PERFORMANCE HIGHLIGHTS

This section reviews the progress made during the year in executing the various elements of our business strategy. The impact of management initiatives on the results of operations and financial condition in 2004 are also discussed in the remaining pages of this MD&A.

We continued to grow our revenue while maintaining our industry-leading margins and significant free cash flow generation. We pursued initiatives to maintain our market-leading position in Canada through the continued execution of our organic growth strategy. Some of the more notable initiatives undertaken during the year are as follows:

• Enhancement of our print product: The binding of the alphabetical business listings to the Yellow Pages™ directory in some markets, the introduction of new advertiser and user features and the redesign of our print directories
• Enhancement of our on-line product: The upgrade of search functionalities of YellowPages.ca™
• Distribution agreement with search engine: The Google agreement making our business listings available on Google Local Canada
• Improvement of the sales force effectiveness: Improved sales coverage and new pricing models

The two-year transition from a wholly-owned subsidiary of Bell Canada to a stand-alone entity ended on November 29, 2004. Notwithstanding this, we continued to focus on business process re-engineering and new technology which has resulted in increased productivity levels and efficiency improvement.

We diversified our funding by implementing a $1 billion shelf offering of Medium Term Notes. Total debt as at December 31, 2004, of approximately $1.2 billion accounts for a solid capital structure with a financial leverage ratio of 2.6 times Adjusted EBITDA, net of cash balances.