Yell US Employee Plan                           |  | 105,909                                           |  | £                      | 0.365
|Yellow Book (USA) West Management Scheme        |  | 1,355,221                                         |  | £                      | 1.28 
|Yell Sharesave Plan                             |  | 3,466,282                                         |  | £                      | 2.60 
|Yell Share Option Scheme (July 2003 grant)      |  | 1,561,403                                         |  | £                      | 2.85 
|Yell Share Option Scheme (Nov 2003 grant)       |  | 1,757,640                                         |  | £                      | 2.96 
|Yell SIP                                        |  | NIL                                               |  |                        | N/A  
|Yell Incentive Plan                             |  | NIL                                               |  |                        | N/A  
|Yell US Equity Incentive Plan (July 2003 grant) |  | 1,250,000                                         |  | £                      | 2.85 
|Yell US Equity Incentive Plan (Nov 2003 grant)  |  | 3,360,281                                         |  | £                      | 2.96 
|Yell US Stock Purchase Plan                     |  | 984,617                                           |  | £                      | 2.60 
|                                                |  |                                                   |  |                        |      
|Total                                           |  | 19,158,211                                        |  |                        | N/A  



ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



A. Major Shareholders



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



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



|                                                                   |  |              |  |                                            
|------------------------------------------------------------------ |  | ------------ |  | -------------------------------------------
|Shareholder                                                        |  | No. ofShares |  | Percentage of issued ordinary share capital
|FMR Corp and Fidelity International Limited and their subsidiaries |  | 96,527,675   |  | 13.83                                      
|Merrill Lynch & Co., Inc                                           |  | 76,119,750   |  | 10.91                                      
|Aviva plc and its subsidiaries                                     |  | 37,955,803   |  | 5.44                                       
|The Goldman Sachs Group                                            |  | 34,730,286   |  | 4.98                                       
|Standard Life Group                                                |  | 28,286,360   |  | 4.05                                       
|Franklin Resources, Inc.                                           |  | 28,195,645   |  | 4.04                                       
|Legal & General Group plc                                          |  | 27,180,778   |  | 3.89                                       
|Scottish Widows Investment Partnership Limited                     |  | 21,332,278   |  | 3.06                                       



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



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B.    Related Party Transactions



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



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



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



C.    Interests of Experts and Counsel



Not applicable.



ITEM 8.    FINANCIAL INFORMATION



A.    Consolidated Statements and Other Financial Information



See Item 18.



Legal Proceedings



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



B.    Significant Changes



Not applicable.



ITEM 9.    THE OFFER AND LISTING



A.    Offer and Listing Details



Not applicable.



B.    Plan of Distribution



Not applicable.



C.    Markets



The Notes are listed on the Luxembourg Stock Exchange.



D.    Selling Shareholders



Not applicable.



E.    Dilution



Not applicable.



F.    Expenses of the Issue



Not applicable.



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ITEM 10.    ADDITIONAL INFORMATION



A.    Share Capital



Not
applicable.



B.    Memorandum and Articles of
Association



Articles of Association



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



C.    Material Contracts



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



Senior Facilities Agreement



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



Structure



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



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



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



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Interest rates and fees



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



Guarantees and
security



The obligations of the subsidiaries of Yell
Group plc under the Senior Facilities Agreement are guaranteed by, amongst others, Yellow Pages Limited, Yell Holdings 2 Limited, Yell Limited, YH Limited, Yell SàrL, Yellow Book Group, Inc. and each of Yell Limiteds and Yellow Book
Group, Inc.s material subsidiaries.



Each of Yellow Pages
Limited, Yell Holdings 2 Limited, Yell Limited, YH Limited and each subsidiary guarantor incorporated in the United Kingdom has granted a security interest over substantially all of its assets, including fixed charges over certain of its properties,
debts, bank accounts, insurances, intellectual property and specified material agreements, and a floating charge over all of its other business, assets and undertakings. In addition, the shares of Yell SàrL, Yell Holdings 2 Limited, Yell
Limited, YH Limited, and the subsidiary guarantors incorporated in the United Kingdom have been charged in favour of HSBC Bank plc as security trustee for the banks under the Senior Facilities Agreement.



Each of Yellow Book Group, Inc. and each borrower and/or subsidiary guarantor
incorporated in the United States has granted a security interest over substantially all of its assets, including, first-priority perfected liens over certain of its properties (including property), debts, bank accounts, insurances, intellectual
property and specified material agreements. In addition, the shares of the borrowers and the subsidiary guarantors incorporated in the United States have been pledged to HSBC Bank plc as security trustee for the banks under the Senior Facilities
Agreement. Certain property owned by McLeodUSA in Cedar Rapids, Iowa has also been mortgaged in favour of HSBC Bank plc (as security trustee as aforesaid).



Yell SàrL has granted a security interest over its shares in Yellow Book Group, Inc. as security for its obligations as a guarantor under the
Senior Facilities Agreement.



The security provided to HSBC
Bank plc as security trustee for the banks under the Senior Facilities Agreement will be released at such time as (i) the Leverage Ratio is less than or equal to 3.50:1, and (ii) Yell Group plc has achieved external credit ratings of a minimum of
BBB- from Standard & Poors and Baa3 from Moodys (with, in each case, a stable outlook or better).



Covenants



The Senior Facilities Agreement contains certain customary negative covenants which restrict Yell Group plc and its subsidiaries (subject to certain
agreed exceptions) from, amongst other things: (i) incurring additional indebtedness; (ii) giving guarantees and indemnities; (iii) making loans to others; (iv) creating security interests on their assets; (v) making acquisitions and investments or
entering into joint ventures; and (vi) disposing of assets.



Acquisitions of assets or companies whose business is similar or related to the business carried on by Yell Group plc and its subsidiaries are, amongst other things, permitted subject to certain requirements (subject to certain agreed
exceptions), including, without limitation, to the extent (i) no defaults exist at the time of the acquisition or would result therefrom, (ii) such acquisitions do not exceed £200 million (rising to £350 million where (A) both prior to
and after completion of the relevant acquisition the Leverage Ratio is less than or equal to 3.50:1, and (B) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys (with,
in each case, a stable outlook or better) prior to completion of any such acquisition) in any financial year (exclusive of amounts funded by equity or from excess cash flow (subject to certain conditions)), (iii) the proposed acquisition assets for
the period of 12 months prior to the date of their acquisition had positive EBITDA, and, (iv) the financial covenants set out in the Senior Facilities Agreement will be met following such acquisition.



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Dividends are, amongst other things, permitted to the extent that such dividends are permitted under the
indentures for the senior notes.



The Senior Facilities
Agreement requires the borrower to observe certain customary positive covenants including, but not limited to, covenants relating to legal status, notification of default, making of claims, financial assistance, financial condition and hedging
arrangements.



In addition, the Senior Facilities Agreement
requires Yell Group plc and its consolidated subsidiaries to maintain specified consolidated financial ratios for (i) consolidated total net debt to consolidated EBITDA, (ii) consolidated net senior debt to consolidated EBITDA (tested until 31 March
2005 only), and (iii) consolidated EBITDA to net cash interest payable.



Maturity and amortisation



The Term Facility
A1 is to be repaid in fixed semi-annual instalments of £40 million commencing on 31 March 2004, increasing to fixed semi-annual instalments of £45 million beginning on 30 September 2005, increasing to fixed semi-annual instalments of
£50 million beginning on 30 September 2006, with a final instalment equal to all amounts then unpaid and outstanding being due and payable on 8 July 2008 (being the final maturity date of the Term Facilities and Revolving Facility).

The Term Facility A2 is to be repaid in one instalment on 8 July 2008. No amounts repaid by the subsidiaries of Yell Group plc that are borrowers under the
Senior Facilities Agreement may be reborrowed.



The Revolving
Facility ceases to be available for drawing on the date falling one month prior to the final maturity date. Each advance made under the Revolving Facility must be repaid on the last day of each interest period relating to it, although any amounts
repaid under the Revolving Facility are available for re-drawing.



Prepayments



All loans under the Senior Facilities Agreement
must be prepaid in full upon the occurrence of certain events including, (i) a change of control of Yell Group plc (if the majority lenders so require), (ii) from 100% of the net cash proceeds of any additional debt capital markets issue, other than
to the extent used to refinance the senior notes, reducing to 50% when (A) the Leverage Ratio is less than or equal to 3.50:1, and (B) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3
from Moodys (with, in each case, a stable outlook or better), and (iii) from 50% of excess cash flow (reducing to 25% when the Levergage Ratio is 3.50:1 or better and reducing further to 0% when the Leverage Ratio is 3.00:1 or better.



Events of default



The Senior Facilities Agreement contains certain customary events of default
for facilities of its type (including Yell Group plc ceasing to have a listing for its ordinary shares on any recognised exchange in the United Kingdom or the United States), the occurrence of which would allow the lenders to accelerate all
outstanding loans and terminate their commitments under the Senior Facilities Agreement.



Hedging arrangements



The subsidiaries of Yell Group plc that are borrowers under the Senior Facilities Agreement are required by the terms of the Senior Facilities Agreement to enter into hedging arrangements to provide protection in respect of interest rate
risk exposure because the financing under the Senior Facilities Agreement is at floating interest rates. The lenders require that a minimum aggregate notional amount of 50% of the consolidated net debt is on a fixed interest basis. The hedging
requirement falls away in circumstances where (i) the Leverage Ratio is less than or equal to 3.50:1, and (ii) Yell Group plc has achieved external credit ratings of a minimum of BBB- from Standard & Poors and Baa3 from Moodys
(with, in each case, a stable outlook or better).



Hedging
banks have been granted security, guarantee and subordination rights which rank at least equally with the rights of the banks under the Senior Facilities Agreement.



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Senior Sterling Notes, Senior Dollar Notes and Senior Discount Dollar Notes



Yell Finance B.V. has issued £250 million principal amount of 10
3⁄4% Senior Sterling Notes due 2011, $200 million principal amount of 10 3⁄4% Senior Dollar Notes due 2011 and $288.25 million principal amount at maturity of 13 1⁄2% Senior Discount Dollar Notes due 2011 (collectively, the
Notes) under indentures (the Indentures) dated as of 6 August 2001 and amended 18 January 2002, in each case among Yell Finance B.V., as the Issuer, Yellow Pages Limited as the Guarantor and The Bank of New York as the
Trustee.



The Notes are general unsecured obligations of Yell
Finance B.V. and mature on 1 August 2011, unless previously redeemed. The Senior Sterling Notes and Senior Dollar Notes bear interest at the rate of 10 3⁄4%, payable semi-annually in arrears on 1 February and 1 August in each year, commencing 1
February 2002. The Senior Discount Dollar Notes were initially issued at a discount with an issue price of $521.33 per $1,000 principal amount at maturity. No interest is payable on the Senior Discount Dollar Notes prior to 1 August 2006. From and
after 1 August 2006, each Senior Discount Dollar Note will bear interest at the rate of 13 1⁄2%, payable semi-annually in arrears on 1 February and 1 August in each year, commencing 1 February 2007.



The Notes will be subject to redemption at any time on or after 1 August
2006, at the option of the Issuer, in whole or in part, at the redemption prices set forth in the Indentures (initially par plus one-half the coupon declining to par on or after 1 August 2009). In addition, the Issuer may redeem all but not less
than all of any series of Notes on or prior to 1 August 2006 by paying a make-whole premium based on the Gilt Rate (as defined therein) or the Treasury Rate (as defined therein).



Further, before 1 August 2004, the issuer may redeem up to 35% of the aggregate principal amount at maturity of each series
of Notes with the net proceeds of a public equity offering at a price of 110.75% of the principal amount (in the case of the Senior Sterling Notes and Senior Dollar Notes) or 113.50% of the accreted amount of the Senior Discount Dollar Notes, if at
least 65% of the original aggregate principal amount at maturity of such series remains outstanding after such redemption. On 18 August 2003, we exercised this right and redeemed 35% (£172.5 million) of our Senior Notes.



Unless previously called for redemption, if a Change of Control (as defined
in the Indentures, which definition includes the requirement that a decline occur in respect of the rating of the Notes) shall occur at any time, then each holder of Notes shall have the right to require that the Issuer purchase such holders
Notes in whole or in part at a purchase price in cash in an amount equal to 101% of the principal amount of the Senior Sterling Notes and the Senior Dollar Notes and 101% of the accreted value of the Senior Discount Dollar Notes.



The Indentures contain certain covenants which, amongst other things,
restrict Yell Finance B.V.s ability and the Restricted Subsidiaries (as defined therein) to:



| |  |  | incur additional indebtedness;
| | - |  | ------------------------------



| |  |  | pay dividends or make distributions in respect of Yell Finance B.V.s equity interests or make certain other investments or restricted payments;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | issue certain guarantees;
| | - |  | -------------------------



| |  |  | enter into certain transactions with shareholders or affiliates;
| | - |  | ----------------------------------------------------------------



| |  |  | create certain liens;
| | - |  | ---------------------



| |  |  | sell certain assets; or
| | - |  | -----------------------



| |  |  | create consensual restrictions on the ability of Restricted Subsidiaries to pay dividends and make certain other payments and transfer of assets to us and the other Restricted
Subsidiaries.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In addition, the Indentures limit
Yell Finance B.V.s ability to consolidate, merge or sell all or substantially all of its assets.



The Indentures also contain events of default, including:



| |  |  | non-payment of amounts due;
| | - |  | ---------------------------



| |  |  | failure to comply with provisions relating to a consolidation, merger or sale of all or substantially all of its assets;
| | - |  | ------------------------------------------------------------------------------------------------------------------------



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| |  |  | failure to repurchase the Notes in accordance with the terms of the Indentures;
| | - |  | -------------------------------------------------------------------------------



| |  |  | breach of covenants;
| | - |  | --------------------



| |  |  | cross-defaults by Yell Finance B.V. or its significant subsidiaries;
| | - |  | --------------------------------------------------------------------



| |  |  | certain judgment awards against Yell Finance B.V. or its significant subsidiaries; and
| | - |  | --------------------------------------------------------------------------------------



| |  |  | certain events of bankruptcy and insolvency.
| | - |  | --------------------------------------------



Upon the occurrence of an event of default, the Trustee under the Indentures or the holders of 25% of outstanding Notes, may declare the Notes immediately
due and payable at 100% of the principal amount plus accrued and unpaid interest and liquidated damages, if any, to the date of declaration.



Subordination Agreement



Yell Group Limited (now Yell Group plc) and Yell Finance B.V. entered into a subordination agreement dated 6 August 2001 with, amongst others, the holders
of the DDBs and the trustee for the benefit of holders of the Notes (the Subordination Agreement). The terms of the Subordination Agreement are subject to those of the Intercreditor Deed.



The Subordination Agreement includes provisions that:



| |  |  | subordinate Yell Group plcs right of payment under the intercompany loans made to Yell Finance B.V. to the prior payment in full of the Notes;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibit the maturity, redemption or repurchase of the intercompany loans prior to the maturity and repayment of the Notes;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibit the Yell Group plcs subsidiaries from securing the intercompany loans by granting a lien on their assets or guaranteeing the intercompany loans;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | entitle the holders of Notes to payment in full before Yell Group plc is entitled to receive any payment in respect of the intercompany loans, in the event of Yell Finance
B.V.s dissolution, bankruptcy, insolvency or similar circumstances;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibit the amendment of the intercompany loans in any manner adverse to the holders of the Notes, prior to the repayment of the Notes;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibit Yell Finance B.V. from making any payments on the intercompany loans prior to the repayment of the Notes (other than permitted payments under the Indentures), setting off
any of the intercompany loans or securing the intercompany loans by a lien on Yell Finance B.V.s assets; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | prohibit any of the holders of the DDBs from taking any action in respect of the DDBs contrary to Yell Group plcs and Yell Finance B.V.s obligations under the
Subordination Agreement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The provisions of the
Subordination Agreement also prohibit Yell Group plc from:



| |  |  | taking any enforcement action on the intercompany loans prior to the maturity and repayment of the Notes in full in cash;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | transferring or otherwise conveying any of the intercompany loans to any person other than Yell Finance B.V.; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | making any payments in respect of the DDBs or the BT Loan Notes; however, Yell Group plc may make such payments with its own funds or funds distributed to it in accordance with the
restricted payments covenant in the Indentures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Keepwell
Agreement



Yell Group Limited (now Yell Group plc) has
entered into a keepwell agreement with Yell Finance B.V. dated as of 6 August 2001 (as amended and restated on 6 April 2002), which provides that in the event Yell Finance B.V., in its sole discretion, determines that it will have insufficient funds
(including funds available from its subsidiaries under the senior credit facilities) to meet its obligations under the Notes and under the bridge notes issued pursuant to a bridge credit facility put in place at the time of the McLeod acquisition in
order to finance part of the McLeod acquisition costs (which bridge notes facility was refinanced in full on



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11 November 2002 as described above in Senior Facilities Agreement), it will promptly notify Yell Group plc, and Yell Group plc will make
available to Yell Finance B.V. before the due date of such obligations, funds sufficient to enable Yell Finance B.V. to satisfy such payment obligations (the Keepwell Agreement). Such funds will be made available to Yell Finance B.V.
either as a capital contribution or a subordinated loan in compliance with the terms of the Indentures and on the basis that no interest or principal payments may be made on any such subordinated loan unless Yell Finance B.V., immediately before and
after such payment, is solvent in all respects and such subordinated loan is subordinated to the Notes or the bridge notes in the event of bankruptcy or insolvency.



In accordance with certain requirements of the Dutch Central Bank, the Keepwell Agreement will be enforceable against Yell
Group plc only by Yell Finance B.V. and/or its liquidator or administrator in the event of a bankruptcy, or, as the case may be, a moratorium under Dutch law (surseance van betaling). The Keepwell Agreement is not enforceable by
the holders of the Notes or the bridge notes or the trustee on behalf of the holders of the Notes or the agent on behalf of the holders of the bridge notes.



Stamp Duty Agreement



On 25 May 2001, Yell Limited (now Castaim Limited and an affiliate of BT), Castaim Limited (now Yell Limited), BT Holdings Limited, Yellow Pages BV and BT
entered into an agreement relating to the stamp duty (the Stamp Duty Agreement) which governed the execution and keeping of the original versions of the Business Sale Agreement and the Umbrella Agreement (together the
Documents and each a Document) outside the United Kingdom.



Under the Stamp Duty Agreement, it was agreed that each party would not at any time cause or knowingly permit the Documents to be brought into the United Kingdom unless (i) it was necessary to produce the Document in
any judicial, arbitration, administrative or other legal proceedings; (ii) it was required to do so by any tax authority; (iii) it was required to do so by any government department or other regulatory body; or (iv) it was required to do so by law.



Subject to the above, it was also agreed that each party would
not argue or raise (or cause to be argued or raised) any question in any judicial, arbitration, administrative or other legal proceeding involving the Documents that a copy or certified copy of any of the Documents could not be produced as adequate
evidence in any such proceedings.



In the event that any of the
Documents is brought into the United Kingdom in the circumstances described above, then Yell Limited as the purchaser of the Yell business in the United Kingdom undertook that it would submit that Document as soon as reasonably practicable to the UK
Inland Revenue and would pay any stamp duty thereon. If Yell Limited fails to comply with that obligation, Castaim Limited has the right to present the relevant Document to the UK Inland Revenue, pay the stamp duty and require repayment of such
stamp duty from Yell Limited.



The Company is not aware of any
circumstances which would require either it or BT to bring any of the Documents into the United Kingdom and believes the risk of such circumstances arising to be remote. However, if stamp duty were to be paid on the Documents, the amount payable by
Yell would be in the order of £54.5 million plus applicable interest.



Management Incentive Plan Trust and Distribution Agreement (MIP Distribution Agreement)



The MIP Distribution Agreement works in conjunction with the Phantom DDB Plan and the US Equity Plan in the event that Yell Marketable Securities are
allocated to the US management participants in those plans. Pursuant to this agreement, Yell Group plc will deliver to Yell Management Company LLC any Yell Marketable Securities paid in respect of the Phantom Units or LLC Interests held by the
participants in the Phantom DDB Plan and the US Equity Plan.



The agreement remains partially in place and on 15 July 2004, the first anniversary of the initial public offering of Yell Group plc, any Yell Marketable Securities still held by Yell Management Company LLC will be distributed to the
participants of the Phantom DDB and US Equity Plan.



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McLeod Acquisition Agreement



The McLeod acquisition agreement was entered into between McLeodUSA Incorporated (the Parent), Yell Group
Limited (now Yell Group plc) and McLeodUSA Holdings, Inc. (the Seller), a wholly owned subsidiary of the Parent, on 19 January 2002 (the McLeod Acquisition Agreement), pursuant to which in April 2002, Yell Group plc acquired
all the issued share capital of McLeod, a wholly owned subsidiary of the Seller, in consideration of the payment of $600 million in cash.



The McLeod Acquisition Agreement contains warranties as to, amongst other things, ownership of the shares, employee benefit plans, intellectual property,
material contracts, and the assets and properties of McLeod .



Under the terms of the McLeod Acquisition Agreement, active employees of McLeod as of the closing date shall be provided with comparable benefits for the two years following the closing of the acquisition and will be given credit for past
service for purposes of eligibility and vesting under employee benefit plans. The Company has also agreed to maintain a major employment centre in Cedar Rapids, Iowa for a period of at least two years following the closing date of the acquisition.



The McLeod Acquisition Agreement also provides the Seller with
an exclusive right of first negotiation for a limited period of time in the event that Yell Group plc decides to sell McLeod to a third party and McLeod is operating as a stand-alone business and is not integrated with the businesses of Yell Group
Limited or any of its subsidiaries.



McLeod Operating Agreement



On 28 April 2003, Yellow Book/McLeod Holdings, Inc.
(Yellow Book/McLeod) assigned its rights under the Publishing, Branding and Operating Agreement, dated as of 16 April 2002 (the Branding Agreement), between Yellow Book/McLeod and McLeodUSA Incorporated and McLeodUSA
Telecommunications Services, Inc. (referred to together as McLeodUSA), to Yellow Book USA, Inc. (Yellow Book). Yellow Book then entered into an Amended and Restated Publishing, Branding and Operating Agreement, dated as of 29
April 2003 (the Amended Branding Agreement), with McLeodUSA.



Under the Branding Agreement, Yellow Book had been obliged to publish the directories acquired from McLeodUSA using the McLeod trademarks and trade dress on the covers. Any directories subsequently acquired in states
where McLeod provided telephone service as of the date of the Branding Agreement (McLeodUSA Service States) also had to be published with the McLeod trademarks and trade dress on the cover. The Branding Agreement also contained
restrictions on changing the geographic coverage of the affected directories and on discontinuing publication of the affected directories, and McLeodUSA had the right to ask Yellow Book to publish additional directories in McLeodUSA Service States.
If Yellow Book declined to publish such additional directories, Yellow Book would be precluded from publishing directories in the relevant geographic area for the term of the Branding Agreement. McLeodUSA also received up to eight pages in the
community section of many of the directories. The term of the Branding Agreement was five years from the effective date, with automatic renewals of two years, unless one of the parties sent notice of termination at least one year prior to the
expiration of the term. McLeodUSA paid Yellow Book an annual fee of $1,900,000, plus a fee for advertisements equal to Yellow Books cost of producing the advertisements



The Amended Branding Agreement does not require Yellow Book to publish directories with the McLeod trademarks and trade
dress. Instead, McLeodUSA receives a credit card-sized advertisement on the cover of each directory published in a McLeodUSA Service State. McLeodUSA also receives up to four pages in the community section of each directory and advertisements under
various headings. The Amended Branding Agreement does not contain any restrictions on changing the geographic coverage of the affected directories or on discontinuing publication of any of the directories. However, Yellow Book has agreed to maintain
a total circulation of at least thirty million with respect to the directories in the McLeodUSA Service States. In the event McLeodUSA wants Yellow Book to publish additional directories in the McLeodUSA Service States, the parties will discuss the
feasibility of publishing such additional directories, but Yellow Book is no longer precluded from publishing in the relevant geographic areas if it declines to publish the additional directories. McLeodUSA no longer pays an annual fee to Yellow
Book, nor does it pay for its advertisements in the directories. The term of the Amended Branding Agreement commences 29 April 2003 and expires 29 April 2008.



NDC Acquisition Agreement



Yellow Book USA entered into an agreement with NDC Holdings II, Inc. (NDC Inc.), the stockholders of NDC Inc. and Three Cities Research Inc.
on 10 December 2002 (the NDC Acquisition Agreement) pursuant to which Yellow Book USA agreed to



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purchase all issued and outstanding shares of capital stock in NDC Inc. free and clear of all liens in consideration for the payment of US$69,000,000.



The NDC Acquisition Agreement contains certain representations
and warranties given on an indemnity basis by the stockholders of NDC Inc. to Yellow Book USA relating to, amongst other things, liabilities, indebtedness, material adverse change, employees, tax, intellectual property and commercial contracts.
Yellow Book USA also gave certain representations and warranties to the stockholders of NDC Inc. on an indemnity basis in relation to, amongst other things, due incorporation and authorisation. The period during which the parties can make a warranty
claim expires on 30 June 2004 with the exception of certain specified warranties given to Yellow Book USA in respect of which the warranty period does not expire until 90 days after the applicable statute of limitations for such relevant claim.



D.    Exchange Controls



None.



E.    Taxation



European Directive on the Taxation of Savings Income



The European Union has adopted a directive regarding the taxation of savings income. Subject to a number of important conditions being met, it is proposed
that Member States will be required from a date not earlier than 1 January 2005 to provide to the tax authorities of other Member States details of payments of interest and other similar income paid by a person to an individual in another Member
State, except that Austria, Belgium and Luxembourg will instead impose a withholding system for a transitional period unless during such period they elect otherwise.



United States



US Federal Income Tax Considerations



This is a discussion of the important US federal income tax consequences of purchasing, holding and disposing of the senior sterling notes, the senior
dollar notes and the senior discount dollar notes. Except to the limited extent discussed below, this discussion only applies to a US holder, defined as a beneficial owner of a note that is:



| |  |  | a citizen or individual resident of the United States;
| | - |  | ------------------------------------------------------



| |  |  | a corporation (or other entity treated as a corporation for US federal income tax purposes) created or organised under the laws of the United States or any political subdivision
thereof or therein;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an estate, the income of which is includible in gross income for US federal income tax purposes regardless of the source; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more US persons have the authority to control
all substantial decisions of the trust.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This
discussion is for general information only and does not address all aspects of US federal income taxation that may be relevant to a particular US holder based on such holders particular circumstances (including the potential application of the
US alternative minimum tax), nor does it address any aspect of state, local or non-US tax laws, or the possible application of US federal gift or estate taxes. This discussion does not consider the tax treatment of partnerships or other
pass-through entities or persons who hold Notes through a partnership or other pass-through entity. This discussion does not address the US federal income tax consequences to US holders that are subject to special treatment, including US holders
that:



| |  |  | are broker-dealers, traders, insurance companies, tax-exempt organisations, financial institutions or financial services entities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | hold notes as part of a straddle, hedge or conversion transaction with other investments; or
| | - |  | --------------------------------------------------------------------------------------------------



| |  |  | own at least 10% of the issuers voting stock (directly, indirectly or constructively).
| | - |  | ---------------------------------------------------------------------------------------



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This discussion considers only US holders that are beneficial owners of the notes that will own Notes as
capital assets and whose functional currency is the dollar. The discussion is generally limited to the tax consequences to holders who purchase Notes in connection with their initial issue at the issue price, and does not address any
special rules that may apply if the Notes are called before the maturity date. For this purpose the issue price of a note is the first price at which a substantial amount of the Notes are sold to the public for money, excluding sales to
bond houses, brokers or similar persons or organisations acting in the capacity of underwriters, placement agents or wholesalers. It does not describe any tax consequences arising out of the tax laws of any state, local or foreign jurisdiction.



This discussion is based upon the US Internal Revenue Code,
existing and proposed regulations thereunder, and current administrative rulings and court decisions. All of the foregoing are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this
discussion.



You should consult your tax adviser concerning the
application of US federal income tax laws, as well as the laws of any state, local or foreign taxing jurisdiction, to your particular situation.



Interest and Original Issue Discount



Stated interest on the senior sterling notes and the senior dollar notes.    Interest paid on a senior dollar note (including
any amounts paid in respect of the guarantees) will be taxable to a US holder as ordinary income at the time it accrues or is received in accordance with such holders method of accounting for US federal income tax purposes.



Interest paid on a senior sterling note (including any amounts paid in
respect of the guarantees) also will be taxable to a US holder as ordinary income at the time it accrues or is received in accordance with such holders method of accounting for US federal income tax purposes. A US holder of a senior
sterling note that uses the cash method of accounting measures interest received by translating the amount of pounds sterling into dollars at the spot rate on the date of receipt or payment. A US holder of a senior sterling note that uses the
accrual method of accounting is generally required to determine interest income received using either of two methods. Under the first method, the dollar value of interest accrued is translated at the average rate for the interest accrual period (or,
with respect to an accrual period that spans two taxable years, the partial period within the taxable year). Under the second method, a US holder can make an election (which must be applied consistently to all debt instruments from year to year and
may not be revoked without the consent of the US Internal Revenue Service) to accrue interest on a senior sterling note at the pounds sterling spot rate on the last day of an interest accrual period or, if the last day of an accrual period is within
five business days of receipt, the spot rate on the date of receipt. A US holder will recognise exchange gain or loss, as the case may be, on the receipt of pounds sterling to the extent that the exchange rate on the date payment is received differs
from the rate applicable to the accrual of that income. This foreign currency gain or loss will generally be treated as ordinary income or loss, and sourced to the United States for foreign tax credit purposes.



Pounds sterling received as interest on the senior sterling notes will have a
tax basis equal to its dollar value at the time the interest payment is received. Gain or loss, if any, realised by a US holder on a sale or other disposition of that foreign currency will be ordinary income or loss and will generally be income from
sources within the United States for foreign tax credit purposes.



Interest income received by a US holder on the senior sterling notes or senior dollar notes that is not subject to a withholding tax of 5% or more will generally be foreign source passive income for purposes of computing the US foreign tax
credit limitation.



Original issue discount on the senior
discount dollar notes.    For the reasons set forth below, the senior discount dollar notes will be considered to have been issued with original issue discount (OID). OID arises when the stated redemption
price at maturity of a debt instrument exceeds its issue price (as defined above). For this purpose, the stated redemption price at maturity will equal the stated principal and the total amount of interest provided for over the
term of the notes other than qualified stated interest (which is defined as interest that is unconditionally payable at least annually throughout the term of the debt instrument). Because none of the interest provided for under the terms
of the senior discount dollar notes is unconditionally payable at least annually, all of the interest on the senior discount dollar notes is added to the stated redemption price at maturity. Consequently, the



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senior discount dollar notes will be considered to have been issued with OID equal to the difference between the price at which a substantial amount of the
senior discount dollar notes were sold to the public and the stated principal due on those notes plus the sum of all of the interest payments provided for in the senior discount dollar notes.



Each US holder of a senior discount dollar note will generally be required to
accrue and include OID in income on an annual basis in advance of the receipt of cash attributable to such income, whether such US holder uses the cash or accrual method of accounting. The amount of OID that must be included in gross income for the
taxable year will equal the sum of the daily portions of OID for each day of the taxable year on which the US holder held the senior discount dollar note. The daily portion of OID required to be included in a US holders gross
income in a taxable year is determined under a constant yield to maturity method by allocating to each day during the taxable year on which the US holder holds the senior discount dollar note a ratable portion of the OID on the note attributable to
the accrual period (i.e. the interval between compounding dates) in which such day is included. The amount of OID allocable to each accrual period will equal the product of the adjusted issue price of the senior discount dollar note at the beginning
of the accrual period (i.e. the original issue price plus previously accrued OID minus previous cash payments) multiplied by the yield to maturity of the note (properly adjusted for the length of the accrual period). Finally, the yield to
maturity of a senior discount dollar note is that discount rate which, when used in computing the present value of all principal and stated interest payments to be made under the senior discount dollar note, produces an amount equal to the
issue price of that senior discount dollar note. The amount of OID included in income by a US holder will be treated as interest income. Thus, OID received from the issuer as well as any payments received pursuant to the guarantees that is not
subject to a withholding tax of 5% or more will generally be foreign source passive income for purposes of computing the US foreign tax credit limitation.



Additional Amounts and Special Interest



We believe the likelihood that the issuer will pay additional amounts or special interest is remote or incidental (within the meaning of the applicable US
Treasury regulations). In any event, a US holder will be required to treat the gross amount of any Additional Amounts or Special Interest as ordinary interest income at the time such amount is received or accrued in accordance with such US
holders method of accounting for tax purposes. Consequently, the amount a US holder will include in gross income with respect to a note could exceed the amount includible by the US holder as stated interest.



Dispositions of Notes



Senior dollar notes and senior discount dollar notes.    Unless a non-recognition provision
applies, a US holder will generally recognise gain or loss on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note equal to the difference between:



| |  |  | the amount of cash received plus the fair market value of any property received on the sale, exchange, repayment or other disposition (other than amounts attributable to accrued
interest, which will be taxable as ordinary interest income); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the US holders adjusted tax basis in the note.
| | - |  | -----------------------------------------------



A US holders adjusted tax basis in a senior dollar note or a senior discount dollar note generally will equal the cost of the note to the US holder
(net of accrued interest), and increased by amounts includible in income as OID. Because the senior dollar notes and senior discount dollar notes are held as a capital asset, such gain or loss will generally constitute capital gain or loss and will
be long-term capital gain or loss if the notes are held for longer than one year. If the US holder is an individual, any capital gain generally will be subject to US federal income tax at preferential rates if specified minimum holding periods are
met. The deductibility of capital losses is subject to certain limitations. Any gain recognised by a US holder on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note will generally be treated
as US source income for purposes of computing the US foreign tax credit limitation. Any loss recognised by a US holder on the sale, exchange, repayment or other disposition of a senior dollar note or a senior discount dollar note generally will
be treated as US source loss.



Senior sterling
notes.    Gain or loss recognised by a US holder on the sale, exchange, repayment or other disposition of a senior sterling note will generally be computed in the same way as gain or loss on the sale, exchange, repayment or
other disposition of a senior dollar note. For this purpose, however, the cost of a senior sterling note to a US holder will be the dollar value of the pound sterling purchase price, translated at the spot rate of the pound sterling on the date of
purchase (or, in some cases, on the settlement



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date). The conversion of dollars into pounds sterling and the immediate use of those pounds sterling to purchase a senior sterling note generally will not
result in a taxable gain or loss to the US holder. A US holder will have a tax basis in any pounds sterling received on the sale, exchange, repayment or other disposition of a senior sterling note equal to the dollar value of the pound sterling on
the date of receipt.



The holding period for a sterling senior
note, as well as the source of gain or loss recognised on the sale, exchange, repayment or other disposition of such a note, generally will be the same as for a senior dollar note. However, upon the sale, exchange, repayment or other disposition of
a senior sterling note, the foreign currency amount realised will be considered first to be the payment of accrued but unpaid interest (on which exchange gain or loss is recognised as described above), then as accrued but unpaid original issue
discount (on which exchange gain or loss is recognised as described above) and finally as a payment of principal. With respect to such payment of principal, (i) gain or loss is computed in the foreign currency and translated on the date of sale,
exchange, repayment or other disposition and (ii) exchange gain or loss is separately computed on the foreign currency amount of the purchase price. A US holder will recognise exchange gain or loss measured by the difference between the currency
exchange rate on the date of sale, exchange, repayment or other disposition and the exchange rate on the date that the senior sterling note was acquired. Exchange gain or loss computed on accrued interest and principal is recognised, however, only
to the extent of total gain or loss on the transaction. For purposes of determining the total gain or loss on the transaction, a US holders tax basis in the note will generally equal the dollar cost of the note (as described above), increased
by the dollar amounts includible in income as accrued interest or OID and reduced by the dollar amount of any payments other than payments of qualified stated interest. Exchange gain or loss is generally treated as US source income or loss.



Information Reporting and Backup Withholding



The amount of interest (including OID) and principal paid or accrued on the
notes to a US holder (other than corporations and other exempt recipients) will be reported to the US Internal Revenue Service. Under the Internal Revenue Code, a US holder of a note may be subject, under certain circumstances, to backup
withholding currently at a rate of 28% with respect to interest payments thereon or the gross proceeds from a sale, exchange or other disposition (including repayment of principal) thereof. Backup withholding generally applies only if the US
holder:



| |  |  | fails to furnish his or her social security or other taxpayer identification number certified under penalties of perjury within a reasonable time after the request therefore;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | furnishes an incorrect taxpayer identification number;
| | - |  | ------------------------------------------------------



| |  |  | fails to report properly interest or OID; or
| | - |  | --------------------------------------------



| |  |  | fails, under certain circumstances, to provide a certified statement, signed under penalty of perjury, that the taxpayer identification number provided is the correct number and
that such US holder is not subject to backup withholding.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A US holder of notes who does not provide his, her or its correct taxpayer identification number may be subject to penalties imposed by the US Internal Revenue Service. Any amount withheld from a payment to a US holder under backup
withholding rules will be refunded or allowed as a credit against such holders US federal income tax liability, provided that the required information is furnished to the US Internal Revenue Service. A US holder of a note should consult their
tax adviser as to their qualification for exemption from backup withholding and the procedure for obtaining such an exemption.



United Kingdom



UK Tax Consequences



The following summary describes certain UK tax consequences of the ownership of the Notes but does not purport to be comprehensive. Except where expressly stated, the summary relates only to the position of those persons who are the
absolute beneficial owners of their Notes and the interest thereon and may not apply to special situations, such as those of dealers in securities. It is not intended to apply to persons other than companies. Furthermore, the discussion below is
generally based upon provisions of UK tax law and UK Inland Revenue practice as at the date hereof. These provisions may be repeated, revoked or modified (possibly with retrospective effect) so as to result in UK tax consequences different from
those described below.



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Persons considering the purchase, ownership or disposition of the Notes should consult their own tax
advisers concerning UK tax consequences in the light of their particular situations as well as any consequences arising under the law of any other relevant tax jurisdiction. No representations with respect to the tax consequences to any particular
holder of Notes are made hereby.



Interest on the Notes



The notes will constitute quoted Eurobonds within the meaning
of section 349(4) of the UK Income and Corporation Taxes Act 1988 (ICTA) provided they are listed on a recognised stock exchange within the meaning of section 841 of ICTA. The Luxembourg Stock Exchange is currently a
recognised stock exchange for these purposes. Accordingly, once the Notes are listed on the Luxembourg Stock Exchange (and provided they remain so listed), payments of interest on the Notes may be made without withholding on account of UK income
tax.



Interest on the Notes constitutes UK source income for UK
tax purposes and, as such, may be subject to income tax by direct assessment even where paid without withholding except in the hands of a holder who is exempt from UK income tax under the terms of an applicable double taxation treaty or otherwise.
However, interest on a UK source received without deduction or withholding on account of UK tax will not be chargeable to UK tax in the hands of a holder of Notes who is not resident for tax purposes in the United Kingdom unless that holder of Notes
carries on a trade, profession or vocation in the United Kingdom through a UK branch or agency in connection with which the interest is received or to which the Notes are attributable. There are exemptions for interest received by certain categories
of agents (such as brokers and investment managers).



Accrued Income
Scheme-Individual Noteholders



For the purposes of the
provisions known as the Accrued Income Scheme, a transfer of a Note by a holder who is resident or ordinarily resident in the United Kingdom or a holder who carries on a trade in the United Kingdom through a branch or agency to which the
Note is attributable, may give rise to a charge to tax on income in respect of an amount as is just and reasonable.



Taxation of Chargeable Gains-Individual Noteholders



For the purposes of United Kingdom taxation of chargeable gains, Notes which are denominated in Sterling are expected to be treated as qualifying
corporate bonds by the UK Inland Revenue. Accordingly, for UK chargeable gains tax purposes, no chargeable gain or allowable loss should arise on the disposal of Notes which are so denominated.



Notes which are denominated in Euro will not be qualifying corporate
bonds for the purposes of United Kingdom taxation of chargeable gains. Accordingly, a holder of Notes which are so denominated who is resident or ordinarily resident in the United Kingdom, or who carries on a trade in the United Kingdom to
which the holding of the Notes is attributable, may realise a chargeable gain or allowable loss on the disposal of their holding of Notes, including a gain or loss which is attributable to currency exchange differences.



UK Corporation Tax Payers



Holders of the Notes within the charge to UK corporation tax will not be
subject to the methods of taxation set out in Accrued Income SchemeIndividual Noteholders. Any profits and gains (including interest) and profits or gains arising from currency fluctuations arising from the Notes in the hands
of those holders will generally be charged to tax as income in each accounting period on a basis reflecting the treatment in the statutory accounts of the holders, calculated in accordance the holders authorized accounting methods.



Stamp Duty and Stamp Duty Reserve Tax



No stamp duty or stamp duty reserve tax is payable on the issuance or
transfer of the Notes.



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UK Corporation Taxpayers



In respect of holders of Notes which are within the charge to UK corporation tax will not be subject to the methods of
taxation set out in Accrued Income SchemeIndividual Noteholders. Any returns, profits or gains (including interest and discount) arising from the notes or any fluctuation in their value (whether attributable to currency
fluctuations or otherwise) will generally be charged to tax as income in each accounting period on a basis reflecting the treatment in the statutory accounts of such holders, calculated in accordance with the holders authorised accounting
method.



Stamp Duty and Stamp Duty Reserve Tax



No stamp duty or stamp duty reserve tax is payable on the issue or transfer
of the Notes.



Prospective purchasers of the Notes who are in any doubt as
to their tax position or who may be subject to tax in other jurisdictions should consult their own tax advisers.



F.    Dividends and Paying Agents



Not applicable.



G.    Statements by Experts



Not applicable.



H.    Documents on Display



We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), applicable to foreign private issuers and fulfill the obligation with respect to such requirements by filing
reports with the United States Securities and Exchange Commission (the SEC). You may read and copy any document we file with the SEC without charge at the SECs public reference room at 450 Fifth Street, N.W., Washington, DC 20549.
Copies of such material may be obtained by mail from the Public Reference Branch of the SEC at such address, at prescribed rates. Please call the SEC at l-800-SEC-0330 for further information on the public reference room.



As a foreign private issuer, we are exempt from the rules under the Exchange
Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
In addition, we are not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as US companies whose securities are registered under the Exchange Act. A copy of each report
submitted in accordance with applicable US securities laws is available for public review at our principal executive offices.



I.    Subsidiary Information



Not applicable.



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ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Market-related Risks



Interest is payable under our senior credit facilities at a variable rate. We could, therefore, be adversely affected if interest rates were to rise
significantly. Under the senior credit facilities agreement dated 8 July 2003 we are required to have fixed or capped interest on at least 50% of net interest payments during the 21 months following each month end. This requirement ceases once net
debt falls below 3.5 times EBITDA, as defined in the credit facilities agreement. We have fixed interest on nearly 55% of the indebtedness under the senior credit facilities using interest rate swaps falling to 50% over the period to March 2006,
with a review of this strategy on a quarterly basis. When combined with the fixed rate senior notes, we have fixed our interest rates on approximately 64% of our total gross debt until March 2006, falling to approximately 30% thereafter. At 31 March
2004, we had £3.2 million net unrecognised losses on these instruments that will be recognised when the interest is paid.



All of these instruments are entered into for hedging purposes and, under UK GAAP, gains and losses on these instruments are deferred and only recognised
in income when the underlying transaction is recorded. Such instruments have not been designated and do not qualify for hedge accounting under the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards No
133 Accounting for Derivative Instruments and Hedging Activities for US GAAP purposes.



All significant cash inflows and outflows associated with our operations in the United Kingdom are denominated in pounds sterling, and all significant
cash inflows and outflows associated with our operations in the United States are denominated in US dollars. However, our financial statements are presented in pounds sterling, and changes in the exchange rate between the US dollar and pounds
sterling will affect the translation of the results of our operations into pounds sterling. The composition of our debt partially hedges exchange rate fluctuations, because 37.2% of our net third-party debt and 30.7% of our net interest expense are
denominated in US dollars, thereby reducing our US EBITDA exposure by approximately 30%. We do not currently intend to hedge any foreign exchange translation rate risk relating to US dollar-denominated notes or other US financial liabilities,
although we will continue to review this practice.



At 31 March
2004, we had £462.0 million of borrowings denominated in US dollars net of deferred financing fees, and £941.6 million of borrowings, also net of deferred financing fees, that accrue interest at variable rates, before taking into account
hedging arrangements. The following examples illustrate the effect certain changes in foreign exchange rates and interest rates would have had in the 2004 financial year. The following discussion of estimated amounts generated from the sensitivity
analysis is forward-looking and involves risks and uncertainties. If the amount or mix of long-term borrowings is different, then the following examples may not be indicative of the effects of changing exchange rates and interest rates.



If the variable interest rates had been a full percentage point higher or
lower with no change in foreign exchange rates, then the interest payable with respect to our variable-rate indebtedness in the 2004 financial year would have been £4.5 million higher or lower, respectively, taking into account our hedging
arrangements, or £9.9 million higher or lower, respectively, without taking into account hedging arrangements.



If the average exchange rate of the US dollar as measured against the pound sterling had been 10% higher or lower, with no change in variable rates of
interest, then the interest payable in the 2004 financial year would have been approximately £3.2 million lower or £3.9 million higher, respectively.



Our exposure to interest rate fluctuations will depend on the amount of variable-rate indebtedness that we have outstanding
and the extent of any hedging arrangements that we put in place. Similarly, our exposure to currency fluctuations will depend on the mix of US dollar and pounds sterling-denominated indebtedness and the extent of any hedging arrangements.



For further information on financial instruments and our risk
management see note 17 of the notes to the financial statements.



ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not applicable.



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PART II



ITEM 13.    DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None.



ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS



None.



ITEM 15.    CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures



Based on their review as of the end of the period covered by this annual report of the Groups disclosure controls and procedures, the Chief Executive Officer and Chief Financial Officer have concluded that the Groups current
disclosure controls and procedures are effective to ensure that material information regarding the Group is recorded, processed, summarised and reported in a timely manner and that the information is accumulated and communicated to management to
allow timely decisions regarding required disclosure.



Change in Internal
Control over Financial Reporting



During the period
covered by this annual report, based on the assessment of management, there were no changes in the Groups internal control over financial reporting or in other factors that could significantly affect this control that materially affected, or
that are reasonably likely to materially affect, the Groups internal control over financial reporting. Nor has management identified any material weaknesses in the Groups internal control over financial reporting.



ITEM 16.    [RESERVED]



ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT



Our board of directors has determined that John Coghlan is an audit committee financial expert as defined in Item 16A of the SECs Form 20-F.



ITEM 16B.    CODE OF ETHICS



We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer and persons performing similar functions. Our finance code of ethics is filed as Exhibit 14.1 to this annual report.



ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following fees were paid or are payable to the Yell Groups
auditors for the years ended 31 March 2003 and 31 March 2004:



|                             |  |                          |  |                       
|---------------------------- |  | ------------------------ |  | ----------------------
|                             |  | Consolidated (Successor)
|                             |  | Year ended31 March2003   |  | Year ended31 March2004
|                             |  | £                        |  | £                     
|                             |  |                          |  |                       
|Audit fees                   |  | 0.6                      |  | 0.6                   
|Audit-related fees           |  | 0.1                      |  | 0.2                   
|Tax fees                     |  | 0.3                      |  | 1.1                   
|All other fees(a)            |  | 5.2                      |  | 4.3                   
|                             |  |                          |  |                       
|Total auditors remuneration |  | 6.2                      |  | 6.2                   
|                             |  |                          |  |                       

---

|(a) |  | Fees in relation to accounting and tax advice of our parent companys postponed IPO in the year ended 31 March 2003 (£4.3 million) and the global offer in the year ended
31 March 2004 (£3.6 million) were approved and incurred prior to the parent companys flotation. Certain other fees in relation to due diligence totalling £0.5 million were approved and incurred in the year ended 31 March 2004 prior
to our parent companys flotation.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



97



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Prior to the acquisition on 22 June 2001, the audits of the combined financial statements of the
operations comprising the Yell Group were carried out in connection with a proposed demerger of the Yell Group by BT. The costs of these audits (£0.7 million) was borne by BT and are not included in the auditors remuneration disclosed
above.



ITEM 16D.    EXEMPTIONS FROM THE LISTING
STANDARDS FOR AUDIT COMMITTEES



Not applicable.



ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE
ISSUER AND AFFILIATED PURCHASER



Not applicable.



98



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##### Table of Contents

PART III



ITEM 17.    FINANCIAL STATEMENTS



We have responded to Item 18. Financial Statements in lieu of this item.



ITEM 18.    FINANCIAL STATEMENTS



Our combined and consolidated financial statements, together with the reports thereon by the independent auditors, are filed as part of this annual report as pages F-2 to F-64. An index to these pages is given on page
F-1.



ITEM 19.    EXHIBITS



The exhibits filed with or incorporated by reference into this annual report are listed below.



|1.1 |  | Deed of Incorporation of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.1 to Yell Finance B.V.s Registration Statement on Form F-4 filed with the United
States Securities and Exchange Commission on August 29, 2001, declared effective on August 30, 2001 (the Exchange Offer Registration Statement)).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.2 |  | Articles of Association of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.2 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



|1.3 |  | Memorandum of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.3 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|1.4 |  | Articles of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.4 to the Exchange Offer Registration Statement).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



|2.1 |  | Indenture relating to 10 3⁄4% Senior Sterling Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as
Trustee (incorporated herein by reference to Exhibit 4.1 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.2 |  | Indenture relating to 10 3⁄4% Senior Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as
Trustee (incorporated herein by reference to Exhibit 4.2 to the Exchange Offer Registration Statement).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.3 |  | Indenture relating to 13 1⁄2% Senior Discount Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New
York, as Trustee (incorporated herein by reference to Exhibit 4.3 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.4 |  | Registration Rights Agreement, dated August 6, 2001, between Yell Finance B.V. and Yellow Pages Limited, as Guarantor, and Merrill Lynch International, Deutsche Bank AG London, CIBC
World Markets plc, and the other Initial Purchasers as listed on Schedule A of the Purchase Agreement, as Initial Purchasers (incorporated herein by reference to Exhibit 4.4 to the Exchange Offer Registration Statement).*
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.5 |  | Subordination Agreement, dated August 6, 2001, between Yell Finance B.V., Yell Group Limited, as Parent and The Bank of New York, as Trustee (incorporated herein by reference to
Exhibit 4.5 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.6 |  | Intercreditor Deed, dated June 22, 2001 (as amended on July 11, 2001, March 13, 2002, April 16, 2002, May 31, 2002 and November 11, 2002), with, amongst others, Yell Group plc and
certain of its subsidiaries as Obligors, Yellow Pages Limited as the Guarantor, Yell Finance B.V. as the Issuer of the High Yield Notes. Discount High Yield Notes and Further High Yield Debt, the Institutions named therein as the Senior Finance
Parties and the funds managed or advised by Apax Partners and Hicks Muse (the Intercreditor Deed). (The Intercreditor Deed and amendment prior to November 11, 2002 incorporated herein by reference to Exhibit 2.6 to Yell Finance
B.V.s annual report on Form 20-F filed with the United States Securities and Exchange Commission on July 19, 2002 (the 2002 Annual Report)* and the amendment of November 11, 2002.*
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.7 |  | Form of Sterling Note (incorporated herein by reference to Exhibit 4.7 to the Exchange Offer Registration Statement).*
|--- |  | ----------------------------------------------------------------------------------------------------------------------



|2.8 |  | Form of Dollar Note (incorporated herein by reference to Exhibit 4.8 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------



99



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##### Table of Contents

|2.9 |  | Form of Discount Dollar Note (incorporated herein by reference to Exhibit 4.9 to the Exchange Offer Registration Statement).*
|--- |  | -----------------------------------------------------------------------------------------------------------------------------



|2.10 |  | Form of Guarantee (included in Exhibits 2.7, 2.8 and 2.9) (incorporated herein by reference to Exhibits 4.7, 4.8 and 4.9 to the Exchange Offer Registration Statement).*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.11 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 3⁄4% Senior Sterling Notes due 2011 incorporated herein by reference to Exhibit 4.1 to the
Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.11 to the 2002 Annual Report).*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.12 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 3⁄4% Senior Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.2 to the
Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.12 to the 2002 Annual Report).*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.13 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 13 1⁄2% Senior Discount Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.3 to
the Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.13 to the 2002 Annual Report).*
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.1 |  | Senior Facilities Agreement dated 8 July 2003 (as amended and restated on 12 August 2003 and as further amended and restated on 26 August 2003) among, inter alios, Yell Group
plc, the subsidiaries identified therein as borrowers and guarantors, ABN AMRO Bank N.V. and HSBC Bank plc as joint mandated lead arrangers, the financial institutions named therein as lenders and HSBC Bank plc as facility agent and security
trustee.**
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.2 |  | Security Agreement, dated June 22, 2001, between Yasmin Two (US) Inc. (now known as Yellow Book Holdings, Inc.), Yasmin One (US), Inc. (now known as Yellow Book Group Inc.), Yellow
Book USA, Inc., Yellow Book GP, LLC, Yellow Book of Florida Directories, L.P., Yellow Book of Illinois, LLC, Yellow Book Mid-Atlantic, L.P., Yellow Book of New York, Inc., Yellow Book Southern Directories, LLC, Yellow Book of Pennsylvania, Inc., and
Yellow Book Delaware Inc. (incorporated herein by reference to Exhibit 10.2 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.3 |  | Keep-Well Agreement, dated August 6, 2001 as amended and restated on April 6, 2002, between Yell Group Limited and Yell Finance B.V. (incorporated herein by reference to Exhibit
10.3 to the Exchange Offer Registration Statement) (incorporated herein by reference to Exhibit 4.3 to the 2002 Annual Report).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.4 |  | Yellow Book Last Acquisition Agreement dated January 19, 2002 among McLeodUSA Inc. as Parent, Yell Group Limited (now Yell Group plc) and McLeodUSA Holdings, Inc as Seller
(incorporated herein by reference to Exhibit 4.8 to the 2002 Annual Report).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.5 |  | McLeod Operating Agreement dated April 16, 2002 (as amended and restated April 28, 2003) among Yell Group Limited (now Yell Group plc), McLeodUSA Inc. and McLeodUSA
Telecommunications Services, Inc (incorporated herein by reference to Exhibit 4.9 to the 2002 Annual Report)* and the amendment and restatement of April 28, 2003 filed herewith.*
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.6 |  | Directors Service Contract, dated 10 July 2003, between John Condron and Yell Group plc. **
|--- |  | --------------------------------------------------------------------------------------------



|4.7 |  | Directors Service Contract, dated 10 July 2003, between John Davis and Yell Group plc. **
|--- |  | ------------------------------------------------------------------------------------------



|4.8 |  | Stock Sale Agreement, dated as of December 10, 2002, by and among NDC Holdings II, Inc., The Stockholders of NDC Holdings II, Inc., Three Cities Research, Inc., as Sellers
Representative and Yellow Book USA, Inc.*
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8.1 |  | Subsidiaries of Yell Finance B.V. (please see list of principal subsidiaries under Item 4.C. Information on the CompanyOrganizational Structure of this annual
report on Form 20-F on pages 36).
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|12.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Condron dated June 8, 2004.**
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



|12.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Davis dated June 8, 2004.**
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



|13.1 |  | Chief Executive Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|---- |  | -----------------------------------------------------------------------------------------------------------------------



|13.2 |  | Chief Financial Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|---- |  | -----------------------------------------------------------------------------------------------------------------------



|14.1 |  | Code of Ethics for the Chief Executive and Senior Financial Officers.**
|---- |  | -----------------------------------------------------------------------



---

|* |  | Incorporated by reference.
|- |  | --------------------------

|** |  | Filed herewith.
|-- |  | ---------------



100



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##### Table of Contents

SIGNATURES



Each registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the
undersigned to sign this annual report on its behalf.



|    |  |                                                  
|--- |  | -------------------------------------------------
|    |  | YELL FINANCE B.V.                                
|    | 
|By: |  | /s/ JOHN CONDRON                                 
|    |  | John Condron Director and Chief Executive Officer



|    |  |                                                
|--- |  | -----------------------------------------------
|    |  | YELL FINANCE B.V.                              
|    | 
|By: |  | /s/ JOHN DAVIS                                 
|    |  | John Davis Director and Chief Financial Officer



|    |  |                                                  
|--- |  | -------------------------------------------------
|    |  | YELLOW PAGES LIMITED                             
|    | 
|By: |  | /s/ JOHN CONDRON                                 
|    |  | John Condron Director and Chief Executive Officer



|    |  |                                                
|--- |  | -----------------------------------------------
|    |  | YELLOW PAGES LIMITED                           
|    | 
|By: |  | /s/ JOHN DAVIS                                 
|    |  | John Davis Director and Chief Financial Officer



Date:
June 8, 2004



101



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##### Table of Contents

INDEX TO FINANCIAL STATEMENTS



|                                                                                                                                                                                                                            |  |     
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                            |  | Page
|YELL GROUP                                                                                                                                                                                                                  |  |     
|Statement of Managements Responsibilities and Reports of Independent Auditors                                                                                                                                              |  | F-2 
|                                                                                                                                                                                                                            | 
|Audited Combined and Consolidated Financial Statements                                                                                                                                                                      |  |     
|                                                                                                                                                                                                                            | 
|Combined Profit and Loss Accounts for the period from 1 April 2001 to 22 June 2001, and the Consolidated Profit and Loss Accounts for the period from 22 June 2001 to 31 March 2002, the years ended 31 March 2003 and
2004 |  | F-4 
|                                                                                                                                                                                                                            | 
|Combined Cash Flow Statements for the period from 1 April 2001 to 22 June 2001, and the Consolidated Cash Flow Statements for the period from 22 June 2001 to 31 March 2002, the years ended 31 March 2003 and
2004         |  | F-5 
|                                                                                                                                                                                                                            | 
|Consolidated Balance Sheets at 31 March 2003 and 2004                                                                                                                                                                       |  | F-6 
|                                                                                                                                                                                                                            | 
|Notes to the Financial Statements                                                                                                                                                                                           |  | F-7 



F-1



---

##### Table of Contents

YELL GROUP



STATEMENT OF
MANAGEMENTS RESPONSIBILITIES



The following
statement, which should be read in conjunction with the Reports of Independent Auditors set out below, is made with a view to distinguishing for shareholders the respective responsibilities of the Management and of the Independent Auditors in
relation to the combined and consolidated financial statements.



It is the responsibility of the Management to prepare financial statements for each period which present fairly the state of affairs of the Yell Group as at the end of the financial period and the profit or loss for that period. The
Management confirm that applicable accounting standards have been followed, and that suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the
financial statements. They are also responsible for maintaining adequate accounting records, for safeguarding the assets of the Yell Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.



REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and Shareholders of the Yell Group.



We have audited the accompanying consolidated balance sheets of the Yell
Group at 31 March 2003 and 2004 and the related consolidated profit and loss accounts, statements of total recognised gains and losses and cash flow statements for the period from 22 June 2001 to 31 March 2002 and for the years ended 31 March 2003
and 31 March 2004, all expressed in pounds sterling. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statements presentation. We believe our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Yell Group at 31 March 2003 and 2004 and the consolidated
results of its operations and its cash flows for the period from 22 June 2001 to 31 March 2002 and the years ended 31 March 2003 and 31 March 2004 in conformity with accounting principles generally accepted in the United Kingdom.



Accounting principles generally accepted in the United Kingdom vary in
certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in note 27 to the financial statements.



PricewaterhouseCoopers LLP

London, England

8 June 2004



F-2



---

##### Table of Contents

REPORT OF INDEPENDENT AUDITORS



To the Board of Directors and Shareholders of the Yell Group.



We have audited the accompanying combined profit and loss accounts, statements of total recognised gains and losses and cash
flow statements of the Yell Group, as defined in note 1 to the financial statements, for the period from 1 April 2001 to 22 June 2001, all expressed in pounds sterling. These financial statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these financial statements based on our audit.



We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe our audit provides a reasonable basis for our opinion.



In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the combined results of operations and cash flows of the Yell Group for the period from 1 April 2001 to 22 June 2001 in conformity with accounting principles generally accepted in the United
Kingdom.



Accounting principles generally accepted in the
United Kingdom vary in certain important respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of combined profit expressed in pounds sterling for
the period from 1 April 2001 to 22 June 2001 to the extent summarised in note 27 to the financial statements.



As described in note 1 to these financial statements, during the period from 1 April 2001 to 22 June 2001, the combined revenues and expenses of the Yell
Group have been carved out of British Telecommunications plc. The Yell Group further had significant transactions and relationships with British Telecommunications plc and its affiliates during the period from 1 April 2001 to 22 June 2001.
Accordingly, the combined results of operations and cash flows of the Yell Group reflected in the accompanying financial statements for the period from 1 April 2001 to 22 June 2001 are not necessarily indicative of those that would have resulted had
the Yell Group operated on a separate, stand-alone basis.



PricewaterhouseCoopers

London, England

15 July 2002



F-3



---

##### Table of Contents

YELL GROUP



COMBINED AND
CONSOLIDATED PROFIT AND LOSS ACCOUNTS



Continuing Operations



|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|----------------------------------------------------------- |  | ----- | ---------------------- | --------------------- | - |  |  | ---------------------------- | ------------------------ | - | ------------------------ | ------- | - | ----------------------- | ------- | -
|                                                            |  | Notes |                        | Combined(Predecessor) |   |  |  |                              | Consolidated (Successor) |  
|                                                            |  |       | 1 April to22 June 2001 |                       |   |  |  | 22 June 2001to 31 March 2002 |                          |   | Year ended 31 March 2003 |         |   | Year ended 31 March2004 |        
|                                                            |  |       |                        |                       |   | 
|                                                            |  |       |                        | £                     |   |  |  |                              | £                        |   |                          | £       |   |                         | £       |  
|                                                            |  |       |                        | (in millions)         |   |  |  |                              | (in millions)            |  
|Turnover                                                    |  | 2     |                        | 169.1                 |   |  |  |                              | 696.3                    |   |                          | 1,114.0 |   |                         | 1,186.9 |  
|Cost of sales                                               |  |       |                        | (71.1                 | ) |  |  |                              | (315.9                   | ) |                          | (509.9  | ) |                         | (552.9  | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Gross profit                                                |  |       |                        | 98.0                  |   |  |  |                              | 380.4                    |   |                          | 604.1   |   |                         | 634.0   |  
|Distribution costs                                          |  |       |                        | (5.5                  | ) |  |  |                              | (18.5                    | ) |                          | (36.0   | ) |                         | (34.5   | )
|Administrative costs                                        |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Ongoing activities                                          |  |       |                        | (56.6                 | ) |  |  |                              | (243.2                   | ) |                          | (369.7  | ) |                         | (359.0  | )
|Exceptional items                                           |  | 4     |                        | (3.0                  | ) |  |  |                              |                         |   |                          | (15.0   | ) |                         | (90.1   | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|                                                            |  |       |                        | (59.6                 | ) |  |  |                              | (243.2                   | ) |                          | (384.7  | ) |                         | (449.1  | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Operating profit                                            |  | 2, 3  |                        | 32.9                  |   |  |  |                              | 118.7                    |   |                          | 183.4   |   |                         | 150.4   |  
|Net interest payable                                        |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Ongoing activities                                          |  |       |                        | (5.8                  | ) |  |  |                              | (158.6                   | ) |                          | (236.6  | ) |                         | (136.1  | )
|Exceptional items                                           |  | 4     |                        |                      |   |  |  |                              |                         |   |                          |        |   |                         | (58.4   | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|                                                            |  | 6     |                        | (5.8                  | ) |  |  |                              | (158.6                   | ) |                          | (236.6  | ) |                         | (194.5  | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Profit (loss) on ordinary activities before taxation        |  |       |                        | 27.1                  |   |  |  |                              | (39.9                    | ) |                          | (53.2   | ) |                         | (44.1   | )
|Tax (charge) credit on profit (loss) on ordinary activities |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Before exceptional items                                    |  |       |                        | (11.3                 | ) |  |  |                              | (7.3                     | ) |                          | 10.3    |   |                         | (44.2   | )
|On exceptional items                                        |  | 4     |                        |                      |   |  |  |                              |                         |   |                          | 2.3     |   |                         | 37.2    |  
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Taxation                                                    |  | 7     |                        | (11.3                 | ) |  |  |                              | (7.3                     | ) |                          | 12.6    |   |                         | (7.0    | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  
|Profit (loss) for the financial period                      |  | 20    |                        | 15.8                  |   |  |  |                              | (47.2                    | ) |                          | (40.6   | ) |                         | (51.1   | )
|                                                            |  |       |                        |                       |   |  |  |                              |                          |   |                          |         |   |                         |         |  



The capital structure
of the Yell Group changed as a result of the Yell acquisition on 22 June 2001, and, consequently, net interest payable and goodwill amortisation are significantly different in periods following that date when compared to periods prior to that date.



STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES



|                                                         |  |       |                        |                       |  |  |                             |                          |   |                          |       |   |                         |        |  
|-------------------------------------------------------- |  | ----- | ---------------------- | --------------------- |  |  | --------------------------- | ------------------------ | - | ------------------------ | ----- | - | ----------------------- | ------ | -
|                                                         |  | Notes |                        | Combined(Predecessor) |  |  |                             | Consolidated (Successor) |  
|                                                         |  |       | 1 April to22 June 2001 |                       |  |  | 22 June 2001to 31 March2002 |                          |   | Year ended 31 March 2003 |       |   | Year ended 31 March2004 |       
|                                                         |  |       |                        |                       |  | 
|                                                         |  |       |                        | £                     |  |  |                             | £                        |   |                          | £     |   |                         | £      |  
|                                                         |  |       |                        | (in millions)         |  |  |                             | (in millions)            |  
|                                                         |  |       |                        |                       |  | 
|Profit (loss) for the financial period                   |  |       |                        | 15.8                  |  |  |                             | (47.2                    | ) |                          | (40.6 | ) |                         | (51.1  | )
|Currency movements                                       |  | 20    |                        | 0.8                   |  |  |                             | (3.7                     | ) |                          | (34.0 | ) |                         | (65.0  | )
|                                                         |  |       |                        |                       |  |  |                             |                          |   |                          |       |   |                         |        |  
|Total recognised gains (losses) for the financial period |  |       |                        | 16.6                  |  |  |                             | (50.9                    | ) |                          | (74.6 | ) |                         | (116.1 | )
|                                                         |  |       |                        |                       |  |  |                             |                          |   |                          |       |   |                         |        |  



The accompanying notes
form an integral part of these financial statements.



F-4



---

##### Table of Contents

YELL GROUP



COMBINED AND
CONSOLIDATED CASH FLOW STATEMENTS



|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|--------------------------------------------------------------------- |  | ----- | ---------------------- | --------------------- | - |  |  | -------------------------- | ------------------------ | - | ------------------------ | ------ | - | ------------------------ | -------- | -
|                                                                      |  | Notes |                        | Combined(Predecessor) |   |  |  |                            | Consolidated (Successor) |  
|                                                                      |  |       | 1 April to22 June 2001 |                       |   |  |  | 22 June2001 to31March 2002 |                          |   | Year ended 31 March 2003 |        |   | Year ended 31 March 2004 |         
|                                                                      |  |       |                        |                       |   | 
|                                                                      |  |       |                        | £                     |   |  |  |                            | £                        |   |                          | £      |   |                          | £        |  
|                                                                      |  |       |                        | (in millions)         |   |  |  |                            | (in millions)            |  
|Net cash inflow from operating activities                             |  |       |                        | 37.6                  |   |  |  |                            | 158.7                    |   |                          | 309.1  |   |                          | 253.5    |  
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Returns on investments and servicing of finance                       |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net interest paid                                                     |  |       |                        | (8.8                  | ) |  |  |                            | (85.9                    | ) |                          | (139.5 | ) |                          | (141.8   | )
|Redemption premium paid                                               |  |       |                        |                      |   |  |  |                            |                         |   |                          |       |   |                          | (19.7    | )
|Finance fees paid                                                     |  |       |                        |                      |   |  |  |                            | (49.4                    | ) |                          | (16.1  | ) |                          | (16.4    | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net cash outflow from returns on investments and servicing of finance |  |       |                        | (8.8                  | ) |  |  |                            | (135.3                   | ) |                          | (155.6 | ) |                          | (177.9   | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Taxation                                                              |  |       |                        |                      |   |  |  |                            | (0.4                     | ) |                          | (9.7   | ) |                          | (13.7    | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Capital expenditure and financial investment                          |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Purchase of tangible fixed assets                                     |  |       |                        | (5.2                  | ) |  |  |                            | (9.7                     | ) |                          | (16.0  | ) |                          | (24.5    | )
|Purchase of shares in parent company                                  |  |       |                        |                      |   |  |  |                            |                         |   |                          |       |   |                          | (5.8     | )
|Sale of tangible fixed assets                                         |  |       |                        |                      |   |  |  |                            | 1.1                      |   |                          |       |   |                          |         |  
|Payment for assets transferred from BT                                |  |       |                        | (11.7                 | ) |  |  |                            |                         |   |                          |       |   |                          |         |  
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net cash outflow for capital expenditure and financial investment     |  |       |                        | (16.9                 | ) |  |  |                            | (8.6                     | ) |                          | (16.0  | ) |                          | (30.3    | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Acquisitions                                                          |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Purchase of subsidiary undertakings, net of cash acquired             |  | 8     |                        |                      |   |  |  |                            | (1,906.4                 | ) |                          | (470.9 | ) |                          | (108.9   | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net cash outflow for acquisitions                                     |  |       |                        |                      |   |  |  |                            | (1,906.4                 | ) |                          | (470.9 | ) |                          | (108.9   | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net cash inflow (outflow) before financing                            |  |       |                        | 11.9                  |   |  |  |                            | (1,892.0                 | ) |                          | (343.1 | ) |                          | (77.3    | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Financing                                                             |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Issue of ordinary share capital                                       |  | 20    |                        |                      |   |  |  |                            | 1.0                      |   |                          | 0.1    |   |                          | 304.4    |  
|New loans issued                                                      |  |       |                        | 12.4                  |   |  |  |                            | 2,531.1                  |   |                          | 485.7  |   |                          | 1,082.5  |  
|Borrowings repaid                                                     |  |       |                        |                      |   |  |  |                            | (540.0                   | ) |                          | (211.9 | ) |                          | (1,318.4 | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Net cash inflow from financing                                        |  |       |                        | 12.4                  |   |  |  |                            | 1,992.1                  |   |                          | 273.9  |   |                          | 68.5     |  
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Increase (decrease) in net cash in the period                         |  |       |                        | 24.3                  |   |  |  |                            | 100.1                    |   |                          | (69.2  | ) |                          | (8.8     | )
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  
|Decrease (increase) in net debt resulting from cash flows             |  | 9     |                        | 11.9                  |   |  |  |                            | (1,841.6                 | ) |                          | (326.9 | ) |                          | 162.9    |  
|                                                                      |  |       |                        |                       |   |  |  |                            |                          |   |                          |        |   |                          |          |  



RECONCILIATION OF
OPERATING PROFIT TO NET CASH INFLOW FROM

OPERATING ACTIVITIES



|                                          |  |                        |   |  |  |  |                            |   |  |                          |   |  |                          |  
|----------------------------------------- |  | ---------------------- | - |  |  |  | -------------------------- | - |  | ------------------------ | - |  | ------------------------ | -
|                                          |  | Combined(Predecessor)  |   |  |  |  | Consolidated (Successor)   |  
|                                          |  | 1 April to22 June 2001 |   |  |  |  | 22 June2001 to31 March2002 |   |  | Year ended 31 March 2003 |   |  | Year ended 31 March 2004 |  
|                                          |  |                        |   |  | 
|                                          |  | £                      |   |  |  |  | £                          |   |  | £                        |   |  | £                        |  
|                                          |  | (in millions)          |   |  |  |  | (in millions)              |  
|Total operating profit                    |  | 32.9                   |   |  |  |  | 118.7                      |   |  | 183.4                    |   |  | 150.4                    |  
|Depreciation                              |  | 4.4                    |   |  |  |  | 15.8                       |   |  | 22.5                     |   |  | 22.9                     |  
|Goodwill amortisation                     |  | 5.4                    |   |  |  |  | 65.3                       |   |  | 98.4                     |   |  | 96.7                     |  
|(Increase) decrease in stocks             |  | (12.1                  | ) |  |  |  | 7.4                        |   |  | (23.0                    | ) |  | (19.5                    | )
|Decrease (increase) in debtors            |  | 3.4                    |   |  |  |  | (52.8                      | ) |  | (35.0                    | ) |  | (3.8                     | )
|Increase (decrease) in creditors          |  | 3.6                    |   |  |  |  | 3.8                        |   |  | 58.4                     |   |  | (3.7                     | )
|Other                                     |  |                       |   |  |  |  | 0.5                        |   |  | 4.4                      |   |  | 10.5                     |  
|                                          |  |                        |   |  |  |  |                            |   |  |                          |   |  |                          |  
|Net cash inflow from operating activities |  | 37.6                   |   |  |  |  | 158.7                      |   |  | 309.1                    |   |  | 253.5                    |  
|                                          |  |                        |   |  |  |  |                            |   |  |                          |   |  |                          |  



The accompanying notes
form an integral part of these financial statements.



F-5



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##### Table of Contents

YELL GROUP



CONSOLIDATED
BALANCE SHEETS



|                                                              |  |       |  |               |   |  |            |  
|------------------------------------------------------------- |  | ----- |  | ------------- | - |  | ---------- | -
|                                                              |  |       |  | At 31March    |   |  | At 31March |  
|                                                              |  | Notes |  | 2003          |   |  | 2004       |  
|                                                              |  |       |  | £             |   |  | £          |  
|                                                              |  |       |  | (in millions) |  
|Fixed assets                                                  |  |       |  |               |   |  |            |  
|Intangible assets                                             |  | 10    |  | 1,824.1       |   |  | 1,725.3    |  
|Tangible assets                                               |  | 11    |  | 47.1          |   |  | 45.9       |  
|Investment                                                    |  | 12    |  | 1.9           |   |  | 7.6        |  
|                                                              |  |       |  |               |   |  |            |  
|Total fixed assets                                            |  |       |  | 1,873.1       |   |  | 1,778.8    |  
|Current assets                                                |  |       |  |               |   |  |            |  
|Stocks                                                        |  | 13    |  | 145.8         |   |  | 151.9      |  
|Debtors                                                       |  | 14    |  | 461.4         |   |  | 460.6      |  
|Cash at bank and in hand                                      |  |       |  | 30.0          |   |  | 18.4       |  
|                                                              |  |       |  |               |   |  |            |  
|Total current assets                                          |  |       |  | 637.2         |   |  | 630.9      |  
|                                                              |  |       |  |               |   |  |            |  
|Creditors: amounts falling due within one year                |  |       |  |               |   |  |            |  
|Loans and other borrowings                                    |  | 16    |  | (112.8        | ) |  | (127.7     | )
|Other creditors                                               |  | 18    |  | (235.9        | ) |  | (231.0     | )
|                                                              |  |       |  |               |   |  |            |  
|Total creditors: amounts falling due within one year          |  |       |  | (348.7        | ) |  | (358.7     | )
|                                                              |  |       |  |               |   |  |            |  
|Net current assets                                            |  |       |  | 288.5         |   |  | 272.2      |  
|                                                              |  |       |  |               |   |  |            |  
|Total assets less current liabilities                         |  |       |  | 2,161.6       |   |  | 2,051.0    |  
|                                                              |  |       |  |               |   |  |            |  
|Creditors: amounts falling due after more than one year       |  |       |  |               |   |  |            |  
|Loans and other borrowings                                    |  | 16    |  | (2,286.0      | ) |  | (1,987.1   | )
|                                                              |  |       |  |               |   |  |            |  
|Total creditors: amounts falling due after more than one year |  |       |  | (2,286.0      | ) |  | (1,987.1   | )
|                                                              |  |       |  |               |   |  |            |  
|Net (liabilities)assets                                       |  |       |  | (124.4        | ) |  | 63.9       |  
|                                                              |  |       |  |               |   |  |            |  
|Capital and reserves                                          |  |       |  |               |   |  |            |  
|Called up share capital                                       |  | 19    |  | 0.1           |   |  | 0.1        |  
|Share premium account                                         |  | 20    |  | 1.0           |   |  | 305.4      |  
|Deficit                                                       |  | 20    |  | (125.5        | ) |  | (241.6     | )
|                                                              |  |       |  |               |   |  |            |  
|Equity shareholders (deficit) funds                          |  |       |  | (124.4        | ) |  | 63.9       |  
|                                                              |  |       |  |               |   |  |            |  



The accompanying notes
form an integral part of these financial statements.



F-6



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##### Table of Contents

YELL GROUP



NOTES TO THE
FINANCIAL STATEMENTS



1. Basis of preparation, combination and
consolidation, and accounting policies



Basis of preparation,
combination and consolidation



Presentations in the
profit and loss account and cash flow statement for the year ended 31 March 2002 of certain immaterial amounts related to an investment have been reclassified to conform with the presentations in the 2003 and 2004 financial periods.



The principal activity of the Yell Group is publishing classified advertising
directories in the United Kingdom and the United States.



The
Yell Group comprises a number of legal entities. The principal entities included within the financial statements are reflected on the next page.



Intra-group transactions which have been eliminated on consolidation of the Yell Group have not been disclosed, as permitted by FRS 8 Related Party
Disclosures.



On 22 June 2001, the Yell Group and its
subsidiaries acquired from British Telecommunications plc (BT) the net assets of the Yellow Pages business unit of BT, which had been transferred to a separate legal entity, Yell Limited, on 6 March 2001, Yellow Pages Sales Limited and
General Art Services Limited (collectively Yellow Pages) and Yellow Book USA, Inc. and its subsidiary undertakings (Yellow Book East).



The predecessor combined financial statements of the Yell Group for the period from 1 April to 22 June 2001 represent an aggregation of the historical
financial statements of Yellow Pages and of Yellow Book, as if the Yell Group had been formed as a discrete operation throughout that period. The capital structure of the Yell Group and its interest charges, goodwill amortisation, administration
costs, pension costs and tax charges for the period up to 22 June 2001 are significantly different from those that have existed since the acquisition from BT. The successor consolidated financial statements of the Yell Group represent a
consolidation of the financial statements of Yell Finance B.V. and its subsidiaries after the acquisition from 22 June 2001. The capital structure of the Yell Group and its interest charges, goodwill amortisation, administrative expenses, pension
costs and tax charges during the periods up to 22 June 2001 are significantly different from those that have existed since the acquisition from BT.



Substantially all funding of the Yell Groups businesses was financed via BTs net investment and loans issued by BT up until 22 June 2001.
Subsequently, all funding is financed by a number of shareholder and third-party debt facilities as detailed in note 16.



Up until the acquisition of the Yell Group from BT on 22 June 2001, Yell Group management regarded BT as the ultimate controlling party of the Yell Group.
Thereafter and up until 15 July 2003, management regarded funds managed or advised by Apax Partners & Co. and Hicks, Muse, Tate & Furst Incorporated, together purchased the Yell Group, as the ultimate controlling parties. On 15 July 2003,
Yell Group plc, our parent company, completed raising £433.6 million in gross proceeds through a global offer of shares to institutional investors in an initial public offering. From that date, Yell Group plc has been the ultimiate controlling
party of the Group.



Turnover and operating profits in respect
of acquisitions shown separately in the profit and loss account relate to four minor acquisitions in the period from 22 June 2001 to 31 March 2002, the McLeod acquisition together with four minor acquisitions in the year ended 31 March 2003 and six
minor acquisitions in the year ended 31 March 2004. The results of the existing Yell Group acquired from BT on 22 June 2001 have been shown as continuing operations in the period from 22 June 2001 to 31 March 2002. Details of the acquisition from BT
on 22 June 2001 and other acquisitions are given in note 8.



Where the financial statements of subsidiary undertakings do not conform with the Yell Groups accounting policies, appropriate adjustments are made on combination and consolidation in order to present the Yell Group combined and
consolidated financial statements on a consistent basis. All companies within the Yell Group during the period of ownership have coterminous financial years. All transactions between the Yell Groups businesses have been eliminated in the
preparation of these combined and consolidated financial statements. The results of companies and businesses acquired during the year are included in the financial information from their respective dates of acquisition.



F-7



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



1. Basis of preparation, combination and consolidation, and accounting policies (continued)



Basis of preparation, combination and consolidation (continued)



The preparation of the combined and consolidated financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and
expenditure during the reporting period. Actual results could differ from those estimates. Estimates are used principally when accounting for provision for doubtful debts, depreciation, employee pension and management incentive schemes and taxes.



Subsidiary undertakings



Brief details of principal subsidiary undertakings at each year end (except
where noted), all of which are unlisted, are as follows:



|                           |  |                                |  |                                      |  |                         
|-------------------------- |  | ------------------------------ |  | ------------------------------------ |  | ------------------------
|                           |  | Activity                       |  | Group interest inallotted capital(a) |  | Country of operation(b) 
|Yell Limited(c)            |  | Classified directory publisher |  | 100% ordinary                        |  | United Kingdom          
|Yellow Pages Sales Limited |  | Provision of sales services    |  | 100% ordinary                        |  | United Kingdom          
|Yellow Book USA, Inc.      |  | Classified directory publisher |  | 100% common                          |  | United States of America

---

|(a) |  | The proportion of voting rights held corresponds to the aggregate interest percentage held by the holding company and subsidiary undertakings, unless otherwise stated.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | Incorporated in its country of operation.
|--- |  | -----------------------------------------

|(c) |  | Company formed for the acquisition from BT on 22 June 2001.
|--- |  | -----------------------------------------------------------



Accounting policies



Accounting convention



The financial statements have been prepared under the historical cost convention, in accordance with applicable accounting standards in the United Kingdom
and the Companies Act 1985. These differ significantly from those in the United States and a reconciliation to generally accepted accounting principles in the United States (US GAAP) is provided in note 27. A summary of the more
important Yell Group accounting policies, which have been consistently applied, is set out below.



(a) Turnover



Group
turnover, after deduction of sales allowances, value added tax and other sales taxes, comprises the value of products provided by the Yell Group undertakings. Turnover from classified directories, Business Pages and other directories, mainly
comprising advertising revenue, is recognised in the profit and loss account upon completion of delivery to the users of the directories. Other turnover, principally from Yellow Pages 118 24 7 and online services, is recognised from the point at
which service is first provided over the life of the contract.



(b) Cost of
sales



Cost of sales are the costs incurred in producing
directories and other group products, including costs of the sales force and certain sales overheads dedicated to the sale of advertising. Charges for doubtful debts are also included within cost of sales. Such costs are charged to the profit and
loss account as a percentage of turnover based upon the actual bad debt experience as a proportion of total billings.



F-8



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



1. Basis of preparation, combination and consolidation, and accounting policies (continued)



Accounting policies (continued)



(c) Advertising



The Yell Group expenses the costs of advertising its own products and services as the costs are incurred.



(d) Interest



Interest payable is charged as incurred on an accruals basis.



(e) Foreign currencies



On combination and consolidation, the assets and liabilities of foreign undertakings are translated into sterling at year-end exchange rates. The results
of foreign undertakings are translated into sterling at average rates of exchange for the period.



Exchange differences arising from the retranslation at period-end exchange rates of the net investment in foreign undertakings, less exchange differences
on borrowings that finance or provide a hedge against those undertakings, are taken through the statement of total recognised gains and losses to reserves and are disclosed in note 20.



All other exchange gains or losses are dealt with through the profit and loss account.



(f) Intangible fixed assets



Goodwill arising from the purchase of subsidiary undertakings represents the
excess of the fair value of the purchase consideration over the fair value of the net assets acquired and is amortised on a straight-line basis from the time of the acquisition over its estimated useful economic life. Estimated useful life is
determined after taking into account such factors as the nature and age of the business, as well as the typical life span of the acquired products to which goodwill attaches. Goodwill in respect of all acquired businesses is amortised over 20 years.



(g) Tangible fixed assets



Tangible fixed assets are stated at historical cost less depreciation. Cost
comprises the purchase price and any other costs of bringing an asset into use. Depreciation is provided on tangible fixed assets on a straight-line basis from the time they are available for use, so as to write off their costs over their estimated
useful economic lives taking into account any expected residual values. The lives assigned to significant tangible fixed assets range from two to six years.



(h) Asset impairment



Intangible and tangible fixed assets are tested for impairment when an event that might affect asset values has occurred. An impairment loss is recognised
to the extent that the carrying amount cannot be recovered either by selling the asset or by the discounted future earnings from operating the assets. Goodwill is subject to an impairment review at the end of the first full year following an
acquisition and at any other time when the directors believe that an impairment may have occurred.



(i) Investments



Parent
company shares are held at cost and are reviewed annually for impairment in value. The shares are held in an ESOP trust for the benefit of certain employees.



F-9



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



1. Basis of preparation, combination and consolidation, and accounting policies (continued)



Accounting policies (continued)



(j) Leased assets



Rentals in respect of operating leases, under which substantially all the benefits and risks of ownership remain with the
lessor, are charged to the profit and loss account on a straight-line basis over the life of the lease.



Assets held under finance leases where substantially all the benefits and risks of ownership are transferred to the Yell Group are capitalised as tangible
fixed assets and depreciated over their useful economic lives. The capital element of the future obligations under the leases is included as a liability in the combined and consolidated balance sheets, classified as appropriate as a creditor due
within or after one year. Lease payments are split between capital and interest elements using the annuity method and the interest is then charged to the profit and loss account.



(k) Stocks



Stocks are stated at the lower of cost and net realisable value. Directories in progress mainly comprise sales force costs, artwork and other directory
production costs, including appropriate overheads, pending completion of delivery of the relevant directories. Other stock represents paper stock held by the US business.



(l) Pension schemes



The Yell Group currently operates a defined benefit pension scheme for its UK employees employed before 1 October 2001 and operates defined contribution
pension schemes for its UK employees employed subsequent to 1 October 2001 and its US employees.



All pension schemes are independent of the Yell Groups finances. Actuarial valuations of the defined benefit scheme are carried out as determined by
the trustees at intervals of not more than three years, the rates of contribution payable and the pension cost being determined on the advice of the actuaries, having regard to the results of these valuations. In any intervening years, the actuaries
review the continuing appropriateness of the contribution rates. The cost of providing pensions is charged against profits over employees working lives with the Yell Group using the projected unit method.



Payments to the Yell Groups defined contribution schemes are charged
against profit as incurred.



The transitional arrangements of
FRS 17 Retirement Benefits have been applied in the preparation of these financial statements with the relevant disclosures shown in note 23.



(m) Employee share schemes



The cost of employee share options, except for options in Inland Revenue approved Sharesave schemes, is measured at the intrinsic value of the options
granted on the date of grant and is charged to the profit and loss over the vesting period. The Group takes advantage of available exemptions in respect of accounting for discounts arising on the grant of options in Inland Revenue approved Sharesave
schemes. When the ESOP trust acquires and holds shares of our parent company, we present them as an investment in parent company shares.



F-10



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



1. Basis of preparation, combination and consolidation, and accounting policies (continued)



Accounting policies (continued)



(n) Taxation



The charge (credit) for taxation is based on the profit (loss) for the period and takes into account deferred taxation.
Provision is made in full for deferred tax liabilities that arise from timing differences where transactions or events that result in an obligation to pay more tax in the future have occurred by the balance sheet date. Deferred tax assets are
recognised to the extent that they are regarded more likely than not to be recoverable.



Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially
enacted by the balance sheet date. Deferred tax assets and liabilities are not discounted.



A substantial portion of the Yellow Pages operation was not a separate taxable entity for corporation tax purposes prior to 22 June 2001 and the results of the Yellow Pages operation were included in the UK
corporation tax returns of BT. In the financial statements for the periods prior to 22 June 2001, Yellow Pages has provided for corporation taxes as if it were a separate taxpayer in the United Kingdom.



(o) Financial instruments



All borrowings are initially stated at the fair value of consideration
received after deduction of issue costs. Issue costs are charged to the profit and loss account together with the coupon, as finance costs, on a constant-yield basis over the term of the borrowings, or over a shorter period where the lender can
require earlier repayment.



The Yell Group considers its
derivative financial instruments to be hedges when certain criteria are met. For interest rate derivatives, the instrument must be related to assets or liabilities or a probable commitment and must also change the interest rate or the nature of the
interest rate by converting a variable rate to a fixed rate or vice versa. Interest differentials under interest rate swap agreements are recognised by adjustment of interest payable.



See note 17 for further details on the Groups financial instruments.



2. Segmental analysis



The Yell Group is a publisher of classified advertising directories in the United Kingdom and the United States. Turnover is
principally derived from the sale of advertising in such publications. The geographical analysis is stated on the basis of origin of operations, although it would not be different had it been stated on the basis of customer origin.



The segmental information presented is based on the segmental operating
results regularly reviewed by the Yell Groups chief operating decision maker (the CEO).



The Groups operations are split geographically between the United Kingdom and the United States and have been managed on this basis. For the
purposes of exercising day-to-day managerial and budgetary control, the UK management accounts are divided internally by product but these divisions are not self-standing businesses. For the purpose of managing the UK business, most common costs are
allocated entirely to classified directories. Control is exercised by comparing performance against budgets that are agreed in advance.



The CEO reviews the turnover and Earnings before interest, tax, depreciation and amortisation (EBITDA) before and after exceptional items
within geographic segments. EBITDA, before exceptional items, together with turnover, are key financial measures that we use to assess the success of our people in achieving growth in the business and operational efficiencies. Segmental information
is provided below in respect of UK and US businesses.



F-11



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



2. Segmental analysis (continued)



Turnover



|                                                 |  |                        |  |                             |  |                         |  |                         |  
|------------------------------------------------ |  | ---------------------- |  | --------------------------- |  | ----------------------- |  | ----------------------- | -
|                                                 |  | 1 April to22 June 2001 |  | 22 June 2001to31 March 2002 |  | Year ended31 March 2003 |  | Year ended31 March 2004 |  
|                                                 |  | £                      |  | £                           |  | £                       |  | £                       |  
|                                                 |  | (in millions)          |  | (in millions)               | 
|UK printed directories                           |  | 118.5                  |  | 422.0                       |  | 573.7                   |  | 593.9                   |  
|Other products and services                      |  | 8.3                    |  | 32.5                        |  | 41.2                    |  | 41.0                    |  
|                                                 |  |                        |  |                             |  |                         |  |                         |  
|Total UK turnover                                |  | 126.8                  |  | 454.5                       |  | 614.9                   |  | 634.9                   |  
|                                                 |  |                        |  |                             |  |                         |  |                         |  
|US printed directories:                          |  |                        |  |                             |  |                         |  |                         |  
|US printed directories at constant exchange rate |  | 42.3                   |  | 241.8                       |  | 499.1                   |  | 605.0                   |  
|Exchange impact                                  |  |                       |  |                            |  |                        |  | (53.0                   | )
|                                                 |  |                        |  |                             |  |                         |  |                         |  
|Total US turnover                                |  | 42.3                   |  | 241.8                       |  | 499.1                   |  | 552.0                   |  
|                                                 |  |                        |  |                             |  |                         |  |                         |  
|Group turnover                                   |  | 169.1                  |  | 696.3                       |  | 1,114.0                 |  | 1,186.9                 |  
|                                                 |  |                        |  |                             |  |                         |  |                         |  



F-12



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



2. Segmental analysis (continued)



Profit and loss information

|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|------------------------------------------------------------------ |  | ---------------------- | -- |  | --------------------------- | - |  | ----------------------- | - |  | ----------------------- | -
|                                                                   |  | Combined(Predecessor)  |    |  | Consolidated (Successor)    |  
|                                                                   |  | 1 April to22 June 2001 |    |  | 22 June 2001to31 March 2002 |   |  | Year ended31 March 2003 |   |  | Year ended31 March 2004 |  
|                                                                   |  | £                      |    |  | £                           |   |  | £                       |   |  | £                       |  
|                                                                   |  | (in millions)          |    |  | (in millions)               |  
|UK operations                                                      |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Turnover                                                           |  | 126.8                  |    |  | 454.5                       |   |  | 614.9                   |   |  | 634.9                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|UK printed directories operating profit                            |  | 46.8                   |    |  | 117.2                       |   |  | 146.6                   |   |  | 127.2                   |  
|Other products and services operating profit (loss)                |  | (4.4                   | )  |  | (9.2                        | ) |  | (4.3                    | ) |  | 2.6                     |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|UK Operating profit                                                |  | 42.4                   |    |  | 108.0                       |   |  | 142.3                   |   |  | 129.8                   |  
|Depreciation and amortisation(a)                                   |  | 2.6                    |    |  | 57.4                        |   |  | 69.2                    |   |  | 69.4                    |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|UK operations EBITDA                                               |  | 45.0                   |    |  | 165.4                       |   |  | 211.5                   |   |  | 199.2                   |  
|Exceptional items                                                  |  |                       |    |  |                            |   |  | 14.7                    |   |  | 33.9                    |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|UK operations EBITDA before exceptionals                           |  | 45.0                   |    |  | 165.4                       |   |  | 226.2                   |   |  | 233.1                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|UK operations EBITDA before exceptionals as % of turnover          |  | 35.5                   | %  |  | 36.4                        | % |  | 36.8                    | % |  | 36.7                    | %
|                                                                   |  |                        |    | 
|US operations                                                      |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Turnover                                                           |  | 42.3                   |    |  | 241.8                       |   |  | 499.1                   |   |  | 552.0                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Operating profit                                                   |  | (9.5                   | )  |  | 10.7                        |   |  | 41.1                    |   |  | 20.6                    |  
|Depreciation and amortisation                                      |  | 7.2                    |    |  | 23.7                        |   |  | 51.7                    |   |  | 50.2                    |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|US operations EBITDA                                               |  | (2.3                   | )  |  | 34.4                        |   |  | 92.8                    |   |  | 70.8                    |  
|Exceptional items and non-recurring restructuring charges in 2003  |  |                       |    |  |                            |   |  | 4.0                     |   |  | 56.2                    |  
|Exchange impact                                                    |  |                       |    |  |                            |   |  |                        |   |  | 11.4                    |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|US operations EBITDA before exceptionals at constant exchange rate |  | (2.3                   | )  |  | 34.4                        |   |  | 96.8                    |   |  | 138.4                   |  
|Exchange impact                                                    |  |                       |    |  |                            |   |  |                        |   |  | (11.4                   | )
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|US operations EBITDA before exceptionals                           |  | (2.3                   | )  |  | 34.4                        |   |  | 96.8                    |   |  | 127.0                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|US operations EBITDA before exceptionals as % of turnover          |  | (5.4                   | %) |  | 14.2                        | % |  | 19.4                    | % |  | 23.0                    | %
|                                                                   |  |                        |    | 
|Group                                                              |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Turnover                                                           |  | 169.1                  |    |  | 696.3                       |   |  | 1,114.0                 |   |  | 1,186.9                 |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Operating profit                                                   |  | 32.9                   |    |  | 118.7                       |   |  | 183.4                   |   |  | 150.4                   |  
|Depreciation and amortisation                                      |  | 9.8                    |    |  | 81.1                        |   |  | 120.9                   |   |  | 119.6                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Group EBITDA                                                       |  | 42.7                   |    |  | 199.8                       |   |  | 304.3                   |   |  | 270.0                   |  
|Exceptional items and non-recurring restructuring charges in 2003  |  | 3.0                    |    |  |                            |   |  | 18.7                    |   |  | 90.1                    |  
|Exchange impact                                                    |  |                       |    |  |                            |   |  |                        |   |  | 11.4                    |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Group EBITDA before exceptionals at constant exchange rate         |  | 45.7                   |    |  | 199.8                       |   |  | 323.0                   |   |  | 371.5                   |  
|Exchange impact                                                    |  |                       |    |  |                            |   |  |                        |   |  | (11.4                   | )
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Group EBITDA before exceptionals                                   |  | 45.7                   |    |  | 199.8                       |   |  | 323.0                   |   |  | 360.1                   |  
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Group EBITDA before exceptionals as % of turnover                  |  | 25.3                   | %  |  | 28.7                        | % |  | 29.0                    | % |  | 30.3                    | %
|Group EBITDA before exceptionals                                   |  | 45.7                   |    |  | 199.8                       |   |  | 323.0                   |   |  | 360.1                   |  
|Exceptional items and non-recurring restructuring charges in 2003  |  | (3.0                   | )  |  |                            |   |  | (18.7                   | ) |  | (90.1                   | )
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Group EBITDA                                                       |  | 42.7                   |    |  | 199.8                       |   |  | 304.3                   |   |  | 270.0                   |  
|Depreciation and amortisation                                      |  | (9.8                   | )  |  | (81.1                       | ) |  | (120.9                  | ) |  | (119.6                  | )
|Net interest payable                                               |  | (5.8                   | )  |  | (158.6                      | ) |  | (236.6                  | ) |  | (194.5                  | )
|Taxation                                                           |  | (11.3                  | )  |  | (7.3                        | ) |  | 12.6                    |   |  | (7.0                    | )
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  
|Profit (loss) for the financial year                               |  | 15.8                   |    |  | (47.2                       | ) |  | (40.6                   | ) |  | (51.1                   | )
|                                                                   |  |                        |    |  |                             |   |  |                         |   |  |                         |  

---

|(a) |  | In the year ended 31 March 2004, £66.6 million (2003-£66.0 million; period from 22 June 2001 to 31 March 2002-£55.4 million; period from 1 April to 22 June
2001-£2.0 million) of depreciation and amortisation was allocated to UK printed directories and £2.8 million (2003-£3.2 million; period from 22 June to 31 March 2002-£2.0 million; period from 1 April to 22 June
2001-£0.6 million) was allocated to other products and services in the UK.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-13



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



2. Segmental analysis (continued)

|                         |  |               |   |  |             |  
|------------------------ |  | ------------- | - |  | ----------- | -
|                         |  | At 31 March   |   |  | At 31 March |  
|                         |  | 2003          |   |  | 2004        |  
|                         |  | £             |   |  | £           |  
|                         |  | (in millions) |  
|Fixed assets             |  |               |   |  |             |  
|United Kingdom           |  | 1,085.7       |   |  | 1,033.7     |  
|United States            |  | 787.4         |   |  | 745.1       |  
|                         |  |               |   |  |             |  
|Group total              |  | 1,873.1       |   |  | 1,778.8     |  
|                         |  |               |   |  |             |  
|Net operating assets     |  |               |   |  |             |  
|United Kingdom           |  | 1,265.9       |   |  | 1,190.9     |  
|United States            |  | 1,008.5       |   |  | 987.8       |  
|                         |  |               |   |  |             |  
|Group total              |  | 2,274.4       |   |  | 2,178.7     |  
|                         |  |               |   |  |             |  
|Net (liabilities) assets |  |               |   |  |             |  
|United Kingdom           |  | (815.7        | ) |  | (603.1      | )
|United States            |  | 691.3         |   |  | 667.0       |  
|                         |  |               |   |  |             |  
|Group total              |  | (124.4        | ) |  | 63.9        |  
|                         |  |               |   |  |             |  
|Total assets             |  |               |   |  |             |  
|United Kingdom           |  | 1,418.5       |   |  | 1,336.9     |  
|United States            |  | 1,091.8       |   |  | 1,072.8     |  
|                         |  |               |   |  |             |  
|Group total              |  | 2,510.3       |   |  | 2,409.7     |  
|                         |  |               |   |  |             |  



Net operating assets
comprise total assets less creditors, excluding loans and other borrowings. The majority of UK net operating assets relate to the UK printed directories business. The majority of external loans are included in the UK segment.



3. Operating profit



Operating profit for the Yell Group is stated after charging:

|                                                                |  |                        |  |  |      |                          |      |                    |  |                   
|--------------------------------------------------------------- |  | ---------------------- |  |  | ---- | ------------------------ | ---- | ------------------ |  | ------------------
|                                                                |  | Combined(Predecessor)  |  |  |      | Consolidated (Successor)
|                                                                |  | 1 April to22 June 2001 |  |  |      | 22 June to31 March 2002  |      | Year ended31 March |  | Year ended31 March
|                                                                |  |                        |  |  | 2003 |                          | 2004
|                                                                |  | £                      |  |  |      | £                        |      | £                  |  | £                 
|                                                                |  | (in millions)          |  |  |      | (in millions)            |      |                   
|Staff costs (note 5)                                            |  | 74.3                   |  |  |      | 157.9                    |      | 299.0              |  | 311.4             
|Advertising costs                                               |  | 7.1                    |  |  |      | 26.6                     |      | 46.4               |  | 53.1              
|Operating leases, excluding plant and equipment hire            |  | 2.4                    |  |  |      | 14.6                     |      | 13.2               |  | 14.0              
|Plant and equipment hire                                        |  | 0.1                    |  |  |      | 0.5                      |      | 1.2                |  | 1.0               
|Depreciation of owned tangible fixed assets                     |  | 4.2                    |  |  |      | 15.3                     |      | 22.0               |  | 22.7              
|Depreciation of tangible fixed assets held under finance leases |  | 0.2                    |  |  |      | 0.5                      |      | 0.5                |  | 0.2               
|Goodwill amortisation                                           |  | 5.4                    |  |  |      | 65.3                     |      | 98.4               |  | 96.7              
|Restructuring charges(a)                                        |  |                       |  |  |      |                         |      | 3.7                |  |                  
|Exceptional administrative costs:                               |  |                        |  |  |      |                          |      |                    |  |                   
|Management incentive scheme costs (note 5)                      |  | 3.0                    |  |  |      |                         |      |                   |  |                  
|IPO costs                                                       |  |                       |  |  |      |                         |      | 15.0               |  | 90.1              

---

|(a) |  | The restructuring changes were incurred for the closure of a production site as part of the integration of the former McLeod directories.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------



F-14



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



3. Operating profit (continued)



The auditors remuneration has been disclosed in note 26.



4. Results before and after exceptional items

|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|------------------------ |  | ------------- |  | ----------------- | - |  | ------------------- | - |  | ---------------------- | - |  | ------------------- | - |  | --------------------------- | - |  | ---------------------- | - |  | --------------------------- | -
|                         |  | Gross Profit  |  | Distributioncosts |   |  | Administrativecosts |   |  | Operatingprofit (loss) |   |  | Net interestpayable |   |  | Profit (loss)beforetaxation |   |  | Taxation(charge)credit |   |  | Profit (loss) for theperiod |  
|                         |  | £             |  | £                 |   |  | £                   |   |  | £                      |   |  | £                   |   |  | £                           |   |  | £                      |   |  | £                           |  
|Combined (Predecessor)   |  | (in millions) | 
|1 April to 22 June 2001  |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Ongoing activities       |  | 98.0          |  | (5.5              | ) |  | (56.6               | ) |  | 35.9                   |   |  | (5.8                | ) |  | 30.1                        |   |  | (11.3                  | ) |  | 18.8                        |  
|Exceptional items        |  |              |  |                  |   |  | (3.0                | ) |  | (3.0                   | ) |  |                    |   |  | (3.0                        | ) |  |                       |   |  | (3.0                        | )
|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Total                    |  | 98.0          |  | (5.5              | ) |  | (59.6               | ) |  | 32.9                   |   |  | (5.8                | ) |  | 27.1                        |   |  | (11.3                  | ) |  | 15.8                        |  
|Consolidated (Successor) |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|22 June to 31 March 2002 |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Ongoing activities       |  | 380.4         |  | (18.5             | ) |  | (243.2              | ) |  | 118.7                  |   |  | (158.6              | ) |  | (39.9                       | ) |  | (7.3                   | ) |  | (47.2                       | )
|Exceptional items        |  |              |  |                  |   |  |                    |   |  |                       |   |  |                    |   |  |                            |   |  |                       |   |  |                            |  
|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Total                    |  | 380.4         |  | (18.5             | ) |  | (243.2              | ) |  | 118.7                  |   |  | (158.6              | ) |  | (39.9                       | ) |  | (7.3                   | ) |  | (47.2                       | )
|                         |  |               |  |                   |   |  |                     |  
|Year ended 31 March 2003 |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Ongoing activities       |  | 604.1         |  | (36.0             | ) |  | (369.7              | ) |  | 198.4                  |   |  | (236.6              | ) |  | (38.2                       | ) |  | 10.3                   |   |  | (27.9                       | )
|Exceptional items        |  |              |  |                  |   |  | (15.0               | ) |  | (15.0                  | ) |  |                    |   |  | (15.0                       | ) |  | 2.3                    |   |  | (12.7                       | )
|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Total                    |  | 604.1         |  | (36.0             | ) |  | (384.7              | ) |  | 183.4                  |   |  | (236.6              | ) |  | (53.2                       | ) |  | 12.6                   |   |  | (40.6                       | )
|                         |  |               |  |                   |   |  |                     |  
|Year ended 31 March 2004 |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Ongoing activities       |  | 634.0         |  | (34.5             | ) |  | (359.0              | ) |  | 240.5                  |   |  | (136.1              | ) |  | 104.4                       |   |  | (44.2                  | ) |  | 60.2                        |  
|Exceptional items        |  |              |  |                  |   |  | (90.1               | ) |  | (90.1                  | ) |  | (58.4               | ) |  | (148.5                      | ) |  | 37.2                   |   |  | (111.3                      | )
|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  
|Total                    |  | 634.0         |  | (34.5             | ) |  | (449.1              | ) |  | 150.4                  |   |  | (194.5              | ) |  | (44.1                       | ) |  | (7.0                   | ) |  | (51.1                       | )
|                         |  |               |  |                   |   |  |                     |   |  |                        |   |  |                     |   |  |                             |   |  |                        |   |  |                             |  



Exceptional
administrative costs in the year ended 31 March 2004 relate to costs incurred in connection with our parent companys global offer, including £57.0 million for employee incentive plans contingent upon IPO and £33.1 million of
transaction costs. Of the £90.1 million exceptional administrative costs, £33.9 million relates to our UK business and £56.2 million to our US business. Exceptional administrative costs in the year ended 31 March 2003 relate to
costs incurred in connection with our parent companys initial public offering withdrawn in July 2002. Of the £15.0 million exceptional administrative costs, £14.7 million was charged to our UK business and £0.3 was charged to
our US business. The exceptional interest payable in the year ended 31 March 2004 comprises £19.7 million senior note redemption premium and £36.4 million accelerated amortisation of financing fees on our debt repaid in July and August
2003 and £2.3 million for arrangement fees for the withdrawn revolving credit facility. The exceptional tax credits in the year ended 31 March 2004 represent the effective tax on the exceptional items before tax. The £3.0 million
exceptional cost in the period to June 2001 is discussed in note 5.



F-15



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



5. Employees



|                                                                                                                            |  |                     |  |       |  |      
|--------------------------------------------------------------------------------------------------------------------------- |  | ------------------- |  | ----- |  | -----
|                                                                                                                            |  | Year ended 31 March
|                                                                                                                            |  | 2002                |  | 2003  |  | 2004 
|Average monthly number of employees in the Yell Group (including executive directorssee note 22 for separate disclosures): |  |                     |  |       |  |      
|United Kingdom                                                                                                              |  | 3,271               |  | 3,319 |  | 3,414
|United States                                                                                                               |  | 2,050               |  | 4,350 |  | 4,668
|                                                                                                                            |  |                     |  |       |  |      
|Total employees                                                                                                             |  | 5,321               |  | 7,669 |  | 8,082
|                                                                                                                            |  |                     |  |       |  |      
|Marketing and sales                                                                                                         |  | 4,097               |  | 5,631 |  | 4,913
|Other                                                                                                                       |  | 1,224               |  | 2,038 |  | 3,169
|                                                                                                                            |  |                     |  |       |  |      
|Total employees                                                                                                             |  | 5,321               |  | 7,669 |  | 8,082
|                                                                                                                            |  |                     |  |       |  |      



|                                               |  |                        |  |  |      |                             |      |                    |  |                   
|---------------------------------------------- |  | ---------------------- |  |  | ---- | --------------------------- | ---- | ------------------ |  | ------------------
|                                               |  | Combined (Predecessor) |  |  |      | Consolidated (Successor)   
|                                               |  | 1 Aprilto22 June 2001  |  |  |      | 22 June 2001to31 March 2002 |      | Year ended31 March |  | Year ended31 March
|                                               |  |                        |  |  | 2003 |                             | 2004
|                                               |  | £                      |  |  |      | £                           |      | £                  |  | £                 
|                                               |  | (in millions)          |  |  |      | (in millions)              
|Staff costs for the Yell Group during the year |  |                        |  |  |      |                             |      |                    |  |                   
|Wages and salaries                             |  | 68.4                   |  |  |      | 139.0                       |      | 268.5              |  | 274.2             
|Social security                                |  | 4.0                    |  |  |      | 12.5                        |      | 20.6               |  | 26.5              
|Other pension costs (note 23)                  |  | 1.9                    |  |  |      | 6.4                         |      | 9.9                |  | 10.7              
|                                               |  |                        |  |  |      |                             |      |                    |  |                   
|Total staff costs                              |  | 74.3                   |  |  |      | 157.9                       |      | 299.0              |  | 311.4             
|                                               |  |                        |  |  |      |                             |      |                    |  |                   



Employee incentive plans



Certain of the Yellow Book management were awarded
units under an incentive plan, the charge for which amounted to £3.0 million for the period up to 22 June 2001. Prior to 22 June 2001 no payments were made under this plan. Effective on the sale of the Yell Group, this plan was terminated and
payments aggregating £44.7 million were made to management in settlement of all obligations agreed under this plan by BT. The amount of £24.1 million over and above that already accrued was agreed and funded by BT and, accordingly, was
not charged to the Yell Group profit and loss account.



Pursuant to the acquisition of the Yell Group from BT, a new incentive scheme (the Phantom DDB Plan) was established for certain Yellow Book management. Under this scheme the participants as a group were treated economically as
if they had invested £32 million in the Yell Group in the same manner as the funds advanced by the owners before the initial public offering. In satisfaction of these obligations, the plan participants exchanged their interests in the plan for
equity in the company.



The Yell Groups employees in the
United Kingdom were eligible to participate in BTs employee share schemes up to the date of the acquisition from BT. Following the acquisition, the Yell Groups employees had to exercise existing options before 12 December 2001. None of
the BT shares or options issued to employees of the Yell Group were converted into equity of the Yell Group, nor was there any charge on the Yell Group for the cost of these options.



See note 25 for a discussion of the employee stock option plans.



F-16



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



6. Net interest payable



|                                                     |  |                        |  |  |      |                              |      |  |                    |  |                   
|---------------------------------------------------- |  | ---------------------- |  |  | ---- | ---------------------------- | ---- |  | ------------------ |  | ------------------
|                                                     |  | Combined (Predecessor) |  |  |      | Consolidated (Successor)    
|                                                     |  | 1 April to22 June 2001 |  |  |      | 22 June 2001 to31 March 2002 |      |  | Year ended31 March |  | Year ended31 March
|                                                     |  |                        |  |  | 2003 |                              | 2004
|                                                     |  | £                      |  |  |      | £                            |      |  | £                  |  | £                 
|                                                     |  | (in millions)          |  |  |      | (in millions)               
|Senior credit facilities                             |  |                       |  |  |      | 61.5                         |      |  | 87.6               |  | 68.2              
|Senior sterling and dollar notes(a)                  |  |                       |  |  |      | 36.4                         |      |  | 55.4               |  | 43.3              
|Subordinated parent company loan(a)                  |  |                       |  |  |      | 46.3                         |      |  | 70.1               |  | 21.3              
|Bridging facilities                                  |  |                       |  |  |      | 7.0                          |      |  | 10.3               |  |                  
|Loans from BT                                        |  | 5.8                    |  |  |      |                             |      |  |                   |  |                  
|Other                                                |  |                       |  |  |      | 0.2                          |      |  | 0.6                |  | 0.3               
|Amortisation of finance costs                        |  |                       |  |  |      | 9.5                          |      |  | 15.0               |  | 5.2               
|Exceptional interest and write off of financing fees |  |                       |  |  |      |                             |      |  |                   |  | 58.4              
|                                                     |  |                        |  |  |      |                              |      |  |                    |  |                   
|Total interest payable                               |  | 5.8                    |  |  |      | 160.9                        |      |  | 239.0              |  | 196.7             
|                                                     |  |                        |  |  |      |                              |      |  |                    |  |                   
|Interest receivable                                  |  |                       |  |  |      | (2.3                         | )    |  | (2.4)              |  | (2.2)             
|                                                     |  |                        |  |  |      |                              |      |  |                    |  |                   
|Net interest payable                                 |  | 5.8                    |  |  |      | 158.6                        |      |  | 236.6              |  | 194.5             
|                                                     |  |                        |  |  |      |                              |      |  |                    |  |                   

---

|(a) |  | Interest on the senior discount dollar notes rolls up into the principal balance and is not due until the maturity or repayment of the respective loan. Yell Group settled
35% of the amounts outstanding on 18 August 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



7. Tax
charge (credit) on profit (loss) on ordinary activities



|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|----------------------------------------------------------- |  | ---------------------- | - |  | ---- |  | ---------------------------- | ---- |  | ------------------ | - |  | ------------------ | -
|                                                            |  | Combined (Predecessor) |   |  |      |  | Consolidated (Successor)     |     
|                                                            |  | 1 April to22 June 2001 |   |  |      |  | 22 June 2001 to31 March 2002 |      |  | Year ended31 March |   |  | Year ended31 March |  
|                                                            |  |                        |   |  | 2003 |  |                              | 2004 | 
|                                                            |  | £                      |   |  |      |  | £                            |      |  | £                  |   |  | £                  |  
|                                                            |  | (in millions)          |   |  |      |  | (in millions)                |     
|UK corporation tax at 30%                                   |  | 13.4                   |   |  |      |  | 8.6                          |      |  | 6.6                |   |  | 22.0               |  
|Foreign taxes                                               |  |                       |   |  |      |  |                             |      |  | 0.5                |   |  | 1.1                |  
|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Total current tax                                           |  | 13.4                   |   |  |      |  | 8.6                          |      |  | 7.1                |   |  | 23.1               |  
|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Origination and reversal of timing differences              |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
| UK                                                        |  | (2.1                   | ) |  |      |  | (1.3                         | )    |  | (2.5               | ) |  | (1.8               | )
| Foreign                                                   |  |                       |   |  |      |  |                             |      |  | (17.2              | ) |  | (14.3              | )
|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Total deferred tax                                          |  | (2.1                   | ) |  |      |  | (1.3                         | )    |  | (19.7              | ) |  | (16.1              | )
|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Tax charge (credit) on profit (loss) on ordinary activities |  | 11.3                   |   |  |      |  | 7.3                          |      |  | (12.6              | ) |  | 7.0                |  
|                                                            |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  



F-17



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



7. Tax charge (credit) on profit (loss) on ordinary activities (continued)



The effective tax rate for each period is different from the standard rate
of corporation tax in the United Kingdom (30%) as explained below:



|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|--------------------------------------------------------------------------------------------------------------- |  | ---------------------- | - |  | ---- |  | ---------------------------- | ---- |  | ------------------ | - |  | ------------------ | -
|                                                                                                                |  | Combined (Predecessor) |   |  |      |  | Consolidated (Successor)     |     
|                                                                                                                |  | 1 April to22 June 2001 |   |  |      |  | 22 June 2001 to31 March 2002 |      |  | Year ended31 March |   |  | Year ended31 March |  
|                                                                                                                |  |                        |   |  | 2003 |  |                              | 2004 | 
|                                                                                                                |  | £                      |   |  |      |  | £                            |      |  | £                  |   |  | £                  |  
|                                                                                                                |  | (in millions)          |   |  |      |  | (in millions)                |     
|Profit (loss) on ordinary activities before taxation                                                            |  | 27.1                   |   |  |      |  | (39.9                        | )    |  | (53.2              | ) |  | (44.1              | )
|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Profit (loss) on ordinary activities multiplied by standard rate of corporation tax in the United Kingdom (30%) |  | 8.2                    |   |  |      |  | (12.0                        | )    |  | (16.0              | ) |  | (13.2              | )
|Effects of:                                                                                                     |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Adjustments from prior years                                                                                    |  |                       |   |  |      |  |                             |      |  | (0.3               | ) |  | 0.4                |  
|Non-deductible goodwill amortisation                                                                            |  |                       |   |  |      |  | 13.5                         |      |  | 20.9               |   |  | 22.6               |  
|Higher tax rates on overseas earnings                                                                           |  | (3.2                   | ) |  |      |  | (0.8                         | )    |  | (0.3               | ) |  | (1.9               | )
|Other expenses not deductible for tax purposes                                                                  |  | 0.4                    |   |  |      |  | 1.4                          |      |  | 4.0                |   |  | 12.9               |  
|US tax losses (used) created in the year                                                                        |  | 1.5                    |   |  |      |  | 8.7                          |      |  | (2.7               | ) |  | 0.7                |  
|Other timing differences                                                                                        |  | 6.5                    |   |  |      |  | (2.2                         | )    |  | 1.5                |   |  | 1.6                |  
|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Total current tax                                                                                               |  | 13.4                   |   |  |      |  | 8.6                          |      |  | 7.1                |   |  | 23.1               |  
|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|                                                                                                                |  |                        |   |  |     
|Deferred tax in current year                                                                                    |  | (2.1                   | ) |  |      |  | (1.3                         | )    |  | (2.5               | ) |  | (1.8               | )
|Recognition of deferred tax assets on prior year US tax losses                                                  |  |                       |   |  |      |  |                             |      |  | (17.2              | ) |  | (14.3              | )
|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Net tax charge (credit)                                                                                         |  | 11.3                   |   |  |      |  | 7.3                          |      |  | (12.6              | ) |  | 7.0                |  
|                                                                                                                |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  



F-18



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



8. Acquisitions



Acquisition in 2004



In the year ended 31 March 2004, the Yell Group acquired yellow pages directories businesses in the United States totalling $198.9 million (£108.6
million) plus expenses of $0.5 million (£0.3 million). The purchases were accounted for as acquisitions. The purchase prices were allocated to the acquired assets and liabilities as follows:



|                                               |  |               |   |  |                          |   |  |            |  
|---------------------------------------------- |  | ------------- | - |  | ------------------------ | - |  | ---------- | -
|                                               |  | Book value(a) |   |  | Fair valueadjustments(b) |   |  | Fair value |  
|                                               |  | £             |   |  | £                        |   |  | £          |  
|                                               |  | (in millions) |  
|Fixed assets                                   |  |               |   |  |                          |   |  |            |  
|Tangible assets                                |  |              |   |  | 1.2                      |   |  | 1.2        |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total fixed assets                             |  |              |   |  | 1.2                      |   |  | 1.2        |  
|Current assets                                 |  |               |   |  |                          |   |  |            |  
|Stocks                                         |  | 2.1           |   |  |                         |   |  | 2.1        |  
|Debtors                                        |  | 15.6          |   |  | (4.9                     | ) |  | 10.7       |  
|Cash at bank and in hand                       |  |              |   |  |                         |   |  |           |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total current assets                           |  | 17.7          |   |  | (4.9                     | ) |  | 12.8       |  
|                                               |  |               |   |  |                          |   |  |            |  
|Creditors: amounts falling due within one year |  | (5.9          | ) |  | 0.4                      |   |  | (5.5       | )
|                                               |  |               |   |  |                          |   |  |            |  
|Net current assets                             |  | 11.8          |   |  | (4.5                     | ) |  | 7.3        |  
|                                               |  |               |   |  |                          |   |  |            |  
|Identifiable net assets                        |  | 11.8          |   |  | (3.3                     | ) |  | 8.5        |  
|                                               |  |               |   |  |                          |   |  |            |  
|Goodwill                                       |  |               |   |  |                          |   |  | 100.4      |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total cost                                     |  |               |   |  |                          |   |  | 108.9      |  
|                                               |  |               |   |  |                          |   |  |            |  
|Consideration:                                 |  |               |   |  |                          |   |  |            |  
|Cash                                           |  |               |   |  |                          |   |  | 108.9      |  
|                                               |  |               |   |  |                          |   |  |            |  

---

|(a) |  | Translated from US dollars to pounds sterling at the exchange rate on the date of acquisition.
|--- |  | ----------------------------------------------------------------------------------------------

|(b) |  | The fair value adjustments principally comprise a revaluation of fixed assets to estimated fair market value, and an alignment of accounting policies for revenue
recognition.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The effect of acquisitions in the
year on Yell Groups cash flows before financing were as follows:



|                                                |  |                       
|----------------------------------------------- |  | ----------------------
|                                                |  | Year ended31 March2001
|                                                |  | £                     
|                                                |  | (in millions)         
|Net cash inflow from operating activities       |  | 0.1                   
|Returns on investments and servicing of finance |  |                      
|Taxation paid                                   |  |                      
|Investing activities                            |  |                      
|                                                |  |                       
|Net cash flow before financing                  |  | 0.1                   
|                                                |  |                       



F-19



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



8. Acquisitions (continued)



Acquisition of McLeod



On 16 April 2002, the Yell Group acquired McLeod for an aggregate purchase price of $600.0 million (£417.0 million) plus expenses of $10.0 million
(£6.9 million). The purchase was accounted for as an acquisition. The purchase price was allocated to the assets and liabilities of McLeod as follows:



|                                               |  |               |   |  |                          |   |  |            |  
|---------------------------------------------- |  | ------------- | - |  | ------------------------ | - |  | ---------- | -
|                                               |  | Book value(a) |   |  | Fair valueadjustments(b) |   |  | Fair value |  
|                                               |  | £             |   |  | £                        |   |  | £          |  
|                                               |  | (in millions) |  
|Fixed assets                                   |  |               |   |  |                          |   |  |            |  
|Tangible assets                                |  | 24.4          |   |  | (1.4                     | ) |  | 23.0       |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total fixed assets                             |  | 24.4          |   |  | (1.4                     | ) |  | 23.0       |  
|Current assets                                 |  |               |   |  |                          |   |  |            |  
|Stocks                                         |  | 37.5          |   |  | (5.1                     | ) |  | 32.4       |  
|Debtors                                        |  | 67.1          |   |  | 1.1                      |   |  | 68.2       |  
|Cash at bank and in hand                       |  | 0.5           |   |  |                         |   |  | 0.5        |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total current assets                           |  | 105.1         |   |  | (4.0                     | ) |  | 101.1      |  
|                                               |  |               |   |  |                          |   |  |            |  
|Creditors: amounts falling due within one year |  | (28.5         | ) |  | (1.7                     | ) |  | (30.2      | )
|                                               |  |               |   |  |                          |   |  |            |  
|Net current assets                             |  | 76.6          |   |  | (5.7                     | ) |  | 70.9       |  
|                                               |  |               |   |  |                          |   |  |            |  
|Identifiable net assets                        |  | 101.0         |   |  | (7.1                     | ) |  | 93.9       |  
|                                               |  |               |   |  |                          |   |  |            |  
|Goodwill                                       |  |               |   |  |                          |   |  | 330.0      |  
|                                               |  |               |   |  |                          |   |  |            |  
|Total cost                                     |  |               |   |  |                          |   |  | 423.9      |  
|                                               |  |               |   |  |                          |   |  |            |  
|Consideration:                                 |  |               |   |  |                          |   |  |            |  
|Cash                                           |  |               |   |  |                          |   |  | 423.9      |  
|                                               |  |               |   |  |                          |   |  |            |  

---

|(a) |  | Translated from US dollars to pounds sterling at the exchange rate on the date of acquisition.
|--- |  | ----------------------------------------------------------------------------------------------

|(b) |  | The fair value adjustments principally comprise an impairment in the value of fixed assets following an impairment review, and an alignment of accounting policies for
directories in progress and revenue recognition.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The operating results of McLeod during the year ended 31 December 2001 and the period from 1 January 2002 to 16 April 2002 were:



|                                       |  |                           |   |  |                         |  
|-------------------------------------- |  | ------------------------- | - |  | ----------------------- | -
|                                       |  | Year ended31 December2001 |   |  | 1 Januaryto 16April2002 |  
|                                       |  | £                         |   |  | £                       |  
|                                       |  | (in millions)             |  
|Turnover                               |  | 207.2                     |   |  | 66.0                    |  
|                                       |  |                           |   |  |                         |  
|Total operating (loss) profit(c)       |  | (15.6                     | ) |  | 7.0                     |  
|                                       |  |                           |   |  |                         |  
|(Loss) profit before taxation          |  | (15.5                     | ) |  | 6.9                     |  
|Taxation                               |  | (0.1                      | ) |  | (0.1                    | )
|                                       |  |                           |   |  |                         |  
|(Loss) profit for the financial period |  | (15.6                     | ) |  | 6.8                     |  
|                                       |  |                           |   |  |                         |  

---

|(c) |  | Operating profit for the year ended December 2001 is stated after charging £25.1 million of management fees from the previous owner.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------



Results for the year ended 31 December 2001 were extracted from the latest
published financial statements. Results for the period to 16 April 2002 were obtained from management accounts.



F-20



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



8. Acquisitions (continued)



The impact of the McLeod acquisition on the Groups cashflows before financing was as follows:



|                                                |  |                         |  
|----------------------------------------------- |  | ----------------------- | -
|                                                |  | Year ended31 March 2003 |  
|                                                |  | (£ in millions)         |  
|Net cash inflow from operating activities       |  | 35.8                    |  
|Returns on investments and servicing of finance |  |                        |  
|Taxation paid                                   |  | (1.0                    | )
|Investing activities                            |  | (3.8                    | )
|                                                |  |                         |  
|Net cash inflow before financing                |  | 31.0                    |  
|                                                |  |                         |  



The Group made other
US acquisitions in the year ended 31 March 2003 for cash of £47.4 million to acquire net assets with a book value of £16.0 million. These acquisitions gave rise to goodwill of £31.4 million recorded in the year.



F-21



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



8. Acquisitions (continued)



Acquisition of Yell Group from BT



The Yell Group was acquired from BT on 22 June 2001 for an aggregate price of £2,007.6 million. The purchase was accounted for as an acquisition.
The purchase price was allocated to the assets and liabilities of the Yell Group as follows:



|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|------------------------------------------------------------- |  | ------------- | --- |  | ------------------------ | - |  | --------------------------------------- |  | ---------- | -
|                                                              |  | Bookvalue     |     |  | Fair valueadjustments(a) |   |  | Debt andotherliabilitiesextinguished(b) |  | Fair value |  
|                                                              |  | £             |     |  | £                        |   |  | £                                       |  | £          |  
|                                                              |  | (in millions) |    
|Fixed assets                                                  |  |               |     |  |                          |   |  |                                         |  |            |  
|Tangible assets                                               |  | 42.6          |     |  |                         |   |  |                                        |  | 42.6       |  
|Investment                                                    |  | 2.1           |     |  |                         |   |  |                                        |  | 2.1        |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total fixed assets                                            |  | 44.7          |     |  |                         |   |  |                                        |  | 44.7       |  
|Current assets                                                |  |               |     |  |                          |   |  |                                         |  |            |  
|Stocks                                                        |  | 100.2         |     |  | (2.3                     | ) |  |                                        |  | 97.9       |  
|Debtors                                                       |  | 275.0         |     |  | (0.8                     | ) |  |                                        |  | 274.2      |  
|Cash at bank and in hand                                      |  | 8.3           |     |  |                         |   |  |                                        |  | 8.3        |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total current assets                                          |  | 383.5         |     |  | (3.1                     | ) |  |                                        |  | 380.4      |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Creditors: amounts falling due within one year                |  |               |     |  |                          |   |  |                                         |  |            |  
|Loans and other borrowings                                    |  | (110.5        | )   |  |                         |   |  | 109.7                                   |  | (0.8       | )
|Other creditors                                               |  | (112.7        | )   |  | (6.0                     | ) |  |                                        |  | (118.7     | )
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total creditors: amounts falling due within one year          |  | (223.2        | )   |  | (6.0                     | ) |  | 109.7                                   |  | (119.5     | )
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Net current assets                                            |  | 160.3         |     |  | (9.1                     | ) |  | 109.7                                   |  | 260.9      |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total assets less current liabilities                         |  | 205.0         |     |  | (9.1                     | ) |  | 109.7                                   |  | 305.6      |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Creditors: amounts falling due after more than one year       |  |               |     |  |                          |   |  |                                         |  |            |  
|Loans and other borrowings                                    |  | (222.8        | )   |  |                         |   |  | 222.4                                   |  | (0.4       | )
|Other creditors                                               |  | (21.3         | )   |  |                         |   |  | 20.6                                    |  | (0.7       | )
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total creditors: amounts falling due after more than one year |  | (244.1        | )   |  |                         |   |  | 243.0                                   |  | (1.1       | )
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Identifiable net (liabilities) assets                         |  | (39.1         | )   |  | (9.1                     | ) |  | 352.7                                   |  | 304.5      |  
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Goodwill                                                      |  | 1,703.1       |    
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total cost                                                    |  | 2,007.6       |    
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Consideration:                                                |  |               |    
|Cash                                                          |  | 1,907.6       | (c)
|Subordinated parent company loan                              |  | 100.0         |    
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  
|Total consideration                                           |  | 2,007.6       |    
|                                                              |  |               |     |  |                          |   |  |                                         |  |            |  

---

|(a) |  | The fair value adjustments principally comprise a write down of directories in progress at the date of acquisition and accruals for unprovided liabilities at the date of
acquisition. These adjustments to stocks and other creditors relate to matters affecting a number of years and the impact on any individual year is insignificant.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) |  | Debt extinguished reflects the repayment on the date of acquisition of loans due to BT, loan notes due to senior management of Yellow Book and amounts previously accrued
and payable under the Yellow Book management incentive plan. Additional amounts payable under this incentive plan on the change of ownership were funded by BT.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(c) |  | Consideration includes acquisition costs of £39.2 million.
|--- |  | ----------------------------------------------------------



The Group made other acquisitions in the year ended 31 March 2002 for cash of £7.1 million. These acquisitions gave rise to goodwill of £7.1
million recorded in the year.



F-22



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



8. Acquisitions (continued)



Reconciliation of cash paid to the cash flow statement



|                                                                        |  |                        |  |  |      |                              |   |  |                    |   |  |                      
|----------------------------------------------------------------------- |  | ---------------------- |  |  | ---- | ---------------------------- | - |  | ------------------ | - |  | ---------------------
|                                                                        |  | Combined (Predecessor) |  |  |      | Consolidated (Successor)    
|                                                                        |  | 1 April to22 June 2001 |  |  |      | 22 June 2001 to31 March 2002 |   |  | Year ended31 March |   |  | Yearended31 March2004
|                                                                        |  |                        |  |  | 2003 |                              |  
|                                                                        |  | £                      |  |  |      | £                            |   |  | £                  |   |  | £                    
|                                                                        |  | (in millions)          |  |  |      | (in millions)               
|Cash consideration for:                                                 |  |                        |  |  |      |                              |   |  |                    |   |  |                      
|Acquisition of Yell Group from BT                                       |  |                       |  |  |      | 1,907.6                      |   |  |                   |   |  |                     
|Acquisition of McLeod                                                   |  |                       |  |  |      |                             |   |  | 423.9              |   |  |                     
|Other acquisitions                                                      |  |                       |  |  |      | 7.1                          |   |  | 47.4               |   |  | 108.9                
|Less:                                                                   |  |                        |  |  |      |                              |   |  |                    |   |  |                      
|Cash acquired with subsidiaries                                         |  |                       |  |  |      | (8.3                         | ) |  | (0.4               | ) |  |                     
|                                                                        |  |                        |  |  |      |                              |   |  |                    |   |  |                      
|Cash paid for purchase of subsidiary undertakings, net of cash acquired |  |                       |  |  |      | 1,906.4                      |   |  | 470.9              |   |  | 108.9                
|                                                                        |  |                        |  |  |      |                              |   |  |                    |   |  |                      



The effect of the
acquisitions on the results of the Yell Group during the year of the acquisitions includes the following for the years ended 31 March 2003 and 2004:



|                     |  |                    |   |  |      |  
|-------------------- |  | ------------------ | - |  | ---- | -
|                     |  | Year ended31 March |  
|                     |  | 2003               |   |  | 2004 |  
|                     |  | £                  |   |  | £    |  
|                     |  | (in millions)      |  
|Turnover             |  | 200.4              |   |  | 0.7  |  
|Cost of sales        |  | (110.7             | ) |  | (0.4 | )
|                     |  |                    |   |  |      |  
|Gross profit         |  | 89.7               |   |  | 0.3  |  
|Distribution costs   |  | (11.9              | ) |  |     |  
|Administrative costs |  | (70.9              | ) |  | (0.2 | )
|                     |  |                    |   |  |      |  
|Operating profit     |  | 6.9                |   |  | 0.1  |  
|                     |  |                    |   |  |      |  



F-23



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



9. Movements in net debt



Reconciliation of movement in net debt

|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|-------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | - |  | ------------------------------------------ | - |  | --------------------- | - |  | -------- | -
|                                                                                                                           |  | Totalcash lessbankoverdraft |   |  | Debt duewithin oneyear excludingoverdraft |   |  | Debt dueafterone year |   |  | Net debt |  
|                                                                                                                           |  | £                           |   |  | £                                          |   |  | £                     |   |  | £        |  
|                                                                                                                           |  | (in millions)               |  
|At 31 March 2001 (Predecessor)                                                                                             |  | 24.8                        |   |  | (97.2                                      | ) |  | (221.8                | ) |  | (294.2   | )
|Cash inflow before acquisitions and financing                                                                              |  | 11.9                        |   |  |                                           |   |  |                      |   |  | 11.9     |  
|Cash inflow from financing                                                                                                 |  | 12.4                        |   |  | (12.4                                      | ) |  |                      |   |  |         |  
|Other non-cash items                                                                                                       |  |                            |   |  | (223.0                                     | ) |  | 223.0                 |   |  |         |  
|Currency movements                                                                                                         |  |                            |   |  | (0.5                                       | ) |  | (1.3                  | ) |  | (1.8     | )
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|At 22 June 2001 (Predecessor)                                                                                              |  | 49.1                        |   |  | (333.1                                     | ) |  | (0.1                  | ) |  | (284.1   | )
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|                                                                                                                           | 
|At 22 June 2001 (Successor)                                                                                                |  |                            |   |  |                                           |   |  |                      |   |  |         |  
|Cash inflow before acquisitions and financing                                                                              |  | 63.8                        |   |  |                                           |   |  |                      |   |  | 63.8     |  
|Cash inflow from financing:                                                                                                |  |                             |   |  |                                            |   |  |                       |   |  |          |  
| on acquisition                                                                                                           |  | 2,029.9                     |   |  | (592.8                                     | ) |  | (1,436.1              | ) |  | 1.0      |  
| after acquisition                                                                                                        |  | 502.2                       |   |  |                                           |   |  | (502.2                | ) |  |         |  
|Repayment of loans                                                                                                         |  | (540.0                      | ) |  | 540.0                                      |   |  |                      |   |  |         |  
|Cash outflow on acquisitions                                                                                               |  | (1,914.7                    | ) |  |                                           |   |  |                      |   |  | (1,914.7 | )
|Balances assumed on acquisitions                                                                                           |  | 8.3                         |   |  | (0.6                                       | ) |  | (0.1                  | ) |  | 7.6      |  
|Subordinated parent company loan                                                                                           |  |                            |   |  |                                           |   |  | (100.0                | ) |  | (100.0   | )
|Finance fees paid                                                                                                          |  | (49.4                       | ) |  |                                           |   |  | 49.4                  |   |  |         |  
|Interest and amortised fees                                                                                                |  |                            |   |  |                                           |   |  | (65.0                 | ) |  | (65.0    | )
|Other non-cash items                                                                                                       |  |                            |   |  |                                           |   |  | 1.4                   |   |  | 1.4      |  
|Currency movements                                                                                                         |  |                            |   |  |                                           |   |  | 1.9                   |   |  | 1.9      |  
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|At 31 March 2002 (Successor)                                                                                               |  | 100.1                       |   |  | (53.4                                      | ) |  | (2,050.7              | ) |  | (2,004.0 | )
|Cash inflow less interest and taxation paid and capital expenditures                                                       |  | 143.9                       |   |  |                                           |   |  |                      |   |  | 143.9    |  
|Cash inflow from financing:                                                                                                |  |                             |   |  |                                            |   |  |                       |   |  |          |  
| for acquisitions                                                                                                         |  | 408.8                       |   |  |                                           |   |  | (408.7                | ) |  | 0.1      |  
| after acquisitions                                                                                                       |  | 77.0                        |   |  |                                           |   |  | (77.0                 | ) |  |         |  
|Cash outflow on acquisitions                                                                                               |  | (470.9                      | ) |  |                                           |   |  |                      |   |  | (470.9   | )
|Reclass of long-term to short-term debt                                                                                    |  |                            |   |  | (286.5                                     | ) |  | 286.5                 |   |  |         |  
|Borrowings repaid                                                                                                          |  | (211.9                      | ) |  | 211.9                                      |   |  |                      |   |  |         |  
|Finance fees paid                                                                                                          |  | (16.1                       | ) |  |                                           |   |  | 16.1                  |   |  |         |  
|Interest and amortised fees                                                                                                |  |                            |   |  |                                           |   |  | (102.9                | ) |  | (102.9   | )
|Currency movements                                                                                                         |  | (0.9                        | ) |  | 15.2                                       |   |  | 50.7                  |   |  | 65.0     |  
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|At 31 March 2003 (Successor)                                                                                               |  | 30.0                        |   |  | (112.8                                     | ) |  | (2,286.0              | ) |  | (2,368.8 | )
|Cash inflow from operating activities less interest paid and redemption premium and taxation paid and capital expenditures |  | 48.0                        |   |  |                                           |   |  | 19.4(a)               |   |  | 67.4     |  
|Cash outflow on acquisitions                                                                                               |  | (108.9                      | ) |  |                                           |   |  |                      |   |  | (108.9   | )
|Net proceeds from shares issued                                                                                            |  | 304.4                       |   |  |                                           |   |  |                      |   |  | 304.4    |  
|Reclass of long-term to short-term debt                                                                                    |  |                            |   |  | (41.9                                      | ) |  | 41.9                  |   |  |         |  
|Borrowings repaid                                                                                                          |  | (1,318.4                    | ) |  | 112.8                                      |   |  | 1,205.6               |   |  |         |  
|New loans acquired                                                                                                         |  | 1,082.5                     |   |  | (85.8                                      | ) |  | (996.7                | ) |  |         |  
|Finance fees paid                                                                                                          |  | (16.4                       | ) |  |                                           |   |  | 16.4                  |   |  |         |  
|Non-cash charges                                                                                                           |  |                            |   |  |                                           |   |  | (66.9                 | ) |  | (66.9    | )
|Currency movements                                                                                                         |  | (2.8                        | ) |  |                                           |   |  | 79.2                  |   |  | 76.4     |  
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  
|At 31 March 2004 (Successor)                                                                                               |  | 18.4                        |   |  | (127.7                                     | ) |  | (1,987.1              | ) |  | (2,096.4 | )
|                                                                                                                           |  |                             |   |  |                                            |   |  |                       |   |  |          |  

---

|(a) |  | The £141.8 million of interest paid in the year included £19.4 million of interest that had been capitalised as long-term debt.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------



F-24



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



9. Movements in net debt (continued)



Reconciliation of net cash flow to movements in net debt



|                                                           |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|---------------------------------------------------------- |  | ---------------------- | - |  | ---- |  | ---------------------------- | ---- |  | ------------------ | - |  | ------------------ | -
|                                                           |  | Combined(Predecessor)  |   |  |      |  | Consolidated (Successor)     |     
|                                                           |  | 1 April to22 June 2001 |   |  |      |  | 22 June 2001 to31 March 2002 |      |  | Year ended31 March |   |  | Year ended31 March |  
|                                                           |  |                        |   |  | 2003 |  |                              | 2004 | 
|                                                           |  | £                      |   |  |      |  | £                            |      |  | £                  |   |  | £                  |  
|                                                           |  | (in millions)          |   |  |      |  | (in millions)                |     
|Increase (decrease) in net cash in the period              |  | 24.3                   |   |  |      |  | 100.1                        |      |  | (69.2              | ) |  | (8.8)              |  
|Net cash (inflow) outflow from increase (decrease) in debt |  | (12.4                  | ) |  |      |  | (1,941.7                     | )    |  | (257.7             | ) |  | 171.7              |  
|                                                           |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Decrease (increase) in net debt resulting from cash flows  |  | 11.9                   |   |  |      |  | (1,841.6                     | )    |  | (326.9             | ) |  | 162.9              |  
|Balances assumed on acquisitions                           |  |                       |   |  |      |  | (0.7                         | )    |  |                   |   |  |                   |  
|Subordinated parent company loan                           |  |                       |   |  |      |  | (100.0                       | )    |  |                   |   |  | 100.0              |  
|Interest and amortised fees                                |  |                       |   |  |      |  | (65.0                        | )    |  | (102.9             | ) |  | (66.9              | )
|Other non-cash items                                       |  |                       |   |  |      |  | 1.4                          |      |  |                   |   |  |                   |  
|Currency movements                                         |  | (1.8                   | ) |  |      |  | 1.9                          |      |  | 65.0               |   |  | 76.4               |  
|                                                           |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Decrease (increase) in net debt in the period              |  | 10.1                   |   |  |      |  | (2,004.0                     | )    |  | (364.8             | ) |  | 272.4              |  
|Net debt at beginning of the period                        |  | (294.2                 | ) |  |      |  |                             |      |  | (2,004.0           | ) |  | (2,368.8           | )
|                                                           |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  
|Net debt at end of the period                              |  | (284.1                 | ) |  |      |  | (2,004.0                     | )    |  | (2,368.8           | ) |  | (2,096.4           | )
|                                                           |  |                        |   |  |      |  |                              |      |  |                    |   |  |                    |  



F-25



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



10. Intangible assets



Goodwill



|                                    |  |                 |  
|----------------------------------- |  | --------------- | -
|                                    |  | £ (in millions) |  
|Cost                                |  |                 |  
|Balance at 31 March 2002            |  | 1,705.8         |  
|Additions                           |  | 361.4           |  
|Fair value adjustment(a)            |  | (0.7            | )
|Currency movements                  |  | (81.4           | )
|                                    |  |                 |  
|Total cost at 31 March 2003         |  | 1,985.1         |  
|                                    |  |                 |  
|Amortisation                        |  |                 |  
|Balance at 31 March 2002            |  | 65.3            |  
|Charge for the year                 |  | 98.4            |  
|Currency movements                  |  | (2.7            | )
|                                    |  |                 |  
|Total amortisation at 31 March 2003 |  | 161.0           |  
|                                    |  |                 |  
|Net book value at 31 March 2003     |  | 1,824.1         |  
|                                    |  |                 |  
|Cost                                |  |                 |  
|Balance at 31 March 2003            |  | 1,985.1         |  
|Additions                           |  | 100.4           |  
|Fair value adjustment               |  | 3.3             |  
|Currency movements                  |  | (117.3)         |  
|                                    |  |                 |  
|Total cost at 31 March 2004         |  | 1,971.5         |  
|                                    |  |                 |  
|Amortisation                        |  |                 |  
|Balance at 31 March 2003            |  | 161.0           |  
|Charge for the year                 |  | 96.7            |  
|Currency movements                  |  | (11.5)          |  
|                                    |  |                 |  
|Total amortisation at 31 March 2004 |  | 246.2           |  
|                                    |  |                 |  
|Net book value at 31 March 2004     |  | 1,725.3         |  
|                                    |  |                 |  

---

|(a) |  | The fair value adjustment to goodwill was due to the finalisation of transaction costs in respect of acquisitions in the year ended 31 March 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



The acquisitions of the Yell Group from BT on 22 June 2001 and the McLeod
acquisition on 16 April 2002 are detailed in note 8. The other goodwill arose on several small acquisitions. The goodwill arising on the acquisitions is being amortised on a straight-line basis over its estimated useful life of 20 years.



F-26



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



11. Tangible fixed assets



Tangible fixed assets, comprising primarily computers and office equipment, are summarised as follows:



|                                    |  |                 |  
|----------------------------------- |  | --------------- | -
|                                    |  | £ (in millions) |  
|Cost                                |  |                 |  
|Balance at 31 March 2002            |  | 36.8            |  
|Acquisitions(a)                     |  | 23.8            |  
|Additions                           |  | 19.2            |  
|Disposals                           |  | (8.1            | )
|Currency movements                  |  | (3.1            | )
|                                    |  |                 |  
|Total cost at 31 March 2003         |  | 68.6            |  
|                                    |  |                 |  
|Depreciation                        |  |                 |  
|Balance at 31 March 2002            |  | 6.8             |  
|Charge for the year                 |  | 22.5            |  
|Disposals                           |  | (8.1            | )
|Currency movements                  |  | 0.3             |  
|                                    |  |                 |  
|Total depreciation at 31 March 2003 |  | 21.5            |  
|                                    |  |                 |  
|Net book value at 31 March 2003     |  | 47.1            |  
|                                    |  |                 |  
|Cost                                |  |                 |  
|Balance at 31 March 2003            |  | 68.6            |  
|Acquisitions(a)                     |  | 1.2             |  
|Additions                           |  | 24.8            |  
|Disposals                           |  | (9.0            | )
|Currency movements                  |  | (5.2            | )
|                                    |  |                 |  
|Total cost at 31 March 2004         |  | 80.4            |  
|                                    |  |                 |  
|Depreciation                        |  |                 |  
|Balance at 31 March 2003            |  | 21.5            |  
|Charge for the year                 |  | 22.9            |  
|Disposals                           |  | (8.4            | )
|Currency movements                  |  | (1.5            | )
|                                    |  |                 |  
|Total depreciation at 31 March 2004 |  | 34.5            |  
|                                    |  |                 |  
|Net book value at 31 March 2004     |  | 45.9            |  
|                                    |  |                 |  

---

|(a) |  | Fixed assets acquired comprised computers and office equipment.
|--- |  | ---------------------------------------------------------------



The net book value of fixed assets included amounts of £0.8 million (2003-£0.2 million, 2002-£0.7 million) in respect of assets held
under finance leases.



F-27



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



12. Investments



|                         |  |                 |  |                
|------------------------ |  | --------------- |  | ---------------
|                         |  | At 31 March2003 |  | At 31 March2004
|                         |  | £               |  | £              
|                         |  | (in millions)  
|Shares in parent company |  |                |  | 5.8            
|Other investments        |  | 1.9             |  | 1.8            
|                         |  |                 |  |                
|                         |  | 1.9             |  | 7.6            
|                         |  |                 |  |                



13. Stocks



|                        |  |                 |  |                
|----------------------- |  | --------------- |  | ---------------
|                        |  | At31 March 2003 |  | At31 March 2004
|                        |  | £               |  | £              
|                        |  | (in millions)  
|Directories in progress |  | 143.5           |  | 147.2          
|Other                   |  | 2.3             |  | 4.7            
|                        |  |                 |  |                
|Total stocks            |  | 145.8           |  | 151.9          
|                        |  |                 |  |                



14. Debtors



|                             |  |                 |  |                
|---------------------------- |  | --------------- |  | ---------------
|                             |  | At31 March 2003 |  | At31 March 2004
|                             |  | £               |  | £              
|                             |  | (in millions)  
|Trade debtors(a)             |  | 412.3           |  | 401.9          
|Other debtors                |  | 8.2             |  | 8.7            
|Accrued income(a)            |  | 7.6             |  | 4.7            
|Prepayments                  |  | 10.2            |  | 10.6           
|Deferred tax asset (note 15) |  | 23.1            |  | 34.7           
|                             |  |                 |  |                
|Total debtors                |  | 461.4           |  | 460.6          
|                             |  |                 |  |                

---

|(a) |  | The Yell Groups trade debtors and accrued income are stated after deducting a provision of £113.1 million at 31 March 2004 (2003£105.5 million) for
doubtful debts and sales allowances. The amount charged to the Yell Group profit and loss account for doubtful debts for the year ended 31 March 2004 was £71.1 million (year ended 31 March 2003£67.6 million; periods ended 22 June
2001 to 31 March 2002 and 1 April to 22 June 2001£43.4 million and £9.8 million, respectively);
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



All amounts above fall due within one year except for the deferred tax asset, which may fall due after more than one year.



F-28



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



15. Deferred taxation



Deferred tax asset

|                                           |  |                          |  |                          |  
|------------------------------------------ |  | ------------------------ |  | ------------------------ | -
|                                           |  | Year ended 31 March 2003 |  | Year ended 31 March 2004 |  
|                                           |  | £                        |  | £                        |  
|                                           |  | (in millions)            | 
|Balance at beginning of the year           |  | 3.4                      |  | 23.1                     |  
|Amount credited to profit and loss account |  | 19.7                     |  | 16.1                     |  
|Adjustments relating to acquisitions       |  |                         |  | (1.9                     | )
|Currency movements                         |  |                         |  | (2.6                     | )
|                                           |  |                          |  |                          |  
|Balance at end of the year                 |  | 23.1                     |  | 34.7                     |  
|                                           |  |                          |  |                          |  



The deferred tax
assets are included in debtors (note 14). The elements of all net deferred tax assets not recognised in the accounts, including the cumulative unrecognised effect of net operating losses arising from operations in the United States, were as follows:

|                                                                                         |  |               |   |  |       |  
|---------------------------------------------------------------------------------------- |  | ------------- | - |  | ----- | -
|                                                                                         |  | At 31 March   |  
|                                                                                         |  | 2003          |   |  | 2004  |  
|                                                                                         |  | £             |   |  | £     |  
|                                                                                         |  | (in millions) |  
|Tax effect of timing differences due to:                                                 |  |               |   |  |       |  
|Amortisation and depreciation                                                            |  | (5.7          | ) |  | (12.2 | )
|Bad debt provisions                                                                      |  | 17.3          |   |  | 22.7  |  
|Recognised tax net operating losses                                                      |  | 17.2          |   |  | 40.0  |  
|Stocks valuation                                                                         |  | (16.8         | ) |  | (22.6 | )
|Accrued expenses                                                                         |  | 7.9           |   |  | 9.8   |  
|Other temporary differences                                                              |  | 3.2           |   |  | (3.0  | )
|                                                                                         |  |               |   |  |       |  
|Recognised net deferred tax assets                                                       |  | 23.1          |   |  | 34.7  |  
|                                                                                         |  |               |   |  |       |  
|Unrecognised deferred tax assets relating to tax net operating losses from US operations |  | 27.2          |   |  | 7.7   |  
|                                                                                         |  |               |   |  |       |  



These unrecognised
net deferred tax assets are available to offset against future operating profits in the United States and are recognised when it is considered to be more likely than not that the US operations will become tax profitable. An amount of
£127.0 million is available to use against taxable income in the United States in future years. The benefits available in respect of tax net operating losses arising from US operations expire between 2018 and 2024 if not used.



F-29



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



16. Loans and other borrowings



|                                                   |  |              |  |                  |  |                 
|-------------------------------------------------- |  | ------------ |  | ---------------- |  | ----------------
|                                                   |  | Interestrate |  | At 31 March 2003 |  | At 31 March 2004
|                                                   |  | %            |  | £                |  | £               
|                                                   |  |              |  | (in millions)   
|Amounts falling due within one year                |  |              |  |                  |  |                 
|Senior credit facilities(a)(b)                     |  | 5.30         |  | 111.8            |  | 80.0            
|Revolving loan under senior credit facilities      |  | 5.70         |  |                 |  | 5.0             
|Net obligations under finance leases               |  |              |  | 1.0              |  | 0.8             
|Subordinated parent company loan                   |  |              |  |                 |  | 41.9            
|                                                   |  |              |  |                  |  |                 
|Total amounts falling due within one year          |  |              |  | 112.8            |  | 127.7           
|                                                   |  |              |  |                  |  |                 
|Amounts falling due after more than one year       |  |              |  |                  |  |                 
|Senior credit facilities(a)(b)                     |  | 5.30         |  | 990.3            |  | 856.6           
|Senior notes:                                      |  |              |  |                  |  |                 
|Senior sterling notes(c)                           |  | 10.75        |  | 242.0            |  | 158.1           
|Senior dollar notes(d)                             |  | 10.75        |  | 122.2            |  | 68.1            
|Senior discount dollar notes(e)                    |  | 13.95        |  | 114.8            |  | 73.1            
|Subordinated parent company loan                   |  |              |  | 816.7            |  | 831.2           
|                                                   |  |              |  |                  |  |                 
|Total amounts falling due after more than one year |  |              |  | 2,286.0          |  | 1,987.1         
|                                                   |  |              |  |                  |  |                 
|Net loans and other borrowings                     |  |              |  | 2,398.8          |  | 2,114.8         
|                                                   |  |              |  |                  |  |                 

---

|(a) |  | Facilities comprise two term loans of £624.0 million and $596.0 million which are due in 2008. The senior credit facilities were drawn upon IPO to refinance in part
loans drawn in June 2001. In addition to the term loans, the senior credit facilities include a revolving credit facility of £200.0 million. At 31 March 2004, £5.0 million was outstanding under the revolving credit facility. The
senior credit facilities including the revolving credit facility have first priority security over substantially all of the Yell Groups assets.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

|(c) |  | This represents a £162.5 million aggregate principal amount of 10.75% senior sterling notes due 2011. Interest is payable on 1 February and 1 August of each
year. The notes are unsecured and rank equally with each other and existing and future senior debt.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | This represents a $130.0 million aggregate principal amount of 10.75% senior dollar notes due 2011. Interest is payable on 1 February and 1 August of each year. The notes
are unsecured and rank equally with each other and existing and future senior debt.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) |  | This represents a $187.4 million aggregate principal amount of 13.50% senior discount dollar notes due 2011 discounted from 1 August 2006. The issue price of each senior
discount dollar note was $521.3 per $1,000.0 principal amount at maturity. Cash interest will not accrue on the senior discount dollar notes until 1 August 2006, at which time interest is payable on 1 February and 1 August of each year, beginning 1
February 2007. The notes are unsecured and rank equally with each other and existing and future senior debt. The 13.96% interest rate represents the rate of return from inception on the notes including the unwinding of the discount.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-30



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



16. Loans and other borrowings (continued)



These balances are shown net of unamortised deferred finance costs, which have been allocated as follows:



|                                              |  |                  |  |                       |   |  |            
|--------------------------------------------- |  | ---------------- |  | --------------------- | - |  | -----------
|                                              |  | At 31 March 2004
|                                              |  | Principalamount  |  | Deferredfinance costs |   |  | Net balance
|                                              |  | £                |  | £                     |   |  | £          
|                                              |  | (in millions)   
|Senior credit facilities                      |  | 947.8            |  | (11.2                 | ) |  | 936.6      
|Senior notes:                                 |  |                  |  |                       |   |  |            
|Senior sterling notes                         |  | 162.5            |  | (4.4                  | ) |  | 158.1      
|Senior dollar notes                           |  | 70.6             |  | (2.5                  | ) |  | 68.1       
|Senior discount dollar notes                  |  | 75.1             |  | (2.0                  | ) |  | 73.1       
|Subordinated parent company loan              |  | 873.1            |  |                      |   |  | 873.1      
|Revolving loan under senior credit facilities |  | 5.0              |  |                      |   |  | 5.0        
|Other                                         |  | 0.8              |  |                      |   |  | 0.8        
|                                              |  |                  |  |                       |   |  |            
|Total loans and borrowings                    |  | 2,134.9          |  | (20.1                 | ) |  | 2,114.8    
|                                              |  |                  |  |                       |   |  |            



Repayments fall due
as follows:



|                                                 |  |                  |   |  |                  |  
|------------------------------------------------ |  | ---------------- | - |  | ---------------- | -
|                                                 |  | At 31 March 2003 |   |  | At 31 March 2004 |  
|                                                 |  | £                |   |  | £                |  
|                                                 |  | (in millions)    |  
|Within one year, or on demand                    |  | 112.8            |   |  | 127.7            |  
|                                                 |  |                  |   |  |                  |  
|Between one and two years                        |  | 110.4            |   |  | 90.0             |  
|Between two and three years                      |  | 134.4            |   |  | 100.0            |  
|Between three and four years                     |  | 116.4            |   |  | 50.0             |  
|Between four and five years                      |  | 122.4            |   |  | 627.8            |  
|After five years                                 |  | 1,841.7          |   |  | 1,139.4          |  
|                                                 |  |                  |   |  |                  |  
|Total due for repayment after more than one year |  | 2,325.3          |   |  | 2,007.2          |  
|                                                 |  |                  |   |  |                  |  
|Total repayments due                             |  | 2,438.1          |   |  | 2,134.9          |  
|                                                 |  |                  |   |  |                  |  
|Deferred finance costs                           |  | (39.3            | ) |  | (20.1            | )
|                                                 |  |                  |   |  |                  |  
|Total loans and other borrowings                 |  | 2,398.8          |   |  | 2,114.8          |  
|                                                 |  |                  |   |  |                  |  



17. Financial instruments and risk
management



Treasury policy



The Yell Group treasury functions primary role is to fund investments
and to manage liquidity and financial risk, including risk from volatility in currency and interest rates and counterparty credit risk. The treasury function is not a profit centre and its objective is to manage risk at optimum cost.



The board of directors sets the treasury functions policy and its
activities are subject to a set of controls commensurate with the magnitude of the investments and borrowings under its management.



Counterparty credit risk is closely monitored and managed within controls set by the board of directors. Derivative financial instruments, including
forward foreign exchange contracts, are used only for hedging purposes.



The principal financing and treasury exposures faced by the Yell Group arise from working capital management, the financing of acquisitions and tangible fixed assets, the management of interest rate positions and the investment of surplus
cash. The treasury function manages those exposures with the objective of remaining within ratios covenanted with the senior lenders. The Yell Group has not purchased or issued any derivative contracts for trading or hedging purposes, except as
referred to below.



F-31



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



17. Financial instruments and risk management (continued)



The Yell Group financed its operations prior to 22 June 2001 primarily by a
mixture of BTs net investment and loans. Subsequent to 22 June 2001 and up until the initial public offering on 15 July 2003, the Yell Group financed its operations primarily by long-term debt. Details of the Yell Groups borrowings are
disclosed in note 16. Subsequent to the initial public offering, the Yell Group funds the business largely from cash flows generated from operations.



All significant cash inflows and outflows associated with the Yell Groups operations in the United Kingdom are denominated in pounds sterling, and
all significant cash inflows and outflows associated with operations in the United States are denominated in US dollars. However, the financial statements are presented in pounds sterling, and changes in the exchange rate between the US dollar and
pounds sterling will affect the translation of the results of our operations in the United States into pounds sterling. The composition of our debt partially hedges exchange rate fluctuations, because 37% of our third party debt and 31% of our net
interest expense are denominated in US dollars. The Group does not intend to hedge any foreign exchange rate risk relating to US dollar-denominated notes, although we will continue to review this practice.



The Yell Group borrows at both fixed and floating rates of interest and, in
order to achieve the objective of managing interest rate risk, partially hedges its risk through the use of interest-rate derivative instruments. Interest is payable under the senior credit facilities at a variable interest rate. Under our previous
senior facilities, we were required to hedge at least 50% of the variable rate indebtedness for a duration of two years. Under our new senior facilities agreement we are required to have fixed interest on at least 50% of all interest payments during
the 21 months following each month end. This requirement ceases once the Group leverage ratio falls below 3.5 times. We have fixed interest on at least 50% of the indebtedness under the senior credit facilities using interest rate swaps over the
period to March 2006, with a review of this strategy on a quarterly basis.



During the year ended 31 March 2004, as set out in note 9, net debt decreased from £2,368.8 million to £2,096.4 million, primarily as a result of financings and their associated costs, foreign currency
movements in the period and repaying borrowings on the initial public offering.



Other financial instruments



The Yell
Group has short-term debtors and creditors which arise in the normal course of business and have been excluded from the disclosures which follow.



There has been no change in the role that financial instruments have in creating or changing the Yell Groups risk between 31 March 2004 and the date
of these financial statements.



F-32



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



17. Financial instruments and risk management (continued)



Currency risk profile



The interest rate profile of the Yell Groups financial assets and
liabilities was:



|                                             |  |               |   |  |           |   |  |           |  
|-------------------------------------------- |  | ------------- | - |  | --------- | - |  | --------- | -
|                                             |  | Sterling      |   |  | US dollar |   |  | Total     |  
|                                             |  | £             |   |  | £         |   |  | £         |  
|                                             |  | (in millions) |  
|                                             |  |               |  
|Floating rate                                |  | 22.6          |   |  | 7.4       |   |  | 30.0      |  
|                                             |  |               |   |  |           |   |  |           |  
|Total financial assets at 31 March 2003      |  | 22.6          |   |  | 7.4       |   |  | 30.0      |  
|                                             |  |               |   |  |           |   |  |           |  
|Fixed rate                                   |  | (1,735.3      | ) |  | (458.4    | ) |  | (2,193.7  | )
|Floating rate                                |  | (81.7         | ) |  | (123.4    | ) |  | (205.1    | )
|                                             |  |               |   |  |           |   |  |           |  
|Total financial liabilities at 31 March 2003 |  | (1,817.0      | ) |  | (581.8    | ) |  | (2,398.8  | )
|                                             |  |               |   |  |           |   |  |           |  
|Net financial liabilities at 31 March 2003   |  | (1,794.4      | ) |  | (574.4    | ) |  | (2,368.8  | )
|                                             |  |               |   |  |           |   |  |           |  
|Floating rate                                |  | 7.5           |   |  | 10.9      |   |  | 18.4      |  
|                                             |  |               |   |  |           |   |  |           |  
|Total financial assets at 31 March 2004      |  | 7.5           |   |  | 10.9      |   |  | 18.4      |  
|                                             |  |               |   |  |           |   |  |           |  
|Fixed rate                                   |  | (1,386.6)     |   |  | (295.7)   |   |  | (1,682.3) |  
|Floating rate                                |  | (278.0)       |   |  | (174.6)   |   |  | (452.6)   |  
|                                             |  |               |   |  |           |   |  |           |  
|Total financial liabilities at 31 March 2004 |  | (1,664.6)     |   |  | (470.3)   |   |  | (2,134.9) |  
|                                             |  |               |   |  |           |   |  |           |  
|Net financial liabilities at 31 March 2004   |  | (1,657.1)     |   |  | (459.4)   |   |  | (2,116.5) |  
|                                             |  |               |   |  |           |   |  |           |  



Details of currency
denomination, interest and maturity profiles of specific borrowings are given in note 16. There are no material monetary assets or liabilities denominated in currencies other than local reporting currencies.



Interest rate profile



Details of year-end interest rates on borrowings are set out in note 16. The
Yell Group has entered into interest rate forward rate agreements and swaps for the purpose of hedging future floating interest rate movements. The Yell Group has fixed interest rates on at least 50% of the interest rate exposure on the indebtedness
under the senior credit facilities using interest rate swaps over the period to March 2006.



For the fixed-rate financial liabilities, the average interest rates and the average periods for which the rates are fixed are:



|                                                        |  |          |  |           |  |                
|------------------------------------------------------- |  | -------- |  | --------- |  | ---------------
|                                                        |  | Sterling |  | US dollar |  | Totalborrowings
|At 31 March 2003                                        |  |          |  |           |  |                
|Weighted average interest rate (%)                      |  | 9.2      |  | 9.8       |  | 9.3            
|Weighted average period for which rate is fixed (years) |  | 9.1      |  | 4.9       |  | 8.2            
|At 31 March 2004                                        |  |          |  |           |  |                
|Weighted average interest rate (%)                      |  | 7.1      |  | 8.5       |  | 7.3            
|Weighted average period for which rate is fixed (years) |  | 3.0      |  | 4.2       |  | 3.4            



The floating-rate
financial liabilities bear interest at rates fixed in advance for periods ranging from one month to six months by reference to LIBOR.



Borrowing facilities and liquidity risk



Since 22 June 2001, the Yell Group has maintained committed banking facilities to mitigate any liquidity risk it may face. There were committed senior
debt facilities at 31 March 2004 of £200.0 million (2003£100.0 million) of which £5.0 million had been drawn down at 31 March 2004 (2003-£nil). These facilities expire on 7 July 2008.



F-33



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



17. Financial instruments and risk management (continued)



Fair values of financial assets and liabilities



The following table reflects the carrying amount and fair value of the Yell
Groups financial instruments at 31 March 2003 and 2004. The fair values of the financial instruments are the amounts at which the instruments could be exchanged in a current transaction between willing parties, other than in forced liquidation
or sale.



|                                   |  |                        |  |                        |   |  |                        |  |                        |  
|---------------------------------- |  | ---------------------- |  | ---------------------- | - |  | ---------------------- |  | ---------------------- | -
|                                   |  | Book value at 31 March |  | Fair value at 31 March |   |  | Book value at 31 March |  | Fair value at 31 March |  
|                                   |  |                        | 
|                                   |  |                        | 
|                                   |  | 2003                   |  | 2003                   |   |  | 2004                   |  | 2004                   |  
|                                   |  | £                      |  | £                      |   |  | £                      |  | £                      |  
|                                   |  | (in millions)          | 
|Non-derivatives:                   |  |                        |  |                        |   |  |                        |  |                        |  
|Assets                             |  |                        |  |                        |   |  |                        |  |                        |  
|Cash at bank and in hand           |  | 30.0                   |  | 30.0                   |   |  | 18.4                   |  | 18.4                   |  
|Liabilities                        |  |                        |  |                        |   |  |                        |  |                        |  
|Short-term borrowings(a)           |  | 112.8                  |  | 112.8                  |   |  | 127.7                  |  | 127.7                  |  
|Long-term borrowings(b)            |  | 2,286.0                |  | 2,302.2                |   |  | 1,987.1                |  | 1,987.1                |  
|Derivatives:                       |  |                        |  |                        |   |  |                        |  |                        |  
|Interest rate swaps                |  |                       |  | (25.0                  | ) |  |                       |  | (3.2                   | )
|Forward foreign exchange contracts |  |                       |  | 0.1                    |   |  |                       |  |                       |  

---

|(a) |  | The fair value of short-term borrowings approximated to carrying value due to the short maturity of the instruments.
|--- |  | --------------------------------------------------------------------------------------------------------------------



|(b) |  | The fair value of the Yell Groups notes and other long-term borrowings has been estimated on the basis of quoted market prices for the same or similar issues with
the same maturities where they existed, and on calculations of the present value of future cash flows using the appropriate discount rates in effect at the balance sheet dates, where market prices of similar issues did not exist.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Gains and losses on instruments used for hedging
are not recognised until the exposure that is being hedged is itself recognised. Unrecognised gains and losses on the interest rate derivative instruments are as follows:



|                                                                    |  |                  |  |        |   |  |            |  
|------------------------------------------------------------------- |  | ---------------- |  | ------ | - |  | ---------- | -
|                                                                    |  | At 31 March 2004 | 
|                                                                    |  | Gains            |  | Losses |   |  | Net losses |  
|                                                                    |  | £                |  | £      |   |  | £          |  
|                                                                    |  | (in millions)    | 
|Unrecognised gains and losses on hedges at 31 March 2004, of which: |  | 1.1              |  | (4.2   | ) |  | (3.2       | )
|Expected to be recognised in the year to 31 March 2005              |  | 0.2              |  | (3.2   | ) |  | (3.0       | )
|Expected to be recognised after 31 March 2005                       |  | 0.8              |  | (1.0   | ) |  | (0.2       | )



The Yell Group had no
derivatives in any period prior to 22 June 2001.



18. Other creditors



Amounts falling due within one year

|                                                  |  |               |  |            
|------------------------------------------------- |  | ------------- |  | -----------
|                                                  |  | At 31 March   |  | At 31 March
|                                                  |  | 2003          |  | 2004       
|                                                  | 
|                                                  |  | £             |  | £          
|                                                  |  | (in millions)
|Trade creditors                                   |  | 34.9          |  | 26.0       
|Corporation tax                                   |  | 6.2           |  | 16.2       
|Other taxation and social security                |  | 24.7          |  | 22.9       
|Other creditors                                   |  | 5.7           |  | 4.4        
|Accrued expenses                                  |  | 90.4          |  | 89.7       
|Deferred income                                   |  | 74.0          |  | 71.8       
|                                                  |  |               |  |            
|Total other creditors falling due within one year |  | 235.9         |  | 231.0      
|                                                  |  |               |  |            



F-34



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



19. Called up share capital



|                                                        |  |                  |  |                 
|------------------------------------------------------- |  | ---------------- |  | ----------------
|                                                        |  | At 31 March 2003 |  | At 31 March 2004
|                                                        | 
|                                                        |  | £                |  | £               
|                                                        |  | (in millions)   
|Authorised                                              |  |                  |  |                 
|900 shares of 100 euro each                             |  | 0.1              |  | 0.1             
|                                                        |  |                  |  |                 
|Allotted, called up and fully paid                      |  |                  |  |                 
|350 shares issued to Yell Group plc (2003 - 300 shares) |  | 0.1              |  | 0.1             
|                                                        |  |                  |  |                 



20. Changes in equity
shareholders funds (deficit)



BTs net investment in the
Yell Group (pre-22 June 2001)



|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  
|--------------------------------------------------------- |  | ------------------ |  | ---------------------- |  | ------------ |  | ---------------------- |  | ------ | -
|                                                          |  | BTs netinvestment |  | Called upshare capital |  | Sharepremium |  | Profit andloss account |  | Total  |  
|                                                          |  | £                  |  | £                      |  | £            |  | £                      |  | £      |  
|                                                          |  | (in millions)      | 
|Balance at 31 March 2001 (Predecessor)                    |  | 394.3              |  |                       |  |             |  |                       |  | 394.3  |  
|Profit from 1 April to 22 June 2001                       |  | 15.8               |  |                       |  |             |  |                       |  | 15.8   |  
|Currency movements(a)                                     |  | 0.8                |  |                       |  |             |  |                       |  | 0.8    |  
|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  
|Balance at 22 June 2001 (Predecessor)                     |  | 410.9              |  |                       |  |             |  |                       |  | 410.9  |  
|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  
|Cash retained by BT on acquisition                        |  |                    |  |                        |  |              |  |                        |  | (40.8  | )
|Taxation to be settled by BT after acquisition            |  |                    |  |                        |  |              |  |                        |  | 17.1   |  
|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  
|Identifiable net assets sold by BT                        |  |                    |  |                        |  |              |  |                        |  | 387.2  |  
|Elimination of BT invested capital on acquisition from BT |  |                    |  |                        |  |              |  |                        |  | (387.2 | )
|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  
|Balance at 22 June 2001 (Successor)                       |  |                    |  |                        |  |              |  |                        |  |       |  
|                                                          |  |                    |  |                        |  |              |  |                        |  |        |  

---

|(a) |  | The cumulative foreign currency translation adjustment was £25.1 million at 22 June 2001 (year ended 31 March 2001£24.3 million, year ended 31 March
2000£1.6 million).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-35



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



20. Changes in equity shareholders funds (deficit) (continued)



Reconciliation of movement in the consolidated equity shareholders deficit
(post-22 June 2001)



|                                                       |  |               |  |              |  |                        |   |  |        |  
|------------------------------------------------------ |  | ------------- |  | ------------ |  | ---------------------- | - |  | ------ | -
|                                                       |  | Sharecapital  |  | Sharepremium |  | Profit andloss account |   |  | Total  |  
|                                                       |  | £             |  | £            |  | £                      |   |  | £      |  
|                                                       |  | (in millions) | 
|Issuance of share capital (ordinary shares)(a)         |  | 0.1           |  | 0.9          |  |                       |   |  | 1.0    |  
|Loss for the period from 22 June 2001 to 31 March 2002 |  |              |  |             |  | (47.2                  | ) |  | (47.2  | )
|Currency movements                                     |  |              |  |             |  | (3.7                   | ) |  | (3.7   | )
|                                                       |  |               |  |              |  |                        |   |  |        |  
|Balance at 31 March 2002 (Successor)                   |  | 0.1           |  | 0.9          |  | (50.9                  | ) |  | (49.9  | )
|Issuance of share capital (ordinary shares)(b)         |  |              |  | 0.1          |  |                       |   |  | 0.1    |  
|Loss for the year                                      |  |              |  |             |  | (40.6                  | ) |  | (40.6  | )
|Currency movements(c)                                  |  |              |  |             |  | (34.0                  | ) |  | (34.0  | )
|                                                       |  |               |  |              |  |                        |   |  |        |  
|Balance at 31 March 2003 (Successor)                   |  | 0.1           |  | 1.0          |  | (125.5                 | ) |  | (124.4 | )
|Issuance of share capital (ordinary shares)(d)         |  |              |  | 304.4        |  |                       |   |  | 304.4  |  
|Loss for the year                                      |  |              |  |             |  | (51.1                  | ) |  | (51.1  | )
|Currency movements(c)                                  |  |              |  |             |  | (65.0                  | ) |  | (65.0  | )
|                                                       |  |               |  |              |  |                        |   |  |        |  
|Balance at 31 March 2004 (Successor)                   |  | 0.1           |  | 305.4        |  | (241.6)                |   |  | 63.9   |  
|                                                       |  |               |  |              |  |                        |   |  |        |  

---

|(a) |  | 180 shares of 100 euro each were issued on incorporation at par value, and a further 20 shares were issued on 28 November 2001 for £971,000.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------

|(b) |  | 100 shares of 100 euro each were issued on 16 April 2002 for £111,600.
|--- |  | ----------------------------------------------------------------------

|(c) |  | The cumulative foreign currency translation adjustment was a £102.7 million loss at 31 March 2004 (31 March 2003£37.7 million loss, 31 March 2002£3.7
million loss).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) |  | 50 shares of 100 euro each were issued on 15 July 2003 for £304,401,000.
|--- |  | ------------------------------------------------------------------------



21. Financial commitments and contingent liabilities



|                                                                                                               |  |                  |  |                 
|-------------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ----------------
|                                                                                                               |  | At 31 March 2003 |  | At 31 March 2004
|                                                                                                               | 
|                                                                                                               |  | £                |  | £               
|                                                                                                               |  | (in millions)   
|Operating lease payments payable within one year of the balance sheet date were in respect of leases expiring: |  |                  |  |                 
|Within one year                                                                                                |  | 8.7              |  | 2.0             
|Between one and five years                                                                                     |  | 5.2              |  | 11.1            
|After five years                                                                                               |  | 7.3              |  | 5.8             
|                                                                                                               |  |                  |  |                 
|Total payable within one year                                                                                  |  | 21.2             |  | 18.9            
|                                                                                                               |  |                  |  |                 



F-36



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



21. Financial commitments and contingent liabilities (continued)



Future minimum operating lease payments for the Yell Group at 31 March 2004
are as follows:



|                                              |  |                
|--------------------------------------------- |  | ---------------
|                                              |  | £ (in millions)
|Payable in the year ending 31 March:          |  |                
|2005                                          |  | 18.9           
|2006                                          |  | 15.8           
|2007                                          |  | 11.9           
|2008                                          |  | 8.9            
|2009                                          |  | 8.2            
|Thereafter                                    |  | 27.2           
|                                              |  |                
|Total future minimum operating lease payments |  | 90.9           
|                                              |  |                



Operating lease
commitments are principally in respect of leases of land and buildings.



On 22 January 2004 Verizon filed suit in New York alleging that sales and marketing communications published by Yellow Book USA are misleading and have caused Verizon to lose revenue. We believe that the complaint is without merit and we
will vigorously resist any claim for relief. We believe that a material adverse outcome to the company is considerably less than likely.



There are no contingent liabilities or guarantees other than those referred above and on page 56 of the Operating and Financial Review and those arising
in the ordinary course of the Yell Groups business.



No
material losses are anticipated on liabilities arising in the ordinary course of business.



The Group does not believe that there are any pending legal proceedings which would have a material adverse effect on the financial position or results of operations of the Group.



22. Directors remuneration



The emoluments of the directors and the benefits including those received
under the long-term incentive plans were:



|                                                                       |  |                  |  |       |  |      
|---------------------------------------------------------------------- |  | ---------------- |  | ----- |  | -----
|                                                                       |  | Year to 31 March
|                                                                       |  | 2002             |  | 2003  |  | 2004 
|                                                                       |  | £                |  | £     |  | £    
|                                                                       |  | (in thousands)  
|Salary                                                                 |  | 706              |  | 795   |  | 890  
|Other benefits                                                         |  | 77               |  | 48    |  | 69   
|Performance-related bonus                                              |  | 723              |  | 795   |  | 890  
|Non-executive directors fees and share benefits                       |  | 6                |  | 197   |  | 933  
|Additional payments by BT following the acquisition on 22 June 2001(a) |  | 3,800            |  |      |  |     
|                                                                       |  |                  |  |       |  |      
|Aggregate emoluments                                                   |  | 5,312            |  | 1,835 |  | 2,782
|Aggregate gains made on the exercise of share options                  |  | 20               |  |      |  | 2,714
|Aggregate amounts receivable under long-term incentive plans           |  | 132              |  | 46    |  |     
|                                                                       |  |                  |  |       |  |      
|                                                                       |  | 5,464            |  | 1,881 |  | 5,496
|                                                                       |  |                  |  |       |  |      

---

|(a) |  | This amount included primarily an agreed settlement with BT to terminate the UK management incentive plan.
|--- |  | ----------------------------------------------------------------------------------------------------------



Two directors (2003: two, 2002: two) had retirement benefits accruing under a
defined benefit pension scheme.



F-37



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



22. Directors remuneration (continued)



Directors detailed remuneration



|                                                                       |  |                  |  |                  |  |       |  |       |  |      |  |      
|---------------------------------------------------------------------- |  | ---------------- |  | ---------------- |  | ----- |  | ----- |  | ---- |  | -----
|                                                                       |  | John Condron     |  | John Davis      
|                                                                       |  | Year to 31 March |  | Year to 31 March
|                                                                       |  | 2002             |  | 2003             |  | 2004  |  | 2002  |  | 2003 |  | 2004 
|                                                                       |  | £                |  | £                |  | £     |  | £     |  | £    |  | £    
|                                                                       |  | (in thousands)   |  | (in thousands)  
|Salary                                                                 |  | 416              |  | 485              |  | 550   |  | 290   |  | 310  |  | 340  
|Other benefits                                                         |  | 29               |  | 27               |  | 47    |  | 48    |  | 21   |  | 22   
|Performance-related bonus                                              |  | 426              |  | 485              |  | 550   |  | 297   |  | 310  |  | 340  
|Additional payments by BT following the acquisition on 22 June 2001(a) |  | 3,300            |  |                 |  |      |  | 500   |  |     |  |     
|                                                                       |  |                  |  |                  |  |       |  |       |  |      |  |      
|Aggregate emoluments                                                   |  | 4,171            |  | 997              |  | 1,147 |  | 1,135 |  | 641  |  | 702  
|Gains made on exercise of share options                                |  | 20               |  |                 |  | 1,422 |  |      |  |     |  | 1,292
|Amounts receivable under long-term incentive plans                     |  | 132              |  | 46               |  |      |  |      |  |     |  |     
|                                                                       |  |                  |  |                  |  |       |  |       |  |      |  |      
|                                                                       |  | 4,323            |  | 1,043            |  | 2,569 |  | 1,135 |  | 641  |  | 1,994
|                                                                       |  |                  |  |                  |  |       |  |       |  |      |  |      

---

|(a) |  | This amount included primarily an agreed settlement with BT to terminate the UK management incentive plan.
|--- |  | ----------------------------------------------------------------------------------------------------------



Non-executive directors fees



The non-executive directors, except Lord Powell of Bayswater, who held
office between 22 June 2001 and 31 March 2002 were appointed to the board of the Yell Group as representatives of Apax Partners Managing Entities and Hicks Muse. Monitoring fees charged to the Yell Group by these companies are detailed in note 24.



During the year ended 31 March 2003, additional non-executive
directors were appointed.



No fees were paid directly to
non-executive directors who were representatives of Apax Partners Managing Entities or Hicks Muse prior to the flotation of our parent company. Fees were paid to the following non-executive directors.



|                         |  |                  |  |      |  |     
|------------------------ |  | ---------------- |  | ---- |  | ----
|                         |  | Year to 31 March
|                         |  | 2002             |  | 2003 |  | 2004
|                         |  | £                |  | £    |  | £   
|                         |  | (in thousands)  
|Robert Scott             |  |                 |  | 38   |  | 129 
|Charles Carey            |  |                 |  | 38   |  | 57  
|John Coghlan             |  |                 |  | 39   |  | 64  
|Joachim Eberhardt        |  |                 |  | 38   |  | 63  
|Lydon Lea                |  |                 |  |     |  | 45  
|Lord Powell of Bayswater |  | 6                |  | 44   |  | 50  



F-38



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



22. Directors remuneration (continued)



Retirement benefits



|                                                                                               |  |                |  |                |  |       |  |      |  |      |  |     
|---------------------------------------------------------------------------------------------- |  | -------------- |  | -------------- |  | ----- |  | ---- |  | ---- |  | ----
|                                                                                               |  | John Condron   |  | John Davis    
|                                                                                               |  | At 31 March    |  | At 31 March   
|                                                                                               |  | 2002           |  | 2003           |  | 2004  |  | 2002 |  | 2003 |  | 2004
|                                                                                               |  | £              |  | £              |  | £     |  | £    |  | £    |  | £   
|                                                                                               |  | (in thousands) |  | (in thousands)
|Cumulative accrued annual pension                                                              |  | 146            |  | 195            |  | 229   |  | 9    |  | 17   |  | 27  
|Cumulative accrued lump sum                                                                    |  | 439            |  | 584            |  | 686   |  |     |  |     |  |    
|Transfer value of increase in accrued benefit in excess of inflation less member contributions |  | 817            |  | 659            |  | 426   |  | 25   |  | 35   |  | 54  
|Transfer value of accrued benefits at year end                                                 |  | 2,018          |  | 2,923          |  | 3,647 |  | 59   |  | 119  |  | 207 
|Change in transfer value over year less member contributions                                   |  |                |  | 876            |  | 691   |  |      |  | 45   |  | 73  



Beneficial and
non-beneficial interests



The interests of directors
and their families in Yell Group ordinary shares are shown below:



|             |  |                    |  |          
|------------ |  | ------------------ |  | ---------
|             |  | At 31 March       
|             |  | 2003 (restated)(a) |  | 2004     
|             |  | Number             |  | Number   
|John Condron |  | 8,219,048          |  | 6,549,853
|John Davis   |  | 3,424,603          |  | 2,901,379



| | 
| | 

| | (a) |  | Number of shares restated for share split.
| | --- |  | ------------------------------------------



F-39



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



23. Pensions



SSAP 24Accounting for Pension Costs



Pension costs in respect of the Yell Pension Plan (YPP), the BT Pension Scheme (BTPS) and the defined contribution schemes were:



|                                                   |  |                       |  |  |  |                          |     |  |                    |     |  |                   
|-------------------------------------------------- |  | --------------------- |  |  |  | ------------------------ | --- |  | ------------------ | --- |  | ------------------
|                                                   |  | Combined(Predecessor) |  |  |  | Consolidated (Successor)
|                                                   |  | 1 April to 22June     |  |  |  | 22 June2001 to 31 March  |     |  | Year ended31 March |     |  | Year ended31 March
|                                                   |  | 2001                  |  |  |  | 2002                     |     |  | 2003               |     |  | 2004              
|                                                   |  | £                     |  |  |  | £                        |     |  | £                  |     |  | £                 
|                                                   |  |                       |  |  |  | (in millions)            |     |  |                   
|Amounts expensed for YPP (defined benefit section) |  | 1.0                   |  |  |  | 4.7                      | (a) |  | 8.0                | (a) |  | 8.3               
|Amounts charged from BTPS                          |  | 0.5                   |  |  |  | 0.9                      | (b) |  |                   |     |  |                  
|Amounts expensed for defined contribution schemes  |  | 0.4                   |  |  |  | 0.8                      |     |  | 1.9                |     |  | 2.4               
|                                                   |  |                       |  |  |  |                          |     |  |                    |     |  |                   
|Total                                              |  | 1.9                   |  |  |  | 6.4                      |     |  | 9.9                |     |  | 10.7              
|                                                   |  |                       |  |  |  |                          |     |  |                    |     |  |                   

---

|(a) |  | From 1 November 2001 includes cost in respect of the members transferred from the BTPS.
|--- |  | ---------------------------------------------------------------------------------------



|(b) |  | For the period 1 April 2001 to 1 November 2001.
|--- |  | -----------------------------------------------



Yell Pension Plan (YPP)Defined benefit Section



With effect from 1 October 2001, a defined contribution section was established in the YPP and the defined benefit sections were closed to new entrants.



The pension costs for the year ended 31 March 2002 in respect
of the defined benefit sections of the YPP were based on the valuation at 6 April 1999. The pension cost for the year ended 31 March 2003 was based on the valuation at 5 April 2002. The valuations, carried out by professionally qualified independent
actuaries, used the projected unit method in conjunction with a discounted value of assets at 6 April 1999 and market value of assets in the 5 April 2002 valuation. The principal assumptions used and the results of the valuations are set out below:



|                                               |  |                   |  |              
|---------------------------------------------- |  | ----------------- |  | -------------
|                                               |  | 6 April1999       |  | 5 April2002  
|                                               |  | Rates per annum %
|Valuation method                               |  | Projectedunit     |  | Projectedunit
|Return on existing and future assets           |  | 8.0               |  | 6.0 to 6.5   
|Average increase in retail price index         |  | 4.0               |  | 2.7          
|Average future increases in wages and salaries |  | 6.0               |  | 4.2          
|Average increase in pensions                   |  | 3.8               |  | 2.7          
|Dividend growth                                |  | 4.8               |  |              



At 5 April 2002 (the
last valuation date) the market value of assets was £102.7 million. The results of the valuation show that the assets of the scheme were sufficient to cover 102% of the benefits that had accrued to members by that date after allowing for
expected future increases in salaries. The date for the next valuation is expected to be no later than 5 April 2005.



For the year ended 31 March 2004, the Yell Group made regular contributions totalling £8.5 million to the defined benefit section (year ended 31
March 2003£7.9 million; 1 April to 22 June 2001£1.0 million; 22 June 2001 to 31 March 2002£4.7 million). In addition, a contribution of £0.9 million (2003£0.1 million) in respect of benefit
improvements was made of which £0.8 million was accrued in the 2003 financial year. There are no provisions or prepayments held on the balance sheet in respect of this plan at 31 March 2004 or 2003. The group has a prepayment of
£0.3 million at 31 March 2004 (2003£nil).



F-40



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Pensions (continued)



The YPP assets are invested in UK and overseas equities, fixed interest and index linked securities,
deposits and short-term investments. The assets are held in separate trustee administered funds.



Defined contribution schemes



In addition to the defined contribution section Four of the YPP, the Group sponsors a 401(k) plan for the majority of Yellow Book employees in the United States. The plan allows employees to contribute a portion of their pre-tax and/or
after-tax income in accordance with specified guidelines. Yellow Book matches a percentage of the employee contributions up to certain limits. The assets of the plan are held separately from those of Yellow Book in an independently administered
fund.



The pension cost in respect of these schemes represents
contributions payable to the funds and amounted to £2.4 million in the year ended 31 March 2004 (year ended 31 March 2003£1.9 million; periods from 22 June 2001 to 31 March 2002 and 1 April to 22 June 2001£0.8 million
and £0.4 million respectively). Outstanding contributions amounted to £nil million as at 31 March 2003 (2003£0.3 million). These are included in other creditors (note 18).



FRS 17Retirement benefits



A valuation of the YPP for the purposes of FRS 17 was carried out at 31
March 2002 and updated to 31 March 2003 and 2004 by a qualified independent actuary. The following key assumptions were used:



|                  |  |                  |  |                  |  |                 
|----------------- |  | ---------------- |  | ---------------- |  | ----------------
|                  |  | At 31 March 2002 |  | At 31 March 2003 |  | At 31 March 2004
|                  |  | %                |  | %                |  | %               
|                  |  | per annum        |  | per annum        |  | per annum       
|Discount rate     |  | 6.0              |  | 5.4              |  | 5.4             
|Salary increases  |  | 4.2              |  | 4.0              |  | 4.4             
|Pension increases |  | 2.7              |  | 2.5              |  | 2.9             
|Inflation rate    |  | 2.7              |  | 2.5              |  | 2.9             



The assets in the YPP
and the annual expected rates of return were:



|                                   |  |                  |  |                  |  |                  |  |               |  |     |  |              
|---------------------------------- |  | ---------------- |  | ---------------- |  | ---------------- |  | ------------- |  | --- |  | -------------
|                                   |  | At 31 March 2002 |  | At 31 March 2003 |  | At 31 March 2004
|                                   |  | %                |  | £                |  | %                |  | £             |  | %   |  | £            
|                                   |  |                  |  | (in millions)    |  |                  |  | (in millions) |  |     |  | (in millions)
|Equities                           |  | 7.6              |  | 38.6             |  | 7.8              |  | 49.9          |  | 7.7 |  | 66.4         
|Corporate Bonds                    |  | 5.5              |  | 6.4              |  | 5.4              |  | 15.8          |  | 5.4 |  | 3.7          
|Gilts                              |  | n/a              |  |                 |  | 4.8              |  | 28.4          |  | 4.7 |  | 52.3         
|Property                           |  | 7.1              |  | 1.6              |  | n/a              |  |              |  | n/a |  |             
|Other                              |  | 3.5              |  | 3.5              |  | n/a              |  |              |  | n/a |  |             
|Bulk transfer receivable from BTPS |  | 7.6              |  | 52.9             |  | n/a              |  |              |  | n/a |  |             
|                                   |  |                  |  |                  |  |                  |  |               |  |     |  |              
|Total                              |  |                  |  | 103.0            |  |                  |  | 94.1          |  |     |  | 122.4        
|                                   |  |                  |  |                  |  |                  |  |               |  |     |  |              



The following amounts
as at 31 March 2002, 2003 and 2004 were measured in accordance with the requirements of FRS 17 and show the net balance sheet liability at the year end if FRS 17 had been adopted:



|                                                     |  |               |   |  |        |   |  |        
|---------------------------------------------------- |  | ------------- | - |  | ------ | - |  | -------
|                                                     |  | At 31 March  
|                                                     |  | 2002          |   |  | 2003   |   |  | 2004   
|                                                     |  | £             |   |  | £      |   |  | £      
|                                                     |  | (in millions)
|Total market value of assets                         |  | 103.0         |   |  | 94.1   |   |  | 122.4  
|Present value of scheme liabilities                  |  | (104.6        | ) |  | (141.2 | ) |  | (188.8)
|                                                     |  |               |   |  |        |   |  |        
|Deficit in the scheme                                |  | (1.6          | ) |  | (47.1  | ) |  | (66.4) 
|                                                     |  |               |   |  |        |   |  |        
|Related deferred tax asset, based on 30% rate of tax |  | 0.5           |   |  | 14.1   |   |  | 19.9   
|                                                     |  |               |   |  |        |   |  |        
|Net balance sheet liability                          |  | (1.1          | ) |  | (33.0  | ) |  | (46.5) 
|                                                     |  |               |   |  |        |   |  |        



F-41



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Pensions (continued)



The following amounts explain the change in the deficit in the scheme for the years ended 31 March
2003 and 2004 if FRS 17 had been adopted:



|                                       |  |                    |   |  |       |  
|-------------------------------------- |  | ------------------ | - |  | ----- | -
|                                       |  | Year ended31 March |  
|                                       |  | 2003               |   |  | 2004  |  
|                                       |  | £                  |   |  | £     |  
|                                       |  | (in millions)      |  
|Deficit in scheme at beginning of year |  | (1.6               | ) |  | (47.1 | )
|Movement in year:                      |  |                    |   |  |       |  
|Current service cost                   |  | (8.8               | ) |  | (10.4 | )
|Contributions                          |  | 8.0                |   |  | 9.4   |  
|Past service costs                     |  | (0.3               | ) |  | (0.8  | )
|Other finance income (costs)           |  | 1.3                |   |  | (1.5  | )
|Actuarial loss                         |  | (45.7              | ) |  | (16.0 | )
|                                       |  |                    |   |  |       |  
|Deficit in scheme at 31 March          |  | 47.1               |   |  | (66.4 | )
|                                       |  |                    |   |  |       |  



The full actuarial
valuation at 5 April 2002 updated to 31 March 2003 showed a deficit of £47.1 million. Improvements in benefits costing £0.8 million were made in the year ended 31 March 2004 and contributions of £8.5 million (13.05% of pensionable
earnings), plus an additional contribution of £0.1 million in respect of the benefit improvement, were made. A further additional contribution of £0.1 million in respect of the benefit improvement was made on 1 April 2003. In the year
ended 31 March 2003, the Yell Group made contributions at an average rate of 13.05% of pensionable earnings inclusive of expenses and life assurance premiums. Yell Groups trustees have agreed that contributions for the next two years will be
at the same rate with an evaluation of future contribution rates after the next evaluation.



As the scheme is closed to new members, under the projected unit method, the current service cost will increase as the members of the scheme approach retirement.



The history of experience gains and losses follows:



|                                                                                                                 |  |                    |   |  |       |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------ | - |  | ----- | -
|                                                                                                                 |  | Year ended31 March |  
|                                                                                                                 |  | 2003               |   |  | 2004  |  
|Difference between the expected and actual return on scheme assets                                               |  |                    |   |  |       |  
|  (loss) gain (£ in millions)                                                                                   |  | (27.4              | ) |  | 11.4  |  
|  (loss) gain (% of scheme assets)                                                                              |  | (29%               | ) |  | 9%    |  
|                                                                                                                 |  |                   
|Experience gains and losses on scheme liabilities                                                                |  |                    |   |  |       |  
|  loss (£ in millions)                                                                                          |  | (4.7               | ) |  | (8.4  | )
|  loss (% of present value of scheme liabilities)                                                               |  | (3%                | ) |  | (4%   | )
|                                                                                                                 |  |                   
|Total amount to be recognised in the statement of total recognised gains and losses upon full adoption of FRS 17 |  |                    |   |  |       |  
|  loss (£ in millions)                                                                                          |  | (45.7              | ) |  | (15.9 | )
|  loss (% of present value of scheme liabilities)                                                               |  | (32%               | ) |  | (8%   | )



F-42



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

23. Pensions (continued)



If the above amounts had been recognised in the financial statements, the Yell Groups net
liabilities and profit and loss account deficit at 31 March 2003 and 2004 would have been as follows:



|                                                            |  |               |   |  |        |  
|----------------------------------------------------------- |  | ------------- | - |  | ------ | -
|                                                            |  | At 31 March   |  
|                                                            |  | 2003          |   |  | 2004   |  
|                                                            |  | £             |   |  | £      |  
|                                                            |  | (in millions) |  
|Net (liabilities) assets excluding pension liability(a)     |  | (123.6        | ) |  | 63.6   |  
|Pension liability                                           |  | (33.0         | ) |  | (46.5  | )
|                                                            |  |               |   |  |        |  
|Net (liabilities) assets including FRS 17 pension liability |  | (156.6        | ) |  | 17.1   |  
|                                                            |  |               |   |  |        |  
|                                                            |  |              
|Deficit excluding pension liability                         |  | (125.5        | ) |  | (241.6 | )
|Pension reserve                                             |  | (33.0         | ) |  | (46.5  | )
|                                                            |  |               |   |  |        |  
|Deficit including FRS 17 pension liability                  |  | (158.5        | ) |  | (288.1 | )
|                                                            |  |               |   |  |        |  

---

|(a) |  | Excluding SSAP 24 balance sheet items.
|--- |  | --------------------------------------



If the above amounts had been recognised in the financial statements, the Yell Groups profit and loss account and statement of total recognised
gains and losses for the years ended 31 March 2003 and 31 March 2004 would have included the following:



|                                                                             |  |                     |   |  |       |  
|---------------------------------------------------------------------------- |  | ------------------- | - |  | ----- | -
|Amounts charged to operating profit                                          |  |                     |   |  |       |  
|                                                                             |  | Year ended 31 March |  
|                                                                             |  | 2003                |   |  | 2004  |  
|                                                                             |  | £                   |   |  | £     |  
|                                                                             |  | (in millions)       |  
|Current service cost                                                         |  | 8.8                 |   |  | 10.4  |  
|Past service cost                                                            |  | 0.3                 |   |  | 0.8   |  
|                                                                             |  |                     |   |  |       |  
|Total operating charge                                                       |  | 9.1                 |   |  | 11.2  |  
|                                                                             |  |                     |   |  |       |  
|                                                                             |  |                    
|Net amount credited to net interest payable                                  |  |                     |   |  |       |  
|                                                                             |  | Year ended 31 March |  
|                                                                             |  | 2003                |   |  | 2004  |  
|                                                                             |  | £                   |   |  | £     |  
|                                                                             |  | (in millions)       |  
|Expected return on pension scheme assets                                     |  | 7.9                 |   |  | 6.5   |  
|Interest on pension scheme liabilities                                       |  | (6.6                | ) |  | (8.0  | )
|                                                                             |  |                     |   |  |       |  
|Net return on pension scheme                                                 |  | 1.3                 |   |  | (1.5  | )
|                                                                             |  |                     |   |  |       |  
|                                                                             |  |                    
|Amount recognised in statement of total recognised gains and losses          |  |                     |   |  |       |  
|                                                                             |  | Year ended 31 March |  
|                                                                             |  | 2003                |   |  | 2004  |  
|                                                                             |  | £                   |   |  | £     |  
|                                                                             |  | (in millions)       |  
|Actual return less expected return on pension scheme assets                  |  | (27.4               | ) |  | 11.4  |  
|Experience losses arising on the scheme liabilities                          |  | (4.7                | ) |  | (8.4  | )
|Changes in assumption underlying the present value of the scheme liabilities |  | (13.6               | ) |  | (19.0 | )
|                                                                             |  |                     |   |  |       |  
|Actuarial loss                                                               |  | (45.7               | ) |  | (16.0 | )
|                                                                             |  |                     |   |  |       |  



F-43



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



24. Related party transactions



Transactions with BT



Transactions with the Yell Groups former parent, BT, which are not referred to in notes 1, 6, and 22 included the following:



|                               |  |                    |  
|------------------------------ |  | ------------------ | -
|                               |  | Year ended31 March |  
|                               |  | 2002               |  
|                               |  | £                  |  
|                               |  | (in millions)      |  
|Telecommunication services(a)  |  | 9.8                |  
|Building rental(a)             |  | 0.2                |  
|Motor vehicles costs(b)        |  | 1.8                |  
|Data capture(a)                |  | 0.3                |  
|Commission on BT Phonebooks(a) |  | (3.4               | )
|Other                          |  | 4.3                |  
|                               |  |                    |  
|Total transactions with BT     |  | 13.0               |  
|                               |  |                    |  

---

|(a) |  | Transactions are at amounts that would have been incurred had they been purchased from an independent third party.
|--- |  | ------------------------------------------------------------------------------------------------------------------



|(b) |  | Transactions are charged on an allocated cost basis.
|--- |  | ----------------------------------------------------



In addition, prior to 22 June 2001, the Yell Group performed billing services for the BT group on an agency basis. In this capacity, the Yell Group
collected and forwarded £9.5 million in the year ended 31 March 2002.



There have been no related party transactions with BT in the years ended 31 March 2003 and 31 March 2004.



Transactions with funds managed or advised by Apax Partners & Co. and Hicks, Muse, Tate and Furst Incorporated (Hicks Muse)



Funds managed or advised by Apax Partners and Hicks Muse have held deep
discount bonds issued by our parent company of £610 million subscribed amount. Details of these bonds are given in note 16. All of the deep discount bonds were redeemed in the year ended 31 March 2004.



Under the arrangement put in place following the acquisition from BT, Apax
Partners Managing Entities and affiliates of Hicks Muse charged monitoring fees of £25.8 million for the year ended 31 March 2004 (2003£3.2 million, 2002£1.9 million), of which £nil million (2003£0.9
million, 2002£1.1 million) remained outstanding at the year end.



Transaction costs charged to the Yell Group on 22 June 2001, on the McLeod acquisition and on the NDC acquisition from Apax Partners Managing Entities and affiliates of Hicks Muse were £15.0 million, and
£3.1 million and £0.3 million each, respectively.



No transaction or monitoring fees were payable after 15 July 2003, the date of our parent companys initial public offering. Apax Partners Managing Entities and affiliates of Hicks Muse ceased being related parties on 6 January 2004,
when they sold their equity interests in our parent company.



F-44



---

##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



25. Employee Share Schemes



Our parent company, Yell Group plc, has various stock option plans for employees and directors. The maximum number of
options available for grant under these plans is discussed in Section E, Share Ownership.



Description of schemes



|(a) |  | The Yell Group Limited Plans
|--- |  | ----------------------------



In March 2002, our parent company introduced three stock option plans, the Yell Group Limited Employee Plan, the Yell Group Limited US Employee Plan and
the Yell Group Limited Senior Manager Incentive Plan. The plans were set up to provide employees with option awards for shares that would become exercisable on an exit event (e.g. sale or quotation). The option life under these plans is ten years
from date of grant. Under these plans 9,750,735 options were granted in March 2002 at an exercise price of 0.365 pence each. No options were exercised in the year ended 31 March 2003 and 210,615 options lapsed. In the year ended 31 March 2004
2,977,557 options were granted at an exercise price of 0.365 pence each, 5,685,594 options were exercised and 1,409,316 options lapsed. In addition, social security tax liabilities arose in respect of options exercised under these options by
employees in the United Kingdom and United States of £1.8m and £0.2m respectively, being 12.8% and 7.65% respectively of the difference between the share price on the date of exercise and the exercise price.





|(b) |  | The Yell Group plc Yellow Book (USA) West Management Share Option Scheme
|--- |  | ------------------------------------------------------------------------



In September 2002, our parent company introduced a stock option plan, the Yell Group plc Yellow Book (USA) West Management
Share Option Scheme for certain employees of the former McLeod directories. This plan provided employees with option awards for shares that vest ratably on each anniversary of the grant date over a three-year period. The options could be exercised
and sold on the later of the vesting date or the date of an exit event. The option life under the plan is ten years from the date of grant. Under this plan 1,506,805 options were granted at an exercise price of £1.28. As a result there were
1,506,805 options outstanding at 31 March 2003. As a result of the initial public offering, 110,859 of these options were exercised. 40,725 options lapsed in the year ended 31 March 2004. A charge in respect of these schemes arose on the occurrence
of the initial public offering.





|(c) |  | The Yell Group plc Sharesave Plan
|--- |  | ---------------------------------



The Yell Group plc Sharesave Plan (the Sharesave) was established in July 2003. Eligible employees who wish to participate must enter into a
savings contract for a period of three or five years under which they will contribute payments of between £5 and £250 per month, and a bonus is added at the end of three, five or seven years. In conjunction with the savings contract, an
eligible employee is granted an option to subscribe for Ordinary shares of Yell Group plc, our parent company, out of the repayment made under that contract at the end of three, five or seven years. The exercise price of any option will not be
manifestly less than 80% of the market value of the Ordinary shares at the date of grant. The Sharesave Plan is Inland Revenue approved and therefore no charge has been recorded to the profit and loss account in accordance with the exemption
available under UITF 17. During the year ended 31 March 2004 3,579,347 options were granted at an exercise price of £2.60 and 113,065 of these had lapsed by the end of the year.





|(d) |  | The Yell Group plc 2003 Employee Stock Purchase Plan
|--- |  | ----------------------------------------------------



The Yell Group plc 2003 Employee Stock Purchase Plan (the US ESPP) was established in July 2003. Eligible employees are entitled to purchase
Ordinary shares of Yell Group plc, our parent company (Ordinary shares), at the lower of 85% of the fair market value of the Ordinary shares on the date the Ordinary shares are offered and 85% of the fair market value of the Ordinary
shares on the date ending the offer period when the Ordinary shares are purchased by the employee. All Ordinary shares must be purchased through the savings accumulated during an offer period through payroll deductions. Based on the value at date of
offer, 984,617 options were issued in November 2003.



|(e) |  | The Yell Group plc Executive Share Option Scheme
|--- |  | ------------------------------------------------



The Yell Group plc Executive Share Option Scheme (the UK Option Scheme) was established in July 2003, and contains an unapproved section and a
section approved by the Inland Revenue. The price per Ordinary share at which options will be



F-45



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

25. Employee Share Schemes (continued)



exercised will be not less than the market value of the Ordinary shares at the date of grant. Options will normally be granted within a period of 42 days
commencing on the day after the date on which our parent company releases its quarterly, half- yearly or final consolidated results for any financial period. In most circumstances an objective performance condition must be satisfied before an option
can be exercised. Normally options may only be exercised three years after the initial date of grant, with, where appropriate, one re-test of the performance condition at the end of the year. The option life under this plan is ten years from the
date of grant. During the year ended 31 March 2004 3,319,043 options were granted at an average price of £2.91.



|(f) |  | The Yell Group plc 2003 US Equity Incentive Plan
|--- |  | ------------------------------------------------



The Yell Group plc 2003 US Equity Incentive Plan (the US EIP) was established July 2003. It allows our parent company to issue both
non-qualified and incentive stock options and Ordinary shares. The Board of our parent company has sole discretion to determine who may receive awards under the US EIP and any performance conditions. The exercise price for incentive stock options
will not be less than 100% of the fair market value of the Ordinary shares on the date of grant. The option life under this plan is ten years from the date of grant. Stock awards may be made to officers or employees, and the purchase price, if any,
is as established by our parent company. During the year ended 31 March 2004 4,610,281 options were granted at an average exercise price of £2.93.



|(g) |  | The Capital Accumulation Plan
|--- |  | -----------------------------



The Yell Group plc Capital Accumulation Plan (CAP) was established in March 2004. It allows our parent company to award Ordinary Shares to
employees which vest three years from the date of grant. There are no performance criteria attached to the vesting of these shares, which are awarded to employees whom our parent company wishes to retain as key talent within the organization.
1,774,327 ordinary shares were issued under this plan to employees in March 2004.



Options under share schemes



The following
table summarises option activity for 2004, 2003 and 2002:



|                                                                                            |  |            |  |                                       |  |            |   |  |                                       |  |            |   |  |                                      
|------------------------------------------------------------------------------------------- |  | ---------- |  | ------------------------------------- |  | ---------- | - |  | ------------------------------------- |  | ---------- | - |  | -------------------------------------
|                                                                                            |  | 2002       |  | 2003                                  |  | 2004      
|                                                                                            |  | Shares     |  | Weightedaverage exerciseprice (pence) |  | Shares     |   |  | Weightedaverage exerciseprice (pence) |  | Shares     |   |  | Weightedaverage exerciseprice (pence)
|Outstanding at beginning of year                                                            |  |           |  |                                      |  | 9,750,735  |   |  | 0.365                                 |  | 11,046,925 |   |  | 18                                   
|Granted                                                                                     |  | 9,750,735  |  | 0.365                                 |  | 1,506,805  |   |  | 128                                   |  | 15,470,845 |   |  | 226                                  
|Exercised                                                                                   |  |           |  |                                      |  |           |   |  |                                      |  | (5,796,453 | ) |  | 3                                    
|Expired or forfeited                                                                        |  |           |  |                                      |  | (210,615   | ) |  |                                      |  | (1,563,106 | ) |  | 22                                   
|                                                                                            |  |            |  |                                       |  |            |   |  |                                       |  |            |   |  |                                      
|Outstanding at end of year                                                                  |  | 9,750,735  |  | 0.365                                 |  | 11,046,925 |   |  | 18                                    |  | 19,158,211 |   |  | 190                                  
|                                                                                            |  |            |  |                                       |  |            |   |  |                                       |  |            |   |  |                                      
|Options exercisable at year end                                                             |  |           |  |                                      |  |           |   |  |                                      |  | 6,777,988  |   |  | 26                                   
|Shares available for future grant at year end                                               |  | 23,125,455 |  |                                      |  | 23,336,091 |   |  |                                      |  | 57,398,341 |   |  |                                     
|Weighted-average fair value of options granted during the year                              |  | 9,750,735  |  | 18                                    |  | 1,506,805  |   |  | 25                                    |  | 15,470,845 |   |  | 69                                   
|Weighted-average exercise price equal to fair value of ordinary shares at date of grant     |  |           |  |                                      |  | 1,506,805  |   |  | 128                                   |  | 9,284,545  |   |  | 268                                  
|Weighted-average exercise price greater than fair value of ordinary shares at date of grant |  |           |  |                                      |  | 9,540,120  |   |  | 0.365                                 |  | 9,873,666  |   |  | 117                                  
|Weighted-average exercise price less than fair value of ordinary shares at date of grant    |  | 9,750,735  |  | 0.365                                 |  |           |   |  |                                      |  |           |   |  |                                     



F-46



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

25. Employee Share Schemes (continued)



The following table summarises information about stock options outstanding at March 31, 2004:



|                    |  |                     |  |                                   |  |                   
|------------------- |  | ------------------- |  | --------------------------------- |  | ------------------
|Options outstanding |  | Options exercisable
|Exercise price      |  | Number outstanding  |  | Weighted average contractual life |  | Number exercisable
|Pence               |  |                     |  | Years                             |  |                   
|0.365               |  | 5,422,767           |  | 10                                |  | 5,422,767         
|128                 |  | 1,355,221           |  | 10                                |  | 1,355,221         
|260                 |  | 4,450,899           |  | 4                                 |  |                  
|285                 |  | 2,811,403           |  | 10                                |  |                  
|296                 |  | 5,117,921           |  | 10                                |  |                  
|                    |  |                     |  |                                   |  |                   
|1 to 296            |  | 19,158,211          |  | 8.6                               |  | 6,777,988         
|                    |  |                     |  |                                   |  |                   



26. Auditors remuneration



The following fees were paid or are payable to the Yell
Groups auditors for the years ended 31 March 2002, 31 March 2003 and 31 March 2004:



|                                                            |  |                        |  |  |   |                            |   |                        |   |                       
|----------------------------------------------------------- |  | ---------------------- |  |  | - | -------------------------- | - | ---------------------- | - | ----------------------
|                                                            |  | Combined (Predecessor) |  |  |   | Consolidated (Successor)  
|                                                            |  | 1 April to22 June2001  |  |  |   | 22 June2001 to31 March2002 |   | Year ended31 March2003 |   | Year ended31 March2004
|                                                            |  | £                      |  |  | £ |                            | £ |                        | £
|                                                            |  | (in millions)          |  |  |   | (in millions)             
|Audit services                                              |  |                        |  |  |   |                            |   |                        |   |                       
|Statutory audit                                             |  |                       |  |  |   | 0.4                        |   | 0.6                    |   | 0.6                   
|Audit-related regulatory reporting                          |  |                       |  |  |   |                           |   | 0.1                    |   | 0.2                   
|Further assurance services                                  |  |                       |  |  |   |                           |   | 0.6                    |   | 0.2                   
|Tax services                                                |  |                        |  |  |   |                            |   |                        |   |                       
|Compliance services                                         |  |                       |  |  |   |                           |   | 0.1                    |   | 0.1                   
|Advisory Services                                           |  |                       |  |  |   |                           |   | 0.2                    |   | 1.0                   
|Other services:                                             |  |                        |  |  |   |                            |   |                        |   |                       
|Accounting and tax advice on purchase from BT               |  |                       |  |  |   | 1.6                        |   |                       |   |                      
|Accounting and tax advice on US reporting and bond issuance |  |                       |  |  |   | 0.8                        |   |                       |   |                      
|Other services not covered above                            |  |                       |  |  |   | 0.3                        |   | 0.3                    |   |                      
|                                                            |  |                        |  |  |   |                            |   |                        |   |                       
|Total auditors remuneration                                |  |                       |  |  |   | 3.1                        |   | 1.9                    |   | 2.1                   
|                                                            |  |                        |  |  |   |                            |   |                        |   |                       



In addition to the
amounts above, fees in relation to accounting and tax advice in respect of our parent companys postponed IPO in the year ended 31 March 2003 and our parent companys global offer in the year ended 31 March 2004, which were approved and
incurred prior to our parent companys IPO, were £4.3 million and £3.6 million respectively. In addition, certain fees in relation to due diligence totalling £0.5 million in the year ended 31 March 2004 were approved and
incurred prior to our parent companys IPO.



Prior to the
acquisition on 22 June 2001, the audits of the combined financial statements of the operations comprising the Yell Group were carried out in connection with a proposed demerger of the Yell Group by BT. The costs of these audits (£0.7 million)
was borne by BT and are not included in the auditors remuneration disclosed above.



F-47



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



27. United States Generally Accepted Accounting Principles



The Yell Groups combined and consolidated financial statements are
prepared in accordance with accounting principles generally accepted in the United Kingdom (UK GAAP), which differ in certain respects from those applicable in the United States (US GAAP).



I    Differences between United Kingdom and United States generally
accepted accounting principles



The following are the main
differences between UK and US GAAP which are relevant to the Yell Groups financial statements.



(a) Directories in progress



Under UK GAAP, the cost of directories in progress deferred in stock represents direct fixed and variable costs as well as directly attributable overhead costs. Under US GAAP, the deferred costs associated with directories in progress would
comprise the production costs and the incremental direct costs associated with selling and creating the directories.



Directories in progress acquired in a business purchase are valued at replacement value under UK GAAP and at fair value under US GAAP. Under UK GAAP this
difference is included in goodwill. Under US GAAP, the fair value is charged to the profit and loss upon delivery of the related directories.



(b) Pensions



Under both UK and US GAAP, pension costs are charged against profits over employees working lives. Differences between the UK and US GAAP figures
arise from the requirement to use different actuarial methods and assumptions and a different method of amortising surpluses or deficits, when accounting for a single employer scheme.



(c) Goodwill and other intangibles



Under UK GAAP the purchase price of acquisitions is allocated to the fair market value of identifiable acquired tangible assets, with the excess recorded
as goodwill with an estimated economic life of 20 years. Under US GAAP the purchase price is allocated to the fair value of identifiable acquired tangible and intangible assets, including acquired customer relationships that are amortised over five
to nine years and brand names that are amortised over five or forty years with the excess recorded as goodwill. On April 1, 2002, the Yell Group adopted Statement of Financial Accounting Standards No 142 (SFAS 142) Goodwill and
Other Intangible Assets. SFAS 142 eliminates amortisation of goodwill associated with business combinations completed after 30 June 2001 and requires annual impairment tests. During the transition period from 1 July 2001 through 31 March 2002,
the Companys goodwill associated with business combinations completed prior to 1 July 2001 continued to be amortised over a period of up to 20 years. Effective 1 April 2002, all goodwill amortisation was discontinued under US GAAP. Upon
adoption the Yell Group completed its transitional impairment tests of goodwill as of 1 April 2002 and determined that goodwill balances were not impaired. Also upon adoption the company evaluated its depreciable intangible assets and determined
that their remaining useful lives were appropriate. Goodwill impairment tests were also completed at 31 March 2003 and 2004, which determined that goodwill balances were not impaired. The aggregate amortisation expense for the years ended 31 March
2003 and 2004 and the estimated aggregate amortisation expense for the succeeding five years, assuming a constant US dollar exchange rate, are as follows:



|                               |  |                
|------------------------------ |  | ---------------
|                               |  | £ (in millions)
|Aggregate amortisation expense |  |                
|For year ended 31 March 2003   |  | 106.7          
|For year ended 31 March 2004   |  | 86.5           
|                               | 
|Estimated amortisation expense |  |                
|For year ending 31 March 2005  |  | 74.5           
|For year ending 31 March 2006  |  | 60.6           
|For year ending 31 March 2007  |  | 49.9           
|For year ending 31 March 2008  |  | 41.7           
|For year ending 31 March 2009  |  | 35.9           



F-48



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



27. United States Generally Accepted Accounting Principles (continued)



Goodwill



The changes in the net book value of goodwill for the years ended 31 March
2003 and 31 March 2004 are as follows:



|                                                                |  |       |  |               |   |  |            |  
|--------------------------------------------------------------- |  | ----- |  | ------------- | - |  | ---------- | -
|                                                                |  | UK    |  | US            |   |  | Yell Group |  
|                                                                |  | £     |  | £             |   |  | £          |  
|                                                                |  |       |  | (in millions) |   |  |            |  
|Balance as of 1 April 2002                                      |  | 599.4 |  | 354.4         |   |  | 953.8      |  
|Goodwill acquired during year                                   |  |      |  | 299.7         |   |  | 299.7      |  
|Reversal of valuation allowance on deferred tax assets acquired |  |      |  | (17.2         | ) |  | (17.2      | )
|Currency movements                                              |  |      |  | (58.9         | ) |  | (58.9      | )
|                                                                |  |       |  |               |   |  |            |  
|Balance as of 31 March 2003                                     |  | 599.4 |  | 578.0         |   |  | 1,177.4    |  
|Goodwill acquired during year                                   |  |      |  | 76.1          |   |  | 76.1       |  
|Reversal of valuation allowance on deferred tax assets acquired |  |      |  | (8.2          | ) |  | (8.2       | )
|Fair value adjustments(a)                                       |  |      |  | 3.3           |   |  | 3.3        |  
|Currency movements                                              |  |      |  | (85.6         | ) |  | (85.6      | )
|                                                                |  |       |  |               |   |  |            |  
|Balance as of 31 March 2004                                     |  | 599.4 |  | 563.6         |   |  | 1,163.0    |  
|                                                                |  |       |  |               |   |  |            |  

---

|(a) |  | The fair value adjustment to goodwill was due to the finalisation of transaction costs in respect of acquisitions in prior years.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------





Intangible assets under US GAAP comprise:



|                                                |  |               |   |  |         |  
|----------------------------------------------- |  | ------------- | - |  | ------- | -
|                                                |  | At 31 March   |  
|                                                |  | 2003          |   |  | 2004    |  
|                                                |  | £             |   |  | £       |  
|                                                |  | (in millions) |  
|Gross book value                                |  |               |   |  |         |  
|Acquired customer relationships                 |  | 493.4         |   |  | 498.1   |  
|Brand names                                     |  | 535.0         |   |  | 511.6   |  
|Additional minimum liability                    |  | 0.3           |   |  | 1.1     |  
|Goodwill (net of amortisation to 31 March 2002) |  | 1,177.4       |   |  | 1,163.0 |  
|                                                |  |               |   |  |         |  
|Total gross book value under US GAAP            |  | 2,206.1       |   |  | 2,173.8 |  
|                                                |  |               |   |  |         |  
|Accumulated amortisation                        |  |               |   |  |         |  
|Acquired customer relationships                 |  | (161.1        | ) |  | (224.6  | )
|Brand names                                     |  | (25.6         | ) |  | (39.6   | )
|                                                |  |               |   |  |         |  
|Total accumulated amortisation under US GAAP    |  | (186.7        | ) |  | (264.2  | )
|                                                |  |               |   |  |         |  
|Net book value in accordance with US GAAP       |  | 2,019.4       |   |  | 1,909.6 |  
|Net book value in accordance with UK GAAP       |  | 1,824.1       |   |  | 1,725.3 |  
|                                                |  |               |   |  |         |  
|Estimated UK to US GAAP adjustments             |  | 195.3         |   |  | 184.3   |  
|                                                |  |               |   |  |         |  



Included in goodwill
is £344.9 million of unamortised goodwill relating to purchases made after 1 April 2002.



In the year 31 March 2004, the remaining £3.1 million asset relating to the Planet Pages brand name was written off as this name, which was acquired in connection with the McLeod business, is no
longer used.



Additionally, under US GAAP, the difference
between the retail value and net replacement value of directories in progress is included in directories in progress and charged against profits when the directories are delivered. Under UK GAAP the difference is included in goodwill.



F-49



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



27. United States Generally Accepted Accounting Principles (continued)



(d) Derivative financial instruments



Certain financial risks are managed through the use of financial
instruments, mainly interest rate swaps/collars. These contracts provide economic hedging to the Company; however, they do not qualify as hedges for US GAAP accounting purposes under Statement of Financial Accounting Standards No 133
Accounting for Derivative Instruments and Hedging Activities as amended and interpreted. Derivative financial instruments are recorded on the balance sheet at fair value. Therefore, unrealised gains/losses must be recorded in the profit
and loss account at each reporting date. For the interest rate derivative contracts, a gain of £21.7 million would have been recorded for the year ended 31 March 2004 (2003loss of £13.6 million, 2002loss of £11.3
million) under US GAAP, within interest expense. The liability at 31 March 2004 would have been £3.2 million (2003£24.9 million, 2002£11.3 million). These movements reflect fluctuations in the fair value of the US
dollar and pounds sterling floating interest rate swaps since the contracts were agreed, and the unwinding of losses previously recognised under US GAAP which have been recorded as expense under UK GAAP.



(e) Management incentive plans



Under UK GAAP, certain incentive payments made by BT to senior management
were accounted for as an adjustment to the Yell Group purchase price. Under US GAAP, these payments would be treated as an expense that would be pushed down to the acquired company.



(f) Employee option plans



Under UK GAAP, compensation expense on awards of stock options and other
share-based compensation is measured based on the intrinsic value of the awards, if any, at the date of grant. Under US GAAP, compensation expense is measured based on the fair value of the awards at the date of grant. The fair value of each option
grant during the period from 1 April 2001 through June 2003 was estimated at the date of grant using the minimum-value method. The fair value of each option grant subsequent to June 2003 was estimated at the date of grant using the Black-Scholes
option valuation method. The Group used the following weighted-average assumptions in its estimations of fair value:





|                        |  |                     |  |           |  |          
|----------------------- |  | ------------------- |  | --------- |  | ---------
|                        |  | Year ended 31 March
|                        |  | 2002                |  | 2003      |  | 2004     
|Risk free interest rate |  | 4.0%                |  | 4.3%      |  | 4.4%     
|Expected dividend yield |  | 0%                  |  | 0%        |  | 3%       
|Expected volatility     |  | 0%                  |  | 0%        |  | 35%      
|Expected life of option |  | 2.0 years           |  | 5.0 years |  | 3.7 years



(g) Closure provisions





Under UK GAAP, charges relating to employee redundancies and termination of lease or other contracts are recorded as a provision only when there is a present obligation and a reliable estimate can be made of the
amount. Under US GAAP, charges relating to employee redundancies are measured when management has committed to a detailed plan of termination that meets specified criteria and has been communicated to the employees and are recorded at that date if
future services will not be rendered by the employees or they will be retained only for a minimum retention period. In the event future service by the employees to be terminated is required or the employee will be retained for a period greater than
minimum retention period, the charge is recorded ratably over the remaining period the employees provide services. Charges relating to termination of lease or other contracts are recorded under US GAAP at the time the contract is terminated in
accordance with the contracts terms and are based on the fair value of the related liability.



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)



(h) Deferred taxation



The reconciling adjustment for deferred taxation comprises the tax effects arising from the other UK to US GAAP adjustments
listed in the reconciliation below, together with the effect of an adjustment of £8.2 million for the year ended 31 March 2004 (2003£17.2 million) to reverse tax benefits associated with the reversal of a valuation allowance
recorded on purchase which under US GAAP results in a reduction to goodwill.



At 31 March 2004, the adjustment to decrease shareholders funds (deficit) of £182.9 million (2003£223.9 million decrease, 2002£235.0 million decrease) included the tax effect of
other US GAAP adjustments. This comprised an adjustment increasing current deferred tax assets by £35.7 million (2003£21.1 million, 2002£15.1 million) increasing non-current deferred tax assets by £nil
million at 31 March 2004 (2003£14.0 million, 2002£nil) which were net of a £7.7 million (2003£54.6 million, 2002£71.3 million), valuation allowance for deferred tax assets arising from operations
in the United States, and £218.6 million (2003£259.0 million, 2002£250.1 million) of non-current deferred tax liabilities. Deferred tax assets arising from operations in the United Kingdom are considered to be
recoverable for all years presented.



For the periods from 1
April to 22 June 2001 and 22 June 2001 to 31 March 2002, the US GAAP deferred taxation adjustment to shareholders deficit relates largely to the deferred tax liabilities arising on the intangible assets other than goodwill arising as a result
of the acquisition from BT.



(i) Gross profit under US GAAP
presentation



Under UK GAAP, doubtful debt expenses are
included in cost of sales. Under US GAAP, these expenses do not meet the criteria to be classified as cost of sales and thus would be included in administrative expenses. Additionally, distribution costs would be included in cost of sales under US
GAAP.



F-51



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)



II    Profit (loss) and shareholders (deficit) funds reconciliation statements



The following statements summarise estimated adjustments,
gross of their tax effect, which reconcile profit (loss) and shareholders (deficit) funds from that reported under UK GAAP to that which would have been reported had US GAAP been applied.



Profit (loss)

|                                                     |  |                       |   |  |                             |   |  |                         |   |  |                        |  
|---------------------------------------------------- |  | --------------------- | - |  | --------------------------- | - |  | ----------------------- | - |  | ---------------------- | -
|                                                     |  | Combined(Predecessor) |   |  | Consolidated (Successor)    |  
|                                                     |  | 1 April to22 June2001 |   |  | 22 June 2001to 31 March2002 |   |  | Year ended31 March 2003 |   |  | Year ended31 March2004 |  
|                                                     |  |                       |   | 
|                                                     |  | £                     |   |  | £                           |   |  | £                       |   |  | £                      |  
|                                                     |  | (in millions)         |   |  | (in millions)               |  
|Profit (loss) for the financial period under UK GAAP |  | 15.8                  |   |  | (47.2                       | ) |  | (40.6                   | ) |  | (51.1                  | )
|Adjustment for:                                      |  |                       |   |  |                             |   |  |                         |   |  |                        |  
|Directories in progress                              |  |                       |   |  |                             |   |  |                         |   |  |                        |  
| Deferred costs                                     |  | (6.2                  | ) |  | 4.3                         |   |  | (23.9                   | ) |  | (20.8                  | )
| Acquisition accounting(a)                          |  |                      |   |  | (94.1                       | ) |  | (24.2                   | ) |  |                       |  
|Pensions                                             |  | (0.4                  | ) |  | (0.2                        | ) |  | 0.1                     |   |  | (8.0                   | )
|Goodwill                                             |  |                      |   |  | 26.9                        |   |  | 98.3                    |   |  | 96.7                   |  
|Other intangible assets                              |  | (2.0                  | ) |  | (83.0                       | ) |  | (106.8                  | ) |  | (86.5                  | )
|Derivative financial instruments                     |  |                      |   |  | (11.3                       | ) |  | (13.6                   | ) |  | 21.7                   |  
|Employee option costs                                |  |                      |   |  |                            |   |  |                        |   |  | (1.3                   | )
|Management incentive plans(a)                        |  | (24.1                 | ) |  |                            |   |  |                        |   |  |                       |  
|Closure provisions                                   |  |                      |   |  |                            |   |  | 2.9                     |   |  | (0.6                   | )
|Deferred taxation                                    |  | (1.3                  | ) |  | 56.7                        |   |  | 28.7                    |   |  | 28.6                   |  
|                                                     |  |                       |   |  |                             |   |  |                         |   |  |                        |  
|Net loss as adjusted for US GAAP                     |  | (18.2                 | ) |  | (147.9                      | ) |  | (79.1                   | ) |  | (21.3                  | )
|                                                     |  |                       |   |  |                             |   |  |                         |   |  |                        |  

---

|(a) |  | Represents certain adjustments that arose as a result of acquisitions.
|--- |  | ----------------------------------------------------------------------



Effective 1 April 2002, the Group adopted SFAS 142 for US GAAP reporting purposes which eliminated the requirement to
amortise goodwill. The following table presents net loss after eliminating the effect of goodwill amortisation from 1 April 2001.



Adjusted net loss



|                                          |  |                       |   |  |                             |  
|----------------------------------------- |  | --------------------- | - |  | --------------------------- | -
|                                          |  | Combined(Predecessor) |   |  | Consolidated(Successor)     |  
|                                          |  | 1 April to22 June2001 |   |  | 22 June 2001to 31 March2002 |  
|                                          |  |                      
|                                          |  | £                     |   |  | £                           |  
|                                          |  | (in millions)         |   |  | (in millions)               |  
|Reported net loss as adjusted for US GAAP |  | (18.2                 | ) |  | (147.9                      | )
|Goodwill amortisation, net of tax         |  | 1.6                   |   |  | 55.6                        |  
|                                          |  |                       |   |  |                             |  
|Adjusted net loss as adjusted for US GAAP |  | (16.6                 | ) |  | (92.3                       | )
|                                          |  |                       |   |  |                             |  



F-52



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)



Shareholders (deficit) funds



|                                              |  |               |   |  |        |  
|--------------------------------------------- |  | ------------- | - |  | ------ | -
|                                              |  | At 31 March   |  
|                                              |  | 2003          |   |  | 2004   |  
|                                              |  | £             |   |  | £      |  
|                                              |  | (in millions) |  
|Shareholders (deficit) funds under UK GAAP   |  | (124.4        | ) |  | 63.9   |  
|Adjustment for:                               |  |               |   |  |        |  
|Directories in progress                       |  | (92.6         | ) |  | (103.2 | )
|Pensions                                      |  | 7.7           |   |  | (0.3   | )
|Additional minimum pension liability          |  | (35.8         | ) |  | (37.9  | )
|Goodwill                                      |  | (646.7        | ) |  | (562.3 | )
|Other intangible assets                       |  | 842.0         |   |  | 746.6  |  
|Derivative financial instruments              |  | (24.9         | ) |  | (3.2   | )
|Closure provisions                            |  | 2.9           |   |  | 2.3    |  
|Deferred taxation                             |  | (223.9        | ) |  | (182.9 | )
|                                              |  |               |   |  |        |  
|Shareholders deficit as adjusted for US GAAP |  | (295.7        | ) |  | (77.0  | )
|                                              |  |               |   |  |        |  



III    Consolidated statements of cash flows



Under UK GAAP, the Consolidated Statements of Cash Flows are presented in accordance with UK Financial Reporting Standard No 1, Cash Flows Statement (FRS 1). The statements prepared under FRS 1
present substantially the same statements as that required under Statement of Financial Accounting Standards No 95 Statement of Cash Flows (SFAS 95).



Under SFAS 95, cash and cash equivalents include cash and short-term investments with original maturities of three months or
less. Under FRS 1, cash comprises cash in hand and at bank and overnight deposits, net of bank overdrafts.



Under FRS 1, cash flows are presented for operating activities; returns on investments and servicing of finance; taxation; capital expenditure and
financial investments; acquisitions and disposals; dividends paid to the Companys shareholders; and financing. SFAS 95 requires a classification of cash flows as resulting from operating, investing and financing activities.



Cash flows under FRS 1 in respect of interest and finance fees paid and
taxation would be included within operating activities under SFAS 95.



The following statements summarise the statements of cash flows as if they had been presented in accordance with US GAAP.



|                                                                             |  |                       |   |  |                             |   |  |                        |   |  |                        |  
|---------------------------------------------------------------------------- |  | --------------------- | - |  | --------------------------- | - |  | ---------------------- | - |  | ---------------------- | -
|                                                                             |  | Combined(Predecessor) |   |  | Consolidated (Successor)    |  
|                                                                             |  | 1 April to22 June2001 |   |  | 22 June 2001to31 March 2002 |   |  | Year ended31 March2003 |   |  | Year ended31 March2004 |  
|                                                                             |  |                       |   | 
|                                                                             |  | £                     |   |  | £                           |   |  | £                      |   |  | £                      |  
|                                                                             |  | (in millions)         |   |  | (in millions)               |  
|Net cash provided by operating activities                                    |  | 28.8                  |   |  | 48.3                        |   |  | 143.8                  |   |  | 56.1                   |  
|Net cash used in investing activities                                        |  | (16.9                 | ) |  | (1,890.9                    | ) |  | (486.9                 | ) |  | (139.2                 | )
|Net cash provided by financing activities                                    |  | 12.4                  |   |  | 1,942.7                     |   |  | 273.9                  |   |  | 74.3                   |  
|                                                                             |  |                       |   |  |                             |   |  |                        |   |  |                        |  
|Net increase (decrease) in cash and cash equivalents at end of the period(a) |  | 24.3                  |   |  | 100.1                       |   |  | (69.2                  | ) |  | (8.8                   | )
|Effects of exchange rate changes on cash and cash equivalents                |  |                      |   |  |                            |   |  | (0.9                   | ) |  | (2.8                   | )
|Cash and cash equivalents at beginning of the period                         |  | 24.8                  |   |  |                            |   |  | 100.1                  |   |  | 30.0                   |  
|                                                                             |  |                       |   |  |                             |   |  |                        |   |  |                        |  
|Cash and cash equivalents at end of the period(a)                            |  | 49.1                  |   |  | 100.1                       |   |  | 30.0                   |   |  | 18.4                   |  
|                                                                             |  |                       |   |  |                             |   |  |                        |   |  |                        |  

---

|(a) |  | Cash and cash equivalents under US GAAP are the same as cash at bank and in hand under UK GAAP for all periods presented.
|--- |  | -------------------------------------------------------------------------------------------------------------------------



F-53



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YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)



IV    Unaudited pro forma financial information



The following table reflects unaudited condensed pro forma financial
information under UK GAAP as if the acquisition of Yell Group from BT and the McLeod and other acquisitions had occurred as of 1 April 2001 and 1 April 2002, respectively, for the years ended 31 March 2002 and 2003.



|                  |  |                    |   |  |         |  
|----------------- |  | ------------------ | - |  | ------- | -
|                  |  | Year ended31 March |  
|                  |  | 2002               |   |  | 2003    |  
|                  |  | £                  |   |  | £       |  
|                  |  | (in millions)      |  
|Group turnover    |  | 865.4              |   |  | 1,126.3 |  
|Loss for the year |  | (71.7              | ) |  | (38.5   | )



V    Pensions



The following position for the YPP is computed in
accordance with US GAAP pension accounting rules under Statement of Financial Accounting Standards No 87 Employers Accounting for Pensions (SFAS 87), the effect of which is shown in the above reconciliation statements.



The components of the pension cost for the YPP comprised:



|                                                                         |  |                        |   |  |                              |   |  |                        |   |  |                        |  
|------------------------------------------------------------------------ |  | ---------------------- | - |  | ---------------------------- | - |  | ---------------------- | - |  | ---------------------- | -
|                                                                         |  | Combined(Predecessor)  |   |  | Consolidated (Successor)     |  
|                                                                         |  | 1 April to 22June 2001 |   |  | 22 June 2001to 31 March 2002 |   |  | Year ended31 March2003 |   |  | Year ended31 March2004 |  
|                                                                         |  |                        |   | 
|                                                                         |  | £                      |   |  | £                            |   |  | £                      |   |  | £                      |  
|                                                                         |  | (in millions)          |   |  | (in millions)                |  
|Service cost                                                             |  | 1.4                    |   |  | 5.8                          |   |  | 9.1                    |   |  | 12.6                   |  
|Interest cost                                                            |  | 0.8                    |   |  | 4.5                          |   |  | 6.6                    |   |  | 8.0                    |  
|Expected return on scheme assets                                         |  | (0.8                   | ) |  | (5.5                         | ) |  | (7.9                   | ) |  | (6.5                   | )
|Amortisation of net obligation at date of limited application of SFAS 87 |  | 0.1                    |   |  |                             |   |  |                       |   |  | 3.1                    |  
|Recognised losses                                                        |  |                       |   |  |                             |   |  | 0.1                    |   |  |                       |  
|                                                                         |  |                        |   |  |                              |   |  |                        |   |  |                        |  
|YPP pension costs for the period under US GAAP                           |  | 1.5                    |   |  | 4.8                          |   |  | 7.9                    |   |  | 17.2                   |  
|                                                                         |  |                        |   |  |                              |   |  |                        |   |  |                        |  



F-54



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



27. United States Generally Accepted Accounting Principles (continued)



The information required to be disclosed in accordance with Statement of
Financial Accounting Standard No 132 (revised 2003) Employers Disclosures about Pensions and Other Postretirement Benefitsan amendment of FASB Statements No 87, 88 and 106 (SFAS 132 R) concerning the funded status
of the YPP at and for the years ended 31 March 2003 and 2004, based on the valuation at 6 April 1999 and 5 April 2002, respectively, is as follows:



|                                                                 |  |                                  |   |  |       |  
|---------------------------------------------------------------- |  | -------------------------------- | - |  | ----- | -
|                                                                 |  | At and for theyear ended31 March |  
|                                                                 |  | 2003                             |   |  | 2004  |  
|                                                                 |  | £                                |   |  | £     |  
|                                                                 |  | (in millions)                    |  
|Changes in benefit obligation                                    |  |                                  |   |  |       |  
|Present value of scheme liabilities at the beginning of the year |  | 109.6                            |   |  | 147.9 |  
|Service cost                                                     |  | 9.2                              |   |  | 12.6  |  
|Interest cost                                                    |  | 6.6                              |   |  | 8.0   |  
|Employees contributions                                         |  | 3.6                              |   |  | 3.7   |  
|Actuarial movement                                               |  | 19.6                             |   |  | 24.6  |  
|Benefits paid or payable                                         |  | (1.0                             | ) |  | (2.7  | )
|Plan amendments                                                  |  | 0.3                              |   |  | 0.8   |  
|                                                                 |  |                                  |   |  |       |  
|Benefit obligation at the end of the year                        |  | 147.9                            |   |  | 194.9 |  
|                                                                 |  |                                  |   |  |       |  



|                                                                      |  |                         |  
|--------------------------------------------------------------------- |  | ----------------------- | -
|                                                                      |  | Year ended31 March 2004 |  
|                                                                      | 
|                                                                      |  | £                       |  
|                                                                      |  | (in millions)           |  
|Amounts recognised in the statement of financial position consist of: |  |                         |  
|Prepaid pension costs                                                 |  | (37.9                   | )
|Intangible asset                                                      |  | 1.1                     |  
|Charge to equity                                                      |  | 36.8                    |  
|                                                                      |  |                         |  
|Net prepaid pension costs recognised                                  |  |                        |  
|                                                                      |  |                         |  



The accumulated
benefit obligation of £160.3 million at 31 March 2004 (2003£122.2 million) was calculated on the assumption that pension increases start immediately. Scheme assets at 31 March 2002 exceeded the accumulated benefit obligations.



|                                                           |  |               |   |  |       |  
|---------------------------------------------------------- |  | ------------- | - |  | ----- | -
|                                                           |  | At 31 March   |  
|                                                           |  | 2003          |   |  | 2004  |  
|                                                           |  | £             |   |  | £     |  
|                                                           |  | (in millions) |  
|Changes in scheme assets                                   |  |               |   |  |       |  
|Market value of scheme assets at the beginning of the year |  | 103.0         |   |  | 94.1  |  
|Actual return on scheme assets                             |  | (19.5         | ) |  | 17.8  |  
|Employers contributions                                   |  | 8.0           |   |  | 9.5   |  
|Employees contributions                                   |  | 3.6           |   |  | 3.7   |  
|Benefits paid or payable                                   |  | (1.0          | ) |  | (2.7  | )
|                                                           |  |               |   |  |       |  
|Market value of assets at the end of the year              |  | 94.1          |   |  | 122.4 |  
|                                                           |  |               |   |  |       |  



F-55



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

27. United States Generally Accepted Accounting Principles (continued)



|                                                        |  |               |   |  |       |  
|------------------------------------------------------- |  | ------------- | - |  | ----- | -
|                                                        |  | At 31 March   |  
|                                                        |  | 2003          |   |  | 2004  |  
|                                                        |  | £             |   |  | £     |  
|                                                        |  | (in millions) |  
|Funded status under US GAAP                             |  |               |   |  |       |  
|Projected benefit obligation in excess of scheme assets |  | (53.8         | ) |  | (72.6 | )
|Unrecognised prior service cost(a)                      |  | 0.3           |   |  | 1.1   |  
|Other unrecognised net actuarial losses                 |  | 61.2          |   |  | 71.5  |  
|                                                        |  |               |   |  |       |  
|Prepaid pension costs under US GAAP                     |  | 7.7           |   |  |      |  
|                                                        |  |               |   |  |       |  

---

|(a) |  | The unrecognised prior service cost is being amortised over 15 years.
|--- |  | ---------------------------------------------------------------------



The benefit obligation for the main pension scheme was determined using the following assumptions at 1 April 2002, 1 April 2003 and 1 April 2004:



|                             |  |                    |  |      |  |     
|---------------------------- |  | ------------------ |  | ---- |  | ----
|                             |  | Rates (per annum)%
|                             |  | 2002               |  | 2003 |  | 2004
|Discount rate                |  | 6.00               |  | 5.40 |  | 5.40
|Rate of future pay increases |  | 4.20               |  | 4.00 |  | 4.40
|Pension increases            |  | 2.70               |  | 2.50 |  | 2.90
|Expected return on assets    |  | 7.35               |  | 6.50 |  | 6.35



For US GAAP purposes,
multi-employer accounting was applied in respect of past participation in the BTPS for the period until 1 November 2001. Accordingly, the annual pension expense in respect of the BTPS is equal to the annual employer contributions, as is the case
under UK GAAP.



Beginning 1 November 2001, the date of the
transaction, the participants in the BTPS became participants of YPP, which is a single employer scheme. The SFAS 87 disclosures above for the periods after 1 November 2001 reflect the additional participants as a result of the transaction.



As a result of the acquisition at 22 June 2001, the surplus of
£6.1 million (made up of a £3.1 million deficit in the YPP and a £9.2 million surplus in respect of the transfer from the BTPS) was recognised on the balance sheet as part of the purchase price allocation.



F-56



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YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)



F-57



28. Valuation and Qualifying Accounts and Reserves



The following table presents the movements in provision and valuation allowances:



|                                     |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|------------------------------------ |  | -------------------------- |  | ------------------------ |  | -------------------------------- | - |  | ---------------- | - |  | ---------------------
|                                     |  | Balance atbeginning ofyear |  | Charged toprofit andloss |  | Charged tootheraccounts/acquired |   |  | Deductions/other |   |  | Balance atend of year
|                                     |  | £                          |  | £                        |  | £                                |   |  | £                |   |  | £                    
|                                     |  | (in millions)             
|                                     |  |                            |  |                          | 
|1 April to 22 June 2001              |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|(Predecessor)                        |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|Allowance for doubtful debts         |  | 60.9                       |  | 13.5                     |  |                                 |   |  | (18.8            | ) |  | 55.6                 
|Provisions for deferred compensation |  | 18.0                       |  | 3.0                      |  | 0.7                              |   |  | (21.7            | ) |  |                     
|Unrecognised net deferred tax assets |  | 22.8                       |  |                         |  | 3.5                              |   |  |                 |   |  | 26.3                 
|                                    
|                                     |  |                            |  |                          | 
|22 June 2001 to 31 March 2002        |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|(Successor)                          |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|Allowance for doubtful debts         |  | 55.6                       |  | 65.2                     |  |                                 |   |  | (49.4            | ) |  | 71.4                 
|Provisions for deferred compensation |  |                           |  |                         |  |                                 |   |  |                 |   |  |                     
|Unrecognised net deferred tax assets |  | 26.3                       |  |                         |  | 11.4                             |   |  |                 |   |  | 37.7                 
|                                     |  |                            |  |                          | 
|Year ended 31 March 2003             |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|(Successor)                          |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|Allowance for doubtful debts         |  | 71.4                       |  | 115.9                    |  | 19.2                             |   |  | (101.0)          |   |  | 105.5                
|Provisions for deferred compensation |  |                           |  |                         |  |                                 |   |  |                 |   |  |                     
|Unrecognised net deferred tax assets |  | 37.7                       |  |                         |  | (10.5                            | ) |  |                 |   |  | 27.2                 
|                                     |  |                            |  |                          | 
|Year ended 31 March 2004             |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|(Successor)                          |  |                            |  |                          |  |                                  |   |  |                  |   |  |                      
|Allowance for doubtful debts         |  | 105.5                      |  | 72.5                     |  | 2.3                              |   |  | (67.2            | ) |  | 113.1                
|Provisions for deferred compensation |  |                           |  |                         |  |                                 |   |  |                 |   |  |                     
|Unrecognised net deferred tax assets |  | 27.2                       |  |                         |  | (19.5                            | ) |  |                 |   |  | 7.7                  



29. Supplemental Guarantor
Information



The notes issued by Yell Finance B.V. (the
Issuer) pursuant to Rule 144A under the US Securities Act 1933 and described in note 16 are guaranteed by Yellow Pages Limited and certain subsidiaries (the Guarantor). Yellow Pages Limited and certain subsidiaries are the
wholly owned guarantor subsidiaries of Yell Finance B.V. who jointly and severally, fully and unconditionally guarantee the debt securities that were issued. Yellow Pages Limited has granted a security interest over substantially all of its assets
including a fixed charge over certain of its properties, debts, bank accounts, insurances, intellectual property and specified agreements and a floating charge over all of its other undertakings and assets. Substantially all of Yell Finance
B.V.s income and cash flow is generated by its subsidiaries. As a result, funds necessary to meet the debt service obligations are provided in large part by distributions or advances from Yellow Pages Limited and its subsidiaries.



Investments in subsidiaries are accounted for at cost; accordingly,
entries necessary to consolidate Yell Finance B.V. and the Guarantor and its consolidated subsidiaries are reflected in the eliminations column. Separate complete financial statements of Yell Finance B.V. and the Guarantor would not provide
additional material information that would be useful in assessing the financial composition of Yellow Pages Limited and subsidiaries.



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##### Table of Contents

YELL GROUP



NOTES TO THE FINANCIAL STATEMENTS (continued)

29. Supplemental Guarantor Information (continued)



The following information sets out the consolidating profit and loss accounts and cash flow
statements for the two years ended 31 March 2004 and the period from 22 June 2001 to 31 March 2002 and the consolidating balance sheets at 31 March 2003 and 2004.



The Yell Group has not provided reconciliations from UK GAAP to US GAAP for the columns relating to the guarantor entities
as such reconciliations would not materially affect an investors understanding of the nature of the guarantee. All reconciling items as shown in note 27 relate to the Guarantor. Information has not been provided for the period prior to 22 June
2001, as the companies were not incorporated until this date.



YELL GROUP



CONSOLIDATED PROFIT AND LOSS
ACCOUNTS



|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|---------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                     |  | Consolidated (Successor)           |  
|                                                     |  | 22 June 2001 to 31 March 2002      |  
|                                                     |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                     |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                     |  | (in millions)                      |  
|Group turnover                                       |  |                                   |   |  | 696.3                           |   |  |             |   |  | 696.3        |  
|Cost of sales                                        |  |                                   |   |  | (315.9                          | ) |  |             |   |  | (315.9       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Gross profit                                         |  |                                   |   |  | 380.4                           |   |  |             |   |  | 380.4        |  
|Distribution costs                                   |  |                                   |   |  | (18.5                           | ) |  |             |   |  | (18.5        | )
|Administrative expenses                              |  |                                   |   |  | (243.2                          | ) |  |             |   |  | (243.2       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total operating profit                               |  |                                   |   |  | 118.7                           |   |  |             |   |  | 118.7        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest payable                                     |  | (96.2                              | ) |  | (160.9                          | ) |  | 96.2         |   |  | (160.9       | )
|Interest receivable                                  |  | 96.2                               |   |  | 2.3                             |   |  | (96.2        | ) |  | 2.3          |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net interest payable                                 |  |                                   |   |  | (158.6                          | ) |  |             |   |  | (158.6       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Profit (loss) on ordinary activities before taxation |  |                                   |   |  | (39.9                           | ) |  |             |   |  | (39.9        | )
|Tax on profit (loss) on ordinary activities          |  | (0.3                               | ) |  | (7.0                            | ) |  |             |   |  | (7.3         | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|(Loss) profit for the financial period               |  | (0.3                               | ) |  | (46.9                           | ) |  |             |   |  | (47.2        | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-58



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##### Table of Contents

YELL GROUP



CONSOLIDATING PROFIT AND LOSS ACCOUNTS



|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                            |  | Consolidation (Successor)          |  
|                                            |  | Year ended 31 March 2003           |  
|                                            |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                            |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                            |  | (in millions)                      |  
|Group turnover                              |  |                                   |   |  | 1,114.0                         |   |  |             |   |  | 1,114.0      |  
|Cost of sales                               |  |                                   |   |  | (509.9                          | ) |  |             |   |  | (509.9       | )
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Gross profit                                |  |                                   |   |  | 604.1                           |   |  |             |   |  | 604.1        |  
|Distribution costs                          |  |                                   |   |  | (36.0                           | ) |  |             |   |  | (36.0        | )
|Administrative costs                        |  | (9.9                               | ) |  | (374.8                          | ) |  |             |   |  | (384.7       | )
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total operating (loss) profit               |  | (9.9                               | ) |  | 193.3                           |   |  |             |   |  | 183.4        |  
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest payable                            |  | (146.6                             | ) |  | (239.0                          | ) |  | 146.6        |   |  | (239.0       | )
|Interest receivable                         |  | 146.6                              |   |  | 2.4                             |   |  | (146.6       | ) |  | 2.4          |  
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net interest payable                        |  |                                   |   |  | (236.6                          | ) |  |             |   |  | (236.6       | )
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loss on ordinary activities before taxation |  | (9.9                               | ) |  | (43.3                           | ) |  |             |   |  | (53.2        | )
|Tax credit on loss on ordinary activities   |  |                                   |   |  | 12.6                            |   |  |             |   |  | 12.6         |  
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loss for the financial period               |  | (9.9                               | ) |  | (30.7                           | ) |  |             |   |  | (40.6        | )
|                                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  



YELL GROUP



CONSOLIDATING PROFIT AND LOSS ACCOUNTS



|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|---------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                     |  | Consolidation (Successor)          |  
|                                                     |  | Year ended 31 March 2004           |  
|                                                     |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                     |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                     |  | (in millions)                      |  
|Group turnover                                       |  |                                   |   |  | 1,186.9                         |   |  |             |   |  | 1,186.9      |  
|Cost of sales                                        |  |                                   |   |  | (552.9                          | ) |  |             |   |  | (552.9       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Gross profit                                         |  |                                   |   |  | 634.0                           |   |  |             |   |  | 634.0        |  
|Distribution costs                                   |  |                                   |   |  | (34.5                           | ) |  |             |   |  | (34.5        | )
|Administrative costs                                 |  | (8.4                               | ) |  | (440.7                          | ) |  |             |   |  | (449.1       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total operating (loss) profit                        |  | (8.4                               | ) |  | 158.8                           |   |  |             |   |  | 150.4        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest payable                                     |  | (100.2                             | ) |  | (248.6                          | ) |  | 152.1        |   |  | (196.7       | )
|Interest receivable                                  |  | 152.1                              |   |  | 2.2                             |   |  | (152.1       | ) |  | 2.2          |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net interest payable                                 |  | 51.9                               |   |  | (246.4                          | ) |  |             |   |  | (194.5       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Profit (loss) on ordinary activities before taxation |  | 43.5                               |   |  | (87.6                           | ) |  |             |   |  | (44.1        | )
|Tax credit on loss on ordinary activities            |  | (15.2                              | ) |  | 8.2                             |   |  |             |   |  | (7.0         | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Profit (loss) for the financial year                 |  | 28.3                               |   |  | (79.4                           | ) |  |             |   |  | (51.1        | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-59



---

##### Table of Contents

YELL GROUP



CONSOLIDATED CASH FLOW STATEMENTS



|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|-------------------------------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                                           |  | Consolidated (Successor)           |  
|                                                                           |  | 22 June 2001 to 31 March 2002      |  
|                                                                           |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                                           |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                                           |  | (in millions)                      |  
|Net cash inflow from operating activities                                  |  |                                   |   |  | 158.7                           |   |  |             |   |  | 158.7        |  
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Returns on investments and servicing of finance                            |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest paid                                                              |  | (2.8                               | ) |  | (83.1                           | ) |  |             |   |  | (85.9        | )
|Finance fees paid                                                          |  | (19.1                              | ) |  | (30.3                           | ) |  |             |   |  | (49.4        | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash outflow for returns on investments and servicing of finance       |  | (21.9                              | ) |  | (113.4                          | ) |  |             |   |  | (135.3       | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Taxation                                                                   |  |                                   |   |  | (0.4                            | ) |  |             |   |  | (0.4         | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Capital expenditure and financial investment                               |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of tangible fixed assets                                          |  |                                   |   |  | (9.7                            | ) |  |             |   |  | (9.7         | )
|Sale of tangible fixed assets                                              |  |                                   |   |  | 1.1                             |   |  |             |   |  | 1.1          |  
|Amounts loaned to subsidiaries                                             |  | (1,019.3                           | ) |  |                                |   |  | 1,019.3      |   |  |             |  
|Investment in subsidiary                                                   |  | (1.0                               | ) |  |                                |   |  | 1.0          |   |  |             |  
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow for capital expenditure and financial investment |  | (1,020.3                           | ) |  | (8.6                            | ) |  | 1,020.3      |   |  | (8.6         | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Acquisitions                                                               |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of subsidiary undertakings, net of cash acquired with subsidiary  |  |                                   |   |  | (1,906.4                        | ) |  |             |   |  | (1,906.4     | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash outflow for acquisitions                                          |  |                                   |   |  | (1,906.4                        | ) |  |             |   |  | (1,906.4     | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow before financing                                 |  | (1,042.2                           | ) |  | (1,870.1                        | ) |  | 1,020.3      |   |  | (1,892.0     | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Financing                                                                  |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Issue of ordinary share capital                                            |  | 1.0                                |   |  | 1.0                             |   |  | (1.0         | ) |  | 1.0          |  
|Proceeds from third-party borrowings                                       |  | 1,002.2                            |   |  | 989.9                           |   |  |             |   |  | 1,992.1      |  
|Proceeds from parent company borrowings                                    |  | 539.0                              |   |  | 1,019.3                         |   |  | (1,019.3     | ) |  | 539.0        |  
|Third-party borrowings repaid                                              |  | (500.0                             | ) |  | (40.0                           | ) |  |             |   |  | (540.0       | )
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash inflow (outflow) from financing                                   |  | 1,042.2                            |   |  | 1,970.2                         |   |  | (1,020.3     | ) |  | 1,992.1      |  
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Increase in net cash in theperiod                                          |  |                                   |   |  | 100.1                           |   |  |             |   |  | 100.1        |  
|                                                                           |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-60



---

##### Table of Contents

YELL GROUP



CONSOLIDATING CASH FLOW STATEMENTS



|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|----------------------------------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                                              |  | Consolidation (Successor)          |  
|                                                                              |  | Year ended 31 March 2003           |  
|                                                                              |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                                              |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                                              |  | (in millions)                      |  
|Net cash (outflow) inflow from operating activities                           |  | (28.3                              | ) |  | 337.4                           |   |  |             |   |  | 309.1        |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Returns on investments and servicing of finance                               |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest received (paid)                                                      |  | 10.3                               |   |  | (149.8                          | ) |  |             |   |  | (139.5       | )
|Finance fees paid                                                             |  | (6.2                               | ) |  | (9.9                            | ) |  |             |   |  | (16.1        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash inflow (outflow) for returns on investments and servicing of finance |  | (4.1                               | ) |  | (159.7                          | ) |  |             |   |  | (155.6       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Taxation                                                                      |  |                                   |   |  | (9.7                            | ) |  |             |   |  | (9.7         | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Capital expenditure and financial investment                                  |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of tangible fixed assets                                             |  |                                   |   |  | (16.0                           | ) |  |             |   |  | (16.0        | )
|Amounts loaned to subsidiaries                                                |  | (53.0                              | ) |  |                                |   |  | 53.0         |   |  |             |  
|Investment in subsidiary                                                      |  | (0.1                               | ) |  |                                |   |  | 0.1          |   |  |             |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow for capital expenditure and financial investment    |  | (53.1                              | ) |  | (16.0                           | ) |  | 53.1         |   |  | (16.0        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Acquisitions                                                                  |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of subsidiary undertakings, net of cash acquired with subsidiary     |  |                                   |   |  | (470.9                          | ) |  |             |   |  | (470.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash outflow for acquisitions                                             |  |                                   |   |  | (470.9                          | ) |  |             |   |  | (470.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow before financing                                    |  | (77.3                              | ) |  | (318.9                          | ) |  | 53.1         |   |  | (343.1       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Financing                                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Issue of ordinary share capital                                               |  | 0.1                                |   |  | 0.1                             |   |  | (0.1         | ) |  | 0.1          |  
|Proceeds from third-party borrowings                                          |  | 173.7                              |   |  | 250.7                           |   |  |             |   |  | 424.4        |  
|Proceeds from parent company borrowings                                       |  | 61.3                               |   |  | 53.0                            |   |  | (53.0        | ) |  | 61.3         |  
|Third-party borrowings repaid                                                 |  | (157.8                             | ) |  | (54.1                           | ) |  |             |   |  | (211.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash inflow (outflow) from financing                                      |  | 77.3                               |   |  | 249.7                           |   |  | (53.1        | ) |  | 273.9        |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Decrease in net cash in theperiod                                             |  |                                   |   |  | (69.2                           | ) |  |             |   |  | (69.2        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-61



---

##### Table of Contents

YELL GROUP



CONSOLIDATING CASH FLOW STATEMENTS



|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|----------------------------------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                                              |  | Consolidation (Successor)          |  
|                                                                              |  | Year ended 31 March 2004           |  
|                                                                              |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                                              |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                                              |  | (in millions)                      |  
|Net cash (outflow) inflow from operating activities                           |  | (15.8                              | ) |  | 269.3                           |   |  |             |   |  | 253.5        |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Returns on investments and servicing of finance                               |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Interest received (paid)                                                      |  |                                   |   |  | (141.8                          | ) |  |             |   |  | (141.8       | )
|Redemption premium paid                                                       |  | (19.7                              | ) |  |                                |   |  |             |   |  | (19.7        | )
|Finance fees paid                                                             |  |                                   |   |  | (16.4                           | ) |  |             |   |  | (16.4        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash inflow (outflow) for returns on investments and servicing of finance |  | (19.7                              | ) |  | (158.2                          | ) |  |             |   |  | (177.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Taxation                                                                      |  |                                   |   |  | (13.7                           | ) |  |             |   |  | (13.7        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Capital expenditure and financial investment                                  |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of tangible fixed assets                                             |  |                                   |   |  | (24.5                           | ) |  |             |   |  | (24.5        | )
|Purchase of shares in parent company                                          |  |                                   |   |  | (5.8                            | ) |  |             |   |  | (5.8         | )
|Amounts loaned to subsidiaries                                                |  | (80.8                              | ) |  |                                |   |  | 80.8         |   |  |             |  
|Investment in subsidiary                                                      |  | (604.4                             | ) |  |                                |   |  | 604.4        |   |  |             |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow for capital expenditure and financial investment    |  | (685.2                             | ) |  | (30.3                           | ) |  | 685.2        |   |  | (30.3        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Acquisitions                                                                  |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Purchase of subsidiary undertakings, net of cash acquired with subsidiary     |  |                                   |   |  | (108.9                          | ) |  |             |   |  | (108.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash outflow for acquisitions                                             |  |                                   |   |  | (108.9                          | ) |  |             |   |  | (108.9       | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash (outflow) inflow before financing                                    |  | (720.7                             | ) |  | (41.8                           | ) |  | 685.2        |   |  | (77.3        | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Financing                                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Issue of ordinary share capital                                               |  | 304.4                              |   |  | 604.4                           |   |  | (604.4       | ) |  | 304.4        |  
|Proceeds from third-party borrowings                                          |  |                                   |   |  | 503.1                           |   |  |             |   |  | 503.1        |  
|Proceeds from parent company borrowings                                       |  | 579.4                              |   |  | 80.8                            |   |  | (80.8        | ) |  | 579.4        |  
|Third-party borrowings repaid                                                 |  | (163.1                             | ) |  | (1,155.3                        | ) |  |             |   |  | (1,318.4     | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net cash inflow (outflow) from financing                                      |  | 720.7                              |   |  | 33.0                            |   |  | (685.2       | ) |  | 68.5         |  
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Decrease in net cash in the year                                              |  |                                   |   |  | (8.8                            | ) |  |             |   |  | (8.8         | )
|                                                                              |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-62



---

##### Table of Contents

YELL GROUP



CONSOLIDATING BALANCE SHEETS



|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|---------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                     |  | Consolidation (Successor)          |  
|                                                     |  | At 31 March 2003                   |  
|                                                     |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                     |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                     |  | (in millions)                      |  
|Fixed assets                                         |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Intangible assets                                    |  |                                   |   |  | 1,824.1                         |   |  |             |   |  | 1,824.1      |  
|Tangible assets                                      |  |                                   |   |  | 47.1                            |   |  |             |   |  | 47.1         |  
|Investment                                           |  | 1.1                                |   |  | 1.9                             |   |  | (1.1         | ) |  | 1.9          |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total fixed assets                                   |  | 1.1                                |   |  | 1,873.1                         |   |  | (1.1         | ) |  | 1,873.1      |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Current assets                                       |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Stock                                                |  |                                   |   |  | 145.8                           |   |  |             |   |  | 145.8        |  
|Debtors                                              |  |                                   |   |  | 461.4                           |   |  |             |   |  | 461.4        |  
|Intercompany debtors                                 |  | 1,306.2                            |   |  | 830.7                           |   |  | (2,136.9     | ) |  |             |  
|Cash at bank and in hand                             |  |                                   |   |  | 30.0                            |   |  |             |   |  | 30.0         |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total current assets                                 |  | 1,306.2                            |   |  | 1,467.9                         |   |  | (2,136.9     | ) |  | 637.2        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Creditors: amounts falling due within one year       |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loans and other borrowings                           |  | (14.1                              | ) |  | (112.8                          | ) |  | 14.1         |   |  | (112.8       | )
|Other creditors                                      |  | (6.4                               | ) |  | (229.5                          | ) |  |             |   |  | (235.9       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total creditors: amounts falling due within one year |  | (20.5                              | ) |  | (342.3                          | ) |  | 14.1         |   |  | (348.7       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net current assets                                   |  | 1,285.7                            |   |  | 1,125.6                         |   |  | (2,122.8     | ) |  | 288.5        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total assets less current liabilities                |  | 1,286.8                            |   |  | 2,998.7                         |   |  | (2,123.9     | ) |  | 2,161.6      |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Creditors: amounts falling due after one year        |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loans and other borrowings                           |  | (478.9                             | ) |  | (1,807.1                        | ) |  |             |   |  | (2,286.0     | )
|Intercompany loans                                   |  | (816.7                             | ) |  | (1,306.1                        | ) |  | 2,122.8      |   |  |             |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total creditors: amounts falling due after one year  |  | (1,295.6                           | ) |  | (3,113.2                        | ) |  | 2,122.8      |   |  | (2,286.0     | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net liabilities                                      |  | (8.8                               | ) |  | (114.5                          | ) |  | (1.1         | ) |  | (124.4       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Capital and reserves                                 |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Share capital                                        |  | 1.1                                |   |  | 1.1                             |   |  | (1.1         | ) |  | 1.1          |  
|Deficit                                              |  | (9.9                               | ) |  | (115.6                          | ) |  |             |   |  | (125.5       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Equity shareholders deficit                         |  | (8.8                               | ) |  | (114.5                          | ) |  | (1.1         | ) |  | (124.4       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-63



---

##### Table of Contents

YELL GROUP



CONSOLIDATING BALANCE SHEETS



|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|---------------------------------------------------- |  | ---------------------------------- | - |  | ------------------------------- | - |  | ------------ | - |  | ------------ | -
|                                                     |  | Consolidation (Successor)          |  
|                                                     |  | At 31 March 2004                   |  
|                                                     |  | Yell Finance B.V.(Issuer of notes) |   |  | Yellow Pages Limited(Guarantor) |   |  | Eliminations |   |  | Consolidated |  
|                                                     |  | £                                  |   |  | £                               |   |  | £            |   |  | £            |  
|                                                     |  | (in millions)                      |  
|Fixed assets                                         |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Intangible assets                                    |  |                                   |   |  | 1,725.3                         |   |  |             |   |  | 1,725.3      |  
|Tangible assets                                      |  |                                   |   |  | 45.9                            |   |  |             |   |  | 45.9         |  
|Investment                                           |  | 605.5                              |   |  | 1.8                             |   |  | (605.5       | ) |  | 1.8          |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total fixed assets                                   |  | 605.5                              |   |  | 1,773.0                         |   |  | (605.5       | ) |  | 1,773.0      |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Current assets                                       |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Stock                                                |  |                                   |   |  | 151.9                           |   |  |             |   |  | 151.9        |  
|Debtors                                              |  |                                   |   |  | 466.4                           |   |  |             |   |  | 466.4        |  
|Intercompany debtors                                 |  | 897.8                              |   |  | 1,644.8                         |   |  | (2,542.6     | ) |  |             |  
|Cash at bank and in hand                             |  |                                   |   |  | 18.4                            |   |  |             |   |  | 18.4         |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total current assets                                 |  | 897.8                              |   |  | 2,281.5                         |   |  | (2,542.6     | ) |  | 636.7        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Creditors: amounts falling due within one year       |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loans and other borrowings                           |  | (41.8                              | ) |  | (127.7                          | ) |  | 41.8         |   |  | (127.7       | )
|Other creditors                                      |  | (7.1                               | ) |  | (219.2                          | ) |  | (4.7         | ) |  | (231.0       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total creditors: amounts falling due within one year |  | (48.9                              | ) |  | (346.9                          | ) |  | 37.1         |   |  | (358.7       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net current assets                                   |  | 848.9                              |   |  | 1,934.6                         |   |  | (2,505.5     | ) |  | 278.0        |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total assets less current liabilities                |  | 1,454.4                            |   |  | 3,707.6                         |   |  | (3,111.0     | ) |  | 2,051.0      |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Creditors: amounts falling due after one year        |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Loans and other borrowings                           |  | (299.3                             | ) |  | (1,687.8                        | ) |  |             |   |  | (1,987.1     | )
|Intercompany loans                                   |  | (831.2                             | ) |  | (1,674.3                        | ) |  | 2,505.5      |   |  |             |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Total creditors: amounts falling due after one year  |  | (1,130.5                           | ) |  | (3,362.1                        | ) |  | 2,505.5      |   |  | (1,987.1     | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Net assets (liabilities)                             |  | 323.9                              |   |  | 345.5                           |   |  | (605.5       | ) |  | 63.9         |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Capital and reserves                                 |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Share capital                                        |  | 305.5                              |   |  | 605.5                           |   |  | (605.5       | ) |  | 305.5        |  
|Funds (deficit)                                      |  | 18.4                               |   |  | (260.0                          | ) |  |             |   |  | (241.6       | )
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  
|Equity shareholders funds                           |  | 323.9                              |   |  | 345.5                           |   |  | (605.5       | ) |  | 63.9         |  
|                                                     |  |                                    |   |  |                                 |   |  |              |   |  |              |  



F-64



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##### Table of Contents

EXHIBIT INDEX



The exhibits filed
with or incorporated by reference into this annual report are listed below.



|1.1 |  | Deed of Incorporation of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.1 to Yell Finance B.V.s Registration Statement on Form F-4 filed with the United
States Securities and Exchange Commission on August 29, 2001, declared effective on August 30, 2001 (the Exchange Offer Registration Statement)).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1.2 |  | Articles of Association of Yell Finance B.V. (incorporated herein by reference to Exhibit 3.2 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------



|1.3 |  | Memorandum of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.3 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------



|1.4 |  | Articles of Association of Yellow Pages Limited (incorporated herein by reference to Exhibit 3.4 to the Exchange Offer Registration Statement).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



|2.1 |  | Indenture relating to 10 3⁄4% Senior Sterling Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as
Trustee (incorporated herein by reference to Exhibit 4.1 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.2 |  | Indenture relating to 10 3⁄4% Senior Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New York, as
Trustee (incorporated herein by reference to Exhibit 4.2 to the Exchange Offer Registration Statement).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.3 |  | Indenture relating to 13 1⁄2% Senior Discount Dollar Notes due 2011, dated August 6, 2001, between Yell Finance B.V., Yellow Pages Limited, as Guarantor, and The Bank of New
York, as Trustee (incorporated herein by reference to Exhibit 4.3 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.4 |  | Registration Rights Agreement, dated August 6, 2001, between Yell Finance B.V. and Yellow Pages Limited, as Guarantor, and Merrill Lynch International, Deutsche Bank AG London, CIBC
World Markets plc, and the other Initial Purchasers as listed on Schedule A of the Purchase Agreement, as Initial Purchasers (incorporated herein by reference to Exhibit 4.4 to the Exchange Offer Registration Statement).*
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.5 |  | Subordination Agreement, dated August 6, 2001, between Yell Finance B.V., Yell Group Limited, as Parent and The Bank of New York, as Trustee (incorporated herein by reference to
Exhibit 4.5 to the Exchange Offer Registration Statement).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.6 |  | Intercreditor Deed, dated June 22, 2001 (as amended on July 11, 2001, March 13, 2002, April 16, 2002, May 31, 2002 and November 11, 2002), with, amongst others, Yell Group plc and
certain of its subsidiaries as Obligors, Yellow Pages Limited as the Guarantor, Yell Finance B.V. as the Issuer of the High Yield Notes. Discount High Yield Notes and Further High Yield Debt, the Institutions named therein as the Senior Finance
Parties and the funds managed or advised by Apax Partners and Hicks Muse (the Intercreditor Deed). (The Intercreditor Deed and amendment prior to November 11, 2002 incorporated herein by reference to Exhibit 2.6 to Yell Finance
B.V.s annual report on Form 20-F filed with the United States Securities and Exchange Commission on July 19, 2002 (the 2002 Annual Report)* and the amendment of November 11, 2002.*
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.7 |  | Form of Sterling Note (incorporated herein by reference to Exhibit 4.7 to the Exchange Offer Registration Statement).*
|--- |  | ----------------------------------------------------------------------------------------------------------------------



|2.8 |  | Form of Dollar Note (incorporated herein by reference to Exhibit 4.8 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------



|2.9 |  | Form of Discount Dollar Note (incorporated herein by reference to Exhibit 4.9 to the Exchange Offer Registration Statement).*
|--- |  | -----------------------------------------------------------------------------------------------------------------------------



|2.10 |  | Form of Guarantee (included in Exhibits 2.7, 2.8 and 2.9) (incorporated herein by reference to Exhibits 4.7, 4.8 and 4.9 to the Exchange Offer Registration Statement).*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.11 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 3⁄4% Senior Sterling Notes due 2011 incorporated herein by reference to Exhibit 4.1 to the
Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.11 to the 2002 Annual Report).*
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|2.12 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 10 3⁄4% Senior Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.2 to the
Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.12 to the 2002 Annual Report).*
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



1



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##### Table of Contents

|2.13 |  | First Supplemental Indenture dated January 18, 2002, to the Indenture relating to 13 1⁄2% Senior Discount Dollar Notes due 2011 incorporated herein by reference to Exhibit 4.3 to
the Exchange Offer Registration Statement (incorporated herein by reference to Exhibit 2.13 to the 2002 Annual Report).*
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.1 |  | Senior Facilities Agreement dated 8 July 2003 (as amended and restated on 12 August 2003 and as further amended and restated on 26 August 2003) among, inter alios, Yell Group
plc, the subsidiaries identified therein as borrowers and guarantors, ABN AMRO Bank N.V. and HSBC Bank plc as joint mandated lead arrangers, the financial institutions named therein as lenders and HSBC Bank plc as facility agent and security
trustee.**
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.2 |  | Security Agreement, dated June 22, 2001, between Yasmin Two (US) Inc. (now known as Yellow Book Holdings, Inc.), Yasmin One (US), Inc. (now known as Yellow Book Group Inc.), Yellow
Book USA, Inc., Yellow Book GP, LLC, Yellow Book of Florida Directories, L.P., Yellow Book of Illinois, LLC, Yellow Book Mid-Atlantic, L.P., Yellow Book of New York, Inc., Yellow Book Southern Directories, LLC, Yellow Book of Pennsylvania, Inc., and
Yellow Book Delaware Inc. (incorporated herein by reference to Exhibit 10.2 to the Exchange Offer Registration Statement).*
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.3 |  | Keep-Well Agreement, dated August 6, 2001 as amended and restated on April 6, 2002, between Yell Group Limited and Yell Finance B.V. (incorporated herein by reference to Exhibit
10.3 to the Exchange Offer Registration Statement) (incorporated herein by reference to Exhibit 4.3 to the 2002 Annual Report).*
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.4 |  | Yellow Book Last Acquisition Agreement dated January 19, 2002 among McLeodUSA Inc. as Parent, Yell Group Limited (now Yell Group plc) and McLeodUSA Holdings, Inc as Seller
(incorporated herein by reference to Exhibit 4.8 to the 2002 Annual Report).*
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.5 |  | McLeod Operating Agreement dated April 16, 2002 (as amended and restated April 28, 2003) among Yell Group Limited (now Yell Group plc), McLeodUSA Inc. and McLeodUSA
Telecommunications Services, Inc (incorporated herein by reference to Exhibit 4.9 to the 2002 Annual Report)* and the amendment and restatement of April 28, 2003 filed herewith.*
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4.6 |  | Directors Service Contract, dated 10 July 2003, between John Condron and Yell Group plc. **
|--- |  | --------------------------------------------------------------------------------------------



|4.7 |  | Directors Service Contract, dated 10 July 2003, between John Davis and Yell Group plc. **
|--- |  | ------------------------------------------------------------------------------------------



|4.8 |  | Stock Sale Agreement, dated as of December 10, 2002, by and among NDC Holdings II, Inc., The Stockholders of NDC Holdings II, Inc., Three Cities Research, Inc., as Sellers
Representative and Yellow Book USA, Inc.*
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|8.1 |  | Subsidiaries of Yell Finance B.V. (please see list of principal subsidiaries under Item 4.C. Information on the CompanyOrganizational Structure of this annual
report on Form 20-F on pages 36-37).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|12.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Condron dated June 8, 2004.**
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



|12.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 302 of the Sarbanes-Oxley Act of 2002 of John Davis dated June 8, 2004.**
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



|13.1 |  | Chief Executive Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|---- |  | -----------------------------------------------------------------------------------------------------------------------



|13.2 |  | Chief Financial Officer certification, dated June 8, 2004, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
|---- |  | -----------------------------------------------------------------------------------------------------------------------



|14.1 |  | Code of Ethics for the Chief Executive and Senior Financial Officers.**
|---- |  | -----------------------------------------------------------------------



---

|* |  | Incorporated by reference.
|- |  | --------------------------

|** |  | Filed herewith.
|-- |  | ---------------



2