Vodafone - 20-F annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F


o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: March 31, 2011


o		TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report:

For the transition period from: to

Commission file number: 001-10086

VODAFONE GROUP PUBLIC LIMITED COMPANY

(Exact name of Registrant as specified in its charter)

England
(Jurisdiction of incorporation or organization)

Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
(Address of principal executive offices)

Rosemary Martin (Group General Counsel and Company Secretary)
tel +44 (0) 1635 33251, fax +44 (0) 1635 580 857

Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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


		Name of each exchange
Title of each class		on which registered
See Schedule A		See Schedule A

Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None

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.


Ordinary Shares of 11 3/7 US cents each			51,577,525,830
7% Cumulative Fixed Rate Shares of £1 each			50,000

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act

Yes þ No o

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes o No þ

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:

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


US GAAP o	International Financial Reporting þ	Other o
	Standards as issued by the
	International Accounting
	Standards Board

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

SCHEDULE A


		Name of each exchange
Title of each class		on which registered
Ordinary shares of 11 3/7 US cents each		NASDAQ Global Select Market^*
American Depositary Shares (evidenced by American Depositary Receipts) each representing ten ordinary shares		NASDAQ Global Select Market
5.00% Notes due December 2013		New York Stock Exchange
4.150% Notes due June 2014		New York Stock Exchange
5.375% Notes due January 2015		New York Stock Exchange
5% Notes due September 2015		New York Stock Exchange
3.375% Notes due November 2015		New York Stock Exchange
2.875% Notes March 2016		New York Stock Exchange
5.75% Notes March 2016		New York Stock Exchange
5.625% Notes due February 2017		New York Stock Exchange
4.625% Notes due July 2018		New York Stock Exchange
5.450% Notes due June 2019		New York Stock Exchange
4.375% Notes due March 2021		New York Stock Exchange
7.875% Notes due February 2030		New York Stock Exchange
6.25% Notes due November 2032		New York Stock Exchange
6.15% Notes due February 2037		New York Stock Exchange

Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

Vodafone GroupAnnual Report on Form 20-FFortheyearended31 March 2011power to you

Delivering a more valuable VodafoneGroup highlights for the 2011 financial year^ A ^ ^\ I ^^ ^^ ^ ^^ L^. u^ ^^7 ^\ U^. k*^ This constitutes the annual report on Form 20-F of Vodafone Group Pic ^™ £j. ^^ ^y [j | I f^ [j [^ ^™ / I I [j | (the ‘Company’) in accordance with the requirements of the US ^^^,,^L^1 ‘ l™ ‘ ¦ •^l^1¦ U f tVL/l I Securities and Exchange Commission (the’SEC’) for the year endedRevenue Adjusted Operating profit Free Cash flOW31 March 2011 and is dated l June 2011. This document contains certain 3 2% growth 31% growth 2 7% decrease information set out within the Company’s annual report in accordance with International Financial Reporting Standards (‘I FRS’) and with those parts of the UK Companies Act 2006 applicable to companies re porting ^£^7f\ Qm Q Of^P> under IFRS, dated 17 May 2011, as updated or supplemented ifJj f ^^» jy I ^J« Z/ ^^ L/ necessary. Details of events occurring subsequent to the approval of the ., ... _ . .. . . r. annual report on 17 May 2011 are summarise don page A-l. The contentMODIle CUStOmerS lOtal dividends _of _tne Group’swebsite (www.vodafone.com) should not be considered 14.5% growth 7.1% growth to form part of this annual report on Form 20-F.

Vodafone Group Plc Annual Report 2011 1

Highlights of the year

•		Group revenue increased 3.2% to £45.9 billion with a strong result from emerging markets and signs of renewed growth in some parts of Europe.

•		Adjusted operating profit rose 3.1% to £11.8 billion, supported by a good performance from our US associate, Verizon Wireless.

•		Free cash flow of £7.0 billion, reflecting consistent levels of capital expenditure and strong working capital performance.

•		£14.2 billion expected to be raised from agreed disposals of interests in China Mobile (China), SoftBank (Japan) and, after year end, SFR (France).

•		Total dividends per share of 8.90 pence, up 7.1% in line with our dividend per share growth target. £6.8 billion committed to share buybacks.

Our new strategy

In November 2010 we unveiled an updated strategy to move us from ‘A Stronger Vodafone’ to ‘A More Valuable Vodafone’. The new strategy is composed of four main elements:

Focus on key areas of growth potential

Mobile data, emerging markets, enterprise, total communications and new services.

Deliver value and efficiency from scale

Using our size and scale to drive cost efficiencies and operational effectiveness.

Generate liquidity or free cash flow from non-controlled interests

Releasing liquidity and free cash flow from minority stakes and investments.

Apply rigorous capital discipline to investment decisions

Allocating capital to maximise shareholder value.

Find out more on pages 12 to 27

You can visit our online annual report at:

www.vodafone.com/investor


Contents

Business review^#
2		About us
4		Vodafone at a glance
6		Chairman’s statement
8		Mobile telecommunications industry
10		Chief Executive’s review
12		Strategy in action
28		Key market review
30		Sustainable business
32		People

Performance^#
34		Operating results
44		Guidance
45		Principal risk factors and uncertainties
47		Financial position and resources

Governance^#
52		Board of directors and Group management
55		Corporate governance
62		Directors’ remuneration

Financials
74		Contents
75		Directors’ statement of responsibility^#
76		Audit report on internal controls
77		Critical accounting estimates
79		Audit report on the consolidated financial statements
80		Consolidated financial statements

Additional information
132		Shareholder information^#
139		History and development^#
140		Regulation^#
143		Non-GAAP information^#
146		Form 20-F cross reference guide
148		Forward-looking statements
149		Definition of terms
151		Selected financial data
		Exhibit 1.1
		Exhibit 4.2
		Exhibit 4.3
		Exhibit 4.4
		Exhibit 4.6
		Exhibit 4.7
		Exhibit 4.8
		Exhibit 4.35
		Exhibit 4.36
		Exhibit 7
		Exhibit 12
		Exhibit 13
		Exhibit 15.1
		Exhibit 15.2

^# These sections make up the directors’ report

The terms ‘Vodafone’, the ‘Group’, ‘we’, ‘our’ and ‘us’ refer to the Company and, as applicable, its subsidiaries and/or interests in joint ventures and associates.

Unless otherwise stated references: to ‘year’ or ‘2011’ mean the financial year ended 31 March 2011; to ‘2010’ or ‘previous year’ mean the financial year ended 31 March 2010; to the ‘third quarter’, ‘previous quarter’ or ‘Q3’ are to the quarter ended 31 December 2010; and to the ‘fourth quarter’ or ‘Q4’ are to the quarter ended 31 March 2011.

All amounts marked with an ‘(*)’ represent organic growth which presents performance on a comparable basis, both in terms of merger and acquisition activity and foreign exchange rates.

Definitions of terms used throughout the report can be found on page 149.

This report is dated 17 June 2011.

2 Vodafone Group Pic Annual Report 2011

About us

A business intent on meeting all our customers’ communication needsTechnologies and resourcesThe latest technologies offering our best customer experienceNetwork infrastructureWe have one of the Largest mobile foot prints in the world with more than 224,000 base station sites. During the year our networks carried around 850 billion minutes of voice traffic (equivalent to 208 minutes per month, per customer) and 161 peta bytes of data equivalent to downloading over 1,400 three minute video clips every second.Network performanceWe continue to invest around £6 billion a year to maintain leadership of our networks. Tests show that in the Europe region, Vodacom and Egypt, Vodafone offers peak user data downlink speeds which are on average 40% faster than our best competitors.Research and development (‘R&D’)We drive innovation through new technologies and enhancements to existing capabilities. This yearR&Dexpenditureamounted to £287 million.Customer support technologiesOur billing and customer relationship management systems are being enhanced to enable our customers to manage a single account, with a single bill, for multiple devices or for several people.Customer serviceWe are redesigning and improving our customer care, retail presence and online service to ensure that customers get the best data experience with Vodafone.Licences and spectrumLicences and spectrum enable us to deliver fixed and mobile communications services in certain markets. During the year we acquired additional licences and spectrum in several markets, including India for third generation C3G0 services and Germany for the provision of fourth generation C4G’) or’LTE’ services, to enhance the speed, coverage and quality of voice and data services in those markets.Strategic agreementsWe work closely with some of the world’s leading companies to deliver innovative products and services to our customers. Our agreement swith Samsung, Google®, Microsoft®, HTC and others have enabled us to be first to market with cutting-edge smart devices. We now distribute the Apple iPad in the UK and to our enterprise customers in Europe. For enterprise customers, in partnership with Microsoft we provide the Microsoft Online suite which provides hosted email, conferencing and collaboration services. In conjunction with RIM® and Nokia, Vodafone customers using smartphones will be able to securely pay for applications via their Vodafone bill.BrandAccording to Brand Finance pic, the Vodafone brand has risen to become the fifth most valuable brand in the world. In the 2010 calendar year we renewed our title partnership with the Vodafone McLaren Mercedes Formula One team. It has been a strong year for the sponsorship with increased television viewing figures and a greater exposure.PeopleWe employed approximately 83,900 people worldwide during the year, compared to 85,000 the previous year.Employees by activity (%)

DistributionA broad range of channels through which customers can access our services and productsDirect channelsWe directly own and manage about 2,200 stores around the world and we also havearound 10,300 Vodafone-branded stores run through franchise and exclusive deaLerarrangements. In most of our Local markets sales forces also sell direct to enterprise customers.Vodafone Group Pic Annual Report 2011 3Indirect channelsThe level of indirect distribution varies between markets and may include using third party service providers, independent dealers, distributors and retailers.OnlineThe internet has also become an increasingly powerfuland cost-effective distribution channel. 51% of ou r Europea n contract customers receive their bills online.ServicesServices to meet all our customers’ needsVoiceWe are one of the largest carriers of mobile voice traffic in the world providing domestic, intemationaland roamingvoice services to more than 370 million customers.MessagingOur networks sent and received over 292 billion text, picture, musicand video messagesthisyear.DataMore than 75 million customers buy our mobile data services which allowaccess to the internet, emailand applications on their phones, tablets, laptops and netbooks.Fixed lineOver six million customers use ourfixed broadband services in 13 markets to meet theirtotal communications needs. In addition, through Gateway, we provide wholesale carrier services to more than 40 African countries.Other service revenueThis includes business managed services, such assecure remote networkaccess,and revenue from mobile virtual networkoperators generated from selling access to our networkat the wholesale level.Service revenue by type (%) DevicesEnsuring that our services are available through multiple platformsSmartphones and tabletsThese have advanced capabilities including access to email, the internet and mobile applications such as Google Maps™ and Facebook. Smartphones nowaccountfor 19% of the total number of phones used by ourcustomers in Europe. We now supply the iPhone in 19 markets.Vodafone branded handsetsWe are making Vodafone designed handsets available to mass market audiences while offering differentiated experiences. During the year 14 new handsets were released under our own brandand we shipped 5.8 million.Other connected devicesIn addition to handsets, we supply a range of innovative connected smart devices. During the year we launched our first ever USB stick based on 4G/LTE technology and Vodafone WebBox which enables customers to connectto the internet using existing television sets by simply plugging in a keyboard with an embedded mobile SIM.4G/LTE mobile broadband USB stickThe Samsung GT-B3740, is our first ever 4G/LTE network device which enables customers to experience super-fast mobile broadband.

4 VodafoneGroup Pic Annual Report 2011
Vodafone at a glance

We are one of the world’s largest mobile communications companies by revenueBasestation VodafoneM-PesaWe are leaders in data networks with over 66,000 3G sites delivering Over 20 million people, mainly in emerging markets, use this service to high speed mobile broadband capability. send and receive money using their mobile phones. More on page 20.Partner marketsPartner markets extend our reach outside our equity investments by entering into a partnership agreement with a Local mobile operator, enabling a range of our global products and services to be marketed in that operator’s territory. Under the terms of these partner market agreements we cooperate with our partners in the development and marketing of certain servicesand products.These partnerships create additional revenue through fees paid by the partners for access to VodafoneGroup products, servicesand our brand portfolio without the need for equity investment. As part of the agreement for the sale of Vodafone’s interest in SFR to Vivendi, we have entered intoan agreement with SFR which will continue our commercial cooperation and willallowus to continue to deliver cross-border services to customers across the major markets of western Europe. Over 40Partner markets

Vodafone Group Pic Annual Report 2011 5Our mobile subsidiariesand joint venture Our subsidiariesand joint ventures in AMAP in Europe operate underthe brand name operate underthe’Vodafone’ brand, or in the ‘Vodafone’ and our major fixed Line businesses case of Vodacom and its mobile subsidiaries, operate as’Vodafone’or in the case of Italy as’Vodacom’and’Gateway’brands. In India as ‘TeleTu’ or in Spain as Tele2’. we operate as ‘Vodafone Essar’. Our associate in Kenya operates as ‘Safaricom’. 2.5% decrease 20.0% growth Revenue™ £32.0t>n (2010:£32.8bn) (2010:£11.1bn) 9.8% decrease 55.5% growthAdjusted operating profit(1) £5.7bn £1.3bn(2010:£6.4bn) (2010:£0.8bn) stable 6.2% growthCapital expenditure"' £3.7bn £2.2bn(2010:£3.7bn) (2010:£2.1bn) 9.2% decrease 53.7% growthOperating free cash flow(1) £7.5bn £2.4bn(2010:£8.2bn) (2010:£1.6bn) Mobile customers by market(2) MiLLions .MiLLi°nsGermany 36.7 India 134.6Italy 23.4 Vodacom 43.5UK 19.1 Egypt 31.8Spain 17.3 Australia 3.6Turkey 16.8 Ghana 3.0Romania 9.2 New Zealand 2.5Portugal 6.1 Qatar 0.8Netherlands 5.0 Fiji 0.3Greece 3.9 Total 220.1Czech Republic 3.2Notes: -— —y^— Vodacom consists of:(DThesumoftheseamountsdonotequaLGrouptotaLsdue ^—±- ’ SouthAfrica 26 5to Non-Controlled Interests and Common Functions and Ireland 2.2 —: r~r. —:— ~tt~ Tanzania 8.9 ntercompanyelimmations. Albania 1 6(2) Controlled and jointly controlled businesses. Excludes _M ^— —^~ Democratic Republic of Congo 4.23.4millioncustomersrepresentingtheGroup’sshareof —‘- Mozambique 3.1customers inour Polish jointventure Polkomtel which Total 147.4 Lesotho 0~8 s in our Non-Controlled Interests and Common Functions segment. n addition to the above, our associate Safaricom had 6.9 million mobile customers based on our percentage ownership.Non-Controlledlnterestsarebusinessesin Business Country Ownership at 51 Ma rch 2011 C~7 AY\r\which we have an equity interest but do not Verizon Wireless US 45.0% t/iTUlhavemanagementcontrol.Weaimtomaximise Agreed proceeds cpD Franrp AA O0/^thevalueoftheseinterestseitherbygenerating r^J name HH,U^°fromthesaleofliquidityorincreasingfreecashflow.Duringthe Polkomtel Poland 24.4% Non-ControlledyearwesoldourinterestsinChinaMobileand ,,,- .., ₄.,,, ... . ._Ma “ Interests i. ,^ , .. . .,_,,,,., . BhartiAirtel India 4.4%u’ SoftBankandmApnl2011 weannouncedan agreementtosellour44%interestinSFR. China Mobile China Sold’5‘SoftBank Japan SoldM> Common Functions primarily represent the resultsofthe partner marketsand the net result Notes:ofunallOCatedcentralGroupCOStS. (1) SaleannouncedinApril2011. (2) Indirect interest. (3) We previously held a 3.2% interest in China Mobile Limited. (4) Our interests previously included loan notes and receivables issued by SoftBank.

6 VodafoneGroup Pic Annual Report 2011

Chairman’s statement

“lleaveVodafone Dividend per share (pence) with huge optimism ^^^ ^^H ^^h for its future”2009 2010 2011Improving operational performance shareholder return for the year was 23%, compared to 8% for After the macroeconomic shocks of the previous financial theFTSE100. year and the business challenges that accompanied them, our overall operating environment did not deteriorate further Tax policyduring theyear. Most markets saw economic growth recover, During the year, the Group has been involved in two high although southern Europe remained weaker. profile tax cases in the UK and India. Our tax policy is straightforward: we pay taxes that are due in the countries Within this context, the Group has performed well. Weachieved where we make profits or record capital gains in line with the organic service revenue growth of 2.1%<*>, a significant change prevailing legislation of those jurisdictions, in momentum from last year’s 1.6%(,) decline.Our peopleOur adjusted operating profit was up 3.1% at £11.8 billion, I am proud to say every year that our people all around the reflecting a stable performance in our controlled operations world are absolutely committed to serving our customers and strong growth in the contribution from Verizon Wireless, and are often the difference between Vodafone and our our US associate. competitors. However, this year I must highlight the extraordinary commitment and dedication shown to Data has been the key driver of growth over the last year. Our maintaining services to customers in two of our markets customers around the world are increasingly drawn to the in extremis, experience of the mobile internet and related services. Organic data revenue growth was 26.4%<*> achieved through In Egypt, our employees risked their personal safety in a very combining increasingly disciplined pricing structures with a volatile environment to keep the network up and running at broad range of devices and a network with a deserved a time when mobile communication was more important reputation for market-leading speed and reliability. than ever, keeping the voice network outage to less than 24 hours. We have continued to make substantial investments in our infrastructure to maintain our advantage over our peers, with a In New Zealand, our people responded magnificently to the total capital expenditure outlay of £6.2 billion during the year, earthquake that devastated Christchurch in February 2011. The Group, however, remains highly cash generative, with free They ensured network coverage was maintained 24 hours a cash flowfortheyeartotalling £7.0 billion. day despite major power outages and structural damage, and managed unprecedented levels of demand as the mobileDelivering value from non-controlled interests phone became the primary means of communication for the The Board remains committed to achieving full value from people of Christchurch and the rescue services. The team the non-controlled interests within the Group. This has been worked around the clock to ensure the safety of our own staff an ongoing process, starting with the disposals of our and to provide temporary stores and subsidised packages to interests in Belgacom and Swisscom five years ago, but support customers’communications needs, inevitably pausing during the financial crisis when asset prices were depressed. During the year, we successfully The Vodafone Foundationdisposed of our holdings in China Mobile Limited and We have continued to fund the good work of the Vodafone SoftBank, generating proceeds of £7.4 billion. Just after the Foundation. Through the Vodafone Foundation and our year end, we were pleased to announce the sale of our 44% network of national affi liate foundations we support interestinSFR.thenumbertwomobileoperatorinFrance. communities and societies in the countries in which we operate. In this financialyear we invested a total of £50 millionIncreasing shareholder returns in foundation programmesand social causes. This time last year the Board put in place a target to growtotal dividends per share by at least 7% per annum over the Our World of Difference programme is now in 20 countries following three years, and I am pleased to announce a 7.1% and has so far enabled 1,500 people to take paid time to work increaseinthefinaldividendfortheMarch2011 year.givinga for a charitable purpose of their choice in their own total payout for theyear of 8.90 pence. community or in a developing country. In addition, from the proceeds from our portfolio Our Mobiles for Good programme, combining our rationalisation, we have committed £6.8 billion to share technology with our giving, saw the launch of Instant buyback programmes. Combined with the dividend, this Network, a partnership with Telecoms Sans Frontieres which takes total committed shareholder returns during the year enables a network to be deployed from three suitcases, to £15.7 billion, or 17% of our market capitalisation at covering10sqkmforusageofupto12,000people.Fieldtrials 31 March 2011. Including share price appreciation, our total are currently underway.

Vodafone Group Pic Annual Report 2011 7Vodafone total shareholder return(2011 financialyear)FTSE100 total shareholder return(2011 financialyear)Vodafone share price vs FTSE 100— Vodafone (share price in pence) — FTSE 100 index 200 7000180 xl!L~*y fcA. ^! 625°120 ™ 40001 Apr 10 1 Jun 10 1 Aug 10 1 Oct 10 1 Dec 10 1 Feb 11 1 Apr 1’ Acrossthe Group we continue to promote text giving, enabling mobile networksthatlead the industryforspeedand reliability, our customers to give money simply and free of charge Thiswillbecrucialascustomers’expectationsgrowinlinewith to support charitable appeals following disasters. Using this their data usage, platform we raised over NZ$1.3 million for the Red Cross to supportthepeopleofChristchurch. Furthermore, we have continually assessed the risks and opportunities of having capital deployed in some of ourThe Board non-controlled interests. This is particularly true of Verizon During the year the Board appointed Renee James as a Wireless, from which we have not received a dividend (other non-executive director. Renee is Senior Vice President and than tax related dividend receipts) for six years. It would General Manager of the Software and Services Group for arguably have been easier to sell our stake along the way, but Intel Corporation. She joined the Board in January 2011 and it our decision to remain invested has been strongly vindicated is clear that her industry knowledge and expertise will make by its exceptional operating performance and strong cash a strong contribution to the Group through another period generation,whichhaveledtoasignificantincreaseinthevalue of rapid technological change. of the asset. The Board welcomed the publication in February of the Our approach has led to strong returns to shareholders over Davies Review on Women on Boards and, in line with its the last five years. Total shareholder return since July 2006 recommendations, it is our aspiration to have a minimum has been 85%, compared to 22% for the FTSE 100 and 6% for of 25% female representation on the Board by 2015. The theMSCIGlobalTelecoms Index. Financial Reporting Council is currently consulting on changes to the UK Corporate Governance Code including I am delighted to welcome Gerard Kleisterlee as Vodafone’s a recommendation that companies adopt a boardroom new Chairman. As CEO of Philips, Gerard spent ten successful diversity policy; we expect to comply with any such years at the helm of an international consumer technology recommendation. The Board recognises the importance of business, and the Group is certain to make continued good gender balance throughout the Group and continues to progress under his stewardship. I wish him, and the Group, all support our CEO, Vittorio Colao, in his efforts to build a thebestforthefuture. diverse organisation. Further information can be found in the Corporate Governance section of this report. After five years as Chairman I am retiring from the Board at :—J the AGM in July. It has been a privilege to chaira Board of such f^~ "^5? jC diverse and rich experience, and to help steer the Group through the challenges of a dynamicindustryandan uncertain Sir John Bondeconomic environment. Chairman As a Board, our goal has always been to make the right decisions based on the long-term opportunities for the business. As a result, we now have an established presence in a number of emerging markets that offer attractive potential for sustained growth; and our commitment to maintaining investment throughout the economic cycle means we have

8 VodafoneGroup Pic Annual Report 2011

Mobile telecommunications industry

An industry with 5.6 billion customers with growth driven by increasing global demand for data services and rising mobile penetration in emerging marketsRevenue and customers Competition and regulation ¦ The mobile industry generates around ¦ There are typically between three to five mobile US$900 billion of annual revenue and accounts network operators per market, although in for around 1.5% of world GDP. some markets, such as India, there are ¦ There are 5.6 billion mobile customers which is considerably more. equivalent to around 80% of the world population. ¦ Regulators continue to seek to impose policies ¦ Approximately 75% of mobile customers are in to lower the cost of access to mobile networks, emerging markets such as India and China.Mobile services account for around 60% of The telecommunications industry is competitive with telecommunications revenue with the remainder coming consumers having a large choice of mobile and fixed line from fixed. Within mobile the majority of income comes operators from which to select services. Newer competitors, from voice calls in mature markets such as Europe. However, including handset manufacturers, internet companies and the fastest growing revenue segment is data services software providers, are also entering the market offering such as access to the internet through laptops, tablets integrated communication services, andsmartphones. Industry regulators continue to impose lower mobile The number of mobilecustomersfarexceedsotherformsof termination rates (the fees mobile companies charge for electronic communication. Only 1.3 billion people have calls received from other companies’networks) and lower fixed line telephones, 2.1 billion have access to the internet roaming prices. and 1.2 billion have televisions. The combination of competition and regulatory pressures The mobile proportion of voice calls has increased overthe contributed to a 10% decline in the global average price per last five years and now accounts for 82% of all calls made, minute in the 2010 calendaryear. However, price pressures are with the remainder over fixed lines, reflecting the benefits being partly offset by increased mobile usage leading to a 6% of mobility, lower cost handsetsand cheaper calling plans. increase in mobile service revenue overthesame period.Mobile customers Mobile penetrationMarch 2011: 5.6 billion (%) March 2011 (%) The industry data on pages 8 and 9 has been sourced from Wireless Intelligence, Strategy Analytics, Merrill Lynch, Informa WCIS and CISCO.

Vodafone Group Pic Annual Report 2011 9 A growing industry ^^^^^^^^^ Data traffic has more j than doubled year- | ^^_J ‘ ^^m ff! ^_^_ on-yeardue to usage | i I ]W^ _ ^ mEmHs/St M of smart connected ‘^*™"-1^"^ JT ! [ I devices and significant I ^fc- H ^^¦¦—I progress in mobile *.-¦¦ ^^^^M ^^^^^Ktf “^t^^ .”—>. “^""^(^Mobile data and networks Emerging markets¦ Mobile data traffic is driving revenue growth. ¦ Mobile phone usage continues to grow rapidly.¦ Network speeds are increasing dramatically ¦ Data represents a significant growth opportunity, because of improving technology.¦ The pace of product innovation remains high.In 2006 data accounted for 3% of industry revenue, in 2010 Thenumberofcustomersusingmobileservicesinemerging it reached 13% and by 2014 it is expected to be 21%. Demand markets such as India and Africa has grown rapidly over is being driven by the widening range of smart connected the Last ten years, increasing by over 17 times, compared devices, such as mobile broadband sticks, smartphones and to nearly 130% in more mature markets such as Europe, tablets, greater network speeds and an increased range of The key driver of growth has been a fundamental need applications with greater functionality. Smartphone sales for communication services against a background of often grew by 66% in the 2010 calendar year, compared to a 16% low quality alternative fixed line infrastructure and strong increase in the 2009 calendar year, and are expected to economic growth, continue to grow due to lower entry prices, device innovation and attractive applications. Most of the future growth in mobile customers is expected to continue to be in emerging markets where Today’s 3G networks offer typically achieved data download mobile penetration is only around 70% compared to speeds of up to 4 Mbps which is around 100 times faster than approximately 130% in mature markets such as Europe, that delivered by 2G networks ten years ago. The industry has supported by the expectation of continued strong recently begun to deploy 4G/LTE networks which will provide economic growth, typically achieved rates of up to 12 Mbps, depending on the capabilityofthedevicesandthenetwork. Data also represents a substantial growth opportunity in emerging markets both in terms of mobile broadband and Device innovation is a key feature of our industry. Recent mobile internet services. It is being driven partly by the lack developments include femtocells which enhance customers’ of fixed line broadband infrastructure but also by locally indoor 3G signals via a fixed line broadband connection and relevant content and services in local languages, and mobile Wi-Fi devices which allow customers to share their software innovations that give customers a high-quality mobile broadband connection with others. mobile internet experience on affordable handsets.Mobile data demand is being accelerated by devices Emerging market customer growth will be driven by and network improvements rising mobile penetration and GDP growth¦ Market customers growth2006 2010 (2010-2014 estimated cumulative annual growth rate) (%) Smartphone share of industry handset _18%shipments (%) 8 21 ^^^^^^^^h Typically achieved data download speeds (Mbps) 2.2 4 I 6% 1A I South Africa Egypt India The industry data on pages 8 and 9 has been sourced from Wireless Intelligence, Strategy Analytics, Merrill Lynch, Informa WCIS and CISCO.

10 VodafoneGroup Pic Annual Report 2011

Chief Executive’s review

“We are gaining or holding market share in most of our major markets and are Leading our competitors in the drive to migrate customers to smartphones and data packages.” Financial review of the year EuropeWe have performed well this year, combining a better OrganicservicerevenueinEuropewasdown0.4%<*)duringthe operational performance with good strategic progress, year and down 0.8%<*> in Q4. This represents a good recovery Organic service revenue growth improved during the year, on last year (-3.8%)(,) and is the result of two different trends: with a strong result from emerging markets and signs of the more stable economies of northern Europe (Germany, UK, renewed growth in some parts of Europe. Netherlands) were up 2.7%<*>, while the rest of Europe was down 2.9%<*> as a result of the ongoing macroeconomic Customers have adopted data services in increasing numbers, challenges. Data revenue growth continued to be strong, but as smartphones proliferate and the tablet market begins wasoffsetbycontinuedvoicepricedeclinesandcutstomobile to take off. Our network investment is becoming a key termination rates CMTRs’). differentiator, as we are leading the migration to smartphones in most of our European operations. Through this and our Organic adjusted EBITDA for Europe was down 3.7%<*>and continued stronger commercial focus, we are growing our the adjusted EBITDA margin fell 1.7 percentage points as a market share again in most of our markets. result of the decline in revenue, ongoing competitive activity and higher commercial costs as we accelerated However, markets remain competitive and the economic smartphoneadoption, environment, particularly across southern Europe, is challenging. We continue to keep a tight rein on costs AMAPand working capital, allowing us to maintain our levels Organic service revenue growth in AMAP was 9.5%<*>, of investment while again delivering a strong free cash accelerating through the year to a level of 11.8%(*) in Q4. Our flow performance. two major businesses, India and Vodacom, reported growth of 16.2%(,) and 5.8%(,) respectively. Our performance in India has Group revenue for the year was up 3.2% to £45.9 billion, with been driven by increasing voice penetration and a more stable Group service revenue up 2.1%<*> on an organic basis and up pricingenvironment.lnSouthAfrica.Vodacomcontinuestobe 2.5%<*> in Q4. Group adjusted EBITDA margin fell 1.1 percentage highly successful in promoting data services, points, reflecting continuing weakness across southern Europe, higher growth in lower margin markets, and the Organic adjusted EBITDA was up 75%<*> with adjusted EBITDA increased investment in migrating customers to higher value margin falling 0.6 percentage points”. The two main factors smartphones.Asaresult,adjustedEBITDAfell0.4%year-on-year. behind the margin decline were the adverse impact from higher recurring licence fee costs in India and the change in Group adjusted operating profit rose 3.1% to £11.8 billion, at regional mixfrom the strong growth in India, the top end of our guidance range after allowing for currency exchange rate movements and despite the additional costs Verizon Wirelessincurred by Verizon Wireless’s iPhone launch. The main Our US associate, Verizon Wireless, has continued to perform drivers were good growth in the Africa, Middle East and Asia strongly. Organic service revenue was up 5.8%(,) and adjusted Pacific region (AMAP’) and a strong performance from EBITDA was up 6.7%< *>, with good growth in customers and Verizon Wireless. strong data take-up. In Q4, Verizon Wireless launched a CDMA version of the iPhone, ending the exclusivity of its main We recorded impairment charges of £6.1 billion relating to competitor. Our share of profits from Verizon Wireless our businesses in Spain, Greece, Portugal, Italy and Ireland amounted to £4.6 billion, up 8.5%(,). which were primarily driven by higher discount rates given sharply increased interest rates. The impairment in Spain Delivering a more valuable Vodafonerepresentedapproximatelyhalfofthetotal. In November 2010 we announced an updated strategy designed to build on the progress made during my first two Free cash flow was £7.0 billion, at the top end of our medium- years as CEO. There are four main elements to the strategy to term guidance as a result of our continued financial discipline builda more valuable Vodafone: and a strong working capital performance. Capital expenditure was £6.2 billion, broadly flat on last year and in line with our ¦ Focus on key areas of growth potential; target, as we focused on widening our data coverage and ¦ Delivervalueandefficiencyfromscale; improving network performance. ¦ Generate liquidity or free cash flowfrom non-controlled interests; and Adjusted earnings per share was 16.75 pence, up 4.0% on last ¦ Apply rigorous capital discipline to investment decisions, year, reflecting higher profitability and lower shares in issue as a result of the ongoing £2.8 billion buyback programme. I am pleased to say that we are making good progress in The Board is recommending a final dividend per share of each area. 6.05 pence, to give total dividends per share for the year of 8.90 pence, up 71%year-on-year.

VodafoneGroup Pic Annual Report 2011 11Group organic service revenue growth (%) 2.1 ((0.3) | ^^A M S¦ fc M ‘,2009 2010 2011 M / / ¦ Focus on five key areas of growth potential shareholder, for £6.8 billion. These three transactionsMobile data: data revenue was up 26.4%<*> year-on-year to crystallisedsignificantvalueforshareholders.with£6.8 billion £5.1 billion, and now represents 12.0% of Group service of proceeds being committed to share buyback programmes. revenue. We have continued to increase the penetration of smartphones into our customer base as these are a key driver Applying rigorous capital disciplineof data adoption. to investment decisionsWe continue to apply capital discipline to our investment Network quality is absolutely central to our data strategy and decisions. We apply rigorous commercial analysis and we have made further significant investments over the last demanding hurdle rates to ensure that any investment or 12monthstoimprovethespeedandreliabilityofourcoverage. corporate activity will enhance shareholder returns. We will Based on third party tests performed in 16 of our main 3G continue to undertake regular reviews of Vodafone’s entire markets, we rankfirstfor overall data performancein 13 markets, portfolio to ensure thatwe optimise value for shareholders.Enterprise: revenue in the overall European enterprise Prospects for 2012 financial yearsegment was up 0.5%<*> year-on-year and represented 29.5% We enter the new financial year in a strong position. We are of our European service revenue. Within this, Vodafone Global gaining or holding market share in most of our major markets, Enterprise, which serves our multinational customers, and are leading our competitors in the drive to migrate delivered revenue growth of around 8%<*> thanks to some customers to smartphones and data packages. We will important customer wins and increased penetration of continue to focus on our key growth areas of data, enterprise existing customer accounts. This market offers attractive and emerging markets, while maintaining investment in growth opportunities, as multinationals and smaller networkqualityandthedevelopmentofnewservices. companies alike look not only to manage costs but also to move to converged platforms and improve mobile However, we continue to face challenging macroeconomic connectivityfortheirworkforces. conditions across our southern European footprint, and we expect further regulated cuts to mobile termination rates toEmerging markets: the Group has an attractive level of have a negative impact of about 2.5 percentage points on exposure to emerging markets where penetration is lower service revenue growth in the 2012 financialyear. and GDP growth higher than in the more mature markets of western Europe. The Group adjusted EBITDA margin is expected to continue to decline, albeit at a lower rate than in the 2011 financial year.Total communications: we continue to develop our fixed The main driver is the persistent revenue decline in some of Linecapabilitiestomeetourcustomers’total communications our southern European operations, needs beyond mobile connectivity. Revenue from our fixed Lineoperationsamountedto£3.4billion,up5.2%<*)year-on-year. Adjusted operating profit is expected to be in the range of £11.0 billion to £11.8 billion, reflecting the loss of ourNew services: machine-to-machine platforms CM2M’), £0.5billionshareofprofitsfromSFRasaresultofthedisposal mobile financial services and near-field communications, ofour44%interest. among other new services, all offer potential for incremental growth. During the year we made good progress in our Free cash flow is expec ted to be in the range of £6.0 to M2M business and continued the growth and expansion of £6.5 billion, reflecting continued strong cash generation our mobile money transfer platform, which now has over offset by the £0.3 billion reduction in dividends from SFR and 20 million customersand is currently being trialled in India. China Mobile Limited in the 2012 financial year, and the more limited working capitalimprovementsavailablegoingforward.Deliver value and efficiency from scale Capital expenditure is expected to be at a similar level to last The current composition of the Group has enabled us to yearonaconstantcurrencybasis. increase efficiency and achieve favourable comparable cost positionsinmanymarkets.Duringtheyearwealsoestablished We are well positioned to continue to deliver value to a more formal relationship with Verizon to leverage our shareholders through the achievement of our medium-term purchasing poweracrossa wide range of suppliers. targets for revenue, free cash flow and dividend growth; our commitment to investment in profitable growth areas; and ourGenerate liquidity or free cash flow from clear capital discipline.non-controlled interests ¦ t / ,Duringtheyearweagreeddisposalsofour3.2%stakeinChina . 7/ Mobile Limited and our SoftBank interests for a total cash V^J^_ t/V consideration of £7.4 billion. Subsequent to the year end, ‘**•” we announced the sale of our44% holding in SFR, the number Vittorio Colaotwo mobile operator in France, to Vivendi, the majority Chief Executive

12 Vodafone Group Pic Annual Report 2011

Strategy in action

“Our new strategy is delivering a more valuable Vodafone” Focus on key areas we aim to deliver organic service revenue growth of 1 -4% per ^^^frf^k of arowth DOtentiaL yearuntiltheyearending31March2014.Weseefivekeyareas\ r ^^^l of growth potential: ,,.v^^^ -i £^*m. .L More on pages 14 to 24 ... ... .._r. M;^ *V !Bkrw ¦ mobile data: accelerate mobile data growth opportunity; .^Pf^ ¦ ¦ emerging markets: increase mobile penetration and data adoption; M^^ . ^^k ^^rM. ¦ enterprise: selectively expand growth segments;p«i ’’Q Mlm-’Wi ¦ total communications: continue to develop the adoption **^jB -^ of converged fixed and mobile services; and*9 ¦ new services: expand into new growth areas including Br Jk machine-to-machine and financial services.** ~P ,ifr, v- Deliver value and We will continue to drive benefit from the Group’s scale -jpP^ *A.ffiB P9^* efficiencvfrom ^cale advantage and maintain ourfocus on cost.We have favourable^m^ fl^B^l Pt costpositionsinmanymarketsandintendtogeneratefurthertjp, ‘^Wlw u ,r significantsavingsfromtechnologystandardisation, t^ T{, p 3 off-shoring, outsourcingand platform sharing.kh G e ne rate liq u id ity We will seekto maximise the value of non-controlled interests. — _^h or frPP ra«;h flow eitherthroughgeneratingliquidityorincreasingfreecash ^"^^*” ¦ lAli^B flowinordertofundprofitableinvestmentandenhance™^™ from non-controlled shareholder returns. =ScABmk pius1-” interestsMore on page 26 ^B ¦ Apply rigOrOUS Wewillcontinuetoapplycapitaldisciplinetoourinvestment_^ifl ranital di«;rinlinP decisionsthroughrigorouscommercialanalysisand .\^ If \ ^ demandinginvestmentcriteriatoensureanyinvestment_^_ tO investment in existing businessesoracquisitionswillenhancevalue¦V^ decisions for shareholders.p^p^S^I ., __ We aim to maintain our low single A long-term credit rating. ^^^r-# More on page 27 a a 3lew.Notes: (1) See “Principal risk factors and uncertainties” on pages 45 to 46 for more details on the risks (2) Organic growth which presents performance on a comparable basis, both in terms facing our business and “Corporate governance — Risk management and Risk mitigation” of merger and acquisition activity and foreign exchange rates, on page 59 for detail on how we manage and mitigate risk. (3) India, Vodacom, Egypt, Turkey, Ghana, Qatar, and Fiji.

Vodafone Group Pic Annual Report 2011 13 Our business in India has grown from 28 million fcustomers at the time of 73^ ” ^^-^^k. acquisition in May 2007 _| ^B^ ₍to become our largest Jjj Is -v marketwith over ^^ c^ 134 million customers ^K .-¦ at 31 March / JIHV ¦TTW^fi JP|?<T .’\S> H^MA number of factors may impact the prices Key revenue performance indicators121we charge and therefore the revenue we 2009 2010 2011 receive including: Service revenue growth (0.3)% (1.6)% 2.1% ¦ competition; Data revenue growth 25.9% 19.3% 26.4% ¦ regulatory decisions and Legislation on Emerging markets service revenue growth13‘ 6.4%M> 7.9% 11.8% mobile termination rates, international ~ : : ; ~ ., ,,.,,, ttt;_m,_m;_nn ,h,,^ ,n^ *« ^«ii,wiih, Europe enterprise service revenue growth -l5) (4.8)% 0.5% roaming charges and the availability 1 _ f and cost of spectrum; and Fixed line revenue growth 2.1% 7.9% 5.2% ¦ changes in macroeconomic conditions. The net savingsfrom our cost efficiency Organic European operating expenses ^^^^^™»« programmes may be impacted by inflationary (£bn) U ^^^^^En pressuresandthevolumeoftrafficonour ES networks which can affect our operating costs. Net savings will be used eitherto invest in commercial activities or respond to competitor activity or retained for margin enhancement. 2009 2010 2011 Inthosebusinessesinwhichwehavea Dividends and sale proceeds from ^^^^^^^ non-controlling interest, matters such as the non-controlled interests (£bn) timing and amount of cash distribution may ¦ Dividend income from non-controlled interests’9 require the consent of our partners which can ¦ Cash received from the sale of non-controlled influencetheleveloffreecashflowwereceive interests"' I from that business. ^^^^^Rl I KQ I 2009 2010 2011 The returns we make on investments may be Return to shareholders (£bn) impacted by competitor activity, regulatory ¦ Dividends paid decisions and macroeconomic conditions ¦ Share buybacks ^^^^^^^ that affect our commercial position, financial performanceandthemarketenvironmentin ^^B I which we operate.The cost of financing investmentand hence £15.7bnthe return on investment maybe influenced by Total returns to shareholderschangesin credit markets or our credit ratings. over the last three years. 2009 2010 2011 Notes: (4) Excludes India, Ghana and Qatar as these were not owned for the full financial year. (7) A further £1.5 billion is expected be received in April 2012 from the sale of the Group’s (5) Information not available. interests in SoftBank. (6) Excludes tax related dividend receipts from Verizon Wireless.

Mobile data: strategyOur data revenue was up 26.4%(*)year-on-year to £5.1 billion and now represents 12.0% of Group service revenue. Network quality is central to our data strategy and based on third party tests ^ performed in 16 of our main 3G markets, we rank first for overall data performance in 13 markets.

Vodafone Group Pic Annual Report 2011 15 Focus on key areas of growth potential: Mobile data-strategySamsung Galaxy Tab 10.1 v We were the first operator to launch this Samsung tablet which uses the Android™ 3.0 Honeycomb operating system to deliver mobile entertainment such as gaming, reading eBooks or updating a social network status.How the market is developing ApproachThe fastest growing sector of the global telecommunications We already have a strong data position in Europe thanks to our market is mobile data. According to industry estimates, significant 3G investment, with over 66,000 3G sites providing between 2010 and 2014 total global revenue from fixed voice high speed mobile data and 65% of our 3G network providing will decline by US$70 billion, mobile voice will increase by theoretical downlink speeds faster than 14.4 Mbps. Some of US$24 billion, fixed data will increase by US$49 billion and ourEuropeantargetsaresetoutinthetablebelow. mobile data will increase by US$138 billion (source: IDC WorldwideBlackBook2010). _March20ii bt MaS Mobile data penetration of our customer base in Europe is Number of 5G sites 66^000 9O000 around 37%, far higher than in developing countries such as Percentage of 3G network India at around 18% which highlights the opportunities in at>14.4Mbps 65% 100% emerging markets. Data usage growth on our networks has been significant, growing by around 69%acrosstheGroup over thelastyearcomparedwith25%forvoice. We have also launched commercial initiatives to encourage mobile data use including: Mobile data demand is being accelerated by the wide range of sophisticated devices available, including mobile broadband ¦ tiered pricing plans to give customers more control sticks, smartphones and tablets, greater network speeds and (see page 19); an increased range of applications. ¦ re-designing customer experience and support systems to provide a better mobile data experience; Our objective is to deliver data faster, with the best ¦ a multiplicity of data-enabled devices such asexperienceand more profitably smartphones, tablets, low-cost handsets and USB To accelerate the opportunities of mobile data we are sticks; and investing in: ¦ managing smartphone and networkyields to deliver profitable growth. ¦ network technologies to deliver the best network experience; Typical achieved speeds in Vodafone’s network (Mbps) ¦ providing a better data experience to our customers ¦ Vodafone’s markets average™ through all our customer channels; and ¦ Best competitor market average ¦ providing leading smart connected devices. 3.0 1.8 Downlink Uplink Note: (1) Europe region plus Egypt and Vodacom. Source: Vodafone commissioned third party drive-by tests on data user speeds (September 2010 — January 2011).

Mobile data: technologyWe have collaborated with our main suppliers to pioneer the development of single RAN base station equipment which enables us to replace our existing 2G and 3G base stations with one solution which also supports LIE, providing significant savings in energy consumption and maintenance, and delivering improvements in capacity and coverage.

Vodafone Group Pic Annual Report 2011 17 Focus on key areas of growth potential: Mobile data-technology Vodafone 3G station ¦* ‘kw^^b Branded as Vodafone I Sure Signal in the UKa I femtocell that guarantees I a 3G signal and super-fast I mobile data transfer where installed in homes: • also available for enterprise customers. Network trials As part of a strategy to implement scalable and cost-effective We always aim to deliver a market-leading customer self-build solutions we have deployed high capacity ethemet experience and we use a third party to compare our networks microwave technology and high bandwidth optical fibre with those of our major competitors. During the year we transmission solutions. In Europe about 80% of our radio base benchmarked our 16 main 3G markets. The results showed stations are served by self-built transmission (where we have that weare the leading data services provider in 13 markets.On physically installed and own the infrastructure) and over 20% average across the networks measured we were almost 40% are currently connected using high capacity technologies, faster on data downlink than our best competitor and 40% faster on data uplink, a resultachieved through our investment New services and capabilities engineering in extensive network upgrades and optimisation. We have consolidated the national IP networks in all our major markets into a single IP network giving us the ability to deliver Investing to increase coveragehigh quality IPconnectivity to our customers.Continued site deployment At 31 March 2011 we had over 66,000 3G sites in Europe, Investing to improve cost efficiency providing 83% 3G coverage across our major European Yield management capability markets.Thisrepresentsanincreaseofover8,500sitesduring We have been supporting the improvement of 3G data the year. service quality by managing the operational effectiveness of our network capacity.This enables us to optimise content Vodafone 3G station and services as well as manage our costs. We have improved We have continued to introduce Vodafone 3G stations, also 3G data service quality in this way in 18 markets, known asfemtocells in our markets.These innovative devices deliver a personal 3G mobile phone signal to customers Network sharing through a fixed line broadband connection, giving coverage To reduce the cost of mobile network infrastructure, we to customers where mobile operatorsare unable toprovidea have continued to use network sharing agreements with strong enough signal. At 31 March 2011 Vodafone 3G stations other operators in all of our controlled markets, with 70% of were in service in seven of our markets serving almost the new radio sites throughout the Group being shared with 400,000 customers. other mobile network operators.Investing to improve customer experience Single radio access network (‘RAN’) High speed packet access CHSPA’) upgrades and green technologyWe have continued to upgrade our HSPA networks with 65%of By 31 March 2011 we had installed over 9,000 of these new our European 3G network equipped with 14.4 Mbpstheoretical single RAN base stations. We are also working hard to reduce peak downlink speeds or above and 90% providing 7.2 Mbps or our carbon impact through the wide-scale adoption of leading above theoretical downlink speeds. Peak download speeds of edge green technology solutions. Across our markets we are up to 43.2 Mbps (downlink) and 5.8 Mbps (uplink) are now equipping our radio sites with advanced carbon-efficient supported in several key traffic areas. These figures are solutionssuchaswind.solarandfuelcelltechnologies. theoretical peak rates deliverable in ideal radio conditions with no customer contention for resources. Research and development (‘R&D’)Our R&D ambition is to pioneer innovative services and Lon g-term evolution CLTE’) technology in order to connect anyone and any device to one During the year we commercially launched our 4G/LTE another and to the internet. We have introduced six key technology in Germany and Verizon Wireless launched in programmes to achieve these ambitions: networks of the the US. 4G/LTE can offer better performance than our current future; smart charging; mobile location analysis; consumer 3G/HSPA technology while increasing network capacity. electronics; automotive;andM2M.High capacity backhaul upgrades Our focus over the next year will be on data and smart To support the high speed data capabilities introduced across communication. We are also launching an innovation centre our access networks we have upgraded our backhaul and in the US and have strengthened our patent portfolio backbone transmission networks, which connect our base through strategic patent filing activity in areas relevant to our stationstogether, to the latest high bandwidth IPtechnologies. business interests.

Mobile data: customer experience, pricing and connected devicesWe are enhancing our customer care, retail presence and online service to ensure that customers get the best data experience. We are introducing data centric store formats and we now have 5,000 specialised data customer care representatives in Europe.

Vodafone Group Pic Annual Report 2011 19 Focus on key areas of growth potential:Mobile data-customer experience, pricing and connected devices 1 Mobile Wi-Fi R201A mobile Wi-Fi hotspot device that lets customers share their 3G mobile connectior with up to five users at the press of a button.Customer experience Smart connected devicesToacceleratetheopportunitiesofmobiledataweareinvesting Our handset portfolio is key to our strategy as it helps in providing a better data experience to our customers differentiate us from the competition, acquire customers and through all channels. They interact with us through retail increase data usage. stores, online, through our call centres and by our mobile phones. We place great importance on multi-channel Smartphones and tabletscapabilities to make it convenient and easy for people to We aim to have the most attractive portfolio in the market. contact us. We have developed the online self service and Smartphones now account for 19% of the total number of sales function, and website visits have grown to approximately phones used by our customers in Europe and this is expected 133 million a month. to grow strongly. We are also driving down the cost of smartphones in order to make the data experience available Most of our markets are able to propose individually relevant for lower income segments in both European and emerging offers, specific to a particular customer based on their usage markets. Examples of this are the Android-powered Vodafone patterns, and we are seeing as many as 50% of customers 845and945deviceslaunchedduringtheyear. accepting them when offered. We are enhancing our billing and customer management platforms to make it easier for We also aim to lead the tablet segment, which is growing people to have several Vodafone SIMs, subscriptions and rapidly. We were the first operator to launch an Android bundles, using different devices. We are also developing a HoneycombtabletwiththeSamsungGalaxyTab10.1vandwe single view of all our customers which will allow multiple havestartedtodistributetheAppleiPad2. services used by a customer to be managed and presented on a single bill. Vodafone branded handsetsWe have developed a broad range of Vodafone branded To better understand our customers’ satisfaction, we started handsets focused on mobile internet experience and to use net promoterscore (‘NPS’)thisyearto measure to what design differentiation. The Android-powered Vodafone 845 extent customers would recommend us to others. We are in and 945 are competitively driving mobile internet further a NPS leadership position in either consumer or enterprise into the prepaid segment. The Vodafone 553 accelerated in over 60% of our markets. We are also implementing the widespread use of qwerty devices and related programmes in all our controlled markets to get direct messaging and social network trends. Additionally, devices feedbackfrom customers to help us improve service. such as the Vodafone 543 powered with Opera Mini, enhance mobile internet browsing experiences even on lowPricing bandwidth connections. Tiered data pricing in EuropeWe have introduced tiered data pricing to give customers more Other devicescontrol over their mobile data spend and therefore encourage During theyear we introduced the Vodafone K4605 USB stick mobile data use. Customers are charged for the amount of which provides theoretical peak data download speeds of data they use rather than a flat fee for a high level or unlimited 42.2 Mbps using 3G/HSDPA technology and a 4G/LTE USB use.Thebenefitsincludeprovidingsmallerandlessexpensive stick which has the potential for faster download speeds, allowances for people who do not use much data and better We also launched Vodafone WebBox (see page 21 for further cost management for higher users as well as optimising the information) and Vodafone TV services (see page 23 for capacity of the data network. further information).Data roaming Smartphone yield managementThis year we launched a market leading smartphone roaming Evidence from our main markets shows that smartphones are data plan that allows our European customers to use their driving incremental ARPU uplift and longer customer life home data plan abroad for only €2 a day to access the internet, times relative to non-smartphones. emails and applications, making data roaming easier and more affordable. Acrossourmarketsweareworkingtooptimisethesmartphone migration path by carefully managing how we allocate acquisition and retention subsidies, managingoursmartphone portfolio, and maximising data attachment on smartphones and the penetration of integrated tariffs. As data penetration and usage amongst existing customers grows, we are introducing tiered data allowances.

20 Vodafone Group Pic Annual Report 2011 Focus on key areas of growth potential: Emerging marketsCustomer growth will be driven by rising mobile Development impact of products and services penetration and GDPgrowth Mobile services are a key driver of economic development in The number of customers using mobile services in emerging emerging markets by increasing access to communications markets such as India and Africa has grown rapidly over the and mobile-enabled services. We continued to market Lasttenyears,increasingbyover17timescomparedtonearly Vodafone-branded competitively priced handsets, selling 130% in more mature markets such as Europe. In the 2010 1.7milliondevicesduringtheyearinouremergingmarkets<2>. calendar year the Indian mobile market increased by more than 225 million customers, nearly four times the size of The uptake of Vodafone M-Pesa, which brings financial the UK population. The key driver of growth has been a services to people without bank accounts, continued to grow, fundamental need for communication services against a making an increasing contribution to economic development background of low quality fixed infrastructure and strong in communities that lack conventional banking services. It economic growth. now has over 20 million customers globally (11 million in 2010), who transferredaround US$500 million a month during Most ofthe future growth in mobile phone users is expected to the year (up from US$300 million a month in the previous continue to be in emerging markets where mobile penetration financial year). We launched Vodafone M-Pesa in South Africa, is still only approximately 70% compared with around QatarandFijiduringtheyear.bringingthetotaltosixmarkets, 130% in Europe, supported by the expectation of continued and began pilotsinlndiawithlCICIBankandHDFC Bank, strong economic growth. We expect to see between 20 to 40 percentage points of additional penetration by 2014 in The Vodafone WebBox (see opposite) was launched in emerging markets01. South Africa in February 2011 and other markets will follow inthe2012financialyear. Data is the next major opportunityData represents a substantial growth opportunity as only 19% Strong performanceofouractivecustomersinemergingmarketsusedataservices We are either number one or two in six of our seven which isabout half the rate in Europe.There are two significant emerging markets based on revenue. This year’s performance opportunities. One is mobile broadband, helped by the lack of highlights include: a comprehensive fixed broadband infrastructure in emerging markets. Already in South Africa mobile broadband accounts ¦ increased revenue market share in India and Turkey; for around 90% of all broadband. The other is mobile internet ¦ data revenue growth of 43.8%<*> in Vodacom and 37.7%<*i which we are driving by: in Egypt;and ¦ surpassing the 134 million customer mark in India, an ¦ enhancing the mobile internet experience through increaseof 34 million over the year, our Opera Mini browser software which provides faster page downloads; We launched 3G services in India in February 2011 and ¦ driving down the cost of internet enabled handsets anticipate that this will provide further revenue growth powered by Opera Mini, with prices starting at US$45; opportunities going forward. ¦ low day-to-day micro pricing which allows the purchase of individual data services, for example the download . . r Notes: of a single ring tone; and ₍₁₎ source: mforma was.¦ locally relevant Content and Services in local languages. (2) India, Vodacom, Egypt, Turkey.Ghana, Qatar and Fiji.

Vodafone WebBox Dji^U A Vodafone innovation bringing internet access to a customer’s existing television set just by plugging in a keyboard with a built-in mobile SIM card. It was Ma developed specifically for customers in emergingBmMMM markets where technology and cost barriers oftenWBM exclude people from enjoying readily availableftjjflflllB internet access.

Machine-to-machine CM2M’) servicesMachine-to-machine communications, commonly known as M2M ortelemetry, enables devices to communicate with one another via built-in mobile SIM cards. This allows key information to be automatically exchanged without human intervention making it possible to reduce costs, and improve efficiency and services to customers, for example, enabling drivers to upload and download real-time information to their sat nav devices on traffic jams which can help reduce journey times and save fuel. Focus on key areas of growth potential: EnterpriseEnterprise customers Multinational companies Mfe"^^ *~’~Our enterprise customers range from small-office-home- Vodafone Global Enterprise manages the communication ¦ j “SiJ office CSoHo’) businesses and small to medium-sized needs of over 560 of our largest multinational corporate ‘ ~a| ^\\enterprises CSMEs’), through to large domestic and customers. It provides a range of managed services ™ “t »’ multinational companies. Across the Group we have which bring together every aspect of a customer’stM^)^34 million enterprise customers accounting for around 9% telecommunications infrastructure, both fixed and mobile, l"* of all customers and around 23% of service revenue. providing greater visibility and control of expenditure. During the year Vodafone Global Enterprise achieved organic ^^1Selected expansion in growth markets revenue growth of around 8%<*>. Newcustomersand renewedSoHo and SME contracts thisyear included Unilever, Luxottica and Bosch. In Vodafone One NetOur focus for SoHos and SMEs is to provide customers with March 2011 Vodafone Global Enterprise received the HP Enables small and integrated fixed and mobile communications solutions Supplier of the Year Award for its role in delivering globally medium size business where we host and maintain the entire service “in the cloud” to consistent managed mobility services to Hewlett Packard. customers to combine help customers reduce costs and simplify administration. theirfixed and mobile Vodafone One Net for example, brings together fixed and In October 2010 we acquired Quickcomm and TnT communications into mobile communications in one system and now has around Expense Management, which are specialist providers of a single service with 1.4 million end users in six markets. Through our partnership telecommunications expense management services. The one number, one voice with Microsoft we provide our customers with hosted acquisitions will strengthen our ability to provide our mailbox and one bill. email, conferencing and collaboration services in a single enterprise customers with greater visibility and control over package called Microsoft Online suite, which is now available their combined fixed lineand mobile expenditure, in four markets. In the area of health, Vodafone Global Enterprise is workingDomestic companies with partners such as Novartis on innovative health projects. For larger domestic companies we provide unified Further information is contained in “Sustainable business” communications solutions delivering integrated mobile and on page 30. fixed services, fixed voice and data services, IP virtual private networks and network integration services.

VodafoneTVThis is a new service, Launched in four markets, that provides a wide range of content over the airwaves through a fixed Line broadband connection. In Germany it is supplied through an innovative ‘hybrid’ set-top box which delivers free and pay TV channels transmitted by satellite, cable or broadband. It also provides on-demand films and TV programmes, and other premium content. Focus on key areas of growth potential: Total communications To meet customers’ total communications needs beyond immediately after purchase via the USB broadband modem just mobile we have developed our fixed line capabilities and then later with fixed broadband when this has been including voice calls and broadband data, to provide a full provisioned. During the year we have enriched this product in suite of services. We can integrate customers’ mobile and fixed our largest fixed markets (Germany, Italy and Spain) through Line communications into one service and provide related the integration of digital living network alliance CDLNA’) services such as Vodafone TV. Enterprise customers in capabilities which facilitates the sharing of digital media particular have shown an increasing demand for receiving all between different electronic devices. For example, a DLNA I their communication productsfrom one company. compliant TV can operate with a DLNA compliant PC to play music or videos, or display photos. Approach Vodafone DSL RouterOur European strategy is to obtain long-term access to fast We have been offering triple play services (fixed broadband, The DSL Router fixed broadband to service high value customers in a capital voice and TV) in Portugal since 2009. This year we increased comes complete with efficient manner. Access is obtained through wholesale our presence in the home TV market by launching services in a Vodafone Mobile agreements, partnerships oracquisitions. Italy, Spain and Germany. Broadband USB stick so customers can haveFixed services Application services instant access to the Fixed broadband and voice account for around 8% of Weofferarangeoftotalcommunicationsapplicationsaswell internetwhiletheirfixed ourservicerevenue.Wehavefixedservicesin13countrieswith as services for enterprise and consumer customers. For broadband is set-up. 6.1 million fixed broadband customers at 31 March 2011, example Vodafone Always Best Connected software enables a 9.5% increase over the previous year. In addition, through customers to stay connected to the internet on the best Gateway, we provide wholesale carrier services in over 40 available connection wherever they are by automatically African countries. managing the switching between connection types including mobile broadband, Wi-Fi and LAN. Vodafone PC Backup is anCombining fixed and mobile services online back-up and restore service that enables users to The Vodafone DSL Router, now available in 11 markets, up remotely store data securely and automatically via their from six markets the previous year, combines mobileand fixed internet connection, broadband services. This means customers can connect

Mobile payments (an application of NFC)Vodafone, ABN AMRO, ING, KPN, Rabobank and T-Mobile signed a Letter of intent this year to create a joint venture company and introduce simple and secure mobile payments at checkouts in the Netherlands. It is an early example of how Vodafone is leading the market for mobile payments in partnership with other mobile network operators and major banks. Focus on key areas of growth potential: New services We have strategically chosen to expand into a number of new Financial servicesgrowth segments to create additional revenue and enhanced VodafoneM-Pesaisnowliveinsixmarkets.Furtherinformation customer experience that complement our core voice and is contained in “Focus on key areas of growth potential: data products. Emerging markets” on page 20.Machine-to-machine CM2M’) Near field communication CN FC)M2M connections allow devices to communicate with one NFC allows communication between devices when they are another via built-in mobile SIM cards. This allows us to offer touched together or brought within a few centimetres of each services such as fleet tracking and asset management, remote other. We aim to make mobile phones the preferred device for monitoring of, for example, vending machines, cash machines most personal transactions including payments, tickets, Vodafone Ad Plusandbuildingmanagement.aswellassecurityandsurveillance. coupons, identification and the provision of information. We in Romania allows We are now serving around 5.3 million M2M connections have been developing mobile NFC standards since 2006, have companies to access around the world. Further information is contained in “Focus conducted trials in several markets and are now developing by SMS an opted in on key areas of growth potential: Enterprise” on page 22 and services and partnerships in preparation for commercial customer base of up to “Sustainable business” on page 30. launch in key markets. five million customers. Research in RomaniaThird party billing Mobile advertising shows almost 58% We work with third party content and service providers to We have an established mobile advertising business in 18 of our customers like simplify our customers’ experience when they purchase countrieswithawiderangeofcapabilities.Thefastadoptionof to receive relevant applications and content by letting our customers charge smartphone devices is promoting mobile as an alternative adverts on their mobile these services direct to their mobile account (‘charge to bill’), channel to reach consumers and we are collaborating We provide a single technical interface to these providers to with other mobile network operators to make the most of the / ¦»’»•» . . greach all our European customers and we plan to expand this potential of mobile advertising. 1 ^^^¦H^^B reachtootherpartsoftheworldoverthe2012financialyear. I ¦

Delivering cost efficiency from sharing resourcesThis year we established two shared service centres in India to provide quick, simple and cost effective customer contact points for our technology and business operations and data services for our finance and administration functions in seven European markets and across India. We expect to gain significant benefits to help consolidate, standardise and optimise the way we run our operations. Deliver value and efficiency from scale Against a background of continual price pressures due to Our achievements to date ~7C\^l/competition and regulation we continually seek to improve We have been taking advantage of the large scale of our I \J/Oour cost efficiency. During the year we reduced our European networks. We are sharing base station sites where this Newradiositesoperating costs by 4% on an organic basis, equivalent to makes commercial sense in order to reduce site rental and deployed thisyearsaving over £140 million. We have used the savings to fund maintenance costs. We have also renegotiated leases on most builtassharedinvestment in customer facing activities and growth areas of our sites, are standardising the technology we deploy, and sitestoreducesuch as data and enterprise services. have reduced the energy consumption of our sites andoperating costsswitching centres. We are reducing costs in maintenance andOur cost advantage fieldactivitiesinparticularthrough outsourcing. C\ ir\vBased on external independent benchmarking we have \J VCIfavourable comparative cost positions in many markets. This We use the Vodafone Procurement Company, the central O’l A r\v^c\reflects both our scale as one of the world’s largest mobile Group procurement function based in Luxembourg, to t IH”\yl I Icommunications companies by revenue and our ongoing leverage our scale to achieve better prices, more value and Reduction in organiccostfocus. drive standardisation across the business. We have further European operatingreduced costs by centralising the purchasing of handsets. Our costs due to ourcost position vs competitors [_arge _sj_ze_a[_s0 _a[[_OWS _us to drive ethical, health and safety, costsavingNetwork: cost to carry a unit of data™ Top quartile position labour and environmental standards with our suppliers and Terminals: cost to purchase aLso t0 9et the best rates on warehousing, inbound anda handset"' Top quartile position outbound logistics, and repair costs. General supplies12’ 4% better than our shared service centres in Hungary, India and Egypt haveglobal benchmark allowed us to reduce costs as well as deliver better service. Notes: Additionally, we have outsourced application development (DATKearneyExecutiveSummaryReport. _ancj _maj_ntenance to third party providers on multi-year (2) The Hackett Group’s world class benchmarking. COmDetitive tenders

Verizon WirelessIn the US, our associate Verizon Wireless has continued to perform strongly. Organic service revenue increased by 5.8%c*) Led by a 3.1% increase in the customer base to 88.4 million and strong data revenue growth driven by increased smartphone penetration. Verizon Wireless launched 4G LTE services in December 2010 and began distribution of the iPhone on its network in February 2011. Generate liquidity or free cash flow from non-controlled interests Non-controlled interests constitute around 40% (based on third Polkomtel ~7 Q 0/party estimates) of the value of the Group’s assets. We aim to Polkomtel trades as Plus in Poland and is a leading operator in «3 -7 /O maximise the value of these interests either by generating Poland. Along with the four other owners we are exploring GroupadjustedLiquidity or increasing free cash flow in order to fund profitable optionsfora sale of the business. operating profit frominvestmentandenhanceshareholder returns. Verizon Wireless BhartiAirtel (201036%)Verizon Wireless Bharti is the market leader in India. Following the purchase of Verizon Wireless is our largest non-controlled interest, in which our controlling interest in Vodafone Essar in India in 2007, we we havean equity interest of 45%. Itisthe revenue marketleader sold 5.6% of our stake in Bharti in 2008 and retained a 4.4% in the US and performed strongly thisyearwith service revenue indirect interest, growth of 5.8%(,). To create additional value we are working closely with Verizon Wireless on several initiatives that leverage Sale of interestsour combined scaleand scope including purchasing of network In September 2010 we sold our 3.2% interest in China Mobile equipment, IT and services, technology enhancements and Limitedfor£4.3billion.InNovember2010wesoldourinterests propositions for multinational companies. We received around in SoftBank of Japan for £3.1 billion and approximately half of £1.0 billion in dividends this year, in relation to tax related the proceeds have been received to date and used to reduce dividend receipts (see “Dividends from associates and to non- the Group’s net debt.The remaining proceedsare expected to controlling shareholders” on page 48 for further information), be received in April 2012. In April 2011 we announced the sale which was substantially less than our proportionate share of of our44%interestinSFR, the second largest mobile operator Verizon Wireless’ free cash flow which shows the material in France, for £6.8 billion. The transaction, which is subject to opportunity forincremental returns. competition authority and regulatory approvals, isexpected to complete during the second calendar quarter of 2011. Proceeds from the sale of all of these interests are being used to reduce net debt and committed to a £6.8 billion buyback of our shares of which £2.6 billion has been completed to date.

Creating value for shareholdersWe aim to increase shareholder returns through regular dividends and one-off returns. In 2009 we established a target to grow total dividends per share by at least 7% per annum until the financialyear ending 31 March 2013, and consistent with this, total dividends per share increased by 7.1% in 2011 to 8.90 pence per share. In addition, we have committed £6.8 billion to buying back our shares, of which £2.6 billion has been returned to date. Apply rigorous capital discipline to investment decisionsDiscipline of regular business reviews Selective acquisitions ~7®/We are focused on enhancing returns to our shareholders and When managing capital we also consider whether to I SOare therefore careful how we invest shareholders’ money. We strengthen the Group by acquiring other companies to Targetannualregularly review the cash needs of each of our businesses increase our operations in a particular market. All potential increase in totalacross the globe, taking into account their performance and acquisitions are judged on strict financial and commercial dividends per sharecompetitive position. criteria, especially whether they would provide meaningful until March 2013scale in a particular segment, the cost of the acquisition andHow we invest your money the ability to enhance the Group’s free cash flow. For example, —.. . .Organic investment in March 2011 we announced our intention to acquire LUWWe make capital investments, such as for new equipment BelCompany BV, the Netherlands’ largest independent njrtol^ Aor spectrum, in our existing businesses to improve their telecom retailer, which will expand our Dutch stores from jl I IU LC l\performanceanddriveorganicgrowth. 86to296. Target long-term credit rating Returns to shareholders Investment principlesWe thoroughly review the best ways to provide returns to our All of our investments, whether in existing businesses shareholders. We have a target of increasing total dividends or acquisitions, are subject to rigorous commercial analysis per share by at least 7% a year until the financial year ending and demanding hurdle rates (the minimum rate of return on an 31 March 2013. When we have surplus funds we consider investment) to ensure they enhance shareholder returns. We additional returns to shareholders through special dividends remain committed to ourtarget credit rating of low single Afor or share buyback programmes. long-term debt as this provides us with a low cost of debt and good access to liquidity from financial institutions.

28 Vodafone Group Pic Annual Report 2011

Key market review

Revenue trends continue to improve ¦ Group organic service revenue growth improved ¦ Service revenue growth in our Africa, Middle East during the year, with a strong result from emerging and Asia Pacific region was 9.5’*’. Our two major markets and encouraging signs of renewed growth businesses within this region, India and Vodacom, in some parts of Europe. reported continued strong growth reflecting the . _ ajowij • benefits of rising mobile penetration in India and a ¦ In Europe service revenue was down 0.4%’’during ... .~ . . . . . ,v . ... . .,. .. . , ..3 more stable pricing environment; and strong take-up the year; however, this was significantly better than , . . .r . r. .. .,. 3 r . / , . .. ,, _M/fl .: . ... of data services in South Africa. last year s decline of 3.8%’’. We are seeing positive revenue trends in the more stable economies of _ .. .. .. ,,,, , .. ,. . ,, .. ,.., .. ¦ See operating results on pages 34 to 38 for further northern Europe such as Germany, the UK and the . . .,r , \ r..r ,.,,.., . ... . . details of performance within each of our markets Netherlands, while our remaining mature markets in . . .r Europe, particularly those impacted by government 3 y austerity measures, have seen declining revenue growth. Turkey has seen significant revenue growth this year, driven by improvements both in voice and data revenue.We have gained or held market share in most of our key markets Germany ¦ Excluding the impact of regulated ^^^^^^^ termination rate cuts, service revenue ^^^^^^h ^^^^^^h ^^^^^^^ Service revenue growth (%)(,) 0.8 growth was 2.1%(,). Adjusted EBITDA margin (%) ~1*A ¦ Strong growth in enterprise segment ₍₂₅₎l - due to significant customer wins. (3.5)Operating free cash flow (£m) 2,297 _m Our first market to launch 4G/LTE. 2009 2010 2011ltdly ¦ Increased market share in a challenging 1.2 ^^^^^^_—economic and competitive environment. ^^^^^^H I Service revenue growth (%)(,) (2.1) ¦ A 21.5% ‘*’increase in data revenue due Adjusted EBITDA margin (%) ~^62 to increased smartphone penetration. - ¦ Nowwith 1.7 million fixed broadband (2.1)Operating free cash flow (£m) 2,067 customers (on a 100% basis), up 29%. 2009 2010 2011Spain ¦ Extremely challenging economic ^^^^^^™ ^^^^^^™ ^^^^^^™ environment and increasing Service revenue growth (%)(,) (6.9) competitive pressure. Adjusted EBITDA margin (%) ^qJ ¦ New integrated voice and data plans₍₄,₉₎ I - to support smartphone adoption. (7.0) (6.9) Operating free cash flow (£m) 885__m New management in place 2009 2010 2011 since April 2011.

Vodafone Group Pic Annual Report 2011 29_—.Ourstrong brand and ncreased customer r^^l focus, supported by Jfl ^^BJ our leading network performance, is driving our improved j£ ^M ^J^^^^^^^ performance. ^^HRevenue by key market (%) Mobile service revenue market share (%)<1^^^^ ¦ 2010 ^rt ^ ¦ Germany ¦ 201’ft ^ ltalV 54¦ ¦ Spain ^^ 53<2; ^. UK 34 34 33 | ^_w-s- ¦¦¦¦¦¦¦¦-.!¦Germany Italy Spain UK India South Africa0-United Kingdom ¦ Significant year-on-year improvement ^^^^^^^in revenue trends.Service revenue growth (%)(,) 4.7 ¦ Data revenue increased 28.5%(,)due toAdjusted EBITDA margin (%) ~2s7 increasing penetration of smartphones. (1.1)1 ¦ - ¦ Strong contract customer growth due (4.7)Operating free cash flow (£m) 950_ to increased commercial focus. 2009 2010 2011India ¦ Revenue growth improved through the ₍₄₎year as the customer base increased ^^^^^^^ Service revenue growth (%)(,) 16.2 and price declines slowed. 147 16.2 Adjusted EBITDA margin (%) ~25£ ¦ Fourthsuccessiveyearofgaining I ^^^H ^^^H - revenue market share. ^^^^^^H ^^^^^^H ^^^^^^H Operating free cash flow (£m) 455_ ¦ Commenced 3G services in February 2011 2009 2010 2011with 1.5 million customers by 31 March. Vodacom ¦ Strong revenue growth led by increasing demand for mobile broadband services. ^^^^^^^ Service revenue growth (%)(,) 5.8 Launched Web Box service for ., 58 Adjusted EBITDA mai.nn(%.i 55.7 internet access. I ^^^^M ^^^^B - ¦ Continued network investment with over ^^^^^^M^^^^^^M^^^^^^M Operating free cash flow (£m) 1,559 3,200 base stations now 4G/LTE ready. 2009 2010 2011 Notes: (3) Market share information relates to South Africa which is Vodacom’s largest business. (1) At31 March (2011 estimated). (4) This figure reflects pro-forma growth which is organic growth adjusted to include acquired business for the whole (2) Q3 2010 and Q3 2011 data; mobile total revenue share. of both periods.

Sustainable business

SustainabiLity underpins everything we doStrategy our focus is on remote care services, including assisted Living H f\0/Oursustainabilitystrategyhasthreecomponents: and condition management, saving costs and improving+J\JsO m sustainable societies: helping create more sustainable patients’ quality of life, as well as mobile-based services that C0₂ reductionsocieties by providing communication services to meet increase the efficiency of clinical trials. In emerging markets target in developedthe needs ofpeople in emerging markets and facilitating we are using mobile to improve access to medicine, for markets versus thethe transition to a low carbon society; example, ‘SMS for Life’, a supply chain management solution2007 baseline by ¦ eco-efficiency: cutting our carbon footprint in developed which helps clinics manage supplies of malaria drugs. It has March 2020 markets, reducing carbon intensity in rapidly growing successfully improved stock management in Tanzania and emerging markets and minimising other environmental is now being rolled out in other countries in collaboration impacts; and with Novartisand other pharmaceuticalcompanies. ¦ ethical business: ensuring responsible, ethical and honest behaviour throughout our operations and supply chain. Mobile communications, particularly M2M connections, have been playing a part in the transition to a low carbon society by Performance for the yearfacilitating the development of smart energy grids andCreating more sustainable societies improving the efficiency and emissionsfrom vehicle travel (see Our networks, products and services have been making a “M2Mservices“seepage22).WehavebeenworkingwithBritish difference to people’slivesaroundtheworldandcontributingto Gas in the UK and Italgas in Italy to provide M2M connections achieving the United Nations’ Millennium Development Goals, in homesforoverone million smart meterstoallowconsumers to monitor and reduce their electricity and gas use. Many of our innovative services, pricing plans and products, such as Vodafone WebBox, Vodafone-branded handsets and Eco-efficiencyVodafone M-Pesa are tailored to emerging markets. See Our total C0₂ emissions increased by 62.6% to 1.96 million “Focus on key areas of growth potential: Emerging markets” tonnes principally due to the inclusion of India, South Africa, onpage20forfurtherinformation. Ghana and Qatar in our reporting, and were approximately level against last year on a like-for-like basis. Our target is to Vodafone mHealth Solutions uses mobile communicationsto reduce our absolute C0₂ emissions in developed markets by improve the efficiency of healthcare. In developed countries 50% from the 2007 financialyear baseline by March 2020, and

VodafoneGroupPlcAnnualReport2011 31 Instant NetworkVodafone Foundation and Group Technology worked M with Huawei and Telecoms l^—^^^B ‘ Sans Frontieresto develops|TjL ^^^^^^^^^ portable GSM/EDGE mobile JI | feh network that provides‘^M I ‘• ^f instant mobile coverage i Jj “ ‘ for emergency situations ¦ ¦ f^^B ‘ ^B; in under 40 minutes, which - “; ^^^^^^^ fits into three suitcase-size ^^ boxes to be transported by plane worldwide. in emerging markets we are setting carbon intensity targets to Sustainability governancereduce emissions per network node. The Executive Committee is ultimately responsible for our sustainability performance and receives a formal update every We are deploying more efficient equipment across our year, as does the Board. Each local market has a sustainability network, working with suppliers to develop more efficient management structure and a system for monitoring equipment, and using solar and wind power to generate performance and reporting to the Group. We also influence renewable energyforoff-grid base stations. and monitor the sustainability performance of our joint ventures, outsourcing partners and other organisations withEthical business whichwework. Our business and sustainability strategies are underpinned by our business principles and code of conduct which stress The Vodafone Sustainability Expert Advisory Panel met the importance of responsible, ethical and honest behaviour twice during the year to discuss various issues. We engage in everything we do. This means being a responsible a wide range of stakeholders, including customers, employer, maintaining the health and safety of our employees investors, employees, suppliers, communities, governments and contractors (see “People” on page 32), ensuring high and regulators, standards of labour and environmental protection in our supply chain, transparent and ethical business practices, clear Our 11th annualsustainability report, which isassured by Ernst pricing and maintaining a safe internet experience (including & Young LLP using the International Standard on Assurance child safety and privacy). In response to the proposed Engagements(‘ISAE3000’)tocheckadherencetotheAA1000 disclosure requirements on conflict minerals required by Account Ability Principles Standard CAA1000APS’), is available the US Dodd-Frank legislation, we continue to strengthen our atwww.vodafone.com/sustainability. 16 local markets also due diligence activities on the source and chain of custody of publish their own sustainability reports, these materials. The issue of human rights and access to communications has been brought into sharp focus by Key performance indicators’11continuing eventsin the Middle East and North Africa. 2011 2010 2009Vodafone Group Social investment - The Vodafone Foundation and its network of 27 local Energy use (GWh) foundations continue to invest in the communities in which (direct and indirect) 4,117 5,278 5,044Vodafone operates. Specific initiatives include Mobiles for Carbon dioxide emissions Good projects which include the piloting of handsets for (millions of tonnes) 1.96 1.21 1.22 women at risk of domestic violence and an instant network D«,_rar,₍,_n.,,( »r,»^,. Percentage of energy which provides rapid network coverage for emergencies, _sourced from renewables 19.42 25 19 Red Alert SMS fundraising services for emergency appeals and its World of Difference programme which enables Number of phones collected for individuals to take paid time to work for a charity of their reuse and recycling (millions)1.25 1.55 1.55choice for up to a year. We make grants to a variety of local Network equipment waste charitable organisations meeting the needs of their generated (tonnes) 7,475 5,870 4,944 communities. Total donations for the year were £49.6 million : and included donations of £5.2 million towards foundation Percentage of network equipment operating costs. waste sent for reuse or recycling 99 98 97NJote: (1)These performance indicators were calculated using actual or estimatec data collected by our mobile operating companies. The data is sourced frorr nvoices, purchasing requisitions, direct data measurement and estimations where required. The carbon dioxide emissions figures are calculated using the kWh/CO., conversion factor for the electricity provided by the national grid, suppliers or the International Energy Agency and for other energy sources in each operating company. The 2011 data includes India, Ghana, Qatar and South Africa but excludes all other Vodacom markets. Our joint venture in Italy is included inallyears.

PeopleOur people are integral to building and sustaining our successOrganisation effectiveness and change Employment policies and employee relations Employees byWe employed an average of around 83,900 people worldwide Our employment policies are developed to reflect local legal, location (%) during the year and saw an increase in the percentage of cultural and employment requirements. We aim to be ^^^^ women in senior roles, up from 14.5% to 16.5%. People recognised as an employer of choice and therefore seek to ^^ numbers have changed in different areas of the business maintain high standards and good employee relations according to overall business strategy. For example: in wherever we operate. t/kVodacom head count was increased to support the growing ^3enterprise businessand data; in India, we increased headcount Our goal is to create a working culture that is inclusive for all. to grow the business; in Ghana, to drive operational efficiency, We believe that having a diverse workforce helps to meet the we reduced headcount through redundancy and outsourcing different needs ofourcustomersacrosstheglobe.An inclusive ¦ Germany ofnetworkoperations,callcentresandfacilities;andintheUK culture and environment is one which respects, values, ¦ Italy we reduced back office roles and increased investment in celebrates and makes the most of the individual differences ¦ Spair customer facing activities. we each bring to Vodafone, to the benefit of our customers, ¦ UK employees, shareholders, business partners and the wider ¦ India We have also made a number of changes to our structure, communities in which we operate. We do not condone unfair ¦ Vodacom governance and accountabilities to help us concentrate on treatment of any kind and offer equal opportunities in all Other our main commercial and financial priorities. These changes aspects of employment and advancement regardless of race, includethecreationofaGroupCommercialunit.expansionof nationality, gender, age, marital status, sexual orientation, the role and scope of Group Technology to oversee all disability, religious or political beliefs. This also applies to operating companies, the consolidation of our regional agency workers, the self-employed and contract workers who structure into two distinct regions, plus reporting line changes work for us. In our latest people survey, 87% of employees to align teams more closely with theirfunctions. agreed that Vodafone treats people fairly, regardless of their gender, background, age or beliefs.

Vodafone Group Pic Annual Report 2011 33Q7 Qf\f\ The main emphasis of our global diversity strategy has been plans and key individuals, and at our monthly Executive0+D)Js\J\J on gender diversity and to increase the number of women in Committee meetings we discuss the senior leadership roles. Average employees management positions which has risen to 16.5%. Efforts to increase the percentage further will continue during the A global graduate and recruitment programme was introduced 2012 financialyear. Our second priority has been to increase with a target to hire 250-300 top graduates across the Group O Q talent from our emerging markets in Group roles and senior during the year. By 31 March 2011 we had recruited 306. InL- J leadership positions. addition, we partnered with nine leading MBA schools in Europe,Nationalities the US, Africa and India to recruit 15-20 MBA graduates for keyin top senior During the year we ran a series of two-and-a-half day diversity management roles.management roles and inclusion workshops for over 450 people from human resources teams globally to support their senior leaders who Learning and capability developmenthad previously all attended inclusive leadership workshops in We are committed to helping people reach their full potential their local market. through ongoing training and development. People identify and agree their development objectives with their managersHealth, safety and wellbeing every year as part of the performance dialogue process. Local, The health, safety and wellbeing of everyone affected by our functional and global learning programmes are provided to business activities has continued to be a high priority. The meet people’s development needs, delivered through a blend implementation of the Vodafone fatality prevention plan saw of classroom training, e-leaming, coaching, mentoring and on- a significant reduction, of 33%, in fatalities in India, Ghana and the-job experience. Turkey, where there were 14 fatalities in those countries this year compared with 21 in the previous year. Sadly, across the During the year we invested around £55 million in training Group 21 fatalities have occurred this year including four programmes. In our most recent people survey, 72% of our fatalities that occurred within the Vodacom Group operations, employees rated the opportunity to develop the skills that which are included in the Group figure for the first time this theyneedtodotheirjobwellasgoodorverygood, year. The Vodafone fatality prevention plan has now been rolled out across Vodacom’s subsidiaries which has seen a Inspire, our global leadership development programme for reduction in fatal incidents to one in the last six months of the high-potential managers, is in its fourth year. So far, 124 people financial year. Out of the Group total 17 were third-party havecompletedtheprogramme. contractors and four were Vodafone employees. Further detailscan befoundintheGroup’s2011 sustainability report. Performance, rewardand recognitionWe reward employees based on their performance, potential As part of a more robust governance programme, we and contribution to the success of the business and we aim introduced external health and safety benchmark reviews, to provide competitive and fair rates of pay and benefits in These reviews evaluated health and safety management every country where we operate. We also offer competitive systems in several countries, including New Zealand, Czech retirement and other benefit provisions which vary depending Republic, Hungary, Romania, Vodacom South Africa and Egypt, on conditions and practices in local markets.Culture, communications and engagement Global short-term incentive plans are offered to a large In October 2010 we carried out our sixth annual global people percentage of employees an d global long-term incentive survey.The survey measures employees’levelof engagement, plans are offered to our senior managers. Both plans are paid a combination of pride, loyalty and motivation and 90% of according to individualand company performance, those surveyed responded. We achieved an overall employee engagement score of 75 which means we have maintained a Key performance indicatorshighscoreinemployeeengagementforthethirdyearrunning. 2011 2010 2009 Number of employees™ 83,862 84,990 79,097 Regular, consistent and open communication is fundamental —; —; ; to high levels of employee engagement. Our people have Nationalities in top senior access to information about our business through a global management roles 29 26 25intranet.withlocaltranslationsandcontentwhereappropriate. Women in top senior TheChiefExecutivecommunicatesdirectlywithallemployees management roles (%) 16.5 14.5 13.1 through regular team meetings, email and video updates and tttt: this is reinforced by local chief executive communications in Employee turnover rates (%F 15 15 15all our markets. Relevant performance and change issues are Notes:alSO diSCUSSed With Our employees through team meetings, (1) Represents the average number of employeesinourcontrolled and jointly round table discussions or through elected representative ,,, controlled marketsduring the year 3 r (2) Based on our controlled markets and ourjointventure in Italy. bodiesin some of the European countries. Our culture is based on The Vodafone Way. All of our senior Leadership team (approximately 250 people) have now been through the Leading in The Vodafone Way workshop which provides a picture of howThe Vodafone Way works day-to-day. Local markets will roll out a similar programme for all their managers. We have also created a community of ‘change Leads’, senior leaders who meet regularly to identify what more ^^^^ canbedonetofurtherembedTheVodafoneWay. ^^te*_ Diversity and inclusion Talent and resourcing ^ Our inclusive culture Duringtheyearouremployeescontinuedtoperformatahigh t respects, values, Level and we strengthened our leadership team. This was i™ \ j tj I celebrates and makes achieved partly by introducing talent identification tools and bA ^* ''^ the most of the diversity partly by investing in staff with high potential and helping \ Hl. of our people. them with their career planning and development. Quarterly ^B, ‘ 1 , r J^Wtalent reviews are held to discuss performance, succession H. .

34 Vodafone Group Plc Annual Report 2011

Operating results

This section presents our operating performance, providing commentary on how the revenue and the adjusted EBITDA performance of the Group and its operating segments within Europe, Africa, Middle East and Asia Pacific, and Non-Controlled Interests and Common Functions have developed in the last three years.

2011 financial year compared to the 2010 financial year

Group⁽¹⁾⁽²⁾


					Non-Controlled
			Africa,		Interests and
			Middle East		Common
	Europe		and Asia		Functions⁽³⁾			Eliminations			2011			2010			% change
	£m		Pacific £m		£m			£m			£m			£m			£			Organic⁽⁴⁾

Revenue		32,015		13,304		659			(94	)		45,884			44,472			3.2			2.8
Service revenue		30,097		12,292		412			(63	)		42,738			41,719			2.4			2.1
Adjusted EBITDA		10,823		3,999		(152	)		—			14,670			14,735			(0.4	)		(0.7	)

Adjusted operating profit		5,726		1,272		4,820			—			11,818			11,466			3.1			1.8
Adjustments for:
Impairment losses												(6,150	)		(2,100	)
Other income and expense⁽⁵⁾												(72	)		114

Operating profit												5,596			9,480
Non-operating income and expense⁽⁶⁾												3,022			(10	)
Net investment income/(financing costs)												880			(796	)

Profit before taxation												9,498			8,674
Income tax expense												(1,628	)		(56	)

Profit for the financial year												7,870			8,618


Notes:

(1)		The Group revised its segment structure on 1 October 2010. See note 3 to the consolidated financial statements.

(2)		Current period results reflect average exchange rates of £1:€1.18 and £1:US$1.56.

(3)		Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs.

(4)		Organic growth includes Vodacom at the current level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

(5)		Other income and expense for the year ended 31 March 2011 included £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement.

(6)		Non-operating income and expense for the year ended 31 March 2011 includes £3,019 million profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited. For further details see “Other significant transactions” on page 49.

Revenue

Group revenue increased by 3.2% to £45,884 million and Group service revenue increased by 2.4% to £42,738 million. On an organic basis Group service revenue increased by 2.1%^(*), with a 0.8 percentage point improvement between the first and second half as both Europe and AMAP delivered improved organic service revenue trends.

In Europe service revenue fell by 0.4%^(*) with a decline of 0.3%^(*) in the second half of the year. Both the UK and Germany performed well delivering full year service revenue growth of 4.7%^(*) and 0.8%^(*) respectively. Spain continued to experience economic pressures which have intensified competition leading to a 6.9%^(*) decline in service revenue. Service revenue also declined by 2.1%^(*) in Italy driven by a challenging economic and competitive environment combined with the impact of termination rate cuts. Our improved commercial offers in Turkey have delivered service revenue growth of 28.9%^(*), despite a 52% cut in termination rates which was effective from 1 April 2010. Challenging economic and competitive conditions continued in our other central European businesses where service revenue growth was also impacted by mobile termination rate cuts. European enterprise revenue increased by 0.5%^(*) with improved roaming activity and important customer wins.

In AMAP service revenue grew by 9.5%^(*). Vodacom continued to perform well, with strong data revenue growth from mobile broadband offsetting weaker voice revenue which was impacted by two termination rate cuts during the year. In India service revenue increased by 16.2%^(*), driven by an increase in the mobile customer base and a more stable pricing environment towards the end of the year. In Qatar the customer base reached 757,000 by the end of the year, with 45% of the population now actively using Vodafone services less than two years after launch. On an organic basis, service revenue in Egypt declined by 0.8%^(*) where performance was impacted by the socio-political unrest during the fourth quarter.

Adjusted EBITDA and profit

Adjusted EBITDA decreased by 0.4% to £14,670 million with a 1.1 percentage point decline in both the reported and organic adjusted EBITDA margin.

In Europe adjusted EBITDA decreased by 3.7%^(*), with a decline in adjusted EBITDA margin of 1.7 percentage points, primarily driven by a reduction in service revenue in most markets and higher investment in acquisition and retention costs, partially offset by operating cost efficiencies.

In AMAP adjusted EBITDA increased by 7.5%^(*), driven primarily by growth in India, together with improvements in Vodacom, Ghana, New Zealand and Qatar, partially offset by a slight decline in Egypt. The adjusted EBITDA margin fell 0.6 percentage points^(*), the two main factors behind the decline being higher recurring licence fee costs in India and the change in regional mix from the strong growth in India.

Adjusted operating profit grew by 3.1% as a result of an increase in the Group’s share of results of Verizon Wireless partially offset by the decline in Group adjusted EBITDA. The Group’s share of results in Verizon Wireless, the Group’s associate in the United States, increased by 8.5%^(*) primarily due to the expanding customer base, robust data revenue, efficiencies in operating expenses and lower acquisition costs partially offset by higher customer retention costs reflecting the increased demand for smartphones in the United States.

The Group recorded other net income of £5,342 million, primarily in relation to a £2.8 billion net gain on the sale of the Group’s interests in China Mobile Limited, £1.8 billion on the settlement of a tax case and £0.5 billion from the disposal of investments in SoftBank Mobile Corp.

Operating profit decreased by 41.0% primarily due to higher impairment losses compared to the prior year. Impairment losses totalling £6,150 million were recorded relating to our businesses in Spain (£2,950 million), Italy (£1,050 million), Ireland (£1,000 million), Greece (£800 million) and Portugal (£350 million) primarily resulting from increased discount rates as a result of

Vodafone Group Plc Annual Report 2011 35

Performance

increases in government bond rates together with lower cash flows within business plans, reflecting weaker country-level macro economic environments. The impairment loss in the prior year was £2,100 million.

Profit for the year decreased by 8.7%.

Net investment income/(financing costs)


	2011			2010
	£m			£m

Investment income		1,309			716
Financing costs		(429	)		(1,512	)

Net investment income/(financing costs)		880			(796	)


Analysed as:
Net financing costs before income from investments		(852	)		(1,024	)
Potential interest charges arising on settlement of outstanding tax issues⁽¹⁾		(46	)		(23	)
Income from investments		83			145
Foreign exchange⁽²⁾		256			(1	)
Equity put rights and similar arrangements⁽³⁾		95			(94	)
Interest related to the settlement of tax cases⁽⁴⁾		872			201
Disposal of SoftBank financial instruments⁽⁵⁾		472			—

		880			(796	)


Notes:

(1)		Excluding interest credits related a tax case settlement.

(2)		Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange rate differences on financial instruments received as consideration on the disposal of Vodafone Japan to SoftBank in April 2006.

(3)		Includes foreign exchange rate movements, accretion expense and fair value charges. Further details of these options are provided on page 51.

(4)		The £872 million in the year ended 31 March 2011 relates to the settlement of a tax case and the £201 million in the year ended 31 March 2010 relates to the settlement of the German tax loss claim.

(5)		See “Other significant transactions” on page 49.

Net financing costs before income from investments decreased from £1,024 million to £852 million primarily due to a reduction in net debt, partially offset by an increase in average interest rates for debt denominated in US dollars. At 31 March 2011 the provision for potential interest charges arising on settlement of outstanding tax issues was £398 million (31 March 2010: £1,312 million), with the reduction primarily reflecting the settlement of a tax case.

Taxation

The adjusted effective tax rate for the year ended 31 March 2011 was 24.5%. This is in line with the adjusted effective tax rate for the year ended 31 March 2010 of 24.0%. Tax on adjustments to derive adjusted profit before tax includes tax payable on the gain on the disposal of the Group’s 3.2% interest in China Mobile Limited.

Income tax expense includes a credit of £929 million arising as a result of the settlement of a tax case in July 2010. For further details see note 4 to the consolidated financial statements in the half-year financial report for the six months ended 30 September 2010.

Earnings per share

Adjusted earnings per share increased by 4.0% to 16.75 pence for the year ended 31 March 2011 due to growth in adjusted earnings and a reduction in shares arising from the Group’s share buyback programme. Basic earnings per share decreased to 15.2 pence primarily due to the £6,150 million of impairment charges partially offset by a gain on disposal of the Group’s 3.2% interest in China Mobile Limited and the settlement of a tax case.


	2011			2010
	£m			£m

Profit attributable to equity shareholders		7,968			8,645


Pre-tax adjustments:
Impairment loss		6,150			2,100
Other income and expense⁽¹⁾⁽⁴⁾		72			(114	)
Non-operating income and expense⁽²⁾⁽⁴⁾		(3,022	)		10
Investment income and financing costs⁽³⁾⁽⁴⁾		(1,695	)		(106	)

		1,505			1,890


Taxation		(697	)		(2,064	)

Adjusted profit attributable to equity shareholders		8,776			8,471


Weighted average number of shares outstanding
Basic		52,408			52,595
Diluted		52,748			52,849


Notes:

(1)		The year ended 31 March 2011 includes £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement.

(2)		The year ended 31 March 2011 includes £3,019 million representing the profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited.

(3)		See notes 2, 3, 4 and 5 in “Net investment income/(financing costs)” above.

(4)		These amounts comprise ‘Other net income’ of £5,342 million

Europe⁽¹⁾


	Germany			Italy			Spain			UK			Other			Eliminations			Europe			% change
	£m			£m			£m			£m			£m			£m			£m			£			Organic

Year ended 31 March 2011
Revenue		7,900			5,722			5,133			5,271			8,253			(264	)		32,015			(2.5	)		0.6
Service revenue		7,471			5,432			4,735			4,931			7,787			(259	)		30,097			(3.4	)		(0.4	)
Adjusted EBITDA		2,952			2,643			1,562			1,233			2,433			—			10,823			(7.1	)		(3.7	)
Adjusted operating profit		1,548			1,903			915			348			1,012			—			5,726			(9.8	)		(6.1	)
Adjusted EBITDA margin		37.4	%		46.2	%		30.4	%		23.4	%		29.5	%					33.8	%


Year ended 31 March 2010
Revenue		8,008			6,027			5,713			5,025			8,357			(297	)		32,833
Service revenue		7,722			5,780			5,298			4,711			7,943			(295	)		31,159
Adjusted EBITDA		3,122			2,843			1,956			1,141			2,582			—			11,644
Adjusted operating profit		1,695			2,107			1,310			155			1,084			—			6,351
Adjusted EBITDA margin		39.0	%		47.2	%		34.2	%		22.7	%		30.9	%					35.5	%


Note:

(1)		The Group revised its segment structure on 1 October 2010. See note 3 to the consolidated financial statements.

36 Vodafone Group Plc Annual Report 2011

Operating results continued

Revenue declined by 2.5% reflecting a 3.2 percentage point impact from unfavourable foreign exchange rate movements. On an organic basis service revenue declined by 0.4%^(*)reflecting reductions in most markets offset by growth in Germany, the UK, the Netherlands and Turkey. The decline was primarily driven by lower voice revenue resulting from continued market and regulatory pressure on pricing and the challenging economic climate, partially offset by growth in data and fixed line revenue.

Adjusted EBITDA decreased by 7.1% including a 3.5 percentage point impact from unfavourable exchange rate movements. On an organic basis adjusted EBITDA decreased by 3.7%^(*), with a 1.7 percentage point decline in adjusted EBITDA margin resulting from a reduction in service revenue in most markets and higher customer investment, partially offset by operating cost savings.


	Organic			M&A		Foreign			Reported
	change			activity		exchange			change
	%			pps		pps			%

Revenue — Europe		0.6			0.1		(3.2	)		(2.5	)


Service revenue
Germany		0.8			—		(4.1	)		(3.3	)
Italy		(2.1	)		—		(3.9	)		(6.0	)
Spain		(6.9	)		—		(3.7	)		(10.6	)
UK		4.7			—		—			4.7
Other Europe		0.5			0.5		(3.0	)		(2.0	)

Europe		(0.4	)		0.1		(3.1	)		(3.4	)


Adjusted EBITDA
Germany		(1.5	)		—		(3.9	)		(5.4	)
Italy		(3.1	)		—		(3.9	)		(7.0	)
Spain		(16.8	)		—		(3.3	)		(20.1	)
UK		8.0			—		—			8.0
Other Europe		(2.4	)		0.2		(3.6	)		(5.8	)

Europe		(3.7	)		0.1		(3.5	)		(7.1	)


Adjusted operating profit
Germany		(4.9	)		—		(3.8	)		(8.7	)
Italy		(5.9	)		—		(3.8	)		(9.7	)
Spain		(27.3	)		—		(2.9	)		(30.2	)
UK		125.1			—		—			125.1
Other Europe		(2.0	)		0.3		(4.9	)		(6.6	)

Europe		(6.1	)		0.1		(3.8	)		(9.8	)

Germany

Service revenue increased by 0.8%^(*) driven by strong data and messaging revenue growth. Data revenue grew by27.9%^(*) as a result of increased penetration of smartphones and Superflat Internet tariffs. Mobile revenue remained stable in the fourth quarter despite a termination rate cut effective from 1 December 2010. Enterprise revenue grew by 3.6%^(*) driven by strong customer and data revenue growth.

Adjusted EBITDA declined by 1.5%^(*), with a 1.6 percentage point reduction in the adjusted EBITDA margin. This decline was driven by increased customer acquisition and retention, contributed to by the launch of the iPhone in the third quarter, partially offset by operating cost efficiencies.

During the year we acquired LTE spectrum in Germany and launched LTE services towards the end of the year, initially targeting rural areas underserved by fixed broadband.

Italy

Service revenue declined by 2.1%^(*) primarily driven by the challenging economic and competitive environment, the impact of termination rate cuts and customer tariff optimisation. The average contract customer base grew by 12.6% enabling the partial offset of these pressures. Data revenue growth remained strong at 21.5%^(*) driven by the high level of customers migrating to smartphones and taking advantage of data plans. There was continued investment to improve quality and coverage of the network. Fixed line revenue continued to grow with the broadband customer base reaching 1.7 million at 31 March 2011 on a 100% basis.

Adjusted EBITDA decreased by 3.1%^(*), with a fall in the adjusted EBITDA margin of 1.0 percentage point, as a result of the decline in service revenue and higher investment in acquisition and retention costs partially offset by a reduction in operating expenses.

Spain

Service revenue declined by 6.9%^(*) impacted by continued intense competition, general economic weakness and the penetration of lower priced tariffs into the customer base. New integrated plans were introduced in the third quarter in response to the demand for combined voice and data tariffs driven by the increase in smartphones. Data revenue grew by 14.8%^(*)driven by mobile broadband and mobile internet. One-off items contributed to a 1.8 percentage point^(*) improvement to service revenue growth for the fourth quarter.

Adjusted EBITDA declined 16.8%^(*), with a 3.8 percentage point fall in the adjusted EBITDA margin, due to lower service revenue and proportionately higher acquisition and retention costs, partially offset by a reduction in operating expenses.

Service revenue increased by 4.7%^(*) driven by data revenue growth due to increasing penetration of smartphones and mobile internet bundles and strong net contract customer additions, which more than offset continued competitive pressures and weaker prepaid revenue. The termination rate cuts announced in March 2011 are expected to have a significant negative impact on revenue growth during the 2012 financial year.

Adjusted EBITDA increased by 8.0%^(*) with the adjusted EBITDA margin increasing by 0.7 percentage points, reflecting higher service revenue partially offset by higher customer acquisition and retention costs.

Other Europe

Service revenue increased by 0.5%^(*) with growth in Turkey and the Netherlands being partially offset by declines in other markets due to the challenging economic environment and intense competitive factors. In Turkey service revenue grew by 28.9%^(*) driven by strong growth in both data and voice revenue, despite a 52% cut in termination rates effective from 1 April 2010. In Greece service revenue declined by 19.4%^(*) with intense competition driving a reduction in prepaid revenue and economic factors leading to customer tariff optimisation.

Adjusted EBITDA declined by 2.4%^(*), with declines in all markets except Turkey and the Netherlands, due primarily to lower service revenue and higher acquisition and retention costs partially offset by operating cost efficiencies.

Vodafone Group Plc Annual Report 2011 37



Africa, Middle East and Asia Pacific⁽¹⁾		Performance


													Africa,
													Middle East
													and Asia
	India			Vodacom			Other			Eliminations			Pacific			% change
	£m			£m			£m			£m			£m			£		Organic⁽²⁾

Year ended 31 March 2011
Revenue		3,855			5,479			3,971			(1	)		13,304			20.0		9.5
Service revenue		3,804			4,839			3,650			(1	)		12,292			20.0		9.5
Adjusted EBITDA		985			1,844			1,170			—			3,999			20.7		7.5
Adjusted operating profit		15			827			430			—			1,272			55.5		8.6
Adjusted EBITDA margin		25.6	%		33.7	%		29.5	%					30.1	%


Year ended 31 March 2010
Revenue		3,114			4,450			3,526			(1	)		11,089
Service revenue		3,069			3,954			3,224			(1	)		10,246
Adjusted EBITDA		807			1,528			977			—			3,312
Adjusted operating (loss)/profit		(37	)		520			335			—			818
Adjusted EBITDA margin		25.9	%		34.3	%		27.7	%					29.9	%


Notes:

(1)		The Group revised its segment structure on 1 October 2010. See note 3 to the consolidated financial statements.

(2)		Organic growth includes Vodacom at the current level of ownership and excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

Revenue grew by 20.0% with an 8.5 percentage point benefit from foreign exchange rate movements and the full year impact of the consolidation of Vodacom results from 18 May 2009 partially offset by the impact of the creation of the Vodafone Hutchison Australia (‘VHA’) joint venture on 9 June 2009. On an organic basis service revenue grew by 9.5%^(*) despite the impact of MTR reductions and difficult economic environments. The growth was driven by a strong performance in India and continued growth from Vodacom and the rest of the region, other than Egypt where performance was impacted by the socio-political unrest during the fourth quarter.

Adjusted EBITDA grew by 20.8% with foreign exchange rate movements contributing 8.0 percentage points of growth. On an organic basis adjusted EBITDA grew by 7.5%^(*) driven primarily by growth in India, together with improvements in Vodacom, Ghana, Qatar and New Zealand, partially offset by a decline in Egypt following pricing pressure and socio-political unrest.


	Organic		M&A			Foreign			Reported
	change		activity			exchange			change
	%		pps			pps			%

Revenue –
Africa, Middle East and Asia Pacific		9.5		2.0			8.5			20.0


Service revenue
India		16.2		—			7.7			23.9
Vodacom		5.8		6.7			9.9			22.4
Other Africa, Middle East and Asia Pacific		7.2		(0.9	)		6.9			13.2

Africa, Middle East and Asia Pacific		9.5		2.2			8.3			20.0


Adjusted EBITDA
India		15.1		—			7.0			22.1
Vodacom		4.9		4.9			10.9			20.7
Other Africa, Middle East and Asia Pacific		5.1		10.6			4.1			19.8

Africa, Middle East and Asia Pacific		7.5		5.3			8.0			20.8


Adjusted operating profit
India		134.0		—			6.5			140.5
Vodacom		5.7		38.2			15.1			59.0
Other Africa, Middle East and Asia Pacific		2.2		29.2			(3.0	)		28.4

Africa, Middle East and Asia Pacific		8.6		39.9			7.0			55.5

India

Service revenue grew by 16.2%^(*) including a 1.7 percentage point^(*) benefit from Indus Towers, the Group’s network sharing joint venture. Growth was driven by a 39.0% increase in the average mobile customer base and stable usage per customer trends, partially offset by a fall in the effective rate per minute due to an increase in the penetration of lower priced tariffs into the customer base and strong competition in the market.

February 2011 saw the launch of commercial 3G services following the purchase of 3G spectrum in May 2010 and subsequent network build. By the end of the year 1.5 million customers had activated their 3G access.

Adjusted EBITDA grew by 15.1%^(*) driven by the increase in the customer base and economies of scale which absorbed pricing and cost pressures.

Vodacom

Service revenue grew by 5.8%^(*) driven by South Africa where growth in data revenue of 35.9%^(*)(1) offset a decline in voice revenue caused by termination rate cuts effective from 1 March 2010 and 1 March 2011.

In South Africa data revenue growth was driven by a 48.9%^(*) increase in data usage due to strong growth in mobile connect cards and smartphones. In addition, successful commercial activity, particularly in off-peak periods, drove higher voice usage during the year which partially offset the impact of termination rate cuts. Net customer additions returned to pre-registration levels for the first time in the third quarter, with the trend continuing during the fourth quarter with net additions of 1.2 million.

In Vodacom’s operations outside South Africa service revenue growth continued with strong performances from Tanzania and Mozambique. Trading conditions remain challenging in the Democratic Republic of Congo and the Gateway operations.

Adjusted EBITDA grew by 4.9%^(*) driven by the increase in service revenue, strong handset sales and lower interconnection costs, partially offset by higher operating expenses.

On 1 April 2011 Vodacom refreshed its branding to more closely align with that of the Group.


Note:

(1)		Data revenue in South Africa grew by 41.8%^(). Excluding the impact of reclassifications between messaging and data revenue during the year, data revenue grew by35.9%^().

38 Vodafone Group Plc Annual Report 2011

Operating results continued

Other Africa, Middle East and Asia Pacific

Service revenue grew by 7.2%^(*) with growth across all markets except Egypt. In Qatar the customer base reached 757,000 by the end of the year, with 45% of the population now actively using Vodafone services. The decline in Egypt service revenue was driven by a combination of termination rate reductions, competitive pressure on pricing and socio-political unrest during the fourth quarter, offset in part by strong customer and data revenue growth during the year. In Ghana service revenue growth of 21.0%^(*) was supported by competitive tariffs and improved brand awareness.

VHA integration remains on track and a number of important initiatives were completed during the financial year to begin realising the benefits of the merger. Contact centre operations were consolidated into two major centres in Hobart and Mumbai India, substantial progress was made in the consolidation of the retail footprint, and a major refit of retail stores is underway. VHA appointed new suppliers for network managed services, core, transmission and IT managed services.

Adjusted EBITDA increased by 5.1%^(*) driven by growth in Ghana, New Zealand and Qatar partially offset by a decline in Egypt resulting primarily from the lower effective price per minute but also impacted by the sociopolitical unrest during the fourth quarter.

Non-Controlled Interests and Common Functions Verizon Wireless⁽¹⁾


	2011			2010						% change
	£m			£m			£			Organic⁽³⁾

Revenue		18,711			17,222			8.6			6.0
Service revenue		17,238			15,898			8.4			5.8
Adjusted EBITDA		7,313			6,689			9.3			6.7
Interest		(261	)		(298	)		(12.4	)
Tax⁽²⁾		(235	)		(205	)		14.6
Share of result in Verizon Wireless		4,569			4,112			11.1			8.5


Notes:

(1)		All amounts represent the Group’s share unless otherwise stated.

(2)		The Group’s share of the tax attributable to Verizon Wireless relates only to the corporate entities held by the Verizon Wireless partnership and certain state taxes which are levied on the partnership. The tax attributable to the Group’s share of the partnership’s pre-tax profit is included within the Group tax charge.

(3)		Organic growth rates include the impact of a non-cash revenue adjustment which was recorded by Verizon Wireless to defer previously recognised data revenue that will be earned and recognised in future periods. Excluding this the equivalent organic growth rates for service revenue, revenue,adjusted EBITDA and the Group’s share of result in Verizon Wireless would have been 6.4%^(),6.6%^(),8.2%^() and 10.8%^() respectively.

In the United States Verizon Wireless reported 2.6 million net mobile customer additions bringing its closing mobile customer base to 88.4 million, a 3.1% increase. Customer growth improved in the fourth quarter of the year following the launch of the iPhone 4 on the Verizon Wireless network in February 2011.

Service revenue growth of 5.8%^(*) was driven by the expanding customer base and robust data revenue primarily derived from growth in the penetration of smartphones.

The adjusted EBITDA margin remained strong despite the competitive challenges and economic environment. Efficiencies in operating expenses and lower customer acquisition costs resulting from lower volumes have been partly offset by a higher level of customer retention costs reflecting the increased demand for smartphones.

As part of the regulatory approval for the Alltel acquisition, Verizon Wireless was required to divest overlapping properties in 105 markets. On 26 April 2010 Verizon Wireless completed the sale of network and licence assets in 26 markets, encompassing 0.9 million customers, to Atlantic Tele-Network for US$0.2 billion. On 22 June 2010 Verizon Wireless completed the sale of network assets and mobile licences in the remaining 79 markets to AT&T Mobility for US$2.4 billion. As a result the Verizon Wireless customer base reduced by approximately 2.1 million net customers on a 100% basis, partially offset by certain adjustments in relation to the Alltel acquisition.

On 23 August 2010 Verizon Wireless acquired a spectrum licence, network assets and related customers in southwest Mississippi and in Louisiana, formerly owned by Centennial Communications Corporation, from AT&T Inc. for cash consideration of US$0.2 billion. This acquisition was made to enhance Verizon Wireless’ network coverage in these two locations.

Verizon Wireless’ net debt at 31 March 2011 totalled US$9.6 billion (31 March 2010: US$22.4 billion).

Vodafone Group Plc Annual Report 2011 39

Performance

2010 financial year compared to the 2009 financial year

Group⁽¹⁾


					Non-
			Africa,		Controlled
			Middle East		Interests and
			and Asia		Common
	Europe		Pacific		Functions⁽²⁾			Eliminations			2010			2009			% change
	£m		£m		£m			£m			£m			£m			£			Organic⁽³⁾

Revenue		32,833		11,089		667			(117	)		44,472			41,017			8.4			(2.3	)
Service revenue		31,159		10,246		397			(83	)		41,719			38,294			8.9			(1.6	)
Adjusted EBITDA		11,644		3,312		(221	)		—			14,735			14,490			1.7			(7.4	)

Adjusted operating profit		6,351		818		4,297			—			11,466			11,757			(2.5	)		(7.0	)
Adjustments for:
Impairment losses												(2,100	)		(5,900	)
Other income and expense												114			—

Operating profit												9,480			5,857
Non-operating income and expense												(10	)		(44	)
Net financing costs												(796	)		(1,624	)

Profit before taxation												8,674			4,189
Income tax expense												(56	)		(1,109	)

Profit for the financial year												8,618			3,080


Notes:

(1)		2010 results reflect average exchange rates of £1:€1.13 and £1:US$1.60.

(2)		Common Functions primarily represents the results of the partner markets and the net result of unallocated central Group costs and excludes income from intercompany royalty fees.

(3)		Organic growth includes India and Vodacom (except the results of Gateway) at the current level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

Revenue

Group revenue increased by 8.4% to £44,472 million, with favourable exchange rates contributing 5.7 percentage points of growth and merger and acquisition activity contributing 5.0 percentage points. During the year the Group acquired an additional 15% stake in Vodacom and fully consolidated its results from 18 May 2009.

Group service revenue increased by 8.9% to £41,719 million, while organic service revenue declined by 1.6%^(*). Service revenue was impacted by challenging economic conditions in Europe offset by growth in Africa, Middle East and Asia Pacific.

In Europe service revenue fell 3.8%^(*), a 2.1 percentage point decline on the previous year reflecting challenging economic conditions in most markets, regulatory pressures on pricing, offset by growth in Italy, Turkey and the Netherlands. The decline was primarily driven by reduced voice revenue resulting from continued market and regulatory pressure on pricing and slower usage growth partially offset by growth in data and fixed line. Turkey returned to growth in the second half of the financial year with service revenue growing 31.3%^(*) in the fourth quarter. Romania experienced intense competition throughout the year with service revenue declining 19.9%^(*). Mobile termination rate cuts in the region which became effective during the year, contributed 2.4 percentage points to the decline in service revenue. Data revenue grew by 17.7%^(*) due to an increase in data plans sold with smartphones and good PC connectivity revenue across the region. Fixed line revenue increased by 7.5%^(*) with the number of fixed broadband customers reaching 5.4 million at 31 March 2010, a net increase of 960,000 customers during the financial year.

In Africa, Middle East and Asia Pacific service revenue rose by 7.5%^(*) due to strong growth in Vodacom and India. India’s service revenue increased by 14.7%^(*), 4.7 percentage points of which was delivered by the network sharing joint venture Indus Towers with the remainder being driven by a 46.7% increase in the mobile customer base offset in part by a decline in mobile voice pricing. In Egypt service revenue grew by 1.3%^(*) and Qatar increased its mobile customer base to 465,000, following the launch of services in July.

Adjusted EBITDA and profit

Adjusted EBITDA increased by 1.7% to £14,735 million, with favourable exchange rates contributing 5.8 percentage points and the impact of merger and acquisition activity, primarily the full consolidation of Vodacom, contributing 3.3 percentage points to adjusted EBITDA growth.

In Europe, adjusted EBITDA decreased by 8.9%^(*), with a decline in the adjusted EBITDA margin of 1.5 percentage points, primarily driven by the downward revenue trend, reduced adjusted EBITDA margins across the majority of Europe, investment in Turkey to drive growth in the second half of the financial year and the growth of lower margin fixed line operations partially offset by operating and direct cost savings.

In Africa, Middle East and Asia Pacific adjusted EBITDA increased by 5.5%^(*)due to strong revenue growth in Vodacom and India, combined with direct and customer cost savings partially offset by declines in other markets due to pricing and recessionary pressure and the start-up in Qatar.

Operating profit increased primarily due to changes in impairment losses. In the 2010 financial year, the Group recorded net impairment losses of £2,100 million. Vodafone India was impaired by £2,300 million primarily due to intense price competition following the entry of a number of new operators into the market. This was partially offset by a £200 million reversal in relation to Vodafone Turkey resulting primarily from movements in discount rates. In the prior year impairment losses of £5,900 million were recorded.

Adjusted operating profit decreased by 2.5%, or 7.0%^(*) on an organic basis, with a 6.0 percentage point contribution from favourable exchange rates, whilst the impact of merger and acquisition activity reduced adjusted operating profit growth by 1.5 percentage points.

The share of results in Verizon Wireless, the Group’s associate in the US, increased by 8.0%^(*) primarily due to the expanding customer base, robust data revenue and operating expenses efficiencies partially offset by higher customer acquisition and retention costs.

40 Vodafone Group Plc Annual Report 2011

Operating results continued

Net financing costs


	2010			2009
	£m			£m

Investment income		716			795
Financing costs		(1,512	)		(2,419	)

Net financing costs		(796	)		(1,624	)


Analysed as:
Net financing costs before dividends from investments		(1,024	)		(1,480	)
Potential interest charges arising on settlement of outstanding tax issues⁽¹⁾		(23	)		81
Dividends from investments		145			110
Foreign exchange⁽²⁾		(1	)		235
Equity put rights and similar arrangements⁽³⁾		(94	)		(570	)
Interest on settlement of German tax claim⁽⁴⁾		201			—

		(796	)		(1,624	)


Notes:

(1)		Excluding interest on settlement of German tax claim.

(2)		Comprises foreign exchange differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange differences on financial instruments received as consideration in the disposal of Vodafone Japan to SoftBank in April 2006.

(3)		Primarily represents foreign exchange movements and accretion expense. Further details of these options are provided on page 51.

(4)		See “Taxation” below for further details.

Net financing costs before dividends from investments decreased from £1,480 million to £1,024 million primarily due to the impact of significantly lower interest rates given our preference for floating rate borrowing, partially offset by the 13.4% increase in average net debt being offset by changes in the currency mix of debt. At 31 March 2010 the provision for potential interest charges arising on settlement of outstanding tax issues was £1,312 million (31 March 2009: £1,635 million).

Taxation

The effective tax rate was 0.6% (2009:26.5%). This rate was lower than our weighted average statutory tax rate principally due to the impact of the agreement of the German write down losses (see note 6 to the consolidated financial statements) and also the ongoing benefits from our internal capital structure.

Income tax expense includes a credit of £2,103 million arising from the German tax authorities’ decision that €15 billion of losses booked by a German subsidiary in 2001 are tax deductible. The credit includes benefits claimed in respect of prior years as well as the recognition of a deferred tax asset for the potential use of losses in future tax years.

Earnings per share

Adjusted earnings per share decreased by 6.2% to 16.11 pence for the year ended 31 March 2010 due the prior year tax benefit discussed above. Basic earnings per share increased to 16.44 pence primarily due to the impairment losses of £5,900 million in relation to Spain, Turkey and Ghana in the prior year compared to net impairment losses of £2,100 million in 2010 and the income tax credit arising from the German tax settlement discussed above.


	2010 £m			2009 £m

Profit attributable to equity shareholders		8,645			3,078


Pre-tax adjustments:
Impairment losses, net		2,100			5,900
Other income and expense		(114	)		—
Non-operating income and expense		10			44
Investment income and financing costs⁽¹⁾		(106	)		335

		1,890			6,279


Taxation		(2,064	)		(300	)

Adjusted profit attributable to equity shareholders		8,471			9,057


Weighted average number of shares outstanding	Million			Million
Basic		52,595			52,737
Diluted		52,849			52,969


Note:

(1)		See notes 1 and 2 in “Net financing costs” to the left.

Europe


	Germany			Italy			Spain			UK			Other			Eliminations			Europe			% change
	£m			£m			£m			£m			£m			£m			£m			£			Organic

Year ended 31 March 2010
Revenue		8,008			6,027			5,713			5,025			8,357			(297	)		32,833			0.2			(4.5	)
Service revenue		7,722			5,780			5,298			4,711			7,943			(295	)		31,159			0.9			(3.8	)
Adjusted EBITDA		3,122			2,843			1,956			1,141			2,582			—			11,644			(3.9	)		(8.9	)
Adjusted operating profit		1,695			2,107			1,310			155			1,084			—			6,351			(7.0	)		(12.6	)
Adjusted EBITDA margin		39.0	%		47.2	%		34.2	%		22.7	%		30.9	%					35.5	%


Year ended 31 March 2009
Revenue		7,847			5,547			5,812			5,392			8,514			(343	)		32,769
Service revenue		7,535			5,347			5,356			4,912			8,070			(343	)		30,877
Adjusted EBITDA		3,225			2,565			2,034			1,368			2,920			—			12,112
Adjusted operating profit		1,835			1,839			1,421			328			1,406			—			6,829
Adjusted EBITDA margin		41.1	%		46.2	%		35.0	%		25.4	%		34.3	%					37.0	%

Vodafone Group Plc Annual Report 2011 41

Performance

Revenue increased by 0.2% benefiting from exchange rate movements. On an organic basis service revenue declined by 3.8%^(*) reflecting reductions in most markets partially offset by growth in Italy, Turkey and the Netherlands. The decline was primarily driven by reduced voice revenue resulting from continued market and regulatory pressure on pricing and slower usage growth as a result of the challenging economic climate. This was partially offset by growth in data and fixed line revenue.

Adjusted EBITDA decreased by 3.9% resulting from an organic decline partially offset by a positive contribution from foreign exchange rate movements. On an organic basis, adjusted EBITDA decreased by 8.9%^(*)resulting from a decline in organic service revenue in most markets and increased customer investment partially offset by operating and direct cost savings. The adjusted EBITDA margin declined 1.5 percentage points.


	Organic			M&A			Foreign		Reported
	change			activity			exchange		change
	%			pps			pps		%

Revenue — Europe		(4.5	)		0.1			4.6		0.2


Service revenue
Germany		(3.5	)		—			6.0		2.5
Italy		1.9			—			6.2		8.1
Spain		(7.0	)		—			5.9		(1.1	)
UK		(4.7	)		0.6			—		(4.1	)
Other		(6.0	)		—			4.4		(1.6	)

Europe		(3.8	)		0.1			4.6		0.9


Adjusted EBITDA
Germany		(8.9	)		—			5.7		(3.2	)
Italy		4.3			—			6.5		10.8
Spain		(9.9	)		—			6.1		(3.8	)
UK		(17.7	)		1.1			—		(16.6	)
Other		(16.0	)		—			4.4		(11.6	)

Europe		(8.9	)		0.1			4.9		(3.9	)


Adjusted operating profit
Germany		(13.2	)		(0.1	)		5.7		(7.6	)
Italy		7.8			—			6.8		14.6
Spain		(13.8	)		—			6.0		(7.8	)
UK		(58.3	)		5.6			—		(52.7	)
Other		(27.7	)		—			4.8		(22.9	)

Europe		(12.6	)		0.1			5.5		(7.0	)

Germany

Service revenue declined by 3.5%^(*) driven by a 5.0%^(*) reduction in mobile revenue partly offset by a 1.3%^(*) improvement in fixed line revenue. The mobile revenue decline was driven by a decrease in voice revenue impacted by a termination rate cut effective from April 2009, reduced roaming, competitive pressure and continued tariff optimisation by customers. The service revenue decline in the fourth quarter slowed to 1.6%^(*) with mobile revenue declining 1.8%^(*) driven by the acceleration in data growth and improved usage trends. Data revenue benefited from an increase in Superflat Internet tariff penetration to over 500,000 customers, a 46% increase in smartphones and an 85% increase in active Vodafone Mobile Connect cards compared with the previous year.

Fixed line revenue growth of 1.3%^(*) was supported by a 0.4 million increase in fixed broadband customers to 3.5 million at 31 March 2010 and a 0.2 million increase in wholesale fixed broadband customers to 0.4 million at 31 March 2010.

Adjusted EBITDA declined by 8.9%^(*) driven by lower service revenue and investment in customer acquisition and retention offset in part by lower interconnect costs and a reduction of operating expenses principally from fixed and mobile integration synergies.

Italy

Service revenue growth was 1.9%^(*) with strong growth in data revenue, driven by higher penetration of PC connectivity devices and mobile internet services, and fixed revenue. The continued success of dual branding led to a closing fixed broadband customer base of 1.3 million on a 100% basis. Increased regulatory, economic and competitive pressures led to the fall in voice revenue partially mitigated through initiatives to stimulate customer spending and the continued growth in high value contract customers. Mobile contract customer additions were strong both in consumer and enterprise segments and the closing contract customer base was up by 14.5%.

Adjusted EBITDA increased by 4.3%^(*) and adjusted EBITDA margin increased by 1.0 percentage point as a result of increased revenue, continued operational efficiencies and cost control.

Spain

Full year service revenue declined by 7.0%^(*) primarily due to a decline in voice revenue which was driven by continued intense competition and economic weakness, including high unemployment, termination rate cuts effective from April and October 2009 and increased involuntary churn. In the fourth quarter the service revenue decline improved to 6.2%^(*) as voice usage increased due to further penetration of our flat rate tariffs and fixed line revenue continued to grow with 0.6 million fixed broadband customers by the end of the financial year.

Adjusted EBITDA declined 9.9%^(*) and the adjusted EBITDA margin decreased by 0.8 percentage points as the decline in service revenue, the increase in commercial costs and the dilutive effect of lower margin fixed line services more than offset the reduction in overhead costs.

Service revenue declined by 4.7%^(*) with lower voice revenue primarily due to a mobile termination rate reduction effective from July 2009, continued intense competition and economic pressures resulting in customers optimising bundle usage and lower roaming revenue. These were partially offset by higher messaging revenue, strong growth in data revenue driven by the success of mobile internet bundles and higher wholesale revenue derived from existing MVNO agreements. The decline in the fourth quarter slowed to 2.6%^(*) driven by higher data growth and the impact of mobile customer additions achieved through the launch of new products and expanded indirect distribution channels.

The 17.7%^(*) decline in adjusted EBITDA was primarily due to lower service revenue and increased customer investment partially offset by cost efficiency initiatives, including streamlined processes, outsourcing and reductions in publicity and consultancy.

42 Vodafone Group Plc Annual Report 2011

Operating results continued

Other Europe

Service revenue decreased by 6.0%^(*) with declines in all countries except the Netherlands and Turkey, which returned to growth in the second half of the year, as all markets were impacted by the economic downturn. In the Netherlands service revenue increased 3.0%^(*) benefiting from strong growth in visitor revenue. Service revenue in Turkey increased by 31.3%^(*) in the fourth quarter driven by an improving trend in outgoing mobile revenue. The quality and mix of customers continued to improve, with Vodafone remaining the market leader in mobile number portability in Turkey. In Romania service revenue declined by 19.9%^(*) due to intense competition throughout the year, mobile termination rate cuts and the continued impact on ARPU resulting from local currency devaluation against the euro, as tariffs are quoted in euros while household incomes are earned in local currency. In the Czech Republic and Hungary the decline in service revenue was driven by mobile termination rate cuts which became effective during the year, impacting incoming mobile voice revenue and challenging economic conditions. Vodafone launched its 3G network services in the Czech Republic during the fourth quarter. Service revenue in Greece declined by 14.5%^(*) primarily due to a mobile termination rate cut effective from January 2009, tariff changes and a particularly tough economic and competitive climate. Service revenue in Ireland declined due to a combination of recessionary and competitive factors. In Portugal there was a termination rate reduction effective from April 2009 which contributed to a fall in service revenue of 4.9%^(*).

Adjusted EBITDA declined by 16.0%^(*) mainly due to a reduction in service revenue coupled with turnaround investment in Turkey. The significant service revenue growth in the second half of the financial year in Turkey was driven by investment and improvement in many areas of the business. These led to higher operating costs which, when coupled with increased interconnect costs arising from the introduction of new “any network” tariffs plans, resulted in negative adjusted EBITDA for the financial year. In Romania adjusted EBITDA decreased by 26.5%^(*) due to the revenue decline but this was partially offset by strong cost reduction initiatives in all areas. The adjusted EBITDA margin fell by 3.4 percentage points with declines in all markets except the Netherlands, Portugal, Czech Republic and Hungary. The decline in service revenue was partially offset by lower customer costs and a reduction in operating expenses.

Africa, Middle East and Asia Pacific


													Africa,
													Middle East
													and Asia
	India			Vodacom			Other			Eliminations			Pacific			% change
	£m			£m			£m			£m			£m			£			Organic⁽¹⁾

Year ended 31 March 2010
Revenue		3,114			4,450			3,526			(1	)		11,089			43.6			6.1
Service revenue		3,069			3,954			3,224			(1	)		10,246			44.2			7.5
Adjusted EBITDA		807			1,528			977			—			3,312			38.3			5.5
Adjusted operating profit		(37	)		520			335			—			818			(11.4	)		(0.3	)
Adjusted EBITDA margin		25.9	%		34.3	%		27.7	%					29.9	%


Year ended 31 March 2009
Revenue		2,689			1,778			3,258			(2	)		7,723
Service revenue		2,604			1,548			2,953			(2	)		7,103
Adjusted EBITDA		717			606			1,072			—			2,395
Adjusted operating profit		(30	)		373			580			—			923
Adjusted EBITDA margin		26.7	%		34.1	%		32.9	%					31.0	%


Note:

(1)		Organic growth includes Vodacom (except the results of Gateway) at the current level of ownership and includes India but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

Revenue increased by 43.6% benefiting from the treatment of Vodacom as a subsidiary and the full consolidation of its results from 18 May 2009 combined with a significant benefit from foreign exchange rate movements, offset in part by the impact of the creation of a joint venture in June 2009 between Vodafone Australia and Hutchison 3G Australia. On an organic basis service revenue increased by 7.5%^(*) reflecting a 51% increase in the mobile customer base and continued strong data revenue growth partially offset by a decline in mobile voice pricing. India contributed around 64% of the region’s organic service revenue growth.

Vodafone Group Plc Annual Report 2011 43

Performance

Adjusted EBITDA increased by 38.3%, also benefiting from the full consolidation of Vodacom and positive foreign exchange rate movements, offset in part by the creation of the joint venture in Australia. On an organic basis adjusted EBITDA increased by 5.5%^(*) with adjusted EBITDA margin decreasing due to turnaround investment in Ghana, the competitive pricing environment in India and the impact of launching services in Qatar.


	Organic			M&A			Foreign			Reported
	change			activity			exchange			change
	%			pps			pps			%

Revenue –
Africa, Middle East and Asia Pacific		6.1			25.2			12.3			43.6


Service revenue
India		14.7			—			3.2			17.9
Vodacom		4.6			112.0			38.8			155.4
Other		2.9			(3.3	)		9.6			9.2
Africa, Middle East and Asia Pacific		7.5			24.9			11.8			44.2


Adjusted EBITDA
India		9.2			—			3.4			12.6
Vodacom		10.4			101.8			39.9			152.1
Other		(4.8	)		(11.6	)		7.5			(8.9	)
Africa, Middle East and Asia Pacific		5.5			20.5			12.3			38.3


Adjusted operating profit
India		30.7			—			(7.4	)		23.3
Vodacom		12.5			3.1			23.8			39.4
Other		(19.7	)		(27.6	)		5.1			(42.2	)
Africa, Middle East and Asia Pacific		(0.3	)		(22.3	)		11.2			(11.4	)

India

Service revenue grew by 14.7%^(*) for the year, with fourth quarter growth of 6.5%^(*)including a 0.3 percentage point^(*) benefit from Indus Towers. The contribution to India’s revenue growth from Indus Towers for the fourth quarter was lower than in the third quarter as the fourth quarter represented the first anniversary of significant revenue being earned from the network sharing joint venture. Mobile service revenue growth was driven by the increase in the customer base, with record net additions for the quarter of 9.5 million, partially offset by ongoing competitive pressure on mobile voice pricing. Customer penetration in the Indian mobile market reached an estimated 50% at 31 March 2010 representing an increase of 16.0 percentage points compared to 31 March 2009.

Adjusted EBITDA grew by 9.2%^(*) driven by the increased customer base and the 37.6% increase in total mobile minute usage during the year, with costs decreasing as a percentage of service revenue despite the pressure on pricing. Network expansion continued with the addition of 9,000 base stations by Indus Towers and an additional 16,000 by Vodafone Essar.

Vodacom

Service revenue grew by 4.6%^(*) driven by a robust performance in South Africa offset by revenue declines in Tanzania and the Democratic Republic of Congo. Data revenue increased by 32.9%^(*) driven by increased penetration of mobile broadband and higher mobile internet usage. The introduction of prepaid customer registration in South Africa negatively impacted customer growth in the year and mobile termination rate reductions are expected to reduce growth in the 2011 financial year, with the first reduction taking effect from 1 March 2010.

Adjusted EBITDA increased by 10.4%^(*) driven by the increase in service revenue and lower direct costs and regulatory fees in South Africa.

Other Africa, Middle East and Asia Pacific

Service revenue increased by 2.9%^(*) driven by the performance of Egypt and Qatar. In Egypt service revenue grew by 1.3%^(*) as pressure on voice pricing and a 1.0% impact of retrospective mobile termination rate reductions introduced in the fourth quarter was offset by 31% growth in the average customer base and 64.2%^(*) growth in data and fixed line revenue, with data driven by increased penetration of mobile internet devices. Having launched services in July 2009, Qatar increased its mobile customer base to 465,000 customers at 31 March 2010, representing 28% of the total population.

Adjusted EBITDA declined 4.8%^(*) with a 5.2% decline in adjusted EBITDA margin due to pricing, recessionary pressures and the impact of start-up costs in Qatar offset in part by efficiency savings.

On 9 June 2009 Vodafone Australia successfully completed its merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited. Since the merger the joint venture has performed well delivering 8% pro-forma service revenue growth in the fourth quarter and cost synergies to date of £65 million, in line with management’s expectations.

Non-Controlled Interests and Common Functions Verizon Wireless⁽¹⁾


	2010			2009			% change
	£m			£m			£		Organic

Revenue		17,222			14,085			22.3		5.0
Service revenue		15,898			12,862			23.6		6.3
Adjusted EBITDA		6,689			5,543			20.7		4.4
Interest		(298	)		(217	)		37.3
Tax⁽²⁾		(205	)		(198	)		3.5
Non-controlling interests		(80	)		(78	)		2.6
Discontinued operations		93			57			63.2
Group’s share of result in Verizon Wireless		4,112			3,542			16.1		8.0


Notes:

(1)		All amounts represent the Group’s share unless otherwise stated.

(2)		The Group’s share of the tax attributable to Verizon Wireless relates only to the corporate entities held by the Verizon Wireless partnership and certain state taxes which are levied on the partnership. The tax attributable to the Group’s share of the partnership’s pre-tax profit is included within the Group tax charge.

In the United States Verizon Wireless reported 3.4⁽³⁾ million net mobile customer additions bringing its closing mobile customer base to 85.7⁽³⁾ million, up 4.3%⁽³⁾. Customer growth reflected recent market trends towards the prepaid segment alongside market leading customer churn.

Service revenue growth of 6.3%^(*) was driven by the expanding customer base and robust data revenue derived from growth in multimedia handsets and smartphones.

The adjusted EBITDA margin remained strong despite the tougher competitive and economic environment. Efficiencies in operating expenses have been partly offset by a higher level of customer acquisition and retention costs, particularly for high-end devices including smartphones.

The integration of the recently acquired Alltel business is going according to plan. Store rebranding is complete and network conversions are well underway and on track. As part of the regulatory approval for the Alltel acquisition, Verizon Wireless is required to divest overlapping properties in 105 markets. On 26 April 2010 Verizon Wireless completed the sale of network and licence assets in 26 markets, corresponding to 0.9 million customers, to Atlantic Tele-Network for US$0.2 billion. Verizon Wireless has agreed to sell the network assets and mobile licences in the remaining 79 markets, corresponding to approximately 1.5 million customers, to AT&T for US$2.4 billion. This transaction remains subject to receipt of regulatory approval and is expected to complete by 30 June 2010.

Other Non-Controlled Interests

The share of profit in SFR increased reflecting the foreign exchange benefits upon translation of the results into sterling.


Note:

(3)		Customers have been restated to reflect retail customers only, as reported externally by Verizon Wireless.

44 Vodafone Group Plc Annual Report 2011

Guidance

2012 financial year and medium-term guidance


	2011
	actual		2012
	performance		guidance
	£bn		£bn

Adjusted operating profit		11.8		11.0 – 11.8
Free cash flow		7.0		6.0 – 6.5

2012 financial year

Adjusted operating profit is expected to be in the range of £11.0 billion to £11.8 billion, reflecting the loss of our £0.5 billion share of profits from SFR as a result of the disposal of our 44% stake.

Free cash flow is expected to be in the range of £6.0 billion to £6.5 billion, reflecting continued strong cash generation offset by the £0.3 billion reduction in dividends from China Mobile Limited and SFR in the 2012 financial year, and the more limited working capital improvements available going forward. Capital expenditure is expected to be at a similar level to last year on a constant currency basis.

Medium-term guidance

The execution of the updated strategy is targeted to achieve annual growth in organic service revenue of between 1% and 4% in the period to 31 March 2014. We expect that the Group adjusted EBITDA margin will stabilise by the end of this period.

As a result of the loss of £0.5 billion of cash dividends from our disposals of stakes in China Mobile Limited and SFR, we expect that annual free cash flow generation will now be in the £5.5 billion to £6.5 billion range in the period to March 2014, underpinning the three year 7% per annum dividend per share growth target issued in May 2010. We continue to expect that total dividends per share will be no less than 10.18 pence for the 2013 financial year.

The free cash flow target range excludes any incremental benefit that we derive from our strategy to generate liquidity or incremental cash flow from non-controlled interests of the Group such as Verizon Wireless and Polkomtel.

Assumptions

Guidance for the 2012 financial year and the medium-term is based on our current assessment of the global economic outlook and assumes foreign exchange rates of £1:€1.15 and £1:US$1.60. It excludes the impact of licence and spectrum purchases, material one-off tax related payments and restructuring costs and assumes no material change to the current structure of the Group.

With respect to the 7% per annum dividend per share growth target, as the Group’s free cash flow is predominantly generated by companies operating within the euro currency zone, we have assumed that the euro to sterling exchange rate remains within 10% of the above guidance exchange rate.

Actual exchange rates may vary from the exchange rate assumptions used. A1% change in the euro to sterling exchange rate would impact adjusted operating profit and free cash flow by approximately £50 million and a 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £50 million.

2011 financial year


	Adjusted
	operating			Free
	profit			cash flow
	£bn			£bn

Guidance — May 2010⁽¹⁾		11.2 – 12.0			> 6.5
Guidance — November 2010⁽¹⁾		11.8 – 12.2			> 6.5

2011 performance on guidance basis⁽³⁾		12.2			7.2
Foreign exchange⁽¹⁾		(0.3	)		(0.2	)
Verizon Wireless⁽²⁾		(0.1	)		—

2011 reported performance⁽³⁾		11.8			7.0


Notes:

(1)		The Group’s guidance reflected assumptions for average exchange rates for the 2011 financial year of approximately £1:€1.15 and £1:US$1.50. Actual exchange rates were £1:€1.18 and £1:US$1.56.

(2)		The Group’s guidance did not include the impact of the revenue recognition and Alltel related adjustments in Verizon Wireless.

(3)		After Verizon iPhone launch costs.

Vodafone Group Plc Annual Report 2011 45



Principal risk factors and uncertainties		Performance

The following discussion of principal risk factors and uncertainties identifies the most significant risks that may adversely affect our business, operations, liquidity, financial position or future performance. Additional risks not presently known to us, or that we currently deem less material, may also impact our business. This section should be read in conjunction with the “Forward-looking statements” on page 148 of this document.

Adverse macroeconomic conditions in the markets in which we operate could impact our results of operations.

Adverse macroeconomic conditions and deterioration in the global economic environment, such as further economic slowdown in the markets in which we operate, may lead to a reduction in the level of demand from our customers for existing and new products and services. In difficult economic conditions, consumers may seek to reduce discretionary spending by reducing their use of our products and services, including data services, or by switching to lower-cost alternatives offered by our competitors. Similarly, under these conditions the enterprise customers that we serve may delay purchasing decisions, delay full implementation of service offerings or reduce their use of our services. In addition, adverse economic conditions may lead to an increased number of our consumer and enterprise customers that are unable to pay for existing or additional services. If these events were to occur it could have a material adverse effect on our results of operations.

The continued volatility of worldwide financial markets may have a negative impact on our access to finance.

Our key sources of liquidity in the foreseeable future are likely to be cash generated from operations and borrowings through long-term and short-term issuances in the capital markets as well as committed bank facilities. Due to volatility experienced in capital and credit markets around the world, new issuances of debt securities may experience decreased demand. Adverse changes in credit markets or our credit ratings could increase the cost of borrowing and banks may be unwilling to renew credit facilities on existing terms. Any of these factors could have a negative impact on our access to finance.

Regulatory decisions and changes in the regulatory environment could adversely affect our business.

As we have ventures in a large number of geographic areas, we must comply with an extensive range of requirements that regulate and supervise the licensing, construction and operation of our telecommunications networks and services. In particular, there are agencies which regulate and supervise the allocation of frequency spectrum and which monitor and enforce regulation and competition laws which apply to the mobile telecommunications industry. Decisions by regulators regarding the granting, amendment or renewal of licences, to us or to third parties, could adversely affect our future operations in these geographic areas. In addition, other changes in the regulatory environment concerning the use of mobile phones may lead to a reduction in the usage of mobile phones or otherwise adversely affect us. Additionally, decisions by regulators and new legislation, such as those relating to international roaming charges and call termination rates, could affect the pricing for, or adversely affect the revenue from, the services we offer. Further details on the regulatory framework in certain countries and regions in which we operate, and on regulatory proceedings, can be found in “Regulation” on page 140.

Increased competition may reduce our market share and revenue.

We face intensifying competition and our ability to compete effectively will depend on, among other things, our network quality, capacity and coverage, pricing of services and equipment, quality of customer service, development of new and enhanced products and services in response to customer demands and changing technology, reach and quality of sales and distribution channels and capital resources. Competition could lead to a reduction in the rate at which we add new customers, a decrease in the size of our market share and a decline in our ARPU as customers choose to

receive telecommunications services or other competing services from other providers. Examples include but are not limited to competition from internet based services and MVNOs.

The focus of competition in many of our markets continues to shift from customer acquisition to customer retention as the market for mobile telecommunications has become increasingly penetrated. Customer deactivations are measured by our churn rate. There can be no assurance that we will not experience increases in churn rates, particularly as competition intensifies. An increase in churn rates could adversely affect profitability because we would experience lower revenue and additional selling costs to replace customers or recapture lost revenue.

Increased competition has also led to declines in the prices we charge for our mobile services and is expected to lead to further price declines in the future. Competition could also lead to an increase in the level at which we must provide subsidies for handsets. Additionally, we could face increased competition should there be an award of additional licences in jurisdictions in which a member of our Group already has a licence.

Delays in the development of handsets and network compatibility and components may hinder the deployment of new technologies.

Our operations depend in part upon the successful deployment of continuously evolving telecommunications technologies. We use technologies from a number of vendors and make significant capital expenditure in connection with the deployment of such technologies. There can be no assurance that common standards and specifications will be achieved, that there will be inter-operability across Group and other networks, that technologies will be developed according to anticipated schedules, that they will perform according to expectations or that they will achieve commercial acceptance. The introduction of software and other network components may also be delayed. The failure of vendor performance or technology performance to meet our expectations or the failure of a technology to achieve commercial acceptance could result in additional capital expenditure by us or a reduction in our profitability.

We may experience a decline in revenue or profitability notwithstanding our efforts to increase revenue from the introduction of new services.

As part of our strategy we will continue to offer new services to our existing customers and seek to increase non-voice service revenue as a percentage of total service revenue. However, we may not be able to introduce these new services commercially or may experience significant delays due to problems such as the availability of new mobile devices, higher than anticipated prices of new devices or availability of new content services. In addition, even if these services are introduced in accordance with expected time schedules, there is no assurance that revenue from such services will increase ARPU or maintain profit margins.

Expected benefits from our cost reduction initiatives may not be realised.

We have entered into several cost reduction initiatives principally relating to network sharing, the outsourcing of IT application, development and maintenance, data centre consolidation, supply chain management and a business transformation programme to implement a single, integrated operating model using one enterprise resource planning (‘ERP’) system. However, there is no assurance that the full extent of the anticipated benefits will be realised in the timeline envisaged.

46 Vodafone Group Plc Annual Report 2011

Principal risk factors and uncertainties continued

Changes in assumptions underlying the carrying value of certain Group assets could result in impairment.

We complete a review of the carrying value of Group assets annually, or more frequently where the circumstances require, to assess whether those carrying values can be supported by the net present value of future cash flows derived from such assets. This review examines the continued appropriateness of the assumptions in respect of highly uncertain matters upon which the valuations supporting carrying values of certain Group assets are based. This includes an assessment of discount rates and long-term growth rates, future technological developments, and timing and quantum of future capital expenditure as well as several factors which may affect revenue and profitability identified within the other risk factors in this section such as intensifying competition, pricing pressures, regulatory changes and the timing for introducing new products or services. Discount rates are in part derived from yields on government bonds, the level of which may change substantially period to period and which may be affected by political, economic and legal developments which are beyond our control. Due to our substantial carrying value of goodwill under International Financial Reporting Standards, the revision of any of these assumptions to reflect current or anticipated changes in operations or the financial condition of the Group could lead to an impairment in the carrying value of certain Group assets. While impairment does not impact reported cash flows, it does result in a non-cash charge in the consolidated income statement and thus no assurance can be given that any future impairments would not affect our reported distributable reserves and therefore our ability to make distributions to our shareholders or repurchase our shares. See “Critical accounting estimates” on page 77 and note 10 to the consolidated financial statements.

Our emerging market footprint may present exposure to unpredictable economic, political, regulatory, tax and legal risks.

Political, regulatory, economic and legal systems in emerging markets may be less predictable than in countries with more stable institutional structures. Since we operate in and are exposed to emerging markets, the value of our investments in these markets may be adversely affected by political, regulatory, economic, tax and legal developments which are beyond our control and anticipated benefits resulting from acquisitions and other investments we have made in these markets may not be achieved in the time expected or at all. For further information on legal and tax proceedings see note 28.

We participate in joint ventures which expose us to operational and financial risk.

We participate in a number of joint ventures, some of which we do not control. Whether or not we hold majority interests or maintain operational control in our joint ventures, our partners may have economic or business interests or goals that are inconsistent with ours, exercise their rights in a way that prohibits us from acting in a manner which we would like or they may be unable or unwilling to fulfil their obligations under the joint venture or other agreements. In particular, some of our interests in mobile licences are held through entities in which we are a significant but not a controlling owner. Under the governing documents for some of these partnerships and corporations, certain key matters such as the approval of business plans and decisions as to the timing and amount of cash distributions require the consent of our partners. In others these matters may be approved without our consent. We may enter into similar arrangements as we participate in ventures formed to pursue additional opportunities. Although we have not been materially constrained by our participation in joint ventures to date, no assurance can be given that the actions or decisions of our joint venture partners will not affect our ventures in a way that hinders our corporate objectives or reduces any anticipated cost savings or revenue enhancement resulting from these ventures.

Expected benefits from investment in networks, licences and new technology may not be realised.

We have made substantial investments in the acquisition of licences and in our mobile networks, including the roll out of 3G networks. We expect to continue to make significant investments in our mobile networks due to increased usage and the need to offer new services and greater functionality afforded by new or evolving telecommunications technologies. Accordingly, the rate of our capital expenditures in future years could remain high or exceed that which we have experienced to date. There can be no assurance that the introduction of new services will proceed according to anticipated schedules or that the level of demand for new services will justify the cost of setting up and providing new services. Failure or a delay in the completion of networks and the launch of new services, or increases in the associated costs, could have a material adverse effect on our operations.

Our business may be impaired by actual or perceived health risks associated with the transmission of radio waves from mobile telephones, transmitters and associated equipment.

Concerns have been expressed that the electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks at exposure levels below existing guideline levels and may interfere with the operation of electronic equipment. In the event of national governments responding to public concern with the imposition of more stringent exposure limits, our costs may be increased. In addition, as described under the heading “Legal proceedings” in note 28 to the consolidated financial statements, several mobile industry participants including Verizon Wireless and ourselves have had lawsuits filed against us alleging various health consequences as a result of mobile phone usage including brain cancer. While we are not aware that such health risks have been substantiated, there can be no assurance that the actual or perceived risks associated with radio wave transmission will not impair our ability to retain customers and attract new customers, reduce mobile telecommunications usage or result in further litigation. In such event, because of our strategic focus on mobile telecommunications, our business and results of operations may be more adversely affected than those of other companies in the telecommunications sector.

Our business would be adversely affected by the non-supply of equipment and support services by a major supplier.

Companies within the Group source network infrastructure and other equipment, as well as network-related and other significant support services, from third party suppliers. The withdrawal or removal from the market of one or more of these major third party suppliers could adversely affect our operations and could require us to make additional capital or operational expenditures.

Our business could be adversely affected by disruptions to our telecommunications networks.

We are dependent on the secure operation of our telecommunications networks and attacks on critical infrastructure, or disruption of our networks caused by other factors beyond our control, pose an increasing threat. As the importance of mobile communication in everyday life, as well as during times of crisis, increases and the volume of personal and business data being communicated and stored by network operators grows, organisations and individuals look to us to maintain service and protect sensitive information. Any significant interruption in our service or in our ability to protect sensitive information, whether caused by acts of terrorism, industrial action, natural disasters, political unrest or otherwise, could have a material adverse effect on our revenue and our reputation.

Vodafone Group Plc Annual Report 2011 47

Performance

Financial position and resources

Consolidated statement of financial position


	2011		2010
	£m		£m

Non-current assets
Intangible assets		68,558		74,258
Property, plant and equipment		20,181		20,642
Investments in associates		38,105		36,377
Other non-current assets		7,373		11,489

		134,217		142,766
Current assets		17,003		14,219

Total assets		151,220		156,985



Total equity shareholders’ funds		87,555		90,381
Total non-controlling interests		6		429

Total equity		87,561		90,810


Liabilities
Borrowings
Long-term		28,375		28,632
Short-term		9,906		11,163
Taxation liabilities
Deferred tax liabilities		6,486		7,377
Current taxation liabilities		2,262		2,874
Other non-current liabilities		1,373		1,550
Other current liabilities		15,257		14,579

Total liabilities		63,659		66,175

Total equity and liabilities		151,220		156,985

Assets

Intangible assets

At 31 March 2011 our intangible assets were £68.6 billion (2010: £74.3 billion) with goodwill comprising the largest element at £45.2 billion (2010: £51.8 billion). The decrease primarily resulted from impairment losses of £6.2 billion, amortisation of £3.5 billion and unfavourable foreign exchange rate movements of £0.9 billion partially offset by £4.7 billion of additions. Refer to note 10 to the consolidated financial statements for further information on the impairment charge.

Property, plant and equipment

Property, plant and equipment decreased from £20.6 billion at 31 March 2010 to £20.2 billion at 31 March 2011 predominantly as a result of £4.7 billion of additions offset by £4.4 billion of depreciation charges and unfavourable foreign exchange rate movements of £0.6 billion.

Investments in associates

Investments in associates increased from £36.4 billion at 31 March 2010 to £38.1 billion at 31 March 2011 primarily due to our share of the results of associates, after deductions of interest, tax and non-controlling interest, which contributed £5.1 billion to the increase, mainly arising from our investment in Verizon Wireless, partially offset by £1.4 billion of dividends received and unfavourable foreign exchange movements of £1.9 billion.

Other non-current assets

Other non-current assets decreased to £7.4 billion at 31 March 2011 (2010: £11.5 billion) mainly due to other investments which totalled £1.4 billion at 31 March 2011 compared to £7.6 billion at 31 March 2010. The decrease was primarily as a result of the disposal of our 3.2% interest in China Mobile Limited and our interests in SoftBank investments.

Current assets

Current assets increased to £17.0 billion at 31 March 2011 from £14.2 billion at 31 March 2010 due to an increase in cash and short-term investments resulting from the disposal of our interests in SoftBank and the element of the proceeds from the disposal of our 3.2% interest in China Mobile Limited not utilised for the share buyback programme.

Total equity and liabilities

Total equity shareholders’ funds

Total equity shareholders’ funds decreased from £90.4 billion at 31 March 2010 to £87.6 billion at 31 March 2011. The profit for the year of £8.0 billion was more than offset by equity dividends of £4.5 billion, an other comprehensive loss of £4.5 billion and the share buyback of £2.1 billion.

Borrowings

Long-term borrowings and short-term borrowings decreased to £38.3 billion at 31 March 2011 from £39.8 billion at 31 March 2010 mainly as a result of foreign exchange rate movements and bond repayments during the year.

Taxation liabilities

Current tax liabilities decreased from £2.9 billion at 31 March 2010 to £2.3 billion at 31 March 2011 mainly as a result of lower outstanding tax liabilities in the US as a result of accelerated tax depreciation and the resolution of long-standing tax disputes.

Other current liabilities

Other current liabilities increased from £14.6 billion at 31 March 2010 to £15.3 billion at 31 March 2011. Trade payables at 31 March 2011 were equivalent to 37 days (2010:31 days) outstanding, calculated by reference to the amount owed to suppliers as a proportion of the amounts invoiced by suppliers during the year. It is our policy to agree terms of transactions, including payment terms, with suppliers and it is our normal practice that payment is made accordingly.

Contractual obligations and contingencies

A summary of our principal contractual financial obligations is shown below. Further details on the items included can be found in the notes to the consolidated financial statements. Details of the Group’s contingent liabilities are included in note 28 to the consolidated financial statements.


	Payments due by period £m
Contractual obligations⁽¹⁾	Total		<1 year		1-3 years		3-5 years		>5 years

Borrowings⁽²⁾		45,226		10,864		8,727		10,093		15,542
Operating lease commitments⁽³⁾		6,513		1,225		1,704		1,240		2,344
Capital commitments⁽³⁾⁽⁴⁾		2,124		1,885		228		11		—
Purchase commitments⁽⁵⁾		5,937		3,619		1,835		142		341

Total contractual cash obligations⁽¹⁾		59,800		17,593		12,494		11,486		18,227


Notes:

(1)		The above table of contractual obligations includes commitments in respect of options over interests in Group businesses held by non-controlling shareholders (see “Option agreements and similar arrangements”) and obligations to pay dividends to non-controlling shareholders (see “Dividends from associates and to non-controlling shareholders”).The table excludes current and deferred tax liabilities and obligations under post employment benefit schemes, details of which are provided in notes 6 and 23 to the consolidated financial statements respectively. The table also excludes the contractual obligations of associates.

(2)		See note 22 to the consolidated financial statements.

(3)		See note 27 to the consolidated financial statements.

(4)		Primarily related to network infrastructure.

(5)		In addition to the purchase commitments disclosed above, Vodafone Netherlands has announced its intention to acquire BelCompany BV, one of the largest telecom retailers in the Netherlands, from the Macintosh Retail Group for €120 million. The transaction is subject to regulatory and other approvals.

Equity dividends

The table below sets out the amounts of interim, final and total cash dividends paid or, in the case of the final dividend for the 2011 financial year, proposed, in respect of each financial year.


	Pence per ordinary share
Year ended 31 March	Interim		Final			Total

2007		2.35		4.41			6.76
2008		2.49		5.02			7.51
2009		2.57		5.20			7.77
2010		2.66		5.65			8.31
2011		2.85		6.05	⁽¹⁾		8.90


Note:

(1)		The final dividend for the year ended 31 March 2011 was proposed on 17 May 2011 and is payable on 5 August 2011 to holders on record as of 3 June 2011. For american depositary share (‘ADS’) holders the dividend will be payable in US dollars under the terms of the ADS depositary agreement. Dividend payments on ordinary shares will be paid by direct credit into a nominated bank or building society account or, alternatively, into the Company’s dividend reinvestment plan. The Company no longer pays dividends in respect of ordinary shares by cheque.

48 Vodafone Group Plc Annual Report 2011

Financial position and resources continued

We provide returns to shareholders through dividends and have historically paid dividends semi-annually, with a regular interim dividend in respect of the first six months of the financial year payable in February and a final dividend payable in August. The directors expect that we will continue to pay dividends semi-annually.

In November 2010 the directors announced an interim dividend of 2.85 pence per share representing a 7.1% increase over last year’s interim dividend. The directors are proposing a final dividend of 6.05 pence per share representing a 7.1% increase over last year’s final dividend. Total dividends for the year increased by 7.1% to 8.90 pence per share.

In May 2010 the directors issued a dividend per share growth target of at least 7% per annum for each of the financial years in the period ending 31 March 2013, assuming no material adverse foreign exchange rate movements. We expect that total dividends per share will therefore be no less than 10.18p for the 2013 financial year. See page 44 for the assumptions underlying this expectation.

Liquidity and capital resources

The major sources of Group liquidity for the 2011 and 2010 financial years were cash generated from operations, dividends from associates and borrowings through short-term and long-term issuances in the capital markets. We do not use non-consolidated special purpose entities as a source of liquidity or for other financing purposes.

Our key sources of liquidity for the foreseeable future are likely to be cash generated from operations and borrowings through long-term and short-term issuances in the capital markets as well as committed bank facilities.

Our liquidity and working capital may be affected by a material decrease in cash flow due to factors such as reduced operating cash flow resulting from further possible business disposals, increased competition, litigation, timing of tax payments and the resolution of outstanding tax issues, regulatory rulings, delays in the development of new services and networks, licence and spectrum payments, inability to receive expected revenue from the introduction of new services, reduced dividends from associates and investments or increased dividend payments to non-controlling shareholders. Please see the section titled “Principal risk factors and uncertainties” on pages 45 and 46.

We are also party to a number of agreements that may result in a cash outflow in future periods. These agreements are discussed further in “Option agreements and similar arrangements” at the end of this section.

Wherever possible, surplus funds in the Group (except in Albania, Egypt, India and Vodacom) are transferred to the centralised treasury department through repayment of borrowings, deposits, investments, share purchases and dividends. These are then loaned internally or contributed as equity to fund our operations, used to retire external debt, invested externally or used to pay dividends.

Cash flows

Free cash flow decreased by 2.7% to £7,049 million primarily due to higher taxation payments and dividends to non-controlling shareholders in subsidiaries partially offset by improved cash generated from operations and lower payments for capital expenditure.

Cash generated by operations increased by 0.4% to £15,392 million primarily driven by foreign exchange rate movements and working capital improvements. Cash capital expenditure decreased by £328 million primarily due to lower expenditure in India. We invested £2,982 million in licences and spectrum including £1,725 million in India and £1,210 million in Germany.

Payments for taxation increased by 14.3% to £2,597 million primarily due to the absence of the one-time benefit of additional tax deductions which were available in Italy in the previous year.

Dividends received from associates and investments were stable at £1,509 million.

Net interest payments decreased by 5.5% to £1,328 million primarily due to lower average net debt.


	2011			2010
	£m			£m			%

Cash generated by operations		15,392			15,337			0.4

Cash capital expenditure⁽¹⁾		(5,658	)		(5,986	)
Disposal of intangible assets and property, plant and equipment		51			48

Operating free cash flow		9,785			9,399			4.1

Taxation		(2,597	)		(2,273	)
Dividends received from associates and investments⁽²⁾		1,509			1,577
Dividends paid to non-controlling shareholders in subsidiaries		(320	)		(56	)
Interest received and paid		(1,328	)		(1,406	)

Free cash flow		7,049			7,241			(2.7	)


Other amounts⁽³⁾		45			—
Licence and spectrum payments		(2,982	)		(989	)
Acquisitions and disposals⁽⁴⁾		(183	)		(2,683	)
Contributions from non-controlling shareholders in subsidiaries⁽⁵⁾		—			613
Equity dividends paid		(4,468	)		(4,139	)
Purchase of treasury shares		(2,087	)		—
Foreign exchange		834			1,038
Other⁽⁶⁾		5,250			(174	)

Net debt decrease		3,458			907
Opening net debt		(33,316	)		(34,223	)

Closing net debt		(29,858	)		(33,316	)		(10.4	)


Notes:

(1)		Cash paid for purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments.

(2)		Year ended 31 March 2011 includes £373 million (2010:£389 million) from our interest in SFR and £1,024 million (2010:£1,034 million) from our interest in Verizon Wireless.

(3)		Comprises items in respect of: the UK CFC settlement (£800 million), tax relating to the disposal of China Mobile Limited (£208 million), the SoftBank disposal (£1,409 million) and the court deposit made in respect of the India tax case (£356 million). The latter is included within the line item “Purchase of interests in subsidiaries and joint ventures, net of cash acquired” in the consolidated statement of cash flows.

(4)		Year ended 31 March 2011 includes net cash and cash equivalents paid of £183 million (2010: £1,777 million) and assumed debt of £nil (2010: £906 million).

(5)		Year ended 31 March 2010 includes £613 million in relation to Qatar.

(6)		Year ended 31 March 2011 includes £4,264 million in relation to the disposal of our 3.2% interest in China Mobile Limited.

Dividends from associates and to non-controlling shareholders

Dividends from our associates are generally paid at the discretion of the board of directors or shareholders of the individual operating and holding companies and we have no rights to receive dividends except where specified within certain of the Group’s shareholders’ agreements such as with SFR, our associate in France. Similarly, we do not have existing obligations under shareholders’ agreements to pay dividends to non-controlling interest partners of our subsidiaries or joint ventures, except as specified below.

Included in the dividends received from associates and investments is an amount of £1,024 million (2010: £1,034 million) received from Verizon Wireless. Until April 2005 Verizon Wireless’ distributions were determined by the terms of the partnership agreement distribution policy and comprised income distributions and tax distributions. Since April 2005 only tax distributions have been issued. Following the announcement of Verizon Wireless’ acquisition of Alltel, certain additional tax distributions were agreed in addition to the tax distributions required by the partnership agreement. Taken together with recent revisions to the tax distribution provisions in the partnership agreement, current projections forecast that tax distributions will cover the US tax liabilities arising from our partnership interest in Verizon Wireless.

Under the terms of the partnership agreement the Verizon Wireless board has no obligation to effect additional distributions above the level of the tax distributions. However, the Verizon Wireless board has agreed that it will review distributions from Verizon Wireless on a regular basis. When considering whether distributions will be made each year, the Verizon Wireless board will take into account its debt position, the relationship

Vodafone Group Plc Annual Report 2011 49

Performance

between debt levels and maturities, and overall market conditions in the context of the five year business plan. It is expected that Verizon Wireless’ free cash flow will be deployed in servicing and reducing debt in the near term.

During the year ended 31 March 2011 cash dividends totalling £373 million (2010: £389 million) were received from SFR. Following SFR’s purchase of Neuf Cegetel it was agreed that SFR would partially fund debt repayments by a reduction in dividends between 2009 and 2011 inclusive. In April 2011 we announced an agreement to dispose of our 44% interest in SFR. We will also receive a final dividend from SFR of €200 million (£176 million) on completion of the transaction. Future cash flows will be reduced by the loss of dividends from SFR.

Verizon Communications Inc. has an indirect 23.1% shareholding in Vodafone Italy and under the shareholders’ agreement the shareholders have agreed to take steps to cause Vodafone Italy to pay dividends at least annually, provided that such dividends will not impair the financial condition or prospects of Vodafone Italy including, without limitation, its credit standing. During the 2011 financial year Vodafone Italy paid dividends net of withholding tax totalling €325 million to Verizon Communications Inc.

Given Vodacom’s strong financial position and cash flow generation, the Vodacom board has decided to increase its dividend payout ratio from 40% to approximately 60% of headline earnings for the year ended March 2011.

Acquisitions

We invested £183 million (2010: £1,777 million), net of cash and cash equivalents acquired, in acquisition activities during the year.

Other significant transactions

On 10 September 2010 we sold our entire 3.2% interest in China Mobile Limited for a total consideration of £4.3 billion before tax and transaction costs. Future cash flows will be reduced by the loss of dividends from China Mobile Limited.

On 9 November 2010 we agreed to sell to SoftBank Corp. of Japan our interests which were originally received as part of the proceeds from the sale of Vodafone Japan in 2006, for a total consideration of ¥412.5 billion (£3.1 billion). ¥212.5 billion (£1.6 billion) of the consideration was received in December 2010 and ¥200 billion (£1.5 billion) is expected to be received in April 2012.

On 30 March 2011 the Essar Group exercised its underwritten put option over 22.0% of Vodafone Essar Limited (‘VEL’) following which, on 31 March 2011, we exercised our call option over the remaining 11.0% of VEL owned by the Essar Group. The consideration due under these two options is US$5 billion (£3.1 billion). The Group does not believe that there is any legal requirement to withhold tax in respect of these transactions but as discussed in detail under ‘Legal proceedings’ on page 122, if the Authority for Advanced Rulings directs tax to be withheld, this amount is anticipated to be approximately an additional US$1 billion.

On 3 April 2011 we announced an agreement to sell our entire 44% interest in SFR to Vivendi for a cash consideration of €7.75 billion (£6.8 billion). Subject to customary competition authority and regulatory approvals, the transaction is expected to complete during the second calendar quarter of 2011.

Treasury shares

The Companies Act 2006 permits companies to purchase their own shares out of distributable reserves and to hold shares in treasury. While held in treasury, no voting rights or pre-emption rights accrue and no dividends are paid in respect of treasury shares. Treasury shares may be sold for cash, transferred (in certain circumstances) for the purposes of an employee share scheme or cancelled. If treasury shares are sold, such sales are deemed to be a new issue of shares and will accordingly count towards the 5% of share capital which the Company is permitted to issue on a non pre-emptive basis in any one year as approved by its shareholders at the

AGM. The proceeds of any sale of treasury shares up to the amount of the original purchase price, calculated on a weighted average price method, is attributed to distributable profits which would not occur in the case of the sale of non-treasury shares. Any excess above the original purchase price must be transferred to the share premium account.

Following the disposal of our 3.2% interest in China Mobile Limited on 10 September 2010, we initiated a £2.8 billion share buyback programme under the authority granted by our shareholders at the 2010 AGM. In addition to ordinary market purchases, the Group placed irrevocable purchase instructions with a number of banks to enable the banks to buy back shares on our behalf when we may otherwise have been prohibited from buying in the market. Details of the shares purchased to 16 May 2011 including those purchased under irrevocable instructions, are shown below:


						Total number		Maximum
				Average price		of shares		value of shares
				paid per share		purchased		that may yet
	Number of			inclusive of		under share		be purchased
	shares			transaction		repurchase		under the
	purchased⁽¹⁾			costs		programme⁽²⁾		programme⁽³⁾
Date of share purchase	’000			Pence		’000		£m

September 2010		115,400			161.78		115,400		2,613
October 2010		187,500			165.50		302,900		2,303
November 2010		209,400			170.21		512,300		1,947
December 2010		162,900			167.44		675,200		1,674
January 2011		177,090			176.67		852,290		1,361
February 2011		134,700			179.23		986,990		1,120
March 2011		250,900			177.26		1,237,890		675
April 2011		135,100			176.81		1,372,990		436
May 2011		127,000			170.14		1,499,990		268

Total		1,499,990	⁽⁴⁾		172.01		1,499,990		220


Notes:

(1)		The nominal value of shares purchased is 11³/₇ US cents each.

(2)		No shares were purchased outside the publicly announced share buyback programme.

(3)		In accordance with shareholder authority granted at the 2010 AGM.

(4)		The total number of shares purchased represents 2.9% of our issued share capital at 16 May 2011.

The aggregate amount of consideration paid by the Company for the shares at 16 May 2011 was £2,580 million.

Following the announcement of the agreement to dispose of our 44% interest in SFR on 3 April 2011, we also announced that we will return £4 billion of the net proceeds to shareholders by way of a share buyback programme. This programme will commence following completion of the existing £2.8 billion programme.

Shares purchased are held in treasury in accordance with sections 724 to 732 of the Companies Act 2006 and are cancelled in accordance with the Association of British Insurers guidelines. The movement in treasury shares during the year is shown below:


	Number
	Million			£m

1 April 2010		5,146			7,810
Reissue of shares		(150	)		(232	)
Purchase of shares		1,238			2,125
Cancelled shares		(1,000	)		(1,532	)

31 March 2011		5,234			8,171

Funding

We have maintained a robust liquidity position throughout the year thereby enabling us to service shareholder returns, debt and expansion through capital investment. This position has been achieved through continued delivery of strong operating cash flows, the impact of the working capital reduction programme, issuances of short-term and long-term debt, and non-recourse borrowing assumed in respect of the emerging market businesses. It has not been necessary for us to draw down on our syndicated committed bank facilities during the year.

50 Vodafone Group Plc Annual Report 2011

Financial position and resources continued

Net debt

Our consolidated net debt position at 31 March was as follows:


	2011			2010
	£m			£m

Cash and cash equivalents⁽¹⁾		6,252			4,423


Short-term borrowings:
Bonds		(2,470	)		(1,174	)
Commercial paper⁽²⁾		(1,660	)		(2,563	)
Put options over non-controlling interests		(3,113	)		(3,274	)
Bank loans		(2,070	)		(3,460	)
Other short-term borrowings⁽¹⁾		(593	)		(692	)

		(9,906	)		(11,163	)


Long-term borrowings:
Put options over non-controlling interests		(78	)		(131	)
Bonds, loans and other long-term borrowings		(28,297	)		(28,501	)

		(28,375	)		(28,632	)


Other financial instruments⁽³⁾		2,171			2,056

Net debt		(29,858	)		(33,316	)

Notes:


(1)		At 31 March 2011 the amount includes £531 million (2010: £604 million) in relation to cash received under collateral support agreements.

(2)		At 31 March 2011 US$551 million was drawn under the US commercial paper programme and €1,490 million was drawn under the euro commercial paper programme.

(3)		Comprises i) mark-to-market adjustments on derivative financial instruments which are included as a component of trade and other receivables (2011: £2,045 million; 2010: £2,128 million) and trade and other payables (2011: £548 million; 2010: £460 million) and ii) short-term investments in index linked government bonds and collateral support agreements included as a component of other investments (2011: £674 million; 2010: £388 million). These government bonds have less than six years to maturity, can be readily converted into cash via the repurchase market and are held on an effective floating rate basis.

At 31 March 2011 we had £6,252 million of cash and cash equivalents which are held in accordance with our treasury policy.

We hold cash and liquid investments in accordance with the counterparty and settlement risk limits of the Board approved treasury policy. The main forms of liquid investments at 31 March 2011 were money market funds, UK index linked government bonds and bank deposits.

Net debt decreased by £3,458 million to £29,858 million primarily due to the sale of our interests in SoftBank and the element of the proceeds from the sale of our 3.2% interest in China Mobile Limited which was not committed to the share buyback programme. The £7,049 million free cash flow generated during the year was primarily used to fund £4,468 million of dividend payments to shareholders as well as spectrum purchases in Germany and India. Net debt represented 32.8% of our market capitalisation at 31 March 2011 compared with 41.6% at 31 March 2010. Average net debt at month end accounting dates over the 12 month period ended 31 March 2011 was £31.4 billion and ranged between £28.4 billion and £34.9 billion during the year.

The cash received from collateral support agreements mainly reflects the value of our interest rate swap portfolio which is substantially net present value positive. See note 21 to the consolidated financial statements for further details on these agreements.

Commercial paper programmes

We currently have US and euro commercial paper programmes of US$15 billion and £5 billion respectively which are available to be used to meet short-term liquidity requirements. At 31 March 2011 an amount external to the Group of €1,490 million (£1,317 million) was drawn under the euro commercial paper programme and US$551 million (£343 million) was drawn down under the US commercial paper programme, with such funds being provided by counterparties external to the Group. At 31 March 2010 US$245 million (£161 million) was drawn under the US commercial paper programme and €2,491 million (£2,219 million), £161 million and US$33 million (£22 million) was drawn under the euro commercial paper programme. The commercial paper facilities were supported by US$4.2 billion (£2.6 billion) and €4.2 billion (£3.7 billion) of syndicated

committed bank facilities (see “Committed facilities”), which mature on 9 March 2016 and 1 July 2015 respectively. No amounts had been drawn under either bank facility.

Bonds

We have a €30 billion euro medium-term note programme and a US shelf programme which are used to meet medium to long-term funding requirements. At 31 March 2011 the total amounts in issue under these programmes split by currency were US$14.3 billion, £2.6 billion, €10.6 billion and £0.2 billion sterling equivalent of other currencies.

In the year ended 31 March 2011 bonds with a nominal value equivalent of £0.7 billion at the relevant 31 March 2011 foreign exchange rates were issued under the US shelf and the euro medium-term note programme. The bonds issued during the year were:


		Nominal	Sterling
		amount	equivalent
Date of bond issue	Maturity of bond	Million	Million

August 2010	August 2011	US$100		64
March 2011	March 2016	US$600		374
March 2011	March 2021	US$500		311

At 31 March 2011 we had bonds outstanding with a nominal value of £20,987 million (2010: £21,963 million).

Committed facilities

The following table summarises the committed bank facilities available to us at 31 March 2011.


Committed bank facilities		Amounts drawn

1 July 2010
€4.2 billion syndicated revolving credit facility, maturing 1 July 2015		No drawings have been made against this facility. The facility supports our commercial paper programmes and may be used for general corporate purposes including acquisitions.

9 March 2011
US$4.2 billion syndicated revolving credit facility, maturing 9 March 2016		No drawings have been made against this facility. The facility supports our commercial paper programmes and may be used for general corporate purposes including acquisitions.

16 November 2006
€0.4 billion loan facility, maturing 14 February 2014		This facility was drawn down in full on 14 February 2007. The facility is available for financing capital expenditure in our Turkish operating company.

28 July 2008
€0.4 billion loan facility, maturing 12 August 2015		This facility was drawn down in full on 12 August 2008. The facility is available for financing the roll-out of converged fixed mobile broadband telecommunications network in Italy.

15 September 2009
€0.4 billion loan facility, maturing 30 July 2017		This facility was drawn down in full on 30 July 2010. The facility is available for financing capital expenditure in our German operations.

29 September 2009
US$0.7 billion export credit agency loan facility, final maturity date 19 September 2018		An initial drawing was made of US$120 million on 3 November 2010. The facility is available for financing eligible Swedish goods and services.

Vodafone Group Plc Annual Report 2011 51

Performance

Under the terms and conditions of the €4.2 billion and US$4.2 billion syndicated committed bank facilities lenders have the right, but not the obligation, to cancel their commitments and have outstanding advances repaid no sooner than 30 days after notification of a change of control. This is in addition to the rights of lenders to cancel their commitment if we commit an event of default; however, it should be noted that a material adverse change clause does not apply.

The facility agreements provide for certain structural changes that do not affect the obligations to be specifically excluded from the definition of a change of control.

The terms and conditions of the €0.4 billion loan facility maturing on 14 February 2014 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Turkish operating company spend less than the equivalent of €0.8 billion on capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 50% of the capital expenditure.

The terms and conditions of the €0.4 billion loan facility maturing 12 August 2015 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Italian operating company spend less than the equivalent of €1.5 billion on capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 18% of the capital expenditure.

The loan facility agreed on 15 September 2009 provides €0.4 billion of seven year term finance for the Group’s virtual digital subscriber line (‘VDSL’) project in Germany. The terms and conditions are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that should the Group’s German operating company spend less than the equivalent of €0.8 billion on VDSL related capital expenditure, the Group will be required to repay the drawn amount of the facility that exceeds 50% of the VDSL capital expenditure.

The Group entered into an export credit agency loan agreement on 29 September 2009 for US$0.7 billion. The terms and conditions of the facility are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that the Company is permitted to draw down under the facility based on the eligible spend with Ericsson up until the final drawdown date of 30 June 2011. Quarterly repayments of any drawn balance commenced on 30 June 2010 with a final maturity date of 19 September 2018.

Furthermore, certain of our subsidiaries are funded by external facilities which are non-recourse to any member of the Group other than the borrower due to the level of country risk involved. These facilities may only be used to fund their operations. At 31 March 2011 Vodafone Essar had facilities of INR 281 billion (£3.9 billion) of which INR 262 billion (£3.7 billion) is drawn. Vodafone Egypt has a partly drawn EGP 1.2 billion (£121 million) syndicated bank facility of EGP 4.0 billion (£418 million) that matures in March 2014. Vodacom had fully drawn facilities of ZAR 8.1 billion (£741 million), US$120 million (£73 million) and TZS 87 billion (£36 million), Vodafone Americas has a US$1.4 billion (£871 million) US private placement with a maturity of 17 August 2015 and Ghana had a fully drawn facility of US$75 million (£47 million) with a final maturity of 15 March 2018.

In aggregate we have committed facilities of approximately £15,703 million, of which £7,247 million was undrawn and £8,456 million was drawn at 31 March 2011.

We believe that we have sufficient funding for our expected working capital requirements for at least the next 12 months. Further details regarding the maturity, currency and interest rates of the Group’s gross borrowings at 31 March 2011 are included in note 22 to the consolidated financial statements.

Financial assets and liabilities

Analyses of financial assets and liabilities including the maturity profile of debt, currency and interest rate structure are included in notes 18 and 22 to the consolidated financial statements. Details of our treasury management and policies are included within note 21 to the consolidated financial statements.

Option agreements and similar arrangements

Potential cash outflows

In respect of our interest in the Verizon Wireless partnership, an option granted to Price Communications, Inc. by Verizon Communications Inc. was exercised on 15 August 2006. Under the option agreement Price Communications, Inc. exchanged its preferred limited partnership interest in Verizon Wireless of the East LP for 29.5 million shares of common stock in Verizon Communications Inc. Verizon Communications Inc. has the right, but not the obligation, to contribute the preferred interest to the Verizon Wireless partnership diluting our interest. However, we also have the right to contribute further capital to the Verizon Wireless partnership in order to maintain our percentage partnership interest. Such amount, if contributed, would be US$0.8 billion.

Our aggregate direct and indirect interest in Vodafone Essar Limited (‘VEL’), our Indian operating company, is 59.9% at 31 March 2011. We have call options to acquire shareholdings in companies which indirectly own a further 7.1% interest in VEL. The shareholders of these companies also have put options which, if exercised, would require us to purchase the remaining shares in the respective company. If these options were exercised, which can only be done in accordance with Indian law prevailing at the time of exercise, we would have a direct and indirect interest of 67.0% in VEL. On 30 March 2011 the Essar Group exercised its underwritten put option over 22.0% of VEL following which, on 31 March 2011, we exercised our call option over the remaining 11.0% of VEL owned by the Essar Group. The consideration due under these two options is US$5 billion (£3.1 billion). The Group does not believe that there is any legal requirement to withhold tax in respect of these transactions but as discussed on page 122, if the Authority for Advanced Rulings directs tax to be withheld, this amount is anticipated to be approximately an additional US$1 billion.

Off-balance sheet arrangements

On 7 January 2011 State Bank of India provided a guarantee on our behalf of INR 85 billion (£1.2 billion) to the Supreme Court of India in relation to the ongoing litigation in respect of the purchase of Vodafone Essar Limited as disclosed on page 122. We have counter indemnified State Bank of India for any amounts payable under this guarantee.

Other than this guarantee we do not have any material off-balance sheet arrangements as defined in item 5.E.2. of the SEC’s Form 20-F. Please refer to notes 27 and 28 to the consolidated financial statements for a discussion of our commitments and contingent liabilities.

Quantitative and qualitative disclosures about market risk

A discussion of our financial risk management objectives and policies and the exposure of the Group to liquidity, market and credit risk is included within note 21 to the consolidated financial statements.

52 Vodafone Group Plc Annual Report 2011

Board of directors and Group management

Directors and senior management

Our business is managed by our Board of directors (‘the Board’). Biographical details of the directors and senior management at 17 May 2011 are as follows:

Board of directors

Chairman

1. Sir John Bond^†, aged 69, became Chairman of Vodafone Group Plc in July 2006, having previously served as a non-executive director of the Board, and is Chairman of the Nominations and Governance Committee. He is Chairman of Xstrata plc and a non-executive director of A.P. Møller – Mærsk A/S and Shui On Land Limited (Hong Kong SAR). He retired from the position of Group Chairman of HSBC Holdings plc in May 2006. Previous non-executive directorships include the London Stock Exchange plc, Orange plc, British Steel plc, the Court of the Bank of England and Ford Motor Company, US. He is also an advisor to Northern Trust in Chicago. Sir John will retire from the Board at the conclusion of the Company’s AGM on 26 July 2011.

Executive directors

2. Vittorio Colao, Chief Executive, aged 49, was appointed Chief Executive of Vodafone Group Plc after the AGM in July 2008. He joined the Board in October 2006 as Chief Executive, Europe and Deputy Chief Executive. The early part of his career was spent in the Milan office of McKinsey & Co working on media, telecommunications and industrial goods, with additional responsibility for recruitment. In 1996 he joined Omnitel Pronto Italia, which subsequently became Vodafone Italy, and was appointed Chief Executive in 1999. He was then appointed Regional Chief Executive Officer, Southern Europe for Vodafone Group Plc in 2001, became a member of the Board in 2002 and was appointed to the role of Regional Chief Executive Officer for Southern Europe, Middle East and Africa for Vodafone in 2003. In 2004 he left Vodafone to join RCS MediaGroup, the leading Italian publishing company, where he was Chief Executive until he rejoined Vodafone as Chief Executive Officer, Europe. He sits on the International Advisory Board of Bocconi University, Italy.

3. Andy Halford, Chief Financial Officer, aged 52, joined the Board in July 2005. He joined Vodafone in 1999 as Financial Director for Vodafone Limited, the UK operating company, and in 2001 he became Financial Director for Vodafone’s Northern Europe, Middle East and Africa region. In 2002 he was appointed Chief Financial Officer of Verizon Wireless in the US and is currently a member of the Board of Representatives of the Verizon Wireless partnership. Prior to joining Vodafone he was Group Finance Director at East Midlands Electricity Plc. In December 2010 he was appointed as Chairman of The Hundred Group of Finance Directors in the UK. He holds a bachelor’s degree in Industrial Economics from Nottingham University and is a Fellow of the Institute of Chartered Accountants in England and Wales.

4. Michel Combes, aged 49, Chief Executive Officer, Europe Region, was appointed to the Board in June 2009, having joined the Company in October 2008. He began his career at France Telecom in 1986 in the External Networks Division and then moved to the Industrial and International Affairs Division. After being technical advisor to the Minister of Transportation from 1991 to 1995, he served as Chairman and Chief Executive Officer of

GlobeCast from 1995 to 1999. He was Executive Vice President of Nouvelles Frontieres Group from December 1999 until the end of 2001 when he moved to the position of Chief Executive Officer of Assystem-Brime, a company specialising in industrial engineering. He returned to France Telecom Group in 2003 as Senior Vice President of Group Finance and Chief Financial Officer. Until January 2006 he was Senior Executive Vice President, in charge of NExT Financial Balance & Value Creation and a member of the France Telecom Group Strategic Committee. From 2006 to 2008 he was Chairman and Chief Executive Officer of TDF Group. He is President of the Supervisory Board of Assystem SA in France and serves as a non-executive director on the boards of ISS Equity A/S, ISS Holding A/S and ISS A/S.

5. Stephen Pusey, aged 49, Group Chief Technology Officer, joined Vodafone in September 2006 and was appointed to the Board in June 2009. He is responsible for all aspects of Vodafone’s networks, IT capability and research and development. Prior to joining Vodafone he held the positions of Executive Vice President and President, Nortel EMEA, having joined Nortel in 1982 where he gained a wealth of international experience across both the wireline and wireless industries and in business applications and solutions. Prior to Nortel, he spent several years with British Telecom.

Deputy Chairman and senior independent director

6. John Buchanan^§†, aged 68, became Deputy Chairman and senior independent director in July 2006 and has been a member of the Board since April 2003. He retired from the board of directors of BP p.l.c. in 2002 after six years as Group Chief Financial Officer and executive director following a wide-ranging career with the company. He was a member of the United Kingdom Accounting Standards Board from 1997 to 2001. He is Chairman of Smith & Nephew plc, Senior Independent Director of BHP Billiton Plc, Chairman of The International Chamber of Commerce (UK) and is Chairman of the trustees for the UK Christchurch Earthquake Appeal. Previous non-executive directorships include AstraZeneca plc and Boots plc.

Non-executive directors

7. Alan Jebson^§, aged 61, joined the Board in December 2006. In May 2006 he retired from his role as Group Chief Operating Officer of HSBC Holdings plc, a position which included responsibility for IT and Global Resourcing. During a long career with HSBC he held various positions in IT including the position of Group Chief Information Officer. His roles included responsibility for the Group’s international systems including the consolidation of HSBC and Midland systems following the acquisition of Midland Bank in 1993. He originally joined HSBC as Head of IT Audit in 1978 where, building upon his qualification as a chartered accountant, he built an international audit team and implemented controls in the group’s application systems. He is also a non-executive director of Experian Group plc and MacDonald Dettwiler and Associates Ltd. in Canada.

8. Samuel Jonah^‡, aged 61, was appointed to the Board in April 2009. He is Executive Chairman of Jonah Capital (Pty) Limited, an investment holding company in South Africa and serves on the boards of various public and private companies including The Standard Bank Group. He previously worked for Ashanti Goldfields Company Limited, becoming Chief Executive Officer in

Vodafone Group Plc Annual Report 2011 53

Governance

1986, and was formerly Executive President of AngloGold Ashanti Limited, a director of Lonmin Plc and a member of the Advisory Council of the President of the African Development Bank. He is an advisor to the Presidents of Nigeria and Togo and previously served as an advisor to the Presidents of South Africa and Ghana. An Honorary Knighthood was conferred on him by Her Majesty the Queen in 2003 and in 2006 he was awarded Ghana’s highest national award, the Companion of the Order of the Star.

9. Nick Land^§, aged 63, joined the Board in December 2006 and is Chairman of the Audit Committee. Solely for the purposes of relevant legislation he is the Board’s appointed financial expert on the Audit Committee. In June 2006 he retired as Chairman of Ernst & Young LLP after a distinguished career spanning 36 years with the firm. He became an audit partner in 1978 and held a number of management appointments before becoming Managing Partner in 1992. He was appointed Chairman and joined the Global Executive Board of Ernst & Young Global LLP in 1995. He serves as a non-executive director of Alliance Boots GmbH, BBA Aviation plc and the Ashmore Group plc and was appointed as a non-executive director of the Financial Reporting Council on 1 April 2011. He is an advisor to the board of SNR Denton LLP, a member of the Advisory Board of Alsbridge plc, Chairman of the Board of Trustees of Farnham Castle, and is a member of the Finance and Audit Committees of the National Gallery. He is also Chairman of the board of trustees of the Vodafone Foundation.

10. Anne Lauvergeon^§, aged 51, joined the Board in November 2005. She is Chief Executive Officer of AREVA Group, the leading French energy company, having been appointed to that role in July 2001. She started her professional career in 1983 in the steel industry and in 1990 she was named Advisor for Economic International Affairs at the French Presidency and Deputy Chief of its Staff in 1991. In 1995 she became a Partner of Lazard Frères & Cie, subsequently joining Alcatel Telecom as Senior Executive Vice President in March 1997. She was responsible for international activities and the Group’s industrial shareholdings in the energy and nuclear fields. In 1999 she was appointed Chairman and Chief Executive Officer of AREVA NC. She is currently also a member of the Advisory Board of the Global Business Coalition on HIV/AIDS and a non-executive director of Total S.A. and GDF SUEZ.

11. Luc Vandevelde^†‡, aged 60, joined the Board in September 2003 and is Chairman of the Remuneration Committee. He is a director of Société Générale and the Founder and Managing Director of Change Capital Partners LLP, a private equity fund. He was formerly Chairman of the Supervisory Board of Carrefour SA, Chairman of Marks & Spencer Group plc and Chief Executive Officer of Promodès, and has held senior European and international roles with Kraft General Foods.

12. Anthony Watson CBE^†‡, aged 66, was appointed to the Board in May 2006. He is currently Chairman of Marks & Spencer Pension Trust Ltd and is the Senior Independent Director of Hammerson plc and Witan Investment Trust. He is a non-executive director of Lloyds Banking Group plc and sits on the Advisory Board of Norges Bank Investment Management. He joined the Board of the Shareholder Executive in October 2009, having been a member of its Advisory Group since April 2008. Prior to joining the Vodafone Board

he was Chief Executive of Hermes Pensions Management Limited, a position he had held since 2002. Previously he was Hermes’ Chief Investment Officer having been Managing Director of AMP Asset Management plc and the Chief International Investment Officer of Citicorp Investment Management from 1991 until joining Hermes in 1998. He was Chairman of The Strategic Investment Board in Northern Ireland until he retired in March 2009. In January 2009 he was awarded a CBE for his services to the economic redevelopment of Northern Ireland.

13. Philip Yea^‡, aged 56, became a member of the Board in September 2005. He has held a number of roles in the private equity industry, most notably at 3i Group plc where he was Chief Executive from 2004 until January 2009, and prior to 3i at Investcorp, where his main focus was on the turnaround and performance of portfolio investments. He is a former Finance Director of Diageo plc, the global drinks group, where as Finance Director of Guinness plc he was closely involved in the creation of Diageo through Guiness’s merger with Grand Metropolitan P.L.C. in 1997. Philip holds a number of advisory positions including to HRH The Duke of York in his role as the UK’s Special Representative for International Trade & Investment, as well as to PricewaterhouseCoopers in the UK and Bridges Ventures. He is also Chairman of the trustees of the British Heart Foundation. He has previously held non-executive roles at HBOS plc and Manchester United plc.

Appointments since the 2010 AGM

14. Renee James, aged 46, joined the Board in January 2011. She is Senior Vice President and General Manager of the software and services group for Intel Corporation with responsibility for delivering software products and support across Intel’s entire product line by building and distributing software and services products and partnering with independent software partners in the industry. In addition, she is the Chairman of the software subsidiaries of Intel, Havok, WIndRiver Systems and McAfee, and also serves as an independent director on the VMware Inc. Board of Directors and is a member of its Audit Committee. She holds bachelor’s and master’s degrees from the University of Oregon.

15. Gerard Kleisterlee, aged 64, was appointed to the Board on 1 April 2011. He retired as President/Chief Executive Officer and Chairman of the Board of Management and the Group Management Committee of Koninklijke Philips Electronics N.V. (‘Philips’) on 31 March 2011 after a career with Philips spanning over more than three decades. He has been a member of the Daimler AG Supervisory Board since April 2009, a non-executive director of the Supervisory Board and member of the Audit Committee of Royal Dutch Shell since November 2010, and a member of the Board of Directors of Dell since December 2010. He will succeed Sir John Bond as Chairman of the Company on conclusion of the AGM on 26 July 2011.


§		Audit Committee

†		Nominations and Governance Committee

‡		Remuneration Committee

54 Vodafone Group Plc Annual Report 2011

Board of directors and Group management continued

Executive Committee

Chaired by Vittorio Colao, this committee focuses on the Group’s strategy, financial structure and planning, succession planning, organisational development and Group-wide policies. The Executive Committee membership comprises the executive directors, details of whom are shown on page 52 above, and the senior managers who are listed below.

Senior management

Members of the Executive Committee who are not also executive directors are regarded as senior managers of the Company.

Warren Finegold, aged 54, Group Strategy and Business Development Director, joined the Executive Committee in April 2006 as Chief Executive, Global Business Development with responsibility for mergers and acquisitions and business development. He assumed his current position in August 2009 when his role was expanded to include Group Strategy. He started his career with Hill Samuel & Co. Limited as an Executive in the Corporate Finance department, advising clients on mergers and acquisitions. He then moved to Goldman Sachs International in 1986 where he held positions in New York and London. Prior to joining Vodafone he was a Managing Director of UBS Investment Bank where he held a number of senior positions, most recently as head of its technology team in Europe.

Matthew Kirk, aged 50, Group External Affairs Director, was appointed to his current position and joined the Executive Committee in March 2009. Matthew joined Vodafone in 2006 as Group Director of External Relationships. Prior to that he was a member of the British Diplomatic Service for more than 20 years and before joining Vodafone served as British Ambassador to Finland.

Morten Lundal, aged 46, Group Chief Commercial Officer, was appointed to his current position in October 2010, having joined the Executive Committee in November 2008, and previously served as Chief Executive Officer for the Africa and Central Europe region. He joined Nordic mobile operator, Telenor, in 1997 and held several Chief Executive Officer positions including for the Internet Division and Telenor Business Solutions as well as the position of Executive Vice President for Corporate Strategy before becoming the Chief Executive Officer of Telenor’s Malaysian subsidiary, DiGi Telecommunications.

Rosemary Martin, aged 51, was appointed Group General Counsel and Company Secretary in March 2010. She previously served as Chief Executive Officer of the Practical Law Group prior to which she previously spent 11 years with Reuters Group Plc. in various company secretary and legal roles, with the last five years as Group General Counsel and Company Secretary. Before joining Reuters she was a partner with Mayer, Brown, Rowe & Maw. She is a non-executive director of HSBC Bank Plc (the European arm of HSBC Group) and a member of the Institute of Chartered Accountants of England and Wales Corporate Governance Committee.

Nick Read, aged 46, Chief Executive Officer, Africa, Middle East and Asia Pacific region, was appointed to this position in October 2010. He became a member of the Executive Committee in November 2008 at the time serving as Chief Executive Officer for the Asia Pacific and Middle East region. He joined Vodafone in 2002 and has held a variety of senior roles including Chief Financial Officer and Chief Commercial Officer of Vodafone Limited, the UK operating company, and was appointed Chief Executive Officer of Vodafone Limited in early 2006. Prior to joining Vodafone he held senior global finance positions with United Business Media plc and Federal Express Worldwide.

Ronald Schellekens, aged 47, Group Human Resources Director, joined Vodafone and the Executive Committee in January 2009. Ronald is responsible for the Vodafone human resources management function as well as health and safety, and Vodafone’s property and real estate. Prior to joining Vodafone he was Executive Vice President Human Resources for Royal Dutch Shell plc’s global downstream business. Prior to working for Shell he worked for nine years at PepsiCo in various international senior human resources roles including assignments in Switzerland, Spain, South Africa, the UK and Poland. In his last role he was responsible for the Europe, Middle East and Africa region for PepsiCo Foods International. Prior to PepsiCo he worked for nine years for AT&T in human resources roles in the Netherlands and Poland.

Other Board and Executive Committee members

The following members also served on the Board or the Executive Committee during the year:

Simon Murray was a non-executive director until his retirement on 27 July 2010. Terry Kramer was Regional President – Vodafone Americas and a member of the Executive Committee until 31 July 2010.Wendy Becker was Group Chief Marketing Officer and a member of the Executive Committee until January 2011.

Vodafone Group Plc Annual Report 2011 55


Corporate governance		Governance

We are committed to high standards of corporate governance which we consider are critical to business integrity and to maintaining investors’ trust in us. We expect all our directors, employees and suppliers to act with honesty, integrity and fairness. Our business principles set out the standards we set ourselves to ensure we operate lawfully, with integrity and with respect for the culture of every country in which we do business.

Compliance with the Combined Code

Our ordinary shares are listed in the UK on the London Stock Exchange. In accordance with the Listing Rules of the UK Listing Authority, we confirm that throughout the year ended 31 March 2011 and at the date of this document we were compliant with the provisions of, and applied the principles of, Section 1 of the 2008 FRC Combined Code on Corporate Governance (the “Combined Code”). The Combined Code can be found on the FRC website (www.frc.org.uk). This corporate governance section, together with the “Directors’ remuneration” section on pages 62 to 73, provides detail of how we apply the principles and comply with the provisions of the Combined Code.

The FRC issued the new UK Corporate Governance Code in 2010, applicable for financial years beginning on or after 29 June 2010. We will report on it for the first time in our 2012 financial year and intend to be in compliance.

Corporate governance statement

We comply with the corporate governance statement requirements pursuant to the FSA’s Disclosure and Transparency Rules by virtue of the information included in this “Corporate governance” section of the annual report together with information contained in the “Shareholder information” section on pages 132 to 138.

Board organisation and structure

The role of the Board

The Board is responsible for the overall conduct of the Group’s business and has the powers, authorities and duties vested in it by and pursuant to the relevant laws of England and Wales and the articles of association of the Company. The Board:

•		has final responsibility for the management, direction and performance of our businesses;

•		is required to exercise objective judgement on all corporate matters independent from executive management;

•		is accountable to shareholders for the proper conduct of the business; and

•		is responsible for ensuring the effectiveness of and reporting on our system of corporate governance.

The Board has a formal schedule of matters reserved to it for its decision and these include:

•		Group strategy and long-term plans;

•		major capital projects, acquisitions or divestments;

•		annual budget and operating plan;

•		group financial structure, including tax and treasury;

•		annual and half-year financial results and shareholder communications;

•		system of internal control and risk management; and

•		senior management structure, responsibilities and succession plans.

The schedule is reviewed annually. It was last formally reviewed in March 2011 at which time, it was determined that no amendments were required.

Other specific responsibilities are delegated to Board committees which operate within clearly defined terms of reference. Details of the responsibilities delegated to the Board committees are given on pages 57 and 58.

Board meetings

The Board meets at least eight times a year and the meetings are structured to allow open discussion. All directors participate in discussing strategy, trading and financial performance and risk management. All substantive agenda items have comprehensive briefing material which is circulated one week before the meeting.

The following table shows the number of years directors have been on the Board at 31 March 2011 and their attendance at scheduled Board meetings they were eligible to attend during the year:


	Years		Meetings
	on Board		attended

Sir John Bond		6		8/8
John Buchanan		8		8/8
Vittorio Colao		4		8/8
Michel Combes		1		8/8
Andy Halford		5		8/8
Renee James (since 1 January 2011)		<1		3/3
Alan Jebson		4		7/8
Samuel Jonah		2		8/8
Nick Land		4		8/8
Anne Lauvergeon		5		6/8
Simon Murray (until 27 July 2010)		–		2/2
Stephen Pusey		1		8/8
Luc Vandevelde		7		8/8
Anthony Watson		5		8/8
Philip Yea		5		8/8

In addition to regular Board meetings, there are a number of other meetings to deal with specific matters. Directors unable to attend a Board meeting because of another engagement are nevertheless provided with all the information relevant for such meetings and are able to discuss issues arising in the meeting with the Chairman or the Chief Executive.

Division of responsibilities

The roles of the Chairman and Chief Executive are separate and there is a division of responsibilities that is clearly established, set out in writing and agreed by the Board to ensure that no one person has unfettered powers of decision. The Chairman is responsible for the operation, leadership and governance of the Board, ensuring its effectiveness and setting its agenda. The Chief executive is responsible for the management of the Group’s business and the implementation of Board strategy and policy.

Board balance and independence

Our Board consists of 15 directors, 13 of whom served throughout the year. At 31 March 2011, in addition to the Chairman, Sir John Bond, there were four executive directors and nine non-executive directors. Renee James and Gerard Kleisterlee were appointed as non-executive directors with effect from 1 January 2011 and 1 April 2011 respectively. Simon Murray was a member of the Board until his retirement at the annual general meeting (‘AGM’) on 27 July 2010.

The Board welcomed the publication of the Davies Review on Women on Boards in February 2011. It is our aspiration to have a minimum of 25% female representation on the Board by 2015. Subject to securing suitable candidates, we intend to effect the changes required to the Board’s composition by recruiting additional directors and/or filling vacancies which arise when directors do not seek re-election, by appointing new directors who fit the skills criteria and gender balance which would meet the Board’s aspirations. The FRC is currently consulting on changes to the UK Corporate Governance Code which may result in the Code including a recommendation

56 Vodafone Group Plc Annual Report 2011

Corporate governance continued

that companies adopt a boardroom diversity policy; we expect to comply with any such recommendation. The Board recognises the importance of gender balance throughout the Group and continues to support Vittorio Colao in his efforts to build a diverse organisation. Further information, including the proportions of women in senior management and within the organisation overall, is contained in our 2011 sustainability report at www.vodafone.com/sustainability.

The Deputy Chairman, John Buchanan, is the nominated Senior Independent Director and his role includes being available for approach or representation by directors or significant shareholders who may feel inhibited about raising issues with the Chairman. He is also responsible for conducting an annual review of the performance of the Chairman and, in the event it should be necessary, convening a meeting of the non-executive directors.

We consider all of our present non-executive directors to be fully independent. The Board is aware of the other commitments of its directors and is satisfied that these do not conflict with their duties as directors of the Company. Changes to the commitments of the directors are reported to the Board.

There are no cross-directorships or significant links between directors serving on the Board through involvement in other companies or bodies. For the purpose of section 175 of the Companies Act 2006, the Company’s articles of association include a general power for the directors to authorise any matter which would or might otherwise constitute or give rise to a breach of the duty of a director under this section, to avoid a situation in which a director has, or could have, a direct or indirect interest that conflicts or may possibly conflict, with the interests of the Company. To this end procedures have been established for the disclosure of any such conflicts and also for the consideration and authorisation of these conflicts by the Board, where relevant. The directors are required to complete a conflicts questionnaire, initially on appointment and annually thereafter. In the event of a potential conflict being identified, details of that conflict would be submitted to the Board (excluding the director to whom the potential conflict related) for consideration and, as appropriate, authorisation in accordance with the Companies Act 2006 and the articles of association. Where an authorisation was granted, it would be recorded in a register of potential conflicts and reviewed periodically. On an ongoing basis directors are responsible for notifying the Company Secretary if they become aware of actual or potential conflict situations or a change in circumstances relating to an existing authorisation. To date, no conflicts of interest have been identified.

Under the laws of England and Wales, the executive and non-executive directors are equal members of the Board and have overall collective responsibility for the Company’s direction. In particular, non-executive directors are responsible for:

•		bringing a wide range of skills and experience, including independent judgement on issues of strategy, performance, financial controls and systems of risk management;

•		constructively challenging the strategy proposed by the Chief Executive and executive directors;

•		scrutinising and challenging performance across the Group’s business;

•		assessing risk and the integrity of the financial information and controls; and

•		ensuring appropriate remuneration and succession planning arrangements are in place in relation to executive directors and other senior executive roles.

Board effectiveness

Appointments to the Board

There is a formal, rigorous and transparent procedure for the appointment of new directors to the Board. Candidates are identified and selected on merit against objective criteria and with due regard to the benefits of diversity on the Board, including gender. This process was followed during the recruitment of Renee James and Gerard Kleisterlee and is described in the section on the Nominations and Governance Committee set out on page 57.

Information and professional development

From time to time the Board receives detailed presentations from non-Board members on matters of significance. Financial plans, including budgets and forecasts, are regularly discussed at Board meetings. The non-executive directors periodically visit different parts of the Group and are provided with briefings and information to assist them in performing their duties.

The Chairman is responsible for ensuring that induction and training programmes are provided and the Company Secretary organises the programmes. Individual directors are also expected to take responsibility for identifying their training needs and to take steps to ensure that they are adequately informed about the Company and their responsibilities as a director. The Board is confident that all its members have the knowledge, ability and experience to perform the functions required of a director of a listed company.

On appointment, individual directors undergo an induction programme covering, amongst other things:

•		the business of the Group;

•		their legal and regulatory responsibilities as directors;

•		briefings and presentations from relevant executives; and

•		opportunities to visit business operations.

If appropriate the induction will also include briefings on the scope of the internal audit function and the role of the Audit Committee, meetings with the external auditor and other areas the Company Secretary deems appropriate considering the director’s area of responsibility. Throughout their period in office the directors are continually updated on the Group’s businesses and the regulatory and industry specific environments in which it operates. These updates are by way of written briefings and meetings with senior executives and, where appropriate, external sources.

Performance evaluation

Performance evaluation of the Board, its committees and individual directors takes place on an annual basis and is conducted within the terms of reference of the Nominations and Governance Committee with the aim of improving the effectiveness of the Board and its committees, individual contributions and the Group’s performance as a whole. The evaluation is designed to determine whether the Board continues to be capable of providing the high level judgement required and whether, as a Board, the directors are informed and up to date with the business and its goals and understand the context within which it operates. Every three years the performance evaluation is conducted by an independent external advisor. The last external evaluation took place in respect of the 2010 financial year.

This year the Board undertook a formal self-evaluation of its own performance. The process was led by the Chairman and included a review of the administration of the Board and its committees covering the operation of the Board and its committees, agendas, reports and information produced for their consideration. Using questionnaires completed by all directors, the Chairman produced a report on Board performance which was sent to and considered by the Nominations and Governance Committee before being discussed with the Board members at a Board meeting.

The Chairman led the assessment of the Chief Executive and the non-executive directors, the Chief Executive undertook the performance reviews for the executive directors and the Senior Independent Director led the review of the performance of the Chairman.

The Chairman reported the results of the evaluations at the Board meeting in March 2011. The performance of each director of the Board was found to be effective and it was concluded that the Board provides the effective leadership and control required for a listed company. The Nominations and Governance Committee confirmed to the Board that the contributions made by the directors offering themselves for election and re-election at the AGM in July 2011 continue to be effective and that the Company should support their election and re-election. In addition, the Board considered recommendations made by directors during the Board performance evaluation for the improvement of Board procedures and its effectiveness.

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Governance

Consequently, some changes in Board practice are being implemented, including extending the duration of Audit Committee meetings and allocating more time in the Board schedule for strategy discussions. The Board will continue to review its procedures, its effectiveness and development in the financial year ahead.

Re-election of directors

Although not required by the articles of association, in the interests of good corporate governance the directors have resolved that, subject to the recommendation of the Nominations and Governance Committee, they will all submit themselves for re-election at each AGM. Accordingly, at the AGM to be held on 26 July 2011, all the directors will offer themselves for re-election with the exception of Sir John Bond who is retiring from the Board. New directors seek election for the first time in accordance with the articles of association.

Independent advice

The Board recognises that there may be occasions when one or more of the directors feels it is necessary to take independent legal and/or financial advice at the Company’s expense. There is an agreed procedure to enable them to do so.

Indemnification of directors

In accordance with our articles of association and to the extent permitted by the laws of England and Wales, directors are granted an indemnity from the Company in respect of liabilities incurred as a result of their office. In respect of those matters for which the directors may not be indemnified, we maintained a directors’ and officers’ liability insurance policy throughout the financial year. Neither our indemnity nor the insurance provides cover in the event that a director is proven to have acted dishonestly or fraudulently.

Board committees

The Board has established an Audit Committee, a Nominations and Governance Committee and a Remuneration Committee, each of which has formal terms of reference approved by the Board. The Board reviews the terms of reference for each of the committees on an ongoing basis and is satisfied that they comply with the requirements of the Combined Code. The terms of reference for all Board committees can be found on our website at www.vodafone.com/governance or a copy can be obtained by application to the Company Secretary at our registered office.

The committees are provided with all necessary resources to enable them to undertake their duties in an effective manner. The Company Secretary or her delegate acts as secretary to the committees. The minutes of committee meetings are circulated to all directors.

Each committee has access to such information and advice, both from within the Group and externally, at the Company’s cost as it deems necessary. This may include the appointment of external consultants where appropriate. Each committee undertakes an annual review of the effectiveness of its terms of reference and makes recommendations to the Board for changes where appropriate.

Audit Committee

The members of the Audit Committee during the year, together with a record of their attendance at meetings which they were eligible to attend, are set out below:


	Meetings attended

Nick Land, Chairman and financial expert		4/4
John Buchanan		4/4
Alan Jebson		4/4
Anne Lauvergeon		3/4

The Audit Committee is comprised of financially literate members having the necessary ability and experience to understand financial statements. Solely for the purpose of fulfilling the requirements of the Sarbanes-Oxley Act and the Combined Code, the Board has designated Nick Land, who is an independent non-executive director satisfying the independence

requirements of Rule 10A-3 of the US Securities Exchange Act 1934 (the ‘Exchange Act’), as its financial expert on the Audit Committee. Further details on Nick Land can be found in “Board of directors and Group management” on page 53.

The Audit Committee’s responsibilities include:

•		overseeing the relationship with the external auditor;

•		reviewing our preliminary results announcement, half-year results and annual financial statements;

•		monitoring compliance with statutory and listing requirements for any exchange on which our shares and debt instruments are quoted;

•		reviewing the scope, extent and effectiveness of the activity of the Group internal audit department;

•		engaging independent advisors as it determines is necessary and to perform investigations;

•		reporting to the Board on the quality and acceptability of our accounting policies and practices including, without limitation, critical accounting policies and practices; and

•		playing an active role in monitoring our compliance efforts in respect of Section 404 of the Sarbanes-Oxley Act.

At least twice a year the Audit Committee meets separately with the external auditor, the Chief Financial Officer and the Group Audit Director without other management being present. Further details on the work of the Audit Committee and its oversight of the relationships with the external auditor can be found under “Auditor” and the “Report from the Audit Committee” which are set out on pages 60 and 61.

Nominations and Governance Committee

The members of the Nominations and Governance Committee during the year, together with a record of their attendance at meetings which they were eligible to attend, are set out below:


	Meetings attended

Sir John Bond, Chairman		7/7
John Buchanan		7/7
Luc Vandevelde		7/7
Anthony Watson (from 26 July 2010)		5/5

The Nominations and Governance Committee’s key objective is to ensure that the Board comprises individuals with the requisite skills, knowledge and experience to ensure that it is effective in discharging its responsibilities. The Nominations and Governance Committee:

•		leads the process for identifying and making recommendations to the Board of candidates for appointment as directors giving full consideration to succession planning and the leadership needs of the Group;

•		makes recommendations to the Board on the composition of the Nominations and Governance Committee and the composition and chairmanship of the Audit and Remuneration Committees;

•		regularly reviews the structure, size and composition of the Board including the balance of skills, knowledge and experience and the independence of the non-executive directors, and makes recommendations to the Board with regard to any change; and

•		is responsible for the oversight of all matters relating to corporate governance, bringing any issues to the attention of the Board.

During the financial year an external search was commissioned, using an independent consulting firm which actively searches for female as well as male candidates, for a non-executive director with relevant international experience in the high-tech sector. Renee James was identified as a potential candidate and subsequently recommended to the Board by the Nominations and Governance Committee on the basis that she met the desired criteria.

In February 2010 the Board initiated a succession planning process to search for a new chairman. The independent consulting firm was provided with a detailed brief of the desired candidate profile and their services were used to conduct a thorough search to identify suitable candidates. The Nominations and Governance Committee considered a list of potential

58 Vodafone Group Plc Annual Report 2011

Corporate governance continued

candidates and those shortlisted were met by members of the Board. Following an interview process, Gerard Kleisterlee was invited to join the Board and to become Vodafone’s chairman in succession to Sir John Bond. In accordance with the Combined Code, Sir John Bond did not chair the Nominations and Governance Committee when dealing with the appointment of Mr Kleisterlee. The Deputy Chairman took the chair. Mr Kleisterlee’s deep knowledge of the commercial sector, his international experience and familiarity with business in emerging markets were factors in the Board’s decision.

The Nominations and Governance Committee meets periodically when reguired. In addition to scheduled meetings, there are a number of ad hoc meetings to address specific matters. No one other than a member of the Nominations and Governance Committee is entitled to be present at its meetings. The Chief Executive, other non-executive directors and external advisors may be invited to attend.

Remuneration Committee

The members of the Remuneration Committee during the year, together with a record of their attendance at scheduled meetings which they were eligible to attend, are set out below:


	Meetings attended

Luc Vandevelde, Chairman		5/5
Samuel Jonah (from 1 June 2010)		3/3
Simon Murray (until 27 July 2010)		1/2
Anthony Watson		5/5
Philip Yea		5/5

In addition to scheduled meetings, there were a number of ad hoc meetings to deal with specific matters. The responsibilities of the Remuneration Committee include:

•		determining, on behalf of the Board, the policy on the remuneration of the Chairman, the executive directors and the senior management team;

•		determining the total remuneration packages for these individuals including any compensation on termination of office; and

•		appointing any consultants in respect of executive directors’ remuneration.

The Chairman and Chief Executive may attend the Remuneration Committee’s meetings by invitation. They do not attend when their individual remuneration is discussed. No director is involved in deciding his or her own remuneration.

Further information on the Remuneration Committee’s activities is contained in “Directors’ remuneration” on pages 62 to 73.

Executive Committee

The executive directors, together with certain other Group functional heads and regional chief executives, meet 11 times a year as the Executive Committee under the chairmanship of the Chief Executive. The Executive Committee is responsible for our competitive and financial performance, reviewing strategy and new business opportunities including major acquisitions and disposals, the management of our capital structure and funding, and key organisational and policy decisions. The members of the Executive Committee and their biographical details are set out on pages 52 and 54.

The Executive Committee members and the chief executive officers of the major operating companies and other selected individuals, depending on topics discussed, met twice during the year to discuss strategy.

Company Secretary

The Company Secretary acts as secretary to the Board and to the committees of the Board and, with the consent of the Board, may delegate responsibility for the administration of the committees to other suitably qualified staff. The Company Secretary:

•

assists the Chairman in ensuring that all directors have full and timely access to all relevant information;

•		is responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters; and

•		administers the procedure under which directors can, where appropriate, obtain independent professional advice at the Company’s expense.

The appointment or removal of the Company Secretary is a matter for the Board as a whole.

Relations with shareholders

We are committed to communicating our strategy and activities clearly to our shareholders and, to that end, we maintain an active dialogue with investors through a planned programme of investor relations activities. The investor relations programme includes:

•		formal presentations of full year and half-year results, and interim management statements;

•		briefing meetings with major institutional shareholders in the UK, the US and in Continental Europe after the half-year results and preliminary announcement, to ensure that the investor community receives a Balanced and complete view of our performance and the issues we face;

•		regular meetings between institutional investors and analysts and the Chief Executive and Chief Financial Officer to discuss business performance;

•		hosting investors and analysts sessions at which senior management from relevant operating companies deliver presentations which provide an overview of each of the individual businesses and operations;

•		attendance by senior executives across the business at relevant meetings and conferences throughout the year;

•		responding to enquiries from shareholders and analysts through our Investor Relations team; and

•		www.vodafone.com/investor which is a section dedicated to shareholders on our website.

Overall responsibility for ensuring that there is effective communication with investors and that the Board understands the views of major shareholders on matters such as governance and strategy rests with the Chairman, who makes himself available to meet shareholders for this purpose.

The Senior Independent Director and other members of the Board are also available to meet major investors on request. The Senior Independent Director has a specific responsibility to be available to shareholders who have concerns, for whom contact with the Chairman, Chief Executive or Chief Financial Officer has either failed to resolve their concerns or for whom such contact is inappropriate.

At the 2007 AGM the shareholders approved amendments to the articles of association which enabled us to take advantage of the provisions in the Companies Act 2006 to communicate with our shareholders electronically. Following that approval, unless a shareholder has specifically asked to receive a hard copy, they will receive notification of the availability of the annual report on our website www.vodafone.com/investor. For this year shareholders will receive the notice of meeting and form of proxy in paper through the post unless they have previously opted to receive email communications. We do not intend to send the notice of meeting and form of proxy to shareholders in paper through the post for the 2012 financial year unless shareholders have specifically asked to receive communications in hard copy. Shareholders continue to have the option to appoint proxies and to give voting instructions electronically.

The principal communication with private investors is via the annual report and through the AGM, an occasion which is attended by all our directors and at which all shareholders present are given the opportunity to question the Chairman, the Chairmen of the Audit, Nominations and Governance, and Remuneration Committees and the rest of the Board. After the AGM shareholders can meet informally with directors.

A summary presentation of results and development plans is also given at the AGM before the Chairman deals with the formal business of the meeting. The AGM is broadcast live on our website (www.vodafone.com/agm) and a recording of the webcast can subsequently be viewed on our website. All

Vodafone Group Plc Annual Report 2011 59

Governance

substantive resolutions at our AGMs are decided on a poll. The poll is conducted by our registrars and scrutinised by Electoral Reform Services. The proxy votes cast in relation to all resolutions, including details of votes withheld, are disclosed to those in attendance at the meeting and the results of the poll are published on our website and announced via the Regulatory News Service. Financial and other information is made available on our website (www.vodafone.com/investor) which is regularly updated.

A summary of our share and control structures is set out on pages 135 and 136 in the shareholder information section of this report.

Political donations

The directors consider that it is in the best interest of shareholders that we participate in public debate and opinion forming on matters which affect our business. In order not to inhibit these activities and to avoid inadvertent infringement of the Companies Act 2006, at the 2008 AGM the directors sought and received shareholders’ approval for the Company and its subsidiaries to be authorised, for the purposes of part 14 of the Companies Act 2006, to make political donations and to incur political expenditure during the period from the AGM to the conclusion of the AGM for the 2012 financial year or 29 July 2012, whichever is earlier, up to a maximum aggregate amount of £100,000 per year. Neither the Company nor any of its subsidiaries have made any such political donations during the year. It is our Group policy not to make political donations or incur political expenditure as those expressions are normally understood.

Internal control

The Board has overall responsibility for the system of internal control. A sound system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The process of managing the risks associated with social, environmental and ethical impacts is also discussed under “Sustainable business” on pages 30 to 31.

The Board has established procedures that implement in full the Turnbull Guidance “Internal Control: Revised Guidance for Directors on the Combined Code” for the year under review and to the date of approval of the annual report. These procedures, which are subject to regular review, provide an ongoing process for identifying, evaluating and managing the significant risks we face. See page 75 for management’s report on internal control over financial reporting.

Monitoring and review activities

There are clear processes for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action. These include:

•		a formal annual confirmation provided by the Chief Executive and Chief Financial Officer of each Group company certifying the operation of their control systems and highlighting any weaknesses, the results of which are reviewed by regional management, the Audit Committee and the Board;

•		a review of the appropriateness of disclosures undertaken by the Chief Executive and the Chief Financial Officer which includes formal annual meetings with the Group’s Disclosure Committee; and

•		periodic examination of business processes on a risk basis including reports on controls throughout the Group undertaken by the Group internal audit department which reports directly to the Audit Committee.

In addition, we review any reports from the external auditor presented to the Audit Committee and management relating to internal financial controls.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. Management is required to apply judgement in evaluating the risks we face in achieving our objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materialising, in identifying our ability to reduce the

incidence and impact on the business of risks that do materialise and in ensuring that the costs of operating particular controls are proportionate to the benefit.

Risk management

We have a Risk Council to manage the process of identifying, evaluating, monitoring and mitigating risks. The Risk Council is chaired by the Chief Financial Officer, facilitated by the Group Audit Director and attended by representatives from the two geographic regions, finance and a cross section of functions. Meeting twice a year, the Risk Council discusses and reviews the risks identified by the senior management of the regions and functions in their area of business. The risks are plotted on a “risk matrix” on the basis of the likelihood of those risks occurring and the impact if they do occur taking into consideration the action being taken to manage and mitigate them. Those risk assessments are presented to the Executive Committee and the Audit Committee which in turn report to the Board for review and confirmation. The Group risks identified through this process are included in “Principal risk factors and uncertainties” on pages 45 and 46. The Risk Council ensures the ongoing review of risks to the business, the controls in place to mitigate risks and identifies any further action required.

Risk mitigation

Although many risks remain outside of our direct control, a range of activities are in place to mitigate the primary risks identified including those set out on pages 45 to 46. A significant number of risks faced relate to the wider operational and commercial affairs of the Group including those in relation to competitor and regulator activity, the impact of technological developments, the development of new products and services, the success of cost reduction initiatives, the realisation of benefits from investments and the potential reliance on certain suppliers. The responsibility for the Group’s actions to address and mitigate these risks is either allocated to personnel with direct functional responsibility for the matter or to operating company and regional management with appropriate reporting and monitoring by the Risk Council and Executive Committee. The size of the Group’s operations, its geographical spread and its large and diverse customer base assist in mitigating these risks.

A range of mitigations for other risks faced by the Group are also in place:

•		Macroeconomic, political and legal risks are considered by the Group’s strategic planning process and as part of the Group’s processes for capital allocation.

•		The Group has in place formal treasury policies that seek to ensure the Group’s financing plans place appropriate weight on the risks arising from volatile capital markets.

•		Where we do not have controlling interests in certain of our investments, we work with our partners to maximise alignment of interests through the development of mutually beneficial commercial outcomes and actively involve ourselves in the governance of the company concerned.

•		The potential for health risks is comprehensively addressed through a wide range of activities including the close monitoring of developments in areas of science and technology and ensuring the devices sold meet all necessary regulatory requirements including specific absorption rate (‘SAR’) limits in relation to radio frequency emission and absorption.

•		We have invested significantly to minimise the risk of disruption of our telecommunications services and have extensive business continuity arrangements to mitigate the risks arising from a critical system failure.

Activity and progress on these matters are reported both into the Risk Council and the Executive Committee.

Review of effectiveness

The Board and the Audit Committee have reviewed the effectiveness of the internal control system including financial, operational and compliance controls and risk management, in accordance with the Combined Code for the period from 1 April 2010 to 17 May 2011 (the date of approval of our annual report). No significant failings or weaknesses were identified during this review. However, had there been any such failings or weaknesses, the Board confirms that necessary actions would have been taken to remedy them.

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Corporate governance continued

Disclosure controls and procedures

We maintain “disclosure controls and procedures”, as such term is defined in Rule 13a-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarised and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure.

The directors, the Chief Executive and the Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures and, based on that evaluation, have concluded that the disclosure controls and procedures are effective at the end of the period covered by this document.

Going concern

The going concern statement required by the Listing Rules and the Combined Code is set out in the “Directors’ statement of responsibility” on page 75.

Auditor

Following a recommendation by the Audit Committee, and in accordance with Section 489 of the Companies Act 2006, a resolution proposing the reappointment of Deloitte LLP as our auditor will be put to the shareholders at the 2011 AGM. We do not indemnify our external auditor.

In its assessment of the independence of the auditor and in accordance with the US Public Company Accounting Oversight Board’s standard on independence, the Audit Committee receives in writing details of relationships between the Company and Deloitte LLP that may have a bearing on their independence and receives confirmation that they are independent of the Company within the meaning of the securities laws administered by the SEC.

In addition, the Audit Committee pre-approves the audit fee after a review of both the level of the audit fee against other comparable companies, including those in the telecommunications industry, and the level and nature of non-audit fees, as part of its review of the adequacy and objectivity of the audit process.

In a further measure to ensure auditor independence is not compromised we have a policy that provides for the pre-approval by the Audit Committee of permitted non-audit services by Deloitte LLP. The policy lists categories of non-audit services from which the auditor is excluded from providing. For certain specific permitted services the Audit Committee has pre-approved that Deloitte LLP can be engaged by management subject to specified fee limits for individual engagements and fee limits for each type of specific service permitted. For all other services, or those permitted services that exceed the specified fee limits, the Chairman of the Audit Committee, or in his absence another member, can pre-approve permitted services which have not been pre-approved by the Audit Committee.

In addition to their statutory duties, Deloitte LLP is also engaged where, as a result of their position as auditor, they either must, or are best placed to, perform the audit-related services in question. This is primarily work in relation to matters such as shareholder circulars, Group borrowings, regulatory filings, and certain business acquisitions and disposals. Other work is awarded on the basis of competitive tender.

During the year Deloitte LLP and its affiliates charged the Group £9 million (2010: £9 million, 2009: £8 million) for audit and audit-related services and a further £1 million (2010: £1 million, 2009: £1 million) for non-audit assignments which primarily comprised fees in relation to a number of taxation assignments totalling £1 million (2010: £1 million, 2009: £1 million). The auditor was considered the most suitable supplier for the services given its extensive knowledge of the Group. After reviewing external requirements and guidelines in place, the types of services rendered were considered by the Audit Committee not to impact the objectivity and independence of Deloitte LLP. An analysis of these fees can be found in note 4 to the consolidated financial statements.

US listing requirements

Vodafone’s american depositary shares are listed on the NASDAQ Stock Market LLC (‘NASDAQ’) and we are therefore subject to the rules of NASDAQ as well as US securities laws and the rules of the SEC. NASDAQ requires US companies listed on the exchange to comply with NASDAQ’s corporate governance rules but foreign private issuers, such as the Company, are exempt from many of those rules. However, pursuant to NASDAQ Listing Rule 5615 we are required to disclose a summary of any material ways in which the corporate governance practices we follow differ from those required by NASDAQ for US companies. The material differences are as follows:

Independence

•		The NASDAQ rules require that a majority of the Board be comprised of independent directors and the rules include detailed definitions that US companies must use for determining independence.

•		The Combined Code requires a company’s board of directors to assess and make a determination as to the independence of its directors.

While the Board does not explicitly take into consideration NASDAQ’s detailed definitions, it has carried out an assessment based on the requirements of the Combined Code and has determined in its judgement that all of the non-executive directors are independent within those requirements. At 17 May 2011 the Board comprised the Chairman, four executive directors and ten non-executive directors.

Committees

•		NASDAQ rules require US companies to have a nominations committee, an audit committee and a compensation committee, each composed entirely of independent directors, with the nominations committee and audit committee required to have a written charter that addresses the committees’ purpose and responsibilities.

•		Both our Nominations and Governance Committee and our Remuneration Committee have terms of reference and compositions that comply with the Combined Code’s requirements.

•		Our Nominations and Governance Committee is chaired by the Chairman of the Board and its other members are non-executive directors of the Company.

•		Our Remuneration Committee is composed entirely of non-executive directors whom the Board has determined to be independent.

•		The Audit Committee is composed entirely of non-executive directors whom the Board has determined to be independent and who meet the requirements of Rule 10A-3 under the Exchange Act.

We consider that the terms of reference of these committees, which are available on our website (www.vodafone.com/governance), are generally responsive to the relevant NASDAQ rules but may not address all aspects of these rules.

Code of conduct

Under NASDAQ rules US companies must adopt a code of conduct applicable to all directors, officers and employees. We have adopted a Code of Conduct which applies to all employees. It sets out what conduct is expected of employees as they adhere to our Business Principles and draws their attention to the Group’s policies. In addition, a Code of Ethics has been adopted in compliance with Section 406 of the Sarbanes-Oxley Act which is applicable to the senior financial and principal executive officers. We have made our Code of Ethics available on our website (www.vodafone.com/ governance).

Quorum

Under NASDAQ rules companies are required to have a minimum quorum of 33.33% of the shareholders of ordinary shares for shareholder meetings. However, our articles of association provide for a quorum for general meetings of shareholders of two shareholders regardless of the level of their aggregate share ownership.

Vodafone Group Plc Annual Report 2011 61

Governance

Related party transactions

•		The NASDAQ rules require companies to conduct appropriate reviews of related party transactions and potential conflicts of interest via the company’s audit committee or other independent body of the board of directors.

•		We are subject to extensive provisions under the Listing Rules issued by the FSA in the UK (the “Listing Rules”) governing transactions with related parties, as defined therein, and the Companies Act 2006 also restricts the extent to which companies incorporated in England and Wales may enter into related party transactions.

•		Our articles of association contain provisions regarding disclosure of interests by our directors and restrictions on their votes in circumstances involving conflicts of interest.

•		In lieu of obtaining an independent review of related party transactions for conflicts of interests, but in accordance with the Listing Rules, the Companies Act 2006 and our articles of association, we seek shareholder approval for related party transactions that meet certain financial thresholds or where transactions have unusual features.

•

The concept of a related party for the purposes of NASDAQ’s listing rules differs in certain respects from the definition of a transaction with a related party under the Listing Rules.

Shareholder approval

•		NASDAQ requires shareholder approval for certain transactions involving the sale or issuance by a listed company of share capital.

•		Under the NASDAQ rules, whether shareholder approval is required for such transactions depends on, among other things, the number of shares to be issued or sold in connection with a transaction, while we are bound by the provisions of the Listing Rules which state that shareholder approval is required, among other things, when the size of a transaction exceeds a certain percentage of the size of the listed company undertaking the transaction.

•		In accordance with our articles of association we also seek shareholder approval annually for issuing shares and to dis-apply the pre-emption rights that apply under law in line with limit guidelines issued by investor bodies.

Report from the Audit Committee

The Audit Committee assists the Board in carrying out its responsibilities in relation to financial reporting requirements, risk management and the assessment of internal controls. The Audit Committee also reviews the effectiveness of the Company’s internal audit function and manages the Company’s relationship with the external auditor. For further details, its terms of reference can be found on the Vodafone website (www.vodafone. com/governance).

The Audit Committee is composed of independent, non-executive directors selected to provide the wide range of financial and commercial expertise necessary to fulfil the Committee’s duties. The membership of the Committee is set out in the table on page 57. By invitation of the Chairman of the Audit Committee, the Chief Executive, the Chief Financial Officer, the Group Financial Controller, the Director of Financial Reporting, the Group Audit Director and the external auditor also attend the Audit Committee meetings. Relevant people from the business are also invited to attend certain meetings in order to provide insight and enhance the Audit Committee’s awareness of key issues and developments in the business which are relevant to the Audit Committee in the performance of its role.

During the year ended 31 March 2011 the principal activities of the Audit Committee were as follows:

Financial reporting

The Audit Committee reviewed and discussed with management and the external auditor the half-year and annual financial statements focusing on, amongst other matters:

•		the quality and acceptability of accounting policies and practices;

•		the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements; and

•		material areas in which significant judgements have been applied.

To aid their review, the Audit Committee considered reports from the Group Financial Controller and the Director of Financial Reporting and also reports from the external auditor, Deloitte LLP, on the scope and outcome of their half-year review and annual audit.

Risk management and internal control

The Audit Committee reviewed the process by which the Group evaluated its control environment, its risk assessment process and the way in which significant business risks were managed. It also considered the Group Audit Director’s reports on the effectiveness of internal controls, significant identified frauds and any identified fraud that involved management or employees with a significant role in internal controls. The Audit Committee was also responsible for oversight of the Group’s compliance activities in relation to section 404 of the Sarbanes-Oxley Act.

Internal audit

The Audit Committee monitored and reviewed the scope, extent and effectiveness of the activity of the Group Internal Audit department and received reports from the Group Audit Director which included updates on audit activities, progress of the Group audit plan, the results of any unsatisfactory audits and the action plans to address these areas, and resource requirements of the internal audit department. The Audit Committee held private discussions with the Group Audit Director as necessary throughout the year.

External auditor

The Audit Committee reviewed and monitored the independence of the external auditor and the objectivity and effectiveness of the audit process and provided the Board with its recommendation to the shareholders on the reappointment of Deloitte LLP as external auditor. The Audit Committee approved the scope and fees for audit services and, after consideration of whether they were permissible under the Group’s policies, non-audit services provided by Deloitte LLP.

Private meetings were held with Deloitte LLP without management being present to ensure that there were no restrictions on the scope or independence of their audit.

Audit Committee effectiveness

The Audit Committee conducts a formal review of its effectiveness annually and concluded that its performance was effective. Details of the Board and Committee evaluation process can be found under “Performance evaluation” on page 56.

Nick Land
On behalf of the Audit Committee

62 Vodafone Group Plc Annual Report 2011

Directors’ remuneration

Letter from the Remuneration Committee

Dear Shareholder

Although business conditions were somewhat more stable this year compared to the prior year, the global economy still remained challenging. As a consequence, the Remuneration Committee has maintained its focus on ensuring that the Company’s remuneration policies in general, and the packages of the executive directors in particular, were designed to allow the Company to recruit, retain and motivate its talented people and to ensure those people were fully incentivised to maximise shareholder value.

The key principles of our reward philosophy are set out on page 63. Each year the Remuneration Committee reviews these principles as well as the operation and design of the compensation packages provided to executives. If changes are required, the Committee is both willing and able to effect those changes. The key changes made during the year are detailed below:

•		In order to reflect the equal importance of growing revenue and profit we rebalanced the relative weightings of these two measures in the short-term incentive plan. At the same time we also changed the definition of profit from adjusted operating profit to adjusted EBITDA. Details of this are on page 65.

•		In order to simplify the long-term incentive awards both the co-investment requirement and the matching awards are now defined in terms of a percentage of gross salary. Details of this plan are on page 64.

•		In order to ensure greater alignment with shareholders we have re-emphasised the importance of share ownership for executives and have introduced share ownership goals to all our operating company chief executives and to the rest of the senior leadership team. Details of the current ownership levels are on page 63 where it is noted that at the year end the value of shares held by the Executive Committee exceeded £15 million.

•		Finally after reviewing base salaries for the Executive Committee it was decided appropriate to make some modest salary increases. Details of the increases for the executive directors are found on page 67 but it should be noted that the average increase for the Executive Committee is 3% which is in line with general increases for employees of the Group based in the UK.

As in previous years the Remuneration Committee has had dialogue with its shareholders about the changes and appreciates the feedback from them. The Remuneration Committee will continue to take an active interest in investors’ views and the voting on the remuneration report. As such, it hopes to receive your support at the AGM on 26 July 2011.

Luc Vandevelde
Chairman of the Remuneration Committee
17 May 2011

Remuneration Committee

The Remuneration Committee is comprised to exercise independent judgement and consists only of independent non-executive directors. In anticipation of the retirement of Simon Murray on 27 July 2010, the Board appointed Samuel Jonah to the Remuneration Committee. Further details can be found on page 58.

Remuneration Committee


Chairman		Luc Vandevelde

Committee members		Samuel Jonah (from 1 June 2010)
		Simon Murray (until 27 July 2010)
		Anthony Watson
		Philip Yea

The Remuneration Committee regularly consults with the Chief Executive and the Group HR Director on various matters relating to the appropriateness of awards for executive directors and senior executives, though they are not present when their own compensation is discussed. In addition, the Group Reward and Policy Director provides a perspective on information provided to the Committee, and requests information and analyses from external advisors as required. The Deputy Group Company Secretary advises the Committee on corporate governance guidelines and acts as secretary to the Committee.

Management attendees at Remuneration
Committee meetings


Chief Executive		Vittorio Colao

Group HR Director		Ronald Schellekens

Group Reward and Policy Director		Adrian Jackson

Deputy Group Company Secretary		Philip Howie

External advisors

The Remuneration Committee appointed Towers Watson (‘TW’) and PricewaterhouseCoopers LLP (‘pwc’) as independent advisors in 2007. During the year TW supplied market data and advice on market practice and governance and pwc provided performance analyses and advice on plan design and performance measures. The advisors also provided advice to the Company on general human resource and compensation related matters. In addition, pwc provided a broad range of tax, share scheme and advisory services to the Group during the year.

As noted in his biographical details on page 53 of this annual report, Philip Yea sits on an advisory board for pwc. In light of their role as advisor to the Remuneration Committee on remuneration matters, the Committee continue to consider this position and have determined that there is no conflict or potential conflict arising.

Meetings

The Remuneration Committee had five meetings during the year. The Committee’s work during these meetings and throughout the year included, but was not limited to:

•		a review of the total compensation packages of the executive directors and the most senior management of the company;

•		approval of the global short-term incentive bonus framework and targets;

•		approval of the 2011 global short-term incentive bonus payout;

•		approval of the long-term incentive framework, targets and 2011 grant levels;

•		approval of the July 2008 global long-term incentive vesting level;

•		approval of the introduction of share ownership goals to all operating company chief executive officers and selected senior leadership individuals below the Board and Executive Committee;

•		a review of the current UK corporate governance environment and the implications for our company;

•		a review of the director’s remuneration report; and

•		a review of Chairman’s fees.

On an annual basis, the Committee’s effectiveness is reviewed as part of the evaluation of the Board.

Vodafone Group Plc Annual Report 2011 63

Governance

Reward philosophy

The principles of reward, as well as the individual elements of the reward package, are reviewed each year to ensure that they continue to support our company strategy. These principles are set out below.

Competitive reward assessed on a total compensation basis

Vodafone wishes to provide a level of remuneration which attracts, retains and motivates executive directors of the highest calibre. Within the package there needs to be the opportunity for executive directors to achieve significant upside for truly exceptional performance. The package provided to the executive directors is reviewed annually on a total compensation basis i.e. single elements of the package are not reviewed in isolation. When the package is reviewed it is done so in the context of individual and company performance, internal relativities, criticality of the individual to the business, experience and the scarcity or otherwise of talent with the relevant skill set.

The principal external comparator group (which is used for reference purposes only) is made up of companies of similar size and complexity to Vodafone, and is principally representative of the European top 25 companies and a few other select companies relevant to the sector. The comparator group excludes any financial services companies. When undertaking the benchmarking process the Remuneration Committee makes assumptions that individuals will invest their own money into the long-term incentive plan. This means that individuals will need to make a significant investment in order to achieve the maximum payout.

Pay for performance

A high proportion of total reward will be awarded through short-term and long-term performance related remuneration. The Remuneration Committee believes that incorporating and setting appropriate performance measures and targets in the package is paramount – this will be reflected in an appropriate balance of operational and equity performance.

This is demonstrated in the charts below where we see that at target payout over 70% of the package is delivered in the form of variable pay which rises to almost 90% if maximum payout is achieved. Fixed pay comprises base salary and pension contributions, while variable pay comprises the annual bonus and the long-term incentive opportunity assuming maximum co-investment and no movement in current share price.

Alignment to shareholder interests

Note:

(1)

Proportions for the directors other than the Chief Executive are the same.

Share ownership is a key cornerstone of our reward policy and is designed to help maintain commitment over the long-term, and to ensure that the interests of our senior management team are aligned with those of shareholders. Executive directors are expected to build and maintain a significant shareholding in Vodafone shares as follows:

•		Chief Executive — four times base salary; and

•		Other executive directors — three times base salary.

In all cases executives have been given five years to achieve these goals.

Current levels of ownership and the date by which the goal should be or was required to be achieved are as shown below:


							Value of
	Goal as a			Current%			shareholding		Date for goal
	% of salary			of salary held⁽¹⁾			(£m)⁽¹⁾		to be achieved

Vittorio Colao		400	%		460	%		4.9	July 2012
Andy Halford		300	%		634	%		4.4	July 2010
Michel Combes		300	%		154	%		1.2	June 2014
Stephen Pusey		300	%		240	%		1.3	June 2014

Note:

(1)

Based on a share price at 31 March 2011 of 176.5 pence and includes net intrinsic value of any option gains.

Collectively the Executive Committee including the executive directors own 8.7 million Vodafone shares, with a value of £15.2 million at 31 March 2011.

Alignment with shareholders is also achieved through the use of total shareholder return (‘TSR’) measure in the Global Long-Term Incentive (‘GLTI’) plan.

Incentive targets linked to business strategy

When designing our incentives, performance measures are chosen that support our strategic objectives as shown below:


Strategic objectives		Supported by

Focus on key areas of growth potential — Aiming to deliver organic service revenue growth of 1 — 4% a year until the year ended 31 March 2014 in five key areas: mobile data, emerging markets, enterprise, total communications and new services.		Revenue and relative performance targets in the Global Short-Term Incentive Plan (‘GSTIP’).

Delivering value and efficiency from scale — Continuing to drive benefit from the Group’s scale advantage and maintain our focus on cost.		Adjusted EBITDA, free cash flow and relative performance targets in the GSTIP.

Generate liquidity or free cash flow from non-controlled interests — Aim to seek to maximise the value of non-controlled interests through generating liquidity or increasing free cash flow in order to fund profitable investments and enhance shareholders returns.		The use of TSR as a performance measure in GLTI as well as the value of the underlying shares.

Apply rigorous capital discipline to investment decisions — Continuing to apply capital discipline to our investment decisions through rigorous commercial analysis and demanding investment criteria to ensure any investment in existing businesses or acquisitions will enhance value for shareholders.		Free cash flow targets in both the GSTIP and GLTI as well as the TSR target in the GLTI.

Assessment of risk

In setting the balance between base salary, annual bonus and long-term incentive levels, the Remuneration Committee has considered the risk involved in the incentive schemes and is satisfied that the following design elements mitigate the principal risks:

•		the heavy weighting on long-term incentives which reward sustained performance;

•		the need for short-term incentive payouts to be used to purchase and hold investment shares in order to fully participate in the long-term arrangements; and

•		a considerable weighting on non—financial measures in the short-term plan, which provides an external perspective on our performance by focusing on customer satisfaction and performance relative to our competitors.

The Remuneration Committee will continue to consider the risks involved in the incentive plans on an ongoing basis.

64 Vodafone Group Plc Annual Report 2011

Directors’ remuneration continued

The remuneration package

The table below summarises the main components of the reward package for executive directors.


	Objective and practice	Performance period	Award size and performance conditions

Base salary	• To attract and retain the best talent. • Base salaries are reviewed annually and set on 1 July.	n/a	• Level of skill and experience, scope of responsibilities, individual and business performance, and competitiveness of the total remuneration package are taken into account when determining the appropriate level of base salary.

Global Short-Term Incentive Plan (‘GSTIP’)	• To motivate employees and incentivise delivery of performance over the one-year operating cycle. • Bonus levels and the appropriateness of measures and weightings are reviewed annually to ensure they continue to support our strategy.	1 year	• Performance over the financial year is measured against stretching financial and non-financial performance targets set at the start of the financial year. • Summary of the plan in the 2011 financial year:
	• The annual bonus is paid in cash in June each year for performance over the previous financial year.		– service revenue (30%); – operating profit (20%); – free cash flow (20%); and – competitive performance assessment (30%). • Target bonus is 100% of base salary. • Minimum and maximum bonus is in a range of 0 — 200% of base salary with maximum only paid out for exceptional performance.

Global Long-Term Incentive Plan (‘GLTI’) base awards	• To motivate and incentivise delivery of sustained performance over the long-term. • Award levels and the framework for determining vesting are reviewed annually to ensure they continue to support our strategy.	3 years	• Performance over three financial years is measured against stretching targets set at the beginning of the performance period. • Vesting is determined based on a matrix of two measures as follows:
	• Long-term incentive awards (base awards) consist of performance shares which are granted each year in June/July and vest three years later based on Group operational and external performance.		– free cash flow as our operational performance measure; and – relative TSR as our external performance measure. • Awards vest to the extent performance conditions are satisfied, three years from grant. • The Chief Executive’s base award will have a target face value of 137.5% of base salary as of June 2011. The base award for the other executive directors will have a target face value of 110% of base salary as of June 2011. • Minimum vesting is zero times and maximum vesting is four times the base award level.

Global Long-Term Incentive Plan (‘GLTI’) co-investment matching awards	• To support and encourage greater shareholder alignment through a high level of personal financial commitment. • Individuals may purchase Vodafone shares and hold them in trust for three years in order to receive additional performance shares in the form of a GLTI matching award. • GLTI matching awards are granted each year in June/July in line with the investment made, and vest three years later based on Group operational and external performance.	3 years	• GLTI matching awards are subject to the same performance conditions as the main GLTI award. • Executive directors can co-invest up to their annual gross salary. • Matching awards will be granted on a one for one basis at target performance. • Minimum vesting is zero times and maximum vesting is four times the target award level.

Other remuneration

In addition to base pay and incentive opportunities as described in the table above, the Company offers a competitive package of retirement and other benefits as follows:

•		Executive directors may choose to participate in the defined contribution pension scheme or to receive a cash allowance in lieu of pension. The cash payment or pension contribution is equal to 30% of annual gross salary. From 6 April 2011 contributions into the defined contribution pension scheme are restricted to £50,000 per annum. Any residual of the 30% pension benefit will be delivered as a cash allowance.

•		Company car or cash allowance worth £19,200 per annum.

•		Private medical insurance.

•		Chauffeur services, where appropriate, to assist with their role.

Vodafone Group Plc Annual Report 2011 65

Governance

Awards made to executive directors during the 2011 financial year


Reward elements	Vittorio Colao	Andy Halford	Michel Combes	Stephen Pusey

Base salary	Vittorio’s base salary was increased from £975,000 to £1,065,000 in July 2010.	Andy’s base salary was increased from £674,100 to £700,000 in July 2010.	Michel’s base salary was increased from £740,000 to £770,000 in July 2010.	Stephen’s base salary was increased from £500,000 to £550,000 in July 2010.

Annual bonus	The target bonus was £1,065,000 and the maximum bonus was £2,130,000.	The target bonus was £700,000 and the maximum bonus was £1,400,000.	The target bonus was £770,000 and the maximum bonus was £1,540,000	The target bonus was £550,000 and the maximum bonus was £1,100,000.

Long-term incentive plan	In June 2010 the base award had a face value of 137.5% of base salary at target performance.	In June 2010 the base award had a face value of 110% of base salary at target performance.	In June 2010 the base award had a face value of 110% of base salary at target performance.	In June 2010 the base award had a face value of 110% of base salary at target performance.

Investment opportunity	Vittorio invested the maximum into the GLTI plan (731,796 shares) and therefore received a matching award with a face value of 100% of base salary at target.	Andy invested the maximum into the GLTI plan (506,910 shares) and therefore received a matching award with a face value of 100% of base salary at target.	Michel invested 53% of the maximum into the GLTI plan (275,960 shares) and therefore received a matching award with a face value of 53% of base salary at target.	Stephen invested 37% of the maximum into the GLTI plan (141,834 shares) and therefore received a matching award with a face value of 37% of base salary at target.

Pay and performance for the 2012 financial year

The Remuneration Committee considers the remuneration increases for the different groups of employees across all of our local markets and other relevant factors when assessing the pay of the executive directors. During its regular review of total compensation in March 2011, the Remuneration Committee decided that due to an improvement in business performance, with a return to revenue growth, and continued focus on profit and strong cash flow, that modest salary increases for the executive directors would be appropriate. Individual increases will become effective from 1 July 2011 and are set out in the table on page 67. When determining these increases the Remuneration Committee took into account the general increases in each of the major markets. It should be noted that the average increase for the executive directors is 2.8% and for the whole of the Executive Committee it is 3% which is in line with increases in the rest of the Group based in the UK.

Details of the GSTIP

The short-term incentive plan rewards performance over the one year operating cycle. This plan consists of four performance measures, three of which are financial measures with the fourth being an assessment of our competitive performance including market share performance relative to our competitors measured by revenue and profit, as well as customer endorsement and satisfaction measured by net promoter score. Each performance measure has an individual weighting which is reviewed each year to ensure alignment with our strategy. In the table below we describe our achievement against each of the performance measures and the resulting total incentive payout level for the year ended 31 March 2011.

Performance achievement

Between

threshold

target and

Above

Performance measure

Weighting

Below threshold

and target

maximum

Service revenue

Profit

Cash flow

Competitive performance assessment

Total incentive payout level

124.2

Changes to the GSTIP in 2012

For the 2012 financial year the framework for our annual incentive plan will remain the same as in 2011. However, to emphasise our focus on profitable growth we have rebalanced the weightings for service revenue and profit so the two measures are equally weighted. As a result, the split of weightings for our performance measures for the 2012 financial year will be:

•		Service revenue – 25%;

•		Profit (“earnings before interest tax depreciation amortisation”) – 25%;

•		Free cash flow – 20%; and

•		Competitive performance assessment – 30%.

We believe these measures continue to support our strategy by capturing our underlying operational performance, and our performance as viewed by our customers and in relation to our competition.

66 Vodafone Group Plc Annual Report 2011

Directors’ remuneration continued

Details of the GLTI

The first award under the current GLTI plan was made in July 2008 (2009 financial year) and will vest in July 2011. Details of how the plan works are included in the table on page 64. The extent to which awards vest depend on two performance conditions:

•		underlying operational performance as measured by free cash flow; and

•		relative TSR against a peer group median.

Free cash flow

The free cash flow performance is based on a three year cumulative adjusted free cash flow figure. The definition of adjusted free cash flow is reported free cash flow excluding:

•		Verizon Wireless additional distributions;

•		the impact of any mergers, acquisitions and disposals;

•		certain material one-off tax settlements; and

•		foreign exchange rate movements over the performance period.

The cumulative adjusted free cash flow target and range for awards in the 2012, 2011, 2010 and 2009 financial years are shown in the table below:


	Vesting			2012		2011		2010		2009
Performance	percentage			£bn		£bn		£bn		£bn

Threshold		50	%		16.70		18.00		15.50		15.50
Target		100	%		19.20		20.50		18.00		17.50
Superior		150	%		20.45		21.75		19.25		18.50
Maximum		200	%		21.70		23.00		20.50		19.50

The target free cash flow level is set by reference to the Company’s three year plan and market expectations. The Remuneration Committee considers the targets to be critical to the Company’s long-term success and its ability to maximise shareholder value, and to be in line with the strategic goals of the Company. The Remuneration Committee also considers these targets to be sufficiently demanding with significant stretch where only outstanding performance will be rewarded with a maximum payout.

TSR out-performance of a peer group median

We have a limited number of appropriate peers and this makes the measurement of a relative ranking system volatile. As such, the out-performance of the median of a peer group is felt to be the most appropriate TSR measure. The peer group for the performance condition for the 2011, 2010 and 2009 financial years is:

•		BT Group;

•		Deutsche Telekom;

•		France Telecom;

•		Telecom Italia;

•		Telefonica; and

•		Emerging market composite (consists of the average TSR performance of Bharti, MTN and Turkcell).

The relative TSR position will determine the performance multiplier. This will be applied to the free cash flow vesting percentage. There will be no multiplier until TSR performance exceeds median. Above median the following table will apply to the 2012, 2011, 2010 and 2009 financial years (with linear interpolation between points):


	Out-
	performance
	of peer group
	median		Multiplier

Median		0.0% p.a.	No increase
65th percentile		4.5% p.a.	1.5 times
80th percentile (upper quintile)		9.0% p.a.	2.0 times

The performance measure has been calibrated using standard techniques.

Combined vesting matrix

The combination of the two performance measures gives a combined vesting matrix as follows:


				TSR performance
Free cash flow measure	Up to median			65th			80th

Threshold		50	%		75	%		100	%
Target		100	%		150	%		200	%
Superior		150	%		225	%		300	%
Maximum		200	%		300	%		400	%

The combined vesting percentages are applied to the target number of shares granted.

Vodafone Group Plc Annual Report 2011 67

Governance

Performance shares vesting in 2011

Adjusted free cash flow for the three year period ended on 31 March 2011 was £16.9 billion and the graph below shows our TSR performance against our peer group for the same period resulted in an outperformance of the median by 3.9%. Using the matrix above, this results in a payout of 30.6% of the maximum. These shares will vest in July 2011.

The free cash flow performance is approved by the Remuneration Committee. The performance assessment in respect of the TSR out-performance of a peer group median is undertaken by pwc.

Pay for the 2012 financial year

The information provided in the table below explains what the executive directors who were on the Board on 31 March 2011 will actually receive from base salary and awards made previously with performance conditions which ended on 31 March 2011 but that will vest in the 2012 financial year.


	Vittorio Colao			Andy Halford			Michel Combes			Stephen Pusey

Base salary
Base salary effective from July 2011	£	1,110,000		£	700,000		£	790,000		£	575,000

GSTIP (Annual bonus) ⁽¹⁾
Target (100% of base salary at 31 March 2011)	£	1,065,000		£	700,000		£	770,000		£	550,000
Percentage of target achieved for the 2011 financial year		124.2	%		124.2	%		96.8	%		124.2	%
Actual bonus payout in June 2011	£	1,322,730		£	869,400		£	745,052		£	683,100

GLTI performance shares
GLTI performance base share awarded in July 2008		4,126,587			2,282,447			2,589,782			942,132
GLTI performance match share awarded in July 2008		3,001,154			2,074,952			736,919			500,844
Vesting percentage based on cumulative adjusted three year free cash flow and TSR out-performance		30.6	%		30.6	%		30.6	%		30.6	%
GLTI performance shares vesting in 2011		2,181,088			1,333,363			1,017,970			441,550


Note:

(1)		The executive directors’ GSTIP for the 2011 financial year is payable in June 2011 with actual payments detailed in the table above. Vittorio Colao, Andy Halford and Stephen Pusey were measured solely against Group performance, whilst Michel Combes was measured on both Group and Europe region performance.

68 Vodafone Group Plc Annual Report 2011

Directors’ remuneration continued

Other considerations

Service contracts of executive directors

The Remuneration Committee has determined that after an initial term of up to two years’ duration executive directors’ contracts should thereafter have rolling terms and be terminable on no more than 12 months notice.

The table below summarises the key elements of their service contract:


Provision	Detailed items

Notice period	12 months

Retirement date	Normal retirement date

Termination payment	Up to 12 months salary Bonus paid up to termination day Entitlements under incentive plans and benefits that are consistent with the terms of such plans

Remuneration	Salary, pension, and benefits Company car or cash allowance Participation in the GSTIP, GLTI and the employee share schemes

Non-competition	During employment and for 12 months thereafter


Contract dates	Date of service agreement	Length of Board service

Vittorio Colao	27 May 2008	2 years 10 months
Andy Halford	20 May 2005	5 years 10 months
Michel Combes	1 June 2009	1 year 10 months
Stephen Pusey	1 June 2009	1 year 10 months

Additionally, all of the Company’s share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become exercisable on a change of control to the extent that any performance condition has been satisfied. The Remuneration Committee may also decide that the extent to which an award will vest will be further reduced pro-rata to reflect the acceleration of vesting.

Fees retained for external non-executive directorships

Executive directors may hold positions in other companies as non-executive directors. Michel Combes was the only executive director with such positions held at Assystem SA and ISS Group, and in accordance with Group policy he retained fees for the year of €50,223 from Assystem SA and DKK243,750 from ISS Group (£73,250 in total).

Cascade to senior management

The principles of the policy are cascaded, where appropriate, to the other members of the Executive Committee as set out below.


Cascade of policy to Executive Committee – 2011 financial year

Total remuneration and base salary
Methodology consistent with the executive directors.

Annual bonus
The annual bonus is based on the same measures. For some individuals these are measured within a region rather than across the whole Group.


Cascade of policy to Executive Committee – 2011 financial year

Long-term incentive
The long-term incentive is consistent with the executive directors including the opportunity to invest in the GLTI to receive matching awards. In addition, Executive Committee members have a share ownership requirement of two times base salary.

All-employee share plans

The executive directors are also eligible to participate in the all-employee plans.


Summary of plans

Sharesave
The Vodafone Group 2008 Sharesave Plan is a HM Revenue & Customs (‘HMRC’) approved scheme open to all staff permanently employed by a Vodafone Company in the UK as of the eligibility date. Options under the plan are granted at up to a 20% discount to market value. Executive directors’ participation is included in the option table on page 71.



Share Incentive Plan
The Vodafone Share Incentive Plan is an HMRC approved plan open to all staff permanently employed by a Vodafone Company in the UK. Participants may contribute up to a maximum of £125 per month (or 5% of salary if less) which the trustee of the plan uses to buy shares on their behalf. An equivalent number of shares are purchased with contributions from the employing company. UK-based executive directors are eligible to participate.

Dilution

All awards are made under plans that incorporate dilution limits as set out in the guidelines for share incentive schemes published by the Association of British Insurers. The current estimated dilution from subsisting awards, including executive and all-employee share awards, is approximately 3.4% of the Company’s share capital at 31 March 2011 (3.1% at 31 March 2010).

Funding

A mixture of newly issued shares, treasury shares and shares purchased in the market by the employee benefit trust are used to satisfy share-based awards. This policy is kept under review.

Other matters

The Share Incentive Plan and the co-investment into the GLTI plan include restrictions on the transfer of shares while the shares are subject to the plan. Where, under an employee share plan operated by the Company, participants are the beneficial owners of the shares but not the registered owner, the voting rights are normally exercised by the registered owner at the discretion of the participant.

TSR performance

The following chart is included in order to be compliant with the requirements of the large and medium sized companies and Groups (Accounts and Reports) Regulations 2008. Data was provided by FTSE and DataStream and shows performance of the Company relative to the FTSE 100 index over a five year period, of which we were a constituent throughout the year. It should be noted that the payout from the long-term incentive plan is based on the TSR performance shown in the graph on page 67 and not on the graph below.

Vodafone Group Plc Annual Report 2011 69

Governance

Remuneration for the year ended 31 March 2011

The remuneration of executive directors was as follows:


	Salary/fees				Incentive schemes⁽¹⁾				Cash in lieu of pension				Benefits/other⁽²⁾				Total
	2011		2010		2011		2010		2011		2010		2011		2010		2011		2010
	£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000

Chief Executive Vittorio Colao		1,043		975		1,323		1,255		313		292		55		146		2,734		2,668
Other executive directors Andy Halford		694		674		869		868		208		169		27		26		1,798		1,737
Michel Combes		763		737		745		818		229		221		22		52		1,759		1,828
Stephen Pusey		538		491		683		632		161		147		31		38		1,413		1,308

Total		3,038		2,877		3,620		3,573		911		829		135		262		7,704		7,541

Notes:

(1)		These figures are the cash payouts from the 2011 financial year Vodafone GSTIP and are in relation to the performance against targets in adjusted operating profit, service revenue, free cash flow and competitive performance for the financial year ended 31 March 2011.

(2)		Includes amounts in respect of cost of living allowance, private healthcare and car allowance.

The aggregate remuneration we paid to our Executive Committee⁽¹⁾ for services for the year ended 31 March 2011 is set out below. The aggregate number of Executive Committee members at 31 March 2011 was six, a reduction of two compared to 31 March 2010.


	2011		2010
	£’000		£’000

Salaries and fees		3,151		3,655
Incentive schemes⁽²⁾		4,081		4,417
Cash in lieu of pension		456		164
Benefits/other		799		3,376

Total		8,487		11,612

Notes:

(1)

Aggregate remuneration for the Executive Committee is in respect of those individuals who were members of the Executive Committee, other than the executive directors, during the year ended 31 March 2011 and reflects compensation paid from either 1 April 2010 or date of appointment to the Executive Committee, to 31 March 2011 or date of leaving, where applicable.

(2)

Comprises the incentive scheme information for the Executive Committee members on an equivalent basis to that disclosed for directors in the table at the top of this page. Details of share incentives awarded to directors and other members of the Executive Committee are included in footnotes to “Long-term incentives” on page 70.

Pensions

Vittorio Colao, Andy Halford, Michel Combes and Stephen Pusey take a cash allowance of 30% of base salary in lieu of pension contributions.

The Executive Committee, including the executive directors, are provided benefits in the event of death in service. They also have an entitlement under a long-term disability plan from which two-thirds of base salary, up to a maximum benefit determined by the insurer, would be provided until normal retirement date.

Pension benefits earned by the director in the year ended 31 March 2011 were:

Transfer value

Employer

Change in

of change

allocation/

Change in

transfer value

accrued

in accrued

contribution

Total accrued

accrued

Transfer

over year less

benefit in

benefit net

to defined

benefit at 31

benefit over

value at 31

member

excess of

of member

contribution

March 2011⁽¹⁾

the year⁽¹⁾

March 2010⁽²⁾

March 2011⁽²⁾

contributions

inflation⁽³⁾

contributions

Plans

£’000

Andy Halford

17.8

—

628.0

701.2

73.2

(0.8

)

(32.8

)

—

Notes:

(1)		Andy Halford took the opportunity to take early retirement from the pension scheme due to the closure of the scheme on 31 March 2010 (aged 51 years). In accordance with the scheme rules, his accrued pension at this date was reduced with an early retirement factor for four years to reflect the fact that his pension is being paid before age 55 and is therefore expected to be paid out for a longer period of time. In addition, Andy Halford exchanged part of his early retirement pension at 31 March 2010 for a tax-free cash lump sum of £118,660. The pension in payment at 31 March 2010 was £17,800 per year. This pension is due to increase on 1 April 2011 by 5%, in line with the scheme rules, to £18,700 per year. However, at 31 March 2011 the pension in payment remained at £17,800 per year as shown above. No member contributions are payable as Andy Halford is in receipt of his pension.

(2)		The transfer value at 31 March 2011 has been calculated on the basis and methodology set by the trustees after taking actuarial advice. No director elected to pay additional voluntary contributions. The transfer value disclosed above does not represent a sum paid or payable to the individual director. Instead it represents a potential liability of the pension scheme.

(3)		Inflation has been taken as the increase in the retail price index over the year to 30 September 2010.

In respect of the Executive Committee, the Group has made aggregate contributions of £508,600 (2010: £851,000) into defined contribution pension schemes.

70 Vodafone Group Plc Annual Report 2011

Directors’ remuneration continued

Directors’ interests in the shares of the Company

Long-term incentives

Performance shares

Conditional awards of ordinary shares made to executive directors under the Vodafone Global Incentive Plan (‘GIP’) for the relevant financial years are shown below. Long-term incentive shares that vested during the year ended 31 March 2011 are also shown below:


	Total interest
	in performance		Shares		Shares
	shares at		conditionally		forfeited			Shares			Total interest				Market
	1 April 2010		awarded		during			vested during			in performance				price at date
	or date of		during the 2011		the 2011			the 2011			shares at				awards
	appointment		financial year⁽¹⁾		financial year⁽²⁾			financial year⁽³⁾			31 March 2011⁽⁴⁾		Total value⁽⁵⁾		granted		Vesting date
	Number		Number		Number			Number			Number
	of shares		of shares		of shares			of shares			of shares		£’000		Pence

Vittorio Colao
2007		1,557,409		—		(1,168,057	)		(389,352	)		—		—		156.00	Jul 2010
2008 – Base award		4,126,587		—		—			—			4,126,587		7,283		129.95	Jul 2011
2008 – Match award		3,001,154		—		—			—			3,001,154		5,297		129.95	Jul 2011
2009 – Base award		4,564,995		—		—			—			4,564,995		8,057		117.20	Jun 2012
2009 – Match award		1,817,866		—		—			—			1,817,866		3,209		117.20	Jun 2012
2010 – Base award		—		4,097,873		—			—			4,097,873		7,233		142.94	Jun 2013
2010 – Match award		—		2,980,271		—			—			2,980,271		5,260		142.94	Jun 2013

Total		15,068,011		7,078,144		(1,168,057	)		(389,352	)		20,588,746		36,339


Andy Halford
2007		1,190,305		—		(892,729	)		(297,576	)		—		—		156.00	Jul 2010
2008 – Base award		2,282,447		—		—			—			2,282,447		4,029		129.95	Jul 2011
2008 – Match award		2,074,952		—		—			—			2,074,952		3,662		129.95	Jul 2011
2009 – Base award		2,524,934		—		—			—			2,524,934		4,457		117.20	Jun 2012
2009 – Match award		1,676,756		—		—			—			1,676,756		2,959		117.20	Jun 2012
2010 – Base award		—		2,154,750		—			—			2,154,750		3,803		142.94	Jun 2013
2010 – Match award		—		1,958,863		—			—			1,958,863		3,457		142.94	Jun 2013

Total		9,749,394		4,113,613		(892,729	)		(297,576	)		12,672,702		22,367


Michel Combes
2008 – Base award		2,589,782		—		—			—			2,589,782		4,571		129.95	Nov 2011
2008 – Match award		736,919		—		—			—			736,919		1,301		129.95	Nov 2011
2009 – Base award		2,771,771		—		—			—			2,771,771		4,892		117.20	Jun 2012
2009 – Match award		533,854		—		—			—			533,854		942		117.20	Jun 2012
2010 – Base award		—		2,370,225		—			—			2,370,225		4,183		142.94	Jun 2013
2010 – Match award		—		1,144,116		—			—			1,144,116		2,019		142.94	Jun 2013

Total		6,632,326		3,514,341		—			—			10,146,667		17,908


Stephen Pusey
2007		491,325		—		(368,494	)		(122,831	)		—		—		156.00	Jul 2010
2008 – Base award		942,132		—		—			—			942,132		1,663		129.95	Jul 2011
2008 – Match award		500,844		—		—			—			500,844		884		129.95	Jul 2011
2009 – Base award		1,872,818		—		—			—			1,872,818		3,306		117.20	Jun 2012
2009 – Match award		510,879		—		—			—			510,879		902		117.20	Jun 2012
2010 – Base award		—		1,693,018		—			—			1,693,018		2,988		142.94	Jun 2013
2010 – Match award		—		571,097		—			—			571,097		1,008		142.94	Jun 2013

Total		4,317,998		2,264,115		(368,494	)		(122,831	)		6,090,788		10,751

Notes:

(1)

The awards were granted during the year under the Vodafone Global lncentive Plan using an average of the closing share prices on each of the five working days prior to 28 June 2010 being 142.9 pence. These awards have a performance period running from 1 April 2010 to 31 March 2013. The performance conditions are a matrix of free cash flow performance and relative TSR. The vesting date will be in June 2013.

(2)

Shares granted on 24 July 2007 vested on 24 July 2010. The performance condition on these awards was a relative TSR measure against the companies making up the FTSE Global Telecoms index at the start of the performance period. The threshold relative TSR performance target was met and as such shares vested at 25%. The share price on the vesting date was 151.5 pence.

(3)

The share vesting gave rise to cash payments equal to the equivalent value of dividends over the vesting period. These cash payments equated to £91,484 for Vittorio Colao, £70,198 for Andy Halford and £28,976 for Stephen Pusey.

(4)

The total interest at 31 March 2011 includes awards over three different performance periods ending on 31 March 2011, 31 March 2012 and 31 March 2013. The performance conditions for the award vesting in July 2011 are a matrix of free cash flow performance and relative TSR.

(5)

The total value is calculated using the closing mid-market share price at 31 March 2011 of 176.5 pence.

The aggregate number of shares conditionally awarded during the year to the Executive Committee, other than the executive directors, was 9,276,317 shares. The performance and vesting conditions on the shares awarded in the year are based on a matrix of free cash flow performance and relative TSR.

Vodafone Group Plc Annual Report 2011 71

Governance

Share options

No options have been granted to directors during the year. The following information summarises the directors’ options under the Vodafone Group 2008 Sharesave Plan (‘SAYE’), the Vodafone Group 1998 Company Share Option Scheme (‘CSOS’), the Vodafone Group Plc 1999 Long-Term Stock Incentive Plan (‘LTSIP’) and the GIP.HMRC approved awards may be made under all of the schemes mentioned. The table also summarises the directors’ options under the Vodafone Group 1998 Executive Share Option Scheme (‘ESOS’) which is not HMRC approved. No other directors have options under any of these schemes.

In the past, options under the Vodafone Group 1998 Sharesave Scheme were granted at a discount of 20% to the market value of the shares and options under the Vodafone Group 2008 Sharesave Plan were also granted at a discount of 20% to the market value of the shares at the time of the grant. No other options may be granted at a discount.


				Options		Options		Options
		At		granted		exercised		lapsed
		1 April 2010		during the		during the		during the			Options						Market
		or date of		2011 financial		2011 financial		2011 financial			held at		Option				price on
		appointment		year		year		year			31 March 2011		price		Date from		exercise
	Grant	Number		Number		Number		Number			Number				which	Expiry
	date	of shares		of shares		of shares		of shares			of shares		Pence⁽¹⁾		exercisable	date	Pence

Vittorio Colao
GIP	Nov 2006		3,472,975		—		—		—			3,472,975		135.50	Nov 2009	Nov 2016		—
GIP⁽²⁾	Jul 2007		3,003,575		—		—		—			3,003,575		167.80	Jul 2010	Jul 2017		—
SAYE	Jul 2009		16,568		—		—		—			16,568		93.85	Sep 2014	Feb 2015		—

Total			6,493,118		—		—		—			6,493,118


Andy Halford
CSOS	Jul 2000		200		—		—		(200	)		—		282.30	Jul 2003	Jul 2010		—
ESOS	Jul 2000		66,700		—		—		(66,700	)		—		282.30	Jul 2003	Jul 2010		—
LTSIP	Jul 2001		152,400		—		—		—			152,400		151.56	Jul 2004	Jul 2011		—
LTSIP	Jul 2005		1,291,326		—		—		—			1,291,326		145.25	Jul 2008	Jul 2015		—
GIP⁽²⁾	Jul 2007		2,295,589		—		—		—			2,295,589		167.80	Jul 2010	Jul 2017		—
SAYE	Jul 2009		9,669		—		—		—			9,669		93.85	Sep 2012	Feb 2013		—

Total			3,815,884		—		—		(66,900	)		3,748,984


Stephen Pusey
GIP	Sep 2006		1,034,259		—		—		—			1,034,259		113.75	Sep 2009	Sep 2016		—
GIP⁽²⁾	Jul 2007		947,556		—		—		—			947,556		167.80	Jul 2010	Jul 2017		—
SAYE	Jul 2009		9,669		—		—		—			9,669		93.85	Sep 2012	Feb 2013		—

Total			1,991,484		—		—		—			1,991,484


Michel Combes
SAYE	Jul 2009		9,669		—		—		—			9,669		93.85	Sep 2012	Feb 2013		—

Total			9,669		—		—		—			9,669

Notes:

(1)

The closing mid-market share price on 31 March 2011 was 176.5 pence. The highest mid-market share price during the year was 185.0 pence and the lowest price was 126.5 pence.

(2)

The performance condition on these options is a three year cumulative growth in adjusted earnings per share. The options vested at 100% on 24 July 2010.

72 Vodafone Group Plc Annual Report 2011

Directors’ remuneration continued

Non-executive directors’ remuneration

The remuneration of non-executive directors is reviewed annually by the Chairman following consultation with the Remuneration Committee Chairman. Our policy is to pay competitively for the role including consideration of the time commitment required. In this regard, the fees are benchmarked against a comparator group of the FTSE 15 companies. Following the 2011 review there will be no increase to the fees of non executive directors. However, there is an increase to the Deputy Chairman and Chairmanship of the Remuneration Committee fees from 1 April 2011.


	Fee payable (£’000s)
	From		From
Position/role	1 April 2011		1 April 2010

Chairman⁽¹⁾		600		600
Deputy Chairman		175		162
Non-executive director		115		115
Chairmanship of Audit Committee		25		25
Chairmanship of Remuneration Committee		25		20

Note:

(1)

The Chairman’s fee also includes the fee for the Chairmanship of the Nominations and Governance Committee.

In addition, an allowance of £6,000 is payable each time a non-Europe based non-executive director is required to travel to attend Board and committee meetings to reflect the additional time commitment involved.

Details of each non-executive director’s remuneration for the 2011 financial year are included in the table below.

Non-executive directors do not participate in any incentive or benefit plans. The Company does not provide any contribution to their pension arrangements. The Chairman is entitled to use of a car and a driver whenever and wherever he is providing his services to or representing the Company.

Chairman and non-executive directors service contracts

The Chairman, Sir John Bond, has a contract that may be terminated by either party on 12 months notice. The date of his letter of appointment is 5 December 2005. Sir John Bond will be standing down from his role as Chairman and Chairman of the Nominations and Governance Committee and will not stand for re-election at the AGM on 26 July 2011. Subject to his election by shareholders, Gerard Kleisterlee will become Chairman in succession to Sir John Bond.

Non-executive directors, including the Deputy Chairman, are engaged on letters of appointment that set out their duties and responsibilities. The appointment of non-executive directors may be terminated without compensation. Non-executive directors are generally not expected to serve for a period exceeding nine years.

The terms and conditions of appointment of non-executive directors are available for inspection at the Company’s registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).


	Date of	Date of
	letter of appointment	election/re-election

John Buchanan	28 April 2003	AGM 2011
Renee James	1 January 2011	AGM 2011
Alan Jebson	7 November 2006	AGM 2011
Samuel Jonah	9 March 2009	AGM 2011
Gerard Kleisterlee	1 April 2011	AGM 2011
Nick Land	7 November 2006	AGM 2011
Anne Lauvergeon	20 September 2005	AGM 2011
Luc Vandevelde	24 June 2003	AGM 2011
Anthony Watson	6 February 2006	AGM 2011
Philip Yea	14 July 2005	AGM 2011

Information for non-executive directors serving during the year ended 31 March 2011:


	Salary/fees				Benefits				Total
	2011		2010		2011		2010		2011		2010
	£’000		£’000		£’000		£’000		£’000		£’000

Chairman
Sir John Bond		600		575		3		3		603		578
Deputy Chairman
John Buchanan		162		155		—		—		162		155
Non-executive directors
Renee James⁽¹⁾		35		—		—		—		35		—
Alan Jebson⁽¹⁾		151		146		—		—		151		146
Samuel Jonah⁽¹⁾		151		140		—		—		151		140
Nick Land		140		135		—		—		140		135
Anne Lauvergeon		115		110		—		—		115		110
Simon Murray (retired 26 July 2010)		38		110		—		—		38		110
Luc Vandevelde		135		130		—		—		135		130
Anthony Watson		115		110		—		—		115		110
Philip Yea		115		110		—		—		115		110

Total		1,757		1,721		3		3		1,760		1,724

Note:

(1)

Salary/fees includes travel allowances.

Vodafone Group Plc Annual Report 2011 73

Governance

Beneficial interests

The beneficial interests of directors and their connected persons in the ordinary shares of the Company, which includes interests in the Vodafone Share Incentive Plan, but which excludes interests in the Vodafone Group share option schemes, and the Vodafone Group short-term or long-term incentives, are shown below:


					1 April 2010 or
	16 May 2011		31 March 2011		date of appointment

Sir John Bond		370,677		370,677		357,584
John Buchanan		222,223		222,223		211,055
Vittorio Colao		2,307,663		2,307,663		1,575,567
Andy Halford		2,335,914		2,335,622		2,186,541
Michel Combes		670,589		670,297		392,223
Stephen Pusey		544,733		544,733		402,599
Renee James⁽¹⁾		50,000		50,000		—
Alan Jebson		82,340		82,340		82,340
Samuel Jonah		55,350		55,350		—
Gerard Kleisterlee⁽¹⁾		—		—		—
Nick Land		35,000		35,000		35,000
Anne Lauvergeon		28,936		28,936		28,936
Simon Murray (retired 27 July 2010)		—		—		246,250
Luc Vandevelde		89,030		89,030		72,829
Anthony Watson		115,000		115,000		115,000
Philip Yea		61,250		61,250		61,250

Note:

(1)

Non-executive directors appointed to the Board as follows: Renee James 1 January 2011, Gerard Kleisterlee 1 April 2011.

At 31 March 2011 and during the period from 1 April 2011 to 16 May 2011, no director had any interest in the shares of any subsidiary company. Other than those individuals included in the table above who were Board members at 31 March 2011, members of the Group’s Executive Committee at 31 March 2011 had an aggregate beneficial interest in 2,755,152 ordinary shares of the Company. At 16 May 2011 the directors had an aggregate beneficial interest in 6,968,705 ordinary shares of the Company and the Executive Committee members had an aggregate beneficial interest in 2,755,736 ordinary shares of the Company. None of the directors or the Executive Committee members had an individual beneficial interest amounting to greater than 1% of the Company’s ordinary shares.

Interests in share options of the Company

At 16 May 2011 there had been no change to the directors’ interests in share options from 31 March 2011 (see page 71).

Other than those individuals included in the table above, at 16 May 2011, members of the Group’s Executive Committee held options for 2,620,271 ordinary shares at prices ranging from 115.3 pence to 167.8 pence per ordinary share, with a weighted average exercise price of 161.9 pence per ordinary share exercisable at dates ranging from July 2008 to July 2017.

Sir John Bond, John Buchanan, Alan Jebson, Renee James, Samuel Jonah, Gerard Kleisterlee, Nick Land, Anne Lauvergeon, Luc Vandevelde, Anthony Watson and Philip Yea held no options at 16 May 2011.

Directors’ interests in contracts

None of the current directors had a material interest in any contract of significance to which the Company or any of its subsidiaries was a party during the financial year.

Luc Vandevelde
On behalf of the Board

74 Vodafone Group Plc Annual Report 2011

Contents


Directors’ statement of responsibility			75

Audit report on internal controls			76

Critical accounting estimates			77

Audit report on the consolidated financial statements			79

Consolidated financial statements			80

Consolidated income statement			80
Consolidated statement of comprehensive income			80
Consolidated statement of financial position			81
Consolidated statement of changes in equity			82
Consolidated statement of cash flows			83

Notes to the consolidated financial statements:
1. Basis of preparation			84
2. Significant accounting policies			84
3. Segment analysis			90
4. Operating profit			92
5. Investment income and financing costs			93
6. Taxation			94
7. Equity dividends			96
8. Earnings per share			96
9. Intangible assets			97
10. Impairment			98
11. Property, plant and equipment			102
12. Principal subsidiaries			103
13. Investments in joint ventures			104
14. Investments in associates			105
15. Other investments			105
16. Inventory			106
17. Trade and other receivables			106
18. Cash and cash equivalents			107
19. Called up share capital			107
20. Share-based payments			108
21. Capital and financial risk management			110
22. Borrowings			113
23. Post employment benefits			117
24. Provisions			119
25. Trade and other payables			120
26. Reconciliation of net cash flow from operating activities			120
27. Commitments			121
28. Contingent liabilities			121
29. Directors and key management compensation			123
30. Related party transactions			123
31. Employees			124
32. Subsequent events			124


Separate financial statements required by Rule 3-09 of Regulation S-X			B-1

Report of Independent Registered Public Accounting Firm			B-30

Vodafone Group Plc Annual Report 2011 75

Financials

Directors’ statement of responsibility

Financial statements and accounting records

Company law of England and Wales requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the Group at the end of the financial year and of the profit or loss of the Group for that period. In preparing those financial statements the directors are required to:

•		select suitable accounting policies and apply them consistently;

•		make judgements and estimates that are reasonable and prudent;

•		state whether the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by the IASB, in accordance with IFRS as adopted for use in the EU and Article 4 of the EU IAS Regulations;

•		state for the Company financial statements whether applicable UK accounting standards have been followed; and

•		prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and of the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the EU IAS Regulation. They are also responsible for the system of internal control, for safeguarding the assets of the Company and the Group and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors’ responsibility statement

The Board confirms to the best of its knowledge:

•		the consolidated financial statements, prepared in accordance with IFRS as issued by the International Accounting Standards Board (‘IASB’) and IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group; and

•		the directors’ report includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces.

Neither the Company nor the directors accept any liability to any person in relation to the annual report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and Schedule 10A of the Financial Services and Markets Act 2000.

Disclosure of information to auditor

Having made the requisite enquiries, so far as the directors are aware, there is no relevant audit information (as defined by Section 418(3) of the Companies Act 2006) of which the Company’s auditor is unaware and the directors have taken all the steps they ought to have taken to make themselves aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Going concern

After reviewing the Group’s and Company’s budget for the next financial year, and other longer term plans, the directors are satisfied that, at the time of approving the financial statements, it is appropriate to adopt the going concern basis in preparing the financial statements. Further detail is included within liquidity and capital resources on pages 48 to 51 and notes 21 and 22 to the consolidated financial statements which include disclosure in relation to the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

Management’s report on internal control over financial reporting

As required by Section 404 of the Sarbanes-Oxley Act management is responsible for establishing and maintaining adequate internal control over financial reporting for the Group.

The Company’s internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; are designed to provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with IFRS, as adopted by the EU and IFRS as issued by the IASB, and that receipts and expenditures are being made only in accordance with authorisation of management and the directors of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Any internal control framework, no matter how well designed, has inherent limitations including the possibility of human error and the circumvention or overriding of the controls and procedures, and may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the internal control over financial reporting at 31 March 2011 based on the Internal Control -Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (‘COSO’). Vodacom’s controls have been included in the Group’s assessment for the first time this year. Based on management’s assessment management has concluded that the internal control over financial reporting was effective at 31 March 2011.

Management has excluded from its assessment the internal control over financial reporting of entities which are accounted for under the equity method, including Verizon Wireless and SFR, because the Group does not have the ability to dictate or modify the controls at these entities and does not have the ability to assess, in practice, the controls at these entities. Accordingly, the internal controls of these entities, which contributed a net profit of £5,059 million (2010: £4,742 million) to the profit for the financial year, have not been assessed, except relating to controls over the recording of amounts relating to the investments that are recorded in the Group’s consolidated financial statements.

During the period covered by this document there were no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the effectiveness of the internal controls over financial reporting.

The Company’s internal control over financial reporting at 31 March 2011 has been audited by Deloitte LLP, an independent registered public accounting firm who also audit the Group’s consolidated financial statements. Their audit report on internal controls over financial reporting is on page 76.

By Order of the Board

Rosemary Martin
Company Secretary
17 May 2011

76 Vodafone Group Plc Annual Report 2011

Audit report on internal controls

Report of independent registered public accounting firm to the members of Vodafone Group Plc

We have audited the internal control over financial reporting of Vodafone Group Plc and subsidiaries and applicable joint ventures (the ‘Group’) as of 31 March 2011 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in management’s report on internal controls over financial reporting, management has excluded from its assessment the internal control over financial reporting of those entities that are accounted for under the equity method, including Verizon Wireless and Société Française du Radiotéléphone S.A. (“SFR”), because the Group does not have the ability to dictate or modify controls at these entities and does not have the ability to assess, in practice, the controls at these entities. Accordingly, the internal controls over financial reporting of these entities, which contributed a net profit of £5,059 million to the profit for the financial year, have not been assessed, except relating to the Group’s controls over the recording and related disclosures of amounts relating to the investments that are recorded in the consolidated financial statements.

The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Group maintained, in all material respects, effective internal control over financial reporting as of 31 March 2011, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements of the Group as of and for the year ended 31 March 2011, prepared in conformity with International Financial Reporting Standards (‘IFRS’), as adopted by the European Union and IFRS as issued by the International Accounting Standards Board. Our report dated 17 May 2011 expressed an unqualified opinion on those financial statements.

Deloitte LLP
Chartered Accountants and Registered Auditor
London
United Kingdom
17 May 2011

Vodafone Group Plc Annual Report 2011 77

Financials

Critical accounting estimates

The Group prepares its consolidated financial statements in accordance with IFRS as issued by the IASB and IFRS as adopted by the EU, the application of which often requires judgements to be made by management when formulating the Group’s financial position and results. Under IFRS, the directors are required to adopt those accounting policies most appropriate to the Group’s circumstances for the purpose of presenting fairly the Group’s financial position, financial performance and cash flows.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate.

Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provides an explanation of each below.

The discussion below should also be read in conjunction with the Group’s disclosure of significant IFRS accounting policies which is provided in note 2 to the consolidated financial statements, “Significant accounting policies”.

Management has discussed its critical accounting estimates and associated disclosures with the Company’s Audit Committee.

Impairment reviews

IFRS requires management to undertake an annual test for impairment of indefinite lived assets and, for finite lived assets, to test for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Impairment testing is an area involving management judgement, requiring assessment as to whether the carrying value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain assumptions are required to be made in respect of highly uncertain matters including management’s expectations of:

•		growth in adjusted EBITDA, calculated as adjusted operating profit before depreciation and amortisation;

•		timing and quantum of future capital expenditure;

•		long-term growth rates; and

•		the selection of discount rates to reflect the risks involved.

The Group prepares and approves formal five year management plans for its operations, which are used in the value in use calculations. In certain developing markets the fifth year of the management plan is not indicative of the long-term future performance as operations may not have reached maturity. For these operations, the Group extends the plan data for an additional five year period.

For businesses where the five year management plans are used for the Group’s value in use calculations, a long-term growth rate into perpetuity has been determined as the lower of:

•		the nominal GDP rates for the country of operation;and

•		the long-term compound annual growth rate in adjusted EBITDA in years six to ten estimated by management.

For businesses where the plan data is extended for an additional five years for the Group’s value in use calculations, a long-term growth rate into perpetuity has been determined as the lower of:

•		the nominal GDP rates for the country of operation;and

•		the compound annual growth rate in adjusted EBITDA in years nine to ten of the management plan.

Changing the assumptions selected by management, in particular, the discount rate and growth rate assumptions used in the cash flow projections, could significantly affect the Group’s impairment evaluation and hence results.

The Group’s review includes the key assumptions related to sensitivity in the cash flow projections. Further details are provided in note 10 to the consolidated financial statements.

Revenue recognition and presentation

Arrangements with multiple deliverables

In revenue arrangements including more than one deliverable, the deliverables are assigned to one or more separate units of accounting and the arrangement consideration is allocated to each unit of accounting based on its relative fair value.

Determining the fair value of each deliverable can require complex estimates due to the nature of the goods and services provided. The Group generally determines the fair value of individual elements based on prices at which the deliverable is regularly sold on a standalone basis after considering volume discounts where appropriate.

Presentation: gross versus net

When deciding the most appropriate basis for presenting revenue or costs of revenue, both the legal form and substance of the agreement between the Group and its business partners are reviewed to determine each party’s respective role in the transaction.

Where the Group’s role in a transaction is that of principal, revenue is recognised on a gross basis. This requires revenue to comprise the gross value of the transaction billed to the customer, after trade discounts, with any related expenditure charged as an operating cost.

Where the Group’s role in a transaction is that of an agent, revenue is recognised on a net basis with revenue representing the margin earned.

Taxation

The Group’s tax charge on ordinary activities is the sum of the total current and deferred tax charges. The calculation of the Group’s total tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until resolution has been reached with the relevant tax authority or, as appropriate, through a formal legal process. The final resolution of some of these items may give rise to material profits, losses and/or cash flows.

The complexity of the Group’s structure following its geographic expansion makes the degree of estimation and judgement more challenging. The resolution of issues is not always within the control of the Group and it is often dependent on the efficiency of the legal processes in the relevant taxing jurisdictions in which the Group operates. Issues can, and often do, take many years to resolve. Payments in respect of tax liabilities for an accounting period result from payments on account and on the final resolution of open items. As a result there can be substantial differences between the tax charge in the consolidated income statement and tax payments.

Significant items on which the Group has exercised accounting judgement include litigation with the Indian tax authorities in relation to the acquisition of Vodafone Essar (see note 28 to the consolidated financial statements), recognition of a deferred tax asset in respect of the losses arising following the agreement of German tax loss claims (see note 6 of the consolidated financial statements) and the recognition of a deferred tax asset in respect of losses in Luxembourg following the settlement of the CFC tax case (see note 6 to the consolidated financial statements). The amounts recognised in the consolidated financial statements in respect of each matter are derived from the Group’s best estimation and judgement as described above. However, the inherent uncertainty regarding the outcome of these items means eventual resolution could differ from the accounting estimates and therefore impact the Group’s results and cash flows.

Recognition of deferred tax assets

The recognition of deferred tax assets is based upon whether it is more likely than not that sufficient and suitable taxable profits will be available in the future against which the reversal of temporary differences can be deducted. Where the temporary differences are related to losses, the availability of the losses to offset against forecast taxable profits is also considered.

78 Vodafone Group Plc Annual Report 2011

Critical accounting estimates continued

Recognition therefore involves judgement regarding the future financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised.

Historical differences between forecast and actual taxable profits have not resulted in material adjustments to the recognition of deferred tax assets.

Business combinations

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill and if negative, it is recognised in the income statement.

Goodwill

The amount of goodwill initially recognised as a result of a business combination is dependent on the allocation of the purchase price to the fair value of the identifiable assets acquired and the liabilities assumed. The determination of the fair value of the assets and liabilities is based, to a considerable extent, on management’s judgement.

Allocation of the purchase price affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible assets, including goodwill, are not amortised and could result in differing amortisation charges based on the allocation to indefinite lived and finite lived intangible assets.

On transition to IFRS the Group elected not to apply IFRS 3, “Business combinations”, retrospectively as the difficulty in applying these requirements to the large number of business combinations completed by the Group from incorporation through to 1 April 2004 exceeded any potential benefits. Goodwill arising before the date of transition to IFRS, after adjusting for items including the impact of proportionate consolidation of joint ventures, amounted to £78,753 million.

If the Group had elected to apply the accounting for business combinations retrospectively it may have led to an increase or decrease in goodwill and increase in licences, customer bases, brands and related deferred tax liabilities recognised on acquisition.

Finite lived intangible assets

Other intangible assets include the Group’s aggregate amounts spent on the acquisition of licences and spectrum, computer software, customer bases, brands and development costs. These assets arise from both separate purchases and from acquisition as part of business combinations.

On the acquisition of mobile network operators the identifiable intangible assets may include licences, customer bases and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset where no active market for the assets exist. The use of different assumptions for the expectations of future cash flows and the discount rate would change the valuation of the intangible assets.

The relative size of the Group’s intangible assets, excluding goodwill, makes the judgements surrounding the estimated useful lives critical to the Group’s financial position and performance.

At 31 March 2011 intangible assets, excluding goodwill, amounted to £23,322 million (2010: £22,420 million) and represented 15.4% (2010:14.3%) of the Group’s total assets.

Estimation of useful life

The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset. The basis for determining the useful life for the most significant categories of intangible assets is as follows:

Licences and spectrum fees

The estimated useful life is generally the term of the licence unless there is a presumption of renewal at negligible cost. Using the licence term reflects the period over which the Group will receive economic benefit. For technology specific licences with a presumption of renewal at negligible cost, the estimated useful economic life reflects the Group’s expectation of the period over which the Group will continue to receive economic benefit from the licence. The economic lives are periodically reviewed taking into consideration such factors as changes in technology. Historically any changes to economic lives have not been material following these reviews.

Customer bases

The estimated useful life principally reflects management’s view of the average economic life of the customer base and is assessed by reference to customer churn rates. An increase in churn rates may lead to a reduction in the estimated useful life and an increase in the amortisation charge. Historically changes to the estimated useful lives have not had a significant impact on the Group’s results and financial position.

Capitalised software

The useful life is determined by management at the time the software is acquired and brought into use and is regularly reviewed for appropriateness. For computer software licences, the useful life represents management’s view of expected benefits over which the Group will receive benefits from the software, but not exceeding the licence term. For unique software products controlled by the Group, the life is based on historical experience with similar products as well as anticipation of future events which may impact their life such as changes in technology. Historically changes in useful lives have not resulted in material changes to the Group’s amortisation charge.

Property, plant and equipment

Property, plant and equipment also represent a significant proportion of the asset base of the Group being 13.3% (2010:13.1%) of the Group’s total assets. Therefore the estimates and assumptions made to determine their carrying value and related depreciation are critical to the Group’s financial position and performance.

Estimation of useful life

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the consolidated income statement.

The useful lives and residual values of Group assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life such as changes in technology. Furthermore, network infrastructure is only depreciated over a period that extends beyond the expiry of the associated licence under which the operator provides telecommunications services if there is a reasonable expectation of renewal or an alternative future use for the asset.

Historically changes in useful lives and residual values have not resulted in material changes to the Group’s depreciation charge.

Provisions and contingent liabilities

The Group exercises judgement in measuring and recognising provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims subject to negotiated settlement, mediation, arbitration or government regulation, as well as other contingent liabilities (see note 28 to the consolidated financial statements). Judgement is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be different from the originally estimated provision.

Vodafone Group Plc Annual Report 2011 79

Financials

Report of independent registered public accounting firm

To the Board of Directors and Shareholders of Vodafone Group plc

We have audited the accompanying consolidated statements of financial position of Vodafone Group plc and subsidiaries (the “Company”) as of 31 March 2011 and 31 March 2010, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows for each of the three years in the period ended 31 March 2011. 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 of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of 31 March 2011 and 31 March 2010, and the results of its operations and its cash flows for each of the three years in the period ended 31 March 2011, in conformity with International Financial Reporting Standards (“IFRS”) as adopted for use in the European Union and IFRS as issued by the International Accounting Standards Board (“IASB”).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as at 31 March 2011, based on the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 17 May 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.

Deloitte LLP
Chartered Accountants and Registered Auditor
London
United Kingdom
17 May 2011

80 Vodafone Group Plc Annual Report 2011

Consolidated income statement

for the years ended 31 March


			2011			2010			2009
	Note		£m			£m			£m

Revenue		3		45,884			44,472			41,017
Cost of sales				(30,814	)		(29,439	)		(25,842	)

Gross profit				15,070			15,033			15,175
Selling and distribution expenses				(3,067	)		(2,981	)		(2,738	)
Administrative expenses				(5,300	)		(5,328	)		(4,771	)
Share of result in associates		14		5,059			4,742			4,091
Impairment losses		10		(6,150	)		(2,100	)		(5,900	)
Other income and expense				(16	)		114			—

Operating profit		4		5,596			9,480			5,857
Non-operating income and expense		15		3,022			(10	)		(44	)
Investment income		5		1,309			716			795
Financing costs		5		(429	)		(1,512	)		(2,419	)

Profit before taxation				9,498			8,674			4,189
Income tax expense		6		(1,628	)		(56	)		(1,109	)

Profit for the financial year				7,870			8,618			3,080


Attributable to:
– Equity shareholders				7,968			8,645			3,078
– Non-controlling interests				(98	)		(27	)		2

				7,870			8,618			3,080


Basic earnings per share		8		15.20p			16.44p			5.84p


Diluted earnings per share		8		15.11p			16.36p			5.81p

Consolidated statement of comprehensive income

for the years ended 31 March


	2011			2010			2009
	£m			£m			£m

Gains/losses) on revaluation of available-for-sale investments, net of tax		310			206			(2,383	)
Foreign exchange translation differences, net of tax		(2,132	)		(1,021	)		12,375
Net actuarial gains/losses) on defined benefit pension schemes, net of tax		136			(104	)		(163	)
Revaluation gain		—			860			68
Foreign exchange gains transferred to the income statement		(630	)		(84	)		(3	)
Fair value (gains)/losses transferred to the income statement		(2,192	)		3			—
Other, net of tax		19			67			(40	)

Other comprehensive (loss)/income		(4,489	)		(73	)		9,854
Profit for the financial year		7,870			8,618			3,080

Total comprehensive income for the year		3,381			8,545			12,934


Attributable to:
– Equity shareholders		3,567			8,312			13,037
– Non-controlling interests		(186	)		233			(103	)

		3,381			8,545			12,934

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

Vodafone Group Plc Annual Report 2011 81

Financials

Consolidated statement of financial position

at 31 March


			2011			2010
	Note		£m			£m

Non-current assets
Goodwill		9		45,236			51,838
Other intangible assets		9		23,322			22,420
Property, plant and equipment		11		20,181			20,642
Investments in associates		14		38,105			36,377
Other investments		15		1,381			7,591
Deferred tax assets		6		2,018			1,033
Post employment benefits		23		97			34
Trade and other receivables		17		3,877			2,831

				134,217			142,766


Current assets
Inventory		16		537			433
Taxation recoverable				281			191
Trade and other receivables		17		9,259			8,784
Other investments		15		674			388
Cash and cash equivalents		18		6,252			4,423

				17,003			14,219

Total assets				151,220			156,985


Equity
Called up share capital		19		4,082			4,153
Additional paid-in capital				153,760			153,509
Treasury shares				(8,171	)		(7,810	)
Retained losses				(77,661	)		(79,655	)
Accumulated other comprehensive income				15,545			20,184

Total equity shareholders’ funds				87,555			90,381


Non-controlling interests				2,880			3,379
Put options over non-controlling interests				(2,874	)		(2,950	)

Total non-controlling interests				6			429



Total equity				87,561			90,810


Non-current liabilities
Long-term borrowings		22		28,375			28,632
Taxation liabilities				350			—
Deferred tax liabilities		6		6,486			7,377
Post employment benefits		23		87			237
Provisions		24		482			497
Trade and other payables		25		804			816

				36,584			37,559


Current liabilities
Short-term borrowings		22		9,906			11,163
Taxation liabilities				1,912			2,874
Provisions		24		559			497
Trade and other payables		25		14,698			14,082

				27,075			28,616

Total equity and liabilities				151,220			156,985

The consolidated financial statements were approved by the Board of directors and authorised for issue on 17 May 2011 and were signed on its behalf by:



Vittorio Colao		Andy Halford
Chief Executive		Chief Financial Officer

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

82 Vodafone Group Plc Annual Report 2011

Consolidated statement of changes in equity

for the years ended 31 March


																											Equity
				Additional									Other comprehensive income														share-			Non-
	Share			paid-in			Treasury			Retained			Currency			Pensions			Investment			Revaluation					holders’			controlling
	capital			capital⁽¹⁾			shares			losses			reserve			reserve			reserve			surplus		Other			funds			interests			Total
	£m			£m			£m			£m			£m			£m			£m			£m		£m			£m			£m			£m

1 April 2008		4,182			153,139			(7,856	)		(81,980	)		5,974			(96	)		4,531			112		37			78,043			(1,572	)		76,471
Issue or reissue of shares		3			4			65			(44	)		—			—			—			—		—			28			—			28
Purchase of own shares		—			—			(1,000	)		—			—			—			—			—		—			(1,000	)		—			(1,000	)
Redemption or cancellation of shares		(32	)		47			755			(770	)		—			—			—			—		—			—			—			—
Share-based payment		—			158	⁽²⁾		—			—			—			—			—			—		—			158			—			158
Acquisition of subsidiaries		—			—			—			(87	)		—			—			—			—		—			(87	)		436			349
Comprehensive income		—			—			—			3,078			12,477			(163	)		(2,383	)		68		(40	)		13,037			(103	)		12,934

Profit		—			—			—			3,078			—			—			—			—		—			3,078			2			3,080
OCI – before tax		—			—			—			—			12,614			(220	)		(2,383	)		68		(56	)		10,023			(105	)		9,918
OCI – taxes		—			—			—			—			(134	)		57			—			—		16			(61	)		—			(61	)
Transfer to the income statement		—			—			—			—			(3	)		—			—			—		—			(3	)		—			(3	)

Dividends		—			—			—			(4,017	)		—			—			—			—		—			(4,017	)		(162	)		(4,179	)
Other		—			—			—			—			—			—			—			—		—			—			16			16

31 March 2009		4,153			153,348			(8,036	)		(83,820	)		18,451			(259	)		2,148			180		(3	)		86,162			(1,385	)		84,777


Issue or reissue of shares		—			—			189			(119	)		—			—			—			—		—			70			—			70
Share-based payment		—			161	⁽²⁾		—			—			—			—			—			—		—			161			—			161
Acquisition of subsidiaries		—			—			—			(133	)		—			—			—			—		—			(133	)		1,636			1,503
Comprehensive income		—			—			—			8,645			(1,365	)		(104	)		209			860		67			8,312			233			8,545

Profit/(loss)		—			—			—			8,645			—			—			—			—		—			8,645			(27	)		8,618
OCI – before tax		—			—			—			—			(1,320	)		(149	)		377			860		79			(153	)		260			107
OCI – taxes		—			—			—			—			39			45			(171	)		—		(12	)		(99	)		—			(99	)
Transfer to the income statement		—			—			—			—			(84	)		—			3			—		—			(81	)		—			(81	)

Dividends		—			—			—			(4,131	)		—			—			—			—		—			(4,131	)		(56	)		(4,187	)
Other		—			—			37			(97	)		—			—			—			—		—			(60	)		1			(59	)

31 March 2010		4,153			153,509			(7,810	)		(79,655	)		17,086			(363	)		2,357			1,040		64			90,381			429			90,810


Issue or reissue of shares		—			—			232			(125	)		—			—			—			—		—			107			—			107
Redemption or cancellation of shares		(71	)		71			1,532			(1,532	)		—			—			—			—		—			—			—			—
Purchase of own shares		—			—			(2,125	)		—			—			—			—			—		—			(2,125	)		—			(2,125	)
Share-based payment		—			180	⁽²⁾		—			—			—			—			—			—		—			180			—			180
Acquisition of subsidiaries		—			—			—			(120	)		—			—			—			—		—			(120	)		35			(85	)
Comprehensive income		—			—			—			7,968			(2,669	)		136			(1,882	)		—		14			3,567			(186	)		3,381

Profit/(loss)		—			—			—			7,968			—			—			—			—		—			7,968			(98	)		7,870
OCI – before tax		—			—			—			—			(2,053	)		190			347			—		14			(1,502	)		(88	)		(1,590	)
OCI – taxes		—			—			—			—			14			(54	)		(37	)		—		—			(77	)		—			(77	)
Transfer to the income statement		—			—			—			—			(630	)		—			(2,192	)⁽³⁾		—		—			(2,822	)		—			(2,822	)

Dividends		—			—			—			(4,468	)		—			—			—			—		—			(4,468	)		(328	)		(4,796	)
Other		—			—			—			271			—			—			(238	)		—		—			33			56			89

31 March 2011		4,082			153,760			(8,171	)		(77,661	)		14,417			(227	)		237			1,040		78			87,555			6			87,561


Notes:

(1)		Includes share premium and the capital redemption reserve.

(2)		Includes a £24 million tax credit (2010: £11 million credit, 2009: £9 million charge).

(3)		Amount for 2011 includes a £208 million tax credit.

Vodafone Group Plc Annual Report 2011 83

Financials

Consolidated statement of cash flows

for the years ended 31 March


			2011			2010			2009
	Note		£m			£m			£m

Net cash flow from operating activities		26		11,995			13,064			12,213


Cash flows from investing activities
Purchase of interests in subsidiaries and joint ventures, net of cash acquired				(402	)		(1,777	)		(1,389	)
Purchase of intangible assets				(4,290	)		(2,134	)		(1,764	)
Purchase of property, plant and equipment				(4,350	)		(4,841	)		(5,204	)
Purchase of investments				(318	)		(522	)		(133	)
Disposal of interests in subsidiaries, net of cash disposed				—			—			4
Disposal of interests in associates				—			—			25
Disposal of property, plant and equipment				51			48			317
Disposal of investments				4,467			17			253
Dividends received from associates				1,424			1,436			647
Dividends received from investments				85			141			108
Interest received				1,659			195			302
Taxation on investing activities				(208	)		—			—

Net cash flow from investing activities				(1,882	)		(7,437	)		(6,834	)


Cash flows from financing activities
Issue of ordinary share capital and reissue of treasury shares				107			70			22
Net movement in short-term borrowings				(573	)		227			(25	)
Proceeds from issue of long-term borrowings				4,861			4,217			6,181
Repayment of borrowings				(4,064	)		(5,184	)		(2,729	)
Purchase of treasury shares				(2,087	)		—			(963	)
B share capital redemption				—			—			(15	)
Equity dividends paid				(4,468	)		(4,139	)		(4,013	)
Dividends paid to non-controlling shareholders in subsidiaries				(320	)		(56	)		(162	)
Contributions from non-controlling shareholders in subsidiaries				—			613			—
Other transactions with non-controlling shareholders in subsidiaries				(137	)		—			618
Interest paid				(1,578	)		(1,601	)		(1,470	)

Net cash flow from financing activities				(8,259	)		(5,853	)		(2,556	)


Net cash flow				1,854			(226	)		2,823

Cash and cash equivalents at beginning of the financial year		18		4,363			4,846			1,652
Exchange (loss)/gain on cash and cash equivalents				(12	)		(257	)		371

Cash and cash equivalents at end of the financial year		18		6,205			4,363			4,846

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

84 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements

1. Basis of preparation

The consolidated financial statements are prepared in accordance with IFRS as issued by the IASB. The consolidated financial statements are also prepared in accordance with IFRS adopted by the European Union (‘EU’), the Companies Act 2006 and Article 4 of the EU IAS Regulations.

The preparation of financial statements in conformity with IFRS 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 revenue and expenses during the reporting period. For a discussion on the Group’s critical accounting estimates see “Critical accounting estimates” on pages 77 and 78. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Amounts in the consolidated financial statements are stated in pounds sterling.

Vodafone Group Plc is registered in England (No. 1833679).

2. Significant accounting policies

Accounting convention

The consolidated financial statements are prepared on a historical cost basis except for certain financial and equity instruments that have been measured at fair value.

New accounting pronouncements adopted

IFRS 3 (Revised) “Business Combinations”

The Group adopted IFRS 3 (Revised) on 1 April 2010. The revised standard introduces changes in the accounting for business combinations that impacts the amount of goodwill recognised, the reported results in the period that a business combination occurs and future reported results. The adoption of this standard is likely to have a significant impact on the Group’s accounting for future business combinations.

Amendment to IAS 27 “Consolidated and Separate Financial Statements”

The Group adopted the amendment to IAS 27 on 1 April 2010. The amendment requires that when a transaction occurs with non-controlling interests in Group entities that do not result in a change in control, the difference between the consideration paid or received and the recorded non-controlling interest should be recognised in equity. In cases where control is lost, any retained interest should be remeasured to fair value with the difference between fair value and the previous carrying value being recognised immediately in the income statement. The adoption of this standard may have a significant impact on the Group’s accounting for future transactions involving non-controlling interests.

The adoption of this standard has resulted in a change in presentation within the statement of cash flows of amounts paid to acquire non-controlling interests in Group entities that do not result in a change in control. In the year ended 31 March 2011 £137 million related to such transactions was classified as “Other transactions with non-controlling shareholders in subsidiaries” within “Net cash flows from financing activities”, whereas these amounts would have previously been recorded in “Purchase of interests in subsidiaries and joint ventures, net of cash acquired” within “Cash flows from investing activities”. There is no material impact in the comparative period.

New accounting pronouncements not yet adopted

Phase I of IFRS 9 “Financial Instruments” was issued in November 2009 and is effective for annual periods beginning on or after 1 January 2013. This standard has not yet been endorsed for use in the EU. The standard introduces changes to the classification and measurement of financial assets and the requirements relating to financial liabilities in relation to the presentation of changes in fair value due to credit risks and the removal of an exemption from measuring certain derivative liabilities at fair value. The

Group is currently assessing the impact of the standard on its results, financial position and cash flows.

The Group has not adopted the following pronouncements, which have been issued by the IASB or the IFRIC. These pronouncements have been endorsed for use in the EU, unless otherwise stated. The Group does not currently believe the adoption of these pronouncements will have a material impact on the consolidated results, financial position or cash flows of the Group.

•		Amendments to IFRS 1, “Severe hyperinflation and removal of fixed dates for first-timer adopters”, effective for annual periods beginning on or after 1 July 2011. This standard has not yet been endorsed for use in the EU.

•		Amendments to IFRS 7, “Financial Instruments: Disclosure”, effective for annual periods beginning on or after 1 July 2011. This standard has not yet been endorsed for use in the EU.

•		“Improvements to IFRSs”, effective over a range of dates, with the earliest being for annual periods beginning on or after 1 January 2011.

•		Amendment to IFRS 1, “Limited Exemption from Comparative IFRS 7 disclosures for first time adopters”, effective for annual periods beginning on or after 1 July 2010.

•		Amendment to IAS 12, “Deferred tax: Recovery of Underlying Assets”, effective for annual periods beginning on or after 1 January 2012. This standard has not yet been endorsed for use in the EU.

•		Amendment to IAS 24, “Related Party Disclosures — State-controlled Entities and the Definition of a Related Party”, effective for annual periods beginning on or after 1 January 2011.

•		Amendment to IFRIC 14, “Prepayments on a Minimum Funding Requirement”, effective for annual periods beginning on or after 1 January 2011.

•		IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”, effective annual periods beginning on or after 1 July 2010 with early adoption permitted.

The Group has also not adopted the following pronouncements, all of which were issued by the IASB on 12 May 2011 and which are effective for annual periods beginning on or after 1 January 2013. These pronouncements have not yet been endorsed for use in the EU. The Group has not completed its assessment of the impact of these pronouncements on the consolidated results, financial position or cash flows of the Group. However, the Group currently expects that IFRS 11, “Joint Arrangements”, will have a material impact on the presentation of the Group’s interests in its joint ventures owing to the Group’s significant investments in joint ventures as discussed in note 13.

•

IFRS 10, ‘Consolidated Financial Statements’, which replaces parts of IAS 27, ‘Consolidated and Separate Financial Statements and all of SIC-12, ‘Consolidation – Special Purpose Entities’, builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The remainder of IAS 27, ‘Separate Financial Statements’, now contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates only when an entity prepares separate financial statements and is therefore not applicable in the Group’s consolidated financial statements.

•

IFRS 11, ‘Joint Arrangements’, which replaces IAS 31, ‘Interests in Joint Ventures’ and SIC-13, ‘Jointly Controlled Entities — Non-monetary Contributions by Venturers’, requires a single method, known as the equity method, to account for interests in jointly controlled entities which is consistent with the accounting treatment currently applied to investments in associates. The proportionate consolidation method currently applied to the Group’s interests in joint ventures is prohibited. IAS 28, ‘Investments in Associates and Joint Ventures’, was amended as a consequence of the issuance of IFRS 11. In addition to prescribing the accounting for investment in associates, it now sets out the requirements for the application of the equity method when accounting for joint ventures. The application of the equity method has not changed as a result of this amendment.

•

IFRS 12, ‘Disclosure of Interest in Other Entities’, is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The

Vodafone Group Plc Annual Report 2011 85

Financials

•		standard includes disclosure requirements for entities covered under IFRS 10 and lFRS 11.

•		IFRS 13, ‘Fair Value Measurement’, provides guidance on how fair value should be applied where its use is already required or permitted by other standards within IFRS, including a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled, both unilaterally and jointly, by the Company.

Accounting for subsidiaries

A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder’s share of changes in equity since the date of the combination. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Business combinations

Acquisitions of subsidiaries are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the income statement as incurred. The acquiree’s identifiable assets and liabilities are recognised at their fair values at the acquisition date.

Goodwill is measured as the excess of the sum of the consideration transferred,the amount of any non-controlling interests in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree, if any, over the net amounts of identifiable assets acquired and liabilities assumed at the acquisition date.

The interest of the non-controlling shareholders in the acquiree may initially be measured either at fair value or at the non-controlling shareholders’ proportion of the net fair value of the identifiable assets acquired, liabilities and contingent liabilities assumed. The choice of measurement basis is made on an acquisition-by-acquisition basis.

Acquisition of interests from non-controlling shareholders

In transactions with non-controlling parties that do not result in a change in control, the difference between the fair value of the consideration paid or received and the amount by which the non-controlling interest is adjusted is recognised in equity.

Interests in joint ventures

A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control; that is, when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control.

The Group reports its interests in jointly controlled entities using proportionate consolidation. The Group’s share of the assets, liabilities,

income, expenses and cash flows of jointly controlled entities are combined with the equivalent items in the results on a line-by-line basis. Any goodwill arising on the acquisition of the Group’s interest in a jointly controlled entity is accounted for in accordance with the Group’s accounting policy for goodwill arising on the acquisition of a subsidiary.

Investments in associates

An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of the investment. Losses of an associate in excess of the Group’s interest in that associate are not recognised. Additional losses are provided for, and a liability is recognised, only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment.

The licences of the Group’s associate in the US, Verizon Wireless, are indefinite lived assets as they are subject to perfunctory renewal. Accordingly, they are not subject to amortisation but are tested annually for impairment, or when indicators exist that the carrying value is not recoverable.

Intangible assets

Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributed to the asset will flow to the Group and the cost of the asset can be reliably measured.

Goodwill

Goodwill arising on the acquisition of an entity represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the entity recognised at the date of acquisition.

Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses. Goodwill is held in the currency of the acquired entity and revalued to the closing rate at each reporting period date.

Goodwill is not subject to amortisation but is tested for impairment.

Negative goodwill arising on an acquisition is recognised directly in the income statement.

On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal.

Goodwill arising before the date of transition to IFRS, on 1 April 2004, has been retained at the previous UK GAAP amounts, subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal.

Finite lived intangible assets

Intangible assets with finite lives are stated at acquisition or development cost, less accumulated amortisation. The amortisation period and method is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method,

86 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

Licence and spectrum fees

Amortisation periods for licence and spectrum fees are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and whether licences are dependent on specific technologies. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives from the commencement of service of the network.

Computer software

Computer software comprises computer software purchased from third parties as well as the cost of internally developed software. Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and are probable of producing future economic benefits are recognised as intangible assets. Direct costs include software development employee costs and directly attributable overheads.

Software integral to a related item of hardware equipment is accounted for as property, plant and equipment.

Costs associated with maintaining computer software programs are recognised as an expense when they are incurred.

Internally developed software is recognised only if all of the following conditions are met:

•		an asset is created that can be separately identified;

•		it is probable that the asset created will generate future economic benefits; and

•		the development cost of the asset can be measured reliably.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives from the date the software is available for use.

Other intangible assets

Other intangible assets, including brands and customer bases, are recorded at fair value at the date of acquisition. Amortisation is charged to the income statement on either a straight-line or sum of digits basis over the estimated useful lives of intangible assets from the date they are available for use.

Estimated useful lives

The estimated useful lives of finite lived intangible assets are as follows:


•	Licence and spectrum fees	3 – 25 years
•	Computer software	3 – 5 years
•	Brands	1 – 10 years
•	Customer bases	2 – 7 years

Property, plant and equipment

Land and buildings held for use are stated in the statement of financial position at their cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

Equipment, fixtures and fittings are stated at cost less accumulated depreciation and any accumulated impairment losses.

Assets in the course of construction are carried at cost, less any recognised impairment loss. Depreciation of these assets commences when the assets are ready for their intended use.

The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.

Depreciation is charged so as to write off the cost of assets, other than land and properties under construction, using the straight-line method, over their estimated useful lives, as follows:


•	Freehold buildings	25 – 50 years
•	Leasehold premises	the term of the lease

Equipment, fixtures and fittings:


•	Network infrastructure	3 – 25 years
•	Other	3 – 10 years

Depreciation is not provided on freehold land.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

Impairment of assets

Goodwill

Goodwill is not subject to amortisation but is tested for impairment annually or whenever there is an indication that the asset may be impaired.

For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognised for goodwill are not reversed in a subsequent period.

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

The Group prepares and approves formal five year management plans for its operations, which are used in the value in use calculations. In certain developing markets the fifth year of the management plan is not indicative of the long term future performance as operations may not have reached maturity. For these operations, the Group extends the plan data for an additional five year period.

Property, plant and equipment and finite lived intangible assets

At each reporting period date, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.

Vodafone Group Plc Annual Report 2011 87

Financials

Revenue

Revenue is recognised to the extent the Group has delivered goods or rendered services under an agreement, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue is measured at the fair value of the consideration received, exclusive of sales taxes and discounts.

The Group principally obtains revenue from providing the following telecommunication services: access charges, airtime usage, messaging, interconnect fees, data services and information provision, connection fees and equipment sales. Products and services may be sold separately or in bundled packages.

Revenue for access charges, airtime usage and messaging by contract customers is recognised as services are performed, with unbilled revenue resulting from services already provided accrued at the end of each period and unearned revenue from services to be provided in future periods deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires.

Revenue from interconnect fees is recognised at the time the services are performed.

Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service.

Customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer.

Revenue for device sales is recognised when the device is delivered to the end customer and the sale is considered complete. For device sales made to intermediaries, revenue is recognised if the significant risks associated with the device are transferred to the intermediary and the intermediary has no general right of return. If the significant risks are not transferred, revenue recognition is deferred until sale of the device to an end customer by the intermediary or the expiry of the right of return.

In revenue arrangements including more than one deliverable, the arrangements are divided into separate units of accounting. Deliverables are considered separate units of accounting if the following two conditions are met: (1) the deliverable has value to the customer on a stand-alone basis and (2) there is evidence of the fair value of the item. The arrangement consideration is allocated to each separate unit of accounting based on its relative fair value.

Commissions

Intermediaries are given cash incentives by the Group to connect new customers and upgrade existing customers.

For intermediaries who do not purchase products and services from the Group, such cash incentives are accounted for as an expense. Such cash incentives to other intermediaries are also accounted for as an expense if:

•		the Group receives an identifiable benefit in exchange for the cash incentive that is separable from sales transactions to that intermediary; and

•		the Group can reliably estimate the fair value of that benefit.

Cash incentives that do not meet these criteria are recognised as a reduction of the related revenue.

Inventory

Inventory is stated at the lower of cost and net realisable value. Cost is determined on the basis of weighted average costs and comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition.

Leasing

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

Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement.

Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

Foreign currencies

The consolidated financial statements are presented in sterling, which is the parent company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency.

Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates. Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated.

Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences and other changes in the carrying amount of the security. Translation differences are recognised in the income statement and other changes in carrying amount are recognised in equity.

Translation differences on non-monetary financial assets, such as investments in equity securities, classified as available-for-sale are reported as part of the fair value gain or loss and are included in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than sterling are expressed in sterling using exchange rates prevailing at the reporting period date. Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a foreign entity, the cumulative amount previously recognised in equity relating to that particular foreign operation is recognised in profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated accordingly.

In respect of all foreign operations, any exchange differences that have arisen before 1 April 2004, the date of transition to IFRS, are deemed to be nil and will be excluded from the determination of any subsequent profit or loss on disposal.

88 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

The net foreign exchange gain recognised in the consolidated income statement is £1,022 million (2010: £35 million gain, 2009: £131 million loss).

Research expenditure

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Post employment benefits

For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities is recognised as an asset or liability on the statement of financial position. Scheme liabilities are assessed using the projected unit funding method and applying the principal actuarial assumptions at the reporting period date. Assets are valued at market value.

Actuarial gains and losses are taken to the statement of comprehensive income as incurred. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred.

Other movements in the net surplus or deficit are recognised in the income statement, including the current service cost, any past service cost and the effect of any curtailment or settlements. The interest cost less the expected return on assets is also charged to the income statement. The amount charged to the income statement in respect of these plans is included within operating costs or in the Group’s share of the results of equity accounted operations as appropriate.

The Group’s contributions to defined contribution pension plans are charged to the income statement as they fall due.

Cumulative actuarial gains and losses at 1 April 2004, the date of transition to IFRS, have been recognised in the statement of financial position.

Taxation

Income tax expense represents the sum of the current tax payable and deferred tax.

Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group’s liability for current tax is calculated using UK and foreign tax rates and laws that have been enacted or substantively enacted by the reporting period date.

Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are not recognised to the extent they arise from the initial recognition of non tax deductable goodwill.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in probability that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the reporting period date.

Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis.

Tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the tax is also recognised directly in equity.

Financial instruments

Financial assets and financial liabilities, in respect of financial instruments, are recognised on the Group’s statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables

Trade receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Estimated irrecoverable amounts are based on the ageing of the receivable balances and historical experience. Individual trade receivables are written off when management deems them not to be collectible.

Other investments

Other investments are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at cost, including transaction costs.

Other investments classified as held for trading and available-for-sale are stated at fair value. Where securities are held for trading purposes, gains and losses arising from changes in fair value are included in net profit or loss for the period. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity, determined using the weighted average cost method, is included in the net profit or loss for the period.

Other investments classified as loans and receivables are stated at amortised cost using the effective interest method, less any impairment.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Trade payables

Trade payables are not interest bearing and are stated at their nominal value.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities and includes no obligation to deliver cash or other financial assets. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.

Vodafone Group Plc Annual Report 2011 89

Financials

Capital market and bank borrowings

Interest bearing loans and overdrafts are initially measured at fair value (which is equal to cost at inception), and are subsequently measured at amortised cost, using the effective interest rate method, except where they are identified as a hedged item in a fair value hedge. Any difference between the proceeds net of transaction costs and the amount due on settlement or redemption of borrowings is recognised over the term of the borrowing.

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issuance costs.

Derivative financial instruments and hedge accounting

The Group’s activities expose it to the financial risks of changes in foreign exchange rates and interest rates.

The use of financial derivatives is governed by the Group’s policies approved by the Board of directors, which provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. Changes in values of all derivatives of a financing nature are included within investment income and financing costs in the income statement. The Group does not use derivative financial instruments for speculative purposes.

Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date. The Group designates certain derivatives as either:

•		hedges of the change of fair value of recognised assets and liabilities (‘fair value hedges’); or

•		hedges of net investments in foreign operations.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting, or the Company chooses to end the hedging relationship.

Fair value hedges

The Group’s policy is to use derivative instruments (primarily interest rate swaps) to convert a proportion of its fixed rate debt to floating rates in order to hedge the interest rate risk arising, principally, from capital market borrowings. The Group designates these as fair value hedges of interest rate risk with changes in fair value of the hedging instrument recognised in the income statement for the period together with the changes in the fair value of the hedged item due to the hedged risk, to the extent the hedge is effective. The ineffective portion is recognised immediately in the income statement.

Net Investment hedges

Exchange differences arising from the translation of the net investment in foreign operations are recognised directly in equity. Gains and losses on those hedging instruments (which include bonds, commercial paper and foreign exchange contracts) designated as hedges of the net investments in foreign operations are recognised in equity to the extent that the hedging relationship is effective. These amounts are included in exchange differences on translation of foreign operations as stated in the statement of comprehensive income. Gains and losses relating to hedge ineffectiveness are recognised immediately in the income statement for the period. Gains and losses accumulated in the translation reserve are included in the income statement when the foreign operation is disposed of.

Put option arrangements

The potential cash payments related to put options issued by the Group over the equity of subsidiary companies are accounted for as financial liabilities when such options may only be settled other than by exchange of a fixed amount of cash or another financial asset for a fixed number of shares in the subsidiary.

The amount that may become payable under the option on exercise is initially recognised at fair value within borrowings with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options over non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries.

The Group recognises the cost of writing such put options, determined as the excess of the fair value of the option over any consideration received, as a financing cost.

Such options are subsequently measured at amortised cost, using the effective interest rate method, in order to accrete the liability up to the amount payable under the option at the date at which it first becomes exercisable. The charge arising is recorded as a financing cost. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material.

Share-based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using a binomial pricing model, being a lattice-based option valuation model, which is calibrated using a Black-Scholes framework. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behaviour are considered separately for valuation purposes. The expected life of options granted is derived from the output of the option valuation model and represents the period of time that options are expected to be outstanding. Expected volatilities are based on implied volatilities as determined by a simple average of no less than three international banks, excluding the highest and lowest numbers. The risk-free rates for periods within the contractual life of the option are based on the UK gilt yield curve in effect at the time of grant.

Some share awards have an attached market condition, based on total shareholder return (‘TSR’), which is taken into account when calculating the fair value of the share awards. The valuation for the TSR is based on Vodafone’s ranking within the same group of companies, where possible, over the past five years. The volatility of the ranking over a three year period is used to determine the probable weighted percentage number of shares that could be expected to vest and hence affect fair value.

The fair value of awards of non-vested shares is equal to the closing price of the Vodafone’s shares on the date of grant, adjusted for the present value of future dividend entitlements where appropriate.

90 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

3. Segment analysis

The Group has a single group of related services and products being the supply of communications services and products. Segment information is provided on the basis of geographic areas, being the basis on which the Group manages its worldwide interests. Revenue is attributed to a country or region based on the location of the Group company reporting the revenue. Inter-segment sales are charged at arm’s length prices.

During the year ended 31 March 2011 the Group changed its organisation structure to enable continued improvement in the delivery of the Group’s strategic goals. The Europe region now consists of all existing controlled businesses in Europe plus the Group’s interests in Czech Republic, Hungary, Romania and Turkey. The Africa, Middle East and Asia Pacific region includes the Group’s interests in Egypt, India, Ghana, Kenya, Qatar and Vodacom as well as Australia, New Zealand and Fiji. Non-Controlled Interests and Common Functions includes Verizon Wireless, SFR and Polkomtel as well as central Group functions. The tables below present segment information on the revised basis, with prior years amended to conform to the current year presentation.


	Segment			Intra-region			Regional		Inter-region			Group		Adjusted
	revenue			revenue			revenue		revenue			revenue		EBITDA⁽¹⁾
	£m			£m			£m		£m			£m		£m

31 March 2011
Germany		7,900			(51	)		7,849		(2	)		7,847		2,952
Italy		5,722			(31	)		5,691		(3	)		5,688		2,643
Spain		5,133			(62	)		5,071		(2	)		5,069		1,562
UK		5,271			(50	)		5,221		(7	)		5,214		1,233
Other Europe		8,253			(70	)		8,183		(3	)		8,180		2,433

Europe		32,279			(264	)		32,015		(17	)		31,998		10,823

India		3,855			(1	)		3,854		(11	)		3,843		985
Vodacom		5,479			—			5,479		(8	)		5,471		1,844
Other Africa, Middle East and Asia Pacific		3,971			—			3,971		(27	)		3,944		1,170

Africa, Middle East and Asia Pacific		13,305			(1	)		13,304		(46	)		13,258		3,999

Non-Controlled Interests and Common Functions		659			—			659		(31	)		628		(152	)

Group		46,243			(265	)		45,978		(94	)		45,884		14,670

Verizon Wireless		18,711	⁽²⁾												7,313

31 March 2010
Germany		8,008			(41	)		7,967		(8	)		7,959		3,122
Italy		6,027			(40	)		5,987		(2	)		5,985		2,843
Spain		5,713			(81	)		5,632		(2	)		5,630		1,956
UK		5,025			(47	)		4,978		(10	)		4,968		1,141
Other Europe		8,357			(88	)		8,269		(5	)		8,264		2,582

Europe		33,130			(297	)		32,833		(27	)		32,806		11,644

India		3,114			(1	)		3,113		(20	)		3,093		807
Vodacom		4,450			—			4,450		(7	)		4,443		1,528
Other Africa, Middle East and Asia Pacific		3,526			—			3,526		(30	)		3,496		977

Africa, Middle East and Asia Pacific		11,090			(1	)		11,089		(57	)		11,032		3,312

Non-Controlled Interests and Common Functions		667			—			667		(33	)		634		(221	)

Group		44,887			(298	)		44,589		(117	)		44,472		14,735

Verizon Wireless		17,222	⁽²⁾												6,689

31 March 2009
Germany		7,847			(59	)		7,788		(9	)		7,779		3,225
Italy		5,547			(39	)		5,508		(3	)		5,505		2,565
Spain		5,812			(95	)		5,717		(2	)		5,715		2,034
UK		5,392			(48	)		5,344		(8	)		5,336		1,368
Other Europe		8,514			(102	)		8,412		(3	)		8,409		2,920

Europe		33,112			(343	)		32,769		(25	)		32,744		12,112

India		2,689			(2	)		2,687		(18	)		2,669		717
Vodacom		1,778			—			1,778		—			1,778		606
Other Africa, Middle East and Asia Pacific		3,258			—			3,258		(32	)		3,226		1,072

Africa, Middle East and Asia Pacific		7,725			(2	)		7,723		(50	)		7,673		2,395

Non-Controlled Interests and Common Functions		614			—			614		(14	)		600		(17	)

Group		41,451			(345	)		41,106		(89	)		41,017		14,490

Verizon Wireless		14,085	⁽²⁾												5,543


Notes:

(1)		The Group’s measure of segment profit, adjusted EBITDA, excludes the Group’s share of results in associates. The Group’s share of results in associates, by segment, for the year ended 31 March 2011 is Other Europe £nil (2010: £nil; 2009 £(3) million), Vodacom £nil (2010: £(2) million; 2009: £(1) million), Other Africa, Middle East and Asia Pacific £51 million (2010: £56 million; 2009: £31 million) and Non-Controlled Interests and Common Functions £5,008 million (2010: £4,688 million; 2009: £4,064 million).

(2)		Values shown for Verizon Wireless, which is an associate, are not included in the calculation of Group revenue or adjusted EBITDA.

Vodafone Group Plc Annual Report 2011 91

Financials

A reconciliation of adjusted EBITDA to operating profit is shown below. For a reconciliation of operating profit to profit before taxation, see the consolidated income statement on page 80.


	2011			2010			2009
	£m			£m			£m

Adjusted EBITDA		14,670			14,735			14,490
Depreciation, amortisation and loss on disposal of fixed assets		(7,967	)		(8,011	)		(6,824	)
Share of results in associates		5,059			4,742			4,091
Impairment losses		(6,150	)		(2,100	)		(5,900	)
Other income and expense		(16	)		114			—

Operating profit		5,596			9,480			5,857


					Other
					expenditure
					on		Depreciation		Impairment
	Non-current		Capital		intangible		and		(reversal)/
	assets⁽¹⁾		expenditure⁽²⁾		assets		amortisation		loss
	£m		£m		£m		£m		£m

31 March 2011
Germany		20,764		824		1,214		1,361		—
Italy		16,645		590		12		732		1,050
Spain		9,596		517		—		641		2,950
UK		6,665		516		—		874		—
Other Europe		11,438		1,230		59		1,406		2,150

Europe		65,108		3,677		1,285		5,014		6,150

India		9,882		870		1,851		973		—
Vodacom		7,382		572		19		1,013		—
Other Africa, Middle East and Asia Pacific		4,797		754		2		793		—

Africa, Middle East and Asia Pacific		22,061		2,196		1,872		2,779		—

Non-Controlled Interests and Common Functions		1,570		346		9		83		—

Group		88,739		6,219		3,166		7,876		6,150


31 March 2010
Germany		20,211		766		18		1,422		—
Italy		17,941		610		60		732		—
Spain		12,746		543		—		638		—
UK		6,977		494		—		963		—
Other Europe		13,883		1,282		228		1,467		(200	)

Europe		71,758		3,695		306		5,222		(200	)

India		8,665		853		—		848		2,300
Vodacom		7,783		520		—		1,005		—
Other Africa, Middle East and Asia Pacific		5,062		694		—		683		—

Africa, Middle East and Asia Pacific		21,510		2,067		—		2,536		2,300

Non-Controlled Interests and Common Functions		1,632		430		19		152		—

Group		94,900		6,192		325		7,910		2,100


31 March 2009
Germany				750		16		1,378		—
Italy				521		—		735		—
Spain				632		—		606		3,400
UK				446		—		1,010		—
Other Europe				1,013		21		1,441		2,250

Europe				3,362		37		5,170		5,650

India				1,351		—		746		—
Vodacom				237		—		231		—
Other Africa, Middle East and Asia Pacific				581		1,101		527		250

Africa, Middle East and Asia Pacific				2,169		1,101		1,504		250

Non-Controlled Interests and Common Functions				378		—		140		—

Group				5,909		1,138		6,814		5,900


Notes:

(1)		Comprises goodwill, other intangible assets and property, plant and equipment.

(2)		Includes additions to property, plant and equipment and computer software, reported within intangible assets.

92 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

4. Operating profit

Operating profit has been arrived at after charging/(crediting):


	2011			2010			2009
	£m			£m			£m

Net foreign exchange losses/(gains)		14			(29	)		30
Depreciation of property, plant and equipment (note 11):
Owned assets		4,318			4,412			4,025
Leased assets		54			44			36
Amortisation of intangible assets (note 9)		3,504			3,454			2,753
Impairment of goodwill (note 10)		6,150			2,300			5,650
(Reversal of impairment)/impairment of licence and spectrum (note 10)		—			(200	)		250
Research and development expenditure		287			303			280
Staff costs (note 31)		3,642			3,770			3,227
Operating lease rentals payable:
Plant and machinery		127			71			68
Other assets including fixed line rentals		1,761			1,587			1,331
Loss on disposal of property, plant and equipment		91			101			10
Own costs capitalised attributable to the construction or acquisition of property, plant and equipment		(331	)		(296	)		(273	)

The total remuneration of the Group’s auditor, Deloitte LLP, and its affiliates for services provided to the Group is analysed below:


	2011		2010		2009
	£m		£m		£m

Audit fees:
Parent company		1		1		1
Subsidiaries⁽¹⁾		7		7		5

		8		8		6
Fees for statutory and regulatory filings		1		1		2

Audit and audit-related fees		9		9		8


Other fees:
Taxation		1		1		1

Total fees		10		10		9


Note:

(1)		The increase in the year ended 31 March 2010 primarily arose from the consolidation of Vodacom Group Limited as a subsidiary from 18 May 2009.

In addition to the above, the Group’s joint ventures and associates paid fees totalling £1 million (2010: £2 million, 2009: £3 million) and £5 million (2010: £7 million, 2009: £6 million) respectively to Deloitte LLP and other member firms of Deloitte Touche Tohmatsu Limited during the year. Deloitte LLP and other member firms of Deloitte Touche Tohmatsu Limited have also received amounts totalling less than £1 million in each of the last three years in respect of services provided to pension schemes and charitable foundations associated to the Group.

A description of the work performed by the Audit Committee in order to safeguard auditor independence when non-audit services are provided is set out in “Corporate governance” on page 60.

Vodafone Group Plc Annual Report 2011 93

Financials

5. Investment income and financing costs


	2011			2010			2009
	£m			£m			£m

Investment income:
Available-for-sale investments:
Dividends received		83			145			110
Loans and receivables at amortised cost		339			423			339
Gain on settlement of loans and receivables⁽¹⁾		472			—			—
Fair value through the income statement (held for trading):
Derivatives — foreign exchange contracts		38			3			71
Other⁽²⁾		263			92			275
Equity put rights and similar arrangements⁽³⁾		114			53			—

		1,309			716			795


Financing costs:
Items in hedge relationships:
Other loans		746			888			782
Interest rate swaps		(338	)		(464	)		(180	)
Dividends on redeemable preference shares		58			56			53
Fair value hedging instrument		(47	)		228			(1,458	)
Fair value of hedged item		40			(183	)		1,475
Cash flow hedges transferred from equity		17			82			—
Other financial liabilities held at amortised cost:
Bank loans and overdrafts⁽⁴⁾		629			591			452
Other loans⁽⁵⁾		121			185			440
Potential interest on settlement of tax issues⁽⁶⁾		(826	)		(178	)		(81	)
Equity put rights and similar arrangements⁽³⁾		19			94			627
Finance leases		9			7			1
Fair value through the income statement (held for trading):
Derivatives — forward starting swaps and futures		1			206			308

		429			1,512			2,419

Net (investment income)/financing costs		(880	)		796			1,624


Notes:

(1)		Gain on settlement of loans and receivables issued by SoftBank Mobile Corp.

(2)		Amounts include foreign exchange gains on investments held following the disposal of Vodafone Japan to SoftBank Corp. and for 2011, foreign exchange gains on net investment in foreign operations.

(3)		Includes amounts in relation to the Group’s arrangements with its minority partners in India.

(4)		The Group capitalised £138 million of interest expense in the year (2010:£1 million; 2009:£nil). The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation was 9.8%.

(5)		Amount for 2010 includes £48 million (2009: £94 million) of foreign exchange losses arising from net investments in foreign operations.

(6)		Amounts for 2011, 2010 and 2009 include a reduction of the provision for potential interest on tax issues.

94 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

6. Taxation

Income tax expense


	2011			2010			2009
	£m			£m			£m

United Kingdom corporation tax expense/(income):
Current year		141			40			(132	)
Adjustments in respect of prior years		(5	)		(4	)		(318	)

		136			36			(450	)

Overseas current tax expense/(income):
Current year		2,152			2,377			2,111
Adjustments in respect of prior years		(477	)		(1,718	)		(934	)

		1,675			659			1,177

Total current tax expense		1,811			695			727


Deferred tax on origination and reversal of temporary differences:
United Kingdom deferred tax		(275	)		(166	)		20
Overseas deferred tax		92			(473	)		362

Total deferred tax (income)/expense		(183	)		(639	)		382

Total income tax expense		1,628			56			1,109

Tax (credited)/charged directly to other comprehensive income


	2011			2010			2009
	£m			£m			£m

Current tax (credit)/charge		(14	)		(38	)		133
Deferred tax (credit)/charge		(117	)		137			(72	)

Total tax (credited)/charged directly to other comprehensive income		(131	)		99			61

Tax (credited)/charged directly to equity


	2011			2010			2009
	£m			£m			£m

Current tax (credit)/charge		(5	)		(1	)		1
Deferred tax (credit)/charge		(19	)		(10	)		8

Total tax (credited)/charged directly to equity		(24	)		(11	)		9

Factors affecting tax expense for the year

The table below explains the differences between the expected tax expense on continuing operations, at the UK statutory tax rate of 28%, and the Group’s total tax expense for each year. Further discussion of the current year tax expenses can be found in the section titled “Operating results” on page 35. Subsequently, the UK statutory tax rate reduced to 26%, effective from 1 April 2011 and the impact on the year end tax balances is included in ‘effect of current year changes in statutory tax rates’ below.


	2011			2010			2009
	£m			£m			£m

Profit before tax as shown in the consolidated income statement		9,498			8,674			4,189

Expected income tax expense on profit at UK statutory tax rate		2,659			2,429			1,173
Effect of taxation of associates, reported within operating profit		145			160			118
Impairment losses with no tax effect		1,722			588			1,652
Impact of agreement of German write down losses⁽¹⁾		—			(2,103	)		—

Expected income tax expense at UK statutory rate on profit from continuing operations, before impairment losses and taxation of associates		4,526			1,074			2,943
Effect of different statutory tax rates of overseas jurisdictions⁽²⁾		(141	)		516			382
Effect of current year changes in statutory tax rates		(29	)		35			(31	)
Deferred tax on overseas earnings		143			5			(26	)
Assets revalued for tax purposes		121			—			(155	)
Effect of previously unrecognised temporary differences including losses⁽³⁾		(2,122	)		(1,040	)		(881	)
Adjustments in respect of prior years⁽¹⁾		(1,028	)		(387	)		(1,124	)
Expenses not deductible for tax purposes and other items		677			425			423
Exclude taxation of associates		(519	)		(572	)		(422	)

Income tax expense		1,628			56			1,109


Notes:

(1)		See “Taxation” on page 40.

(2)		2011 includes the impact of the disposal of China Mobile Limited.

(3)		See note below regarding deferred tax asset recognition in Luxembourg.

Vodafone Group Plc Annual Report 2011 95

Financials

Deferred tax

Analysis of movements in the net deferred tax balance during the year:


	£m

1 April 2010		(6,344	)
Exchange movements		305
Credited to the income statement		183
Credited directly to OCI		117
Credited directly to equity		19
Reclassification to current tax⁽¹⁾		1,249
Arising on acquisition		3

31 March 2011		(4,468	)


Note:

(1)		See note below regarding CFC settlement.

Deferred tax assets and liabilities, before offset of balances within countries, are as follows:


	Amount											Net
	credited/											recognised
	(charged)			Gross		Gross			Less			deferred tax
	in income			deferred		deferred tax			amounts			asset/
	statement			tax asset		liability			unrecognised			(liability)
	£m			£m		£m			£m			£m

Accelerated tax depreciation		(1,374	)		253		(3,682	)		—			(3,429	)
Tax losses		1,198			27,882		—			(25,784	)		2,098
Deferred tax on overseas earnings		764			—		(1,775	)		—			(1,775	)
Other short-term temporary differences		(405	)		4,890		(2,844	)		(3,408	)		(1,362	)

31 March 2011		183			33,025		(8,301	)		(29,192	)		(4,468	)

Analysed in the statement of financial position, after offset of balances within countries, as:


	£m

Deferred tax asset		2,018
Deferred tax liability		(6,486	)

31 March 2011		(4,468	)


	Amount											Net
	credited/											recognised
	(charged)			Gross		Gross			Less			deferred tax
	in income			deferred		deferred tax			amounts			asset/
	statement			tax asset		liability			unrecognised			(liability)
	£m			£m		£m			£m			£m

Accelerated tax depreciation		(577	)		627		(2,881	)		(1	)		(2,255	)
Tax losses		493			27,816		—			(27,185	)		631
Deferred tax on overseas earnings		(22	)		—		(4,086	)		—			(4,086	)
Other short-term temporary differences		745			4,796		(3,135	)		(2,295	)		(634	)

31 March 2010		639			33,239		(10,102	)		(29,481	)		(6,344	)

Analysed in the statement of financial position, after offset of balances within countries, as:


	£m

Deferred tax asset		1,033
Deferred tax liability		(7,377	)

31 March 2010		(6,344	)

Factors affecting the tax charge in future years

Factors that may affect the Group’s future tax charge include the impact of corporate restructurings, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, the use of brought forward tax losses and changes in tax legislation and tax rates.

The Group is routinely subject to audit by tax authorities in the territories in which it operates, and the items discussed below have reached litigation. The Group holds provisions in respect of the potential tax liability that may arise, however, the amount ultimately paid may differ materially from the amount accrued and could therefore affect the Group’s overall profitability and cash flows in future periods.

On 22 July 2010 Vodafone reached agreement with the UK tax authorities with respect to the UK Controlled Foreign Company (‘CFC’) tax case. Vodafone will pay £1.25 billion to settle all outstanding CFC issues from 2001 to date and has also reached agreement that no further UK CFC tax liabilities will arise in the near future under current legislation. Longer term, no CFC liabilities are expected to arise as a consequence of the likely reforms of the UK CFC regime due to the facts established in this agreement.

A Spanish subsidiary, Vodafone Holdings Europe SL (‘VHESL’), has resolved its dispute with the Spanish tax authorities regarding the tax treatment of interest expenses claimed in the accounting periods ended 31 March 2003 and 31 March 2004.

96 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

6. Taxation continued

At 31 March 2011 the gross amount and expiry dates of losses available for carry forward are as follows:


	Expiring		Expiring
	within		within
	5 years		6-10 years		Unlimited		Total
	£m		£m		£m		£m

Losses for which a deferred tax asset is recognised		1		—		8,081		8,082
Losses for which no deferred tax is recognised		2,197		559		94,851		97,607

		2,198		559		102,932		105,689

The losses arising on the write down of investments in Germany are available to use against both German federal and trade tax liabilities. Losses of £3,892 million (2010: £3,922 million) are included in the above table on which a deferred tax asset has been recognised. The Group has not recognised a deferred tax asset on £13,389 million (2010: £14,544) of the losses as it is uncertain that these losses will be utilised.

Included in the table above are losses amounting to £1,907 million (2010: £1,909 million) in respect of UK subsidiaries which are only available for offset against future capital gains and since it is uncertain whether these losses will be utilised, no deferred tax asset has been recognised.

The losses above also include £82,725 million (2010: £83,168 million) that have arisen in overseas holding companies as a result of revaluations of those companies’ investments for local GAAP purposes. No deferred tax asset is recognised in respect of £78,757 million of these losses as it is uncertain whether these losses will be utilised. A deferred tax asset has been recognised for the remainder of these losses (see below).

A total deferred tax asset of £1,143 million has been recognised in relation to some of the losses of a fiscal unity in Luxembourg as the members of this fiscal unity are expected to generate taxable profits against which these losses will be used. £856 million of the asset has been recognised as a result of the agreement reached with the UK tax authorities in respect of the CFC tax case (discussed above).

The Group holds provisions in respect of deferred taxation that would arise if temporary differences on investments in subsidiaries, associates and interests in joint ventures were to be realised after the year end reporting date. No deferred tax liability has been recognised in respect of a further £41,607 million (2010: £51,783 million) of unremitted earnings of subsidiaries and joint ventures because the Group is in a position to control the timing of the reversal of the temporary difference and it is probable that such differences will not reverse in the foreseeable future. It is not practicable to estimate the amount of unrecognised deferred tax liabilities in respect of these unremitted earnings.

7. Equity dividends


	2011		2010		2009
	£m		£m		£m

Declared during the financial year:
Final dividend for the year ended 31 March 2010: 5.65 pence per share (2009: 5.20 pence per share, 2008: 5.02 pence per share)		2,976		2,731		2,667
Interim dividend for the year ended 31 March 2011: 2.85 pence per share (2010:
2.66 pence per share, 2009: 2.57 pence per share)		1,492		1,400		1,350

		4,468		4,131		4,017


Proposed after the end of reporting period and not recognised as a liability:
Final dividend for the year ended 31 March 2011:6.05 pence per share (2010: 5.65 pence per share, 2009: 5.20 pence per share)		3,106		2,976		2,731

8. Earnings per share


	2011		2010		2009
	Millions		Millions		Millions

Weighted average number of shares for basic earnings per share		52,408		52,595		52,737
Effect of dilutive potential shares: restricted shares and share options		340		254		232

Weighted average number of shares for diluted earnings per share		52,748		52,849		52,969


	£m		£m		£m

Earnings for basic and diluted earnings per share		7,968		8,645		3,078

Vodafone Group Plc Annual Report 2011 97

Financials

9. Intangible assets


				Licences and			Computer
	Goodwill			spectrum			software			Other			Total
	£m			£m			£m			£m			£m

Cost:
1 April 2009		106,664			26,138			7,359			1,471			141,632
Exchange movements		(2,751	)		62			(72	)		326			(2,435	)
Arising on acquisition		1,185			1,454			153			1,604			4,396
Change in consolidation status		(102	)		(413	)		(281	)		(175	)		(971	)
Additions		—			306			1,199			19			1,524
Disposals		—			—			(114	)		—			(114	)

31 March 2010		104,996			27,547			8,244			3,245			144,032
Exchange movements		(1,120	)		(545	)		(16	)		8			(1,673	)
Arising on acquisition		24			—			17			—			41
Additions		—			3,157			1,493			9			4,659
Disposals		—			—			(424	)		(1	)		(425	)
Other		—			—			635			8			643

31 March 2011		103,900			30,159			9,949			3,269			147,277


Accumulated impairment losses and amortisation:
1 April 2009		52,706			7,552			5,223			1,213			66,694
Exchange movements		(1,848	)		(29	)		(104	)		64			(1,917	)
Amortisation charge for the year		—			1,730			1,046			678			3,454
Change in consolidation status		—			(135	)		(154	)		(181	)		(470	)
Impairment losses		2,300			(200	)		—			—			2,100
Disposals		—			—			(87	)		—			(87	)

31 March 2010		53,158			8,918			5,924			1,774			69,774
Exchange movements		(644	)		(104	)		(14	)		(6	)		(768	)
Amortisation charge for the year		—			1,809			1,166			529			3,504
Impairment losses		6,150			—			—			—			6,150
Disposals		—			—			(426	)		—			(426	)
Other		—			—			485			—			485

31 March 2011		58,664			10,623			7,135			2,297			78,719


Net book value:
31 March 2010		51,838			18,629			2,320			1,471			74,258

31 March 2011		45,236			19,536			2,814			972			68,558

For licences and spectrum and other intangible assets, amortisation is included within the cost of sales line within the consolidated income statement. Licences and spectrum with a net book value of £3,845 million (2010: £2,570 million) have been pledged as security against borrowings.

The net book value at 31 March 2011 and expiry dates of the most significant licences are as follows:


		2011		2010
	Expiry date	£m		£m

Germany	December 2020/2025		5,540		4,802
UK	December 2021		3,581		3,914
India	September 2030		1,746		—
Qatar	June 2028		1,187		1,328
Italy	December 2021		1,002		1,097

During the 2011 financial year the Group completed a number of smaller acquisitions for net cash consideration of £46 million paid during the year. The aggregate fair values of goodwill, identifiable assets and liabilities of the acquired operations were £24 million, £25 million and £3 million, respectively. In addition, the Group completed the acquisition of certain non-controlling interests for net cash consideration of £137 million.

During the year ended 31 March 2010, the aggregate cash consideration in respect of purchases of interests in subsidiaries and joint ventures, net of cash acquired, was as follows:


	£m

Cash consideration paid:
Vodacom Group Limited		1,577
Other acquisitions completed during the year		26
Acquisitions of non-controlling interests		150
Acquisitions completed in previous years		(20	)

		1,733
Net overdrafts acquired		44

		1,777

98 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

Total goodwill acquired was £1,185 million and included £1,193 million in relation to Vodacom, £27 million in relation to other acquisitions completed during the year and a reduction of £35 million resulting from amendments to provisional purchase price allocations on acquisitions completed in previous periods. In addition, there was a reduction of £102 million in relation to the merger of Vodafone Hutchison Australia.

Vodacom Group Limited (‘Vodacom’)

On 20 April 2009 the Group acquired an additional 15% stake in Vodacom for cash consideration of ZAR 20.6 billion (£1.6 billion). On 18 May 2009 Vodacom became a subsidiary following the listing of its shares on the Johannesburg Stock Exchange and concurrent termination of the shareholder agreement with Telkom SA Limited, the seller and previous joint venture partner. During the period from 20 April 2009 to 18 May 2009 the Group continued to account for Vodacom as a joint venture, proportionately consolidating 65% of the results of Vodacom.

The results of the acquired entity were consolidated in the income statement from 18 May 2009. From 18 May 2009 to 31 March 2010 the acquired entity contributed £90 million to the profit attributable to equity shareholders of the Group.

The purchase price allocation is set out in the table below:


				Fair value
	Bookvalue			Adjustments			Fairvalue
	£m			£m			£m

Net assets acquired:
Identifiable intangible assets⁽¹⁾		271			2,931			3,202
Property, plant and equipment		1,603			—			1,603
Other investments		25			—			25
Inventory		56			—			56
Trade and other receivables		870			—			870
Cash and cash equivalents		58			—			58
Current and deferred taxation liabilities		(140	)		(834	)		(974	)
Short and long-term borrowings		(1,312	)		—			(1,312	)
Trade and other payables		(897	)		8			(889	)

Net identifiable assets acquired		534			2,105			2,639
Goodwill⁽²⁾								1,193

Total asset acquired								3,832
Non-controlling interests								(973	)
Revaluation gain								(860	)
Value of investment held prior to acquisition								(422	)

Total consideration⁽³⁾								1,577


Notes:

(1)		Identifiable intangible assets of £3,202 million consist of licences and spectrum fees of £1,454 million and other intangible assets of £1,748 million.

(2)		The goodwill is attributable to the expected profitability of the acquired business and the synergies expected to arise after the Group’s acquisition of Vodacom.

(3)		Includes £5 million of directly attributable costs.

10. Impairment

Impairment losses

The net impairment losses recognised in the consolidated income statement, as a separate line item within operating profit, in respect of goodwill and licences and spectrum fees are as follows:


		2011⁽¹⁾		2010			2009
Cash generating unit	Reportable segment	£m		£m			£m

Italy	Italy		1,050		—			—
Spain	Spain		2,950		—			3,400
Greece	Other Europe⁽²⁾		800		—			—
Ireland	Other Europe⁽²⁾		1,000		—			—
Portugal	Other Europe⁽²⁾		350		—			—
Turkey	Other Europe		—		(200	)		2,250
India	India		—		2,300			—
Ghana	Other Africa, Middle East and Asia Pacific		—		—			250

			6,150		2,100			5,900


Notes:

(1)		Impairment charges for the year ended 31 March 2011 relate solely to goodwill.

(2)		Total impairment losses in the Other Europe segment were £2,150 million in the year ended 31 March 2011.

Vodafone Group Plc Annual Report 2011 99

Financials

Year ended 31 March 2011

The impairment losses were based on value in use calculations. The pre-tax adjusted discount rates used in the most recent value in use calculation in the year ended 31 March 2011 are as follows:


	Pre-tax adjusted
	discount rate

Italy		11.9	%
Spain		11.5	%
Greece		14.0	%
Ireland		14.5	%
Portugal		14.0	%

During the year ended 31 March 2011 the goodwill in relation to the Group’s investments in Italy, Spain, Greece, Ireland and Portugal was impaired by £1,050 million, £2,950 million, £800 million, £1,000 million and £350 million, respectively. The impairment charges were primarily driven by increased discount rates as a result of increases in government bond rates. In addition, business valuations were negatively impacted by lower cash flows within business plans, reflecting weaker country-level macro economic environments.

The pre-tax risk adjusted discount rates used in the previous value in use calculations at 31 March 2010 are disclosed below.

Year ended 31 March 2010

The net impairment losses were based on value in use calculations. The pre-tax adjusted discount rates used in the value in use calculation in the year ended 31 March 2010 were as follows:


	Pre-tax adjusted
	discount rate

India		13.8	%
Turkey		17.6	%

During the year ended 31 March 2010 the goodwill in relation to the Group’s operations in India was impaired by £2,300 million primarily due to intense price competition following the entry of a number of new operators into the market. The pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 March 2009 was 12.3%.

In addition, impairment losses of £200 million, previously recognised in respect of intangible assets in relation to the Group’s operations in Turkey, were reversed. The reversal was in relation to licences and spectrum and was as a result of favourable changes in the discount rate. The cash flow projections within the business plans used for impairment testing were substantially unchanged from those used at 31 March 2009. The pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 March 2009 was 19.5%.

Year ended 31 March 2009

The impairment losses were based on value in use calculations. The pre-tax adjusted discount rates used in the value in use calculation in the year ended 31 March 2009 were as follows:


	Pre-tax adjusted
	discount rate

Spain		10.3	%
Turkey		19.5	%
Ghana		26.9	%

During the year ended 31 March 2009 the goodwill in relation to the Group’s operations in Spain was impaired by £3,400 million following a fall in long-term cash flow forecasts resulting from the economic downturn.

In addition, the goodwill and other intangible assets in relation to the Group’s operations in Turkey was impaired by £2,250 million. At 30 September 2008 the goodwill was impaired by £1,700 million following adverse movements in the discount rate and adverse performance against previous plans. During the second half of the 2009 financial year, impairment losses of £300 million in relation to goodwill and £250 million in relation to licences and spectrum resulted from adverse changes in both the discount rate and a fall in the long-term GDP growth rate. The cash flow projections within the business plans used for impairment testing were substantially unchanged from those used at 30 September 2008.

The goodwill in relation to the Group’s operations in Ghana was also impaired by £250 million following an increase in the discount rate.

Goodwill

The carrying value of goodwill at 31 March was as follows:


	2011		2010
	£m		£m

Germany		12,200		12,301
Italy		13,615		14,786
Spain		7,133		10,167

		32,948		37,254
Other		12,288		14,584

		45,236		51,838

100 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

10. Impairment continued

Key assumptions used in the value in use calculations
The key assumptions used in determining the value in use are:


Assumption		How determined

Budgeted adjusted EBITDA		Budgeted adjusted EBITDA has been based on past experience adjusted for the following:

		• voice and messaging revenue is expected to benefit from increased usage from new customers, the introduction of new services and traffic moving from fixed networks to mobile networks, though these factors will be offset by increased competitor activity, which may result in price declines, and the trend of falling termination rates;

		• non-messaging data revenue is expected to continue to grow strongly as the penetration of 3G enabled devices and smartphones rises and new products and services are introduced; and

		• margins are expected to be impacted by negative factors such as an increase in the cost of acquiring and retaining customers in increasingly competitive markets and the expectation of further termination rate cuts by regulators and by positive factors such as the efficiencies expected from the implementation of Group initiatives.

Budgeted capital expenditure		The cash flow forecasts for capital expenditure are based on past experience and include the ongoing capital expenditure required to roll out networks in emerging markets, to provide enhanced voice and data products and services and to meet the population coverage requirements of certain of the Group’s licences. Capital expenditure includes cash outflows for the purchase of property, plant and equipment and computer software.

Long-term growth rate		For businesses where the five year management plans are used for the Group’s value in use calculations, a long-term growth rate into perpetuity has been determined as the lower of:

		• the nominal GDP rates for the country of operation; and

		• the long-term compound annual growth rate in adjusted EBITDA in years six to ten estimated by management.

		For businesses where the plan data is extended for an additional five years for the Group’s value in use calculations,a long-term growth rate into perpetuity has been determined as the lower of:

		• the nominal GDP rates for the country of operation; and

		• the compound annual growth rate in adjusted EBITDA in years nine to ten of the management plan.

Pre-tax risk adjusted discount rate		The discount rate applied to the cash flows of each of the Group’s operations is generally based on the risk free rate for ten year bonds issued by the government in the respective market. Where government bond rates contain a material component of credit risk, high quality local corporate bond rates may be used.

		These rates are adjusted for a risk premium to reflect both the increased risk of investing in equities and the systematic risk of the specific Group operating company. In making this adjustment, inputs required are the equity market risk premium (that is the required increased return required over and above a risk free rate by an investor who is investing in the market as a whole) and the risk adjustment, beta, applied to reflect the risk of the specific Group operating company relative to the market as a whole.

		In determining the risk adjusted discount rate, management has applied an adjustment for the systematic risk to each of the Group’s operations determined using an average of the betas of comparable listed mobile telecommunications companies and, where available and appropriate, across a specific territory. Management has used a forward-looking equity market risk premium that takes into consideration both studies by independent economists, the average equity market risk premium over the past ten years and the market risk premiums typically used by investment banks in evaluating acquisition proposals.

Sensitivity to changes in assumptions

Other than as disclosed below, management believes that no reasonably possible change in any of the above key assumptions would cause the carrying value of any cash generating unit to exceed its recoverable amount.

31 March 2011

The estimated recoverable amounts of the Group’s operations in Italy, Spain, Greece, Ireland and Portugal equalled their respective carrying values and, consequently, any adverse change in key assumptions would, in isolation, cause a further impairment loss to be recognised. The estimated recoverable amounts of the Group’s operations in Turkey, India and Ghana exceeded their carrying values by approximately £1,481 million, £977 million and £138 million, respectively.

Vodafone Group Plc Annual Report 2011 101

Financials

The table below shows the key assumptions used in the value in use calculations.


	Assumptions used in value in use calculation
	Italy			Spain		Greece		Ireland		Portugal			Turkey		India		Ghana
	%			%		%		%		%			%		%		%

Pre-tax adjusted discount rate		11.9			11.5		14.0		14.5		14.0			14.1		14.2		20.8
Long-term growth rate		0.8			1.6		2.0		2.0		1.5			6.1		6.3		6.3
Budgeted adjusted EBITDA⁽¹⁾		(1.0	)		—		1.2		2.4		(1.2	)		16.8		16.5		41.4
Budgeted capital expenditure⁽²⁾		9.6 - 11.3			7.8 - 10.6		10.7 - 12.3		9.4 - 11.6		12.4 - 14.1			10.0 - 16.6		12.9 - 22.7		7.3 - 41.3

Notes:


(1)		Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

(2)		Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

The table below shows, for Turkey, India and Ghana, the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.


	Change required for the carrying value
	to equal the recoverable amount⁽¹⁾
	Turkey			India			Ghana
	pps			pps			pps

Pre-tax adjusted discount rate		5.6			1.1			6.9
Long-term growth rate		(19.6	)		(1.0	)		n/a
Budgeted adjusted EBITDA⁽²⁾		(4.7	)		(2.2	)		(8.7	)
Budgeted capital expenditure⁽³⁾		7.0			2.5			8.9

Notes:


(1)		The recoverable amount for Greece, which was impaired at 30 September 2010, equals the carrying value at 31 March 2011.

(2)		Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

(3)		Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an (increase)/decrease to the aggregate impairment loss recognised in the year ended 31 March 2011:


	Italy						Spain						Greece						Ireland						Portugal						All other
	Increase			Decrease			Increase			Decrease			Increase			Decrease			Increase			Decrease			Increase			Decrease			Increase			Decrease
	by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps
	£bn			£bn			£bn			£bn			£bn			£bn			£bn			£bn			£bn			£bn			£bn			£bn

Pre-tax adjusted discount rate		(2.4	)		1.0			(1.5	)		2.2			(0.2	)		—			(0.2	)		0.3			(0.3	)		0.4			(0.7	)		—
Long-term growth rate		1.0			(2.4	)		2.2			(1.3	)		—			(0.1	)		0.2			(0.1	)		0.4			(0.3	)		—			(0.7	)
Budgeted adjusted EBITDA⁽¹⁾		1.0			(2.0	)		1.4			(1.3	)		—			(0.2	)		0.2			(0.2	)		0.3			(0.3	)		—			—
Budgeted capital expenditure⁽²⁾		(1.1	)		1.0			(1.0	)		1.0			(0.1	)		—			(0.1	)		0.3			(0.2	)		0.2			—			—

Notes:


(1)		Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

(2)		Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

31 March 2010

The estimated recoverable amount of the Group’s operations in India equalled its respective carrying value at 31 March 2010 and, consequently, any adverse change in key assumptions would, in isolation, cause a further impairment loss to be recognised. The estimated recoverable amount of the Group’s operations in Turkey, Germany, Ghana, Greece, Ireland, Italy, Portugal, Romania, Spain and the UK exceeded their carrying value by approximately £130 million, £4,752 million, £18 million, £118 million, £259 million, £1,253 million, £1,182 million, £372 million, £821 million and £1,207 million respectively.

The table below shows the key assumptions used in the value in use calculations.


	Assumptions used in value in use calculation
	India		Turkey		Germany		Ghana		Greece		Ireland		Italy			Portugal		Romania			Spain			UK
	%		%		%		%		%		%		%			%		%			%			%

Pre-tax adjusted discount rate		13.8		17.6		8.9		24.4		12.1		9.8		11.5			10.6		11.5			10.2			9.6
Long-term growth rate		6.3		7.7		1.0		5.2		1.0		1.0		—			0.5		2.1			1.5			1.5
Budgeted adjusted EBITDA⁽¹⁾		17.5		34.4		n/a		20.2		3.9		0.8		(0.1	)		n/a		(2.5	)		(0.7	)		4.9
Budgeted capital expenditure⁽²⁾		13.4 - 30.3		8.3 - 32.5		n/a		8.4 - 39.6		11.1 - 13.6		7.4 - 9.6		8.2 - 11.4			n/a		12.0 - 19.0			9.1 - 10.9			9.3 - 11.2

Notes:


(1)		Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

(2)		Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

102 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

The table below shows, for Turkey, Germany, Ghana, Greece, Ireland, Italy, Portugal, Romania, Spain and the United Kingdom, the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.


	Change required for carrying value to equal the recoverable amount
	Turkey			Germany			Ghana			Greece			Ireland			Italy			Portugal			Romania			Spain			UK
	pps			pps			pps			pps			pps			pps			pps			pps			pps			pps

Pre-tax adjusted discount rate		0.5			1.8			1.0			0.7			1.0			0.8			4.5			2.0			0.6			1.3
Long-term growth rate		(1.1	)		(1.9	)		(5.1	)		(0.9	)		(1.2	)		(0.8	)		(5.6	)		(2.6	)		(0.6	)		(1.6	)
Budgeted adjusted EBITDA⁽¹⁾		(2.0	)		n/a			(2.8	)		(3.7	)		(8.7	)		(5.0	)		n/a			(14.1	)		(4.5	)		(7.8	)
Budgeted capital expenditure⁽²⁾		1.5			n/a			2.5			2.8			7.0			5.1			n/a			13.8			3.5			5.8

Notes:


(1)		Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

(2)		Budgeted capital expenditure is expressed as the range of capital expenditure as a percentage of revenue in the initial ten years for Turkey and Ghana and the initial five years for all other cash generating units of the plans used for impairment testing.

11. Property, plant and equipment


				Equipment,
	Land and			fixtures
	buildings			and fittings			Total
	£m			£m			£m

Cost:
1 April 2009		1,421			43,943			45,364
Exchange movements		(6	)		8			2
Arising on acquisition		157			1,457			1,614
Additions		115			4,878			4,993
Disposals		(27	)		(1,109	)		(1,136	)
Change in consolidation status		(107	)		(2,274	)		(2,381	)
Other		24			(58	)		(34	)

31 March 2010		1,577			46,845			48,422
Exchange movements		(16	)		(678	)		(694	)
Additions		122			4,604			4,726
Disposals		(21	)		(3,001	)		(3,022	)
Other		69			(732	)		(663	)

31 March 2011		1,731			47,038			48,769


Accumulated depreciation and impairment:
1 April 2009		583			25,531			26,114
Exchange movements		(12	)		(260	)		(272	)
Charge for the year		102			4,354			4,456
Disposals		(10	)		(995	)		(1,005	)
Change in consolidation status		(28	)		(1,461	)		(1,489	)
Other		(2	)		(22	)		(24	)

31 March 2010		633			27,147			27,780
Exchange movements		(4	)		(114	)		(118	)
Charge for the year		99			4,273			4,372
Disposals		(19	)		(2,942	)		(2,961	)
Other		—			(485	)		(485	)

31 March 2011		709			27,879			28,588


Net book value:
31 March 2010		944			19,698			20,642

31 March 2011		1,022			19,159			20,181

The net book value of land and buildings and equipment, fixtures and fittings includes £131 million and £155 million respectively (2010: £91 million and £111 million) in relation to assets held under finance leases. Included in the net book value of land and buildings and equipment, fixtures and fittings are assets in the course of construction, which are not depreciated, with a cost of £38 million and £2,375 million respectively (2010: £45 million and £1,496 million). Property, plant and equipment with a net book value of £972 million (2010: £389 million) has been pledged as security against borrowings.

Vodafone Group Plc Annual Report 2011 103

Financials

12. Principal subsidiaries

At 31 March 2011 the Company had the following principal subsidiaries carrying on businesses which affect the profits and assets of the Group. Unless otherwise stated the Company’s principal subsidiaries all have share capital consisting solely of ordinary shares and are indirectly held. The country of incorporation or registration of all subsidiaries is also their principal place of operation. All subsidiaries are directly or indirectly owned by the Company except for Vodafone Qatar Q.S.C.⁽¹⁾

Country of
incorporation

Percentage⁽²⁾

Name

Principal activity

or registration

shareholdings

Vodacom Business Africa Group (PTY) Limited⁽³⁾⁽⁴⁾

Holding company

South Africa

66.0

Ghana Telecommunications Company Limited

Network operator

Ghana

70.0

VM, SA⁽⁴⁾⁽⁵⁾

Network operator

Mozambique

56.1

Vodacom Congo (RDC) s.p.r.l.⁽⁴⁾

Network operator

The Democratic
Republic of Congo

33.7

Vodacom Group Limited⁽⁶⁾

Network operator

South Africa

66.0

Vodacom Lesotho (Pty) Limited⁽⁴⁾

Network operator

Lesotho

52.8

Vodacom Tanzania Limited⁽⁴⁾

Network operator

Tanzania

42.9

Vodafone Albania Sh.A.

Network operator

Albania

99.9

Vodafone Americas Inc.⁽⁷⁾

Holding company

100.0

Vodafone Czech Republic a.s.

Network operator

Czech Republic

100.0

Vodafone D2 GmbH

Network operator

Germany

100.0

Vodafone Egypt Telecommunications S.A.E.

Network operator

Egypt

54.9

Vodafone España S.A.U.

Network operator

Spain

100.0

Vodafone Essar Limited⁽⁸⁾

Network operator

India

59.9

Vodafone Europe B.V.

Holding company

Netherlands

100.0

Vodafone Group Services Limited⁽⁹⁾

Global products and services provider

England

100.0

Vodafone Holding GmbH

Holding company

Germany

100.0

Vodafone Holdings Europe S.L.U.

Holding company

Spain

100.0

Vodafone Magyarorszag Mobile Tavkozlesi Zartkoruen Mukodo Reszvenytarsasag⁽¹⁰⁾

Network operator

Hungary

100.0

Vodafone International Holdings B.V.

Holding company

Netherlands

100.0

Vodafone Investments Luxembourg S.a.r.l.

Holding company

Luxembourg

100.0

Vodafone Ireland Limited

Network operator

Ireland

100.0

Vodafone Libertel B.V.

Network operator

Netherlands

100.0

Vodafone Limited

Network operator

England

100.0

Vodafone Malta Limited

Network operator

Malta

100.0

Vodafone Marketing S.a.r.l.

Provider of partner market services

Luxembourg

100.0

Vodafone New Zealand Limited

Network operator

New Zealand

100.0

Vodafone-Panafon Hellenic Telecommunications Company S.A.

Network operator

Greece

99.9

Vodafone Portugal-Comunicações Pessoais, S.A.⁽¹¹⁾

Network operator

Portugal

100.0

Vodafone Qatar Q.S.C.⁽¹⁾

Network operator

Qatar

23.0

Vodafone Romania S.A.

Network operator

Romania

100.0

Vodafone Telekomunikasyon A.S.

Network operator

Turkey

100.0

Notes:


(1)		The Group has rights that enable it to control the strategic and operating decisions of Vodafone Qatar Q.S.C., Vodacom Congo (RDC) s.p.r.l. and Vodacom Tanzania Limited.

(2)		Effective ownership percentages of Vodafone Group Plc at 31 March 2011, rounded to nearest tenth of one percent.

(3)		Previous name was Gateway Group (Pty) Limited.

(4)		Shareholding is indirect through Vodacom Group Limited. The indirect shareholding is calculated using the 66.0% ownership interest in Vodacom referred to in note 6 below.

(5)		The share capital of VM, SA consists of 60,000,000 ordinary shares and 469,690,618 preference shares.

(6)		At 31 March 2011 the Group owned 65.0% of the issued share capital of Vodacom Group Limited (‘Vodacom’) with the 66.0% ownership interest in the outstanding shares in Vodacom resulting from the acquisition of treasury shares by Vodacom.

(7)		Share capital consists of 395,834,251 ordinary shares and 1.65 million class D and E redeemable preference shares, of which 100% of the ordinary shares are held by the Group.

(8)		The Group’s aggregate direct and indirect equity interest in Vodafone Essar Limited (‘VEL’) was 59.9% at 31 March 2011. The Group has call options to acquire shareholdings in companies which indirectly own a further 7.1% interest in VEL. The shareholders of these companies also have put options which, if exercised, would require Vodafone to purchase the remaining shares in the respective company. If these options were exercised, which can only be done in accordance with the Indian law prevailing at the time of exercise, the Group would have a direct and indirect interest of 67.0% of VEL. On 30 March 2011 the Essar Group exercised its underwritten put option over 22.0% of VEL following which, on 31 March 2011, the Group exercised its call option over the remaining 11.0% of VEL owned by the Essar Group.

(9)		Share capital consists of 600 ordinary shares and one deferred share, of which 100% of the shares are held indirectly by Vodafone Group Plc.

(10)		Trades as Vodafone Hungary Mobile Telecommunications Company Limited.

(11)		38.6% of the issued share capital of Vodafone Portugal-Comunicações Pessoais, S.A. is held directly by Vodafone Group Plc.

104 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

13. Investments in joint ventures

Principal joint ventures

At 31 March 2011 the Company had the following joint ventures carrying on businesses which affect the profits and assets of the Group. Unless otherwise stated the Company’s principal joint ventures all have share capital consisting solely of ordinary shares, which are indirectly held, and the country of incorporation or registration is also their principal place of operation.

Country of
incorporation

Percentage⁽¹⁾

Name

Principal activity

or registration

shareholdings

Indus Towers Limited

Network infrastructure

India

25.2

⁽²⁾

Polkomtel S.A.⁽³⁾

Network operator

Poland

24.4

Vodafone Hutchison Australia Pty Limited⁽³⁾

Network operator

Australia

50.0

Vodafone Fiji Limited

Network operator

Fiji

49.0

⁽⁴⁾

Vodafone Omnitel N.V.⁽⁵⁾

Network operator

Netherlands

76.9

⁽⁶⁾

Notes:


(1)		Rounded to nearest tenth of one percent.

(2)		Vodafone Essar Limited, in which the Group has a 59.9% equity interest, owns 42.0% of Indus Towers Limited.

(3)		Polkomtel S.A. and Vodafone Hutchinson Australia Pty Limited have a year end of 31 December.

(4)		The Group holds substantive participating rights which provide it with a veto over the significant financial and operating policies of Vodafone Fiji Limited and which ensure it is able to exercise joint control over Vodafone Fiji Limited with the majority shareholder.

(5)		The principal place of operation of Vodafone Omnitel N.V. is Italy.

(6)		The Group considered the existence of substantive participating rights held by the non-controlling shareholder provide that shareholder with a veto right over the significant financial and operating policies of Vodafone Omnitel N.V., and determined that, as a result of these rights, the Group does not have control over the financial and operating policies of Vodafone Omnitel N.V., despite the Group’s 76.9% ownership interest.

Effect of proportionate consolidation of joint ventures

The following table presents, on a condensed basis, the effect on the consolidated financial statements of including joint ventures using proportionate consolidation. The results of Vodacom Group Limited are included until 18 May 2009 when it became a subsidiary and the results of Safaricom Limited (‘Safaricom’) are included until 28 May 2008, at which time its consolidation status changed from joint venture to associate. The results of Australia are included from 9 June 2009 following its merger with Hutchison 3G Australia and results from the 4.8% stake in Polkomtel acquired during the 2009 financial year are included from 18 December 2008.


	2011			2010			2009
	£m			£m			£m

Revenue		7,849			7,896			7,737
Cost of sales		(4,200	)		(4,216	)		(4,076	)

Gross profit		3,649			3,680			3,661
Selling, distribution and administrative expenses		(1,624	)		(1,369	)		(1,447	)
Impairment losses		(1,050	)		—			—
Operating income and expense		—			(12	)		—

Operating profit		975			2,299			2,214
Net financing costs		(146	)		(152	)		(170	)

Profit before tax		829			2,147			2,044
Income tax expense		(608	)		(655	)		(564	)

Profit for the financial year		221			1,492			1,480


	2011		2010
	£m		£m

Non-current assets		19,043		20,787
Current assets		1,908		763

Total assets		20,951		21,550


Total shareholders’ funds and total equity		16,389		17,407


Non-current liabilities		1,887		833
Current liabilities		2,675		3,310

Total liabilities		4,562		4,143

Total equity and liabilities		20,951		21,550

Vodafone Group Plc Annual Report 2011 105

Financials

14. Investments in associates

At 31 March 2011 the Company had the following principal associates carrying on businesses which affect the profits and assets of the Group. The Company’s principal associates all have share capital consisting solely of ordinary shares, unless otherwise stated, and are all indirectly held. The country of incorporation or registration of all associates is also their principal place of operation.

Country of
incorporation

Percentage⁽¹⁾

Name

Principal activity

or registration

shareholdings

Cellco Partnership⁽²⁾

Network operator

45.0

Société Française du Radiotéléphone S.A. (‘SFR’)⁽³⁾

Network operator

France

44.0

Safaricom Limited⁽⁴⁾⁽⁵⁾

Network operator

Kenya

40.0

Notes:


(1)		Rounded to nearest tenth of one percent.

(2)		Cellco Partnership trades under the name Verizon Wireless.

(3)		On 3 April 2011 the Group announced an agreement to sell its entire 44% interest in SFR. See note 32 for further information.

(4)		The Group also holds two non-voting shares.

(5)		At 31 March 2011 the fair value of Safaricom Limited was KES 61 billion (£456 million) based on the closing quoted share price on the Nairobi Stock Exchange.

The Group’s share of the aggregated financial information of equity accounted associates is set out below. The amounts for the year ended 31 March 2009 include the share of results in Safaricom from 28 May 2008, at which time its consolidation status changed from being a joint venture to an associate.


	2011		2010		2009
	£m		£m		£m

Share of revenue in associates		24,213		23,288		19,307
Share of result in associates		5,059		4,742		4,091
Share of discontinued operations in associates		18		93		57


	2011		2010
	£m		£m

Non-current assets		45,446		47,048
Current assets		5,588		4,901

Share of total assets		51,034		51,949


Non-current liabilities		5,719		8,295
Current liabilities		6,656		6,685
Non-controlling interests		554		592

Share of total liabilities and non-controlling interests		12,929		15,572

Share of equity shareholders’ funds in associates		38,105		36,377

15. Other investments

Non-current other investments comprise the following, all of which are classified as available-for-sale, with the exception of other debt and bonds, which are classified as loans and receivables, and cash held in restricted deposits:


	2011		2010
	£m		£m

Included within non-current assets:
Listed securities:
Equity securities		1		4,072
Unlisted securities:
Equity securities		967		879
Public debt and bonds		3		11
Other debt and bonds		72		2,355
Cash held in restricted deposits		338		274

		1,381		7,591

Included within current assets:
Government bonds		610		388
Other		64		—

		674		388

At 31 March 2010 listed equity securities included £4,071 million in relation to the Group’s 3.2% interest in China Mobile Limited which was sold in September 2010 for £4,264 million generating a £3,019 million income statement gain, including income statement recognition of foreign exchange rate gains previously recognised in equity.

Unlisted equity securities include a 26% interest in Bharti Infotel Private Limited through which the Group has a 4.37% economic interest in Bharti Airtel Limited. Unlisted equity investments are recorded at fair value where appropriate, or at cost if their fair value cannot be reliably measured as there is no active market upon which they are traded.

For public debt and bonds and cash held in restricted deposits, the carrying amount approximates fair value.

The short-term investments primarily consist of index linked gilts with less than six years to maturity, which can be readily converted into cash via the gilt repurchase market and are held on an effective floating rate basis.

106 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

16. Inventory


	2011		2010
	£m		£m

Goods held for resale		537		433

Inventory is reported net of allowances for obsolescence, an analysis of which is as follows:


	2011			2010		2009
	£m			£m		£m

1 April		120			111		118
Exchange movements		(1	)		5		13
Amounts (credited)/charged to the income statement		(2	)		4		(20	)

31 March		117			120		111

Cost of sales includes amounts related to inventory amounting to £5,878 million (2010: £5,268 million; 2009: £4,853 million).

17. Trade and other receivables


	2011		2010
	£m		£m

Included within non-current assets:
Trade receivables		92		59
Other receivables		1,719		678
Prepayments and accrued income		137		148
Derivative financial instruments		1,929		1,946

		3,877		2,831


Included within current assets:
Trade receivables		4,185		4,008
Amounts owed by associates		53		24
Other receivables		1,606		1,122
Prepayments and accrued income		3,299		3,448
Derivative financial instruments		116		182

		9,259		8,784

The Group’s trade receivables are stated after allowances for bad and doubtful debts based on management’s assessment of creditworthiness, an analysis of which is as follows:


	2011			2010			2009
	£m			£m			£m

1 April		929			874			664
Exchange movements		(30	)		(27	)		101
Amounts charged to administrative expenses		460			465			423
Trade receivables written off		(353	)		(383	)		(314	)

31 March		1,006			929			874

The carrying amounts of trade and other receivables approximate their fair value. Trade and other receivables are predominantly non-interest bearing.


	2011		2010
	£m		£m

Included within “Derivative financial instruments”:
Fair value through the income statement (held for trading):
Interest rate swaps		1,292		1,031
Foreign exchange swaps		99		132

		1,391		1,163

Fair value hedges:
Interest rate swaps		654		965

		2,045		2,128

The fair values of these financial instruments are calculated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at 31 March.

Vodafone Group Plc Annual Report 2011 107

Financials

18. Cash and cash equivalents


	2011			2010
	£m			£m

Cash at bank and in hand		896			745
Money market funds		5,015			3,678
Other		341			—

Cash and cash equivalents as presented in the statement of financial position		6,252			4,423
Bank overdrafts		(47	)		(60	)

Cash and cash equivalents as presented in the statement of cash flows		6,205			4,363

Bank balances and money market funds comprise cash held by the Group on a short-term basis with original maturity of three months or less. The carrying amount of cash and cash equivalents approximates their fair value.

19. Called up share capital


	2011						2010
	Number			£m			Number		£m

Ordinary shares of 11³/₇US cents each allotted, issued and fully paid:⁽¹⁾⁽²⁾
1 April		57,809,246,732			4,153			57,806,283,716		4,153
Allotted during the year		1,876,697			—			2,963,016		—
Cancelled during the year		(1,000,000,000	)		(71	)		—		—

31 March		56,811,123,429			4,082			57,809,246,732		4,153

Notes:


(1)		The concept of authorised share capital was abolished under the Companies Act 2006, with effect from 1 October 2009, and consequential amendments to the Company’s articles of association removing all references to authorised share capital were approved by shareholders at the 2010 annual general meeting.

(2)		At 31 March 2011 the Group held 5,233,597,599 (2010: 5,146,112,159) treasury shares with a nominal value of £376 million (2010: £370 million). The market value of shares held was £9,237 million (2010: £7,822 million). During the year 150,404,079 (2010: 149,298,942) treasury shares were reissued under Group share option schemes.

Allotted during the year


			Nominal		Net
			value		proceeds
	Number		£m		£m

UK share awards and option scheme awards		35,557		—		—
US share awards and option scheme awards		1,841,140		—		3

Total for share awards and option scheme awards		1,876,697		—		3

108 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

20. Share-based payments

The Company currently uses a number of equity settled share plans to grant options and shares to its directors and employees.

The maximum aggregate number of ordinary shares which may be issued in respect of share options or share plans will not (without shareholder approval) exceed:

•

10% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans; and

•

5% of the ordinary share capital of the Company in issue immediately prior to the date of grant, when aggregated with the total number of ordinary shares which have been allocated in the preceding ten year period under all plans, other than any plans which are operated on an all-employee basis.

Share options

Vodafone Group executive plans

No share options have been granted to any directors or employees under the Company’s discretionary share option plans in the year ended 31 March 2011.

There are options outstanding under a number of plans: the Vodafone Group 1998 Executive Share Option Scheme and the Vodafone Group 1988 Company Share Option Scheme, the Vodafone Group 1999 Long-Term Stock Incentive Plan and the Vodafone Global Incentive Plan. These options are normally exercisable between three and ten years from the date of grant. The vesting of some of these options is subject to satisfaction of performance conditions. Grants made to US employees are made in respect of ADSs.

Vodafone Group Sharesave Plan

The Vodafone Group 2008 Sharesave Plan and its predecessor, the Vodafone Group 1998 Sharesave Scheme, enable UK staff to acquire shares in the Company through monthly savings of up to £250 over a three or five year period, at the end of which they also receive a tax free bonus. The savings and bonus may then be used to purchase shares at the option price, which is set at the beginning of the invitation period and usually at a discount of 20% to the then prevailing market price of the Company’s shares.

Share plans

Vodafone Group executive plans

Under the Vodafone Global Incentive Plan awards of shares are granted to directors and certain employees. The release of these shares is conditional upon continued employment and for some awards achievement of certain performance targets measured over a three year period.

Vodafone Share Incentive Plan

The Vodafone Share Incentive Plan enables UK staff to acquire shares in the Company through monthly purchases of up to £125 per month or 5% of salary, whichever is lower. For each share purchased by the employee, the Company provides a free matching share.

Movements in ordinary share options and ADS options outstanding


	ADS options						Ordinary share options
	2011		2010		2009		2011			2010			2009
	Millions		Millions		Millions		Millions			Millions			Millions

1 April		1		1		1		266			334			373
Granted during the year		—		—		—		4			13			7
Forfeited during the year		—		—		—		(1	)		(2	)		(11	)
Exercised during the year		—		—		—		(72	)		(47	)		(16	)
Expired during the year		—		—		—		(26	)		(32	)		(19	)

31 March		1		1		1		171			266			334


Weighted average exercise price:
1 April		$15.07		$15.37		$18.15		£1.41			£1.41			£1.42
Granted during the year		—		—		—		£1.14			£0.94			£1.21
Forfeited during the year		—		—		—		£1.10			£1.50			£1.47
Exercised during the year		—		—		—		£1.33			£1.11			£1.09
Expired during the year		—		—		—		£2.25			£1.67			£1.55

31 March		$14.82		$15.07		$15.37		£1.32			£1.41			£1.41

Vodafone Group Plc Annual Report 2011 109

Financials

Summary of options outstanding and exercisable at 31 March 2011


	Outstanding						Exercisable
					Weighted						Weighted
					average						average
			Weighted		remaining				Weighted		remaining
	Outstanding		average		contractual		Exercisable		average		contractual
	shares		exercise		life		shares		exercise		life
	Millions		price		Months		Millions		price		Months

Vodafone Group savings related and Sharesave Plan:
£0.01 – £1.00		12		£0.94		28		—		—		—
£1.01 – £2.00		8		£1.19		34		—		—		—

		20		£1.03		31		—		—		—

Vodafone Group executive plans:
£1.01 – £2.00		3		£1.63		5		3		£1.63		5

Vodafone Group 1999 Long-Term Stock Incentive Plan:
£0.01 – £1.00		42		£0.90		15		42		£0.90		15
£1.01 – £2.00		106		£1.52		28		106		£1.52		28

		148		£1.35		24		148		£1.35		24

Other share option plans:
£1.01 – greater than £3.01		—		£2.47		11		—		£2.47		11

Vodafone Group 1999 Long-Term Stock Incentive Plan:
$10.01 – $30.00		1		$14.82		18		1		$14.82		18

Fair value of options granted


	Ordinary share options
	2011			2010			2009

Expected life of option (years)		3-5			3-5			3-5
Expected share price volatility		27.5-27.6	%		32.5-33.5	%		30.9-31.0	%
Dividend yield		5.82	%		6.62	%		5.04	%
Risk free rates		1.3-2.2	%		2.5-3.0	%		4.9	%
Exercise price		£1.14			£0.94			£1.21

The fair value of options granted is estimated at the date of grant using a lattice-based option valuation model which incorporates ranges of assumptions for inputs as disclosed above.

Share awards

Movements in non-vested shares during the year ended 31 March 2011 are as follows:


	Global AllShare Plan					Other					Total
				Weighted					Weighted					Weighted
				average fair					average fair					average fair
				value at					value at					value at
	Millions			grant date		Millions			grant date		Millions			grant date

1 April 2010		34			£1.15		340			£1.05		374			£1.06
Granted		—			—		126			£1.07		126			£1.07
Vested		(15	)		£1.30		(66	)		£1.40		(81	)		£1.38
Forfeited		(2	)		£1.08		(30	)		£0.97		(32	)		£0.97

31 March 2011		17			£1.02		370			£1.00		387			£1.00

Other information

The weighted average grant date fair value of options granted during the 2011 financial year was £0.27 (2010: £0.26; 2009: £0.39).

The total fair value of shares vested during the year ended 31 March 2011 was £113 million (2010: £100 million; 2009: £84 million).

The compensation cost included in the consolidated income statement in respect of share options and share plans was £156 million (2010: £150 million; 2009: £128 million) which is comprised entirely of equity-settled transactions.

The average share price for the year ended 31 March 2011 was 159.5 pence (2010: 132 pence).

110 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

21. Capital and financial risk management

Capital management

The following table summarises the capital of the Group:


	2011			2010
	£m			£m

Cash and cash equivalents		(6,252	)		(4,423	)
Borrowings		38,281			39,795
Other financial instruments		(2,171	)		(2,056	)

Net debt		29,858			33,316
Equity		87,561			90,810

Capital		117,419			124,126

The Group’s policy is to borrow centrally using a mixture of long-term and short-term capital market issues and borrowing facilities to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries. The Board has approved three internal debt protection ratios being: net interest to operating cash flow (plus dividends from associates); retained cash flow (operating cash flow plus dividends from associates less interest, tax, dividends to minorities and equity dividends) to net debt; and operating cash flow (plus dividends from associates) to net debt. These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with the Group’s debt rating agencies being Moody’s, Fitch Ratings and Standard & Poor’s. The Group complied with these ratios throughout the financial year.

Financial risk management

The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management.

Treasury operations are conducted within a framework of policies and guidelines authorised and reviewed by the Board, most recently on 1 February 2011. A treasury risk committee comprising of the Group’s Chief Financial Officer, Group General Counsel and Company Secretary, Corporate Finance Director and Director of Financial Reporting meets at least annually to review treasury activities and its members receive management information relating to treasury activities on a quarterly basis. The Group accounting function, which does not report to the Group Corporate Finance Director, provides regular update reports of treasury activity to the Board. The Group’s internal auditor reviews the internal control environment regularly.

The Group uses a number of derivative instruments for currency and interest rate risk management purposes only that are transacted by specialist treasury personnel. The Group mitigates banking sector credit risk by the use of collateral support agreements.

Credit risk

The Group considers its exposure to credit risk at 31 March to be as follows:


	2011		2010
	£m		£m

Bank deposits		896		745
Cash held in restricted deposits		338		274
Government bonds		610		388
Money market fund investments		5,015		3,678
Derivative financial instruments		2,045		2,128
Other investments — debt and bonds		75		2,366
Trade receivables		4,277		4,067
Other receivables		3,325		1,800

		16,581		15,446

The Group invests in UK index linked government bonds on the basis that they generate a swap return in excess of £ LIBOR and are amongst the most creditworthy of investments available.

Money market investments are in accordance with established internal treasury policies which dictate that an investment’s long-term credit rating is no lower than single A. Additionally, the Group invests in AAA unsecured money market mutual funds where the investment is limited to 10% of each fund.

In respect of financial instruments used by the Group’s treasury function, the aggregate credit risk the Group may have with one counterparty is limited by firstly, reference to the long-term credit ratings assigned for that counterparty by Moody’s, Fitch Ratings and Standard & Poor’s and secondly, as a consequence of collateral support agreements introduced from the fourth quarter of 2008. Under collateral support agreements the Group’s exposure to a counterparty with whom a collateral support agreement is in place is reduced to the extent that the counterparty must post cash collateral when there is value due to the Group under outstanding derivative contracts that exceeds a contractually agreed threshold amount. When value is due to the counterparty the Group is required to post collateral on identical terms. Such cash collateral is adjusted daily as necessary.

In the event of any default ownership of the cash collateral would revert to the respective holder at that point. Detailed below is the value of the cash collateral, which is reported within short-term borrowings, held by the Group at 31 March 2011:


	2011		2010
	£m		£m

Cash collateral		531		604

The majority of the Group’s trade receivables are due for maturity within 90 days and largely comprise amounts receivable from consumers and business customers. At 31 March 2011 £2,233 million (2010: £2,111 million) of trade receivables were not yet due for payment. Total trade receivables consisted of £2,852 million (2010: £2,709 million) relating to the Europe region and £1,425 million (2010: £1,358 million) relating to the Africa, Middle East and Asia Pacific region. Accounts are monitored by management and provisions for bad and doubtful debts raised where it is deemed appropriate.

Vodafone Group Plc Annual Report 2011 111

Financials

The following table presents ageing of receivables that are past due and are presented net of provisions for doubtful receivables that have been established.


	2011		2010
	£m		£m

30 days or less		1,561		1,499
Between 31 – 60 days		100		119
Between 61 – 180 days		85		155
Greater than 180 days		298		183

		2,044		1,956

Concentrations of credit risk with respect to trade receivables are limited given that the Group’s customer base is large and unrelated. Due to this management believes there is no further credit risk provision required in excess of the normal provision for bad and doubtful receivables. Amounts charged to administrative expenses during the year ended 31 March 2011 were £460 million (2010: £465 million, 2009: £423 million) (see note 17).

The Group’s investments in preferred equity and a subordinated loan received as part of the disposal of Vodafone Japan to SoftBank in the 2007 financial year were disposed of during the year. The Group has a receivable of £1,488 million (2010: £nil) in relation to the second tranche of consideration receivable in relation to the disposal.

As discussed in note 28 the Group has covenanted to provide security in favour of the Trustee of the Vodafone Group UK Pension Scheme in respect of the funding deficit in the scheme. The security takes the form of an English law pledge over UK index linked government bonds.

Liquidity risk

At 31 March 2011 the Group had €4.2 billion and US$4.2 billion syndicated committed undrawn bank facilities and US$15 billion and £5 billion commercial paper programmes, supported by the €4.2 billion and US$4.2 billion syndicated committed bank facilities, available to manage its liquidity. The Group uses commercial paper and bank facilities to manage short-term liquidity and manages long-term liquidity by raising funds in the capital markets.

€4.2 billion of the syndicated committed facility has a maturity date of 1 July 2015 and US$4.2 billion has a maturity of 9 March 2016 which may be extended by a further year if agreed by those banks who have participated in the facility. Both facilities have remained undrawn throughout the financial year and since year end and provide liquidity support.

The Group manages liquidity risk on long-term borrowings by maintaining a varied maturity profile with a cap on the level of debt maturing in any one calendar year, therefore minimising refinancing risk. Long-term borrowings mature between one and 26 years.

Liquidity is reviewed daily on at least a 12 month rolling basis and stress tested on the assumption that all commercial paper outstanding matures and is not reissued. The Group maintains substantial cash and cash equivalents which at 31 March 2011 amounted to £6,252 million (2010: £4,423 million).

Market risk

Interest rate management

Under the Group’s interest rate management policy, interest rates on monetary assets and liabilities denominated in euros, US dollars and sterling are maintained on a floating rate basis except for periods up to six years where interest rate fixing has to be undertaken in accordance with treasury policy. Where assets and liabilities are denominated in other currencies interest rates may also be fixed. In addition, fixing is undertaken for longer periods when interest rates are statistically low.

At 31 March 2011 71% (2010: 36%) of the Group’s gross borrowings were fixed for a period of at least one year. For each one hundred basis point fall or rise in market interest rates for all currencies in which the Group had borrowings at 31 March 2011 there would be a reduction or increase in profit before tax by approximately £30 million (2010: increase or reduce by £165 million) including mark-to-market revaluations of interest rate and other derivatives and the potential interest on outstanding tax issues. There would be no material impact on equity.

Foreign exchange management

As Vodafone’s primary listing is on the London Stock Exchange its share price is quoted in sterling. Since the sterling share price represents the value of its future multi-currency cash flows, principally in euro, US dollars and sterling, the Group maintains the currency of debt and interest charges in proportion to its expected future principal multi-currency cash flows and has a policy to hedge external foreign exchange risks on transactions denominated in other currencies above certain de minimis levels. As the Group’s future cash flows are increasingly likely to be derived from emerging markets it is likely that more debt in emerging market currencies will be drawn.

As such, at 31 March 2011 130% of net debt was denominated in currencies other than sterling (55% euro, 47% US dollar and 28% other) while 30% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via dividends and share buybacks. This allows euro, US dollar and other debt to be serviced in proportion to expected future cash flows and therefore provides a partial hedge against income statement translation exposure, as interest costs will be denominated in foreign currencies. Yen debt is used as a hedge against the value of yen assets as the Group has minimal yen cash flows.

112 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

21. Capital and financial risk management continued

Under the Group’s foreign exchange management policy foreign exchange transaction exposure in Group companies is generally maintained at the lower of €5 million per currency per month or €15 million per currency over a six month period. In addition, a US dollar denominated financial liability arising from the options granted over the Essar Group’s interests in Vodafone Essar in the 2008 financial year and as discussed on page 51, was held by a legal entity with a euro functional currency. A 14% (2010: 12%) change in US$/€ exchange rates would have a £436 million (2010: £393 million) impact on profit or loss in relation to this financial instrument.

The Group recognises foreign exchange movements in equity for the translation of net investment hedging instruments and balances treated as investments in foreign operations. However, there is no net impact on equity for exchange rate movements as there would be an offset in the currency translation of the foreign operation.

The following table details the Group’s sensitivity of the Group’s operating profit to a strengthening of the Group’s major currencies in which it transacts.

The percentage movement applied to each currency is based on the average movements in the previous three annual reporting periods. Amounts are calculated by retranslating the operating profit of each entity whose functional currency is either euro or US dollar.


	2011
	£m

Euro 4% change — Operating profit		230
US dollar 13% change — Operating profit		594

At 31 March 2010 sensitivity of the Group’s operating profit was analysed for euro 12% change and US dollar 15% change, representing £804 million and £617 million respectively.

Equity risk

The Group has equity investments, primarily in Bharti Infotel Private Limited, which is subject to equity risk. See note 15 to the consolidated financial statements for further details on the carrying value of this investment. The Group disposed of its 3.2% interest in China Mobile Limited on 10 September 2010.

Fair value of financial instruments

The table below sets out the valuation basis of financial instruments held at fair value by the Group at 31 March 2011.


	Level 1⁽¹⁾				Level 2⁽²⁾				Total
	2011		2010		2011		2010		2011		2010
	£ m		£ m		£ m		£ m		£ m		£ m

Financial assets:
Derivative financial instruments:
Interest rate swaps		—		—		1,946		1,996		1,946		1,996
Foreign exchange contracts		—		—		99		132		99		132
Interest rate futures		—		—		31		20		31		20

		—		—		2,076		2,148		2,076		2,148

Financial investments available-for-sale:
Listed equity securities⁽³⁾		1		4,072		—		—		1		4,072
Unlisted equity securities⁽³⁾		—		—		703		623		703		623

		1		4,072		703		623		704		4,695

		1		4,072		2,779		2,771		2,780		6,843

Financial liabilities:
Derivative financial instruments:
Interest rate swaps		—		—		395		365		395		365
Foreign exchange contracts		—		—		153		95		153		95

		—		—		548		460		548		460

Notes:


(1)		Level 1 classification comprises financial instruments where fair value is determined by unadjusted quoted prices in active markets for identical assets or liabilities.

(2)		Level 2 classification comprises where fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Fair values for unlisted equity securities are derived from observable quoted market prices for similar items. Derivative financial instrument fair values are present values determined from future cash flows discounted at rates derived from market sourced data.

(3)		Details of listed and unlisted equity securities are included in note 15 “Other Investments”.

Vodafone Group Plc Annual Report 2011 113

Financials

22. Borrowings

Carrying value and fair value information


	2011						2010
	Short-term		Long-term				Short-term		Long-term
	borrowings		borrowings		Total		borrowings		borrowings		Total
	£m		£m		£m		£m		£m		£m

Financial liabilities measured at amortised cost:
Bank loans		2,070		5,872		7,942		3,460		4,183		7,643
Bank overdrafts		47		—		47		60		—		60
Redeemable preference shares		—		1,169		1,169		—		1,242		1,242
Commercial paper		1,660		—		1,660		2,563		—		2,563
Bonds		2,470		16,046		18,516		1,174		12,675		13,849
Other liabilities⁽¹⁾⁽²⁾		3,659		1,023		4,682		3,906		385		4,291
Bonds in fair value hedge relationships		—		4,265		4,265		—		10,147		10,147

		9,906		28,375		38,281		11,163		28,632		39,795

Notes:


(1)		At 31 March 2011 amount includes £531 million (2010: £604 million) in relation to collateral support agreements.

(2)		Amounts at 31 March 2011 includes £3,190 million (2010: £3,405 million) in relation to the options disclosed in note 12.

Banks loans include a ZAR 3.5 billion loan borrowed by Vodafone Holdings SA Pty Limited (‘VHSA’), which directly and indirectly owns the Group’s interest in Vodacom Group Limited. VHSA has pledged its 100% equity shareholding in Vodafone Investments SA (‘VISA’), which holds a direct 20.1% equity shareholding in Vodacom Group Limited, as security for its loan obligations. The terms and conditions of the pledge mean that should VHSA not meet all of its loan payment and performance obligations, the lenders may sell the equity shareholding in its subsidiary VISA at market value to recover their losses, with any remaining sales proceeds being returned to VHSA. Vodafone International Holdings B.V. has also guaranteed this loan with recourse only to the VHSA shares it has pledged. The terms and conditions of the security arrangement mean the lenders may be able to sell these respective shares in preference to the VISA shares held by VHSA. An arrangement has been put in place where the Vodacom Group Limited shares held by VHSA and VISA are held in an escrow account to ensure the shares cannot be sold to satisfy the pledge made by the Company. The maximum collateral provided is ZAR 3.5 billion, being the carrying value of the bank loan at 31 March 2011 (2010: ZAR 4.85 billion). Bank loans also include INR 262 billion of loans held by Vodafone Essar Limited (‘VEL’) and its subsidiaries (the ‘VEL Group’). The VEL Group has a number of security arrangements supporting certain licences secured under the terms of tri-party agreements between the relevant borrower, the department of telecommunications, Government of India and the agent representing the secured lenders and certain share pledges of the shares under VEL. The terms and conditions of the security arrangements mean that should members of the VEL Group not meet all of their loan payment and performance obligations, the lenders may sell the pledged shares and enforce rights over the certain licences under the terms of the tri-party agreements to recover their losses, with any remaining sales proceeds being returned to the VEL Group. Each of the eight legal entities within the VEL Group provide cross guarantees to the lenders in respect to debt contracted by the other seven.

The fair value and carrying value of the Group’s short-term borrowings is as follows:


	Sterling equivalent
	nominal value				Fair value				Carrying value
	2011		2010		2011		2010		2011		2010
	£m		£m		£m		£m		£m		£m

Financial liabilities measured at amortised cost		7,316		9,910		7,425		10,006		7,436		9,989
Bonds:		2,444		1,113		2,463		1,124		2,470		1,174
5.875% euro 1.25 billion bond due June 2010		—		1,113		—		1,124		—		1,174
US dollar floating rate note due June 2011		171		—		171		—		171		—
5.5% US dollar 750 million bond due June 2011		467		—		471		—		478		—
1% US dollar 100 million bond due August 2011		45		—		45		—		45		—
Euro floating rate note due January 2012		1,144		—		1,146		—		1,148		—
US dollar floating rate note due February 2012		306		—		306		—		306		—
5.35% US dollar 500 million bond due February 2012		311		—		324		—		322		—

Short-term borrowings		9,760		11,023		9,888		11,130		9,906		11,163

114 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

22. Borrowings continued

The fair value and carrying value of the Group’s long-term borrowings is as follows:


	Sterling equivalent
	nominal value				Fair value				Carrying value
	2011		2010		2011		2010		2011		2010
	£m		£m		£m		£m		£m		£m

Financial liabilities measured at amortised cost:
Bank loans		5,728		4,149		5,872		4,183		5,873		4,183
Redeemable preference shares		1,027		1,174		1,054		1,098		1,169		1,242
Other liabilities		1,022		385		1,023		385		1,022		385
Bonds:		14,581		11,455		15,578		11,961		16,046		12,675
US dollar floating rate note due June 2011		—		230		—		230		—		230
5.5% US dollar 750 million bond due June 2011		—		494		—		518		—		524
Euro floating rate note due January 2012		—		1,158		—		1,157		—		1,161
US dollar floating rate note due February 2012		—		329		—		329		—		329
5.35% US dollar 500 million bond due February 2012		—		329		—		351		—		352
3.625% euro 1,250 million bond due November 2012		1,104		1,113		1,125		1,157		1,132		1,149
6.75% Australian dollar 265 million bond due January 2013		171		160		173		161		176		167
Czech krona floating rate note due June 2013		19		19		19		19		19		19
Euro floating rate note due September 2013		751		757		752		756		752		758
5.0% US dollar 1,000 million bond due December 2013		623		658		676		704		667		718
6.875% euro 1,000 million bond due December 2013		883		891		970		1,024		922		936
Euro floating rate note due June 2014		1,104		1,113		1,099		1,099		1,105		1,114
4.15% US dollar 1,250 million bond due June 2014		778		823		826		856		802		852
4.625% sterling 350 million bond due September 2014		350		—		367		—		382		—
4.625% sterling 525 million bond due September 2014		525		—		551		—		544		—
5.125% euro 500 million bond due April 2015		442		445		475		496		470		475
5.0% US dollar 750 million bond due September 2015		467		—		506		—		512		—
3.375% US dollar 500 million bond due November 2015		311		329		317		327		312		330
6.25% euro 1,250 million bond due January 2016		1,104		—		1,230		—		1,139		—
2.875% US dollar 600 million bond due March 2016		374		—		371		—		371		—
5.75% US dollar 750 million bond due March 2016		467		—		523		—		532		—
4.75% euro 500 million bond due June 2016		442		—		463		—		487		—
5.625% US dollar 1,300 million bond due February 2017		809		—		897		—		920		—
5.375% sterling 600 million bond due December 2017		600		—		638		—		629		—
5% euro 750 million bond due June 2018		663		668		697		721		689		694
8.125% sterling 450 million bond due November 2018		450		—		550		—		488		—
4.375% US dollar 500 million bond due March 2021		311		—		307		—		309		—
7.875% US dollar 750 million bond due February 2030		467		494		591		589		759		814
6.25% US dollar 495 million bond due November 2032		308		326		332		328		425		453
6.15% US dollar 1,700 million bond due February 2037		1,058		1,119		1,123		1,139		1,503		1,600
Bonds in fair value hedge relationships:		3,962		9,395		4,199		10,085		4,265		10,147
4.625% sterling 350 million bond due September 2014		—		350		—		367		—		388
4.625% sterling 525 million bond due September 2014		—		525		—		550		—		532
2.15% Japanese yen 3,000 million bond due April 2015		23		21		24		22		23		22
5.375% US dollar 900 million bond due January 2015		560		592		616		636		621		650
5.0% US dollar 750 million bond due September 2015		—		494		—		529		—		543
6.25% euro 1,250 million bond due January 2016		—		1,113		—		1,278		—		1,168
5.75% US dollar 750 million bond due March 2016		—		494		—		536		—		556
4.75% euro 500 million bond due June 2016		—		445		—		477		—		503
5.625% US dollar 1,300 million bond due February 2017		—		856		—		919		—		960
5.375% sterling 600 million bond due December 2017		—		600		—		634		—		628
4.625% US dollar 500 million bond due July 2018		311		329		327		328		338		349
8.125% sterling 450 million bond due November 2018		—		450		—		553		—		487
5.45% US dollar 1,250 million bond due June 2019		778		823		850		857		823		849
4.65% euro 1,250 million bond January 2022		1,104		1,113		1,115		1,129		1,114		1,145
5.375% euro 500 million bond June 2022		442		445		470		481		505		525
5.625% sterling 250 million bond due December 2025		250		250		258		254		284		285
6.6324% euro 50 million bond due December 2028		44		45		68		64		57		54
5.9% sterling 450 million bond due November 2032		450		450		471		471		500		503

Long-term borrowings		26,320		26,558		27,726		27,712		28,375		28,632

During the year ended 31 March 2011 fair value hedge relationships relating to bonds with nominal value US$2,800 million (£1,743 million), €1,750 million (£1,546 million) and £1,925 million were de-designated.

Fair values are calculated using quoted market prices or discounted cash flows with a discount rate based upon forward interest rates available to the Group at the reporting date.

Vodafone Group Plc Annual Report 2011 115

Financials

Maturity of borrowings

The maturity profile of the anticipated future cash flows including interest in relation to the Group’s non-derivative financial liabilities on an undiscounted basis, which, therefore, differs from both the carrying value and fair value, is as follows:


				Redeemable												Loans in fair
	Bank			preference			Commercial						Other			value hedge
	loans			shares			paper			Bonds			liabilities			relationships			Total
	£m			£m			£m			£m			£m			£m			£m

Within one year		1,881			52			1,670			3,292			3,766			203			10,864
In one to two years		528			52			—			2,009			191			203			2,983
In two to three years		2,510			52			—			2,919			60			203			5,744
In three to four years		321			52			—			3,251			60			763			4,447
In four to five years		885			52			—			3,613			901			195			5,646
In more than five years		1,825			1,240			—			7,725			—			4,752			15,542

		7,950			1,500			1,670			22,809			4,978			6,319			45,226
Effect of discount/financing rates		(8	)		(331	)		(10	)		(4,293	)		(249	)		(2,054	)		(6,945	)

31 March 2011		7,942			1,169			1,660			18,516			4,729			4,265			38,281


Within one year		3,406			93			2,572			1,634			3,983			510			12,198
In one to two years		858			56			—			3,008			145			510			4,577
In two to three years		847			56			—			1,712			156			510			3,281
In three to four years		1,852			56			—			2,671			—			510			5,089
In four to five years		138			56			—			2,152			31			1,977			4,354
In more than five years		598			1,370			—			6,009			68			9,983			18,028

		7,699			1,687			2,572			17,186			4,383			14,000			47,527
Effect of discount/financing rates		(56	)		(445	)		(9	)		(3,337	)		(32	)		(3,853	)		(7,732	)

31 March 2010		7,643			1,242			2,563			13,849			4,351			10,147			39,795

The maturity profile of the Group’s financial derivatives (which include interest rate and foreign exchange swaps), using undiscounted cash flows, is as follows:


	2011				2010
	Payable		Receivable		Payable		Receivable
	£m		£m		£m		£m

Within one year		14,840		15,051		13,067		13,154
In one to two years		631		829		929		938
In two to three years		724		882		1,083		974
In three to four years		667		770		1,040		932
In four to five years		619		690		868		816
In more than five years		3,715		4,592		7,607		5,912

		21,196		22,814		24,594		22,726

The currency split of the Group’s foreign exchange derivatives, all of which mature in less than one year, is as follows:


	2011				2010
	Payable		Receivable		Payable		Receivable
	£m		£m		£m		£m

Sterling		—		10,198		—		8,257
Euro		11,422		2,832		8,650		3,177
US dollar		13		387		1,545		55
Japanese yen		2,164		23		548		21
Other		727		832		1,485		755

		14,326		14,272		12,228		12,265

Payables and receivables are stated separately in the table above as settlement is on a gross basis. The £54 million net payable (2010: £37 million net receivable) in relation to foreign exchange financial instruments in the table above is split £153 million (2010: £95 million) within trade and other payables and £99 million (2010: £132 million) within trade and other receivables.

The present value of minimum lease payments under finance lease arrangements under which the Group has leased certain of its equipment is analysed as follows:


	2011		2010
	£m		£m

Within one year		14		21
In two to five years		45		47
In more than five years		6		7

116 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

22. Borrowings continued

Interest rate and currency of borrowings


	Total		Floating rate		Fixed rate		Other
	borrowings		borrowings		borrowings⁽¹⁾		borrowings⁽²⁾
Currency	£m		£m		£m		£m

Sterling		2,831		906		1,925		—
Euro		12,361		4,198		8,163		—
US dollar		16,030		9,488		3,352		3,190
Japanese yen		807		807		—		—
Other		6,252		2,920		3,332		—

31 March 2011		38,281		18,319		16,772		3,190


Sterling		3,022		3,022		—		—
Euro		14,244		9,429		4,815		—
US dollar		15,195		7,329		4,461		3,405
Japanese yen		2,605		2,605		—		—
Other		4,729		4,105		624		—

31 March 2010		39,795		26,490		9,900		3,405

Notes:


(1)		The weighted average interest rate for the Group’s sterling denominated fixed rate borrowings is 5.7% (2010: n/a). The weighted average time for which these rates are fixed is 5.4 years (2010: n/a). The weighted average interest rate for the Group’s euro denominated fixed rate borrowings is 4.3% (2010: 5.3%). The weighted average time for which the rates are fixed is 3.8 years (2010: 3.4 years). The weighted average interest rate for the Group’s US dollar denominated fixed rate borrowings is 5.4% (2010: 5.5%). The weighted average time for which the rates are fixed is 9.7 years (2010: 12.3 years). The weighted average interest rate for the Group’s other currency fixed rate borrowings is 9.2% (2010: 10.1%). The weighted average time for which the rates are fixed is 2.0 years (2010: 1.5 years).

(2)		Other borrowings of £3,190 million (2010: £3,405 million) are the liabilities arising under options over direct and indirect interests in Vodafone Essar.

The figures shown in the tables above take into account interest rate swaps used to manage the interest rate profile of financial liabilities. Interest on floating rate borrowings is generally based on national LIBOR equivalents or government bond rates in the relevant currencies.

At 31 March 2011 the Group had entered into foreign exchange contracts to decrease its sterling, US dollar and other currency borrowings above by £10,198 million and amounts equal to £374 million and £105 million respectively, and to increase its euro and Japanese yen currency borrowings above by amounts equal to £8,590 million and £2,141 million respectively.

At 31 March 2010 the Group had entered into foreign exchange contracts to decrease its sterling currency borrowings above by £8,257 million and to increase its euro, US dollar, Japanese yen and other currency borrowings above by amounts equal to £5,473 million, £1,490 million, £527 million and £730 million respectively.

Further protection from euro and US dollar interest rate movements is provided by interest rate swaps. At 31 March 2011 the Group had euro denominated interest rate swaps covering the period March 2011 to September 2015 for an amount equal to £883 million and US dollar denominated interest swaps covering the period March 2011 to September 2015 for an amount equal to £641 million. The average effective rate which has been fixed is 1.23% for euro denominated interest rate swaps and 1.73% in relation to US dollar denominated interest rate swaps.

The Group has entered into euro and US dollar denominated interest rate futures. The euro denominated interest rate futures cover the periods September 2011 to December 2011, December 2011 to March 2012, March 2012 to June 2012 and June 2012 to September 2012 for amounts equal to £2,083 million, £833 million, £7,185 million and £6,811 million respectively. Additional cover is provided for the period March 2013 to March 2014 and March 2015 to March 2016 for average amounts for each period equal to £2,006 million and £2,331 million respectively. The US dollar denominated interest rate futures cover the periods June 2011 to September 2011, June 2013 to September 2013 and September 2013 to December 2013 for amounts equal to £3,601 million, £1,923 million and £833 million respectively. The average effective rate which has been fixed is 2.87% for euro denominated interest rate futures and 1.33% for US dollar denominated interest rate futures.

The Group has entered into interest rate futures to alter the level of protection against interest rate movements during some futures periods. During the period June 2016 to December 2016 euro denominated interest rate swaps will reduce the level of fixed rate debt in the Group by an amount equal to £833 million. US dollar denominated futures will reduce the level of fixed rate debt during the period March 2016 to March 2019 for an amount equal to £321 million. US dollar denominated interest rate futures will reduce the level of fixed rate debt during the periods September 2012 to December 2012 and December 2013 to March 2014 for amounts equal to £4,487 million and £1,282 million respectively.

At 31 March 2010 the Group had entered into euro and US dollar denominated interest rate futures. The euro denominated interest rate futures cover the period June 2010 to September 2010, September 2010 to December 2010 and December 2010 to March 2011 for amounts equal to £7,888 million, £8,461 million and £4,067 million respectively. The average effective rate which has been fixed is 1.27%. The US dollar denominated interest rate futures cover the period June 2010 to September 2010, September 2010 to December 2010 and December 2010 to March 2011 for amounts equal to £3,197 million, £2,582 million, and £1,119 million respectively. The average effective rate which has been fixed is 0.86%.

Borrowing facilities

At 31 March 2011 the Group’s most significant committed borrowing facilities comprised two bank facilities which remained undrawn throughout the period of €4,150 million (£3,666 million) and US$4,170 million (£2,596 million) both expiring between four and five years (2010: two bank facilities of US$4,115 million (£2,709 million) and US$5,025 million (£3,308 million)), a US$650 million (£405 million) bank facility which expires in more than five years (2010: US$650 million (£428 million)), a ¥259 billion (2010: ¥259 billion (£1,821 million)) term credit facility expired during the period, two loan facilities of €400 million (£353 million) and €350 million (£309 million) both expiring between two and five years (2010: two loan facilities of €400 million (£356 million) and €350 million (£312 million) and a loan facility of €410 million (£362 million) which expires in more than five years (2010: €410 million (£365 million)). The €400 million and €350 million loan facilities were fully drawn on 14 February 2007 and 12 August 2008 respectively and the €410 million facility was drawn on 30 July 2010.

Under the terms and conditions of the €4,150 million and US$4,170 million bank facilities, lenders have the right, but not the obligation, to cancel their commitment 30 days from the date of notification of a change of control of the Company and have outstanding advances repaid on the last day of the current interest period.

The facility agreements provide for certain structural changes that do not affect the obligations of the Company to be specifically excluded from the definition of a change of control. This is in addition to the rights of lenders to cancel their commitment if the Company has committed an event of default.

The terms and conditions of the €400 million loan facility are similar to those of the US dollar bank facilities, with the addition that, should the Group’s Turkish operating company spend less than the equivalent of US$800 million on capital expenditure, the Group will be required to repay the drawn amount of the facility that exceeds 50% of the capital expenditure.

The terms and conditions of the €350 million loan facility are similar to those of the US dollar bank facilities, with the addition that, should the Group’s Italian operating company spend less than the equivalent of €1,500 million on capital expenditure, the Group will be required to repay the drawn amount of the facility that exceeds 18% of the capital expenditure.

The terms and conditions of the €410 million loan facility are similar to those of the US dollar bank facilities, with the addition that, should the Group’s German fixed line operation, spend less than the equivalent of €824 million on capital expenditure, the Group will be required to repay the drawn amount of the facility that exceeds 50% of the capital expenditure.

Vodafone Group Plc Annual Report 2011 117

Financials

In addition to the above, certain of the Group’s subsidiaries had committed facilities at 31 March 2011 of £7,152 million (2010: £5,759 million) in aggregate, of which £667 million (2010: £1,647 million) was undrawn. Of the total committed facilities £2,137 million (2010: £1,139 million) expires in less than one year, £3,719 million (2010: £2,880 million) expires between two and five years, and £1,296 million (2010: £1,740 million) expires in more than five years.

Redeemable preference shares

Redeemable preference shares comprise class D and E preferred shares issued by Vodafone Americas, Inc. An annual dividend of US$51.43 per class D and E preferred share is payable quarterly in arrears. The dividend for the year amounted to £58 million (2010: £56 million). The aggregate redemption value of the class D and E preferred shares is US$1.65 billion. The holders of the preferred shares are entitled to vote on the election of directors and upon each other matter coming before any meeting of the shareholders on which the holders of ordinary shares are entitled to vote. Holders are entitled to vote on the basis of twelve votes for each share of class D or E preferred stock held. The maturity date of the 825,000 class D preferred shares is 6 April 2020. The 825,000 class E preferred shares have a maturity date of 1 April 2020. The class D and E preferred shares have a redemption price of US$1,000 per share plus all accrued and unpaid dividends.

23. Post employment benefits

Background

At 31 March 2011 the Group operated a number of pension plans for the benefit of its employees throughout the world, which vary depending on the conditions and practices in the countries concerned. The Group’s pension plans are provided through both defined benefit and defined contribution arrangements. Defined benefit schemes provide benefits based on the employees’ length of pensionable service and their final pensionable salary or other criteria. Defined contribution schemes offer employees individual funds that are converted into benefits at the time of retirement.

The Group operates defined benefit schemes in Germany, Ghana, Greece, India, Ireland, Italy, Turkey, the United Kingdom and the United States. Defined contribution pension schemes are currently provided in Australia, Egypt, Greece, Hungary, Ireland, Italy, Kenya, Malta, the Netherlands, New Zealand, Portugal, South Africa, Spain and the United Kingdom. The Group’s principal defined benefit pension scheme in the United Kingdom was closed to new entrants from 1 January 2006 and closed to future accrual by current members on 31 March 2010.

Income statement expense


	2011		2010		2009
	£m		£m		£m

Defined contribution schemes		130		110		73
Defined benefit schemes		4		50		40

Total amount charged to the income statement (note 31)		134		160		113

Defined benefit schemes

The principal actuarial assumptions used for estimating the Group’s benefit obligations are set out below:


	2011⁽¹⁾		2010⁽¹⁾		2009⁽¹⁾
	%		%		%

Weighted average actuarial assumptions used at 31 March:
Rate of inflation		3.1		3.5		2.6
Rate of increase in salaries		2.9		4.6		3.7
Rate of increase in pensions in payment and deferred pensions		3.1		3.5		2.6
Discount rate		5.6		5.7		6.3

Expected rates of return:
Equities		8.2		8.5		8.4
Bonds⁽²⁾		5.1		5.1		5.7

Notes:

(1)		Figures shown represent a weighted average assumption of the individual schemes.

(2)		For the year ended 31 March 2011 the expected rate of return for bonds consisted of a 5.3% rate of return for corporate bonds (2010: 5.5%; 2009: 6.1%) and a 3.6% rate of return for government bonds (2010: 4.0%; 2009: 4.0%).

The expected return on assets assumptions are derived by considering the expected long-term rates of return on plan investments. The overall rate of return is a weighted average of the expected returns of the individual investments made in the group plans. The long-term rates of return on equities are derived from considering current risk free rates of return with the addition of an appropriate future risk premium from an analysis of historic returns in various countries. The long-term rates of return on bonds are set in line with market yields currently available at the statement of financial position date.

Mortality assumptions used are consistent with those recommended by the individual scheme actuaries and reflect the latest available tables, adjusted for the experience of the Group where appropriate. The largest scheme in the Group is the UK scheme and the tables used for this scheme indicate a further life expectancy for a male/female pensioner currently aged 65 of 23.5/24.3 years (2010: 22.3/25.4 years, 2009: 22.0/24.8 years) and a further life expectancy from age 65 for a male/female non-pensioner member currently aged 40 of 27.0/26.6 years (2010: 24.6/27.9 years, 2009: 23.2/26.0 years).

Measurement of the Group’s defined benefit retirement obligations are particularly sensitive to changes in certain key assumptions including the discount rate. An increase or decrease in the discount rate of 0.5% would result in a £156 million decrease or a £178 million increase in the defined benefit obligation respectively.

Charges made to the consolidated income statement and consolidated statement of comprehensive income (‘SOCI’) on the basis of the assumptions stated above are:


	2011			2010			2009
	£m			£m			£m

Current service cost		12			29			46
Interest cost		95			77			83
Expected return on pension assets		(103	)		(76	)		(92	)
Curtailment/settlement		—			20			3

Total included within staff costs		4			50			40


Actuarial losses recognised in the SOCI		(190	)		149			220
Cumulative actuarial losses recognised in the SOCI		306			496			347

118 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

23. Post employment benefits continued

Fair value of the assets and present value of the liabilities of the schemes

The amount included in the statement of financial position arising from the Group’s obligations in respect of its defined benefit schemes is as follows:


	2011			2010			2009
	£m			£m			£m

Movement in pension assets:
1 April		1,487			1,100			1,271
Exchange rate movements		(2	)		(10	)		50
Expected return on pension assets		103			76			92
Actuarial (losses)/gains		(6	)		286			(381	)
Employer cash contributions		24			133			98
Member cash contributions		5			12			15
Benefits paid		(51	)		(45	)		(45	)
Other movements		(2	)		(65	)		—

31 March		1,558			1,487			1,100


Movement in pension liabilities:
1 April		1,690			1,332			1,310
Exchange rate movements		(4	)		(15	)		69
Arising on acquisition		—			—			33
Current service cost		12			29			46
Interest cost		95			77			83
Member cash contributions		5			12			15
Actuarial (gains)/losses		(196	)		435			(161	)
Benefits paid		(51	)		(79	)		(45	)
Other movements		(3	)		(101	)		(18	)

31 March		1,548			1,690			1,332

An analysis of net assets/(deficits) is provided below for the Group’s principal defined benefit pension scheme in the UK and for the Group as a whole.


	UK															Group
	2011			2010			2009			2008			2007			2011			2010			2009			2008			2007
	£m			£m			£m			£m			£m			£m			£m			£m			£m			£m

Analysis of net assets/(deficits):
Total fair value of scheme assets		1,180			1,131			755			934			954			1,558			1,487			1,100			1,271			1,251
Present value of funded scheme liabilities		(1,127	)		(1,276	)		(815	)		(902	)		(901	)		(1,488	)		(1,625	)		(1,196	)		(1,217	)		(1,194	)

Net assets/(deficit) for funded schemes		53			(145	)		(60	)		32			53			70			(138	)		(96	)		54			57
Present value of unfunded scheme liabilities		—			—			(8	)		—			—			(60	)		(65	)		(136	)		(93	)		(98	)

Net assets/(deficit)		53			(145	)		(68	)		32			53			10			(203	)		(232	)		(39	)		(41	)

Net assets/(deficit) are analysed as:
Assets		53			—			—			32			53			97			34			8			65			82
Liabilities		—			(145	)		(68	)		—			—			(87	)		(237	)		(240	)		(104	)		(123	)

It is expected that contributions of £28 million will be paid into the Group’s defined benefit retirement schemes during the year ending 31 March 2012. The assets of the scheme are held in an external trustee administered fund.

Actual return on pension assets


	2011		2010		2009
	£m		£m		£m

Actual return on pension assets		97		362		(289	)


Analysis of pension assets at 31 March is as follows:		%		%		%
Equities		61.6		59.6		55.6
Bonds		36.5		37.5		41.9
Property		0.3		0.3		0.4
Other		1.6		2.6		2.1

		100.0		100.0		100.0

The schemes have no direct investments in the Group’s equity securities or in property currently used by the Group.

Vodafone Group Plc Annual Report 2011 119

Financials

History of experience adjustments


	2011			2010			2009			2008			2007
	£m			£m			£m			£m			£m

Experience adjustments on pension liabilities:
Amount		23			8			6			(5	)		(2	)
Percentage of pension liabilities		1	%		—			—			—			—


Experience adjustments on pension assets:
Amount		(6	)		286			(381	)		(176	)		26
Percentage of pension assets		—			19	%		(35	%)		(14	%)		2	%

24. Provisions


	Asset
	retirement			Other
	obligations			provisions			Total
	£m			£m			£m

1 April 2009		361			545			906
Exchange movements		(7	)		(6	)		(13	)
Arising on acquisition		—			20			20
Amounts capitalised in the year		40			—			40
Amounts charged to the income statement		—			259			259
Utilised in the year — payments		(3	)		(157	)		(160	)
Amounts released to the income statement		—			(37	)		(37	)
Other		(21	)		—			(21	)

31 March 2010		370			624			994
Exchange movements		(4	)		(12	)		(16	)
Amounts capitalised in the year		4			—			4
Amounts charged to the income statement		—			300			300
Utilised in the year — payments		(8	)		(193	)		(201	)
Amounts released to the income statement		—			(59	)		(59	)
Other		(47	)		66			19

31 March 2011		315			726			1,041

Provisions have been analysed between current and non-current as follows:


	2011		2010
	£m		£m

Current liabilities		559		497
Non-current liabilities		482		497

		1,041		994

Asset retirement obligations

In the course of the Group’s activities, a number of sites and other assets are utilised which are expected to have costs associated with exiting and ceasing their use. The associated cash outflows are generally expected to occur at the dates of exit of the assets to which they relate, which are long-term in nature.

Other provisions

Included within other provisions are provisions for legal and regulatory disputes and amounts provided for property and restructuring costs. The Group is involved in a number of legal and other disputes, including notification of possible claims. The directors of the Company, after taking legal advice, have established provisions after taking into account the facts of each case. The timing of cash outflows associated with legal claims cannot be reasonably determined. For a discussion of certain legal issues potentially affecting the Group, refer to note 28. The associated cash outflows for restructuring costs are substantially short-term in nature. The timing of the cash flows associated with property is dependent upon the remaining term of the associated lease.

120 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

25. Trade and other payables


	2011		2010
	£m		£m

Included within non-current liabilities:
Other payables		80		76
Accruals and deferred income		329		379
Derivative financial instruments		395		361

		804		816


Included within current liabilities:
Trade payables		4,453		3,254
Amounts owed to associates		23		17
Other taxes and social security payable		1,140		998
Other payables		520		650
Accruals and deferred income		8,409		9,064
Derivative financial instruments		153		99

		14,698		14,082

The carrying amounts of trade and other payables approximate their fair value. The fair values of the derivative financial instruments are calculated by discounting the future cash flows to net present values using appropriate market interest and foreign currency rates prevailing at 31 March.


	2011		2010
	£m		£m

Included within “Derivative financial instruments”:
Fair value through the income statement (held for trading):
Interest rate swaps		342		330
Foreign exchange swaps		153		95

		495		425

Fair value hedges:
Interest rate swaps		53		35

		548		460

26. Reconciliation of net cash flow from operating activities


	2011			2010			2009
	£m			£m			£m

Profit for the financial year		7,870			8,618			3,080
Adjustments for:
Share-based payments		156			150			128
Depreciation and amortisation		7,876			7,910			6,814
Loss on disposal of property, plant and equipment		91			101			10
Share of result in associates		(5,059	)		(4,742	)		(4,091	)
Impairment losses		6,150			2,100			5,900
Other income and expense		16			(114	)		—
Non-operating income and expense		(3,022	)		10			44
Investment income		(1,309	)		(716	)		(795	)
Financing costs		429			1,512			2,419
Income tax expense		1,628			56			1,109
(Increase)/decrease in inventory		(107	)		2			81
(Increase)/decrease in trade and other receivables		(387	)		(714	)		80
Increase/(decrease) in trade and other payables		1,060			1,164			(145	)

Cash generated by operations		15,392			15,337			14,634
Tax paid		(3,397	)		(2,273	)		(2,421	)

Net cash flow from operating activities		11,995			13,064			12,213

Vodafone Group Plc Annual Report 2011 121

Financials

27. Commitments

Operating lease commitments

The Group has entered into commercial leases on certain properties, network infrastructure, motor vehicles and items of equipment. The leases have various terms, escalation clauses, purchase options and renewal rights, none of which are individually significant to the Group.

Future minimum lease payments under non-cancellable operating leases comprise:


	2011		2010
	£m		£m

Within one year		1,225		1,200
In more than one year but less than two years		958		906
In more than two years but less than three years		746		776
In more than three years but less than four years		638		614
In more than four years but less than five years		602		512
In more than five years		2,344		2,235

		6,513		6,243

The total of future minimum sublease payments expected to be received under non-cancellable subleases is £240 million (2010: £246 million).

Capital commitments


	Company and subsidiaries				Share of joint ventures				Group
	2011		2010		2011		2010		2011		2010
	£m		£m		£m		£m		£m		£m

Contracts placed for future capital expenditure not provided in the financial statements⁽¹⁾		1,786		1,800		338		219		2,124		2,019

Note:


(1)		Commitment includes contracts placed for property, plant and equipment and intangible assets.

The commitments of Cellco Partnership (‘Cellco’), which trades under the name of Verizon Wireless, are disclosed within the consolidated financial statements of Cellco for the year ended 31 December 2010, which are included as an exhibit to our 2011 annual report on Form 20-F filed with the SEC.

28. Contingent liabilities


	2011		2010
	£m		£m

Performance bonds		94		246
Credit guarantees — third party indebtedness		114		76
Other guarantees and contingent liabilities		1,527		496

Performance bonds

Performance bonds require the Group to make payments to third parties in the event that the Group does not perform what is expected of it under the terms of any related contracts or commercial arrangements.

Credit guarantees — third party indebtedness

Credit guarantees comprise guarantees and indemnities of bank or other facilities including those in respect of the Group’s associates and investments.

Other guarantees and contingent liabilities

Other guarantees principally comprise commitments to the India Supreme Court of INR 85 billion (£1,188 million) in relation to the taxation matter discussed on page 122. The Group has pledged money market funds (£1,387 million) for this guarantee.

The Group also enters into lease arrangements in the normal course of business which are principally in respect of land, buildings and equipment. Further details on the minimum lease payments due under non-cancellable operating lease arrangements can be found in note 27.

The Company has covenanted to provide security in favour of the Trustee of the Vodafone Group UK Pension Scheme whilst there is a funding deficit in the scheme. The initial security was in the form of a Japanese law share pledge over 400,000 class 1 preferred shares of ¥200,000 in BB Mobile Corp. During the year, the Company and trustee agreed to replace the initial security with a charge over UK index linked gilts (‘ILG’) held by the Company. A charge in favour of the Trustee was agreed over ILG 2016 with a notional value of £100 million and ILG 2013 with a notional value of £48.9 million. The security may be replaced either on a voluntary or mandatory basis. As and when alternative security is provided, the Company has agreed that the security cover should include additional headroom of 33%, although if cash is used as the security asset the ratio will revert to 100% of the relevant liabilities or where the proposed replacement security asset is listed on an internationally recognised stock exchange in certain defined core jurisdictions, the trustee may decide to agree a lower ratio than 133%.

122 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

28. Contingent liabilities continued

Legal proceedings

The Company and its subsidiaries are currently, and may be from time to time, involved in a number of legal proceedings, including inquiries from, or discussions with, governmental authorities that are incidental to their operations. However, save as disclosed below, the Company and its subsidiaries are not currently involved in any legal or arbitration proceedings (including any governmental proceedings which are pending or known to be contemplated) which may have, or have had in the 12 months preceding the date of the approval of this report, a significant effect on the financial position or profitability of the Company and its subsidiaries. With the exception of the Vodafone 2 enquiry, due to inherent uncertainties, no accurate quantification of any cost, or timing of such cost, which may arise from any of the legal proceedings outlined below can be made.

The Company was one of a number of co-defendants in four actions filed in 2001 and 2002 in the Superior Court of the District of Columbia in the United States alleging personal injury, including brain cancer, from mobile phone use. The Company is not aware that the health risks alleged in such personal injury claims have been substantiated and vigorously defends such claims. In August 2007 the trial court dismissed all four actions against the Company on the basis of the federal pre-emption doctrine. On 29 October 2009 the District of Columbia Court of Appeals ruled on the plaintiffs’ appeal of the trial court’s dismissal of all claims in the action on the basis of the federal pre-emption doctrine. The Court of Appeals has upheld the dismissal of most claims. However, the decision permits the plaintiffs to continue any claims alleging i) injuries in respect of mobile phones purchased before 1 August 1996 (the date of the Federal Communication Commission’s Specific Absorption Rate standard (‘FCC standard’)); ii) injuries in respect of mobile phones alleged not to have complied with the FCC standard; and iii) fraud and misrepresentation in respect of the sale or marketing of mobile phones in question. The cases were returned to the trial court to be adjudicated in accordance with the Court of Appeals’ decision and on 3 May 2010 plaintiffs in the four actions filed amended complaints with the Superior Court. The defendants filed a motion to dismiss the amended complaints on 30 July 2010. The plaintiffs in these four actions have agreed to dismiss the Company from the actions on jurisdiction grounds. However, the plaintiffs have reserved the right to re-commence the actions against the Company if evidence supporting an assertion of jurisdiction were to emerge. On 30 September 2010 the plaintiffs filed a stipulation for the voluntary dismissal of the Company and the order granting the stipulation dismissing the Company without prejudice was entered on the court record on 5 October 2010.

On 22 July 2010 the Company settled the Vodafone 2 CFC case with HMRC by agreeing to pay £1.25 billion (comprising £800 million in the 2011 financial year, with the balance to be paid in instalments over the following five years) in respect of all outstanding CFC issues from 2001 to date. It was also agreed that no further UK CFC tax liabilities will arise in the near future under current legislation. Longer term, no CFC liabilities are expected to arise as a consequence of the likely reforms of the CFC regime due to the facts established in this agreement.

Vodafone Essar Limited (‘VEL’) and Vodafone International Holdings B.V. (‘VIHBV’) each received notices in August 2007 and September 2007 respectively, from the Indian tax authority alleging potential liability in connection with alleged failure by VIHBV to deduct withholding tax from consideration paid to the Hutchison Telecommunications International Limited group (‘HTIL’) in respect of HTIL’s gain on its disposal to VIHBV of its interests in a wholly-owned subsidiary that indirectly holds interests in VEL. Following the receipt of such notices, VEL and VIHBV each filed writs seeking orders that their respective notices be quashed and that the tax authority take no further steps under the notices. Initial hearings were held before the Bombay High Court and in the case of VIHBV the High Court admitted the writ for final hearing in June 2008. In December 2008 the High Court dismissed VIHBV’s writ. VIHBV subsequently filed a special leave petition to the Supreme Court to appeal the High Court’s dismissal of the writ. On 23 January 2009 the Supreme Court referred the question of the tax authority’s jurisdiction to seek to pursue tax back to the tax authority for

adjudication on the facts with permission granted to VIHBV to appeal that decision back to the High Court should VIHBV disagree with the tax authority’s findings. On 30 October 2009 VIHBV received a notice from the tax authority requiring VIHBV to show cause as to why it believed that the tax authority did not have competent jurisdiction to proceed against VIHBV for the default of non-deduction of withholding tax from consideration paid to HTIL. VIHBV provided a response on 29 January 2010. On 31 May 2010 VIHBV received an order from the Indian tax authority confirming their view that they did have jurisdiction to proceed against VIHBV as well as a further notice alleging that VIHBV should be treated as the agent of HTIL for the purpose of recovering tax on the transaction. VIHBV appealed this ruling to the Bombay High Court. On 8 September 2010 the Bombay High Court ruled that the tax authority had jurisdiction to decide whether the transaction or some part of the transaction could be taxable in India. VIHBV appealed this decision to the Supreme Court on 14 September 2010. A hearing before the Supreme Court took place on 27 September 2010 at which the Supreme Court noted the appeal and asked the tax authority to quantify any liability. On 22 October 2010 the Indian tax authority quantified the alleged tax liability and issued a demand for payment of INR 112.2 billion (£1.6 billion) of tax and interest. VIHBV has contested the amount of such demand both on the basis of the calculation and on the basis that no tax was due in any event. On 15 November 2010 VIHBV was asked to make a deposit with the Supreme Court of INR 25 billion (£356 million) and provide a guarantee for INR 85 billion (£1,188 million) pending final adjudication of the case, which request it duly complied with. The Supreme Court will now hear the appeal on the issue of jurisdiction as well as on the challenge to quantification on 19 July 2011. On 23 March 2011 VIHBV received a notice requesting it to explain why it should not be liable for penalties of up to 100% of any tax found due for alleged failure to withhold. On 15 April 2011 the Supreme Court, in response to an application made by VIHBV, allowed the Indian tax authority to continue its investigations into the application of penalties but stayed the Indian tax authorities from enforcing any liability until after the outcome of the Supreme Court hearing scheduled for 19 July 2011. After investigations, on 29 April 2011, the Indian tax authority raised an order alleging penalties were due but noting that these will not be enforced in line with the Supreme Court stay. In addition, the separate proceedings taken against VIHBV to seek to treat it as an agent of HTIL in respect of its alleged tax on the same transaction have been deferred until the outcome in the first matter is known. VEL’s case also continues to be stayed pending the outcome of the VIHBV Supreme Court hearing. VIHBV believes that neither it nor any other member of the Group is liable for such withholding tax, or is liable to be made an agent of HTIL; however, the outcome of the proceedings remains uncertain and such proceedings may or may not dispose of the matter in its entirety and there can be no assurance that any outcome will be favourable to VIHBV or the Group.

In light of the uncertainty created by the Indian tax authority’s actions as set out above, VIHBV, through its indirect wholly owned subsidiary Euro Pacific Securities Ltd, has sought confirmation from the Authority for Advanced Rulings (‘AAR’) in India on whether tax should be withheld in respect of consideration payable on the acquisition of Essar Group’s (‘Essar’) offshore holding in VEL. A ruling from the AAR is expected by the end of May 2011 at the latest. The Group does not believe that there is any legal requirement to withhold tax in respect of these transactions but if, contrary to expectations, the AAR directs tax to be withheld, this amount is anticipated to be approximately an additional US$1 billion.

Vodafone Group Plc Annual Report 2011 123

Financials

29. Directors and key management compensation

Directors

Aggregate emoluments of the directors of the Company were as follows:


	2011		2010		2009
	£m		£m		£m

Salaries and fees		5		5		4
Incentive schemes		3		3		2
Other benefits⁽¹⁾		1		1		1	⁽²⁾

		9		9		7

Notes:


(1)		Includes the value of the cash allowance taken by some individuals in lieu of pension contributions.

(2)		Includes the value of payments in respect of loss of office and relocation to the US.

The aggregate gross pre-tax gain made on the exercise of share options in the year ended 31 March 2011 by directors who served during the year was £nil (2010: £1 million, 2009: £nil).

Further details of directors’ emoluments can be found in “Directors’ remuneration” on pages 62 to 73.

Key management compensation

Aggregate compensation for key management, being the directors and members of the Executive Committee, was as follows:


	2011		2010		2009
	£m		£m		£m

Short-term employee benefits		18		21		17
Post-employment benefits — defined contribution schemes		1		1		1
Share-based payments		22		20		14

		41		42		32

30. Related party transactions

The Group’s related parties are its joint ventures (see note 13), associates (see note 14), pension schemes, directors and Executive Committee members. Group contributions to pension schemes are disclosed in note 23. Compensation paid to the Company’s Board and members of the Executive Committee is disclosed in note 29.

Transactions with joint ventures and associates

Related party transactions with the Group’s joint ventures and associates primarily comprise fees for the use of products and services including network airtime and access charges, and cash pooling arrangements.

No related party transactions have been entered into during the year which might reasonably affect any decisions made by the users of these consolidated financial statements except as disclosed below. Transactions between the Company and its joint ventures are not material to the extent that they have not been eliminated through proportionate consolidation or disclosed below.


	2011			2010			2009
	£m			£m			£m

Sales of goods and services to associates		327			281			205
Purchase of goods and services from associates		171			159			223
Purchase of goods and services from joint ventures		206			194			57
Net interest receivable from joint ventures⁽¹⁾		(14	)		(44	)		(18	)


Trade balances owed:
by associates		52			24			50
to associates		23			17			18
by joint ventures		27			27			10
to joint ventures		67			40			33
Other balances owed by joint ventures⁽¹⁾		176			751			311

Note:


(1)		Amounts arise primarily through Vodafone Italy, Vodafone Hutchison Australia and Indus Towers and represent amounts not eliminated on consolidation. Interest is paid in line with market rates.

Amounts owed by and owed to associates are disclosed within notes 17 and 25. Dividends received from associates are disclosed in the consolidated statement of cash flows.

124 Vodafone Group Plc Annual Report 2011

Notes to the consolidated financial statements continued

30. Related party transactions continued

Transactions with directors other than compensation

During the three years ended 31 March 2011, and as of 16 May 2011, neither any director nor any other executive officer, nor any associate of any director or any other executive officer, was indebted to the Company.

During the three years ended 31 March 2011, and as of 16 May 2011, the Company has not been a party to any other material transaction, or proposed transactions, in which any member of the key management personnel (including directors, any other executive officer, senior manager, any spouse or relative of any of the foregoing or any relative of such spouse) had or was to have a direct or indirect material interest.

31. Employees

The average employee headcount during the year by nature of activity and by segment is shown below. During the year the Group changed its organisation structure. The information on employees by segment are presented on the revised basis, with prior years amended to conform to the current year presentation.


	2011		2010		2009
	Employees		Employees		Employees

By activity:
Operations		14,171		14,099		13,889
Selling and distribution		28,311		27,398		25,174
Customer care and administration		41,380		43,493		40,034

		83,862		84,990		79,097


By segment:
Germany		12,594		13,507		13,788
Italy		6,121		6,207		6,247
Spain		4,389		4,326		4,354
UK		8,174		9,766		10,350
Other Europe		18,953		18,582		19,015

Europe		50,231		52,388		53,754


India		10,743		10,132		8,674
Vodacom		7,320		6,833		3,246
Other Africa, Middle East and Asia Pacific		10,896		10,887		9,525

Africa, Middle East and Asia Pacific		28,959		27,852		21,445


Non-Controlled Interests and Common Functions		4,672		4,750		3,898

Total		83,862		84,990		79,097

The cost incurred in respect of these employees (including directors) was:


	2011		2010		2009
	£m		£m		£m

Wages and salaries		2,960		3,045		2,607
Social security costs		392		415		379
Share-based payments (note 20)		156		150		128
Other pension costs (note 23)		134		160		113

		3,642		3,770		3,227

32. Subsequent events

SFR

On 3 April 2011 the Group announced an agreement to sell its entire 44% shareholding in SFR to Vivendi for cash consideration of €7.75 billion (£6.8 billion). The Group will also receive a final dividend from SFR of €200 million (£176 million) on completion of the transaction.

Subject to customary competition authority and regulatory approvals, the transaction is expected to complete during the second calendar quarter of 2011.

At 31 March 2011 the SFR investment had a carrying value of £4.2 billion and was reported within the Non-Controlled Investments and Common Functions segment.

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132 Vodafone Group Plc Annual Report 2011

Shareholder information

Financial calendar for the 2012 financial year



Interim management statement				22 July 2011
Half-year financial results announcement				8 November 2011

Further details will be published at www.vodafone.com/investor as they become available. Results announcements are available online at www.vodafone.com/investor — we do not publish them in the press.

Dividends

Full details on the dividend amount per share can be found on page 47. Set out below is information relevant to the final dividend for the year ended 31 March 2011.



Ex-dividend date				1 June 2011
Record date				3 June 2011
Dividend reinvestment plan last election date				15 July 2011
Dividend payment date⁽¹⁾				5 August 2011

Note:


(1)		Payment date for both ordinary shares and american depositary shares (‘ADSs’).

Dividend payment methods

Currently holders of ordinary shares and ADSs can:

•		have cash dividends paid direct to a bank or building society account; or

•		elect to use the cash dividends to purchase more Vodafone ordinary shares under the dividend reinvestment plan (see below) or, in the case of ADSs, have the dividends reinvested to purchase additional Vodafone ADSs.

ADS holders can, in addition to the above, have their cash dividends paid in the form of a cheque.

Holders of ordinary shares:

•		resident in the UK automatically receive their dividends in pounds sterling provided that UK bank details have been provided to the Company;

•		resident in the eurozone (defined for this purpose as a country that has adopted the euro as its national currency) automatically receive their dividends in euros provided that euro bank details have been provided to the Company; and

•

resident outside the UK and eurozone automatically receive dividends in pounds sterling by lodging UK bank account details but may elect to receive dividends in local currency into their bank account directly via our registrars’ global payments service. Visit www.investorcentre.co.uk for details, and terms and conditions.

For dividend payments in euros, the sterling/euro exchange rate will be determined by us in accordance with the Company’s articles of association, up to 13 business days prior to the payment date.

We will pay the ADS depositary, BNY Mellon, its dividend in US dollars. The sterling/US dollar exchange rate for this purpose will be determined by us up to ten New York and London business days prior to the payment date. Cash dividends to ADS holders will be paid by the ADS depositary in US dollars.

Further information about the dividend payments can be found at www. vodafone.com/dividends or, alternatively, please contact our registrars or the ADS depositary, as applicable, for further details.

Dividend reinvestment

We offer a dividend reinvestment plan which allows holders of ordinary shares, who choose to participate, to use their cash dividends to acquire additional shares in the Company. These are purchased on their behalf by the plan administrator through a low cost dealing arrangement.

For ADS holders BNY Mellon maintains a Global Buy DIRECT Plan which is a direct purchase and sale plan for depositary receipts with a dividend reinvestment facility.

Telephone share dealing

A telephone share dealing service operated by our registrars is available for holders of ordinary shares. The service is available from 8.00 am to 4.30 pm, Monday to Friday, excluding bank holidays, on telephone number +44 (0)870 703 0084. Detailed terms and conditions are available on request by calling the above number.

Registrars and transfer office

If private shareholders have any enquiries about their holding of ordinary shares, such as a change of address, change of ownership or dividend payments, they should contact our registrars at the address or telephone number below. Computershare Investor Services PLC maintain the Company’s share register and holders of ordinary shares can visit the registrars’ investor centre at www.investorcentre.co.uk to view and update details of their shareholding.

ADS holders should address any queries or instructions regarding their holdings to the depositary bank for the Company’s ADR programme at the address or telephone number below. At www.bnymellon.com/shareowner ADS holders can view their account information, make changes and conduct many other transactions.


The Registrars		Holders of ordinary shares resident in Ireland:
Computershare Investor Services PLC		Computershare Investor Services (Ireland) Limited
The Pavilions		PO Box 9742
Bridgwater Road, Bristol BS99 6ZZ, England		Dublin 18, Ireland
Telephone: +44 (0)870 702 0198		Telephone: +353 (0)818 300 999
www.investorcentre.co.uk/contactus		www.investorcentre.co.uk/contactus

ADS depositary
BNY Mellon
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516, US
Telephone: +1 800 233 5601 (toll free) or, for calls outside the US,
+1 201 680 6837 (not toll free) and enter company number 2160
Email: shrrelations@bnymellon.com

Vodafone Group Plc Annual Report 2011 133

Additional information

Internet share dealing

An internet share dealing service is available for holders of ordinary shares who want to buy or sell ordinary shares. Further information about this service can be obtained from our registrars on +44 (0)870 702 0198 or by logging onto www.computershare.com/dealing/uk.

Online shareholder services

We provide a number of shareholder services online at www.vodafone.com/ investor where shareholders may:

•		register to receive electronic shareholder communications. Benefits to shareholders include faster receipt of communications, such as annual reports, with cost and time savings for the Company. Electronic shareholder communications are also more environmentally friendly;

•		update registered address or dividend bank mandate instructions;

•		view and/or download the 2011 annual report;

•		check the current share price;

•		calculate dividend payments; and

•		use interactive tools to calculate the value of shareholdings, look up the historic price on a particular date and chart Vodafone ordinary share price changes against indices.

Shareholders and other interested parties can also receive company press releases, including London Stock Exchange announcements, by registering for Vodafone news via the website at www.vodafone.com/media. Registering for Vodafone news will enable users to:

•		access the latest news from their mobile; and

•		have news automatically emailed to them.

Annual general meeting (‘AGM’)

The twenty-seventh AGM of the Company will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1P 3EE on 26 July 2011 at 11.00 a.m.

A combined review of the year and notice of AGM, including details of the business to be conducted at the AGM, will be circulated to shareholders or can be viewed on our website at www.vodafone.com/agm. Shareholders who have registered to receive communications electronically will receive an email notification when the document is available to view on the website.

The AGM will be transmitted via a live webcast which can be viewed on the website at www.vodafone.com/agm on the day of the meeting and a recording will be available to view after that date.

ShareGift

We support ShareGift, the charity share donation scheme (registered charity number 1052686). Through ShareGift shareholders who have only a very small number of shares, which might be considered uneconomic to sell, are able to donate them to charity. Donated shares are aggregated and sold by ShareGift, the proceeds being passed on to a wide range of UK charities. Donating shares to charity gives rise neither to a gain nor a loss for UK capital gains tax purposes and UK taxpayers may also be able to claim income tax relief on the value of the donation.

ShareGift transfer forms specifically for our shareholders are available from our registrars, Computershare Investor Services PLC, and even if the share certificate has been lost or destroyed, the gift can be completed. The service is generally free. However, there may be an indemnity charge for a lost or destroyed share certificate where the value of the shares exceeds £100. Further details about ShareGift can be obtained from its website at www.ShareGift.org or at 17 Carlton House Terrace, London SW1Y 5AH (telephone: +44 (0)207 930 3737).

Asset Checker Limited

We participate in Asset Checker, the online service which provides a search facility for solicitors and probate professionals to quickly and easily trace UK shareholdings relating to deceased estates. For further information visit www.assetchecker.co.uk or call +44 (0)870 707 4004.

Share price history

Upon flotation of the Company on 11 October 1988 the ordinary shares were valued at 170 pence each. When the Company was finally demerged on 16 September 1991 the base cost of Racal Electronics Plc shares for UK taxpayers was apportioned between the Company and Racal Electronics Plc for Capital Gains Tax purposes in the ratio of 80.036% and 19.964% respectively. Opening share prices on 16 September 1991 were 332 pence for each Vodafone share and 223 pence for each Racal share.

On 21 July 1994 the Company effected a bonus issue of two new shares for every one then held and on 30 September 1999 it effected a bonus issue of four new shares for every one held at that date. The flotation and demerger share prices therefore may be restated as 11.333 pence and 22.133 pence respectively.

On 31 July 2006 the Group returned approximately £9 billion to shareholders in the form of a B share arrangement. As part of this arrangement, and in order to facilitate historical share price comparisons, the Group’s share capital was consolidated on the basis of seven new ordinary shares for every eight ordinary shares held at this date. Share prices in the five year data table below have not been restated to reflect this consolidation.

The closing share price at 31 March 2011 was 176.5 pence (31 March 2010: 152.0 pence). The closing share price on 16 May 2011 was 168.3 pence.

The following tables set out, for the periods indicated, i) the reported high and low middle market quotations of ordinary shares on the London Stock Exchange, and ii) the reported high and low sales prices of ADSs on the New York Stock Exchange (‘NYSE’)/NASDAQ. The Company transferred its ADSs from the NYSE to NASDAQ on 29 October 2009.


	London Stock
	Exchange
	Pounds per				NYSE/NASDAQ⁽¹⁾
	ordinary share				Dollars per ADS
Year ended 31 March	High		Low		High		Low

2007		1.54		1.08		29.85		20.07
2008		1.98		1.36		40.87		26.88
2009		1.70		0.96		32.87		15.30
2010		1.54		1.11		24.04		17.68
2011		1.85		1.27		32.70		18.21


	London Stock
	Exchange
	Pounds per				NYSE/NASDAQ⁽¹⁾
	ordinary share				Dollars per ADS
Quarter	High		Low		High		Low

2009/2010
First quarter		1.33		1.11		20.08		17.68
Second quarter		1.44		1.12		23.85		18.25
Third quarter		1.45		1.32		24.04		21.10
Fourth quarter		1.54		1.32		23.32		21.32

2010/2011
First quarter		1.53		1.27		23.79		18.21
Second quarter		1.65		1.36		25.80		20.71
Third quarter		1.80		1.57		28.52		28.84
Fourth quarter		1.85		1.67		32.70		26.34

2011/2012
First quarter⁽²⁾		1.83		1.66		29.46		27.12


	London Stock
	Exchange
	Pounds per				NASDAQ
	ordinary share				Dollars per ADS
Month	High		Low		High		Low

November 2010		1.80		1.59		28.52		24.84
December 2010		1.72		1.60		27.10		25.62
January 2011		1.85		1.68		32.70		26.34
February 2011		1.83		1.72		29.75		27.90
March 2011		1.85		1.67		29.67		26.71
April 2011		1.83		1.69		29.46		28.06
May 2011⁽²⁾		1.74		1.66		29.27		27.12

Notes:


(1)		The Company transferred its ADSs from the NYSE to NASDAQ on 29 October 2009.

(2)		Covering period up to 16 May 2011.

134 Vodafone Group Plc Annual Report 2011

Shareholder information continued

Inflation and foreign currency translation

Inflation

Inflation has not had a significant effect on the Group’s results of operations and financial condition during the three years ended 31 March 2011.

Foreign currency translation

The following table sets out the pounds sterling exchange rates of the other principal currencies of the Group, being: “euros”, “€” or “eurocents”, the currency of the European Union (‘EU’) member states which have adopted the euro as their currency, and “US dollars”, “US$”, “cents” or “¢”, the currency of the US.


	31 March				%
Currency (=£1)	2011		2010		change

Average:
Euro		1.18		1.13		4.4
US dollar		1.56		1.60		(2.5	)
At 31 March:
Euro		1.13		1.12		0.9
US dollar		1.61		1.52		5.9

The following table sets out, for the periods and dates indicated, the period end, average, high and low exchanges rates for pounds sterling expressed in US dollars per £1.00.


Year ended 31 March	31 March		Average		High		Low

2007		1.97		1.89		1.98		1.74
2008		1.99		2.01		2.11		1.94
2009		1.43		1.72		2.00		1.37
2010		1.52		1.60		1.70		1.44
2011		1.61		1.56		1.64		1.43

The following table sets out, for the periods indicated, the high and low exchange rates rates for pounds sterling expressed in US dollars per £1.00.


Month	High		Low

November 2010		1.63		1.56
December 2010		1.59		1.54
January 2011		1.60		1.55
February 2011		1.63		1.60
March 2011		1.64		1.60
April 2011		1.67		1.61

Markets

Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and in the form of ADSs on NASDAQ. The Company had a total market capitalisation of approximately £86.4 billion at 16 May 2011 making it the second largest listing in The Financial Times Stock Exchange 100 index and the 28^th largest company in the world based on market capitalisation at that date.

ADSs, each representing ten ordinary shares, are traded on NASDAQ under the symbol ‘VOD’. The ADSs are evidenced by ADRs issued by BNY Mellon, as depositary, under a deposit agreement, dated as of 12 October 1988, as amended and restated on 26 December 1989, 16 September 1991, 30 June 1999, 31 July 2006 and 30 July 2009 between the Company, the depositary and the holders from time to time of ADRs issued thereunder.

ADS holders are not members of the Company but may instruct BNY Mellon on the exercise of voting rights relative to the number of ordinary shares represented by their ADSs. See “Articles of association and applicable English law — Rights attaching to the Company’s shares — Voting rights” on page 135.

Shareholders at 31 March 2011


	Number of		% of total
Number of ordinary shares held	accounts		issued shares

1 – 1,000		430,021		0.21
1,001 – 5,000		79,461		0.32
5,001 – 50,000		27,629		0.61
50,001 – 100,000		1,126		0.14
100,001 – 500,000		1,094		0.44
More than 500,000		1,636		98.28

		540,967		100.00

Geographical analysis of shareholders

At 31 March 2011 approximately 46.9% of the Company’s shares were held in the UK, 30.2% in North America, 14.4% in Europe (excluding the UK) and 8.5% in the rest of the world.

Major shareholders

BNY Mellon, as custodian of the Company’s ADR programme, held approximately 17% of the Company’s ordinary shares of 11³/7 US cents each at 16 May 2011 as nominee. The total number of ADRs outstanding at 16 May 2011 was 886,242,945. At this date 1,369 holders of record of ordinary shares had registered addresses in the US and in total held approximately 0.007% of the ordinary shares of the Company. At 16 May 2011 the following percentage interests in the ordinary share capital of the Company, disclosable under the Disclosure and Transparency Rules, (DTR 5), have been notified to the directors:


Shareholder	Shareholding

Black Rock, Inc.		6.00	%
Legal & General Group Plc		3.59	%

The rights attaching to the ordinary shares of the Company held by these shareholders are identical in all respects to the rights attaching to all the ordinary shares of the Company. The directors are not aware, at 16 May 2011, of any other interest of 3% or more in the ordinary share capital of the Company. The Company is not directly or indirectly owned or controlled by any foreign government or any other legal entity. There are no arrangements known to the Company that could result in a change of control of the Company.

Articles of association and applicable English law

The following description summarises certain provisions of the Company’s articles of association and applicable English law. This summary is qualified in its entirety by reference to the Companies Act 2006 of England and Wales and the Company’s articles of association. Information on where shareholders can obtain copies of the articles of association is provided under “Documents on display” on page 137.

The Company is a public limited company under the laws of England and Wales. The Company is registered in England and Wales under the name Vodafone Group Public Limited Company with the registration number 1833679.

All of the Company’s ordinary shares are fully paid. Accordingly, no further contribution of capital may be required by the Company from the holders of such shares.

English law specifies that any alteration to the articles of association must be approved by a special resolution of the shareholders.

Articles of association

Pursuant to the Companies Act 2006, the object clauses and other provisions which are contained in a company’s memorandum of association are deemed to be contained in the company’s articles of association unless they are removed by a special resolution of the company. If removed, the company’s objects are unrestricted.

By a special resolution passed at the 2010 AGM the Company removed its object clause together with all other provisions of its memorandum of association which, by virtue of the Companies Act 2006, are treated as forming part of the Company’s articles of association.

Vodafone Group Plc Annual Report 2011 135

Additional information

Directors

The Company’s articles of association provide for a Board of directors, consisting of not fewer than three directors, who shall manage the business and affairs of the Company.

The directors are empowered to exercise all the powers of the Company subject to any restrictions in the articles of association, the Companies Act (as defined in the articles of association) and any special resolution.

Under the Company’s articles of association a director cannot vote in respect of any proposal in which the director, or any person connected with the director, has a material interest other than by virtue of the director’s interest in the Company’s shares or other securities. However, this restriction on voting does not apply to resolutions i) giving the director or a third party any guarantee, security or indemnity in respect of obligations or liabilities incurred at the request of or for the benefit of the Company, ii) giving any guarantee, security or indemnity to the director or a third party in respect of obligations of the Company for which the director has assumed responsibility under an indemnity or guarantee, iii) relating to an offer of securities of the Company in which the director is entitled to participate as a holder of shares or other securities or in the underwriting of such shares or securities, iv) concerning any other company in which the director (together with any connected person) is a shareholder or an officer or is otherwise interested, provided that the director (together with any connected person) is not interested in 1% or more of any class of the Company’s equity share capital or the voting rights available to its shareholders, v) relating to the arrangement of any employee benefit in which the director will share equally with other employees and vi) relating to any insurance that the Company purchases or renews for its directors or any group of people including directors.

The directors are empowered to exercise all the powers of the Company to borrow money, subject to the limitation that the aggregate amount of all liabilities and obligations of the Group outstanding at any time shall not exceed an amount equal to 1.5 times the aggregate of the Group’s share capital and reserves calculated in the manner prescribed in the articles of association unless sanctioned by an ordinary resolution of the Company’s shareholders.

The Company can make market purchases of its own shares or agree to do so in the future provided it is duly authorised by its members in a general meeting and subject to and in accordance with Section 701 of the Companies Act 2006.

At each AGM all directors who were elected or last re-elected at or before the AGM held in the third calendar year before the current year shall automatically retire. In 2005 the Company reviewed its policy regarding the retirement and re-election of directors and, although it is not intended to amend the Company’s articles of association in this regard, the Board has decided in the interests of good corporate governance that all of the directors wishing to continue in office should offer themselves for re-election annually.

Directors are not required under the Company’s articles of association to hold any shares of the Company as a qualification to act as a director, although executive directors participating in long-term incentive plans must comply with the Company’s share ownership guidelines. In accordance with best practice in the UK for corporate governance, compensation awarded to executive directors is decided by a remuneration committee consisting exclusively of non-executive directors.

In addition, as required by The Directors’ Remuneration Report Regulations, the Board has, since 2003, prepared a report to shareholders on the directors’ remuneration which complies with the regulations (see pages 62 to 73). The report is also subject to a shareholder vote.

Rights attaching to the Company’s shares

At 31 March 2011 the issued share capital of the Company was comprised of 50,000 7% cumulative fixed rate shares of £1.00 each and 51,577,525,830 ordinary shares (excluding treasury shares) of 11³/7 US cents each.

Dividend rights

Holders of 7% cumulative fixed rate shares are entitled to be paid in respect of each financial year, or other accounting period of the Company, a fixed cumulative preferential dividend of 7% per annum on the nominal value of the fixed rate shares. A fixed cumulative preferential dividend may only be paid out of available distributable profits which the directors have resolved should be distributed. The fixed rate shares do not have any other right to share in the Company’s profits.

Holders of the Company’s ordinary shares may, by ordinary resolution, declare dividends but may not declare dividends in excess of the amount recommended by the directors. The Board of directors may also pay interim dividends. No dividend may be paid other than out of profits available for distribution. Dividends on ordinary shares can be paid to shareholders in whatever currency the directors decide, using an appropriate exchange rate for any currency conversions which are required.

If a dividend has not been claimed for one year after the date of the resolution passed at a general meeting declaring that dividend or the resolution of the directors providing for payment of that dividend, the directors may invest the dividend or use it in some other way for the benefit of the Company until the dividend is claimed. If the dividend remains unclaimed for 12 years after the relevant resolution either declaring that dividend or providing for payment of that dividend, it will be forfeited and belong to the Company.

Voting rights

The Company’s articles of association provide that voting on substantive resolutions (i.e. any resolution which is not a procedural resolution) at a general meeting shall be decided on a poll. On a poll, each shareholder who is entitled to vote and is present in person or by proxy has one vote for every share held. Procedural resolutions (such as a resolution to adjourn a general meeting or a resolution on the choice of Chairman of a general meeting) shall be decided on a show of hands, where each shareholder who is present at the meeting has one vote regardless of the number of shares held, unless a poll is demanded. In addition, the articles of association allow persons appointed as proxies of shareholders entitled to vote at general meetings to vote on a show of hands, as well as to vote on a poll and attend and speak at general meetings. The articles of association also allow persons appointed as proxies by two or more shareholders entitled to vote at general meetings to vote for and against a resolution on a show of hands.

Under English law two shareholders present in person constitute a quorum for purposes of a general meeting unless a company’s articles of association specify otherwise. The Company’s articles of association do not specify otherwise, except that the shareholders do not need to be present in person and may instead be present by proxy to constitute a quorum.

Under English law shareholders of a public company such as the Company are not permitted to pass resolutions by written consent.

Record holders of the Company’s ADSs are entitled to attend, speak and vote on a poll or a show of hands at any general meeting of the Company’s shareholders by the depositary’s appointment of them as corporate representatives with respect to the underlying ordinary shares represented by their ADSs. Alternatively holders of ADSs are entitled to vote by supplying their voting instructions to the depositary or its nominee who will vote the ordinary shares underlying their ADSs in accordance with their instructions.

Employees are able to vote any shares held under the Vodafone Group Share Incentive Plan and ‘My ShareBank’ (a vested nominee share account) through the respective plan’s trustees.

Holders of the Company’s 7% cumulative fixed rate shares are only entitled to vote on any resolution to vary or abrogate the rights attached to the fixed rate shares. Holders have one vote for every fully paid 7% cumulative fixed rate share.

136 Vodafone Group Plc Annual Report 2011

Shareholder information continued

Liquidation rights

In the event of the liquidation of the Company, after payment of all liabilities and deductions in accordance with English law, the holders of the Company’s 7% cumulative fixed rate shares would be entitled to a sum equal to the capital paid up on such shares, together with certain dividend payments, in priority to holders of the Company’s ordinary shares. The holders of the fixed rate shares do not have any other right to share in the Company’s surplus assets.

Pre-emptive rights and new issues of shares

Under Section 549 of the Companies Act 2006 directors are, with certain exceptions, unable to allot the Company’s ordinary shares or securities convertible into the Company’s ordinary shares without the authority of the shareholders in a general meeting. In addition, Section 561 of the Companies Act 2006 imposes further restrictions on the issue of equity securities (as defined in the Companies Act 2006 which include the Company’s ordinary shares and securities convertible into ordinary shares) which are, or are to be, paid up wholly in cash and not first offered to existing shareholders. The Company’s articles of association allow shareholders to authorise directors for a period specified in the relevant resolution to allot i) relevant securities generally up to an amount fixed by the shareholders and ii) equity securities for cash other than in connection with a pre-emptive offer up to an amount specified by the shareholders and free of the pre-emption restriction in Section 561. At the AGM in 2010 the amount of relevant securities fixed by shareholders under (i) above and the amount of equity securities specified by shareholders under (ii) above were both in line with corporate governance guidelines. The directors consider it desirable to have the maximum flexibility permitted by corporate governance guidelines to respond to market developments and to enable allotments to take place to finance business opportunities as they arise. In order to retain such maximum flexibility, the directors propose to renew the authorities granted by shareholders in 2010 at this year’s AGM. Further details of such proposals are provided in the 2011 notice of AGM.

Disclosure of interests in the Company’s shares

There are no provisions in the articles of association whereby persons acquiring, holding or disposing of a certain percentage of the Company’s shares are required to make disclosure of their ownership percentage although such requirements exist under rules derived from the Disclosure and Transparency Rules (‘DTRs’).

The basic disclosure requirement upon a person acquiring or disposing of shares that are admitted to trading on a regulated market and carrying voting rights is an obligation to provide written notification to the Company, including certain details as set out in DTR 5, where the percentage of the person’s voting rights which he holds as shareholder or through his direct or indirect holding of financial instruments (falling within DTR 5.3.1R) reaches or exceeds 3% and reaches, exceeds or falls below each 1% threshold thereafter.

Under Section 793 of the Companies Act 2006 the Company may, by notice in writing, require a person that the Company knows or has reasonable cause to believe is, or was during the preceding three years, interested in the Company’s shares to indicate whether or not that is correct and, if that person does or did hold an interest in the Company’s shares, to provide certain information as set out in the Companies Act 2006. DTR 3 deals with the disclosure by persons “discharging managerial responsibility” and their connected persons of the occurrence of all transactions conducted on their account in the shares of the Company. Part 28 of The Companies Act 2006 sets out the statutory functions of the Panel on Takeovers & Mergers (the ‘Panel’). The Panel is responsible for issuing and administering the Code on Takeovers & Mergers which includes disclosure requirements on all parties to a takeover with regard to dealings in the securities of an offeror or offeree company and also on their respective associates during the course of an offer period.

General meetings and notices

Subject to the articles of association, annual general meetings are held at such times and place as determined by the directors of the Company. The directors may also, when they think fit, convene other general meetings of the Company. General meetings may also be convened on requisition as provided by the Companies Act 2006.

An annual general meeting needs to be called by not less than 21 days’ notice in writing. Subject to obtaining shareholder approval on an annual basis, the Company may call other general meetings on 14 days’ notice. The directors may determine that persons entitled to receive notices of meetings are those persons entered on the register at the close of business on a day determined by the directors but not later than twenty-one days before the date the relevant notice is sent. The notice may also specify the record date, the time of which shall be determined in accordance with the articles of association and the Companies Act 2006.

Shareholders must provide the Company with an address or (so far as the Companies Act 2006 allows) an electronic address or fax number in the United Kingdom in order to be entitled to receive notices of shareholders’ meetings and other notices and documents. In certain circumstances the Company may give notices to shareholders by publication on the Company’s website and advertisement in newspapers in the United Kingdom. Holders of the Company’s ADSs are entitled to receive notices under the terms of the deposit agreement relating to the ADSs.

Under Section 336 of the Companies Act 2006 the annual general meeting of shareholders must be held each calendar year and within six months of the Company’s year end.

Electronic communications

The Company has previously passed a resolution allowing it to communicate all shareholder information by electronic means, including making such information available on the Company’s website. Those shareholders who have positively elected for website communication (or are deemed to have consented to receive electronic communication in accordance with the Companies Act 2006) will receive written notification whenever shareholder documentation is made available on the website.

Variation of rights

If at any time the Company’s share capital is divided into different classes of shares, the rights attached to any class may be varied, subject to the provisions of the Companies Act 2006, either with the consent in writing of the holders of three quarters in nominal value of the shares of that class or at a separate meeting of the holders of the shares of that class.

At every such separate meeting all of the provisions of the articles of association relating to proceedings at a general meeting apply, except that i) the quorum is to be the number of persons (which must be at least two) who hold or represent by proxy not less than one third in nominal value of the issued shares of the class or, if such quorum is not present on an adjourned meeting, one person who holds shares of the class regardless of the number of shares he holds, ii) any person present in person or by proxy may demand a poll and iii) each shareholder will have one vote per share held in that particular class in the event a poll is taken. Class rights are deemed not to have been varied by the creation or issue of new shares ranking equally with or subsequent to that class of shares in sharing in profits or assets of the Company or by a redemption or repurchase of the shares by the Company.

Limitations on voting and shareholding

As far as the Company is aware there are no limitations imposed on the transfer, holding or voting of the Company’s ordinary shares other than those limitations that would generally apply to all of the shareholders. No shareholder has any securities carrying special rights with regard to control of the Company.

Vodafone Group Plc Annual Report 2011 137

Additional information

Documents on display

The Company is subject to the information requirements of the Exchange Act applicable to foreign private issuers. In accordance with these requirements the Company files its annual report on Form 20-F and other related documents with the SEC. These documents may be inspected at the SEC’s public reference rooms located at 100 F Street, NE Washington, DC 20549. Information on the operation of the public reference room can be obtained in the US by calling the SEC on +1-800-SEC-0330. In addition, some of the Company’s SEC filings, including all those filed on or after 4 November 2002, are available on the SEC’s website (www.sec.gov). Shareholders can also obtain copies of the Company’s articles of association from our website at www.vodafone.com/governance or from the Company’s registered office.

Material contracts

At the date of this annual report the Group is not party to any contracts that are considered material to the Group’s results or operations except for its US$4.2 billion and €4.2 billion credit facilities which are discussed under “Financial position and resources” on page 50.

Exchange controls

There are no UK government laws, decrees or regulations that restrict or affect the export or import of capital, including but not limited to, foreign exchange controls on remittance of dividends on the ordinary shares or on the conduct of the Group’s operations.

Taxation

As this is a complex area investors should consult their own tax advisor regarding the US federal, state and local, the UK and other tax consequences of owning and disposing of shares and ADSs in their particular circumstances.

This section describes, primarily for a US holder (as defined below), in general terms, the principal US federal income tax and UK tax consequences of owning or disposing of shares or ADSs in the Company held as capital assets (for US and UK tax purposes). This section does not, however, cover the tax consequences for members of certain classes of holders subject to special rules including officers of the Company, employees and holders that, directly or indirectly, hold 10% or more of the Company’s voting stock.

A US holder is a beneficial owner of shares or ADSs that is for US federal income tax purposes:

•		a citizen or resident of the US;

•		a US domestic corporation;

•		an estate, the income of which is subject to US federal income tax regardless of its source; or

•		a trust, if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust.

If a partnership holds the shares or ADSs, the US federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the shares or ADSs should consult its tax advisor with regard to the US federal income tax treatment of an investment in the shares or ADSs.

This section is based on the US Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, and on the tax laws of the United Kingdom and the Double Taxation Convention between the United States and the United Kingdom (the ‘treaty’), all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

This section is further based in part upon the representations of the depositary and assumes that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms.

Based on this assumption, for purposes of the treaty and the US-UK double taxation convention relating to estate and gift taxes (the ‘Estate Tax Convention’), and for US federal income tax and UK tax purposes, a holder of ADRs evidencing ADSs will be treated as the owner of the shares in the Company represented by those ADSs. Generally exchanges of shares for ADRs and ADRs for shares will not be subject to US federal income tax or to UK tax other than stamp duty or stamp duty reserve tax (see the section on these taxes below).

Taxation of dividends

UK taxation

Under current UK tax law no withholding tax will be deducted from the dividends we pay. Shareholders who are within the charge to UK corporation tax will be subject to corporation tax on the dividends we pay unless the dividends fall within an exempt class and certain other conditions are met. It is expected that the dividends we pay would generally be exempt.

A shareholder in the Company who is an individual resident for UK tax purposes in the United Kingdom is entitled, in calculating their liability to UK income tax, to a tax credit on cash dividends we pay on our shares or ADSs and the tax credit is equal to one-ninth of the cash dividend.

US federal income taxation

Subject to the PFIC rules described below, a US holder is subject to US federal income taxation on the gross amount of any dividend we pay out of our current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid to a non-corporate US holder in tax years beginning before 1 January 2013 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15% provided that the ordinary shares or ADSs are held for more than 60 days during the 121 day period beginning 60 days before the ex-dividend date and the holder meets other holding period requirements. Dividends paid by us with respect to the shares or ADSs will generally be qualified dividend income. A US holder is not subject to a UK withholding tax. The US holder includes in gross income for US federal income tax purposes only the amount of the dividend actually received from us and the receipt of a dividend does not entitle the US holder to a foreign tax credit.

Dividends must be included in income when the US holder, in the case of shares, or the depositary, in the case of ADSs, actually or constructively receives the dividend and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. Dividends will be income from sources outside the United States. For the purpose of the foreign tax credit limitation, foreign source income is classified in one or two baskets and the credit for foreign taxes on income in any basket is limited to US federal income tax allocable to that income. Generally the dividends we pay will constitute foreign source income in the passive income basket.

In the case of shares, the amount of the dividend distribution to be included in income will be the US dollar value of the pound sterling payments made determined at the spot pound sterling/US dollar rate on the date of the dividend distribution regardless of whether the payment is in fact converted into US dollars. Generally any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is to be included in income to the date the payment is converted into US dollars will be treated as ordinary income or loss. Generally the gain or loss will be income or loss from sources within the United States for foreign tax credit limitation purposes.

138 Vodafone Group Plc Annual Report 2011

Shareholder information continued

Taxation of capital gains

UK taxation

A US holder may be liable for both UK and US tax in respect of a gain on the disposal of our shares or ADSs if the US holder is:

•		a citizen of the United States resident or ordinarily resident for UK tax purposes in the United Kingdom;

•		a citizen of the United States who has been resident or ordinarily resident for UK tax purposes in the United Kingdom, ceased to be so resident or ordinarily resident for a period of less than five years of assessment and who disposed of the shares or ADSs during that period (a ‘temporary non-resident’), unless the shares or ADSs were also acquired during that period, such liability arising on that individual’s return to the UK;

•		a US domestic corporation resident in the United Kingdom by reason of being centrally managed and controlled in the United Kingdom; or

•		a citizen of the United States or a US domestic corporation that carries on a trade, profession or vocation in the United Kingdom through a branch or agency or, in the case of US domestic companies, through a permanent establishment and that has used the shares or ADSs for the purposes of such trade, profession or vocation or has used, held or acquired the shares or ADSs for the purposes of such branch or agency or permanent establishment.

Under the treaty capital gains on dispositions of the shares or ADSs are generally subject to tax only in the country of residence of the relevant holder as determined under both the laws of the United Kingdom and the United States and as required by the terms of the treaty. However, individuals who are residents of either the United Kingdom or the United States and who have been residents of the other jurisdiction (the US or the UK, as the case may be) at any time during the six years immediately preceding the relevant disposal of shares or ADSs may be subject to tax with respect to capital gains arising from the dispositions of the shares or ADSs not only in the country of which the holder is resident at the time of the disposition but also in that other country (although, in respect of UK taxation, generally only to the extent that such an individual comprises a temporary non-resident).

US federal income taxation

Subject to the PFIC rules described below a US holder that sells or otherwise disposes of our shares or ADSs will recognise a capital gain or loss for US federal income tax purposes equal to the difference between the US dollar value of the amount realised and the holder’s tax basis, determined in US dollars, in the shares or ADSs. Generally a capital gain of a non-corporate US holder that is recognised in tax years beginning before 1 January 2013 is taxed at a maximum rate of 15% provided the holder has a holding period of more than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes. The deductibility of losses is subject to limitations.

Additional tax considerations

UK inheritance tax

An individual who is domiciled in the United States (for the purposes of the Estate Tax Convention) and is not a UK national will not be subject to UK inheritance tax in respect of our shares or ADSs on the individual’s death or on a transfer of the shares or ADSs during the individual’s lifetime, provided that any applicable US federal gift or estate tax is paid, unless the shares or ADSs are part of the business property of a UK permanent establishment or pertain to a UK fixed base used for the performance of independent personal services. Where the shares or ADSs have been placed in trust by a settlor they may be subject to UK inheritance tax unless, when the trust was created, the settlor was domiciled in the United States and was not a UK national. Where the shares or ADSs are subject to both UK inheritance tax and to US federal gift or estate tax, the estate tax convention generally provides a credit against US federal tax liabilities for UK inheritance tax paid.

UK stamp duty and stamp duty reserve tax

Stamp duty will, subject to certain exceptions, be payable on any instrument transferring our shares to the custodian of the depositary at the rate of 1.5% on the amount or value of the consideration if on sale or on the value of such shares if not on sale. Stamp duty reserve tax (‘SDRT’), at the rate of 1.5% of the price or value of the shares, could also be payable in these circumstances and on issue to such a person but no SDRT will be payable if stamp duty equal to such SDRT liability is paid. A recent ruling by the European Court of Justice has determined that the 1.5% SDRT charge on issue to a clearance service is contrary to EU law. HMRC have indicated that where new shares are first issued to a clearance service or to a depositary within the European Union, the 1.5% SDRT charge will not be levied. However, to the extent that the clearance service or depositary is located outside the European Union, HMRC have indicated that such charge would still apply. In accordance with the terms of the deposit agreement, any tax or duty payable on deposits of shares by the depositary or the custodian of the depositary will be charged to the party to whom ADSs are delivered against such deposits.

No stamp duty will be payable on any transfer of our ADSs provided that the ADSs and any separate instrument of transfer are executed and retained at all times outside the United Kingdom. A transfer of our shares in registered form will attract ad valorem stamp duty generally at the rate of 0.5% of the purchase price of the shares. There is no charge to ad valorem stamp duty on gifts.

SDRT is generally payable on an unconditional agreement to transfer our shares in registered form at 0.5% of the amount or value of the consideration for the transfer, but is repayable if, within six years of the date of the agreement, an instrument transferring the shares is executed or, if the SDRT has not been paid, the liability to pay the tax (but not necessarily interest and penalties) would be cancelled. However, an agreement to transfer our ADSs will not give rise to SDRT.

PFIC rules

We do not believe that our shares or ADSs will be treated as stock of a passive foreign investment company (‘PFIC’) for US federal income tax purposes. This conclusion is a factual determination that is made annually and thus is subject to change. If we are treated as a PFIC, any gain realised on the sale or other disposition of the shares or ADSs would in general not be treated as capital gain unless a US holder elects to be taxed annually on a mark-to-market basis with respect to the shares or ADSs. Otherwise a US holder would be treated as if he or she has realised such gain and certain “excess distributions” rateably over the holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated. An interest charge in respect of the tax attributable to each such year would also apply. Dividends received from us would not be eligible for the preferential tax rate applicable to qualified dividend income for certain non-corporate holders.

Vodafone Group Plc Annual Report 2011 139

Additional information

History and development

The Company was incorporated under English law in 1984 as Racal Strategic Radio Limited (registered number 1833679). After various name changes, 20% of Racal Telecom Plc capital was offered to the public in October 1988. The Company was fully demerged from Racal Electronics Plc and became an independent company in September 1991, at which time it changed its name to Vodafone Group Plc.

Since then we have entered into various transactions which consolidated our position in the United Kingdom and enhanced our international presence. The most significant of these transactions were as follows:

•		the merger with AirTouch Communications, Inc. which completed on 30 June 1999. The Company changed its name to Vodafone AirTouch Plc in June 1999 but then reverted to its former name, Vodafone Group Plc, on 28 July 2000;

•		the acquisition of Mannesmann AG which completed on 12 April 2000. Through this transaction we acquired businesses in Germany and Italy and increased our indirect holding in SFR;

•		through a series of business transactions between 1999 and 2004 we acquired a 97.7% stake in Vodafone Japan. This was then disposed of on 27 April 2006; and

•		on 8 May 2007 we acquired companies with interests in Vodafone Essar for US$10.9 billion (£5.5 billion), following which we control Vodafone Essar.

Other transactions that have occurred since 31 March 2008 are as follows:

19 May 2008 — Arcor: We increased our stake in Arcor for €460 million (£366 million) and now own 100% of Arcor.

17 August 2008 — Ghana: We acquired 70.0% of Ghana Telecommunications for cash consideration of £486 million.

9 January 2009 — Verizon Wireless: Verizon Wireless completed its acquisition of Alltel Corp. for approximately US$5.9 billion (£3.9 billion).

20 April 2009 — South Africa: We acquired an additional 15.0% stake in Vodacom for cash consideration of ZAR 20.6 billion (£1.6 billion). On 18 May 2009 Vodacom became a subsidiary.

10 May 2009 — Qatar: Vodafone Qatar completed a public offering of 40.0% of its authorised share capital raising QAR 3.4 billion (£0.6 billion). The shares were listed on the Qatar Exchange on 22 July 2009. Qatar launched full services on its network on 7 July 2009.

9 June 2009 — Australia: Vodafone Australia merged with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited.

10 September 2010 — China Mobile Limited: We sold our entire 3.2% interest in China Mobile Limited for cash consideration of £4.3 billion.

30/31 March 2011— India: The Essar Group exercised its underwritten put option over 22.0% of Vodafone Essar Limited (‘VEL’), following which we exercised our call option over the remaining 11.0% of VEL owned by the Essar Group. The total consideration due under these two options is US$5 billion (£3.1 billion).

3 April 2011— SFR: We agreed to sell our entire 44% interest in SFR to Vivendi for a cash consideration of €7.75 billion (£6.8 billion). We will also receive a final dividend from SFR of €200 million (£176 million) on completion of the transaction which, subject to competition authority and regulatory approvals, is expected during the second calendar quarter of 2011.

140 Vodafone Group Plc Annual Report 2011

Regulation

Our operating companies are generally subject to regulation governing the operation of their business activities. Such regulation typically takes the form of industry specific law and regulation covering telecommunications services and general competition (antitrust) law applicable to all activities.

The following section describes the regulatory frameworks and the key regulatory developments at the global and regional level and in selected countries in which we have significant interests. Many of the regulatory developments reported in the following section involve ongoing proceedings or consideration of potential proceedings that have not reached a conclusion. Accordingly, we are unable to attach a specific level of financial risk to our performance from such matters.

European Union (‘EU’)

The European Commission (the ‘Commission’) has begun to consult on the future scope and nature of universal service provision in the EU. Current obligations generally involve the provision of a fixed connection allowing access to voice and simple data services. In some countries those operators responsible for providing universal services receive compensation from a fund to which we and others are required to make a financial contribution. The Commission has indicated that it would be reluctant to extend the scope of these funds to include very high speed broadband deployment and that additional financing for such projects should instead be sought from general taxation. The Commission has also published a broadband strategy which proposes that the European Investment Bank offer support for broadband infrastructure projects which fulfil certain criteria.

Roaming

The current roaming regulation (the ‘roaming regulation’) entered into force in July 2009 and requires mobile operators to supply voice and text roaming services under retail price caps. Wholesale price caps also apply to voice, text and data roaming services. Caps are adjusted (reduced) annually. The regulation expires in 2012 and the Commission is currently undertaking a review to determine what should happen thereafter. The Commission expects to publish formal proposals for the new roaming regulations during the summer of 2011. These will then be considered by the European Parliament and Council of Ministers (the ‘Council’). In the meantime, the Commission has indicated that there is widespread support for the continuation of some form of regulation beyond 2012 and that this may extend to retail data services which are currently excluded from regulation. The Commission has consulted on a variety of options for regulation including a continuation of existing price caps, closer alignment of roaming prices to domestic prices, or the implementation of various ‘structural’ solutions, such as the decoupling of roaming services from domestic services, all of which would be intended to increase competition in either the retail or the wholesale roaming markets.

Call termination

In June 2010 the body of European Regulators for Electronic Communications (‘BEREC’) concluded that a move to ‘bill and keep’, in which no termination rates are payable between operators was “more promising (than existing call termination arrangements) in the long-term”. In the meantime, national regulators are required to take utmost account of the Commission’s existing recommendation on the regulation of fixed and mobile termination rates published in 2009.

At 31 March 2011 the termination rates effective for our subsidiaries and joint ventures within the EU, which differs from our Europe region, ranged from 3.00 eurocents per minute (2.64 pence) to 7.38 eurocents per minute (6.49 pence), at the relevant 31 March 2011 exchange rate.

Fixed network regulation

In September 2010 the Commission published a recommendation on the regulation of fibre ‘next generation’ broadband access networks (the ‘NGA recommendation’), of which national regulators are required to take utmost account. The Commission recommends that national regulators ensure operators that have significant market power make unbundled access to fibre networks available to competitors on a cost-oriented basis which reflects the risk profile of the investment.

Spectrum

In July 2009 the Council adopted the amended GSM directive allowing the use of the 900 MHz and 1800 MHz GSM bands for universal mobile telecommunications service (‘UMTS’) technology (‘refarming’) and, in the future, other technologies. Member states were required to implement this by May 2010, subject to the undertaking of a competition review by the national regulator.

In September 2010 the Commission published a proposed radio spectrum policy programme (‘RSPP’) for consideration by the European Parliament and Council. The RSPP proposes that all member states release 800 MHz spectrum for mobile broadband services by 1 January 2013 unless the Commission agrees otherwise. It also provides guidance to national regulators to ensure that competition is safeguarded when rights of use for existing spectrum are changed (e.g. through refarming) or when new spectrum is assigned. Various amendments to the draft RSPP have been proposed by the European Parliament and Council.

Europe region

Germany

Our current termination rate was reduced in December 2010 to 3.36 eurocents per minute, effective until 30 November 2012.

The rates that access seekers have to pay in order to unbundle Deutsche Telekom’s VDSL network were set by the national regulator in March 2010. We have appealed against these rates. The national regulator obliged Deutsche Telekom to grant access to its projected fibre to the home access network at ex post regulated rates in March 2011.

In May 2010 we acquired nationwide 15 year licences for 2x10 MHz of 800 MHz spectrum, 2x5 MHz of 2.1 GHz spectrum, 2x20 MHz of 2.6 GHz spectrum and 25 MHz of 2.6 GHz unpaired spectrum for a cost of €1.4 billion (£1.2 billion).

Italy

In July 2008 the national regulator reduced our termination rate to 8.85 eurocents per minute, in July 2009 to 7.70 eurocents per minute and in July 2010 to 6.60 eurocents per minute. Termination rates will reduce to 5.30 eurocents per minute in July 2011. The national regulator is currently consulting upon further reductions to 4.1 cents in January 2012 with further reductions to 0.98 cents by January 2015.

In November 2010 the Government entered into a memorandum of understanding with telecommunications operators, including Vodafone, to jointly develop a plan for the deployment of next generation fixed infrastructure in Italy.

In December 2010 the Italian regulator increased the monthly cost of an unbundled copper local loop from €8.49 (which had applied until 1 May 2010) to €8.70 for the period 1 May to 31 December 2010, to €9.02 for 2011 and to €9.28 for 2012, subject to Telecom Italia’s network meeting certain quality thresholds. In February 2011 the national regulator approved the price increases for the 2011 wholesale products charge.

In January 2011 the national regulator launched a consultation on the obligations to be imposed on Telecom Italia in relation to its fibre network. These proposals vary significantly from the principles in the NGA recommendation described above as they do not require unbundled access where there are or could be two competing networks. We have objected to these proposals.

Spain

The national regulator has adopted a glide path of termination rate reductions to 4.00 from October 2011 to April 2012.

The national regulator has adopted an immediate 7% increase in the price at which we and other operators obtain unbundled copper local loops from Telefonica while it undertakes further analysis of these costs.

Vodafone Group Plc Annual Report 2011 141

Additional information

The national regulator has determined the net cost and industry contributions corresponding to universal service contributions for 2007. Vodafone is required to contribute €14.9 million. We are currently appealing this decision.

In June 2010 the Spanish Ministry of Industry, Tourism and Commerce issued a wideranging consultation on spectrum. In February 2011 the Government confirmed its plans under which operators (including Vodafone) will return small amounts of their existing 900 MHz and 1800 MHz spectrum, the remaining licences would be extended until 2030 and refarming would be allowed in these bands. A tender process for the 2.6 GHz and 800 MHz bands will also be undertaken in the 2011 calendar year, with the 800 MHz spectrum available for use from around 2015.

The national competition authority has commenced an investigation into the wholesale origination and termination charges levied by all Spanish mobile operators for SMS services.

United Kingdom

Our regulated average termination rate is currently 2.98 pence per minute. The national regulator has finalised the process to decide the rates that will apply from 1 April 2011 to 31 March 2015. It has imposed a glidepath with annual adjustments that would see a reduction to 0.69 pence per minute (plus inflation adjustment) in 2014 and 2015. The mobile network operators have until 16 May 2011 to appeal this decision.

All 2G licences have been modified to allow refarming to 3G. All 3G licences will also be made indefinite rather than expiring in 2021.

The national regulator will carry out a competition assessment and consultation process to what restrictions, if any, might be applied to participation in the auction of 800 MHz and 2.6 GHz spectrum, which is expected to be conducted in early 2012.

As part of the conditions for clearance of the merger between Orange UK and T-Mobile UK, the Commission has required them to dispose of 2x15 MHz of spectrum in the 1800 MHz band. If they fail to do so, this spectrum will be included in the auction.

Other Europe

Albania

Vodafone Albania acquired the single 3G licence (2x15 MHz) for €31.4m in November 2010. Commercial services were launched in January 2011.

Greece

The national regulator is currently consulting on the renewal/re-auction of existing 900 MHz licences expiring in 2012.

Hungary

In October 2010 the Hungarian Parliament adopted a law which imposes a significant additional tax burden on the telecommunications, retail and energy sectors. The law came into force in December 2010 and will apply until at least January 2013, although the Hungarian government has indicated that it may be further extended. Vodafone prepaid 7,343,503,000 HUF (£24 million) in December 2010. A large number of firms have asked the Commission to review the legality of the tax, which they are currently doing.

Ireland

The national regulator has proposed auctioning all spectrum in the 900 MHz and 1800 MHz spectrum bands at the same time as an auction of 800 MHz spectrum in 2011, with spectrum available in 2013. In the meantime, Vodafone’s and O2’s 900 MHz licences will be renewed until the commencement of the new licences in 2013.

Malta

The national regulator has concluded a process for the renewal/issue of all 900 MHz and 1800 MHz spectrum which allows Vodafone to retain all but five MHz of its 900 and 1800 MHz spectrum for 15 years. Vodafone has also secured an additional 20 MHz of 1800 MHz spectrum.

Netherlands

Our termination rate reduced to 4.20 eurocents per minute in January 2011 following a cost model analysis by the NRA which proposes reducing to 1.2 eurocents per minute by September 2012. This decision is currently under appeal.

Auctions of 2.6 GHz spectrum concluded in April 2010. Vodafone acquired 2x10 MHz of 2.6 GHz of spectrum for the reserve price of €200,000.

In February 2011 the Government announced plans to auction 800 MHz, 900 MHz, 1800 MHz, 2.1 GHz and 2.6 GHz spectrum in early 2012. It proposes to reserve two 800 MHz licences for new entrants.

Portugal

The national regulator has adopted a glide path of termination rate reductions from May 2010 to take the rate from 6.50 eurocents per minute to 3.50 eurocents per minute by August 2011. The national regulator is currently consulting on a cost modelling process to determine rates beyond August 2011.

The spectrum auction in Portugal was delayed and is now expected in 2011 and will include a number of spectrum bands including 800 MHz and 2.6 GHz.

The competition authority has started an investigation into certain retail pricing initiatives undertaken by Vodafone in early 2011.

Romania

Proposals for the renewal of Vodafone’s 900/1800 MHz licences, which expire in December 2011, are expected shortly.

In February 2011 Vodafone was fined €28 million by the competition authority in relation to an alleged refusal to interconnect with another party in 2006. We appealed this decision in April 2011. Other enquiries remain ongoing. In April 2011 we were advised that new proceedings in relation to termination rates and subsidies for handsets will be initiated.

Turkey

Our termination rates are currently set at 0.032 Lira per minute.

Africa, Middle East and Asia Pacific region

India

The national regulator’s decision to reduce interconnection charges to Rs 0.20 per minute effective 1 April 2010 was successfully appealed to the appellate body. The national regulator launched a new interconnect charges consultation process in April 2011 and has been directed by the appellate body to implement new rates by June 2011.

In May 2010 we secured 20 year licences for 2x5 MHz of 3G spectrum in nine circles in the Indian auction for a total price of INR 116.2 billion (£1.7 billion). These circles include Delhi, Mumbai, Kolkata and a further three ‘A’ circles and three ‘B’ circles providing a footprint covering 66% of VEL’s current revenue base. In May 2010 the national regulator made recommendations on the spectrum management and licensing framework which includes far-reaching proposals for spectrum allocation and pricing. In February 2011 the national regulator recommended a new spectrum valuation approach for 1800 MHz spectrum. These recommendations will be reviewed by the Union Minister of Communications and IT.

In September 2010 VEL’s appeal against the increase in 2G spectrum fees of 1% to 2% of adjusted gross revenue (effective from 1 April 2010) was unsuccessful. VEL then appealed to the Supreme Court in October 2010 and was granted a stay against the order increasing spectrum charges.

142 Vodafone Group Plc Annual Report 2011

Regulation continued

South Africa

The national regulator may recommence the process for an auction of the 2.6 GHz and 3.5 GHz bands during the 2012 financial year.

In October 2010 the national regulator published a regulation establishing a glide path for mobile and fixed termination rates over the period to March 2014. The mobile termination rate will decline from a peak/off-peak rate of ZAR 0.89/0.77 respectively to ZAR 0.40 per minute from 1 March 2013.

Other Africa, Middle East and Asia Pacific

Egypt

The national regulator set termination rates at 65% of each operator’s on-net retail revenue per minute in September 2008. Mobinil obtained interim relief against this regulation and a final order is awaited to clarify its application. On 28 January 2011, during a period of socio-political unrest and demonstrations, the government ordered Vodafone and the two other licensed mobile operators to temporarily suspend mobile services in certain areas. Vodafone subsequently restored its voice network to its customers the following day, and data and SMS were unavailable for five and nine days respectively.

New Zealand

Vodafone and Telecom New Zealand have been selected to share a NZ$285 million government grant to roll-out and operate an open access fibre and wireless network in rural areas.

The national regulator has adopted a regulation which reduces termination rates from around 18 cents to 7.5 cents in May 2011, with further reductions to 4.0 cents from April 2012. SMS termination rates are also regulated at 0.06 cents per SMS. The national regulator has indicated that it will monitor the impact of these measures and of on-net/off-net retail pricing which it believes to have inhibited competition.

Qatar

The price floor on retail services imposed in November 2009 on Vodafone by the national regulator was removed in April 2010. In July 2010 the national regulator ruled that QTel had launched the Virgin Mobile service illegally and required significant changes to be compliant. The national regulator has launched a strategic review of the sector.

Licences

The table below summarises the most significant mobile licences held by our operating subsidiaries and our joint venture in Italy at 31 March 2011. We present the licences by frequency band since in many markets, including the majority of Europe, they can be used for a variety of technologies including 2G, 3G and in the future LTE.

Mobile licences

Country by region

800 MHz expiry date

900 MHz expiry date

1800 MHz expiry date

2.1 GHz expiry date

2.6 GHz expiry date

Europe

Germany

December 2025

December 2016

December 2020

December 2025

Italy

n/a

February 2015

December 2021

n/a

Spain

n/a

February 2020

July 2023

April 2020

n/a

See note

⁽¹⁾

See note

⁽¹⁾

December 2021

n/a

Albania

n/a

June 2016

December 2025

n/a

Czech Republic

n/a

January 2021

February 2025

n/a

Greece

n/a

September 2012

⁽²⁾

August 2016

August 2021

n/a

Hungary

n/a

July 2014

⁽³⁾

July 2014

⁽³⁾

December 2019

⁽³⁾

n/a

Ireland

n/a

May 2011

December 2015

October 2022

n/a

Malta

n/a

May 2011

August 2020

n/a

Netherlands

n/a

March 2013

December 2016

May 2030

Portugal

n/a

October 2021

January 2016

n/a

Romania

n/a

December 2011

March 2020

n/a

Turkey

n/a

April 2023

—

April 2029

n/a

Africa, Middle East and Asia Pacific

November 2014 —

India⁽⁴⁾

n/a

December 2026

September 2030

n/a

Vodacom: South Africa

n/a

See note

⁽⁵⁾

See note

⁽⁵⁾

See note

⁽⁵⁾

n/a

Egypt

n/a

January 2022

n/a

Ghana

n/a

December 2019

December 2023

⁽⁶⁾

n/a

New Zealand

n/a

November 2031

March 2021

n/a

Qatar

n/a

June 2028

n/a

Notes:


(1)		Indefinite licence with a one year notice of revocation.

(2)		One third of the 900 MHz spectrum will expire in 2016.

(3)		Options to extend these licences.

(4)		India is comprised of 23 separate service area licences with a variety of expiry dates. Option to extend 900/1800 licences by ten years. Vodafone acquired 3G licences in nine of the service areas in May 2010.

(5)		Vodacom’s South African spectrum licences are renewed annually. As part of the migration to a new licensing regime the NRA has issued Vodacom a service licence and a network licence which will permit Vodacom to offer mobile and fixed services. The service and network licences have 20 year duration and will expire in 2028. Vodacom also holds licences to provide 2G and/or 3G services in the Democratic Republic of Congo, Lesotho, Mozambique and Tanzania.

(6)		The NRA has issued provisional licences with the intention of converting these to full licences once the NRA board has been reconvened.

Vodafone Group Plc Annual Report 2011 143

Additional information

Non-GAAP information

In the discussion of our reported financial position, operating results and cash flows, information is presented to provide readers with additional financial information that is regularly reviewed by management. However, this additional information presented is not uniformly defined by all companies including those in the Group’s industry. Accordingly, it may not be comparable with similarly titled measures and disclosures by other companies. Additionally, certain information presented is derived from amounts calculated in accordance with IFRS but is not itself an expressly permitted GAAP measure. Such non-GAAP measures should not be viewed in isolation or as an alternative to the equivalent GAAP measure.

Adjusted EBITDA

Adjusted EBITDA is operating profit excluding share in results of associates, depreciation and amortisation, gains/losses on the disposal of fixed assets, impairment losses and other operating income and expense. We use adjusted EBITDA, in conjunction with other GAAP and non-GAAP financial measures such as adjusted operating profit, operating profit and net profit, to assess our operating performance. We believe that adjusted EBITDA is an operating performance measure, not a liquidity measure, as it includes non-cash changes in working capital and is reviewed by the Chief Executive to assess internal performance in conjunction with adjusted EBITDA margin, which is an alternative sales margin figure. We believe it is both useful and necessary to report adjusted EBITDA as a performance measure as it enhances the comparability of profit across segments.

Because adjusted EBITDA does not take into account certain items that affect operations and performance, adjusted EBITDA has inherent limitations as a performance measure. To compensate for these limitations, we analyse adjusted EBITDA in conjunction with other GAAP and non-GAAP operating performance measures. Adjusted EBITDA should not be considered in isolation or as a substitute for a GAAP measure of operating performance.

A reconciliation of adjusted EBITDA to the closest equivalent GAAP measure, operating profit, is provided in note 3 to the consolidated financial statements on page 91.

Group adjusted operating profit and adjusted earnings per share

Group adjusted operating profit excludes non-operating income of associates, impairment losses and other income and expense. Adjusted earnings per share also excludes amounts in relation to equity put rights and similar arrangements and certain foreign exchange rate differences, together with related tax effects. We believe that it is both useful and necessary to report these measures for the following reasons:

•		these measures are used for internal performance analysis;

•		these measures are used in setting director and management remuneration; and

•		they are useful in connection with discussion with the investment analyst community and debt rating agencies.

Reconciliations of adjusted operating profit and adjusted earnings per share to the respective closest equivalent GAAP measures, operating profit and basic earnings per share, are provided in “Operating results” beginning on page 34.

Cash flow measures

In presenting and discussing our reported results, free cash flow and operating free cash flow are calculated and presented even though these measures are not recognised within IFRS. We believe that it is both useful and necessary to communicate free cash flow to investors and other interested parties, for the following reasons:

•		free cash flow allows us and external parties to evaluate our liquidity and the cash generated by our operations. Free cash flow does not include payments for licences and spectrum included within intangible assets, items determined independently of the ongoing business, such as the level of dividends, and items which are deemed discretionary, such as cash flows relating to acquisitions and disposals or financing activities. In addition, it does not necessarily reflect the amounts which we have an obligation to incur. However, it does reflect the cash available for such discretionary activities, to strengthen the consolidated statement of financial position or to provide returns to shareholders in the form of dividends or share purchases;

•		free cash flow facilitates comparability of results with other companies although our measure of free cash flow may not be directly comparable to similarly titled measures used by other companies;

•		these measures are used by management for planning, reporting and incentive purposes; and

•		these measures are useful in connection with discussion with the investment analyst community and debt rating agencies.

A reconciliation of cash generated by operations, the closest equivalent GAAP measure, to operating free cash flow and free cash flow, is provided in “Financial position and resources” on page 48.

Other

Certain of the statements within the section titled “Chief Executive’s review” on pages 10 to 11 contain forward-looking non-GAAP financial information for which at this time there is no comparable GAAP measure and which at this time cannot be quantitatively reconciled to comparable GAAP financial information.

Certain of the statements within the section titled “Guidance” on page 44 contain forward-looking non-GAAP financial information which at this time cannot be quantitatively reconciled to comparable GAAP financial information.

Organic growth

All amounts in this document marked with an “(*)” represent organic growth which present performance on a comparable basis, both in terms of merger and acquisition activity and foreign exchange rates. We believe that “organic growth”, which is not intended to be a substitute for or superior to reported growth, provides useful and necessary information to investors and other interested parties for the following reasons:

•		it provides additional information on underlying growth of the business without the effect of certain factors unrelated to the operating performance of the business;

•		it is used for internal performance analysis; and

•		it facilitates comparability of underlying growth with other companies, although the term “organic” is not a defined term under IFRS and may not, therefore, be comparable with similarly titled measures reported by other companies.

144 Vodafone Group Plc Annual Report 2011

Non-GAAP information continued

Reconciliation of organic growth to reported growth is shown where used, or in the table below:


	Organic			M&A			Foreign			Reported
	change			activity			exchange			change
	%			pps			pps			%

31 March 2011
Group
Service revenue
H2 2011		2.5			0.2			(1.5	)		1.2
H1 2011		1.7			1.5			0.5			3.7

Change		0.8			(1.3	)		(2.0	)		(2.5	)
Revenue		2.8			0.8			(0.4	)		3.2
Service revenue		2.1			0.9			(0.6	)		2.4
Service revenue for the quarter ended 31 March 2011		2.5			0.1			(2.2	)		0.4
Data revenue		26.4			1.2			(1.2	)		26.4
Fixed line revenue		5.2			1.7			(3.5	)		3.4
Emerging markets service revenue		11.8			3.4			6.8			22.0
Vodafone Global Enterprise revenue		8			—			3			11
Adjusted EBITDA		(0.7	)		1.4			(1.1	)		(0.4	)
Adjusted operating profit		1.8			2.5			(1.2	)		3.1


Europe
Service revenue
31 March 2010		(3.8	)		0.1			4.6			0.9
31 March 2009		(1.7	)		2.5			13.2			14.0

Change		(2.1	)		(2.4	)		(8.6	)		(13.1	)
Service revenue for the six months ended 31 March 2011		(0.3	)		0.2			(3.5	)		(3.6	)
Service revenue for the quarter ended 31 March 2011		(0.8	)		0.2			(3.2	)		(3.8	)
Northern Europe service revenue growth		2.7			(1.2	)		(2.8	)		(1.3	)
Southern Europe service revenue growth		(2.9	)		1.2			(3.5	)		(5.2	)
Enterprise revenue		0.5			0.2			(3.2	)		(2.5	)
Germany — service revenue excluding the impact of termination rate cuts		2.1			—			(4.1	)		(2.0	)
Germany — data revenue		27.9			—			(5.1	)		22.8
Germany — enterprise revenue		3.6			—			(4.2	)		(0.6	)
Italy — data revenue		21.5			—			(4.8	)		16.7
Spain — data revenue		14.8			—			(4.8	)		10.0
UK — data revenue		28.5			—			—			28.5
Greece — service revenue		(19.4	)		—			(3.2	)		(22.6	)
Turkey — service revenue		28.9			3.6			2.7			35.2


Africa, Middle East and Asia Pacific
Service revenue for the quarter ended 31 March 2011		11.8			(1.3	)		0.7			11.2
Vodacom — data revenue⁽¹⁾		43.8			9.7			15.2			68.7
South Africa — data revenue		41.8			9.5			15.6			66.9
Egypt — service revenue		(0.8	)		—			(1.0	)		(1.8	)
Egypt — data revenue		37.7			—			(1.5	)		36.2
Ghana — service revenue		21.0			—			1.6			22.6
Indus Towers — contribution to India service revenue growth		1.7			—			0.1			1.8
Percentage point reduction in adjusted EBITDA margin		(0.6	)		1.0			(0.2	)		0.2


Verizon Wireless
Revenue		6.0			—			2.6			8.6
Service revenue⁽²⁾		5.8			—			2.6			8.4
Adjusted EBITDA		6.7			(0.1	)		2.7			9.3
Group’s share of result of Verizon Wireless		8.5			(0.1	)		2.7			11.1

Vodafone Group Plc Annual Report 2011 145

Additional information


	Organic			M&A			Foreign			Reported
	change			activity			exchange			change
	%			pps			pps			%

31 March 2010
Group
Service revenue		(1.6	)		4.9			5.6			8.9
Data revenue		19.3			6.9			6.8			33.0
Fixed line revenue		7.9			6.0			6.7			20.6
Emerging markets service revenue		7.9			31.3			7.9			47.1


Europe
Service revenue		(3.8	)		0.1			4.6			0.9
Data revenue		17.7			—			5.5			23.2
Fixed line revenue		7.5			—			6.3			13.8
Enterprise revenue		(4.8	)		—			4.5			(0.3	)
Germany — service revenue for the quarter ended 31 March 2010		(1.6	)		—			(2.4	)		(4.0	)
Germany — mobile service revenue		(5.0	)		—			6.0			1.0
Germany — mobile service revenue for the quarter ended 31 March 2010		(1.8	)		—			(2.3	)		(4.1	)
Germany — fixed line revenue		1.3			—			6.1			7.4
Spain — service revenue for the quarter ended 31 March 2010		(6.2	)		—			(2.3	)		(8.5	)
UK — service revenue for the quarter ended 31 March 2010		(2.6	)		—			—			(2.6	)
Greece — service revenue		(14.5	)		—			5.6			(8.9	)
Netherlands — service revenue		3.0			—			6.4			9.4
Portugal — service revenue		(4.9	)		—			6.1			1.2
Romania — service revenue		(19.9	)		—			5.2			(14.7	)
Romania — adjusted EBITDA		(26.5	)		—			4.7			(21.8	)
Turkey — service revenue for the quarter ended 31 March 2010		31.3			—			1.5			32.8


Africa, Middle East and Asia Pacific
India — service revenue for the quarter ended 31 March 2010		6.5			—			0.1			6.6
Indus Towers — contribution to India service revenue growth for the quarter ended 31 March 2010		0.3			—			0.1			0.4
Vodacom — data revenue		32.9			155.3			57.3			245.5
Egypt — service revenue		1.3			—			4.7			6.0
Egypt — data and fixed line revenue		64.2			—			4.4			68.6


Verizon Wireless
Revenue		5.0			11.8			5.5			22.3
Service revenue		6.3			11.7			5.6			23.6
Adjusted EBITDA		4.4			10.9			5.4			20.7
Group’s share of result of Verizon Wireless		8.0			2.5			5.6			16.1


31 March 2009
Group
Service revenue		(0.3	)		3.1			13.1			15.9
Data revenue		25.9			0.7			17.1			43.7
Fixed line revenue		2.1			21.3			22.1			45.5
Emerging markets service revenue⁽³⁾		6.4			14.2			6.4			27.0


Europe
Germany — service revenue		(2.5	)		(0.1	)		17.6			15.0
Italy — service revenue		1.2			4.7			19.2			25.1
Spain — service revenue		(4.9	)		2.5			17.7			15.3
UK — service revenue		(1.1	)		0.3			—			(0.8	)


Africa, Middle East and Asia Pacific
India — pro-forma revenue		33			9			6			48
Vodacom — service revenue		13.8			2.1			(5.2	)		10.7


Notes:

(1)		Data revenue in South Africa grew by 41.8%^(). Excluding the impact of reclassifications between messaging and data revenue during the year, data revenue grew by 35.9%^().

(2)		Organic growth rates include the impact of a non-cash revenue adjustment which was recorded to properly defer previously recognised data revenue that will be earned and recognised in future periods. Excluding this the equivalent growth rates for service revenue, revenue, adjusted EBITDA and the Group’s share of result in Verizon Wireless would have been 6.4%^(), 6.6%^(), 8.2%^() and 10.8%^()respectively.

(3)		Excludes India, Ghana and Qatar as these were not owned for the full financial year.

146 Vodafone Group Plc Annual Report 2011

Form 20-F cross reference guide

This annual report on Form 20-F for the fiscal year ended 31 March 2011 has not been approved or disapproved by the SEC nor has the SEC passed judgement upon the adequacy or accuracy of this document. The table below sets out the location in this document of the information required by SEC Form 20-F.


Item	Form 20-F caption	Location in this document	Page

1	Identity of directors, senior management and advisers	Not applicable		—

2	Offer statistics and expected timetable	Not applicable		—

3	Key information
	3A Selected financial data	Selected financial data		151
		Shareholder information — Inflation and foreign currency translation		134
	3B Capitalisation and indebtedness	Not applicable		—
	3C Reasons for the offer and use of proceeds	Not applicable		—
	3D Risk factors	Principal risk factors and uncertainties		45 to 46

4	Information on the Company
	4A History and development of the company	History and development		139
		Contact details		BC
	4B Business overview	About us		2 to 3
		Vodafone at a glance		4 to 5
		Mobile telecommunications industry		8 to 9
		Focus on key areas of growth potential — Mobile data		15 to 19
		Focus on key areas of growth potential — Enterprise		22
		Focus on key areas of growth potential — Total communications		23
		Focus on key areas of growth potential — New services		24
		Operating results		34 to 43
	4C Organisational structure	Note 12 “Principal subsidiaries”		103
		Note 13 “Investments in joint ventures”		104
		Note 14 “Investments in associates”		105
		Note 15 “Other investments”		105
	4D Property, plant and equipment	About us		2 to 3
		Financial position and resources		47 to 51
		Sustainable business		30 to 31

4A	Unresolved staff comments	None		—

5	Operating and financial review and prospects
	5A Operating results	Operating results		34 to 43
		Note 22 “Borrowings”		113 to 117
		Shareholder information — Inflation and foreign currency translation		134
		Regulation		140 to 142
	5B Liquidity and capital resources	Financial position and resources — Liquidity and capital resources		48 to 51
		Note 21 “Capital and financial risk management”		110 to 112
		Note 22 “Borrowings”		113 to 117
	5C Research and development, patents and licences, etc	Focus on key areas of growth potential — Mobile data		17
		Note 4 “Operating profit”		92
		Regulation — Licences		142
	5D Trend information	Mobile telecommunications industry		8 to 9
	5E Off-balance sheet arrangements	Financial position and resources — Off-balance sheet arrangements		51
		Note 27 “Commitments”		121
		Note 28 “Contingent liabilities”		121 to 122
	5F Tabular disclosure of contractual obligations	Financial position and resources — Contractual obligations and contingencies		47
	5G Safe harbor	Forward-looking statements		148

6	Directors, senior management and employees
	6A Directors and senior management	Board of directors and Group management		52 to 54
	6B Compensation	Directors’ remuneration		62 to 73
	6C Board practices	Corporate governance		55 to 61
		Directors’ remuneration		62 to 73
		Board of directors and Group management		52 to 54
	6D Employees	People		32 to 33
		Note 31 “Employees”		124
	6E Share ownership	Directors’ remuneration		62 to 73
		Note 20 “Share-based payments”		108 to 109

7	Major shareholders and related party transactions
	7A Major shareholders	Shareholder information — Major shareholders		134
	7B Related party transactions	Directors’ remuneration		62 to 73
		Note 28 “Contingent liabilities”		121 to 122
		Note 30 “Related party transactions”		123 to 124
	7C Interests of experts and counsel	Not applicable		—

Vodafone Group Plc Annual Report 2011 147

Additional information


Item	Form 20-F caption	Location in this document	Page

8	Financial information
	8A Consolidated statements and other financial information	Financials	74 to 124
		Audit report on the consolidated financial statements	79
		Note 28 “Contingent liabilities”	121 to 122
		Financial position and resources	47 to 51
	8B Significant changes	Subsequent events	A-1 to A-6

9	The offer and listing
	9A Offer and listing details	Shareholder information — Share price history	133
	9B Plan of distribution	Not applicable	—
	9C Markets	Shareholder information — Markets	134
	9D Selling shareholders	Not applicable	—
	9E Dilution	Not applicable	—
	9F Expenses of the issue	Not applicable	—

10	Additional information
	10A Share capital	Not applicable	—
	10B Memorandum and articles of association	Shareholder information — Articles of association and applicable English law	134 to 136
	10C Material contracts	Shareholder information — Material contracts	137
	10D Exchange controls	Shareholder information — Exchange controls	137
	10E Taxation	Shareholder information — Taxation	137 to 138
	10F Dividends and paying agents	Not applicable	—
	10G Statement by experts	Not applicable	—
	10H Documents on display	Shareholder information — Documents on display	137
	10I Subsidiary information	Not applicable	—

11	Quantitative and qualitative disclosures about market risk	Note 21 “Capital and financial risk management”	110 to 112

12	Description of securities other than equity securities
	12A Debt securities	Not applicable	—
	12B Warrants and rights	Not applicable	—
	12C Other securities	Not applicable	—
	12D American depositary shares	ADR payment information

13	Defaults, dividend arrearages and delinquencies	Not applicable	—

14	Material modifications to the rights of security holders and use of proceeds	Not applicable	—

15	Controls and procedures	Corporate governance	55 to 61
		Directors’ statement of responsibility — Management’s report on internal control over financial reporting	75
		Audit report on internal controls	76

16	16A Audit Committee financial expert	Corporate governance — Board committees	57 to 58
	16B Code of ethics	Corporate governance	55 to 61
	16C Principal accountant fees and services	Note 4 “Operating profit” Corporate governance — Auditor	92 60
	16D Exemptions from the listing standards for audit committees	Not applicable	—
	16E Purchase of equity securities by the issuer and affiliated purchasers	Financial position and resources	47 to 51
	16F Change in registrant’s certifying accountant	Not applicable	—
	16G Corporate governance	Corporate governance — US listing requirements	60

17	Financial statements	Not applicable	—

18	Financial statements	Financials⁽¹⁾	74 to 124
	18A Separate financial statements required by Rule 3-09 of Regulation S-X	Financials	B-1
	18B Report of Independent Registered Public Accounting Firm	Financials	B-30

19	Exhibits	Filed with the SEC	Index to Exhibits

148 Vodafone Group Plc Annual Report 2011

Forward-looking statements

This document contains “forward-looking statements” within the meaning of the US Private Securities Litigation Reform Act of 1995 with respect to the Group’s financial condition, results of operations and businesses and certain of the Group’s plans and objectives.

In particular, such forward-looking statements include statements with respect to:

•		the Group’s expectations regarding its financial and operating performance, including statements contained within the Chief Executive’s review on pages 10 to 11, the Group’s 7% dividend per share growth target contained on pages 6, 27, 44 and 48, and the guidance statement for the 2012 financial year and the medium-term guidance statement for the three financial years ending 31 March 2014 on page 44 of this document, and the performance of joint ventures, associates, including Verizon Wireless and VHA, other investments and newly acquired businesses;

•		intentions and expectations regarding the development of products, services and initiatives introduced by, or together with, Vodafone or by third parties, including new mobile technologies, such as the introduction of 4G, the Vodafone M-Pesa money transfer system, tablets and an increase in download speeds and 3G sites;

•		expectations regarding the global economy and the Group’s operating environment, including future market conditions, growth in the number of worldwide mobile phone users and other trends, including increased data usage;

•		revenue and growth expected from the Group’s total communications strategy, including data revenue growth, and its expectations with respect to long-term shareholder value growth;

•		mobile penetration and coverage rates, termination rate cuts, the Group’s ability to acquire spectrum, expected growth prospects in the Europe, Africa, Middle East and Asia Pacific regions and growth in customers and usage generally;

•		expected benefits associated with the merger of Vodafone Australia and Hutchison 3G Australia;

•		anticipated benefits to the Group from cost efficiency programmes;

•		possible future acquisitions, including increases in ownership in existing investments, the timely completion of pending acquisition transactions and pending offers for investments, including licence acquisitions, and the expected funding required to complete such acquisitions or investments;

•		expectations regarding the Group’s future revenue, operating profit, adjusted EBITDA margin, free cash flow, capital intensity, depreciation and amortisation charges, foreign exchange rates, tax rates and capital expenditure;

•		expectations regarding the Group’s access to adequate funding for its working capital requirements and share buyback programmes, and the rate of dividend growth by the Group (including the Group’s 7% dividend per share growth target) or its existing investments; and

•		the impact of regulatory and legal proceedings involving Vodafone and of scheduled or potential regulatory changes.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as “will”, “anticipates”, “aims”, “could”, “may”, “should”, “expects”, “believes”, “intends”, “plans” or “targets”. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following:

•		general economic and political conditions in the jurisdictions in which the Group operates and changes to the associated legal, regulatory and tax environments;

•		increased competition, from both existing competitors and new market entrants, including mobile virtual network operators;

•		levels of investment in network capacity and the Group’s ability to deploy new technologies, products and services in a timely manner, particularly data content and services;

•		rapid changes to existing products and services and the inability of new products and services to perform in accordance with expectations,

		including as a result of third party or vendor marketing efforts;

•		the ability of the Group to integrate new technologies, products and services with existing networks, technologies, products and services;

•		the Group’s ability to generate and grow revenue from both voice and non-voice services and achieve expected cost savings;

•		a lower than expected impact of new or existing products, services or technologies on the Group’s future revenue, cost structure and capital expenditure outlays;

•		slower than expected customer growth, reduced customer retention, reductions or changes in customer spending and increased pricing pressure;

•		the Group’s ability to expand its spectrum position, win 3G and 4G allocations and realise expected synergies and benefits associated with 3G and 4G;

•		the Group’s ability to secure the timely delivery of high quality, reliable handsets, network equipment and other key products from suppliers;

•		loss of suppliers, disruption of supply chains and greater than anticipated prices of new mobile handsets;

•		changes in the costs to the Group of, or the rates the Group may charge for, terminations and roaming minutes;

•		the Group’s ability to realise expected benefits from acquisitions, partnerships, joint ventures, franchises, brand licences, platform sharing or other arrangements with third parties, particularly those related to the development of data and internet services;

•		acquisitions and divestments of Group businesses and assets and the pursuit of new, unexpected strategic opportunities which may have a negative impact on the Group’s financial condition and results of operations;

•		the Group’s ability to integrate acquired business or assets and the imposition of any unfavourable conditions, regulatory or otherwise, on any pending or future acquisitions or dispositions;

•		the extent of any future write-downs or impairment charges on the Group’s assets, or restructuring charges incurred as a result of an acquisition or disposition;

•		developments in the Group’s financial condition, earnings and distributable funds and other factors that the Board takes into account in determining the level of dividends;

•		the Group’s ability to satisfy working capital requirements through borrowing in capital markets, bank facilities and operations;

•		changes in foreign exchange rates, including particularly the exchange rate of pounds sterling to the euro and the US dollar;

•		changes in the regulatory framework in which the Group operates, including the commencement of legal or regulatory action seeking to regulate the Group’s permitted charging rates;

•		the impact of legal or other proceedings against the Group or other companies in the communications industry; and

•		changes in statutory tax rates and profit mix, the Group’s ability to resolve open tax issues and the timing and amount of any payments in respect of tax liabilities.

Furthermore, a review of the reasons why actual results and developments may differ materially from the expectations disclosed or implied within forward-looking statements can be found under “Principal risk factors and uncertainties” on pages 45 and 46 of this document. All subsequent written or oral forward-looking statements attributable to the Company or any member of the Group or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Subject to compliance with applicable law and regulations, Vodafone does not intend to update these forward-looking statements and does not undertake any obligation to do so.

Vodafone Group Plc Annual Report 2011 149

Additional information

Definition of terms


2G		2G networks are operated using global system for mobile (‘GSM’) technology which offer services such as voice, text messaging and basic data. In addition, all the Group’s controlled networks support general packet radio services (‘GPRS’), often referred to as 2.5G. GPRS allows mobile devices to access IP based data services such as the internet and email.

3G		A cellular technology based on wide band CDMA delivering voice and data services.

4G		4G or LTE technology offers even faster data transfer speeds than 3G/HSPA, increases network capacity and is able to deliver sustained customer throughputs of between 6-12 Mbps in real network conditions.

Acquisition costs		The total of connection fees, trade commissions and equipment costs relating to new customer connections.

ADR		American depositary receipts is a mechanism designed to facilitate trading in shares of non-US companies in the US stock markets. The main purpose is to create an instrument which can easily be settled through US stock market clearing systems.

ADS		American depositary shares are shares evidenced by american depositary receipts. ADSs are issued by a depositary bank and represent one or more shares of a non-US issuer held by the depositary bank. The main purpose of ADSs is to facilitate trading in shares of non-US companies in the US markets and, accordingly, ADRs which evidence ADSs are in a form suitable for holding in US clearing systems.

AGM		Annual general meeting.

ARPU		Service revenue excluding fixed line revenue, fixed advertising revenue, revenue related to business managed services and revenue from certain tower sharing arrangements divided by average customers.

Capital expenditure		This measure includes the aggregate of capitalised property, plant and equipment additions and capitalised software costs.

CDMA		Code-division multiple access refers to any of several protocols used in 2G and 3G communications. It allows numerous signals to occupy a single transmission channel, optimising availability of bandwidth.

Churn		Total gross customer disconnections in the period divided by the average total customers in the period.

Controlled and jointly controlled		Controlled and jointly controlled measures include 100% for the Group’s mobile operating subsidiaries and the Group’s proportionate share for joint ventures.

Customer costs		Customer costs include acquisition costs, being the total of connection fees, trade commissions and equipment costs relating to new customer connections, and retention costs, being the total of trade commissions, loyalty scheme and equipment costs relating to customer retention and upgrades, as well as expenses related to ongoing commissions.

Depreciation and other amortisation		This measure includes the profit or loss on disposal of property, plant and equipment and computer software.

Direct costs		Direct costs include interconnect costs and other direct costs of providing services.

DSL		A digital subscriber line which is a fixed line enabling data to be transmitted at theoretical peak speeds of up to 16 Mbps.

DTT		Digital terrestrial television.

Adjusted EBITDA		Operating profit excluding share in results of associates, depreciation and amortisation, gains/losses on the disposal of fixed assets, impairment losses and other operating income and expense.

EDGE		In most our networks we also provide an advanced version of GPRS called enhanced data rates for GSM evolution (‘EDGE’). This provides download speeds of over 200 kilobits per second (‘kbps’) to customers.

Emerging markets		India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji.

Fixed broadband customer		A fixed broadband customer is defined as a physical connection or access point to a fixed line network.

FRC		Financial Reporting Council.

Free cash flow		Operating free cash flow after cash flows in relation to taxation, interest, dividends received from associates and investments and dividends paid to non-controlling shareholders in subsidiaries but before licence and spectrum payments and for the year ended 31 March 2011 other items in respect of: the UK CFC settlement, tax relating to the disposal of China Mobile Limited, the SoftBank disposal and the court deposit made in respect of the India tax case.

FSA		Financial Services Authority.

HSDPA		High speed downlink packet access is a wireless technology enabling theoretical network to mobile data transmission speeds of up to 43.2 Mbps.

HSPA		High speed packet access or third generation (‘3G’) is a wireless technology operating wideband code division multiple access (‘W-CDMA’) technology, providing customers with voice, video telephony, multimedia messaging and high speed data services.

Impairment		A downward revaluation of an asset.

‘in the cloud’		This means the customer has little or no equipment at their premises and all the equipment and capability is run from the Vodafone network instead. This removes the need for customers to make capital investment and instead they have an operating cost model with a recurring monthly fee.

Interconnect costs		A charge paid by Vodafone to other fixed line or mobile operators when a Vodafone customer calls a customer connected to a different network.

IP		Internet protocol (‘IP’) is the method by which data is sent from one computer to another on the internet.

LAN		A local area network supplies networking capability to a group of computers in close proximity to each other.

LTE		Long-term evolution (‘LTE’) is 4G technology which offers even faster data transfer speeds than 3G/HSPA, increases network capacity and is able to deliver sustained customer throughputs of between 6-12 Mbps in real network conditions.

Mark-to-market		Mark-to-market or fair value accounting refers to accounting for the value of an asset or liability based on the current market price of the asset or liability.

150 Vodafone Group Plc Annual Report 2011

Definition of terms continued


Mobile broadband		Also known as mobile internet (see below).

Mobile customer		A mobile customer is defined as a subscriber identity module (‘SIM’), or in territories where SIMs do not exist, a unique mobile telephone number, which has access to the network for any purpose, including data only usage, except telemetric applications. Telemetric applications include, but are not limited to, asset and equipment tracking, mobile payment and billing functionality, e.g. vending machines and meter readings, and include voice enabled customers whose usage is limited to a central service operation, e.g. emergency response applications in vehicles.

Mobile internet		Browser based access to the internet or web applications using a mobile device, such as a smartphone, connected to a wireless network.

Mobile termination rate (‘MTR’)		A per minute charge paid by a telecommunications network operator when a customer makes a call to another mobile or fixed line network operator.

MVNO		Mobile virtual network operators, companies that provide mobile phone services but do not have their own licence of spectrum or the infrastructure required to operate a network.

Net debt		Long-term borrowings, short-term borrowings and mark-to-market adjustments on financing instruments less cash and cash equivalents.

Net promoter score		Net promoter score (‘NPS’) is a customer loyalty metric used to monitor customer satisfaction.

Operating costs		Operating expenses plus customer costs other than acquisition and retention costs.

Operating expenses		Operating expenses comprise primarily of network and IT related expenditure, support costs from HR and finance and certain intercompany items.

Operating free cash flow		Cash generated from operations after cash payments for capital expenditure (excludes capital licence and spectrum payments) and cash receipts from the disposal of intangible assets and property, plant and equipment.

Organic growth		The percentage movements in organic growth are presented to reflect operating performance on a comparable basis, both in terms of merger and acquisition activity and foreign exchange rates.

Partner markets		Markets in which the Group has entered into a partner agreement with a local mobile operator enabling a range of Vodafone’s global products and services to be marketed in that operator’s territory and extending Vodafone’s reach into such markets.

Penetration		Number of SIMs in a country as a percentage of the country’s population. Penetration can be in excess of 100% due to customers’ owning more than one SIM.

Petabyte		A petabyte is a measure of data usage. One petabyte is a million gigabytes.

Pps		Percentage points.

Pro-forma growth		Pro-forma growth is organic growth adjusted to include acquired business for the whole of both periods.

Reported growth		Reported growth is based on amounts reported in pounds sterling as determined under IFRS.

RAN		Radio access network is part of a mobile telecommunication system which conceptually sits between the mobile phone and the base station.

Retention costs		The total of trade commissions, loyalty scheme and equipment costs relating to customer retention and upgrade.

Roaming		Allows our customers to make calls on other operators’ mobile networks while travelling abroad.

Service revenue		Service revenue comprises all revenue related to the provision of ongoing services including, but not limited to, monthly access charges, airtime usage, roaming, incoming and outgoing network usage by non-Vodafone customers and interconnect charges for incoming calls.

Smartphone devices		A smartphone is a mobile phone offering advanced capabilities including access to email and the internet.

Smartphone penetration		The number of smartphone devices divided by the number of registered SIMs, excluding data only SIMs.

Spectrum		The radio frequency bands and channels assigned for telecommunication services.

Tablet device		A tablet is a slate shaped, mobile or portable, casual computing device equipped with a finger operated touchscreen or stylus, for example, the Apple iPad.

Visitor revenue		Amounts received by a Vodafone operating company when customers of another operator, including those of other Vodafone companies, roam onto its network.

Wi-Fi		A Wi-Fi enabled device such as a smartphone can connect to the internet when within a range of a wireless network connected to the internet.

Vodafone Group Plc Annual Report 2011 151

Selected financial data


At/for the year ended 31 March	2011		2010		2009		2008		2007

Consolidated income statement data (£m)
Revenue		45,884		44,472		41,017		35,478		31,104
Operating profit/(loss)		5,596		9,480		5,857		10,047		(1,564	)
Profit/(loss) before taxation		9,498		8,674		4,189		9,001		(2,383	)
Profit/(loss) for the financial year from continuing operations		7,870		8,618		3,080		6,756		(4,806	)
Profit/(loss) for the financial year		7,870		8,618		3,080		6,756		(5,222	)


Consolidated statement of financial position data (£m)
Total assets		151,220		156,985		152,699		127,270		109,617
Total equity		87,561		90,810		84,777		76,471		67,293
Total equity shareholders’ funds		87,555		90,381		86,162		78,043		67,067


Earnings per share⁽¹⁾
Weighted average number of shares (millions)
— Basic		52,408		52,595		52,737		53,019		55,144
— Diluted		52,748		52,849		52,969		53,287		55,144

Basic earnings/(loss) per ordinary share (pence)
— Profit/(loss) from continuing operations		15.20p		16.44p		5.84p		12.56p		(8.94)p
— Profit/(loss) for the financial year		15.20p		16.44p		5.84p		12.56p		(9.70)p
Diluted earnings/(loss) per ordinary share
— Profit/(loss) from continuing operations		15.11p		16.36p		5.81p		12.50p		(8.94)p
— Profit/(loss) for the financial year		15.11p		16.36p		5.81p		12.50p		(9.70)p


Cash dividends⁽¹⁾⁽²⁾
Amount per ordinary share (pence)		8.90p		8.31p		7.77p		7.51p		6.76p
Amount per ADS (pence)		89.0p		83.1p		77.7p		75.1p		67.6p

Amount per ordinary share (US cents)		14.33c		12.62c		11.11c		14.91c		13.28c
Amount per ADS (US cents)		143.3c		126.2c		111.1c		149.1c		132.8c


Other data
Ratio of earnings to fixed charges⁽³⁾		5.7		3.6		1.2		3.9		—
Ratio of earnings to fixed charges deficit⁽³⁾		—		—		—		—		(4,389	)


Notes:

(1)		See note 8 to the consolidated financial statements, “Earnings per share”. Earnings and dividends per ADS is calculated by multiplying earnings per ordinary share by ten, the number of ordinary shares per ADS. Dividend per ADS is calculated on the same basis.

(2)		The final dividend for the year ended 31 March 2011 was proposed by the directors on 17 May 2011 and is payable on 5 August 2011 to holders of record as of 3 June 2011. The total dividends have been translated into US dollars at 31 March 2011 for purposes of the above disclosure but the dividends are payable in US dollars under the terms of the ADS depositary agreement.

(3)		For the purposes of calculating these ratios, earnings consist of profit before tax adjusted for fixed charges, dividend income from associates, share of profits and losses from associates, interest capitalised, interest amortised and profits and losses on ordinary activities before taxation from discontinued operations. Fixed charges comprise one third of payments under operating leases, representing the estimated interest element of these payments, interest payable and similar charges, interest capitalised and preferred share dividends.

152 Vodafone Group Plc Annual Report 2011

Notes

Vodafone, the Vodafone logo, Vodafone Mobile Broadband, The Vodafone Way, Vodafone Always Best Connected, TeleTu and Tele2, Vodafone TV, Vodafone WebBox, M-PESA, Vodafone One Net, Vodafone Sure Signal, Vodafone Mobile Connect and Vodacom are trade marks of the Vodafone Group. World of Difference and Mobiles for Good are trade marks of the Vodafone Foundation. RIM and BlackBerry are registered with the US Patent and Trademark Office and may be pending or registered in other countries. Microsoft, Windows Mobile and ActiveSync are either registered trade marks or trade marks of Microsoft Corporation in the US and/or other countries. Google, Google Maps and Android are trademarks of Google Inc. Apple, iPhone and iPad are trade marks of Apple Inc., registered in the US and other countries. Other product and company names mentioned herein may be the trade marks of their respective owners. The content of our website (www.vodafone.com) should not be considered to form part of this annual report or our annual report on Form 20-F. Copyright ^© Vodafone Group 2011 FSC www.fsc.org MIX From responsible sources FSC@ C018444 This report has been printed on Revive 75 Special Silk paper. The composition of the paper is 50% de-inked post consumer waste, 25% pre-consumer waste and 25% virgin wood fibre. It has been certified according to the rules of the Forest Stewardship Council (FSC). It is manufactured at a mill that has been awarded the ISO14001 certificate for environmental management. The mill uses pulps that are elemental chlorine free (ECF) and totally chlorine free (TCF) process and the inks used are all vegetable oil based. Printed at St Ives Westerham Press Ltd, ISO14001, FSC certified and CarbonNeutral^®. Designed and produced by Addison, www.addison.co.uk

Berkshire RG14 2FN England Registered in England No. 1833679 Telephone: +44 (0) 1635 33251 Fax: +44 (0) 1635 238080 www.vodafone.com Contact detailsInvestor RelationsTelephone: +44 (0) 7919 990230 Email: ir@vodafone.co.uk Website: www.vodafone.com/investorMedia RelationsTelephone: +44 (0) 1635 664444 Email: groupmediarelations@vodafone.com Website: www.vodafone.com/mediaSustainabilityEmail: sustainability@vodafone.com Website: www.vodafone.com/sustainability

Events occurring subsequent to the approval of the Company’s Annual Report on 17 May 2011

SFR

Further to the announcement dated 3 April 2011 (see note 32 to the consolidated financial statements), and following clearance of the transaction by the relevant competition and regulatory authorities, the Group announced on 16 June 2011 the completion of the disposal of its entire 44% shareholding in SFR to Vivendi.

The Group received cash consideration of €7.75 billion (£6.8 billion) from Vivendi and a final dividend from SFR of €200 million (£176 million). Vodafone and SFR have also entered into a Partner Market agreement which will maintain their commercial co-operation.

Indian tax case

In light of the uncertainty created by the Indian tax authority’s actions set out in note 28 to the consolidated financial statements, Vodafone International Holdings BV, through its indirect wholly owned subsidiary, Euro Pacific Securities Ltd, has sought confirmation from the Authority for Advanced Rulings (‘AAR’) in India on whether withholding tax is due in respect of consideration payable on the acquisition of Essar Group’s offshore holding in Vodafone Essar Limited. The hearing at the AAR has been further adjourned until 1 July 2011. The first possible tax payment date will be 7 July 2011.

A-1

Information contained within this Annual Report on Form 20-F

The following treasury shares, beneficial interests, share price history, shareholder information and regulation information contained within the Annual Report on Form 20-F has been updated to reflect the position as at 14 June 2011:

Treasury Shares

(Information as at the approval of the Company’s Annual Report on 17 May is disclosed on page 49 of this Annual Report on Form 20-F)

Details of the shares purchased to 14 June 2011 (inclusive), including those purchased under irrevocable instructions, are as follows:


						Total number of
						shares purchased		Maximum value of
				Average price paid		under share		shares that may yet
	Number of shares			per share inclusive of		repurchase		be purchased under
Date of share	purchased⁽¹⁾			transaction costs		programme⁽²⁾		the programme⁽³⁾
purchase	‘000			Pence		‘000		£m

September 2010		115,400			161.78		115,400		2,613
October 2010		187,500			165.50		302,900		2,303
November 2010		209,400			170.21		512,300		1,947
December 2010		162,900			167.44		675,200		1,674
January 2011		177,090			176.67		852,290		1,361
February 2011		134,700			179.23		986,990		1,120
March 2011		250,900			177.26		1,237,890		675
April 2011		135,100			176.81		1,372,990		436
May 2011		179,300			170.84		1,552,290		130
June 1 to June 14, 2011 (inclusive)		79,373			163.23		1,631,663		—

Total		1,631,663	⁽⁴⁾		171.60		1,631,663


Notes:

(1)		The nominal value of shares purchased is 11³/₇US cents each.

(2)		No shares were purchased outside the publicly announced share buyback programme.

(3)		In accordance with the shareholder authority granted at the 2010 AGM.

(4)		The total number of shares purchased represents 3.19% of our issued share capital at 14 June 2011.

The aggregate amount of consideration paid by the Company for the shares at 14 June 2011 was £2,800 million.

A-2

Beneficial interests

(Information as at the approval of the Company’s Annual Report on 17 May is disclosed on page 73 of this Annual Report on Form 20-F)

The beneficial interests of directors and their connected persons in the ordinary shares of the Company, which includes interests in the Vodafone Share Incentive Plan, but which excludes interests in the Vodafone Group share options schemes, and the Vodafone Group short-term or long-term incentives, are shown below:


							1 April 2010
							or date of
	14 June 2011		16 May 2011		31 March 2011		appointment

Sir John Bond		370,677		370,677		370,677		357,584
John Buchanan		222,223		222,223		222,223		211,055
Vittorio Colao		2,307,663		2,307,663		2,307,663		1,575,567
Andy Halford		2,336,070		2,335,914		2,335,622		2,186,541
Michel Combes		670,745		670,589		670,297		392,223
Stephen Pusey		544,733		544,733		544,733		402,599
Renee James⁽¹⁾		50,000		50,000		50,000		—
Alan Jebson		82,340		82,340		82,340		82,340
Samuel Jonah		55,350		55,350		55,350		—
Gerard Kleisterlee⁽¹⁾		—		—		N/A		—
Nick Land		35,000		35,000		35,000		35,000
Anne Lauvergeon		28,936		28,936		28,936		28,936
Simon Murray (retired 27 July 2010)		N/A		N/A		N/A		246,250
Luc Vandevelde		89,030		89,030		89,030		72,829
Anthony Watson		115,000		115,000		115,000		115,000
Philip Yea		61,250		61,250		61,250		61,250


⁽¹⁾		Non-executive directors appointed to the Board as follows: Renee James 1 January 2011, Gerard Kleisterlee 1 April 2011.

At 31 March 2011 and during the period from 1 April 2011 to 14 June 2011, no director had any interest in the shares of any subsidiary company. Other than those individuals included in the table above who were Board members at 31 March 2011, members of the Group’s Executive Committee at 31 March 2011 had an aggregate beneficial interest in 2,755,152 ordinary shares of the Company. At 14 June 2011 the directors had an aggregate beneficial interest in 6,969,017 ordinary shares of the Company and the Executive Committee members had an aggregate beneficial interest in 2,756,048 ordinary shares of the Company. None of the directors or the Executive Committee members had an individual beneficial interest amounting to greater than 1% of the Company’s ordinary shares.

A-3

Interests in share options of the company

At 14 June 2011 there had been no change to the directors’ interests in share options from 31 March 2011.

Other than those individuals included in the table above, at 14 June 2011, members of the Group’s Executive Committee held options for 2,620,271 ordinary shares at prices ranging from 115.3 pence to 167.8 pence per ordinary share, with a weighted average exercise price of 161.9 pence per ordinary share exercisable at dates ranging from July 2008 to July 2017.

Sir John Bond, John Buchanan, Alan Jebson, Renee James, Samuel Jonah, Gerard Kleisterlee, Nick Land, Anne Lauvergeon, Luc Vandevelde, Anthony Watson and Philip Yea held no options at 14 June 2011.

Share price history

(Information as at the approval of the Company’s Annual Report on 17 May is disclosed on page 133 of this Annual Report on Form 20-F)

The closing share price at 31 March 2011 was 176.5 pence (31 March 2010: 152.0 pence). The closing share price on 14 June 2011 was 160.75 pence.

The following tables set out, for the periods indicated, i) the reported high and low middle market quotations of ordinary shares on the London Stock Exchange and ii) the reported high and low sales prices of ADSs on the New York Stock Exchange (“NYSE”)/NASDAQ. The Company transferred its ADSs from the NYSE to NASDAQ on 29 October 2009.


	London Stock Exchange Pounds per				NYSE/NASDAQ⁽¹⁾
	ordinary share				Dollars per ADS
Year ended 31 March	High		Low		High		Low

2007		1.54		1.08		29.85		20.07
2008		1.98		1.36		40.87		26.88
2009		1.70		0.96		32.87		15.30
2010		1.54		1.11		24.04		17.68
2011		1.85		1.27		32.70		18.21


	London Stock Exchange Pounds per				NYSE/NASDAQ⁽¹⁾
	ordinary share				Dollars per ADS
Quarter	High		Low		High		Low

2009/10
First quarter		1.33		1.11		20.08		17.68
Second quarter		1.44		1.12		23.85		18.25
Third quarter		1.45		1.32		24.04		21.10
Fourth quarter		1.54		1.32		23.32		21.32


2010/11
First quarter		1.53		1.27		23.79		18.21
Second quarter		1.65		1.36		25.80		20.71
Third quarter		1.80		1.57		28.52		28.84
Fourth quarter		1.85		1.67		32.70		26.34


2011/2012
First quarter ⁽²⁾		1.79		1.59		29.46		25.73

A-4


	London Stock Exchange Pounds per				NYSE/NASDAQ⁽¹⁾
	ordinary share				Dollars per ADS
Month	High		Low		High		Low

November 2010		1.80		1.59		28.52		24.84
December 2010		1.72		1.60		27.10		25.62
January 2011		1.85		1.68		32.70		26.34
February 2011		1.83		1.72		29.75		27.90
March 2011		1.85		1.67		29.67		26.71
April 2011		1.83		1.69		29.46		28.06
May 2011		1.74		1.66		29.27		27.12
June 2011⁽²⁾		1.64		1.59		27.14		25.73


Notes:

(1)		The Company transferred its ADSs from the NYSE to NASDAQ on 29 October 2009.

(2)		Covering period to 14 June 2011.

Shareholder information

(Information as at the approval of the Company’s Annual Report on 17 May is disclosed on page 134 of this Annual Report on Form 20-F)

Markets

Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and in the form of ADSs on NASDAQ. The Company had a total market capitalisation of approximately £82.3 billion at 14 June 2011, making it the second largest listing in The Financial Times Stock Exchange 100 index and the 29^th largest company in the world based on market capitalisation at that date.

Geographical analysis of shareholders

At 31 March 2011 approximately 46.9% of the Company’s shares were held in the UK, 30.2% in North America, 14.4% in Europe (excluding the UK) and 8.5% in the rest of the world.

Major shareholders

BNY Mellon, as custodian of the Company’s ADR programme, held approximately 17.45% of the Company’s ordinary shares of 11 ³/₇ US cents each at 14 June 2011 as nominee. The total number of ADRs outstanding at 14 June 2011 was 893,258,980. At this date 1,372 holders of record of ordinary shares had registered addresses in the US and in total held approximately 0.007% of the ordinary shares of the Company. At 14 June 2011 the following percentage interests in the ordinary share capital of the Company, disclosable under the Disclosure and Transparency Rules, (DTR 5), have been notified to the directors:


Shareholder	Shareholding

Black Rock, Inc.		6.29	%
Legal & General Group Plc		3.61	%

A-5

The rights attaching to the ordinary shares of the Company held by these shareholders are identical in all respects to the rights attaching to all the ordinary shares of the Company. The directors are not aware, at 14 June 2011, of any other interest of 3% or more in the ordinary share capital of the Company. The Company is not directly or indirectly owned or controlled by any foreign government or any other legal entity. There are no arrangements known to the Company that could result in a change of control of the Company.

Regulation

(Information as at the approval of the Company’s Annual Report on 17 May is disclosed on page 141 of this Annual Report on Form 20-F)

United Kingdom

Vodafone and three other mobile operators appealed the national regulator’s final decision in respect of the wholesale mobile voice call termination rates that will apply from 1 April 2011 to 31 March 2015. The matter will now be considered by the UK Competition Commission whose final decision is expected in February or March 2012.

A-6

Cellco Partnership
(d/b/a Verizon Wireless)
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
For the years ended
December 31, 2010, 2009 and 2008

B-1

Table of Contents

Cellco Partnership (d/b/a Verizon Wireless)


Consolidated Statements of Income
For the years ended December 31, 2010, 2009 and 2008			B-3

Consolidated Balance Sheets — As Adjusted
December 31, 2010 and 2009			B-4

Consolidated Statements of Cash Flows
For the years ended December 31, 2010, 2009 and 2008			B-5

Consolidated Statements of Changes in Partners’ Capital — As Adjusted
For the years ended December 31, 2010, 2009 and 2008			B-6

Notes to Consolidated Financial Statements			B-7-29

Report of Independent Registered Public Accounting Firm			B-30

B-2

Consolidated Statements of Income
Cellco Partnership (d/b/a Verizon Wireless)


	Years Ended December 31,
(Dollars in Millions)	2010			2009			2008

Operating Revenue (including $94, $102 and $106 from affiliates)
Service revenue	$	55,994		$	53,497		$	42,635
Equipment and other		7,925			8,634			6,697

Total operating revenue		63,919			62,131			49,332


Operating Costs and Expenses (including $1,696, $1,651 and $1,541 from affiliates)
Cost of service (exclusive of items shown below)		8,342			7,722			6,015
Cost of equipment		11,423			12,222			9,705
Selling, general and administrative		18,727			18,289			14,220
Depreciation and amortization		7,458			7,347			5,405

Total operating costs and expenses		45,950			45,580			35,345


Operating Income		17,969			16,551			13,987

Other Income (Expenses)
Interest expense, net		(316	)		(1,141	)		(161	)
Interest income and other, net		90			71			265

Income Before Provision for Income Taxes		17,743			15,481			14,091
Provision for income taxes		(1,067	)		(797	)		(802	)

Net Income	$	16,676		$	14,684		$	13,289


Net income attributable to non-controlling interest		295			286			263
Net income attributable to Cellco Partnership		16,381			14,398			13,026

Net Income	$	16,676		$	14,684		$	13,289

See Notes to Consolidated Financial Statements.

B-3

Consolidated Balance Sheets — As Adjusted
Cellco Partnership (d/b/a Verizon Wireless)


	As of December 31,
(Dollars in Millions)	2010		2009

Assets
Current assets
Cash and cash equivalents	$	5,331	$	607
Receivables, net of allowances of $328 and $356		6,007		5,721
Due from affiliates, net		126		58
Inventories, net		1,072		1,373
Prepaid expenses and other current assets		608		3,335

Total current assets		13,144		11,094

Plant, property and equipment, net		32,253		30,850
Wireless licenses		72,843		72,005
Goodwill		17,434		17,303
Other intangibles and other assets, net		2,370		3,100

Total assets	$	138,044	$	134,352


Liabilities and Partners’ Capital
Current liabilities
Short-term debt, including current maturities	$	4,869	$	2,998
Due to affiliates		—		5,003
Accounts payable and accrued liabilities		7,139		6,123
Advance billings		2,090		1,695
Other current liabilities		912		415

Total current liabilities		15,010		16,234

Long-term debt		11,634		18,661
Deferred tax liabilities, net		10,514		10,593
Other non-current liabilities		1,464		1,877

Total liabilities		38,622		47,365

Partners’ capital
Capital		97,399		84,863
Accumulated other comprehensive income		61		136
Non-controlling interest		1,962		1,988

Total Partners’ capital		99,422		86,987

Total liabilities and Partners’ capital	$	138,044	$	134,352

See Notes to Consolidated Financial Statements.

B-4

Consolidated Statements of Cash Flows
Cellco Partnership (d/b/a Verizon Wireless)


	Years Ended December 31,
(Dollars in Millions)	2010			2009			2008

Cash Flows from Operating Activities
Net income	$	16,676		$	14,684		$	13,289
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization		7,458			7,347			5,405
Provision for uncollectible receivables		746			696			507
Provision for deferred income taxes		65			147			176
Changes in current assets and liabilities, net of the effects of acquisition/disposition of businesses:
Receivables, net		(1,076	)		(1,000	)		(1,032	)
Inventories, net		308			(127	)		60
Prepaid expenses and other current assets		(104	)		(42	)		(74	)
Accounts payable and accrued liabilities		1,505			(607	)		(365	)
Other operating activities, net		(31	)		830			181

Net cash provided by operating activities		25,547			21,928			18,147


Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(8,438	)		(7,152	)		(6,510	)
Acquisition of businesses and licenses, net of cash acquired		(332	)		(4,881	)		(10,277	)
Proceeds from dispositions		2,594			—			—
Investment in debt obligations		—			—			(4,766	)
Other investing activities, net		(495	)		(29	)		(526	)

Net cash used in investing activities		(6,671	)		(12,062	)		(22,079	)


Cash Flows from Financing Activities
Proceeds from affiliates		—			—			9,363
Repayments to affiliates		(5,005	)		(6,291	)		(3,891	)
Net (decrease) increase in revolving affiliate borrowings		—			(457	)		307
Issuance of long-term debt		—			9,223			10,324
Repayment of long-term debt		(5,016	)		(17,028	)		(1,505	)
Distributions to partners		(3,845	)		(3,138	)		(1,529	)
Other financing activities, net		(286	)		(795	)		(318	)

Net cash (used in) provided by financing activities		(14,152	)		(18,486	)		12,751

Increase (decrease) in cash and cash equivalents		4,724			(8,620	)		8,819
Cash and cash equivalents, beginning of year		607			9,227			408

Cash and cash equivalents, end of year	$	5,331		$	607		$	9,227

See Notes to Consolidated Financial Statements.

B-5

Consolidated Statements of Changes in Partners’ Capital — As Adjusted
Cellco Partnership (d/b/a/ Verizon Wireless)


	Years Ended December 31,
(Dollars in Millions)	2010			2009			2008

Partners’ Capital
Balance at beginning of year	$	84,863		$	73,387		$	62,404
Cumulative effect of change in accounting for pension and other post-employment benefits (Note 1)		—			—			(23	)

Adjusted balance at beginning of year		84,863			73,387			62,381
Net income		16,381			14,398			13,026
Contributed capital		—			(344	)		—
Distributions declared to partners		(3,845	)		(2,582	)		(2,085	)
Other		—			4			65

Balance at end of year		97,399			84,863			73,387


Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year		136			(93	)		(50	)
Cumulative effect of change in accounting for pension and other post-employment benefits (Note 1)		—			—			23

Adjusted balance at beginning of year		136			(93	)		(27	)
Unrealized (losses) gains on cash flow hedges, net		(66	)		175			(53	)
Defined benefit pension and postretirement plans		(9	)		54			(13	)

Other comprehensive (loss) income		(75	)		229			(66	)

Balance at end of year		61			136			(93	)



Total Partners’ Capital Attributable to Cellco Partnership		97,460			84,999			73,294


Non-controlling Interest
Balance at beginning of year		1,988			1,692			1,681
Net income attributable to non-controlling interest		295			286			263
Contributed capital		—			31			—
Non-controlling interests in disposed/acquired company		(34	)		497			—
Distributions		(287	)		(280	)		(249	)
Acquisitions of non-controlling partnership interests		—			(240	)		—
Other		—			2			(3	)

Balance at end of year		1,962			1,988			1,692


Total Partners’ Capital	$	99,422		$	86,987		$	74,986


Comprehensive Income
Net income	$	16,676		$	14,684		$	13,289
Other comprehensive (loss) income per above		(75	)		229			(66	)

Total Comprehensive Income	$	16,601		$	14,913		$	13,223


Comprehensive income attributable to non-controlling interest	$	295		$	286		$	263
Comprehensive income attributable to Cellco Partnership		16,306			14,627			12,960

Total Comprehensive Income	$	16,601		$	14,913		$	13,223

See Notes to Consolidated Financial Statements.

B-6

Notes to Consolidated Financial Statements
Cellco Partnership (d/b/a Verizon Wireless)

1. Description of Business and Summary of Significant Accounting Policies

Description of Business

Cellco Partnership (the “Partnership”), a Delaware general partnership doing business as Verizon Wireless, provides wireless voice and data services and related equipment using one of the most extensive and reliable wireless networks in the nation. Verizon Wireless continues to expand its penetration of data services and offerings of data devices for both consumer and business customers. The Partnership has one segment and operates domestically only. References to “our Partners” refers to Verizon Communications, and its subsidiaries (“Verizon”), which owns 55% of the Partnership, and Vodafone Group Plc, and its subsidiaries (“Vodafone”), which owns 45% of the Partnership.

These consolidated financial statements include transactions between the Partnership and Verizon and Vodafone (“Affiliates”) for the provision of services and financing pursuant to various agreements (see Notes 7 and 11).

Consolidated Financial Statements and Basis of Presentation

The consolidated financial statements of the Partnership include the accounts of its majority-owned subsidiaries and the partnerships in which the Partnership exercises control. Investments in businesses and partnerships which the Partnership does not control, but has the ability to exercise significant influence over operating and financial policies, are accounted for under the equity method of accounting. Investments and partnerships which the Partnership does not have the ability to exercise significant influence over operating and financial policies are accounted for under the cost method of accounting. Equity and cost method investments are included in Deferred charges and other assets, net in our consolidated balance sheets. All significant intercompany accounts and transactions have been eliminated.

We have evaluated subsequent events through June 16, 2011, the date these consolidated financial statements were available to be issued.

During the second quarter of 2010, we recorded a one-time non-cash adjustment of $268 million primarily to reduce wireless data revenues. This adjustment was recorded to properly defer previously recognized wireless data revenues that were earned and recognized in future periods. As the amounts involved were not material to our consolidated financial statements in the current or any previous reporting period, the adjustment was recorded during the second quarter.

During 2010, we changed our accounting policy to immediately recognize actuarial gains and losses for pension and other post-employment benefits in the year in which the gains and losses occur. The cumulative effect of the change on Partners’ Capital as of January 1, 2008 was a decrease of approximately $23 million, with the corresponding increase to Accumulated other comprehensive income. This change was not material to our consolidated statements of income or consolidated statement of cash flows in the current or any previous reporting periods presented.

Use of Estimates

We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”), which require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples of significant estimates include: the accounting for allowances for uncollectible accounts receivable, unbilled revenue, fair values of financial instruments, depreciation and amortization, the recoverability of intangible assets, goodwill and other long-lived assets, accrued expenses, inventory

B-7

reserves, unrealized tax benefits, valuation allowances on tax assets, contingencies and allocation of purchase prices in connection with business combinations.

Revenue Recognition

The Partnership earns revenue by providing access and usage of its network, which includes voice and data revenue. In general, access revenue is billed one month in advance and is recognized when earned; the unearned portion is classified in Advance billings in the consolidated balance sheets. Usage revenue is generally billed in arrears and recognized when service is rendered and included in unbilled revenue, within Receivables, net in the consolidated balance sheets. Equipment sales revenue associated with the sale of wireless devices and accessories is recognized when the products are delivered to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless services. For agreements involving the resale of third-party services in which we are considered the primary obligor in the arrangements, we record revenue gross at the time of sale.

We report taxes imposed by governmental authorities on revenue-producing transactions between us and our customers on a net basis.

Advertising Costs

Costs for advertising products and services as well as other promotional and sponsorship costs are charged to Selling, general and administrative expense in the periods in which they are incurred.

Vendor Rebates and Discounts

The Partnership recognizes vendor rebates or discounts for purchases of wireless devices from a vendor as a reduction of Cost of equipment when the related wireless devices are sold. Vendor rebates or discounts that have been earned as a result of completing the required performance under the terms of the underlying agreements but for which the wireless devices have not yet been sold are recognized as a reduction of inventory cost. Advertising credits are granted by a vendor to the Partnership as reimbursement of specific, incremental, identifiable advertising costs incurred by the Partnership in selling the vendor’s wireless devices. These advertising credits are restricted based upon a marketing plan agreed to by the vendor and the Partnership, and accordingly, advertising credits received are recorded as a reduction of those advertising costs when recognized in the Partnership’s consolidated statements of income.

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of 90 days or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates quoted market value, and includes approximately $5,004 million and $192 million at December 31, 2010 and 2009, respectively, held in money market funds that are considered cash equivalents.

Inventory

Inventory consists primarily of wireless equipment held for sale, which is carried at the lower of cost (determined using a first-in, first-out method) or market. The Partnership maintained inventory valuation reserves of $74 million and $106 million as of December 31, 2010 and 2009, respectively, for obsolete and slow moving device inventory based on analyses of inventory agings and changes in technology.

Capitalized Software

Capitalized software consists primarily of direct costs incurred for professional services provided by third parties and compensation costs of employees which relate to software developed for internal use either during the application stage or for upgrades and enhancements that increase functionality. Costs are capitalized and amortized on a straight-line basis over their estimated useful lives. Costs incurred in the preliminary project stage of development and maintenance are expensed as incurred. For a discussion of our

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impairment policy for capitalized software costs, see “Valuation of Assets” below. Also see Note 3 for additional detail of capitalized non-network software reflected in our consolidated balance sheets.

Plant, Property and Equipment

Plant, property and equipment primarily represents costs incurred to construct and expand capacity and network coverage on Mobile Telephone Switching Offices and cell sites. The cost of plant, property and equipment is depreciated over its estimated useful life using the straight-line method of accounting. Periodic reviews are performed to identify any category or group of assets within plant, property and equipment where events or circumstances may change the remaining estimated economic life. This principally includes changes in the Partnership’s plans regarding technology upgrades, enhancements, and planned retirements. Changes in these estimates resulted in an increase in depreciation expense of $260 million, $319 million, and $228 million for the years ended December 31, 2010, 2009, and 2008, respectively. Major improvements to existing plant and equipment are capitalized. Routine maintenance and repairs that do not extend the life of the plant and equipment are charged to expense as incurred. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease.

Upon the sale or retirement of plant, property and equipment, the cost and related accumulated depreciation or amortization is eliminated and any related gain or loss is reflected in the consolidated statements of income in Selling, general and administrative expense.

Interest expense and network engineering costs incurred during the construction phase of the Partnership’s network and real estate properties under development are capitalized as part of plant, property and equipment and recorded as construction in progress until the projects are completed and placed into service.

Valuation of Assets

Long-lived assets, including plant, property and equipment and intangible assets with finite lives, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Wireless Licenses

The Partnership’s principal intangible assets are licenses, which provide the Partnership with the exclusive right to utilize certain radio frequency spectrum to provide wireless communication services. While licenses are issued for only a fixed time, generally ten years, such licenses are subject to renewal by the Federal Communications Commission (“FCC”). Renewals of licenses have occurred routinely and at nominal costs, which are expensed as incurred. Moreover, the Partnership has determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of the Partnership’s wireless licenses. As a result, the wireless licenses are treated as an indefinite lived intangible asset, and are not amortized. The Partnership reevaluates the useful life determination for wireless licenses at least annually to determine whether events and circumstances continue to support an indefinite useful life.

The Partnership tests its wireless licenses for potential impairment annually, and more frequently if indications of impairment exist. The Partnership evaluates its licenses on an aggregate basis, using a direct income-based value approach. This approach estimates fair value using a discounted cash flow analysis to estimate what a marketplace participant would be willing to pay to purchase the aggregated wireless licenses as of the valuation date. If the fair value of the aggregated wireless licenses is less than the aggregated carrying amount of the wireless licenses, an impairment is recognized.

Interest expense incurred while qualifying activities are performed to ready wireless licenses for their intended use is capitalized as part of wireless licenses. The capitalization period ends when a license is substantially complete and the license is ready for its intended use.

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Goodwill

Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Impairment testing of goodwill is performed annually or more frequently if indications of potential impairment exist. The impairment test for goodwill uses a two-step approach, which is performed for our one reporting unit. Step one compares the fair value of the reporting unit (calculated using a market approach and a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value (i.e., fair value of reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets). If the implied fair value of goodwill is less than the carrying amount of goodwill, an impairment is recognized.

Fair Value Measurements

Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received on the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities

Level 3 – No observable pricing inputs in the market

Financial assets and financial liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

See Note 4 for further details on our fair value measurements.

Foreign Currency Translation

The functional currency for all of our operations is the U.S. dollar. However, we have transactions denominated in a currency other than the local currency, principally debt denominated in Euros and British Pounds Sterling. Gains and losses resulting from exchange-rate changes in transactions denominated in a foreign currency are included in earnings.

Derivatives

The Partnership uses derivatives from time to time to manage the Partnership’s exposure to fluctuations in the cash flows of certain transactions. We measure all derivatives at fair value and recognize them as either assets or liabilities on our consolidated balance sheets. Our derivative instruments are valued primarily using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified as Level 2. Changes in the fair values of derivative instruments not qualifying as hedges or any ineffective portion of hedges are recognized in earnings in the current period. Changes in the fair values of derivative instruments used effectively as fair value hedges are recognized in earnings, along with changes in the fair value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in other comprehensive income (loss) and recognized in earnings when the hedged item is recognized in earnings.

Employee Benefit Plans

The Partnership maintains a defined contribution plan, the Verizon Wireless Savings and Retirement Plan (the “Savings and Retirement Plan”), for the benefit of its employees. The Savings and Retirement Plan includes both an employee savings and profit sharing component. Under the employee savings component,

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employees may contribute a percentage of eligible compensation to the Savings and Retirement Plan. Up to the first 6% of an employee’s eligible compensation contributed to the Savings and Retirement Plan is matched 100% by the Partnership. Under the profit sharing component, the Partnership may elect, at the sole discretion of the Human Resources Committee of the Board of Representatives, to contribute an additional amount in the form of a profit sharing contribution to the accounts of eligible employees. (See Note 6)

Long-Term Incentive Compensation

The Partnership measures compensation expense for all stock-based compensation awards made to employees and directors based on estimated fair values. See Note 8 for further details.

Income Taxes

The Partnership is not a taxable entity for federal income tax purposes. Any federal taxable income or loss is included in the respective partners’ consolidated federal return. Certain states, however, impose taxes at the partnership level and such taxes are the responsibility of the Partnership and are included in the Partnership’s tax provision. The consolidated financial statements also include provisions for federal and state income taxes, prepared on a stand-alone basis, for all corporate entities within the Partnership. Deferred income taxes are recorded using enacted tax law and rates for the years in which the taxes are expected to be paid or refunds received. Deferred income taxes are provided for items when there is a temporary difference in recording such items for financial reporting and income tax reporting.

The Partnership uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and provides disclosures regarding uncertainties in income tax positions. The Partnership recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

Concentrations

The Partnership relies on local and long-distance telephone companies, some of whom are related parties (Note 11), and other companies to provide certain communication services. Although management believes alternative telecommunications facilities could be found in a timely manner, any disruption of these services could potentially have an adverse impact on our business, results of operations and financial condition.

The Partnership depends upon various key suppliers to provide it, directly or through other suppliers, with the equipment and services, such as switch and network equipment, handsets and other devices and wireless data applications that are needed to operate the business. Most of our handset and other device suppliers rely on Qualcomm Incorporated (“Qualcomm”) for the manufacture and supply of the chipsets used in their devices. In addition, a small group of suppliers provide nearly all of our network cell site and switch equipment and, in many instances, due to compatibility issues, we must use the same supplier for both the cell site equipment and switches in a given area of our network footprint. If any of our key network cell site and switch equipment suppliers, or other suppliers, fail to provide equipment or services on a timely basis or fail to meet our performance expectations, we may be unable to provide services to our customers in a competitive manner or continue to maintain and upgrade our network. Because of the costs and time lags that can be associated with transitioning from one supplier to another, our business could be substantially disrupted if we were required to, or chose to, replace the products or services of one or more major suppliers with products or services from another source, especially if the replacement became necessary on short notice. Any such disruption could increase our costs, decrease our operating efficiencies and have a material adverse effect on our business, results of operations and financial condition.

No single customer receivable is large enough to present a significant financial risk to the Partnership.

Recently Adopted Accounting Standards

The adoption of the following accounting standards and updates during 2010 did not result in a significant impact to our consolidated financial statements:

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In January 2010, we adopted the accounting standard regarding consolidation accounting for variable interest entities. This standard update requires an enterprise to perform an analysis to determine whether the entity’s variable interest or interests give it a controlling interest in a variable interest entity.

In January 2010, we adopted the accounting standard update regarding fair value measurements and disclosures which requires additional disclosures regarding assets and liabilities measured at fair value.

In December 2010, we adopted the accounting standard update regarding disclosures for finance receivables and allowances for credit losses. This standard update requires that entities disclose information at more disaggregated levels than previously required.

Recent Accounting Standards

On January 1, 2011, we prospectively adopted the accounting standard update regarding revenue recognition for multiple deliverable arrangements. This method allows a vendor to allocate revenue in an arrangement using its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists. Accordingly, the residual method of revenue allocation is no longer permissible. The adoption of this standard update is not expected to have a significant impact on our consolidated financial statements.

On January 1, 2011, we prospectively adopted the accounting standard update regarding revenue recognition for arrangements that include software elements. This requires tangible products that contain software and non-software elements that work together to deliver the products essential functionality to be evaluated under the accounting standard regarding multiple deliverable arrangements. The adoption of this standard update is not expected to have a significant impact on our consolidated financial statements.

2. Acquisitions and Dispositions

On August 23, 2010, the Partnership acquired the net assets and related customers of six operating markets in Louisiana and Mississippi in a transaction with AT&T Inc. (AT&T) for cash consideration of $235 million. These assets were acquired to enhance the Partnership’s network coverage in these operating markets. The preliminary purchase price allocation primarily resulted in $106 million of wireless licenses and $72 million in goodwill.

Acquisition of Alltel Corporation

On June 5, 2008, the Partnership entered into an agreement and plan of merger with Alltel Corporation (“Alltel”), a provider of wireless voice and data services to consumer and business customers in 34 states, and its controlling stockholder, Atlantis Holdings LLC, an affiliate of private investment firms TPG Capital and GS Capital Partners, to acquire, in an all-cash merger, 100% of the equity of Alltel for cash consideration of $5,925 million. The Partnership closed the transaction on January 9, 2009.

The Partnership has completed the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, the fair value of non-controlling interests, and the amount of goodwill recognized as of the acquisition date.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost, and market approaches. The fair value measurements were primarily based on significant inputs that are not observable in the market other than interest rate swaps (see Note 4) and long-term debt assumed in the acquisition. The income approach was primarily used to value the intangible assets, consisting primarily of wireless licenses and customer relationships. The cost approach was used as appropriate for property, plant, and equipment. The market approach was utilized in combination with the income approach for certain acquired investments. Additionally, Alltel historically conducted business operations in certain markets through non-wholly owned entities (“Managed Partnerships”). The fair value of the non-controlling interests in these Managed Partnerships as of the acquisition date of approximately $586 million was estimated by

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using a market approach. The fair value of the majority of the long-term debt assumed and held was primarily valued using quoted market prices.

The following table summarizes the consideration paid and the allocation of the assets acquired, including cash acquired of $1,044 million, and liabilities assumed as of the close of the acquisition, as well as the fair value at the acquisition date of Alltel’s non-controlling partnership interests:


(dollars in millions)

Assets acquired
Current assets	$	2,760
Plant, property and equipment		3,513
Wireless licenses		9,444
Goodwill		16,242
Intangible assets subject to amortization		2,391
Other acquired assets		2,444

Total assets acquired		36,794

Liabilities assumed
Current liabilities		1,833
Long-term debt		23,929
Deferred income taxes and other liabilities		4,982

Total liabilities assumed		30,744

Net assets acquired		6,050
Non-controlling interest		(458	)
Contributed capital		333

Total cash consideration	$	5,925

Included in the above purchase price allocation is $2,064 million of net assets that were subsequently divested as a condition of the regulatory approval as described below.

Wireless licenses have an indefinite life, and accordingly, are not subject to amortization. The weighted average period prior to renewal of these licenses at acquisition was approximately 5.7 years. The customer relationships, included in Intangible assets subject to amortization are being amortized using an accelerated method over 8 years, and other intangibles are being amortized on a straight-line basis or an accelerated method over a period of 2 to 3 years. At the time of the acquisition, goodwill of approximately $1,363 million was expected to be deductible for tax purposes.

Pro Forma Information

The unaudited pro forma information presents the combined operating results of the Partnership and Alltel, with the results prior to the acquisition date adjusted to include the pro forma impact of: the elimination of transactions between the Partnership and Alltel; the adjustment of amortization of intangible assets and depreciation of fixed assets based on the purchase price allocation; the elimination of merger expenses and management fees incurred by Alltel; and the adjustment of interest expense reflecting the assumption and partial redemption of Alltel’s debt and incremental borrowing incurred by the Partnership to complete the acquisition of Alltel.

The unaudited pro forma results are presented for illustrative purposes only and do not reflect the realization of potential cost savings, or any related integration costs. Certain cost savings may result from the merger; however, there can be no assurance that these cost savings will be achieved. These pro forma results do not purport to be indicative of the results that would have actually been obtained if the merger had occurred as of January 1, 2008, nor does the pro forma data intend to be a projection of results that may be obtained in the future.

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The following unaudited pro forma consolidated results of operations assume that the acquisition of Alltel was completed as of January 1, 2008:


	Year ended
(dollars in millions)	December 31, 2008

Operating revenues	$	58,572
Net income		13,398

Consolidated results of operations reported for the year ended December 31, 2009 were not significantly different than the pro forma consolidated results of operations assuming the acquisition of Alltel was completed on January 1, 2009.

During the twelve months ended December 31, 2009, we recorded pretax charges of $88 million primarily related to the Alltel acquisition that were comprised of acquisition related costs recorded in Selling, general and administrative expense in the consolidated statements of income.

Alltel Divestiture Markets

As a condition of the regulatory approvals by the Department of Justice (“DOJ”)and the Federal Communications Commission (“FCC”) to complete the acquisition of Alltel in January 2009, the Partnership was required to divest overlapping properties in 105 operating markets in 24 states (the Alltel Divestiture Markets). Total assets and total liabilities divested were approximately $2.6 billion and $0.1 billion, respectively, principally comprised of network assets, wireless licenses and customer relationships, and were included in Prepaid expenses and other current assets and Other current liabilities, respectively, on the accompanying condensed consolidated balance sheet at December 31, 2009.

On May 8, 2009, the Partnership entered into a definitive agreement with AT&T Mobility LLC (AT&T Mobility), a subsidiary of AT&T, pursuant to which AT&T Mobility agreed to acquire 79 of the 105 Alltel Divestiture Markets, including licenses and network assets, for approximately $2.4 billion in cash. On June 9, 2009, the Partnership entered into a definitive agreement with Atlantic Tele-Network, Inc. (ATN), pursuant to which ATN agreed to acquire the remaining 26 Alltel Divestiture Markets, including licenses and network assets, for $200 million in cash. During the second quarter of 2010, the Partnership received the necessary regulatory approvals and completed both transactions. Upon the completion of the divestitures, we recorded a tax charge of approximately $201 million for the taxable gain on the excess of book over tax basis of the goodwill associated with the Alltel Divestiture Markets.

Acquisition of Rural Cellular Corporation

On August 7, 2008, Verizon Wireless acquired 100% of the outstanding common stock and redeemed all of the preferred stock of Rural Cellular Corporation (“Rural Cellular”) in a cash transaction valued at approximately $1.3 billion. The final purchase price allocation primarily resulted in $1.1 billion of wireless licenses and $0.9 billion in goodwill. Rural Cellular was a wireless communications service provider operating under the trade name of “Unicel,” focusing primarily on rural markets in the United States.

As part of its regulatory approval for the Rural Cellular acquisition, the FCC and DOJ required the divestiture of six operating markets. On December 22, 2008, we exchanged assets acquired from Rural Cellular and an additional cellular license with AT&T for assets having a total aggregate value of approximately $0.5 billion.

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3. Wireless Licenses, Goodwill and Other Intangibles, Net

Wireless Licenses

The changes in the carrying amount of wireless licenses are as follows:


(dollars in millions)	Wireless Licenses (a)

Balance as of January 1, 2009	$	62,392
Acquisitions		9,444
Capitalized interest on wireless licenses		268
Reclassifications, adjustments and other^(b)		(99	)

Balance as of December 31, 2009		72,005
Acquisitions		178
Capitalized interest on wireless licenses		657
Reclassifications, adjustments and other		3

Balance as of December 31, 2010	$	72,843


(a)		During the years ended December 31, 2010 and 2009, approximately $12.2 billion of wireless licenses were under development for commercial service for which we were capitalizing interest costs. In December 2010, a portion of these licenses were placed in service. Accordingly, approximately $3.3 billion of wireless licenses continue to be under development for commercial service.

(b)		Reclassifications, adjustments and other during 2009 primarily includes the reclassification of wireless licenses associated with the pre-merger operations of the Partnership that are included in the Alltel Divestiture Markets (see Note 2) and included in Prepaid expenses and other current assets in the accompanying consolidated balance sheets.

The Partnership evaluated its wireless licenses for potential impairment as of December 15, 2010 and December 15, 2009. These evaluations resulted in no impairment of the Partnership’s wireless licenses.

During 2008, the Partnership was the winning bidder in the FCC’s auction of spectrum in the 700 MHz band and paid the FCC $9,363 million to acquire 109 licenses in this band.

The average remaining renewal period of our wireless license portfolio was 6.9 years as of December 31, 2010.

Goodwill

The changes in the carrying amount of goodwill are as follows:


(dollars in millions)	Goodwill

Balance as of January 1, 2009	$	955
Acquisitions		16,242
Reclassifications, adjustments and other^(a)		106

Balance as of December 31, 2009		17,303
Acquisitions		131
Reclassifications, adjustments and other		—

Balance as of December 31, 2010	$	17,434


(a)		Reclassifications, adjustments and other during 2009 includes adjustments to goodwill associated with the finalization of the Rural Cellular purchase accounting partially offset by the reclassification of goodwill associated with the pre-merger operations of the Partnership that are included in the Alltel

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		Divestiture Markets (see Note 2) and included in Prepaid expenses and other current assets in the accompanying consolidated balance sheets.

The Partnership completed its impairment test as of December 15, 2010 and December 15, 2009. These tests resulted in no impairment of the Partnership’s goodwill.

Other Intangibles, net

Other intangibles, net are included in Other intangibles and other assets, net and consist of the following:


	At December 31, 2010								At December 31, 2009
	Gross		Accumulated			Net		Gross		Accumulated			Net
(dollars in millions)	Amount		Amortization			Amount		Amount		Amortization			Amount

Customer lists (6 to 8 years)	$	2,142	$	(905	)	$	1,237	$	2,122	$	(497	)	$	1,625
Capitalized software (2 to 5 years)		1,009		(457	)		552		879		(377	)		502
Other (1 to 3 years)		382		(348	)		34		397		(235	)		162

Total^(a)	$	3,533	$	(1,710	)	$	1,823	$	3,398	$	(1,109	)	$	2,289


(a)		Based on amortizable intangible assets existing at December 31, 2010, the estimated amortization expense for the five succeeding fiscal years and thereafter is as follows:


2011	$	565
2012		427
2013		344
2014		247
2015		181
Thereafter		59

Total	$	1,823

4. Fair Value Measurements

The following table presents the balances of assets measured at fair value on a recurring basis as of December 31, 2010:


(dollars in millions)	Level 1		Level 2		Level 3		Total

Assets:
Prepaid expense and other current assets:
Derivative contracts—Cross currency swaps (Current)	$	—	$	7	$	—	$	7
Other intangibles and other assets, net:
Derivative contracts—Cross currency swaps (Non-current)	$	—	$	101	$	—	$	101

Derivative contracts consist of cross currency swaps. Derivative contracts are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are

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classified within Level 2. We use mid-market pricing for fair value measurements of our derivative instruments.

We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the fair value hierarchy during 2010.

Fair Value of Short-term and Long-term Debt

The fair value of our term note due to affiliates was determined based on future cash flows discounted at current rates. The fair value of our short-term and long-term debt is determined based on quoted market prices or future cash flows discounted at current rates. Our financial instruments also include cash and cash equivalents, and trade receivables and payables. These financial instruments are short term in nature and are stated at their carrying value, which approximates fair value. The fair value of our term note due to affiliates and short-term and long-term debt were as follows:


	At December 31, 2010				At December 31, 2009
	Carrying		Fair		Carrying		Fair
(dollars in millions)	Value		Value		Value		Value

Term notes due to affiliates	$	—	$	—	$	5,003	$	5,008
Short and long-term debt		16,503		18,697		21,659		23,597

Derivative Instruments

We have entered into derivative transactions to manage our exposure to fluctuations in foreign currency exchange rates and interest rates. We employ risk management strategies which may include the use of a variety of derivatives including cross currency swaps and interest rate swap agreements. We do not hold derivatives for trading purposes.

We measure all derivatives, including derivatives embedded in other financial instruments, at fair value and recognize them as either assets or liabilities on our consolidated balance sheets. The derivative instruments discussed below are valued using models based on readily observable market parameters for all substantial terms of our derivative contracts and thus are classified as Level 2. Changes in the fair values of derivative instruments not qualifying as hedges or any ineffective portion of hedges are recognized in earnings in the current period. Changes in the fair values of derivative instruments used effectively as fair value hedges are recognized in earnings, along with changes in the fair value of the hedged item. Changes in the fair value of the effective portions of cash flow hedges are reported in other comprehensive income (loss) and recognized in earnings when the hedged item is recognized in earnings.

Cross Currency Swaps

We have entered into cross currency swaps designated as cash flow hedges to exchange approximately $2.4 billion of British Pound Sterling and Euro denominated debt into U.S. dollars and to fix our future interest and principal payments in U.S. dollars, as well as mitigate the impact of foreign currency transaction gains or losses. The fair value of the cross currency swaps included in Prepaid expenses and other current assets and Other intangibles and other assets, net was $7 million and $101 million at December 31, 2010, respectively. The fair value of the cross currency swaps included in Other intangibles and other assets, net was $315 million at December 31, 2009. For the years ended December 31, 2010 and 2009, a pretax $207 million loss and $310 million gain, respectively, on the cross currency swaps has been recognized in Other comprehensive income, a portion of which was reclassified to Interest income and other, net to offset the related pretax foreign-currency transaction gain or loss on the underlying debt obligations.

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Alltel Interest Rate Swaps

As a result of the Alltel acquisition, the Partnership acquired seven interest rate swap agreements with a notional value of $9.5 billion that paid fixed and received variable rates based on three-month and one-month London Interbank Offered Rate (“LIBOR”) with maturities ranging from 2009 to 2013. During 2009, we settled all of these agreements for a gain that was not significant. Changes in the fair value of these swaps were recorded in earnings through settlement.

Concentrations of Credit Risk

Financial instruments that subject us to concentrations of credit risk consist primarily of temporary cash investments, trade receivables and derivative contracts. Our policy is to deposit our temporary cash investments with major financial institutions. Counterparties to our derivative contracts are also major financial institutions. The financial institutions have all been accorded high ratings by primary rating agencies. We limit the dollar amount of contracts entered into with any one financial institution and monitor our counterparties’ credit ratings. We generally do not give or receive collateral on swap agreements due to our credit rating and those of our counterparties. While we may be exposed to credit losses due to the nonperformance of our counterparties, we consider the risk remote and do not expect the settlement of these transactions to have a material effect on our results of operations or financial condition.

5. Non-controlling Interest

Non-controlling interests in equity of subsidiaries were as follows:


	At December 31,
(dollars in millions)	2010		2009

Verizon Wireless of the East LP	$	1,179	$	1,179
Cellular partnerships		783		809

Non-controlling interest in consolidated entities	$	1,962	$	1,988

Verizon Wireless of the East LP

Verizon Wireless of the East LP is a limited partnership formed in 2002 and is controlled and managed by the Partnership. Verizon held the non-controlling interest of Verizon Wireless of the East LP at December 31, 2010 and 2009. Verizon is not allocated any of the profits of Verizon Wireless of the East LP.

6. Supplementary Financial Information

Supplementary Balance Sheet Information


	At December 31,
(dollars in millions)	2010			2009

Receivables, Net:
Accounts receivable	$	5,150		$	4,953
Other receivables		866			842
Unbilled revenue		319			282

		6,335			6,077
Less: allowance for doubtful accounts		(328	)		(356	)

Receivables, net	$	6,007		$	5,721

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	Balance at		Additions					Balance at
	beginning of		charged to		Write-offs, net of			end of the
(dollars in millions)	the year		expense		recoveries			year

Accounts Receivable Allowances:
2010	$	356	$	746	$	(774	)	$	328
2009		244		696		(584	)		356
2008		217		507		(480	)		244


	At December 31,
(dollars in millions)	2010			2009

Plant, Property and Equipment, Net:
Land	$	262		$	268
Buildings (20-40 yrs.)		9,481			8,849
Wireless plant and equipment (3-15 yrs.)		45,293			40,862
Furniture, fixtures and equipment (5 yrs.)		4,152			4,245
Leasehold improvements (5 yrs.)		3,811			3,501
Construction-in-progress^(b)		2,431			1,979

		65,430			59,704
Less: accumulated depreciation		(33,177	)		(28,854	)

Plant, property and equipment , net^(a)	$	32,253		$	30,850


(a)		Interest costs of $121 million and $88 million and network engineering costs of $393 million and $351 million were capitalized during the years ended December 31, 2010 and 2009, respectively.

(b)		Construction-in-progress includes $919 million and $784 million of accrued but unpaid capital expenditures as of December 31, 2010 and 2009, respectively.


	At December 31,
(dollars in millions)	2010		2009

Accounts Payable and Accrued Liabilities:
Accounts payable and accrued expenses	$	4,003	$	3,633
Accrued payroll		442		390
Related employee benefits		1,424		945
Taxes payable		529		516
Accrued commissions		518		385
Accrued interest		223		254

Accounts payable and accrued liabilities	$	7,139	$	6,123

Supplementary Statements of Income Information


	For the Years Ended December 31,
(dollars in millions)	2010		2009		2008

Service Revenue:
Voice revenue	$	36,465	$	37,483	$	31,984
Data revenue		19,529		16,014		10,651

Total service revenue	$	55,994	$	53,497	$	42,635

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	For the Years Ended December 31,
(dollars in millions)	2010			2009			2008

Advertising and Promotional Cost:	$	1,801		$	2,036		$	1,779

Employee Benefit Plans:
Matching contribution expense	$	217		$	216		$	185
Profit sharing expense		108			94			103

Depreciation and Amortization:
Depreciation of plant, property and equipment	$	6,771		$	6,545		$	5,258
Amortization of other intangibles		687			802			147

Total depreciation and amortization	$	7,458		$	7,347		$	5,405


Interest Expense, Net:
Interest expense	$	(1,094	)	$	(1,497	)	$	(490	)
Capitalized interest		778			356			329

Interest expense, net	$	(316	)	$	(1,141	)	$	(161	)

Supplementary Cash Flows Information


	For the Years Ended December 31,
(dollars in millions)	2010		2009		2008

Net cash paid for income taxes	$	1,236	$	384	$	575
Interest paid, net of amounts capitalized		284		738		90

7. Debt


					(dollars in millions)
					At December 31,
	Interest Rates %		Maturities		2010			2009

Debt:
Notes payable and other		3.75 - 5.55		2011 - 2014		7,000			7,000
		7.375 - 8.875		2011 - 2018		5,975			6,117
		Floating		2011		1,250			6,246
Alltel notes		6.50 - 7.875		2012 - 2032		2,315			2,334
Unamortized discount, net of premium						(37	)		(38	)

Total debt, including current maturities						16,503			21,659
Less: current maturities						4,869			2,998

Total long-term debt					$	11,634		$	18,661


Term notes payable to Affiliate ^(a):
Promissory note	Floating			2010		—			5,003

Total due to affiliates, including current maturities						—			5,003
Less: current maturities						—			5,003

Total long-term due to affiliates					$	—		$	—

(a)

All affiliate term notes were payable to Verizon Financial Services LLC (“VFSL”), a wholly-owned subsidiary of Verizon.

B-20

Debt

Verizon Wireless Capital LLC, a wholly-owned subsidiary of the Partnership, is a limited liability company formed under the laws of Delaware on December 7, 2001 as a special purpose finance subsidiary to facilitate the offering of debt securities of the Partnership by acting as co-issuer. Other than the financing activities as a co-issuer of the Partnership’s indebtedness, Verizon Wireless Capital LLC has no material assets, operations or revenues. The Partnership is jointly and severally liable with Verizon Wireless Capital LLC for co-issued notes, as indicated below.

Discounts, premiums, and capitalized debt issuance costs are amortized using the effective interest method.

On June 28, 2010, the Partnership exercised its right to redeem the outstanding $1.0 billion of aggregate floating rate notes due June 2011 at a redemption price of 100% of the principal amount of the notes, plus accrued and unpaid interest through the date of redemption. These notes were issued in June 2009.

During 2010, the Partnership repaid the remaining $4.0 billion of borrowings that were outstanding under a three-year term loan facility that had an original maturity of September 2011. No borrowings remain outstanding under this facility as of December 31, 2010 and this facility has been cancelled.

During November 2009, the Partnership and Verizon Wireless Capital LLC completed an exchange offer to exchange privately placed notes issued in November 2008, and February and May 2009 for new notes with similar terms.

In May 2009, the Partnership and Verizon Wireless Capital LLC co-issued $1.3 billion aggregate principal amount floating rate notes due 2011 and $2.8 billion aggregate principal amount 3.75% notes due 2011 in a private placement resulting in cash proceeds of approximately $4.0 billion, net of discounts and issuance costs. In May 2011, these notes matured and were repaid in full using cash generated from operations.

In February 2009, the Partnership and Verizon Wireless Capital LLC co-issued $750 million aggregate principal amount 5.25% notes due 2012 and $3.5 billion aggregate principal amount 5.55% notes due 2014 in a private placement resulting in cash proceeds of $4.2 billion, net of discounts and issuance costs.

On January 9, 2009, the Partnership borrowed $12.4 billion under a $17.0 billion credit facility (“Bridge Facility”) in order to complete the acquisition of Alltel and repay a portion of the approximately $24 billion of Alltel debt assumed. The Partnership used cash generated from operations and the net proceeds from the sale of notes in private placements issued in February 2009, May 2009 and June 2009, which are described above to repay the borrowings under the Bridge Facility. The Bridge Facility and the commitments under the Bridge Facility were terminated.

After completion of the Alltel acquisition and repayments of Alltel debt, including repayments through December 31, 2010, approximately $2.3 billion aggregate principal amount of Alltel Corporation notes and Senior PIK toggle notes remain outstanding and held by third parties. The Alltel Corporation notes are not guaranteed by the Partnership or by any subsidiary of Alltel and are unsecured.

In August 2009, the Partnership repaid $444 million of borrowings that were outstanding under a three-year term loan facility.

Term Notes Payable to Affiliate

Under the terms of a fixed rate promissory note with VFSL, the Partnership may borrow, repay and re-borrow up to a maximum principal amount of $750 million. Amounts borrowed under this note bear interest at a rate of 5.8% per annum. The fixed rate note matures August 1, 2013 and gives VFSL the right to cancel this note and require settlement of the aggregate unpaid principal and interest under this note on August 1,

B-21

2011 or August 1, 2012. There were no outstanding borrowings under this note as of December 31, 2010 and 2009.

During 2009, we used cash generated from operations to repay all of the remaining borrowings under a $2.4 billion floating rate promissory note payable to VFSL. During 2009, we used cash generated from operations to repay $4.4 billion of a $9.4 billion floating rate promissory note payable to VFSL, reducing the outstanding balance to $5.0 billion. During 2010, the Partnership repaid the remaining $5.0 billion of this note and this note has been cancelled.

Debt Covenants

As of December 31, 2010, we are in compliance with all of our debt covenants.

Maturities of Long-Term Debt

Maturities of long-term debt outstanding at December 31, 2010 are as follows:


Years	(dollars in million)

2011	$	4,869
2012		1,550
2013		1,450
2014		3,500
2015		669
Thereafter		4,502

8. Long-Term Incentive Plan

Verizon Wireless Long Term Incentive Plan (“Wireless Plan”)

The Wireless Plan provides compensation opportunities to eligible employees and other participating affiliates of the Partnership. The plan provides rewards that are tied to the long-term performance of the Partnership. Under the Wireless Plan, value appreciation rights (“VARs”) are granted to eligible employees. As of December 31, 2010, all VARs were fully vested. We have not granted new VARs since 2004.

VARs reflect the change in the value of the Partnership, as defined in the plan. Similar to stock options, the valuation is determined using a Black-Scholes model. Once VARs become vested, employees can exercise their VARs and receive a payment that is equal to the difference between the VAR price on the date of grant and the VAR price on the date of exercise, less applicable taxes. VARs are fully exercisable three years from the date of grant with a maximum term of 10 years. All VARs were granted at a price equal to the estimated fair value of the Partnership, as defined in the Wireless Plan, at the date of the grant.

The Partnership employs the income approach, a standard valuation technique, to arrive at the fair value of the Partnership on a quarterly basis using publicly available information. The income approach uses future net cash flows discounted at market rates of return to arrive at an estimate of fair value, as defined in the plan.

The following table summarizes the assumptions used in the Black-Scholes model during the years ended December 31, 2010, 2009 and 2008:

2010

2009

2008

Ranges

Risk-free rate

0.14% – 0.88%

0.15% – 1.63%

0.6% – 3.3%

Expected term (in years)

0.03 – 2.0

0.38 – 2.5

1.2 – 3.0

Expected volatility

31.05% – 47.56%

35.37% – 61.51%

33.9% – 58.5%

B-22

The risk-free rate is based on the U.S. Treasury yield curve in effect at the measurement date. Expected volatility was based on a blend of the historical and implied volatility of publicly traded peer companies for a period equal to the VARs expected life, ending on the measurement date.

For the years ended December 31, 2010, 2009, and 2008, the intrinsic value of VARs exercised during the period was $66 million, $178 million, and $554 million, respectively.

Cash paid to settle VARs for the years ended December 31, 2010, 2009, and 2008 was $67 million, $169 million, and $549 million, respectively.

Awards outstanding at December 31, 2010, 2009 and 2008 under the Wireless Plan are summarized as follows:


				Weighted Average
				Exercise Price		Vested
(shares in thousands)	VARs^(a)			of VARs^(a)		VARs^(a)

Outstanding, January 1, 2008		60,412		$	17.58		60,412
Exercised		(31,817	)		18.47
Cancelled/Forfeited		(351	)		19.01

Outstanding, December 31, 2008		28,244			16.54		28,244
Exercised		(11,442	)		16.53
Cancelled/Forfeited		(211	)		17.63

Outstanding, December 31, 2009		16,591			16.54		16,591
Exercised		(4,947	)		24.47
Cancelled/Forfeited		(75	)		22.72

Outstanding, December 31, 2010		11,569		$	13.11		11,569


(a)		The weighted average exercise price is presented in actual dollars; VARs are presented in actual units.

The following table summarizes the status of the Partnership’s VARs as of December 31, 2010:


	VARs Vested & Outstanding^(a)
			Weighted
			Average Remaining		Weighted
(shares in thousands)			Contractual Life		Average
Range of Exercise Prices	VARs		(Years)		Exercise Price

$8.74 - $14.79		9,407		2.72	$	12.26
$14.80 - $22.19		2,162		0.78		16.76

Total		11,569			$	13.11


(a)		As of December 31, 2010 the aggregate intrinsic value of VARs outstanding and vested was $352 million.

Verizon Communications Inc. Long Term Incentive Plan

The 2009 Verizon Communications Inc. Long-Term Incentive Plan (the Verizon Plan) permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other awards to Partnership employees. The maximum number of shares available for awards from the Verizon Plan is 119.6 million shares.

B-23

Restricted Stock Units

The Verizon Plan provides for grants of Restricted Stock Units (RSUs) that generally vest at the end of the third year after the grant. The RSUs outstanding at January 1, 2010 are classified as liability awards because the RSUs will be paid in cash upon vesting. The RSU award liability is measured at its fair value at the end of each reporting period and, therefore, will fluctuate based on the performance of Verizon common stock. The RSUs granted during 2010 are classified as equity awards because these RSUs will be paid in Verizon common stock upon vesting. Compensation expense for RSUs classified as equity awards is measured based on the market price of Verizon common stock at the date of grant and is recognized over the vesting period. Dividend equivalent units are also paid to participants at the time the RSU award is paid, and in the same proportion as the RSU award.

The Partnership had approximately 4.3 million and 3.5 million RSUs outstanding under the Verizon Plan as of December 31, 2010 and 2009, respectively.

Performance Stock Units

The Verizon Plan also provides for grants of Performance Stock Units (“PSUs”) that generally vest at the end of the third year after the grant. As defined by the Verizon Plan, the Human Resources Committee of the Board of Directors of Verizon determines the number of PSUs a participant earns based on the extent to which the corresponding goals have been achieved over the three-year performance cycle. All payments are subject to approval by the Verizon Human Resources Committee. The PSUs are classified as liability awards because the PSU awards are paid in cash upon vesting. The PSU award liability is measured at its fair value at the end of each reporting period and, therefore, will fluctuate based on the price of Verizon’s stock as well as performance relative to the targets. Dividend equivalent units are also paid to participants at the time that the PSU award is determined and paid, and in the same proportion as the PSU award.

The Partnership had approximately 6.3 million and 5.2 million PSUs outstanding under the Verizon Plans as of December 31, 2010 and 2009, respectively.

As of December 31, 2010, unrecognized compensation expense related to the unvested portion of the Partnership’s RSUs and PSUs was approximately $101 million and is expected to be recognized over a weighted-average period of approximately two years.

Stock-Based Compensation Expense

For the years ended December 31, 2010, 2009 and 2008, the Partnership recognized compensation expense for stock based compensation related to VARs, RSUs and PSUs of $217 million, $169 million and $19 million, respectively.

9. Income Taxes

Provision for Income Taxes

The provision for income taxes consists of the following:


	For the Years Ended December 31,
(dollars in millions)	2010		2009		2008

Current tax provision:
Federal	$	874	$	356	$	413
State and local		128		294		213

		1,002		650		626

B-24


	For the Years Ended December 31,
(dollars in millions)	2010		2009			2008

Deferred tax provision:
Federal		1		335			217
State and local		64		(188	)		(41	)

		65		147			176

Provision for income taxes	$	1,067	$	797		$	802

A reconciliation of the income tax provision computed at the statutory tax rate to the Partnership’s effective tax rate is as follows:


	For the Years Ended December 31,
(dollars in millions)	2010			2009			2008

Income tax provision at the statutory rate	$	6,210		$	5,418		$	4,932
State income taxes, net of U.S. federal benefit		140			27			120
Interest and penalties		—			28			(8	)
Other		183			—			—
Partnership income not subject to federal or state income taxes		(5,466	)		(4,676	)		(4,242	)

Provision for income tax	$	1,067		$	797		$	802

Deferred taxes arise because of differences in the book and tax bases of certain assets and liabilities. The significant components of the Partnership’s deferred tax assets and (liabilities) are as follows:


	December 31,
(dollars in millions)	2010			2009

Deferred tax assets:
Net operating loss carryforward	$	62		$	505
Valuation allowance		(23	)		(23	)
State tax deductions		102			103
Other		233			262

Total deferred tax assets	$	374		$	847

Deferred tax liabilities:
Intangible assets	$	(9,384	)	$	(9,555	)
Plant, property and equipment		(1,173	)		(1,452	)
Other		(218	)		(116	)

Total deferred tax liabilities	$	(10,775	)	$	(11,123	)

Net deferred tax asset-current^(a)	$	113		$	317
Net deferred tax liability-non-current	$	(10,514	)	$	(10,593	)


(a)		Included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

At December 31, 2010, the Partnership had state net operating loss carryforwards of $1,377 million. These net operating loss carryforwards expire at various dates principally from December 31, 2017 through December 31, 2025.

B-25

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


(dollars in millions)	2010			2009			2008
Balance as of January 1	$	506		$	77		$	67
Additions based on tax positions related to the current year		7			212			25
Additions for tax positions of prior years		8			222			16
Reductions due to lapse of applicable statute of limitations		(8	)		(5	)		(14	)
Settlements		(120	)		—			(17	)

Balance as of December 31	$	393		$	506		$	77

Upon the acquisition of Alltel on January 9, 2009, the Partnership recorded a liability of $222 million for unrecognized tax benefits. As of December 31, 2010, $183 million of this balance remains. It is reasonably possible that the range of possible outcomes can change by a significant amount and accordingly, an estimate of the range of possible outcomes cannot be made until issues are further developed or examinations closed.

During the year, the Partnership’s subsidiaries settled and closed several examinations that resulted in the release of approximately $120 million in previously unrecognized tax benefits. As a result of the settlements, the Partnership’s subsidiaries paid approximately $42 million including interest to satisfy the assessments. Additionally, the Partnership’s subsidiaries released approximately $8 million in previously unrecognized tax benefits during the year resulting from the lapse of the statute of limitations in several jurisdictions.

Included in the total unrecognized tax benefits balance as of December 31, 2010, is $240 million of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate. The remaining unrecognized tax benefits relate to temporary items that would not affect the effective tax rate.

The Partnership had approximately $38 million for the payment of interest and penalties accrued as of December 31, 2010, relating to the $393 million of unrecognized tax benefits reflected above.

The Partnership or its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. The Partnership is generally no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 1997. The Internal Revenue Service (IRS) is currently examining some of the Partnership’s subsidiaries. As a result of the anticipated resolution of various income tax matters within the next twelve months, the Partnership believes that it is reasonably possible that the unrecognized tax benefits may be adjusted. An estimate of the amount of the change attributable to any such settlement cannot be made at this time.

B-26

10. Leases

As Lessee

The Partnership has entered into operating leases for facilities and equipment used in its operations. Lease contracts include renewal options that include rent expense adjustments based on the Consumer Price Index as well as annual and end-of-lease term adjustments. Rent expense is recorded on a straight-line basis over the non-cancellable lease term which is generally determined to be the initial lease term. Leasehold improvements related to these operating leases are amortized over the shorter of their estimated useful lives or the non-cancellable lease term. For the years ended December 31, 2010, 2009, and 2008, the Partnership recognized rent expense of $1,363 million, $1,149 million, and $845 million, respectively, in Cost of service and $469 million, $504 million, and $391 million, respectively, in Selling, general and administrative expense in the accompanying consolidated statements of income.

The aggregate future minimum rental commitments under non-cancellable operating leases, excluding renewal options that are not reasonably assured for the periods shown at December 31, 2010, are as follows:


	Operating
(dollars in millions)	Leases
\|
Years
2011	$	1,384
2012		1,210
2013		1,044
2014		894
2015		734
Thereafter		4,263

Total minimum payments	$	9,529

11. Other Transactions with Affiliates

In addition to transactions with Affiliates in Note 7, other significant transactions with Affiliates are summarized as follows:


	For the Years Ended December 31,
(dollars in millions)	2010		2009		2008

Revenue related to transactions with affiliated companies	$	94	$	102	$	106
Cost of service^(a)		1,471		1,377		1,252
Selling, general and administrative expenses^(b)		225		274		289
Interest incurred^(c)		9		66		319


(a)		Affiliate cost of service primarily represents charges for long distance, direct telecommunication and roaming services provided by affiliates.

(b)		Affiliate selling, general and administrative expenses include charges from affiliates for services provided, including insurance, leases, office telecommunications, and billing and lockbox services, as well as services billed from the Verizon Service Organization (“VSO”) and Verizon Corporate Services for functions performed under service level agreements.

(c)		Interest costs of $7, $56 and $252 were capitalized in Wireless licenses and Plant, property and equipment, net in the years ended December 31, 2010, 2009 and 2008, respectively (See Notes 3 and 6).

Receivable from Affiliates, Net

The net amounts due from or payable to affiliates as a result of services provided in the normal course of business are presented in Due from affiliates, net within Current assets in the consolidated balance sheets.

B-27

Distributions to Affiliates

As required under the Partnership Agreement, we paid aggregate tax distributions of $3,845 million, $3,138 million and $1,529 million to our Partners during the years ended December 31, 2010, 2009, and 2008 respectively. In addition to our quarterly tax distribution to our Partners, our Partners have directed us to make supplemental tax distributions to them, subject to our board of representatives’ right to reconsider these distributions based on significant changes in overall business and financial conditions. During the year ended December 31, 2010, we made supplemental tax distributions in the aggregate amount of $667 million, which is included in the total distribution paid above. Subsequent annual supplemental tax distributions in the amount of $667 million comprised of $300 million to Vodafone and $367 million to Verizon Communications in each of 2011 and 2012 are scheduled to be paid in equal quarterly installments during each of those years on the same dates that the established regular quarterly tax distributions are made.

Through May 13, 2011, we paid tax distributions to our Partners of $1,434 million, including aggregate tax distributions of $1,100 million as well as supplemental tax distributions of $334 million.

Additionally, in November 2008, we provided our Partners with the customary calculation of the aggregate tax distribution of $556 million for the quarter ending September 30, 2008. With respect to this tax distribution, however, Verizon Communications and Vodafone agreed to defer payment. On April 23, 2009, we made payment of the deferred distribution in full (without interest, premium or other adjustment) of the applicable amounts to our Partners, which is included in the total distributions paid in 2009.

12. Accumulated Other Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting partners’ capital that, under GAAP, are excluded from net income. The components of Accumulated other comprehensive income are as follows:


	December 31,
(dollars in millions)	2010		2009

Unrealized gains on cash flow hedges, net	$	56	$	122
Defined benefit pension and postretirement plans		5		14

Accumulated other comprehensive income	$	61	$	136

13. Commitments and Contingencies

Bell Atlantic, now known as Verizon Communications, and Vodafone entered into an alliance agreement to create a wireless business composed of both companies’ U.S. wireless assets, as amended, which we refer to as the “Alliance Agreement”. The Alliance Agreement contains a provision, subject to specified limitations, that requires Verizon and Vodafone to indemnify the Partnership for certain contingencies, excluding PrimeCo Personal Communications L.P. contingencies, arising prior to the formation of the Partnership.

The Partnership is subject to lawsuits and other claims, including class actions and claims relating to product liability, patent infringement, intellectual property, antitrust, partnership disputes, and relations with resellers and agents. The Partnership is also defending lawsuits filed against the Partnership and other participants in the wireless industry alleging adverse health effects as a result of wireless phone usage. Various consumer class action lawsuits allege that the Partnership violated certain state consumer protection laws and other statutes and defrauded customers through misleading billing practices or statements. These matters may involve indemnification obligations by third parties and/or affiliated parties covering all or part of any potential damage awards against the Partnership and/or insurance coverage.

All of the above matters are subject to many uncertainties, and outcomes are not predictable with assurance. Consequently, the ultimate liability with respect to these matters as of December 31, 2010 cannot be ascertained. The potential effect, if any, on the consolidated financial statements of the Partnership, in the period in which these matters are resolved, may be material.

B-28

In addition to the aforementioned matters, the Partnership is subject to various other legal actions and claims in the normal course of business. While the Partnership’s legal counsel cannot give assurance as to the outcome of each of these other matters, in management’s opinion, based on the advice of such legal counsel, the ultimate liability with respect to any of these actions, or all of them combined, will not materially affect the consolidated financial statements of the Partnership.

Verizon has entered into reimbursement agreements with third-party lenders that permit these lenders to issue letters of credit to third parties on behalf of the Partnership and our subsidiaries, including Alltel, following the acquisition of Alltel.

We have commitments primarily related to sponsorships and the purchase of network services, equipment and software from suppliers totaling $44.9 billion. Of this total amount, $13.7 billion, $14.0 billion, $17.0 billion, $0.1 billion and $0.1 billion are expected to be purchased in 2011, 2012, 2013, 2014 and 2015 and thereafter, respectively.

B-29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Representatives and Partners of
Cellco Partnership d/b/a Verizon Wireless:

We have audited the accompanying consolidated balance sheets of Cellco Partnership and subsidiaries d/b/a Verizon Wireless (the “Partnership”) as of December 31, 2010 and 2009, and the related consolidated statements of income, cash flows and changes in partners’ capital for each of the three years in the period ended December 31, 2010. These financial statements are the responsibility of the Partnership’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 of 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 statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

New York, New York
February 28, 2011 (June 16, 2011 as to Notes 7 and 11)

B-30

ADR Payment Information

Fees payable by ADR holders

The Bank of New York Mellon, the depositary, collects its fees for delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors, including in connection with the payment of dividends, by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may generally refuse to provide fee-attracting services until its fees for those services are paid.


Persons depositing or withdrawing
shares must pay:		For:
$5.00 (or less) per 100 ADRs (or portion of 100 ADRs)		• Issuance of ADRs, including issuances resulting from a distribution of shares or rights or other property • Cancellation of ADRs for the purpose of withdrawal, including if the deposit agreement terminates

$.02 (or less) per ADR (or portion thereof). The current per ADR fee to be charged for an interim dividend is $0.01 per ADR and for a final dividend is $0.02 per ADR.		• Any cash distribution to ADR registered holders

A fee equivalent to the fee that would be payable if securities distributed to you had been shares and the shares had been deposited for issuance of ADRs		• Distribution of securities distributed to holders of deposited securities which are distributed by the depositary to ADR registered holders

Registration or transfer fees		• Transfer and registration of shares on our share register to or from the name of the depositary or its agent when you deposit or withdraw shares

Expenses of the depositary		• Cable, telex, facsimile transmissions and delivery expenses (when expressly provided in the deposit agreement) • Converting foreign currency to US dollars

Taxes and other governmental charges the depositary or the custodian have to pay on any ADR or share underlying an ADR, for example, stock transfer taxes, stamp duty or withholding taxes		• As necessary

Any charges incurred by the depositary or its agents for servicing the deposited securities		• As necessary

C-1

Fees Payable By The Depositary To The Issuer

The depositary collects fees for the delivery and surrender of ADRs directly from investors depositing shares or surrendering ADRs for the purpose of withdrawal or from intermediaries acting for them. The depositary also collects fees for making distributions to investors (including on the payment of dividends by the Company) by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. As set out above, pursuant to the deposit agreement, the depositary may charge up to $0.02 per ADR in respect of dividends paid by us. We have agreed with the depositary that any dividend fee collected by it is paid to us, net of any dividend collection fee charged by it. We have agreed with the depositary that it will charge $0.01 per ADR in respect of any interim dividend and $0.02 per ADR in respect of any final dividend. As at 31 March 2011, we have received approximately $19.6 million arising out of fees charged in respect of dividends paid.

We also have an agreement with the depositary that it will absorb any of its out-of-pocket maintenance costs for servicing the holders of the ADRs up to $1 million per calendar year. However, any of the depositary’s out-of-pocket maintenance costs which exceed the $1 million annual aggregate limit will be reimbursed by us.

C-2

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


	VODAFONE GROUP PUBLIC LIMITED COMPANY (Registrant)
	/s/ R E S Martin
	Rosemary E S Martin
	Group General Counsel and Company Secretary

Date: 17 June 2011

Index to Exhibits to Form 20-F for year ended 31 March 2011

1.1		Articles of Association, as adopted on June 30, 1999 and including all amendments made on July 25, 2001, July 26, 2005, July 25, 2006, July 24, 2007, July 29, 2008, July 28, 2009 and July 27, 2010, of the Company.

2.1		Indenture, dated as of February 10, 2000, between the Company and Citibank, N.A. as Trustee, including forms of debt securities (incorporated by reference to Exhibit 4(a) of Amendment No. 1 to the Company’s Registration Statement on Form F-3, dated November 24, 2000).

2.2		Agreement of Resignation, Appointment and Acceptance dated as of July 24, 2007, among the Company, Citibank N.A. and the Bank of New York (incorporated by reference to Exhibit 2.2 to the Company’s Annual Report of Form 20-F for the financial year ended March 31, 2008).

2.3		Eighth supplemental Trust Deed dated July 10, 2009, between the Company and the Law Debenture Trust Corporation p.l.c. further modifying the provisions of the Trust Deed dated July 16, 1999 relating to a €30,000,000,000 Euro Medium Term Note Programme (incorporated by reference to Exhibit 2.3 to the Company’s Annual Report of Form 20-F for the financial year ended March 31, 2010).

4.1		Agreement for US$4,675,000,000 7 year Revolving Credit Facility (subsequently increased by accession of further lenders to US$5,025,000,000), dated June 24, 2005, among the Company and various lenders, (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006).

4.2		Notice of cancellation dated March 7, 2011 in respect of the US$5,025,000,000 Revolving Credit Facility dated June 24, 2005.

4.3		Agreement for US$4,015,000,000 5 year Revolving Credit Facility dated March 9, 2011, among the Company and various lenders.

4.4		Lender Accession Agreement with Bank of China Limited, London Branch, effective as of March 17, 2011.

4.5		Agreement for US$4,315,000,000 3 year Revolving Credit Facility dated 29 July 2008 among the Company and various lenders. (incorporated by reference to Exhibit 4.29 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009).

4.6		Notice of cancellation dated June 29, 2010 in respect of the US$4,315,000,000 Revolving Credit Facility dated July 29, 2008.

4.7		Agreement for € 4,000,000,000 5 year Revolving Credit Facility dated July 1, 2010 among the Company and various lenders.

4.8		Lender Accession Agreement with Bank of China Limited, London Branch, effective as of March 17, 2011.

4.9		Vodafone Group Long Term Incentive Plan (incorporated by reference to Exhibit 4.5 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.10		Vodafone Group Short Term Incentive Plan (incorporated by reference to Exhibit 4.6 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.11		Vodafone Group 1999 Long Term Stock Incentive Plan (incorporated by reference to Exhibit 4.7 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.12		Vodafone Group 1998 Company Share Option Scheme (incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.13		Vodafone Group 1998 Executive Share Option Scheme (incorporated by reference to Exhibit 4.9 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2001).

4.14		Vodafone Group 2005 Global Incentive Plan (incorporated by reference to Exhibit 4.8 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006).

4.15		Service Contract of Andrew Halford (incorporated by reference to Exhibit 4.16 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006).

4.16		Agreement for Services for Sir John Bond (incorporated by reference to Exhibit 4.13 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2007).

4.17		Letter of Appointment of Dr. John Buchanan(incorporated by reference to Exhibit 4.11 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2003).

4.18		Letter of Appointment of Anne Lauvergeon (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006).

4.19		Letter of Appointment of Luc Vandevelde (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2004).

4.20		Letter of Appointment of Anthony Watson (incorporated by reference to Exhibit 4.26 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006).

4.21		Letter of Appointment of Philip Yea (incorporated by reference to Exhibit 4.27 to the Company’s Annual Report for the financial year ended March 31, 2006).

4.22		Service contract of Vittorio Colao (incorporated by reference to Exhibit 4.22 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009).

4.23		Letter of appointment of Alan Jebson (incorporated by reference to Exhibit 4.23 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2007).

4.24		Letter of appointment of Nick Land (incorporated by reference to Exhibit 4.24 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2007).

4.25		Letter of appointment of Simon Murray (incorporated by reference to Exhibit 4.25 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2008).

4.26		Letter of Appointment of Sam Jonah (incorporated by reference to Exhibit 4.26 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009).

4.27		Service contract of Michel Combes (incorporated by reference to Exhibit 4.27 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009).

4.28		Service contract of Stephen Pusey (incorporated by reference to Exhibit 4.28 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009).

4.29		Letter of indemnification for Andy Halford (incorporated by reference to Exhibit 4.25 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.30		Letter of indemnification for Michel Combes (incorporated by reference to Exhibit 4.26 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.31		Letter of indemnification for Steve Pusey (incorporated by reference to Exhibit 4.27 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.32		Letter of indemnification for Dr. John Buchanan (incorporated by reference to Exhibit 4.28 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.33		Letter of indemnification for Philip Yea (incorporated by reference to Exhibit 4.29 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.34		Letter of indemnification for Luc Vandevelde (incorporated by reference to Exhibit 4.30 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2010).

4.35		Letter of Appointment of Renee James.

4.36		Letter of Appointment of Gerard Kleisterlee.

7.		Computation of ratio of earnings to fixed charges for the years ended March 31, 2011, 2010, 2009, 2008, and 2007.

8.		The list of the Company’s subsidiaries is incorporated by reference to note 12 to the Consolidated Financial Statements included in the Annual Report.

12.		Rule 13a – 14(a) Certifications.

13.		Rule 13a – 14(b) Certifications. These certifications are furnished only and are not filed as part of the Annual Report on Form 20-F.

15.1		Consent letter of Deloitte LLP, London.

15.2		Consent letter of Deloitte LLP, New York.