message to our shareholders

“we're determined to

Serve
the needs

of Canadian small and
medium businesses

By delivering products and
services that will help them
better manage and grow
their business.”

MARC P. TELLIER
PRESIDENT AND CHIEF EXECUTIVE OFFICER

As we focus on offering effective local search tools to Canadians, we continue to generate valuable business leads to our advertisers.

Needless to say, 2011 was a difficult year for Yellow Media. While we are encouraged by the progress made towards the execution of our strategy, we recognize the challenges associated with our capital structure and industry transformation.

Our industry continues to adapt to a new reality which stems from changes in how consumers look for information and how they fulfill their shopping needs. Indeed, we are increasingly seeing a shift in usage patterns as consumers’ search habits migrate from traditional media to digital alternatives.

While times of change present opportunities, they do not come without challenges or happen overnight. We are building on the changes we have made to our business over the course of the past 10 years including those introduced in 2011 – managed websites, Yellow Pages AnalyticsTM – as well as YellowAPI and other improvements to our online and mobile properties.

By transforming our business and adapting to new market trends, we continue to offer great value to our advertisers in our products and services.

The launch of Yellow Pages 360° Solution during 2011 marked a key milestone in our digital transformation. For the first time, advertisers have single-point access to our comprehensive suite of products and services. Yellow Pages 360° Solution is an opportunity to not only reposition but also to expand our products and services, significantly increasing our addressable market.

The evolution of our products and services ensures that Yellow Media maximizes business opportunities for its advertisers in the context of changing consumer local search habits, therefore optimizing their return on investment. This business transformation brings relevancy to Yellow Media’s product portfolio moving forward and generates growth potential for the Company.

As part of our focus to improve the online user experience and engagement, we are offering more compelling local search alternatives to Canadians across a broad spectrum of print, online and mobile platforms.

OUR CONFIDENCE IN THE FUTURE OF OUR BUSINESS AND OUR STRATEGY IS UNDIMINISHED.

Our objective is to redefine local search by offering timely, complete and relevant content on local merchants on the YellowPages.caTM website and mobile applications as well as by expanding our distribution channels. For advertisers, this will mean more opportunities to increase their visibility and generate valuable business leads.

We serve the needs of more than 340,000 Canadian advertisers — accounting for approximately one-third of all Canadian businesses. Of these, two-thirds are online. YPG has direct relationships with these advertisers through one of the largest face-to-face sales forces in Canada. We invested in these professionals in 2011, and will continue to enhance their skills and digital knowledge so we can deliver superior value to Canadian advertisers.

One of our main goals continues to be to align our capital structure to our operational objectives in order to ensure financial flexibility to execute our business transformation.

Despite progress in Yellow Media’s transformation in 2011, the climate of uncertainty remained. We therefore took actions to protect our business. On July 28, Yellow Media sold Trader Corporation for $702 million, followed by the sale of LesPAC on November 14 for $71 million. Proceeds from these sales are enabling us to focus on our core business, reduce indebtedness and invest in YPG’s continuing transformation. We repaid approximately $800 million of debt during the year.

The Company has begun evaluating alternatives to refinance maturities in 2012 and beyond. In connection with this review, the Board of Directors of Yellow Media has established a committee of independent directors to serve as the Financing Committee of the Company that will oversee this process with the objective of completing any transaction or transactions during the current fiscal year.

The Financing Committee of the Company is comprised of directors Michael T. Boychuk, John R. Gaulding, Anthony G. Miller and Bruce K. Robertson.

Our mobile applications have been downloaded almost 4 million times.

In addition to the creation of the Financing Committee, we are pleased to welcome new directors to our Board. David G. Leith, retired Deputy Chairman of CIBC World Markets and Merchant Banking; Bruce K. Robertson, current Principal at Grandview Capital and Craig Forman, a former executive at EarthLink and Yahoo! have recently joined our Board of Directors.

As we continue our business transformation, it is essential to have the right people and skill sets to support the execution of our digital strategy. Our Board members collectively contribute extensive knowledge in fields such as corporate finance and corporate development and strategy within the technology, media and telecom industries. Their experience will benefit our Company as we continue to lead our industry transformation in Canada.

We will build on the investments we have made in our business and continue to embrace technology in order to adapt our business model to the new digital market reality.

Our business transformation allows us to ensure relevancy of our product and service portfolio moving forward, maximizing business opportunities for our advertisers and in turn generating growth potential for the Company.

Investing to better serve advertisers and consumers

The launch of 360° Solution early in 2011 enabled us to reposition our value proposition. 360° Solution is a comprehensive offer, with all the components of a complete media solution for Canadian businesses. It is central in enabling our advertisers to be found by qualified buyers with online, mobile and print choices. Our sales professionals are now better equipped to offer the right solutions that fit our advertisers’ evolving needs.

During the year, we further strengthened our offering with mobile placement, which enables advertisers to rank higher on consumers’ mobile searches.

As we respond to changes in consumer behaviour, we invested in more powerful mobile search platforms that give our advertisers greater opportunities for visibility. Our mobile applications have been downloaded 3.7 million times and mobile searches continue to grow.

We provide businesses with turn-key Websites and search engine solutions to optimize their online marketing investment.

We also focused on website creation and management, as research shows that approximately half of Canadian SMEs don’t have a website, and those who do are seeking help to improve or optimize it.

Our network of online sites reaches 38% of Canada’s online population. We remain focused on improving the user experience on our digital properties. Our goal is to leverage richer content on local merchants which increases the engagement of online and mobile users ultimately driving increased business leads. In 2011 we invested in YellowPages.ca and ramped-up its performance. It provides great advertiser value through improved fulfillment and lead generation. We also repositioned RedFlagDeals.com, our deals destination site, with richer content to support avid bargain hunters.

Complementing Yellow Pages Group’s SME strategy, Mediative continues to serve the needs of national advertisers. Award-winning Mediative is now among North America’s largest integrated advertising and digital marketing companies, with a client list that includes some of the world’s most-recognized brands.

Focusing on execution

In the year ahead, we will focus on operational excellence to deliver superior customer value. This means delivering on the full potential of 360° Solution, as well as offering a superior consumer experience on all our platforms. We will be investing in our properties to bring more benefits to consumers and grow traffic and business leads to our advertisers. We will introduce differentiated products and services for larger advertisers, increase sales support effectiveness by introducing improved sales tools and simplified order processing, and improve operational execution in fulfillment, billing and support.

Our confidence in Yellow Media’s fundamentals and strategy remains strong. We recognize that while our business transformation is well underway, it will be a journey. Nevertheless, we remain committed to creating Canada’s industry-leading digital media company.

MARC L. REISCH
Chairman of the Board
MARC P. TELLIER
President and Chief Executive Officer
Year in Review