20-F

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
	OR
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended: March 31, 2010
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
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	52,663,134,573
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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

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
Floating Rate Notes due June 2011	New York Stock Exchange
5.50% Notes due June 2011	New York Stock Exchange
5.35% due Feb 2012	New York Stock Exchange
Floating Rate Notes due Feb 2012	New York Stock Exchange
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
5.75% Notes March 2016	New York Stock Exchange
5.625% Notes due Feb 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
6.25% Notes due November 2032	New York Stock Exchange
6.15% Notes due Feb 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.

This constitutes the annual report on Form 20-F of Vodafone Group Plc (the ‘Company’) in accordance with the requirements of the US Securities and Exchange Commission (the ‘SEC’) for the year ended 31 March 2010 and is dated 2 June 2010. This document contains certain information set out within the Company’s annual report in accordance with International Financial Reporting Standards (‘IFRS’) and with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS, dated 18 May 2010, as updated or supplemented if necessary. Details of events occurring subsequent to the approval of the annual report on 18 May 2010 are summarised on page A-1. The content of the Group’s website (www.vodafone.com) should not be considered to form part of this annual report on Form 20-F.

In the discussion of the Group’s reported financial position, operating results and cash flow for the year ended 31 March 2010, information is presented to provide readers with additional financial information that is regularly reviewed by management. However this additional information 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.

All amounts in this document 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.

For further information see “Non-GAAP information” on pages 136 and 137 and “Definition of terms” on page 141.

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

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 business management and strategy, plans and objectives for the Group. For further details please see “Forward-looking statements” on page 140 and “Principal risk factors and uncertainties” on pages 38 and 39 for a discussion of the risks associated with these statements.

Vodafone, the Vodafone logo, Vodafone Mobile Broadband, Vodafone Passport, Vodafone Email Plus, M-PESA, M-PAISA, Vodafone Money Transfer, Vodafone Station, Vodafone 360, Vodafone One Net, Vodafone Sure Signal, Vodafone Mobile Connect and Vodacom are trade marks of the Vodafone Group. The RIM^® and BlackBerry^® families of trade marks, images and symbols are the exclusive properties and trade marks of Research in Motion Limited, used by permission. RIM and BlackBerry are registered with the US Patent and Trademark Office and may be pending or registered in other countries. Windows Mobile and ActiveSync are either registered trade marks or trade marks of Microsoft Corporation in the United States and/or other countries. Other product and company names mentioned herein may be the trade marks of their respective owners.

Copyright ^© Vodafone Group 2010

We are one of the world’s largest mobile communications companies by revenue, operating across the globe providing a wide range of communications services. Our vision is to be the communications leader in an increasingly connected world.

Contents

Executive summary#
1	Highlights
2	Chairman’s statement
4	Telecommunications industry
6	Chief Executive’s review
10	Global presence
Business#
12	Customers and distribution
14	Products and services
16	Value added services
18	Technology and resources
22	People
Performance#
24	Key performance indicators
25	Operating results
37	Guidance
38	Principal risk factors and uncertainties
40	Financial position and resources
45	Corporate responsibility
Governance#
48	Board of directors and Group management
51	Corporate governance
57	Directors’ remuneration
Financials
68	Contents
69	Directors’ statement of responsibility#
70	Audit report on internal controls
71	Critical accounting estimates
73	Audit report on the consolidated financial statements
74	Consolidated financial statements
118	Audit report on the Company financial statements
119	Company financial statements
Additional information
125	Shareholder information#
132	History and development#
133	Regulation#
136	Non-GAAP information#
138	Form 20-F cross reference guide
140	Forward-looking statements
141	Definition of terms
142	Selected financial data
EXHIBIT 1.2
EXHIBIT 2.3
EXHIBIT 4.25
EXHIBIT 4.26
EXHIBIT 4.27
EXHIBIT 4.28
EXHIBIT 4.29
EXHIBIT 4.30
EXHIBIT 7
EXHIBIT 12
EXHIBIT 13
EXHIBIT 15.1
EXHIBIT 15.2
EXHIBIT 15.3

^# These sections make up the directors’ report.

Executive summary

Highlights

Executive summary For more information, visit: www.vodafone.com/investor Highlights Group highlights for the 2010 financial year Revenue Financial highlights Q Total revenue of £44.5 billion, up 8.4%, with improving trends in most £44.5bn markets through the year. 8.4% growth Q Adjusted operating profit of £11.5 billion, a 2.5% decrease in a recessionary environment. Q Data revenue exceeded £4 billion for the first time and is now 10% Adjusted operating profit of service revenue. Q £1 billion cost reduction programme delivered a year ahead of schedule; £11.5bn further £1 billion programme now underway. 2.5% decrease Q Final dividend per share of 5.65 pence, resulting in a total for the year of 8.31 pence, up 7%. Q Higher dividends supported by £7.2 billion of free cash flow, an increase Free cash flow of 26.5%. £7.2bn Operational highlights 26.5% growth Q We are one of the world’s largest mobile communications companies by revenue with 341.1 million proportionate mobile customers, up 12.7% during the year. Proportionate mobile customers Q Improved performance in emerging markets with increasing revenue market share in India, Turkey and South Africa during the year. 341.1m Q Expanded fixed broadband customer base to 5.6 million, up 1 million during the year. 12.7% growth Q Comprehensive smartphone range, including the iPhone, BlackBerry^® Bold and Samsung H1. Q Launch of Vodafone 360, a new internet service for the mobile and internet. Q High speed mobile broadband network with peak speeds of up to 28.8 Mbps. Vodafone Group Plc Annual Report 2010 1

Chairman’s statement

Sir John Bond Chairman Chairman’s statement Your Company continues to deliver strong cash generation, is well positioned to benefit from economic recovery and looks to the future with confidence. Environment and performance more efficiently and pleasurably, making better use of their time and Q Against a difficult background, we generated £7.2 billion opportunities. This has resulted in ever increasing demand, with voice of free cash flow, up 26.5%. minutes up by 22.3%(*) and data revenue up by 19.3%(*) across the Q Total dividends per share of 8.31 pence, up 7%; three year Group. This additional demand on our networks means that we need dividend per share growth target of at least 7% per annum. to manage traffic to ensure both good service for our customers and Q Original £1 billion cost programme completed a year ahead appropriate returns for our shareholders from continued investment of schedule with a further £1 billion initiative underway. in those networks. Q Continued strong investment in network capability to maintain and enhance the quality of service. Innovation Q Continued innovation in our products and services 2009 saw the sharpest contraction in the world’s economy for more broadens and enhances our business portfolio. Dividends per share than a generation. Unquestionably, this has been the most difficult The new Vodafone 360 service combines the benefits (Pence) Q economic environment in which your Company has ever operated. of mobile communications and the internet to bring 8.31 7.51 7.77 Against this background, I am very pleased to report that the Group your phone, email chat and social network contacts delivered an adjusted operating profit of £11.5 billion (down 2.5%), together in one place. and generated £7.2 billion of free cash flow (up 26.5%). The Board is recommending a final dividend of 5.65 pence, making a total for the Innovation in the services we offer, and the expansion of those services year of 8.31 pence per share (up 7%). The Board is also targeting to into other sectors such as health care or communication between maintain growth in dividends per share at no less than 7% per annum different types of machine – smart metering on energy grids or smart for the next three years. This year’s results have been achieved while communications for delivery truck fleets – can make important 2008 2009 2010 maintaining the capital expenditure (up slightly at £6.2 billion) needed contributions to our societies, lowering carbon emissions and to serve our customers’ growing demand for voice minutes and data enhancing lifestyles. This kind of innovation is important both for the services. The share price has increased by 6% since 1 April 2009, wider benefits it brings but also because it broadens and enhances the broadly in line with other major European telecommunications base on which our business is built. We have now set-up separate companies, but behind the increase in the FTSE 100. health and machine-to-machine teams to ensure that we maximise these opportunities. While the Group is not immune from the economic environment in which we operate, with our retail customers seeking to control their Your Company has also continued to innovate in the services we expenditure as much as possible and our business customers seeking provide. This year has seen the launch of Vodafone 360, a service to control cost, we have responded swiftly with cost reduction designed to help bridge the intersection between mobile and efficiency programmes. On top of our original £1 billion cost communications and the internet making it easier to communicate programme, delivered a year ahead of plan, we have now committed with friends, colleagues and family from your mobile using social to a further £1 billion cost programme by the 2013 financial year. With media or more traditional forms of electronic communication. The mobile voice prices continuing to decline in Europe by over 1 0% a year, Vodafone Money Transfer system (branded M-PESA in Kenya and tight cost control will remain a high priority in the future. Tanzania) is available in three countries with 13 million customers transferring US$3.6 billion during the 2010 financial year. We expect The telecommunications sector as a whole has seen declining revenue to roll-out the service to further markets later this year. We recently through this period but we have not seen the extremely steep declines launched two of the world’s most inexpensive handsets – for example in revenue experienced by some other sectors of the economy – the Vodafone 150 retails in most markets at unsubsidised prices below mobile communications remain an essential element in most people’s US $15 – and we are working on low cost handsets which will give lives. We see how our services are allowing people to lead their lives access to the internet. 2 Vodafone Group Plc Annual Report 2010

Geographic diversity experience of the Asia Pacific region have been great assets to the Proportionate mobile Q Wide portfolio of operations including developed and emerging Board, and I am grateful for the contribution he has made. customers markets. Q In emerging markets growth prospects remain positive. The Vodafone Foundation 341.1m We now have over 100 million customers in our key Q The Vodafone Foundation supports communities and societies up 12.7% Indian market. in the countries in which we operate. Q Vodafone invested a total of £42 million in foundation One of the benefits of our broad spread of operations in both programmes and social causes. developed and emerging markets is the diversification of risk that this allows. The Board keeps a close watch on this portfolio of investments, We have continued to fund the work of the Vodafone Foundation. particularly those where we do not exercise management control. In Through the Vodafone Foundation and our network of national affiliate Verizon Wireless we have an outstanding asset whose value has foundations we support communities and societies in the countries in increased substantially over recent years, and SFR has secured a which we operate. In this financial year we invested a total of £42 million strong market position and provided good dividends. The Board in foundation programmes and social causes, and our World of reviews these investments regularly and will remain focused upon the Difference programme enabled 604 people to take paid time to work best way of realising maximum shareholder value. for a charitable purpose of their choice in their own community or in a developing country. Across the Group we have also put in place The impairment of our investment in Vodafone Essar in India was a mechanisms to make it easy for our customers to give money to support major disappointment to the Board. It results from an intense price war, charitable appeals following disasters. After the Haiti earthquake, triggered by the unprecedented and unforeseeable entry of six new Vodafone foundations donated £0.3 million to the emergency relief and competitors into the Indian market. Our operational performance in reconstruction effort, and we helped our customers in 14 countries to India however remains strong and we remain confident in the long- give a total of £4.7 million by text message. term prospects for the Indian market. We recently passed a very important milestone, with Vodafone Essar now having more than 100 Summary million customers – one of only five national mobile operators in the On behalf of the Board, I would like to thank all Vodafone staff around world to have reached this scale, reflecting strong growth from 28 the world for the great efforts they have made in the past year in such million customers when we acquired control of Vodafone Essar in May challenging economic conditions. Vodafone would not have been able 2007. Elsewhere in the emerging markets, the operational turnaround to deliver these results without the tremendous effort of the team. of our company in Turkey has yielded very positive results and we have seen good progress in Ghana. The Board is heartened by your Company’s strong results especially in the face of such a sharp economic downturn. It believes that the Group Your Board is well positioned to benefit from economic recovery and looks to the This year we conducted an evaluation on the effectiveness of the future with confidence. Board and its Committees aided by the external advisors MWM Consulting. They concluded that the Board was effective, had the right composition and skills and was generally performing well. More detail is contained at page 48 of this report. Sir John Bond Simon Murray, who has been a non-executive Director since July 2007, Chairman has decided to step down from the Board after this year’s AGM. His knowledge of telecommunications, entrepreneurial spirit, and Vodafone Group Plc Annual Report 2010 3

Telecommunications industry

Telecommunications industry At a glance The telecommunications industry has grown rapidly in size to provide essential services that facilitate a fundamental human need to communicate. Customers Mobile penetration Competition and regulation Q There are 4.7 billion mobile customers across Q Global mobile penetration is around 70% and Q Ongoing competitive and regulatory the globe with growth of around 20% per is generally higher in more mature markets pressures have contributed to significant annum over the last three years. The majority such as Europe and the United States but is reductions in mobile prices which are being of customers are in emerging markets such growing most quickly in emerging markets partly offset by higher mobile usage. as India and China. Vodafone is a leading such as India, China and Africa. company with a 7% share of the global market. The industry has 4.7 billion mobile customers across Mobile penetration (the proportion of the population Competition in the telecommunications industry the globe, up from 2.7 billion in 2006. that have a mobile) has grown to around 70% from 40% is intense. Consumers have a large choice of in December 2006. communication offers from established mobile and Consumers are increasingly choosing to make voice fixed line operators. Newer competitors, including calls over mobile rather than fixed phones and mobile Looking forward the number of worldwide mobile phone handset manufacturers, internet based companies calls accounted for 70% of all phone calls made in 2009 users is expected to continue to grow strongly. Most of and software providers, are also entering the market compared to 50% in 2006. As a result the number of this growth is expected in emerging markets such as offering converged communication services. mobile users now far exceeds the number of fixed India, China and Africa where mobile penetration is around telephones (1.3 billion). 50% compared to about 130% in mature markets such Industry regulators continue to impose lower mobile as Europe. termination rates (the fees mobile companies charge for Over the last three years mobile customer growth calls received from other companies’ networks) and has been strongest in emerging markets such as India Developing countries are generally expected to deliver lower roaming prices. Termination fees and roaming and China. In contrast growth has been more muted faster GDP growth which combined with relatively little charges accounted for 17% of Group revenue in 2010. in developed regions such as Europe which are alternative fixed line infrastructure is positive for mobile relatively mature.. penetration growth prospects. The combination of competition and regulatory pressures have contributed to a 17% per annum decline in the average price per minute across our global network over the last three years. However price pressures are being partly offset by increased usage. During the year our customers spoke for an average of 191 minutes per month compared to 137 in 2007. Mobile customers (m) Mobile penetration at December 2009 (%) Vodafone outgoing voice prices and minutes (%) 24.0 22.7 130 120 519 764 12.4 93 480 Western Europe Eastern Europe 69 464 USA/Canada (16.8) (12.5) (21.8) 309 54 45 48 India China 525 Other Asia Pacific 866 Africa Price 725 Other Western Eastern USA/ India China Other Africa Minutes Europe Europe Canada Asia 2008 2009 2010 Pacific 4 Vodafone Group Plc Annual Report 2010

Product focus: Vodafone 360 Samsung H1 Customers are increasingly using high-end smartphones to download applications and browse the internet. Major trends The mobile industry continues to evolve rapidly, driven by new sources of revenue, rising smartphone proliferation and new technologies. Services Mobile handsets Network and product evolution Q Around 80% of our service revenue comes Q Global handset volumes increased 5% per Q Our industry is undergoing significant from traditional voice and messaging annum over the last three years. In this time technological change, with faster download services. The remaining 20% stems from the mix has changed, with more demand for speeds and product innovation improving the faster growing areas of mobile data both smartphones and low cost devices at the customer experience. and fixed broadband. the expense of mid range feature phones. Our revenue from traditional voice and messaging The mobile industry shipped around 1.1 billion handsets Our technological capabilities are rapidly changing. Our services in mature markets is declining due to ongoing worldwide in 2009. These include ultra low cost devices networks have evolved from 2G or second generation competitive and regulatory pressures, partly offset by for more value conscious consumers, standard feature systems for voice, text and basic data services to 3G or faster growth in newer areas of data and fixed services. 2G and 3G devices, and high-end smartphones which third generation networks which also provide high speed can access the internet and download increasingly internet and email access. Vodafone’s peak mobile data We have seen demand for data services such as laptop popular user applications. We have seen a change in mix, download speeds have increased to up to 28.8 Mbps. access to the internet and mobile internet browsing lead with increased demand for both smartphones and low Looking forward we, along with other operators, have to a four fold increase in our data traffic over the last two cost devices. been testing 4G, or fourth generation, technologies years. Data revenue has expanded from £1.1 billion in the which offer even faster network speeds to enhance the 2006 financial year to £4.1 billion in the 2010 financial Smartphones accounted for 15% of the industry handset customer experience. year. Data growth has been driven by faster network shipments in 2009 compared to 8% in 2006. 24% of speeds and increased penetration of mobile broadband our new handset sales in Europe during the year were We have been a pioneer in a range of new products. services and smartphones. smartphones and this is expected to grow further over These include high speed mobile broadband for internet the next few years. and email access and femtocells to enhance customers’ Our fixed services mainly comprise fixed broadband indoor 3G signals via their household broadband rather than fixed voice calls. The number of fixed Our low cost devices are targeted at developing markets connection. We have also developed quality of service broadband customers has grown to 5.6 million at and certain prepaid segments in Europe. Demand has techniques which enable careful management of the 31 March 2010 from 2.1 million in March 2007. been driven by lower prices and an expanding portfolio assignment of capacity in our networks during the with attractive features, including touchscreen and busiest times to enhance our customers’ experience. data capabilities. Service revenue (%) Smartphone share of global handset shipments (%) Vodafone mobile peak downlink speeds (Mbps) 15.3 3.8 28 12.8 7.9 10.9 21 9.7 7.9 14 11.5 Voice 67.1 Messaging Data 7 Fixed line Other 0 2006 2007 2008 2009 2006 2010 Note: (1) Market data sourced from Wireless intelligence and Strategy Analytics. Vodafone Group Plc Annual Report 2010 5

Chief Executive’s review

Chief Executive’s review In a challenging economic environment our financial results exceeded our guidance on all measures, we increased our commercial focus, delivered our cost reduction targets ahead of schedule and maintained strong capital investment levels. Financial review of the year profit was £11.5 billion, with a growing contribution from Verizon Q 2010 financial results were ahead of guidance on all measures. Wireless and foreign exchange benefits offsetting weaker performance Q Increased revenue contribution from our targeted growth in Europe. areas in data, fixed line and emerging markets. Q Free cash flow generation of £7.2 billion, up 26.5%. Group free cash flow was £7.2 billion, up 26.5%, benefiting from significant improvements in working capital management and a We have made significant progress in implementing our strategy. We deferred dividend from Verizon Wireless. This exceptional level of cash now generate 33% of service revenue from products other than mobile flow was generated whilst maintaining capital investment, developing voice reflecting the shift of Vodafone to a total communications provider. fixed broadband services in Europe, funding the turnaround in Turkey In particular, mobile data and fixed broadband services continue to grow and Ghana, and expanding in India. while we increased the contribution being made by our operations in emerging economies, primarily by gaining market share. We have At the year end we had 341 million proportionate mobile customers reduced costs and working capital to manage better in the recessionary worldwide. Free cash flow environment while maintaining investment in our networks. Europe service revenue declined by 3.5%(*). Data and fixed line £7.2bn As a result, Vodafone’s financial results are ahead of the guidance revenue growth was strong but this was more than offset by ongoing up 26.5% range we issued in May 2009 and the upgraded guidance we issued in voice price reduction and lower volume growth in our core voice February 2010. The Group generated free cash flow of approximately products. Europe’s adjusted EBITDA margin declined by 1.0 percentage £1 billion ahead of our medium-term target established in November point, at about the same rate as the previous year, reflecting lower 2008 even after adjusting for beneficial foreign exchange. revenue, increased commercial activity, reduced cost and the increased contribution from lower margin fixed broadband. Operating The economic situation has remained challenging throughout the year free cash flow was strong at £8.2 billion. affecting our business in several ways. In our more mature European and Central European operations, voice and messaging revenue Africa and Central Europe service revenue declined by 1.2%(*), with declined and roaming revenue fell due to lower business and leisure good revenue growth at Vodacom and a much stronger result in travel. In addition, enterprise revenue declined in Europe as our business Turkey being offset by the impact of weaker economies in Central customers reduced activity and headcount. However, results in Africa Europe. The adjusted EBITDA margin declined by around 2 percentage and India remained robust driven by continued, albeit lower, GDP points, due to lower profitability in Turkey where we have focused on growth and increasing market penetration. During the course of the investment in the network, distribution, driving market share and financial year the impact of the global slowdown on the Group’s financial brand visibility. performance has diminished somewhat with Group service revenue declining in the fourth quarter by only 0.2%(*), better than the preceding Asia Pacific and Middle East service revenue increased by 9.8%(*), three quarters and the second successive quarterly improvement. reflecting another strong contribution from India where service revenue grew by 14.7%(*). During the 2010 financial year we attracted In the full year Group revenue increased by 8.4% to £44.5 billion, 32 million customers in India and in March we exceeded the 100 declining 2.3%(*) after excluding benefits from foreign exchange and million customer mark. In a very competitive pricing environment we acquisitions. The Group’s adjusted EBITDA margin declined by 2.2 were pleased to have confirmed our number two position in the percentage points to 33.1%, in line with our expectations, primarily as a market. Since Vodafone’s entry into India in 2007, our performance has result of lower revenue in Europe and the greater weight of lower been strong. We have gained about 1 percentage point per annum in margin operations in emerging economies. Group adjusted operating revenue market share, added 72 million customers, moved the 6 Vodafone Group Plc Annual Report 2010

“We have improved business into operating free cash flow generation and launched Indus Vodafone continues to evolve towards being a total communications our commercial Towers, the world’s largest tower company with more than 100,000 provider, rebalancing mobile voice in mature economies with focus and cost towers under management. However the introduction of six additional increasing revenue from broadband data services. We have also national mobile licences one year after our entry and the resulting increased the proportion of revenue we generate from emerging efficiency, with intense price competition have led to a £2.3 billion impairment charge. economies. In parallel we continued to reduce our cost base to finance visible results.” In Australia our joint venture company with Hutchison continues to growth and commercial competitiveness primarily by leveraging our perform in line with the merger plan with pro-forma revenue growth Group scale. of 8%. The adjusted EBITDA margin for the region declined by 2.2 percentage points, primarily reflecting lower margins in India caused 1. Drive operational performance by the competitive pricing environment and operating investment in We have reinforced the commercial focus of our operating companies new circles. by emphasising relative market share of quality customers, exploitation of the data opportunity and expansion into converged services. Verizon Wireless posted another set of strong results for the financial Progress in all areas has become more evident in the second half of the year. Service revenue growth was 6.3%(*) driven by increased customer year. penetration and data, although price competition has increased and growth rates have slowed in the second half of the year. We have At the same time we accelerated our £1 billion cost reduction established joint initiatives with Verizon Wireless around LTE programme, announced in 2008, and delivered its full benefits one technology and enterprise customers during the year. year ahead of plan. The majority of these savings were generated by our European operations and from cost reductions in our central We maintained capital investment at a similar level to the previous functions. Despite growth in mobile voice minutes and a significant financial year and invested £6.2 billion, consistent with our guidance increase in data usage, Europe’s overheads declined enabling in May 2009. Capital expenditure in Europe was slightly higher than in commercial investment to be increased. the 2009 financial year as we took advantage of our strong cash generation to accelerate investment in fixed and mobile broadband In November we announced a further £1 billion cost saving programme networks, and in services to enterprise customers. to be delivered by the 2013 financial year. This will help us to offset inflationary pressures and the competitive environment and Adjusted earnings per share was 16.11 pence, lower than last year enable us to invest in our revenue growth opportunities. Around half primarily as the result of a one-off tax and associated interest benefit of these savings will be available for commercial reinvestment or in the prior year. Excluding this, adjusted earnings per share increased margin enhancement. by 6.6%. We will continually update our programme to identify further ways in Total dividends per share have increased by 7% to 8.31 pence with a which the Group can benefit from its regional scale and further reduce final dividend of 5.65 pence per share, up 9% reflecting the strong cash costs in order to offset external pressures and competitor action and performance of the Group. to invest in growth. Strategy 2. Pursue growth opportunities in total communications Q Cost reduction targets delivered a year ahead of plan. Data revenue grew by 19.3%(*) and is now over £4 billion. In addition to Q Strong revenue growth from data and fixed line services. driving continued growth in PC connectivity services, we have been Q Continued strong growth in emerging markets. particularly successful in increasing smartphone penetration across Q Enhanced shareholder returns – new three year our customer base and in ensuring that smartphone customers dividend target. subscribed for additional data services. Vodafone Group Plc Annual Report 2010 7

During the financial year our active data users across the Group During the year we returned approximately £4.1 billion of free cash increased to around 50 million and within this the number of mobile flow to shareholders in the form of dividends. The remaining free cash internet users to around 31 million. These achievements, while flow was used to fund the Vodacom stake purchase completed in May significant, highlight the huge potential of data as we increase 2009 and spectrum purchases in Turkey, Egypt and Italy. Net debt penetration of the remaining part of our 341 million proportionate declined to £33.3 billion primarily as a result of foreign exchange customer base. movements. The Group has retained a low single A credit rating. Fixed line revenue increased by 7.9%(*) during the year. We now have We now expect that annual free cash flow for the Group will be between 5.6 million fixed broadband customers, an increase of around 1 million £6.0 billion and £7.0 billion (using guidance foreign exchange rates) for during the year. In Europe adjusted EBITDA margins of the fixed the next three financial years ending 31 March 2013 reflecting the activities remained stable at around 14% and the business was broadly successful execution of the Group’s strategy and our expectations for free cash flow neutral after capital expenditure of approximately improving operating free cash flow from our emerging markets and fixed £450 million. line investments. Europe’s enterprise revenue declined by 4.1%(*) during the year as a The Board is therefore targeting dividend per share growth of at least 7% consequence of the significant impact of the economic downturn on per annum for the next three financial years ending on 31 March 2013(1). our enterprise customers. In contrast Vodafone Global Enterprise, which We expect that total dividends per share will therefore be no less than serves our larger enterprise customers on a Group-wide basis, had a 10.18 pence for the 2013 financial year. good year and delivered revenue growth of around 2%(*) demonstrating the strength of Vodafone services to multinational corporations. During Performance-driven organisation the year we launched fixed mobile convergent products such as Significant changes have been made to the Group’s internal structure, Vodafone One Net specifically for smaller and medium enterprise organisation and incentive systems in the last 12 months. Head office customers which will position us well for recovery in due course. functions and management layers have been reduced significantly, simplifying our business processes and increasing the speed with 3. Execute in emerging markets which we can respond to the changing environment. In India we have secured the number two position in the market by revenue despite fierce price competition stimulated by new entrants. The specific responsibilities of Group Technology, Group Marketing Indus Towers is now the world’s largest tower company with over and our local operating companies have been simplified, eliminating 100,000 towers under management. overlapping areas and coordination activities. We are also shifting progressively into incentive schemes which emphasise reward for Vodacom increased service revenue by 4.6%(*) and maintained its competitive performance and cash generation. leadership in South Africa. In Turkey service revenue increased by 31.3%(*) in the last quarter and 5.3%(*) in the full year. The turnaround plan Prospects for the year ahead(1) has brought the company back to growth and we now have to focus on Q Adjusted operating profit of £11.2 to £12.0 billion. continuing this momentum in the forthcoming financial year. Q Free cash flow in excess of £6.5 billion. While we look at opportunities to expand as they are presented, we We expect the Group to return to organic revenue growth during the remain cautious with respect to future footprint ex pansion. Our primary 2011 financial year although this will be dependent upon the strength focus remains on driving results from our existing emerging markets. of the economic environment and the level of unemployment within Europe. In contrast, revenue growth in other emerging economies, in 4. Strengthen capital discipline to drive shareholder returns particular India and Africa, is expected to continue as the Group drives Cash generation by the Group has been strong throughout the recession, penetration and data in these markets. reflecting significant cost reductions and the success of the Group wide working capital improvement plan in its first of two years. 8 Vodafone Group Plc Annual Report 2010

Executive summary Our strategy The key focus of our strategy is to drive free cash flow generation. This is supported by four main objectives: drive operational performance, pursue growth opportunities in total communications, execute in emerging markets and strengthen capital discipline. Drive operational Execute in emerging markets performance We aim to improve our performance through targeted commercial investment in high value customers, improved device portfolio In emerging markets we and cost reduction. are focused on operational performance and driving the Progress mobile data opportunity. Q Increased smartphone penetration across our customer base. Progress Q Capital investment of £6.2bn to enhance our product portfolio Q Increasing revenue market share and network quality. in India, Turkey and South Africa Q £1bn cost reduction programme during the year. delivered a year early; a further Q India now has 100m customers, £1bn programme now underway. up a record 32m during the year. Adjusted EBITDA margins are expected to decline at a significantly Q Cost initiatives include: greater Q Returned to revenue growth in lower rate than in the 2010 financial year. This reflects the continuing network sharing, efficiencies in Turkey driven by investment in benefit of the Group’s cost saving programme which is enabling us to customer self-service and the network, IT and distribution. increase commercial activity and drive increased revenue in data and streamlining of support functions. Q 33%(*) data revenue growth fixed line. in Vodacom. Cost savings over last two years Adjusted operating profit is expected to be in the range of £11.2 billion Service revenue to £12.0 billion. Performance will be determined by actual economic £1bn trends and the extent to which we decide to reinvest cost savings into 32% total communications growth opportunities. from emerging markets(2) Pursue growth opportunities Free cash flow is expected to be in excess of £6.5 billion, consistent with in total communications our new three year target. Strengthen capital discipline We intend to maintain capital expenditure at a similar level to last year, adjusted for foreign exchange, ensuring that we continue to invest in We are focused on enhancing high speed data networks, enhancing our customers’ experience and returns to shareholders and increasing the attractiveness of the Group’s data products. have clear priorities for Summary surplus capital. In an extremely challenging economic environment, we have improved Vodafone’s commercial focus and cost efficiency with We have identified three Progress visible results. revenue growth opportunities, mobile data, fixed broadband Q £4.1bn of free cash flow used to We have made good progress in our growth areas – mobile data, pay dividends. and enterprise services, broadband and enterprise – and exceeded our improved guidance, Q Total dividends per share of 8.31 generating strong free cash flow of £7.2 billion. As a result of greater which represent our total pence, up 7%. confidence in Vodafone’s prospects and cash generation ability, the communications services. Q Remaining free cash flow used Board has adopted a revised dividend policy, delivering attractive to purchase spectrum and growth for shareholders over the next three years(1). Progress an additional 15% of Vodacom. Q New dividend target – dividends Economic growth remains fragile in many of our largest markets but Q 19%(*) data revenue growth; driven by per share growth of at least 7% we remain confident that our strategy is creating a stronger Vodafone. PC connectivity services and mobile over the next three years. internet usage. Q Fixed broadband customer base Total dividends of 5.6m, up 1m. Q 2%(*) revenue growth in Vodafone 8.31p Vittorio Colao Global Enterprise. up 7% Chief Executive Mobile data users Notes: 50m (1) For guidance and dividend assumptions see page 37. up 135% over the year (2) Africa and Cent ral Europe and Asia Pacific and Middle East. Vodafone Group Plc Annual Report 2010 9

Global presence

Global presence We have a significant global presence, with equity interests in over 30 countries and over 40 partner markets worldwide. The Group operates in three geographic regions – Europe, Africa and Central Europe, Asia Pacific and Middle East – and has an investment in Verizon Wireless in the United States. Europe Africa and Central Europe Our mobile subsidiaries and joint venture operate under the brand name ‘Vodafone’. Our subsidiaries in this region operate under the ‘Vodafone’ brand or, in the case Our associate in France operates as ‘SFR’ and ‘Neuf Cegetel’, and our fixed line of Vodacom and its mobile subsidiaries, the ‘Vodacom’ and ‘Gateway’ brands. communication businesses operate as ‘Vodafone’, ‘Arcor’, ‘Tele2’ and ‘TeleTu’. Our joint venture in Poland operates as ‘Plus’ and our associate in Kenya operates as ‘Safaricom’. Poland 3.3m Czech Republic 3.0m Hungary 2.6m Romania 9.7m Turkey 15.8m Ireland 2.1m UK 19.0m Netherlands 4.7m Germany 34.5m Ghana 2.8m France 8.6m Kenya 5.3m Democratic Republic of Congo(2) Italy 23.2m Tanzania(2) Portugal 6.0m Albania 1.7m Spain 16.7m Greece 6.0m Vodacom(2) 39.9m(3) Mozambique(2) Malta 0.2m Lesotho(2) South Africa(2)(3) Europe Revenue growth (%) Africa and Central Europe Revenue growth (%) Revenue(1) 8.7 Revenue(1) 3.2(*)(4) 2.1 £29.9bn £8.0bn (15.8) (1.1) 2.1 0.8% growth (1.7) (6.8) 0.5 45.9% growth Adjusted operating profit(1) Adjusted operating profit(1) £6.9bn Germany Italy Spain UK Other £0.5bn Vodacom Romania Turkey Other 2.9% decrease 21.9% decrease Operating free cash flow(1) (1) The sum of these amounts does not equal Operating free cash flow(1) (2) Vodacom refers to the Group’s interest in Group totals due to Common Functions and Vodacom Group Limited (‘Vodacom’) in South £8.2bn intercompany eliminations. £1.1bn Africa and its subsidiaries, including its operations in the Democratic Republic of Congo, 2.7% decrease 70.5% growth Lesotho, Mozambique and Tanzania. It also Capital expenditure(1) Capital expenditure(1) includes its Gateway services and business network solutions subsidiaries which have customers in more than 40 countries in Africa. £3.0bn £1.4bn (3) The Group’s customers for Vodacom include 17.1 million customers in South Africa. 6.0% growth 61.1% growth (4) Vodacom became a subsidiary on 18 May 2009. The reported revenue growth was 150.3%. Partner markets Partner markets extend our brand exposure outside investment. Similar arrangements also exist with a Partnership agreements in place at 31 March 2010, the controlled operating companies through entering number of our joint ventures, associates and excluding those with our joint ventures, associates and into a partnership agreement with a local mobile investments. investments, are shown in the table to the right. operator, enabling a range of our global products and services to be marketed in that operator’s territory. The results of partner markets are included within Under the terms of these partner market agreements Common Functions, together with the net result of we cooperate with our partners in the development unallocated central costs and recharges to the Group’s and marketing of certain services. These partnerships operations, including royalty fees for the use of the create additional revenue through royalty and Vodafone brand. franchising fees without the need for equity 10 Vodafone Group Plc Annual Report 2010

Executive summary Regions Revenue(1) Adjusted operating Operating free cash flow(1) Capital expenditure(1) (£bn) profit(1) (£bn) (£bn) (£bn) Europe 6.5 0.6 Africa and Central Europe 1.1 1.4 Asia Pacific and Middle East 4.1 8.0 Verizon Wireless (US) 3.0 6.9 29.9 1.4 0.4 8.2 0.5 Asia Pacific and Middle East Verizon Wireless (United States) Our subsidiaries and joint venture in Fiji operate under the ‘Vodafone’ brand and our Our associate in the US operates under the brand ‘Verizon Wireless’. joint venture in Australia operates under the brands ‘Vodafone’ and ‘3’. China 17.2m Egypt 24.6m Verizon Wireless 41.8m Qatar 0.5m India 100.9m Fiji 0.4m Australia 3.5m New Zealand 2.5m Asia Pacific and Middle East Revenue growth (%) Verizon Wireless (US) Revenue growth (%) Revenue(1) 15.8 Revenue(5) 22.3 £6.5bn 9.3 £17.2bn 11.4% growth 22.3% growth 5.1 Adjusted operating profit(1) Adjusted operating profit(1) £0.4bn India Egypt Other £4.1bn US 35.6% decrease 16.1% growth Operating free cash flow(1) (5) This amount represents the Group’s share of Verizon Wireless’ revenue and is not included £0.6bn in Group revenue as Verizon Wireless is an associate. – Subsidiary Capital expenditure(1) Joint venture Associate £1.4bn Investment 25.1% decrease Amounts on map represent proportionate mobile customers at 31 March 2010. Country Operator Country Operator Country Operator Note: Afghanistan Roshan Faroe Islands Vodafone Faroe Islands Russia MTS (1) Partnership includes Bermuda and the Armenia MTS Finland Elisa Serbia VIP mobile following countries within the Caribbean: Austria A1 Honduras Digicel Singapore M1 Anguilla, Antigua and Barbuda, Aruba, Barbados, Bonaire, Curaçao, the Cayman Azerbaijan Azerfon-Vodafone Hong Kong SmarTone-Vodafone Slovenia Si.mobile Islands, Dominica, French West Indies, Bahrain Zain Iceland Vodafone Iceland Sri Lanka Dialog Grenada, Haiti, Jamaica, Samoa, St Lucia, Belgium Proximus Japan SoftBank Sweden TDC St Kitts and Nevis, St Vincent, Trinidad Bulgaria Mobiltel Latvia Bité Switzerland Swisscom and Tobago, Turks and Caicos Islands and Caribbean(1) Digicel Libya Al Madar Taiwan Chunghwa British Guyana. Channel Islands Airtel-Vodafone Lithuania Bité Thailand DTAC Chile Entel Luxembourg Tango Turkmenistan MTS Croatia VIPnet Macedonia/FYROM VIP operator Ukraine MTS Cyprus Cytamobile-Vodafone Malaysia Celcom United Arab Emirates Du Denmark TDC Norway TDC Uzbekistan MTS Estonia Elisa Panama Digicel Vodafone Group Plc Annual Report 2010 11

Customers and distribution

Proportionate mobile customers across the globe. 341.1m (2009: 302.6m; 2008: 260.5m) BrandFinance global ranking 7th most valuable brand (2009: 8th; 2008: 11th) Customers and distribution Customers are at the core of everything we do. Through our products and services we endeavour to address all our customers’ communications needs. International customer base with diverse needs Enterprise Vodafone has a truly international customer base with 341.1 million Vodafone also caters to all business segments ranging from small-proportionate mobile customers across the world. We continually office-home-office (‘SoHo’) and small-medium enterprises (‘SMEs’) to seek to develop new and innovative propositions that deliver relevance corporates and multinational corporations (‘MNCs’). While our core and value to all our customers and build a long lasting relationship mobile voice and data business continues to grow, our enterprise meeting their expectations and needs. As customers move between customers are increasingly asking for combined fixed and mobile work and home environments and look for integrated solutions, solutions for their voice and data needs as well as integrated services we have a suite of propositions which often bundle together and productivity tools. voice, messaging, data and increasingly fixed line services to meet their needs. Brand We have continued to build brand value by delivering a superior, consistent and differentiated customer experience. During the 2010 financial year we evolved our brand positioning to “power to you” emphasising our role of empowering customers to be able to live their lives to the full. It is a further expression of the importance of the customer being central to everything we do and is reinforced in communications substantiating how products and services impact and empower our customers. We regularly conduct brand health tracking which is designed to Global sponsorship measure the performance of the brand in each country and generate Our title sponsorship of the Vodafone insights to manage the brand as effectively as possible. External McLaren Mercedes F1 team delivered benchmark studies have shown that Vodafone brand equity has strong coverage across an exciting and maintained a top ten position in a number of rankings of brands across hard contested 2009 championship. In all industries including the seventh most valuable brand in the world addition to press and news coverage we as measured by BrandFinance. integrated the sponsorship into a wide variety of business activities including Customer segmentation communications, events, content, and Consumer acquisition and retention promotions to Consumer customers are typically classified as prepaid or contract maximise the impact and return on its investment. Significant sponsorship and customers. Prepaid customers pay in advance and are generally not support is also undertaken at a local bound to minimum contractual commitments offering great country level where it builds awareness flexibility and cost control. Contract customers usually sign up for a and brand value by resonating with our predetermined length of time and are invoiced for services, typically customers and their interests. on a monthly basis. Increasingly we offer SIM-only tariffs allowing customers to benefit from our network whilst keeping their existing handset. Around a third of our proportionate customer base including consumer and enterprise customers are contract customers and the remainder are prepaid. 12 Vodafone Group Plc Annual Report 2010

Business Vodafone branded franchise stores Directly owned and 7,600 managed stores (2009: 5,300; 2008: 5,800) 2,100 (2009: 1,800; 2008: 1,150) Distribution Our customers interact with us in a variety of ways including via retail locations, by telephone or increasingly online. Through our subsidiaries, we directly own and manage approximately 2,100 stores selling services to customers and providing customer support. To be most accessible to our customers we constantly review our store footprint and capabilities. We also have around 7,600 Vodafone branded stores in our controlled markets which sell our products and services exclusively through franchise and exclusive dealer arrangements. Additionally, in most operating companies, sales forces are in place to sell directly to business customers. The internet is increasingly a key channel to promote and sell our products and services and to provide customers with an easy, user friendly and accessible way to manage their services and access support, whilst reducing costs for the Group. The extent of indirect distribution varies between markets but may include using third party service providers, independent dealers, distributors and retailers. We host mobile virtual network operators Customer satisfaction (‘MVNOs’) in a number of markets, selling access to our network at a Historically we have measured customer wholesale level. satisfaction using our customer delight index, a proprietary diagnostic system which tracks customer satisfaction across all points of interaction with Vodafone and identifies the drivers of customer delight and their relative impact. At the end of the 2010 financial year we migrated to the net promoter score (‘NPS’) customer measurement system to monitor and drive customer satisfaction at both an operational and country level in many of our markets. The NPS diagnostic system replaces the customer delight Customer delight index index and uses a scale of how likely customers would be to recommend 73.1 us to friends and family. (2009: 72.9; 2008: 73.1) Vodafone Group Plc Annual Report 2010 13

Products and services

Voice revenue £28.0bn (2009: £26.9bn; 2008: £24.2bn) Handsets Our wide range of handsets Voice & messaging services covers all our customer segments and price points and is Products and services We provide value focused pricing available in a variety of designs. through unlimited bundles of Q 66 new models released in the 2010 voice and text services. We offer a wide range of products and services financial year. including voice, messaging, data and fixed line Q 23 exclusive handsets launched. Q Voice services incorporate revenue for national, international and solutions and devices to assist customers in roaming calls. Smartphones SMS services include text meeting their total communications needs. Q messages as well as multiple Q A handset offering advanced media, such as pictures, music, Handsets capabilities including access to sound, video and text. The core functionality and use of handsets continues to be voice and email and the internet. text messaging services. Many different tariffs and propositions are Q 24% of handset sales in Europe. available, targeted at different customer segments, and include a All leading brands represented Voice usage (billions of minutes) Q range of unlimited usage offers which have been particularly appealing including iPhone in 14 countries. 686.6 to customers. Q Launched two tailor-made 548.4 Vodafone 360 handsets: Samsung H1 427.9 With sophisticated handsets becoming readily available, customers and Samsung M1. are increasingly using their mobile phones to complement their lives in new and innovative ways. Data usage continues to grow rapidly fuelled by large numbers of intuitive internet enabled devices Vodafone branded handsets (‘smartphones’), many with touch screens such as the iPhone and 2008 2009 2010 BlackBerry^® Storm™, and transparent pricing available through our Q Enabling millions of people in “internet on your mobile” unlimited browsing tariff. Instant messaging emerging markets to share the SMS usage (billions of messages) is available with Yahoo! and MSN and we offer integrated services from benefits of mobile technology. 223.5 leading internet brand partners including YouTube, eBay, Google™ and Q Prices start from less than US$15. 172.0 Google Maps™. Q 16 new models released under our 131.4 own brand. Our partnership agreements with leading companies, such as RIM, Q Low cost combined with high-end Samsung and Google, have enabled us to be first to market with features, such as touch screen and cutting-edge devices such as the BlackBerry Storm, Samsung H1 and mobile internet capability. Samsung M1 (our two tailor-made handsets that support our Vodafone 2008 2009 2010 360 proposition) and Google Nexus One. Vodafone branded handsets shipped Messaging revenue Available in 31 markets including partner markets, Vodafone branded 5.4m devices are designed to meet a range of customer needs and £4.8bn (2009: 10.7m; 2008: 10.0m) preferences – from low cost phones offering simple voice and text, (2009: £4.5bn; 2008: £4.0bn) through fashion and design influenced, to competitively priced mobile internet devices with cutting-edge smartphone functionality including touch screen and mobile internet capability. During the 2010 financial year Vodafone launched its most affordable handset to date, the Vodafone 150, which retails for less than US$15 unsubsidised, giving millions of people in emerging markets the opportunity to share in the benefits of mobile technology for the first time. Product focus: Vodafone branded handsets Apple iPhone 3GS Vodafone 845 (left) Android smartphone Vodafone 150 (right) ultra low-cost handset. 14 Vodafone Group Plc Annual Report 2010

Business Data services We offer a number of products and services to enhance our customers’ access to data services including access to Fixed services the internet, email, music, games and television. We offer fixed voice and Organic data revenue growth fixed broadband solutions to our customers’ total Total communications services 19.3% communications needs. We have continued to diversify and expand the services we provide to (2009: 25.9%; 2008: 39.0%) assist customers in meeting their total communications needs. These Q Fixed line services available in include data services, such as mobile internet and mobile broadband 13 countries in addition to Gateway. and fixed services incorporating fixed line voice and fixed broadband. Data revenue Q 5.6m fixed broadband customers, up 1m. Data Q Data, a fast growing revenue Q Vodafone DSL Router launched We provide a range of data products including PC connectivity, internet stream, now accounts for 10% in six countries. services, applications and roaming. of service revenue. Q 50m total data users, up over 100%, PC connectivity services, available through Vodafone Mobile Broadband including 31m mobile internet users. Fixed line revenue (£bn) devices and certain handsets, provide mobile internet access for laptop, Q Integrated services from leading 3.3 netbook and PC users. Vodafone Mobile Broadband provides simple and internet partners including YouTube, 2.7 secure access to the internet and to business customers’ systems. We Google and Google Maps. 1.9 have been at the forefront of deployment of HSPA+ networks and development of devices (such as USB modems) to support these speeds. We were the first to deploy high speed HSPA services (peak rate of Data devices 14.4 Mbps) in selected markets, such as the UK, and HSPA+ (peak rate of 21.6 Mbps and 28.8 Mbps) in selected markets such Ireland, Portugal and Q Four netbook models with built-in 2008 2009 2010 Greece. USB sticks with exclusive designs and simple “plug and play” 3G broadband launched. software continue to be very popular. A wide variety of laptop models are Q Peak download speeds of up to Fixed broadband customers available with built in 3G broadband and Vodafone SIM cards. 28.8 Mbps. Q 13m smartphone users in Europe, 5.6m Internet services enable users to access the internet on their mobile representing 11% of customers. (2009: 4.6m; 2008: 3.6m) handset. Applications include email services with real time handheld Q First to launch a 21 Mbps USB stick access to email, calendar, address book and other applications. Data in several markets in Europe. roaming allows customers to use our services on a mobile network when travelling abroad. PC connectivity users Fixed 8.7m Our fixed service incorporates fixed broadband, offered mainly (2009: 5.7m; 2008: 2.7m) through DSL technology, and fixed line voice, which allows consumer and enterprise customers to make fixed line voice calls using Vodafone as their total communications provider. Data revenue (£bn) 4.1 The Vodafone DSL Router combines mobile and fixed broadband services. This means customers can connect immediately after 3.0 Product focus: Vodafone DSL Router purchase via the USB broadband modem and then later with fixed 2.1 The Vodafone DSL Router features instant broadband when this has been provisioned. At this stage the USB activation and a back-up connection via the modem can continue to be used with a laptop for usage outside of the separate USB dongle. home. During the year we have also launched Vodafone Sure Signal in the UK which, used in conjunction with home fixed broadband, 2008 2009 2010 provides customers with excellent indoor 3G coverage. Data traffic in Europe (petabytes) 81.8 40.8 18.8 Product focus: Vodafone Mobile Broadband USB modem Latest high-speed Vodafone USB modem, capable 2008 2009 2010 of supporting peak download speeds up to 28.8 Mbps. Vodafone Group Plc Annual Report 2010 15

Value added services

Vodafone 360 is a new internet service for mobile, PC and Mac. It brings phone, email, chat and social network contacts together in one place. Vodafone 360 provides customers with access to games, music and thousands of applications as well as browsing the internet. Vodafone Money Transfer The Vodafone Money Transfer system is available in three countries with 13 million customers moving US$3.6 billion during the year. We Value added services expect to roll-out the service to further markets later this year. We have continued to diversify and expand Applications Vodafone Money Transfer customers (millions) the services we provide to our customers to meet their total communications needs. 13.0 We provide a wide range of additional services to customers. 6.5 Consumer During the 2010 financial year we launched an exciting new suite of Q Vodafone Email Plus, Windows 2.5 services called Vodafone 360 particularly catering to the needs of Mobile^® Email from Vodafone customers wanting to be always connected both on the move and at and BlackBerry from Vodafone 2008 2009 2010 home. This allows customers to keep all their contacts and content in provide enterprise customers one place and access the latest information available on the internet. with real time handheld access Vodafone 360 integrates the latest updates from popular social to email, calendar, address book Roaming services networking sites, such as Facebook, so customers can stay instantly and other applications. up to date with their friends’ latest news. Q Vodafone PC Backup and Restore enables users to remotely store Our roaming services The Vodafone 360 store gives customers the choice to download from data securely and automatically allow Vodafone customers over 8,000 applications ranging from checking the weather and news to via their internet connection. to make calls and use the latest music and games. All the information, social contacts and Q Full track music down loads with data services on other content can also be seamlessly accessed online from PCs and Macs, in more than 2m songs available. addition to handsets, allowing customers the freedom to connect via operators’ mobile networks whichever channel is most convenient to them. Vodafone was the first whilst travelling abroad. operator to offer DRM-free bundles and now has the largest number of paid digital music subscriptions in Europe, with over 500,000 customers. 4.5m Q Over the last three years we Mobile email users , up 29% have reduced the cost of voice Applications roaming by 38% in Europe. Our range of total communications solutions provides customers with Q Vodafone Passport enables integrated office and mobile voice and data services, such as Vodafone PC Backup and Restore customers to “take their home Always Best Connected, an internet connection management tariff abroad” offering greater software tool which manages connections across all network price transparency and certainty. connection types including Mobile Broadband, Wi-Fi and LAN. This service allows customers to stay connected to the internet on the best available connection, simply and securely. The software provides a Vodafone Passport customers (millions) simple user experience for managing different connections in the 24.9 22.5 office, at home, in a hotspot or on the move by automatically Enables PC users to store data securely managing the switching between available connection types. and automatically, allowing access to files 17.5 and documents at any time from any computer with an internet connection, whether fixed or mobile. Service focus: DRM-free deals with all four major record labels in 2009 More than 500,000 customers signed up 2008 2009 2010 for music subscription services provided in partnership with all four major labels (EMI, Sony, Universal and Warner), making us the largest provider of paid digital music subscription services in Europe. 16 Vodafone Group Plc Annual Report 2010

Business Share of Europe service revenue from enterprise services 30% Product focus: Vodafone One Net Provides small and medium-sized business with just one Mobile broadband solutions number for their fixed and mobile calls. 7 Causes is a marketing consultancy with a difference. Based in the Netherlands, they’ve changed the way they work with clients. Out went expensive office space and long commutes. Instead they bought a bus and turned it into a mobile office complete with Vodafone mobile broadband. So now instead of wasting time travelling, they can work on the move and see more of their clients and their own families. Enterprise services Vodafone offers total Business managed services communications solutions for a wide range of enterprise Q As customers look to improve their efficiency they are increasingly customers from small looking to Vodafone to take control businesses to large of their technology for them. Enterprise multinational companies. Q Business managed services We continue to add value to our enterprise customers, building on our provide fully managed solutions core mobile business and leading the way with a range of services which bring together every where applications and data are secured and hosted in the Vodafone Vodafone One Net aspect of a customers’ network or “cloud”. In addition, we are providing mobile internet telecommunications infrastructure, bundles for smartphones, mobile email (BlackBerry, Microsoft Q Vodafone One Net brings together both fixed and mobile, into a single ActiveSync and Vodafone Email Plus) and mobile broadband via a fixed and mobile communications in management view. range of innovative devices, such as the Vodafone Mobile Wi-Fi, a one system. It means that every user Q Services include logistics, cost portable mobile broadband powered Wi-Fi hub, and class leading USB can have just one number for their control, and security and online dongles, embedded laptops and netbooks. desk phone and mobile, and one management portals offering voicemail box for their messages. single-sign-on. As we embrace the convergence of mobile and fixed networks our Q For a fixed cost per employee, customers are seeing the value it brings to their business through a customers can get business quality range of convergent services. Building on our success in Italy and internet and email, a mobile and/or Machine-to-machine Spain with our cloud-based office phone solution, Vodafone One Net, desk phone for every user, with the service is expected to be launched in Germany and the UK during advanced call management Q Machine-to-machine (‘M2M’) the 2011 financial year. The service provides enterprise customers of features and unlimited calls communication allows businesses all sizes with advanced office desk phone functionality integrated with between all their company phones to automate the capture of data, their mobile services. whether fixed or mobile. perform real-time diagnostics and repair and to control Our partnership with Microsoft has enabled us to combine these assets remotely. converged services with the Microsoft online suite, providing our Vodafone Unified Communications We support M2M solutions ranging Q customers with hosted email and productivity tools as well as from location monitoring of conferencing and collaboration services in a single package. The Q An integrated communications vehicles and remote patient services have launched successfully in Germany and Spain. solution in partnership with monitoring through to supporting Microsoft which provides a real-time secure payments and Vodafone Global Enterprise (‘VGE’) manages the relationships with customer with just one interface providing real-time inventory over 550 of our largest multinational corporate customers. VGE for all of their communications, reports for retailers. corporate simplifies the provision of fixed, mobile and data services for MNCs enabling employees to access and MNC segments. who need a single operat ional and commercial relationship with emails, share documents and files, Vodafone worldwide. It provides a range of managed services, such as access calendars, hold web and central ordering, customer self-serve web portals, telecommunications video conferences and exchange expense management tools and device management coupled with a instant messages from any location single contract and guaranteed service level agreements. and using almost any device. Within VGE, our machine-to-machine (‘M2M’) business unit provides MNC customers with global capabilities for M2M services through a Enterprise mobile voice connections (millions) single platform and a global numbering range. The business has achieved major customer wins in both the automotive and smart 25.2 metering sectors. VGE has continued to expand both its footprint and 22.4 Product focus: Vodafone Mobile Wi-Fi 19.6 the services it provides to our customers and now has dedicated Provides a personal Wi-Fi network resources in India and Africa, both growing areas for VGE’s services. For for up to five users. the fourth year running VGE has extended its position in the Gartner Magic quadrant report to become the clear industry leader. 2008 2009 2010 Vodafone Group Plc Annual Report 2010 17

Technology and resources

Technology and resources Our key technologies and resources include the telecommunications licences that we hold and the related network infrastructure which enable us to operate our telecommunications networks around the world. Delivering the best customer experience of GPRS called enhanced data rates for GSM evolution (‘EDGE’). These We have built extensive coverage across our networks and strive networks provide download speeds of over 200 kilobits per second to deliver the best possible user experience for our customers. (‘kbps’) to our customers. Q Over 200,000 base station sites for the transmission of wireless signals. Third generation (‘3G’) Q Network traffic of nearly 700 billion minutes and over Our 3G networks, operating the wideband code division multiple 90 petabytes of data per year. access (‘W-CDMA’) standard, provide customers with an optimised Q Peak download speeds of up to 28.8 Mbps. data access experience. We have continued to expand our service offering on 3G networks, which provide high speed internet and We continue to deliver a high quality customer experience across all email access, video telephony, full track music downloads, mobile TV of our markets, leveraging the extensive knowledge and expertise that and other data services in addition to existing voice and basic data Our networks we have across the Group. We measure key performance indicators connectivity services. provide peak across our markets on an ongoing basis to ensure we maintain high download speeds standards of service quality and availability. We also participate in High speed packet access (‘HSPA’) of up to 28.8 Mbps. regular network drive test campaigns conducted by independent third HSPA is a 3G wireless technology enhancement enabling significant party companies to benchmark our networks against those of our increases in data transmission speeds. It provides increased mobile We expect to major competitors. data traffic capacity and improves the customer experience through provide ever faster the availability of 3G broadband services and significantly shorter data speeds in the Over the last year we have introduced advanced tools across all of transfer times. All of our markets with 3G capability now support the years to come. our established 3G markets in Europe providing us with the ability 3.6 mega bits per second (‘Mbps’) peak speed evolution of high speed to monitor and proactively manage our customers’ experience on downlink packet access (‘HSDPA’) and with peak speeds of up to the network. 28.8 Mbps peak speed in some areas. The figures are theoretical peak rates deliverable by the technology in ideal radio conditions with no Network infrastructure customer contention for resources. While HSDPA focuses on the Our network infrastructure provides the means of delivering our downlink (network to mobile), high speed uplink packet access mobile and fixed voice, messaging and data services to our customers. (‘HSUPA’) focuses on the uplink (mobile to network) and peak speeds Our customers are linked via the access part of the network which of up to 1.4 Mbps on the uplink are now available across all of our connects to the core network that manages the set-up and routing of markets, with peak speeds up to 5.8 Mbps available in key areas across calls, transfer of messages and data connections. many of our 3G networks. Second generation (‘2G’) Evolving our networks We operate 2G networks in all of our mobile operating subsidiaries We continually improve our network and IT capability in order to through global system for mobile (‘GSM’) networks, offering customers enhance the service we provide our customers. services such as voice, text messaging and basic data services. In addition, all of the Group’s controlled networks operate general packet With the increasing adoption of mobile broadband services and the radio services (‘GPRS’), often referred to as 2.5G. GPRS allows mobile wider availability of advanced smartph ones we are seeing accelerated devices to be used for sending and receiving data over an IP based growth in data traffic across our networks. To ensure we continue to network and enabling data service offers such as internet and email deliver the best possible quality of service to our customers we are access. In a number of networks, we also provide an advanced version proactively evolving our infrastructure through a range of initiatives. 18 Vodafone Group Plc Annual Report 2010

Business Customer devices Access and transmission network Core network Other networks As a total communications Our access networks provide the means by which our customers can The core network is responsible Our networks connect to company our customers connect to Vodafone. We provide mobile access through a network for setting up and controlling a wide range of other can use a broad range of of base stations and fixed access through consumer digital the connection of our customers networks to enable our devices to access our subscriber lines (‘DSL’) and optical fibre, or corporate private wire. to our voice and data services. customers to reach products and services. These access networks connect back to our core network via a customers of other transmission network. operators and access services beyond Vodafone. Base station Circuit switched Base stations manage the The circuit switched domain wireless radio transmissions to provides voice/video calls and from Vodafone’s customers’ and some basic data services. Fixed line operators Standard handsets mobile devices. Smartphones Private wire Transmission Packet switched corporate access infrastructure Mobile operators Netbook and laptop We deliver private branch exchange The transmission infrastructure The packet switched domain computers services to our enterprise customers connects together our access provides our customers access to via dedicated private wire and core networks. data services. Internet service Fixed line devices connections. providers Desktop computers Fixed broadband IP multimedia subsystem Corporate networks We provide fixed line telephony The IP multimedia subsystem connections enabling our provides advanced control for all customers to connect to the internet protocol (‘IP’) services. internet via DSL and optical fibre (‘GPON’) technologies. Access network evolution in our networks in order to optimise the overall customer experience Population coverage We are actively driving additional 3G data technology enhancements we deliver. in Europe to further improve the customer’s experience and capacity of our networks including evolutions of HSPA technology to increase both We have continued to expand the deployments of IP multimedia 99% the downlink and uplink speeds. We have successfully trialled subsystem (‘IMS’) infrastructure across these markets in order to with 2G and over 80% evolutions of mobile broadband technology delivering peak rates of serve the increasing demand for advanced internet based services with 3G 43.2 Mbps. During the 2011 financial year we expect to extend the and applications. availability of 28.8 Mbps downlink and 5.8 Mbps uplink speeds within our network. Licences The licences held across our operating companies enable us to deliver We have continued to expand our fixed line footprint in accordance fixed and mobile communication services. Further detail on the issue with our total communications strategy by building our own and regulation of licences and a table summarising the most significant network and/or using wholesale arrangements in 13 countries at mobile licences held by operating subsidiaries and the joint venture 31 March 2010. in Italy at 31 March 2010 can be found in “Regulation” on page 133. In addition, we also have licences to provide fixed line services in many Transmission network evolution of the countries in which we operate. We continue to upgrade our access transmission infrastructure from the base stations to the core switching network to deal with the We regularly assess the value of our spectrum holdings and participate increasing bandwidth demands of the access network. We have in auctions to supplement our holdings on a case-by-case basis. continued to pursue a strategy of implementing scalable and cost effective self-build solutions and are also leveraging our DSL interests Innovation by increasingly backhauling data traffic onto more cost effective DSL We are a pioneer in products an d services to enhance customer transport connections. During the 2010 financial year we also choice and user experience. introduced new high capacity ethernet microwave solutions into our access transmission network and continued to deploy high bandwidth Quality of service for data applications optical fibre more widely across our access transmission network. In We have been driving the development of quality of service the core transmission network we have continued to expand our high differentiation in 3G which enables us to carefully manage the capacity optical fibre infrastructure, including technology assignment of capacity in our networks during the busiest times. With enhancements, which enable the use of cost effective IP technology increasing data demands, driven by faster HSDPA and fixed broadband, to achieve high quality transport of both voice and data traffic. this capability enables us to manage our costs through intelligent allocation of network resources. We have already launched quality of Core network evolution service differentiation to customers in Spain and Romania and plan At 31 March 2010 we had consolidated 15 national IP networks into a further launches across the majority of our 3G footprint. single IP backbone, including all markets in our Europe region, centralising IP operations to avoid duplication and achieve simplicity and flexibility in the deployment of new services to serve multiple markets. We have also introduced advanced yield management capabilities across substantially all of our established 3G markets. This provides us with the ability to actively manage the capacity allocated Vodafone Group Plc Annual Report 2010 19

Femtocells Q_formation of the wholesale application community (‘WAC’) where At 31 March 2010 we had femtocells in service in the UK and Qatar and innovative applications are developed through the global alliance continue to trial the product in several other markets. Available as of mobile operators and device manufacturers; Vodafone Sure Signal in the UK, these innovative devices provide a Q_participation in industry-wide initiatives to develop standards for 4G personal 3G mobile phone signal to our customers by connecting to mobile communications; our core network and services via their household broadband Q_delivery of a mobile healthcare programme supporting our connection, providing enhanced coverage to our customers in areas commercial and corporate responsibilities; and where mobile operators are unable to give customers a strong enough Q_a series of prototypes which enhance the mobile experience (voice, signal in their homes. video, gesture and data) by utilising cloud computing technologies. Product focus: Vodafone IT Cost reduction Sure Signal boosts your As we integrate fixed and mobile services together, and as the web While evolving the Group’s infrastructure it is also important that we mobile signal at home becomes increasingly mobile, IT has become a key enabler for service continue to have a tight control over our cost base. We have been or work. innovation. New IT technologies, such as cloud-based services, which actively driving a variety of initiatives which enable us to manage our All you need is a home broadband connection, provide unlimited processing capabilities by utilising shared resources network investments. a 3G phone and our easy-on the internet, and service oriented architecture solutions, are to-install Vodafone Sure delivering new revenue generating services and a consistent and Infrastructure sharing Signal box. enriched user experience for our consumer and enterprise customers. Significant effort has been placed in reducing the costs of deploying mobile network infrastructure and we are now conducting network For example in September 2009 Vodafone 360 was launched across sharing in all of our controlled markets as well as securing network Europe which required a common set of interfaces for partners such sharing agreements on over 75% of the new radio sites we deployed as Google and Nokia. This architecture is expected to be the foundation across the Group in the 2010 financial year. for future innovative consumer and enterprise propositions. Transmission self build Research and development We are driving significant reductions in our ongoing operational costs Research and development is oriented to incubate and deliver through our strategy of building our own high capacity backhaul innovation to the business, from disruptive new technologies to transmission network as opposed to leasing capacity from third party incremental commercial enhancements. Supporting our strategic network providers. We now own over 75% of the backhaul transmission objectives we have undertaken significant and varied activities during network across the markets in our Europe region. the 2010 financial year. Highlights include: IT transformation Q_a way to use the mobile subscriber identity module (‘SIM’) card to The IT transformation programme launched in the 2009 financial year simplify and authenticate secure virtual private network access to is on track to deliver its targeted savings and business benefits. The corporate networks; main focus areas include moving towards a common delivery model, Q_trials of next generation wireless technologies including GSM simplifying the use of applications to minimise complexity and evolution, HSPA evolution and 4G; implementing a standard unified communications toolset including Q_new machine-to-machine capabilities enabling us to deliver new video and audio conferencing on standard PCs. services to our customers; Q_near field communications (‘NFC’) tag s that add new functionality to mobile handsets already in use; 20 Vodafone Group Plc Annual Report 2010

Business Supply chain management Proportion of new radio Handsets, network equipment, marketing and IT services account for sites shared the majority of our purchases, with the bulk of these from global suppliers. Our supply chain management (‘SCM’) team is responsible 75% for managing our relationships with all suppliers (excluding handsets) and for providing cost benefits through utilisation of scale and scope. Since the launch of our supplier performance programme, the performance of these global suppliers has improved year-on-year. The best performing suppliers are recognised annually during our supplier conference. Our SCM team was recently voted as one of the top 20 most admired companies for “buy negotiation” by a study run by the International Association for Contract & Commercial Management. SCM is a major contributor to our cost reduction programme and operates across all local markets, achieving savings that are measured using a unified methodology and are reported regularly to the Executive Committee. SCM has been operating its strategic procurement function from the Vodafone Procurement Company (‘VPC’) in Luxembourg for over two years, driving increased standardisation and cost savings through the use of global price books and contracts, e-auctions and low cost network vendors. Worldwide independent benchmarking studies have shown our SCM team has Solar panels powering our base achieved significant cost advantages and indicate that we are stations in India achieving best in class pricing for IT storage and servers. We also We are working hard to reduce our operate through the China Sourcing Centre which has achieved own carbon impact through significant trading volumes further improving the Group’s cost base. increasing energy efficiency and use of renewable energy as well as Our suppliers are expected to comply with the Group’s Code of Ethical behaving responsibly by seeking to manage environmental issues in our Purchasing as well as stringent health and safety plans. Further detail supply chain. on this can be found in “Corporate responsibility” on page 45. 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. Vodafone Group Plc Annual Report 2010 21

People

People Vodafone employed an average of around 85,000 people worldwide during the 2010 financial year. We rely on our people to maintain and build on our success and to deliver excellent service to our customers. We aim to attract, develop and retain the best people and to realise their full potential. We maintain high levels of employee engagement, investing in employees’ development and offering attractive, performance-based incentives and career progression. Culture, communications and engagement We continued to optimise the shape and size of our organisation Q The Vodafone Way aligns all Vodafone employees to during the 2010 financial year. The majority of operating companies Employees a common set of values and behaviours. reduced the number of layers from the top to the bottom of their Q Aiming to be an admired, innovative and customer-focused organisation and increased management spans of control, resulting in 85,000 company operating with speed, simplicity and trust. flatter structures with wider management accountability. Several of Q Maintained high performance benchmark for our markets made significant organisation changes in the year: employee engagement. Q_Vodafone UK simplified its organisation structure, primarily in back During the 2010 financial year we launched a change programme office functions, resulting in 490 redundancies. In the 2011 financial called “The Vodafone Way”. The Vodafone Way is about being an year the UK will be recruiting for 170 new customer-facing roles and admired company in the eyes of our customers, shareholders and appointing 50 graduates into their graduate programme; employees by operating with speed, simplicity and trust. The Q_233 redundancies were made across central commercial functions. programme has defined a consistent set of values and behaviours for The majority of these were from the reshaping of the internet all Vodafone employees. Many of our senior leaders have been services function which included the closure of Wayfinder, through a workshop to embed The Vodafone Way behaviours and Vodafone’s location based services organisation in Sweden; these workshops will be extended to all senior leaders during the 2011 Q_the formation of the joint venture, Vodafone Hutchison Australia, in financial year. The performance and potential of our employees are June 2009 led to 340 redundancies from Vodafone Australia; reviewed against the standards of The Vodafone Way. Q_Vodafone Ghana continued its change programme reducing employee numbers by 1,331 and recruiting more than 350 The Vodafone Way is very much about increasing customer focus. Ghanaians into new roles in the business; For one day each month senior leaders in every operating country and Q_Vodafone Turkey reviewed its organisation structure to the Group spend time with customers and customer-facing staff, such streamline processes and reduce duplication. This resulted in as in retail stores or contact centres. Insights from these customer over 300 redundancies. Turkey has reinvested in hiring similar days are used to simplify customer-facing processes and improve numbers of new talent into key roles and building a graduate customer experiences. recruitment programme; Q_in December 2009 the legal merger of Arcor and Vodafone In November 2009 we carried out our fifth annual global people Germany was finalised and the two organisations have been survey. The survey measures employees’ level of engagement successfully integrated following the creation of a single executive (a combination of pride, loyalty and motivation). 89% of employees committee in March 2009. surveyed responded which is four percentage points more than last year. The above organisation changes clearly had significant implications for the employees in these markets. Changes were communicated We achieved an overall employee engagement score of 76% which clearly and transparently. We offered a range of support to help means that we have maintained the high performance benchmark for affected employees find new jobs, for example outplacement services, engagement for the second year in a row. The high performance insights into how to set-up their own business and training on interview benchmark is an external measure of best in class organisations that and resume writing skills. Vodafone aims to treat all employees fairly, achieve strong financial performance alongside high levels of ensuring healthy employee relations through open communications employee engagement. This achievement demonstrates that people and employee consultation. continue to feel proud to work for Vodafone and are committed and willing to give their best. Talent and resourcing Q Regular reviews of peoples’ performance and potential. Regular, consistent and open communication is fundamental to Q Graduate recruitment programmes in almost all ensuring we maintain high levels of employee engagement. Our operating countries. people have access to information about our business through a Q Continued focus on increasing diversity and inclusion: global intranet with local translations and content where appropriate. Q_14% of senior leaders, two Executive Committee members Nationalities in top The Chief Executive communicates directly with all of our employees and three operating company CEOs are female; and senior management roles via regular email and video updates particularly focusing on business Q_26 nationalities are represented in senior leadership roles. performance, strategy and The Vodafone Way. This is reinforced with 26 local CEO communications in all our markets. Relevant performance During the 2010 financial year we increased our focus on driving high and change issues are also discussed with employee representatives performance and building a strong base of talented leaders and from operating companies within the European Union, who meet employees. All managers are encouraged to hold regular performance annually with members of the Executive Committee in the Vodafone discussions with their direct reports. Annual performance dialogues are European Employee Consultative Council. mandatory to enable each employee to receive a performance and potential rating which is the basis for development planning and reward Organisation effectiveness and change decisions. Quarterly departmental and operating company talent Q Continued focus on efficient and effective reviews have been introduced, alongside annual development boards. organisation structures. For most senior leadership roles, the Executive Committee review Q Headcount reduction in several markets including succession and key appointments each month. the UK and Ghana. Q Successful integration of Arcor into Vodafone Germany. We want to attract the best and brightest graduates to work in all of our operating companies. A globally consistent graduate recruitment programme has been introduced with a target of 230 top graduate 22 Vodafone Group Plc Annual Report 2010

Business Employees by location hires across the Group during the 2010 calendar year. We have also In January 2010 we confirmed the closure of our UK defined benefit partnered with seven leading MBA schools to hire top MBA graduates pension scheme for future accruals on 31 March 2010. All UK based 1 to join us and progress to key management and leadership roles. employees were invited to join a new, enhanced defined contribution pension scheme, which we believe is now highly competitive in the 7 2 We aim to create a working culture that is inclusive to all and believe local market as well as more sustainable longer-term. 3 that having a diverse workforce helps to meet the different needs of 4 our customers across the globe. We do not condone unfair treatment Health, safety and wellbeing 6 5 of any kind and offer equal opportunities for all aspects of employment Q Significant and increased effort to address the frequency and advancement regardless of race, nationality, sex, age, marital and likelihood of fatal accidents in high risk countries. 1. Germany 15.9% status, sexual orientation, disability or religious or political belief. This 2. Italy 7.3% also applies to agency workers, self employed persons and contract The health, safety and wellbeing of our customers, employees and 3. Spain 5.1% workers who work for Vodafone. In the latest people survey 87% of others who could be affected by our activities are of paramount 4. UK 11.5% 5. Vodacom 8.0% employees agreed that people in Vodafone are treated fairly, regardless importance to us. Expansion in emerging markets and the application 6. India 11.9% of their gender, background, age or belief. of the most rigorous and demanding tracking methodologies have this 7. Other 40.3% year highlighted an unacceptable level of fatal accidents. It is deeply The main focus of our diversity strategy has been on gender with actions regrettable that 27 fatalities occurred related to our operations in the taken to provide inclusive working policies and to increase inclusive 2010 financial year. 24 of these were third party contractors and three behaviour amongst managers. Compared to the 2009 financial year were Vodafone employees. Over 80% of these incidents occurred in there has been a slight increase in the percentage of women in senior India, Ghana and Turkey – markets with a legacy of poor safety practice roles, up from 13% to 14%. There will be continued efforts to increase and infrastructure, and a high rate of road accidents. the proportion of women in senior leadership roles during the 2010 financial year. Loss of life as a consequence of us doing business in any country is unacceptable to us and tackling the causes of these fatalities is a top More recently we have extended our diversity strategy to focus on priority. Urgent action was taken to improve safety governance and diversity of nationality, industry background and technical experience. awareness in these countries which has resulted in a significant 26 nationalities are represented in the senior leadership of the Group. reduction in fatal incidents in the second half of the 2010 financial year. In the countries where the majority of the incidents occurred we have Learning and capability development introduced a fatality prevention plan and linked this to the performance Q Global programmes continue to develop high objectives of each CEO. The plan includes two key initiatives: adopting potential employees. Det Norse Veritas’ International Safety Ranking System (‘ISRS’) and implementing a set of absolute rules as mandatory requirements to We are committed to helping people reach their full potential through drive safe behaviour. Further details can be found at www.vodafone. ongoing training and development. In our most recent people survey com/responsibility and in the 2010 sustainability report. 71% of employees rated their opportunities to develop their skills and knowledge as good or very good. Employme nt policies and employee relations Q We aim to be recognised as an employer of choice. Inspire, our global leadership development programme, is in its second Q We strive to maintain high standards and good year. The programme focuses on identifying and developing potential employee relations. future leaders from within the Group. The programme builds commercial capability and leadership skills through an 18 month fast- Our employment policies are developed to reflect local legal, cultural track approach. 67 managers from 19 countries participated in the and employment requirements. We aim to be recognised as an programme during the 2009 calendar year and 51 have started on the employer of choice and therefore seek to maintain high standards and 2010 calendar year course. Of the managers who have completed the good employee relations wherever we operate. programme, 40% have been promoted to a more senior role. Our business principles set out our ethical standards and we have Performance, reward and recognition recently developed a code of conduct that defines what employees Q Extension of reward differentiation based on need to do to live up to our business principles. New and existing individual performance. employees will receive communication and training on the code of Q Replacement of UK defined benefits pension scheme conduct during the 2011 financial year. with enhanced defined contribution scheme. We reward employees based on their performance, potential and Key performance indicators contribution to the success of the business and we aim to provide KPI 2010 2009 2008 competitive and fair rates of pay and benefits in every country where Total number of employees(1) 84,990 79,097 72,375 we operate. Global short- and long-term incentive plans are offered to Employee turnover rates (%) 13.0 13.0 15.2 leadership and management levels and paid according to individual Number of women in the top 33 out 29 out 26 out and company performance. senior management roles of 228 of 221 of 211 Number of nationalities in the In response to global economic conditions a pay freeze policy was top senior management roles 26 23 20 introduced to the senior leadership team in the 2010 financial year. Note: Most operating companies did however award bonuses through global (1) Represents the average number of employees during the financial year. or local plans, with greater emphasis on rewarding strong business and individual performance. Vodafone Group Plc Annual Report 2010 23

Key performance indicators

Key performance indicators The Board and the Executive Committee use a number of key performance indicators(1) (‘KPIs’) to monitor Group and regional performance against budgets and forecasts as well as to measure progress against our strategic objectives. There are a number of other KPIs that are used to monitor the results of individual operating companies but for which no Group KPI is calculated including revenue market share and adjusted EBITDA market share. KPI Purpose of KPI 2010 2009 2008 Free cash flow(2) Provides an evaluation of the cash generated by our £7,241m £5,722m £5,580m operations and available for reinvestment, shareholder returns or debt reduction. Also used in determining management’s remuneration. Service revenue and related Measure of our success in growing ongoing revenue streams. £41,719m £38,294m £33,042m organic growth(2) Also used in determining management’s remuneration. (1.6)% (0.3)% 4.3% Data revenue and related Data revenue is expected to be a key driver of the future growth £4,051m £3,046m £2,119m organic growth(2) of the business. 19.3% 25.9% 39.0% Fixed line revenue and related Measure of success in offering total communications services £3,289m £2,727m £1,874m organic growth(2) 7.9% 2.1% 6.2% Capital expenditure Measure of our investment in capital expenditure £6,192m £5,909m £5,075m to deliver services to customers. Adjusted EBITDA and related Measure used by management to monitor performance at a £14,735m £14,490m £13,178m organic growth(2) segment level. (7.4)% (3.5)% 2.6% Customer delight index Measure of customer satisfaction across our controlled markets 73.1 72.9 73.1 and jointly controlled market in Italy. Also used in determining management’s remuneration. Net promoter score (‘NPS’) At the end of the 2010 financial year, most markets migrated to NPS, which is also used to monitor customer satisfaction. In relation to those subsidiaries that have migrated, NPS will be incorporated into the competitive performance assessment used in determining management’s remuneration. Adjusted operating profit Measure used for the assessment of operating performance, £11,466m £11,757m £10,075m and related organic growth(2) including the results of associates. Also used in determining (7.0)% 2.0% 5.7% management’s remuneration. Proportionate mobile Customers are a key driver of revenue growth in all operating 341.1m 302.6m 260.5m customers(1) companies in which we have an equity interest. Proportionate mobile Measure of our success at attracting new and retaining 34.6m 33.6m 39.5m customer net additions(1) existing customers. Voice usage (in minutes) Voice usage is an important driver of revenue growth, especially 686.6bn 548.4bn 427.9bn given continuing price reductions in the competitive markets in which we operate. Notes: (1) Definition of the key terms is provided on page 141. (2) See ‘Non-GAAP information’ on page 136 for further details on the use of non-GAAP measures. 24 Vodafone Group Plc Annual Report 2010

Operating results

Performance

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 and Central Europe, Asia Pacific and Middle East and Verizon Wireless in the United States have developed in the last three years.

2010 financial year compared to the 2009 financial year

Group⁽¹⁾⁽²⁾

			Africa		Asia
			and Central		Pacific and		Verizon		Common
	Europe		Europe		Middle East		Wireless		Functions(3)			Eliminations			2010			2009			% change
	£m		£m		£m		£m		£m			£m			£m			£m			£			Organic(4)
Revenue		29,878		8,026		6,481		—		269			(182	)		44,472			41,017			8.4			(2.3	)
Service revenue		28,310		7,405		6,146		—		6			(148	)		41,719			38,294			8.9			(1.6	)
Adjusted EBITDA		10,927		2,327		1,840		—		(359	)		—			14,735			14,490			1.7			(7.4	)
Adjusted operating profit		6,918		527		358		4,112		(449	)		—			11,466			11,757			(2.5	)		(7.0	)
Adjustments for:
Impairment losses, net																(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)	The Group revised how it determines and discloses segmental adjusted EBITDA and adjusted operating profit during the year. See note 3 to the consolidated financial statements.
(2)	Current year results reflect average exchange rates of £1: €1.13 and £1:US$1.60.
(3)	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.
(4)	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. See “Acquisitions” on page 42 for further details.

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 £41.7 billion, while organic service revenue declined by 1.6%^(*). Service revenue was impacted by challenging economic conditions in Europe and Central Europe offset by growth in Africa, Asia Pacific and the Middle East.

In Europe service revenue fell 3.5%^(*), a 1.8 percentage point decline on the previous year reflecting challenging economic conditions in most markets offset by growth in Italy 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. 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 7.7%^(*) 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 and Central Europe service revenue fell by 1.2%^(*), a 4.3 percentage point decline on the previous year resulting from challenging economic conditions in Central Europe, mobile termination rate cuts across the region and competition led pricing movements in Romania partially offset by strong growth in Vodacom. 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 across Central Europe, which became effective during the year, contributed 3.4 percentage points to the decline in service revenue.

In Asia Pacific and Middle East service revenue increased by 9.8%^(*). 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.

Operating 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 7.3%^(*), with a decline in the adjusted EBITDA margin of 1.0 percentage point, primarily driven by the downward revenue trend and the growth of lower margin fixed line operations partially offset by operating and direct cost savings.

Africa and Central Europe’s adjusted EBITDA decreased by 5.8%^(*) resulting from reduced adjusted EBITDA margins across the majority of Central Europe due to challenging economic conditions and investment in Turkey to drive growth in the second half of the financial year. Strong revenue growth in Vodacom, combined with direct and customer cost savings partially offset the decline in Central Europe.

In Asia Pacific and Middle East adjusted EBITDA increased by 1.4%^(*), with growth in India being 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.

Vodafone Group Plc Annual Report 2010  25

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 44.
(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 on page 32. 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 the current year and the income tax credit arising from the German tax settlement discussed above.

	2010			2009
	£m			£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”.

26  Vodafone Group Plc Annual Report 2010

Performance

Europe⁽¹⁾

	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			5,354			(249	)		29,878			0.8			(4.1	)
Service revenue		7,722			5,780			5,298			4,711			5,046			(247	)		28,310			1.5			(3.5	)
Adjusted EBITDA		3,122			2,843			1,956			1,141			1,865			—			10,927			(2.0	)		(7.3	)
Adjusted operating profit		1,695			2,107			1,310			155			1,651			—			6,918			(2.9	)		(8.9	)
Adjusted EBITDA margin		39.0	%		47.2	%		34.2	%		22.7	%		34.8	%					36.6	%
Year ended 31 March 2009
Revenue		7,847			5,547			5,812			5,392			5,329			(293	)		29,634
Service revenue		7,535			5,347			5,356			4,912			5,029			(293	)		27,886
Adjusted EBITDA		3,225			2,565			2,034			1,368			1,957			—			11,149
Adjusted operating profit		1,835			1,839			1,421			328			1,702			—			7,125
Adjusted EBITDA margin		41.1	%		46.2	%		35.0	%		25.4	%		36.7	%					37.6	%

Note:
(1)	The Group revised how it determines and discloses segmental adjusted EBITDA and adjusted operating profit during the year. See note 3 to the consolidated financial statements.

Revenue increased by 0.8% benefiting from exchange rate movements. On an organic basis service revenue declined by 3.5%^(*) reflecting reductions in most markets partially offset by growth in Italy 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 2.0% resulting from an organic decline partially offset by a positive contribution from foreign exchange rate movements. On an organic basis, adjusted EBITDA decreased by 7.3%^(*) 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 1.0 percentage point.

	Organic			M&A			Foreign		Reported
	change			activity			exchange		change
	%			pps			pps		%
Revenue — Europe		(4.1	)		0.1			4.8		0.8
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		(5.4	)		—			5.7		0.3
Europe		(3.5	)		0.1			4.9		1.5
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		(10.2	)		—			5.5		(4.7	)
Europe		(7.3	)		0.1			5.2		(2.0	)
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		(9.3	)		0.2			6.1		(3.0	)
Europe		(8.9	)		0.2			5.8		(2.9	)

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.

Vodafone Group Plc Annual Report 2010  27

Operating results continued

UK

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.

Other Europe

Service revenue decreased by 5.4%^(*) with declines in all countries except the Netherlands 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 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 10.2%^(*). The adjusted EBITDA margin fell by 1.9 percentage points with declines in all markets except the Netherlands and Portugal. The decline in service revenue was partially offset by lower customer costs and a reduction in operating expenses.

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

Africa and Central Europe⁽¹⁾

							Africa and
							Central
	Vodacom			Other			Europe			% change
	£m			£m			£m			£			Organic(2)
Year ended 31 March 2010
Revenue		4,450			3,576			8,026			45.9			(2.1	)
Service revenue		3,954			3,451			7,405			44.8			(1.2	)
Adjusted EBITDA		1,528			799			2,327			35.3			(5.8	)
Adjusted operating profit		520			7			527			(21.9	)		(7.9	)
Adjusted EBITDA margin		34.3	%		22.3	%		29.0	%
Year ended 31 March 2009
Revenue		1,778			3,723			5,501
Service revenue		1,548			3,565			5,113
Adjusted EBITDA		606			1,114			1,720
Adjusted operating profit		373			302			675
Adjusted EBITDA margin		34.1	%		29.9	%		31.3	%

Notes:
(1)	The Group revised how it determines and discloses segmental adjusted EBITDA and adjusted operating profit during the year. See note 3 to the consolidated financial statements.
(2)	Organic growth includes Vodacom (except the results of Gateway) at the current level of ownership. See “Acquisitions” on page 42 for further details.

Revenue increased by 45.9% 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. On an organic basis service revenue declined by 1.2%^(*), as the strong growth in Vodacom was offset by a challenging economic environment across Central Europe, mobile termination rate cuts and competition led pricing movements in Romania.

Adjusted EBITDA increased by 35.3%, also benefiting from the full consolidation of Vodacom and positive foreign exchange rate movements. On an organic basis adjusted EBITDA decreased by 5.8%^(*), with adjusted EBITDA margin decreasing due to turnaround investment in Turkey and Ghana and increased competition and the difficult economic environments across the region.

	Organic			M&A			Foreign		Reported
	change			activity			exchange		change
	%			pps			pps		%
Revenue
Africa and Central Europe		(2.1	)		38.9			9.1		45.9
Service revenue
Vodacom		4.6			112.0			38.8		155.4
Other		(7.0	)		2.8			1.0		(3.2	)
Africa and Central Europe		(1.2	)		37.6			8.4		44.8
Adjusted EBITDA
Vodacom		10.4			101.8			39.9		152.1
Other		(25.9	)		(4.1	)		1.7		(28.3	)
Africa and Central Europe		(5.8	)		30.8			10.3		35.3
Adjusted operating profit
Vodacom		12.5			3.1			23.8		39.4
Other		(65.0	)		(32.9	)		0.2		(97.7	)
Africa and Central Europe		(7.9	)		(23.3	)		9.3		(21.9	)

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.

28  Vodafone Group Plc Annual Report 2010

Performance

Other Africa and Central Europe

Service revenue declined by 7.0%^(*) with Turkey’s return to growth in the second half of the year being more than offset by the decline in revenue across Central Europe. 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, Hungary and Poland, the decline in service revenue was driven by mobile termination rate cuts which became effective during the year, impacting incoming mobile voice revenue. In the Czech Republic and Hungary challenging economic conditions also contributed to the decline in service revenue. Vodafone launched its 3G network services in the Czech Republic during the fourth quarter.

Adjusted EBITDA decreased by 25.9%^(*) mainly due to a reduction in service revenue coupled with turnaround investment in Turkey and Ghana. 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. Other Central European operations benefited from a continued focus on reducing costs to mitigate the impact of the revenue decline.

Asia Pacific and Middle East⁽¹⁾

										Asia Pacific
										and Middle
	India			Other			Eliminations			East			% change
	£m			£m			£m			£m			£			Organic(2)
Year ended 31 March 2010
Revenue		3,114			3,368			(1	)		6,481			11.4			8.6
Service revenue		3,069			3,078			(1	)		6,146			13.1			9.8
Adjusted EBITDA		807			1,033			—			1,840			3.4			1.4
Adjusted operating (loss)/profit		(37	)		395			—			358			(35.6	)		(25.9	)
Adjusted EBITDA margin		25.9	%		30.7	%					28.4	%
Year ended 31 March 2009
Revenue		2,689			3,131			(1	)		5,819
Service revenue		2,604			2,831			(1	)		5,434
Adjusted EBITDA		717			1,062			—			1,779
Adjusted operating (loss)/profit		(30	)		586			—			556
Adjusted EBITDA margin		26.7	%		33.9	%					30.6	%

Notes:
(1)	The Group revised how it determines and discloses segmental adjusted EBITDA and adjusted operating profit during the year. See note 3 to the consolidated financial statements.
(2)	Organic growth includes India but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009. See “Acquisitions” on page 42 for further details.

Revenue increased by 11.4% including a 7.4 percentage point 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 which is presented under the “M&A activity” column in the table below. On an organic basis service revenue increased by 9.8%^(*) reflecting a 42.2% increase in the mobile customer base and continued strong data revenue growth partially offset by a decline in mobile voice pricing. India contributed around 88%^(*) of the region’s organic service revenue growth.

Adjusted EBITDA grew by 3.4% with a 6.4 percentage point positive contribution from foreign exchange rate movements, offset in part by the creation of the joint venture in Australia. On an organic basis adjusted EBITDA increased by 1.4%^(*) with adjusted EBITDA margin decreasing by 2.2 percentage points primarily reflecting 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
Asia Pacific and Middle East		8.6			(4.6	)		7.4			11.4
Service revenue
India		14.7			—			3.2			17.9
Other		2.9			(4.5	)		10.3			8.7
Asia Pacific and Middle East		9.8			(3.9	)		7.2			13.1
Adjusted EBITDA
India		9.2			—			3.4			12.6
Other		(4.8	)		(6.0	)		8.1			(2.7	)
Asia Pacific and Middle East		1.4			(4.4	)		6.4			3.4
Adjusted operating profit
India(1)		30.7			—			(7.4	)		23.3
Other		(23.3	)		(14.6	)		5.3			(32.6	)
Asia Pacific and Middle East		(25.9	)		(15.2	)		5.5			(35.6	)

Note:
(1)	The percentage change represents the increase in the adjusted operating loss.

Vodafone Group Plc Annual Report 2010  29

Operating results continued

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.

Other Asia Pacific and Middle East

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 similar 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.

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 6.2 million net mobile customer additions bringing its closing mobile customer base to 92.8 million, up 7.2%. 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.

30  Vodafone Group Plc Annual Report 2010

Performance

2009 financial year compared to the 2008 financial year

Group

			Africa		Asia
			and Central		Pacific and		Verizon		Common
	Europe		Europe		Middle East		Wireless		Functions(1)			Eliminations			2009			2008			% change
	£m		£m		£m		£m		£m			£m			£m			£m			£		Organic
Revenue		29,634		5,501		5,819		—		216			(153	)		41,017			35,478			15.6		(0.4	)
Service revenue		27,886		5,113		5,434		—		—			(139	)		38,294			33,042			15.9		(0.3	)
Adjusted EBITDA		11,149		1,720		1,779		—		(158	)		—			14,490			13,178			10.0		(3.5	)
Adjusted operating profit		7,125		675		556		3,542		(141	)		—			11,757			10,075			16.7		2.0
Adjustments for:
Impairment losses																(5,900	)		—
Other income and expense																—			(28	)
Operating profit																5,857			10,047
Non-operating income and expense																(44	)		254
Net financing costs																(1,624	)		(1,300	)
Profit before taxation																4,189			9,001
Income tax expense																(1,109	)		(2,245	)
Profit for the financial year																3,080			6,756

Note:
(1)	Common Functions represents the results of the partner markets and the net result of unallocated central Group costs and recharges to our operations, including royalty fees for use of the Vodafone brand.

Revenue

Revenue increased by 15.6%, with favourable exchange rates contributing 13.0 percentage points and the impact of merger and acquisition activity contributing 3.0 percentage points to revenue growth. Pro-forma revenue growth, including the acquisition in India and the acquisition of Tele2 in Italy and Spain, was 1%.

Revenue in Europe declined by 2.1%^(*) as benefits from new tariffs and promotions and a strong performance in data revenue were more than offset by the impact of the deteriorating European economy on voice and messaging revenue, including from roaming, usage growth, ongoing competitive pricing pressures and lower termination rates.

In Africa and Central Europe, revenue grew by 3.9%^(*) with double-digit revenue growth in Vodacom being offset by weakening trends in Turkey and Romania. Benefits from the increase in the average customer base were partially offset by both weaker economic conditions in the more mature markets in Central Europe and the impact of termination rate cuts.

In Asia Pacific and Middle East, revenue grew by 19% on a pro-forma basis including India, a result of the rise in the average customer base, although revenue growth slowed primarily as a result of stronger competition coupled with maturing market conditions.

Operating profit

Adjusted EBITDA increased by 10.0% to £14,490 million, with favourable exchange rates contributing 13.4 percentage points and the impact of merger and acquisition activity contributing 0.1 percentage points to adjusted EBITDA growth. Including India and Tele2 in Italy and Spain, pro-forma adjusted EBITDA declined by 3%.

In Europe adjusted EBITDA decreased by 5.0%^(*), with a decline in the adjusted EBITDA margin, primarily driven by the downward revenue trend, the growth of lower margin fixed line operations, a brand royalty provision release included in the 2008 financial year in Italy and restructuring charges in a number of markets, which more than offset customer and operating cost savings. The European adjusted EBITDA margin, including Common Functions which substantially support our European operations, declined by 1.2 percentage points driven by an increasing contribution from lower margin fixed broadband.

Africa and Central Europe’s adjusted EBITDA decreased by 2.3%^(*), with the adjusted EBITDA margin decreasing in the majority of markets due to continued network expansion, investment in the turnaround plan in Turkey and increased competition in Romania.

In Asia Pacific and Middle East adjusted EBITDA increased by 7% on a pro-forma basis including India, with a decline in the adjusted EBITDA margin as licensing costs increased and network expansion continued, primarily in India, but also through the build out in Qatar.

The increase in Common Functions’ adjusted EBITDA in the 2009 financial year resulted primarily from the inclusion of a brand royalty payment charge in the 2008 financial year and increased brand revenue in the 2009 financial year following agreement of revised terms with Vodafone Italy.

Operating profit decreased due to the growth in adjusted operating profit being more than offset by impairment losses in relation to operations in Spain (£3,400 million), Turkey (£2,250 million) and Ghana (£250 million). Adverse changes in macroeconomic assumptions generated the £550 million charge recorded in the second half of the 2009 financial year in relation to Turkey and all of the charge in relation to Ghana. Adjusted operating profit increased by 16.7%, or 2.0%^(*), with a 16.5 percentage point contribution from favourable exchange rates, whilst the impact of merger and acquisition activity reduced adjusted operating profit growth by 1.8 percentage points.

The share of results in Verizon Wireless, our associate in the US, increased by 21.6%^(*) primarily due to a focus on the high value contract segment and low customer churn. On 9 January 2009 Verizon Wireless completed its acquisition of Alltel Corp. (‘Alltel’), adding 13.2 million customers before required divestitures.

Vodafone Group Plc Annual Report 2010  31

Operating results continued

Net financing costs

	2009			2008
	£m			£m
Investment income		795			714
Financing costs		(2,419	)		(2,014	)
Net financing costs		(1,624	)		(1,300	)
Analysed as:
Net financing costs before dividend from investments		(1,480	)		(823	)
Potential interest charges arising on settlement of outstanding tax issues(1)		81			(399	)
Dividends from investments		110			72
Foreign exchange(2)		235			(7	)
Equity put rights and similar arrangements(3)		(570	)		(143	)
		(1,624	)		(1,300	)

Notes:
(1)	Includes release of a £317 million interest accrual relating to a favourable settlement of long standing tax issues. See “Taxation” below.
(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. The amount for the year ended 31 March 2008 also includes a charge of £333 million representing the initial fair value of the put options granted over the Essar Group’s interest in Vodafone Essar, which was recorded as an expense. Further details of these options are provided on page 44.

Net financing costs before dividends from investments increased by 79.8% to £1,480 million, primarily due to mark-to-market losses in the 2009 financial year compared with gains in the 2008 financial year and unfavourable exchange rate movements impacting the translation into sterling. The interest charge resulting from the 28.2% increase in average net debt was minimised due to changes in the currency mix of debt and significantly lower interest rates for US dollar and euro denominated debt. At 31 March 2009 the provision for potential interest charges arising on settlement of outstanding tax issues was £1,635 million (31 March 2008: £1,577 million).

Taxation

The effective tax rate was 26.5% (2008: 24.9%). This rate was lower than our weighted average statutory tax rate due to the structural benefit from the ongoing enhancement to our internal capital structure and a benefit of £767 million following the resolution of long standing tax issues related to the acquisition and subsequent restructuring of the Mannesmann Group. This was offset by an increase in the rate due to the impact of impairment losses for which no tax benefit is recorded.

Earnings per share

Adjusted earnings per share increased by 37.4% to 17.17 pence for the year ended 31 March 2009, resulting primarily from movements in exchange rates and the benefit from a favourable tax settlement, as discussed to the left. Excluding these factors, adjusted earnings per share rose by around 3%. Basic earnings per share decreased by 53.5% to 5.84 pence including the impairment losses of £5.9 billion.

	2009			2008
	£m			£m
Profit from continuing operations attributable to equity shareholders		3,078			6,660
Adjustments:
Impairment losses		5,900			—
Other income and expense(1)		—			28
Non-operating income and expense(2)		44			(254	)
Investment income and financing costs(3)		335			150
		6,279			(76	)
Foreign exchange on tax balances		(155	)		—
Tax on the above items		(145	)		44
Adjusted profit attributable to equity shareholders		9,057			6,628
Weighted average number of shares outstanding	Million			Million
Basic		52,737			53,019
Diluted		52,969			53,287

Notes:
(1)	The amount for the 2008 financial year represents a pre-tax charge offsetting the tax benefit arising on recognition of a pre-acquisition deferred tax asset.
(2)	The amount for the 2009 financial year includes a £39 million adjustment in relation to the broad based black economic empowerment transaction undertaken by Vodacom. The amount for the 2008 financial year includes £250 million representing the profit on disposal of our 5.60% direct investment in Bharti Airtel Limited (‘Bharti Airtel’).
(3)	See notes 2 and 3 in “Net financing costs”.

32  Vodafone Group Plc Annual Report 2010

Performance

Europe

	Germany			Italy			Spain			UK			Other			Eliminations			Europe			% change
	£m			£m			£m			£m			£m			£m			£m			£		Organic
Year ended 31 March 2009
Revenue		7,847			5,547			5,812			5,392			5,329			(293	)		29,634			13.6		(2.1	)
Service revenue		7,535			5,347			5,356			4,912			5,029			(293	)		27,886			14.1		(1.7	)
Adjusted EBITDA		3,225			2,565			2,034			1,368			1,957			—			11,149			9.7		(5.0	)
Adjusted operating profit		1,835			1,839			1,421			328			1,702			—			7,125			9.8		(5.4	)
Adjusted EBITDA margin		41.1	%		46.2	%		35.0	%		25.4	%		36.7	%					37.6	%
Year ended 31 March 2008
Revenue		6,866			4,435			5,063			5,424			4,583			(290	)		26,081
Service revenue		6,551			4,273			4,646			4,952			4,295			(287	)		24,430
Adjusted EBITDA		2,816			2,148			1,908			1,560			1,735			—			10,167
Adjusted operating profit		1,577			1,528			1,362			517			1,504			—			6,488
Adjusted EBITDA margin		41.0	%		48.4	%		37.7	%		28.8	%		37.9	%					39.0	%

Revenue increased by 13.6%, with favourable euro exchange rate movements contributing 14.3 percentage points of growth and mergers and acquisitions activity, primarily Tele2, contributing a further 1.4 percentage point benefit. The organic decline in revenue of 2.1% was a result of a 1.7% decrease in service revenue and a decline in equipment revenue, reflecting lower volumes.

The impact of merger and acquisition activity and foreign exchange movements on revenue, service revenue, adjusted EBITDA and adjusted operating profit are shown below:

	Organic			M&A			Foreign		Reported
	growth			activity			exchange		growth
	%			pps			pps		%
Revenue — Europe		(2.1	)		1.4			14.3		13.6
Service revenue
Germany		(2.5	)		(0.1	)		17.6		15.0
Italy		1.2			4.7			19.2		25.1
Spain		(4.9	)		2.5			17.7		15.3
UK		(1.1	)		0.3			—		(0.8	)
Other		(1.2	)		0.4			17.9		17.1
Europe		(1.7	)		1.4			14.4		14.1
Adjusted EBITDA
Germany		(2.8	)		(0.2	)		17.5		14.5
Italy		(0.1	)		1.2			18.3		19.4
Spain		(9.2	)		(0.5	)		16.3		6.6
UK		(12.8	)		0.5			—		(12.3	)
Other		(4.3	)		(0.1	)		17.2		12.8
Europe		(5.0	)		0.2			14.5		9.7
Adjusted operating profit
Germany		(0.9	)		(0.4	)		17.7		16.4
Italy		2.4			(0.5	)		18.5		20.4
Spain		(9.8	)		(1.9	)		16.0		4.3
UK		(37.9	)		1.3			—		(36.6	)
Other		(4.8	)		1.1			16.9		13.2
Europe		(5.4	)		(0.3	)		15.5		9.8

Service revenue declined by 1.7%^(*), reflecting a gradual deterioration over the year and a 3.3%^(*) decrease in the fourth quarter, with favourable trends in Italy more than offset by deteriorating trends in other markets, in particular Spain and Greece. The impact of the economic slowdown in Europe on voice and messaging revenue, including from roaming, ongoing competitive pricing pressures and lower termination rates were not fully compensated by increased usage arising from new tariffs and promotions and strong growth in data revenue.

Adjusted EBITDA increased by 9.7%, with favourable euro exchange rate movements contributing 14.5 percentage points of growth and a 0.2 percentage point benefit

from business acquisitions. The adjusted EBITDA margin declined 1.4 percentage points primarily driven by the downward revenue trend, the growth of lower margin fixed line operations, a brand royalty provision release included in the 2008 financial year in Italy and restructuring charges in a number of markets, which more than offset customer and operating cost savings.

Germany

The 2.5%^(*) decline in service revenue was consistent with the 2008 financial year, benefiting from higher penetration of the new SuperFlat tariff portfolio. Data revenue growth remained strong, reflecting increased penetration of PC connectivity services in the customer base. Fixed line revenue declined during the year, but grew 2.1%^(*) in the fourth quarter, as the customer base largely migrated to new, lower priced tariffs. The fixed broadband customer base increased by 15.9% during the year to 3.1 million at 31 March 2009, with an additional 154,000 wholesale fixed broadband customers. On 19 May 2008 we acquired a 26.4% interest in Arcor, following which we own 100% of Arcor. The integration of the mobile business and the fixed line operations has progressed, with cost savings being realised according to plan.

Adjusted EBITDA margin remained broadly stable at 41.1%, reflecting an improvement in the mobile margin which was offset by a decline in the fixed line margin, with the former due to a reduction in prepaid subsidies and an increase in the number of SIM-only contracts. Operating expenses were also broadly stable with the 2008 financial year as a restructuring charge of €35 million in the 2009 financial year (£32 million) was more than offset by non-recurring adjustments, including favourable legal settlements.

Italy

Service revenue growth was 1.2%^(*) reflecting targeted demand stimulation initiatives, ARPU enhancing initiatives and strong growth in data revenue due to increased penetration of mobile PC connectivity devices, email enabled devices and mobile internet services. Fixed line revenue growth was 3.7%^(*). supported by 278,000 fixed broadband customer net additions during the year as well as the benefit from the launch of Vodafone Station during the summer of 2008 and the continued good performance of Tele2.

Adjusted EBITDA declined by 0.1%^(*) and adjusted EBITDA margin declined by 2.2 percentage points mainly due to a brand royalty provision release in the 2008 financial year. Excluding the impact of the brand royalty provision release and the impact of the acquisition of Tele2, the adjusted EBITDA margin was broadly stable, with an improvement in the mobile margin offsetting the increased contribution of lower margin fixed line services.

Spain

Service revenue declined by 4.9%^(*) with an 8.6%^(*) decline in the fourth quarter. Negative trends in the economic environment put strong pressure on usage in some customer segments and led to increased involuntary churn. Data revenue growth accelerated during the year, driven primarily by PC connectivity services and an improvement in media content revenue growth following a successful campaign in the fourth quarter. Fixed line revenue continued to grow, supported by the launch of Vodafone Station.

Vodafone Group Plc Annual Report 2010  33

Operating results continued

Adjusted EBITDA decreased by 9.2%^(*) as the decline in service revenue and the dilutive effect of the increased contribution of lower margin fixed line services outweighed benefits from cost cutting initiatives in customer and operating costs.

UK

Service revenue declined by 1.1%^(*) primarily due to a decrease in voice revenue resulting from increased competition in a challenging economic environment, customer optimisation of out of bundle offers and lower roaming revenue. Wholesale revenue increased due to the success of the MVNO business, principally ASDA and Lebara. Data revenue growth was maintained, driven primarily by increased penetration of mobile PC connectivity and mobile internet services. The acquisition of Central Telecom, which provides converged enterprise services, was completed in December 2008.

The 12.8%^(*) decline in adjusted EBITDA, which included the impact of a £30 million VAT refund in the 2008 financial year, was primarily due to higher off network usage in messaging services and higher retention costs. The cost of retaining customers increased as a higher proportion of the contract base received upgrades in the 2009 financial year following the expiration of 18 month contracts which were introduced in 2006. Operating expenses grew, primarily due to the impact of the sterling/euro exchange rate on euro denominated intercompany charges; otherwise operating expenses were broadly stable year-on-year.

Other Europe

Service revenue decreased by 1.2%^(*) during the year and 5.0%^(*) in the fourth quarter, as growth in the Netherlands was more than offset by declines in Greece and Ireland, where the trends have deteriorated throughout the year. The Netherlands benefited from a rise in the customer base and strong growth in visitor revenue. Both Greece and Ireland were impacted by deteriorating market environments, which worsened in the fourth quarter, and substantial price reductions in prepaid tariffs, whilst Greece was also affected by termination rate cuts.

The fall in adjusted EBITDA margin of 1.2 percentage points was primarily driven by the service revenue decline and restructuring charges recorded in the fourth quarter in most countries.

The share of profit in SFR increased, reflecting the acquisition of Neuf Cegetel and foreign exchange benefits on translation of the results into sterling.

Africa and Central Europe

							Africa and
							Central
	Vodacom			Other(1)			Europe			% change
	£m			£m			£m			£			Organic
Year ended 31 March 2009
Revenue		1,778			3,723			5,501			11.2			3.9
Service revenue		1,548			3,565			5,113			10.7			3.1
Adjusted EBITDA		606			1,114			1,720			1.5			(2.3	)
Adjusted operating profit		373			302			675			(12.6	)		(12.6	)
Adjusted EBITDA margin		34.1	%		29.9	%		31.3	%
Year ended 31 March 2008
Revenue		1,609			3,337			4,946
Service revenue		1,398			3,219			4,617
Adjusted EBITDA		586			1,108			1,694
Adjusted operating profit		365			407			772
Adjusted EBITDA margin		36.4	%		33.2	%		34.2	%

Note:
(1)	On 1 October 2007 Romania rebased all of its tariffs and changed its functional currency from US dollars to euros. In calculating all constant exchange rate and organic metrics which include Romania, previous US dollar amounts have been translated into euros at the 1 October 2007 US$/euro exchange rate.

Revenue increased by 11.2%, including the contribution of favourable exchange rate movements and the impact of merger and acquisition activity. Revenue growth was 3.9%^(*) as sustained growth in Vodacom was offset by weakening trends in Turkey and Romania. Service revenue growth was 3.1%^(*) reflecting the 9.9% increase in the average customer base partially offset by an impact from termination rate cuts of around three percentage points.

Adjusted EBITDA increased by 1.5%, with the contribution of favourable exchange rate movements partially offset by merger and acquisition activity. Adjusted EBITDA decreased by 2.3%^(*), with the adjusted EBITDA margin decreasing in the majority of markets reflecting the continued network expansion, investment in the turnaround plan in Turkey and increased competition in Romania.

The impact of merger and acquisition activity and foreign exchange movements on revenue, service revenue, adjusted EBITDA and adjusted operating profit are shown below:

	Organic			M&A			Foreign			Reported
	growth			activity			exchange			growth
	%			pps			pps			%
Revenue
Africa and Central Europe		3.9			(0.7	)		8.0			11.2
Service revenue
Vodacom		13.8			2.1			(5.2	)		10.7
Other		(0.9	)		(1.5	)		13.1			10.7
Africa and Central Europe		3.1			(0.6	)		8.2			10.7
Adjusted EBITDA
Vodacom		7.3			0.5			(4.4	)		3.4
Other		(6.7	)		(5.9	)		13.1			0.5
Africa and Central Europe		(2.3	)		(4.0	)		7.8			1.5
Adjusted operating profit
Vodacom		6.3			0.3			(4.4	)		2.2
Other		(26.2	)		(10.5	)		10.9			(25.8	)
Africa and Central Europe		(12.6	)		(5.6	)		5.6			(12.6	)

Vodacom

Service revenue grew by 13.8%^(*) as strong growth in Vodacom’s average customer base continued, increasing by 11.2%, which took the closing customer base to 39.6 million on a 100% basis. Revenue growth was driven by the prepaid voice market and data services. Voice usage per customer in the prepaid market, which represents the majority of the customer base, grew as the higher usage driven by revised tariffs in South Africa was offset by the dilutive effect of the increased customer base in both Tanzania and Mozambique, which both have lower than average ARPU. Data revenue grew by 59.7%^(*), as the higher revenue base partially offset the benefit from increased penetration of mobile PC connectivity devices, with the absence of fixed line alternatives making mobile data a popular offering. Relatively low contract voice revenue growth resulted from reduced out of bundle usage as customers cut back on spending due to economic conditions. Equipment revenue was adversely impacted by consumer preference for lower value handsets. Trading conditions in the Democratic Republic of Congo (‘DRC’) have worsened significantly due to the impact of lower commodity prices on mining which is central to the DRC’s economy.

Adjusted EBITDA growth was 7.3%^(*), despite lower margins, as the growth in revenue more than offset the increasing cost base which benefited from stable customer costs as a percentage of revenue as the South African market matures. The cost base was adversely impacted by an increase in operating expenses due to continued expansion, investment in enterprise services, Black Economic Empowerment share charges and high wage inflation.

On 30 December 2008 Vodacom acquired the carrier services and business network solutions subsidiaries (‘Gateway’) from Gateway Telecommunications SA (Pty) Ltd. Gateway provides services in more than 40 countries in Africa.

34  Vodafone Group Plc Annual Report 2010

Performance

Other Africa and Central Europe

Service revenue declined by 0.9%^(*) due to the performance in Turkey combined with the impact of deteriorating economic conditions across Central Europe, most notably in Romania in the fourth quarter. Service revenue in Turkey decreased by 7.6%^(*) with an 18.4%^(*) fall in the fourth quarter. Termination rate cuts adversely impacted revenue by 6.9% and revenue was further depressed by a higher rate of churn and a decline in prepaid ARPU due to intense competition in the market. Consumer confidence in Turkey fell with the deterioration in the macroeconomic environment impacting revenue. Competition also intensified with the launch of mobile number portability in November 2008 leading to aggressive acquisition and pricing campaigns, especially in the fourth quarter of the year. Mobile ARPU fell in the second half of the year but stabilised in the fourth quarter following successful promotions. In Romania service revenue grew by 1.1%^(*) but deteriorated during the year with a 10.3%^(*) decline in the fourth quarter. The market continued to mature, with the decline in ARPU resulting from local currency devaluation against the euro — whilst tariffs are quoted in euros household incomes are earned in local currency — in addition to market led price reductions impacting performance in the fourth quarter in particular. These effects were partially offset by data revenue growth following successful data promotions and flexible access offers which led to a rise in the number of mobile PC connectivity devices.

Adjusted EBITDA decreased by 6.7%^(*), with the adjusted EBITDA margin also declining due to the fall in revenue and investment in the turnaround plan in Turkey. Adjusted EBITDA in Turkey declined by 36.6%^(*) as a result of the decline in revenue and increased operating expenses reflecting higher marketing costs, higher technology costs due to expansion of the network and organisational restructuring as part of the turnaround plan. In Romania adjusted EBITDA decreased by 3.7%^(*) as aggressive market competition and higher gross customer additions led to the rise in the cost of acquiring and retaining customers.

In May 2008 the Group changed the consolidation status of Safaricom from a joint venture to an associate following completion of the share allocation for the public offering of 25.0% of Safaricom’s shares previously held by the Government of Kenya and termination of the shareholders’ agreement with the Government of Kenya. In August 2008 we acquired 70.0% of Ghana Telecommunications Company Limited which offers both mobile and fixed services. We also increased our stake in Polkomtel from 19.6% to 24.4% in December 2008.

Asia Pacific and Middle East

										Asia
										Pacific
										and
										Middle
	India			Other			Eliminations			East			% change
	£m			£m			£m			£m			£		Organic
Year ended 31 March 2009
Revenue		2,689			3,131			(1	)		5,819			32.3		9.3
Service revenue		2,604			2,831			(1	)		5,434			32.5		8.5
Adjusted EBITDA		717			1,062			—			1,779			18.3		6.9
Adjusted operating (loss)/profit		(30	)		586			—			556			0.5		5.8
Adjusted EBITDA margin		26.7	%		33.9	%					30.6	%
Year ended 31 March 2008
Revenue		1,822			2,577			—			4,399
Service revenue		1,753			2,348			—			4,101
Adjusted EBITDA		598			906			—			1,504
Adjusted operating profit		35			518			—			553
Adjusted EBITDA margin		32.8	%		35.2	%					34.2	%

Revenue increased by 32.3%, including the contribution from favourable exchange rate movements in addition to the benefit from acquisitions, primarily in India. Revenue growth on a pro-forma basis was 19%, reflecting the growth in India, Egypt and Australia. Service revenue increased by 8.5%^(*) primarily as a result of the 27.3% organic rise in the average customer base, although revenue growth slowed as a result of stronger competition coupled with maturing market conditions.

Adjusted EBITDA grew by 18.3% with favourable exchange rate movements and the positive impact of acquisitions contributing to the growth. On a pro-forma basis including India, adjusted EBITDA increased by 7%. The decline in the adjusted EBITDA margin resulted from positive performances in India and Egypt being mitigated by a decline in Australia.

The impact of merger and acquisition activity and foreign exchange movements on revenue, service revenue, adjusted EBITDA and adjusted operating profit are shown below:

	Organic		M&A			Foreign			Reported
	growth		activity			exchange			growth
	%		pps			pps			%
Revenue
Asia Pacific and Middle East		9.3		13.3			9.7			32.3
Service revenue
India		—		42.5			6.0			48.5
Other		8.5		0.3			11.8			20.6
Asia Pacific and Middle East		8.5		14.2			9.8			32.5
Adjusted EBITDA
India		—		14.1			5.8			19.9
Other		6.9		(3.4	)		13.7			17.2
Asia Pacific and Middle East		6.9		0.6			10.8			18.3
Adjusted operating profit
India		—		(173.2	)		(12.5	)		(185.7	)
Other		5.8		(6.8	)		14.1			13.1
Asia Pacific and Middle East		5.8		(19.7	)		14.4			0.5

India

Revenue grew by 33% on a pro-forma basis, with growth in the fourth quarter of 27.7%^(*). Growth in the fourth quarter remained stable in comparison to the third quarter as the eight percentage point benefit of the new revenue stream from the network sharing joint venture, Indus Towers, which launched during the first half of the 2009 financial year, offset the slowing underlying growth rate. Visitor revenue increased, albeit at a lower rate, due to the impact of economic pressures as people travel less. Lower effective rates per minute reflecting price reductions earlier in the year, coupled with the continued market shift to lifetime validity prepaid offerings, led to a reduction in customer churn. The lower effective rate and a slight fall in usage per customer were mitigated by net customer additions, which averaged 2.1 million per month, and the launch of services in seven new circles, bringing the closing customer base to 68.8 million. Customer penetration in the Indian mobile market reached 34% at 31 March 2009.

Adjusted EBITDA grew by 6% on a pro-forma basis. Customer costs as a percentage of revenue decreased, benefiting from economies of scale. Licensing costs increased as discounts received from the regulator in some service areas were terminated. Network expansion continued, with an average of 2,600 base stations constructed per month, primarily in the new circles. Site sharing increased and Indus Towers steadily increased its operations throughout the rest of the year, with 95,000 sites under its management at the end of March 2009.

Vodafone Group Plc Annual Report 2010  35

Operating results continued

Other Asia Pacific and Middle East

The increase in service revenue of 8.5%^(*) was attributable to performances in Egypt and Australia. In Egypt service revenue grew by 11.9%^(*) as growth in the customer base and increased usage per customer were partially offset by a decline in the effective rate per minute as a result of the introduction of new tariffs in addition to lower termination rates and a fall in both visitor revenue and the enterprise segment revenue as people travelled less. Service revenue in Australia increased by 6.1%^(*) due to an increase in the average customer base and good data revenue growth, especially in mobile broadband services. These were partially offset by lower ARPU, reflecting strong competition, which led to a lower revenue growth rate in the fourth quarter. In New Zealand service revenue grew by 4.9%^(*) as result of an increase in the fixed broadband customer base and growth in data services, the latter following increased penetration of mobile PC connectivity devices. These benefits were partially offset by the competitive and recessionary trends in the market.

Adjusted EBITDA grew by 6.9%^(*), with a decline in the adjusted EBITDA margin, as the increase in Egypt was offset by the decline in Australia. Egypt’s adjusted EBITDA grew by 15.5%^(*) in proportion to revenue, with a slight increase in margin, despite the inclusion of 3G licensing fees for the full year in comparison to only part of the prior year. In Australia adjusted EBITDA decreased by 16.9%^(*) primarily due to a loss provision related to a prepaid recharge vendor and an increased focus on contract customers resulting in higher customer costs.

Verizon Wireless

	2009			2008			% change
	£m			£m			£		Organic
Revenue		14,085			10,144			38.9		10.4
Service revenue		12,862			9,246			39.1		10.5
Adjusted EBITDA		5,543			3,930			41.0		13.0
Interest		(217	)		(102	)		112.7
Tax(1)		(198	)		(166	)		19.3
Non-controlling interest		(78	)		(56	)		39.3
Discontinued operations		57			—			—
Share of result in Verizon Wireless		3,542			2,447			44.7		21.6

Note:
(1)	Our 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 our share of the partnership’s pre-tax profit is included within our tax charge.

Verizon Wireless, our associate in the US, achieved 5.6 million net customer additions in a market where penetration reached an estimated 92% at 31 March 2009. The increased closing customer base of 86.6 million was achieved through continued strong organic growth, the acquisitions of Rural Cellular Corporation and Alltel, combined with concentration on the high value contract segment and market leading customer loyalty as evidenced by low customer churn.

Service revenue growth was 10.5%^(*) driven by the expanding customer base and robust messaging and data ARPU. Messaging and data revenue continued to increase strongly, predominantly as a result of growth in data card, email and messaging services. Verizon Wireless continued to extend the reach of its 3G network which now covers more than 280 million people after the Alltel acquisition.

Verizon Wireless improved its adjusted EBITDA margin to 39.4% through efficiencies in operating expenses partly offset by a higher level of customer acquisition and retention costs, driven by increased demand for high-end data devices such as the BlackBerry Storm.

Verizon Wireless completed the acquisition of Rural Cellular Corporation in the first half of the 2009 financial year, adding 0.7 million customers. On 9 January 2009 Verizon Wireless completed its acquisition of Alltel, purchasing Alltel’s equity and acquiring and repaying Alltel’s debt with Verizon Wireless and Alltel cash as well as the proceeds from capital market transactions. The Alltel acquisition added 13.2 million customers before required divestitures. Verizon Wireless expects to realise synergies with a net present value, after integration costs, of more than US$9 billion, driven by aggregate capital and operating expense savings. Increased debt in relation to the acquisition of Alltel led to a £150 million interest charge for the quarter ended 31 March 2009.

36  Vodafone Group Plc Annual Report 2010

Performance

Guidance

2011 financial year and three year guidance

	2010
	actual		2011		Three year
	performance		guidance		guidance
	£bn		£bn		£bn
Adjusted operating profit		11.5		11.2 — 12.0		n/a
			In excess
Free cash flow		7.2	of 6.5			6.0 — 7.0

2011 financial year

We expect the Group to return to low levels of organic revenue growth during the 2011 financial year although this will be dependent upon the strength of the economic environment and the level of unemployment within Europe. In contrast revenue growth in emerging economies, in particular India and Africa, is expected to continue as the Group drives penetration and data in these markets.

Adjusted EBITDA margins are expected to decline but at a significantly lower rate than that experienced in the previous year. Adjusted operating profit is expected to be in the range of £11.2 billion to £12.0 billion. Total depreciation and amortisation charges are expected to be slightly higher than the prior year, before the impact of licence and spectrum purchases, if any, during the 2011 financial year.

Free cash flow is expected to be in excess of £6.5 billion reflecting a continued but lower level of benefit from the working capital improvement programme launched in the 2010 financial year. We intend to maintain capital expenditure at a similar level to last year, adjusted for foreign exchange, ensuring that we continue to invest in high speed data networks, enhancing our customer experience and increasing the attractiveness of the Group’s data services.

The adjusted tax rate percentage is expected to be in the mid 20s for the 2011 financial year with the Group targeting a similar level in the medium-term. The Group continues to seek resolution of the UK Controlled Foreign Company and India tax cases.

Three year free cash flow and dividend per share growth target

We expect that annual free cash flow will be between £6.0 billion and £7.0 billion, in each of the financial years in the period ending 31 March 2013, underpinning a dividend per share growth target of at least 7% per annum for each of these financial years. We therefore expect that total dividends per share will be no less than 10.18p for the 2013 financial year.

Assumptions

Guidance is based on our current assessment of the global economic outlook and assumes foreign exchange rates of £1: €1.15 and £1:US$1.50 throughout this three year period. It excludes the impact of licence and spectrum purchases, if any, material one-off tax settlements and restructuring costs and assumes no material change to the current structure of the Group.

With respect to the dividend 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 rate remains within 10% of the above guidance exchange rate.

A 1% change in the euro to sterling exchange rate would impact adjusted operating profit by approximately £70 million and free cash flow by approximately £60 million.

2010 financial year

	Adjusted
	operating		Free
	profit		cash flow
	£bn		£bn
Guidance — May 2009(1)		11.0 — 11.8		6.0 — 6.5
Guidance — February 2010(1)		11.4 — 11.8		6.5 — 7.0
2010 actual performance		11.5		7.2
Foreign exchange		0.2		0.1
Alltel restructuring costs(2)		0.2		—
2010 performance on guidance basis		11.9		7.3

Notes:
(1)	The Group’s guidance reflected assumptions for average for exchange rates for the 2010 financial year of approximately £1: €1.12 and £1:US$1.50. Actual exchange rates were £1: €1.13 and £1:US$1.60.
(2)	The Group’s guidance did not include the impact of reorganisation costs arising from the Alltel acquisition by Verizon Wireless.

Vodafone Group Plc Annual Report 2010  37

Principal risk factors and uncertainties

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 immaterial, may also impact our business. This section should be carefully read in conjunction with the “Forward-looking statements” on page 140 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 make it more difficult for us to raise capital externally which could 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 the recent 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 133.

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 handsets, higher than anticipated prices of new handsets 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 ERP system. However there is no assurance that the full extent of the anticipated benefits will be realised in the timeline envisaged.

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

38  Vodafone Group Plc Annual Report 2010

Performance  

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 71 and note 10 to the consolidated financial statements.

Our global footprint may present exposure to unpredictable economic, political, regulatory and legal risks.

Political, regulatory, economic and legal systems in emerging markets may be less predictable than in countries with more developed 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 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.

Our strategic objectives may be impeded by the fact that we do not have a controlling interest in some of our ventures.

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 the nature of our mobile ownership interests, no assurance can be given that our partners will not exercise their power of veto or their controlling influence in any of our ventures in a way that will hinder our corporate objectives and reduce 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 and our ability to retain customers and attract new customers 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 in some countries where we operate 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 addition, as described under the heading “Legal proceedings” in note 29 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.

Vodafone Group Plc Annual Report 2010  39

Financial position and resources

Consolidated statement of financial position

	2010		2009
	£m		£m
Non-current assets
Intangible assets		74,258		74,938
Property, plant and equipment		20,642		19,250
Investments in associates		36,377		34,715
Other non-current assets		11,489		10,767
		142,766		139,670
Current assets		14,219		13,029
Total assets		156,985		152,699
Total equity shareholders’ funds		90,381		86,162
Total non-controlling interests		429		(1,385	)
Total equity		90,810		84,777
Liabilities
Borrowings
Long-term		28,632		31,749
Short-term		11,163		9,624
Taxation liabilities
Deferred tax liabilities		7,377		6,642
Current taxation liabilities		2,874		4,552
Other non-current liabilities		1,550		1,584
Other current liabilities		14,579		13,771
Total liabilities		66,175		67,922
Total equity and liabilities		156,985		152,699

Assets

Intangible assets

At 31 March 2010 our intangible assets were £74.3 billion with goodwill comprising the largest element at £51.8 billion (2009: £54.0 billion). The increase in intangible assets resulting from the acquisition of Vodacom and the £1.5 billion of additions was offset by amortisation of £3.5 billion and net impairment losses of £2.1 billion.

Property, plant and equipment

Property, plant and equipment increased from £19.3 billion at 31 March 2009 to £20.6 billion at 31 March 2010 predominantly as a result of £5.0 billion of additions and £1.6 billion in relation to acquisitions which more than offset the £4.5 billion of depreciation charges.

Investments in associates

Investments in associates increased from £34.7 billion at 31 March 2009 to £36.4 billion at 31 March 2010 mainly as a result of our share of the results of associates, after deductions of interest, tax and non-controlling interest which contributed £4.7 billion to the increase, mainly arising from our investment in Verizon Wireless, and was partially offset by £1.4 billion of dividends received and unfavourable foreign exchange movements of £1.1 billion.

Other non-current assets

Other non-current assets mainly relate to other investments which totalled £7.6 billion at 31 March 2010 compared to £7.1 billion at 31 March 2009. The increase was primarily as a result of an increase in the listed share price of China Mobile.

Current assets

Current assets increased to £14.2 billion at 31 March 2010 from £13.0 billion at 31 March 2009.

Total equity and liabilities

Total equity shareholders’ funds

Total equity shareholders’ funds increased from £86.2 billion at 31 March 2009 to £90.4 billion at 31 March 2010. The increase comprises primarily the profit for the year of £8.6 billion less equity dividends of £4.1 billion.

Borrowings

Long-term borrowings and short-term borrowings decreased to £39.8 billion at 31 March 2010 from £41.4 billion at 31 March 2009 mainly as a result of foreign exchange movements and bond repayments during the year.

Taxation liabilities

Current tax liabilities decreased from £4.6 billion at 31 March 2009 to £2.9 billion at 31 March 2010 mainly as a result of the agreement of the German tax loss claim. The deferred tax liability increased from £6.6 billion at 31 March 2009 to £7.4 billion at 31 March 2010 mainly due to deferred tax arising on the acquisition of Vodacom.

Other current liabilities

The increase in other current liabilities from £13.8 billion at 31 March 2009 to £14.6 billion at 31 March 2010 was primarily due to foreign exchange differences arising on translation of liabilities in foreign subsidiaries and joint ventures. Trade payables at 31 March 2010 were equivalent to 31 days (2009: 38 days) outstanding, calculated by reference to the amount owed to suppliers as a proportion of the amounts invoiced by suppliers during the year.

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 29 to the consolidated financial statements.

	Payments due by period £m
					1-3		3-5
Contractual obligations(1)	Total		<1 year		years		years		>5 years
Borrowings(2)		47,527		12,198		7,858		9,443		18,028
Operating lease commitments(3)		6,243		1,200		1,682		1,126		2,235
Capital commitments(3)(4)		2,019		1,862		126		31		—
Purchase commitments		3,372		2,216		724		189		243
Total contractual cash obligations(1)		59,161		17,476		10,390		10,789		20,506

Notes:
(1)	The above table of contractual obligations excludes 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.
(2)	See note 22 to the consolidated financial statements.
(3)	See note 28 to the consolidated financial statements.
(4)	Primarily related to network infrastructure.

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 2010 financial year, proposed, in respect of each financial year.

	Pence per ordinary share
Year ended 31 March	Interim		Final			Total
2006		2.20		3.87			6.07
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	(1)		8.31

Note:

(1)

The final dividend for the year ended 31 March 2010 was proposed on 18 May 2010 and is payable on 6 August 2010 to holders on record as of 4 June 2010. 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.

40  Vodafone Group Plc Annual Report 2010

Performance  

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 2009 the directors announced an interim dividend of 2.66 pence per share representing a 3.5% increase over last year’s interim dividend. The directors are proposing a final dividend of 5.65 pence per share representing an 8.7% increase over last year’s final dividend. Total dividends for the year increased by 7% to 8.31 pence per share.

The directors intend that dividend per share growth will be at least 7% per annum for the next three financial years ending on 31 March 2013 assuming no material adverse foreign exchange movements. We expect that total dividends per share will therefore be no less than 10.18p for the 2013 financial year. See page 37 for the assumptions underlying this expectation.

Liquidity and capital resources

The major sources of Group liquidity for the 2010 and 2009 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 38 and 39. In particular, we continue to expect significant cash payments and associated interest payments in relation to long standing tax issues.

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 increased by 26.5% to £7,241 million due to increased cash generated by operations, dividends received and lower taxation payments partially offset by higher interest payments. The Group invested £989 million in licences and spectrum including £223 million in respect of Turkey and £549 million in respect of Qatar, the latter of which was funded through the initial public offering in Qatar discussed on page 42.

Cash generated by operations increased by 4.8% to £15,337 million primarily driven by foreign exchange and working capital improvements. Cash capital expenditure decreased by £247 million primarily due to lower expenditure in India partially offset by higher reported spend in South Africa following the change from proportionate to full consolidation of Vodacom during the year. Capital intensity in Europe and Common Functions was 11.3%.

Payments for taxation decreased by £148 million primarily due to the one-time benefit of additional tax deductions in Italy offset by increased tax payments in the US and the impact of the full consolidation of Vodacom.

Dividends received from associates and investments increased by 108.9% to £1,577 million primarily due to the timing of the Verizon Wireless dividend, US$250 million of which had been deferred from 2009 financial year, and the increase in the dividend agreed at the time of the Alltel acquisition.

Net interest payments increased by 20.4% to £1,406 million primarily due to higher average net debt and a proportionate increase in the amount of ZAR and INR denominated debt and an increase in cash payments relating to interest on the settlement of outstanding tax issues. The interest payments resulting from the 13.4% increase in average net debt at month end accounting dates and the change in our currency mix of net debt towards ZAR and INR denominated debt was partially offset by a reduction in underlying interest rates given our preference for floating rate borrowing.

	2010			2009
	£m			£m			%
Cash generated by operations		15,337			14,634			4.8
Cash capital expenditure(1)		(5,986	)		(6,233	)
Disposal of intangible assets and property plant and equipment		48			317
Operating free cash flow		9,399			8,718			7.8
Taxation		(2,273	)		(2,421	)
Dividends from associates and investments(2)		1,577			755
Dividends paid to non-controlling shareholders in subsidiaries		(56	)		(162	)
Net interest paid		(1,406	)		(1,168	)
Free cash flow		7,241			5,722			26.5
Acquisitions and disposals(3)		(2,683	)		(1,450	)
Licence and spectrum payments		(989	)		(735	)
Amounts received from non-controlling shareholders(4)		613			618
Equity dividends paid		(4,139	)		(4,013	)
Purchase of treasury shares		—			(963	)
Foreign exchange and other		864			(8,255	)
Net debt decrease/(increase)		907			(9,076	)
Opening net debt		(34,223	)		(25,147	)
Closing net debt		(33,316	)		(34,223	)		(2.7	)

Notes:
(1)	Cash paid for purchase of intangible assets, other than licence and spectrum payments, and property, plant and equipment.
(2)	Year ended 31 March 2010 includes £389 million (2009:£303 million) from our interest in SFR and £1,034 million (2009: £333 million) from our interest in Verizon Wireless.
(3)	Year ended 31 March 2010 includes net cash and cash equivalents paid of £1,777 million (2009: £1,360 million) and assumed debt of £906 million (2009: £78 million). The year ended 31 March 2009 also includes a £12 million increase in net debt in relation to the change in consolidation status of Safaricom from a joint venture to an associate.
(4)	Year ended 31 March 2010 includes £613 million (2009: £591 million) in relation to Qatar.

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 £1,034 million (2009: £333 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 tax distributions have continued. Current projections forecast that tax distributions will not be sufficient to cover the US tax liabilities arising from our partnership interest in Verizon Wireless until 2015. However the tax distributions are expected to be sufficient to cover the net tax liabilities of the Group’s US holding company.

Following the announcement of Verizon Wireless’ acquisition of Alltel, certain additional tax distributions were agreed. Under the terms of the partnership agreement the Verizon Wireless board has no obligation to effect additional

Vodafone Group Plc Annual Report 2010  41

Financial position and resources continued

distributions above the level of the tax distributions. However the Verizon Wireless board has agreed that it will review distributions from Verizon Wireless on an annual basis. When considering whether distributions will be made each year, the Verizon Wireless board will take into account its debt position, the relationship 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. The 2010 financial year benefited from a US$250 million gross tax distribution deferred from the 2009 financial year to April 2009.

During the year ended 31 March 2010 cash dividends totalling £389 million (2009: £303 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.

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 2010 financial year Vodafone Italy paid dividends net of withholding tax totalling 626 million to Verizon Communications Inc.

The Vodafone Essar shareholders’ agreement provides for the payment of dividends to non-controlling partners under certain circumstances but not before May 2011.

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 a net £1,777⁽¹⁾ million in acquisition activities during the year ended 31 March 2010. An analysis of the significant transactions in the 2010 financial year including changes to our effective shareholding is shown in the table below. Further details of the acquisitions are provided in note 26 to the consolidated financial statements.

	£m
Vodacom (15%)		1,577
Other net acquisitions and disposals, including investments		200
Total		1,777

Note:
(1)	Amounts are shown net of cash and cash equivalents acquired or disposed.

On 20 April 2009 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 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.

On 10 May 2009 Vodafone Qatar completed a public offering of 40.0% of its authorised share capital raising QAR3.4 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.

On 9 June 2009 Vodafone Australia completed its merger with Hutchison 3G Australia to form a 50:50 joint venture, Vodafone Hutchison Australia Pty Limited, which, in due course, will market its products and services solely under the Vodafone brand. To equalise the value difference between the respective businesses Vodafone will receive a deferred payment of AUS$500 million which is expected to be received in the 2011 financial year. The combined business is proportionately consolidated as a joint venture.

In December 2009 we acquired a 49% interest in each of two companies that hold indirect equity interests in Vodafone Essar Limited following the partial exercise of options which are described under “Option agreements and similar arrangements” on page 44. As a result we increased our aggregate direct and indirect equity interest in Vodafone Essar Limited from 51.58% to 57.59%.

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. The Company did not repurchase any of its own shares between 1 April 2009 and 31 March 2010.

Shares purchased are held in treasury in accordance with sections 724 to 732 of the Companies Act 2006. The movement in treasury shares during the 2010 financial year is shown below:

	Number
	Million			£m
1 April 2009		5,322			8,036
Reissue of shares		(149	)		(189	)
Other		(27	)		(37	)
31 March 2010		5,146			7,810

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 on short-term and long-term debt markets and non-recourse borrowing assumed in respect of the emerging market business. It has not been necessary for us to draw down on our committed bank facilities during the year.

Net debt

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

	2010			2009
	£m			£m
Cash and cash equivalents(1)		4,423			4,878
Short-term borrowings:
Bonds		(1,174	)		(5,025	)
Commercial paper(2)		(2,563	)		(2,659	)
Put options over non-controlling interests		(3,274	)		—
Bank loans		(3,460	)		(893	)
Other short-term borrowings(1)		(692	)		(1,047	)
		(11,163	)		(9,624	)
Long-term borrowings:
Put options over non-controlling interests		(131	)		(3,606	)
Bonds, loans and other long-term borrowings		(28,501	)		(28,143	)
		(28,632	)		(31,749	)
Other financial instruments(3)		2,056			2,272
Net debt		(33,316	)		(34,223	)

Notes:
(1)	At 31 March 2010 the amount includes £604 million (2009: £691 million) in relation to collateral support agreements.
(2)	At 31 March 2010 US$245 million was drawn under the US commercial paper programme and amounts of €2,491 million, £161 million and US$33 million were 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 (2010: £2,128 million; 2009: £2,707 million) and trade and other payables (2010: £460 million; 2009: £435 million) and ii) short-term investments in index linked government bonds included as a component of other investments (2010: £388 million; 2009: £nil). 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.

42  Vodafone Group Plc Annual Report 2010

Performance  

At 31 March 2010 we had £4,423 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 2010 were money market funds, commercial paper and bank deposits.

Net debt decreased by £907 million to £33,316 million primarily due to the impact of foreign exchange rate movements which decreased net debt by £1,038 million. The £7,241 million free cash flow generated during the year was primarily used to fund £4,139 million of dividend payments to shareholders, the additional stake in Vodacom purchased during the year as well spectrum purchases in Turkey, Egypt and Italy. Net debt represented 41.6% of our market capitalisation at 31 March 2010 compared with 53.1% at 31 March 2009. Average net debt at month end accounting dates over the 12 month period ended 31 March 2010 was £32,280 million and ranged between £30,363 million and £34,001 million 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.

Credit ratings

Consistent with the development of our strategy we target, on average, a low single A long-term credit rating. As of 17 May 2010 the credit ratings were as follows:

Rating agency	Rating date	Type of debt	Rating	Outlook
Standard & Poor’s	30 May 2006 30 May 2006	Short-term Long-term	A-2 A-	Negative
Moody’s	30 May 2006 16 May 2007	Short-term Long-term	P-2 Baa1	Stable
Fitch Ratings	30 May 2006 30 May 2006	Short-term Long-term	F2 A-	Negative

Our credit ratings enable us to have access to a wide range of debt finance including commercial paper, bonds and committed bank facilities. Credit ratings are not a recommendation to purchase, hold or sell securities in as much as ratings do not comment on market price or suitability for a particular investor and are subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently.

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 2010 amounts external to the Group of €2,491 million (£2,219 million), £161 million and US$33 million (£22 million) were drawn under the euro commercial paper programme and US$245 million (£161 million) was drawn down under the US commercial paper programme, with such funds being provided by counterparties external to the Group. At 31 March 2009 US$1,412 million (£987 million) was drawn under the US commercial paper programme and €1,340 million (£1,239 million), £357 million and US$108 million (£76 million) was drawn under the euro commercial paper programme. The commercial paper facilities were supported by US$9.1 billion (£6.4 billion) of committed bank facilities (see “Committed facilities”), comprised of a US$4.1 billion revolving credit facility that matures on 28 July 2011 and a US$5 billion revolving credit facility that matures on 22 June 2012. At 31 March 2010 and 31 March 2009 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 2010 the total amounts in issue under these programmes split by currency were US$13.2 billion, £2.6 billion, €11.8 billion and £0.2 billion sterling equivalent of other currencies.

In the year ended 31 March 2010 bonds with a nominal value equivalent of £3.9 billion at the relevant 31 March 2010 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
April 2009	November 2012		€250		229
June 2009	December 2017		£600		600
June 2009	June 2014	US	$1,250		780
June 2009	June 2019	US	$1,250		780
November 2009	November 2015	US$500			329
January 2010	January 2022		€1,250		1,113

At 31 March 2010 we had bonds outstanding with a nominal value of £21,963 million (2009: £23,754 million).

Committed facilities

The following table summarises the committed bank facilities available to us at 31 March 2010.

Committed bank facilities	Amounts drawn
29 July 2008
US$4.1 billion revolving credit facility, maturing 28 July 2011	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.
24 June 2005
US$5 billion revolving credit facility, maturing 22 June 2012	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.
21 December 2005
¥258.5 billion term credit facility, maturing 16 March 2011, entered into by Vodafone Finance K.K. and guaranteed by the Company	The facility was drawn down in full on 21 December 2005. The facility is available for general corporate purposes, although amounts drawn must be on-lent to the Company.
16 November 2006
€0.4 billion loan facility, maturing 14 February 2014	The 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	The 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.
14 September 2009
€0.4 billion loan facility, available for 18 months, repayment is the seventh year anniversary of the first advance drawn within the availability period ending March 2011	No drawings have been made against this facility. The facility is available for financing capital expenditure in our German operations.
29 September 2009
US$0.7 billion export credit agency loan facility, maturing 16 September 2018	No drawings have been made against this facility. The facility is available for financing eligible Swedish goods and services.

Vodafone Group Plc Annual Report 2010  43

Financial position and resources continued

Under the terms and conditions of the US$9.1 billion 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.

Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥258.5 billion term credit facility although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. Additionally, the facility agreement requires Vodafone Finance K.K. to maintain a positive tangible net worth at the end of each financial year. As of 31 March 2010 the Company was the sole guarantor.

The terms and conditions of the €0.4 billion loan facility maturing on 14 February 2014 are similar to those of the US$9.1 billion 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 US$9.1 billion 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 up to €0.4 billion of seven year term finance for the Group’s virtual digital subscriber line (‘VDSL’) project in Germany. The facility is available for drawing up until 15 March 2011. The terms and conditions are similar to those of the US$9.1 billion 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 US$9.1 billion 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 commence on 30 June 2010 with a final maturity date of 16 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 2010 Vodafone India had facilities of INR 257 billion (£3.8 billion) of which INR 169 billion (£2.5 billion) is drawn. Vodafone Egypt has a partly drawn EGP 1 billion (£120 million) syndicated bank facility of EGP 4.0 billion (£478 million) that matures in March 2014 and Vodacom had fully drawn facilities of ZAR 10.8 billion (£1 billion), US$103 million (£68 million) and TZS 54 billion (£26 million).

In aggregate we have committed facilities of approximately £15,057 million, of which £8,457 million was undrawn and £6,601 million was drawn at 31 March 2010.

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 2010 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, our Indian operating company, is 57.59% at 31 March 2010. We have call options to acquire shareholdings in three companies which indirectly own a further 9.39% interest in Vodafone Essar Limited. 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 66.98% in Vodafone Essar Limited.

We also granted put options exercisable between 8 May 2010 and 8 May 2011 to members of the Essar group of companies that, if exercised, would allow the Essar group to sell its 33% shareholding in Vodafone Essar Limited for US$5 billion or to sell up to US$5 billion worth of Vodafone Essar Limited shares at an independently appraised fair market value.

Off-balance sheet arrangements

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 28 and 29 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.

44  Vodafone Group Plc Annual Report 2010

Corporate responsibility Performance  

Our approach to Corporate Responsibility (‘CR’) is to engage with stakeholders to understand their expectations on the issues most important to them and respond with appropriate targets, programmes and reports on progress. We understand that responsible behaviour is key to building and maintaining trust in our brand.

More detail on CR performance for the year ended 31 March 2010 will be available in our 2010 sustainability report and at www.vodafone.com/responsibility.

During the year our 2009 CR report won the Corporate Register Reporting Award for the best report. We are included in the FTSE4Good and Dow Jones Sustainability Index and rated first in the Tomorrow’s Value Rating of the sustainability performance of the telecommunications sector.

Strategy

There is increasing interest in how businesses are addressing the challenges of sustainability. Our licences to operate are granted by governments that seek evidence of responsible business practices. Our research shows that consumers are becoming more concerned about sustainability. Ethical investors and non-government organisations remain focused on issues, such as supply chain standards and privacy, and our corporate customers seek information on our performance through questionnaires and meetings.

CR is relevant across all aspects of our activities and therefore we seek integration into all key business processes. The CR strategy focuses on CR issues material to the Group and has the following main strands:

• to capture the potential of mobile communications to bring socio-economic value in both emerging economies and developed markets through broadening access to communications to all sections of society;

• to deliver against stakeholder expectations on the key areas of climate change, a safe and responsible internet experience and sustainable products and services; and

• to ensure our business practices are implemented responsibly, underpinned by our business principles.

Key CR strategic objectives

Core initiative:
Access to communications

Safe and responsible
internet experience Climate change Sustainable
products and
services

Supported by responsible business practices

Underpinned by values, principles and behaviours

CR governance

Our main focus is on implementing our CR programme across local operating companies. For the purposes of this section of the annual report “operating companies” refers to the Group’s operating subsidiaries and the Group’s joint venture in Italy. Vodacom, Ghana and Qatar are currently not consolidated in our CR reporting system but we intend to include them in reporting for the 2011 financial year. We recognise that we also have influence with joint ventures, associates, investments, partner markets and outsourcing partners.

Our approach to CR is underpinned by our business principles which cover, amongst other things, the environment, employees, individual conduct, community and society. During the year the business principles were reviewed and updated. We have also created a code of conduct which provides a practical guide for employees in relation to how to comply with the business principles. The new business principles and the Vodafone code of conduct will be communicated during the 2011 financial year.

The Executive Committee receives a formal update on CR twice a year and the Board continues to receive an annual presentation on CR. A CR management structure is established in each local operating company and CR performance is closely

monitored and reported at most local operating company boards on a regular basis. CR is also integrated into our risk management processes, such as the formal annual confirmation provided by each local operating company detailing the operation of their controls system.

These processes are supported by stakeholder engagement which helps us to ensure we are aware of the issues relevant to the business and to provide a clear understanding of expectations of performance. Stakeholder consultations take place with customers, investors, employees, suppliers, the communities where we operate and where networks are based, governments, regulators and non-governmental organisations. Established in 2007 the Vodafone Corporate Responsibility Expert Advisory Panel comprises opinion leaders who are experts on CR issues important to Vodafone. The Panel met once during the 2010 financial year and discussed the progress made on identifying low carbon product and service opportunities, and customer privacy issues.

Our CR programme and selected performance information, as reported in the Group’s 2010 sustainability report, will be independently assured by KPMG using the International Standard on Assurance Engagements (‘ISAE 3000’). The assurance process assesses our adherence to the AA1000 AccountAbility Principles Standard (‘AA1000APS’) addressing inclusiveness, materiality and responsiveness, and the reliability of selected performance information. KPMG’s assurance statement outlining the specific assurance scope, procedures and assurance conclusions will be published in our 2010 sustainability report.

For the 2010 financial year our CR reporting comprises online information on CR programmes and a performance report. Nine operating companies have produced their own CR reports during the 2010 financial year.

Information regarding our employees including diversity, inclusion, health, safety and wellbeing can be found in “People” on page 22.

Performance in the 2010 financial year

Access to communications

Our access to communications strategy continues to focus on responding to the needs of customers in emerging markets and increasing the accessibility of our products and services across demographics and individual capabilities.

Emerging markets

We have aligned the opportunity from mobile products and services in emerging markets to the United Nations’ Millennium Development Goals – a blueprint agreed to by all the world’s countries and leading development institutions to meet the needs of the world’s poorest. Under this framework we set a target to “be recognised as a communications company making one of the most significant contributions to achieving the Millennium Development Goals (‘MDGs’) by 2015.”

We have continued to support our local markets to develop commercial products and services with high social value through our social investment fund (‘SIF’). In the 2010 financial year we adapted the fund criteria to identify propositions that contribute to one or more of the MDGs and eight projects were conducted under the SIF the majority of which are relevant to MDG goals such as “eradicate extreme poverty and hunger” and “combat HIV/AIDS, malaria and other diseases”.

In February 2010 we announced the launch of Vodafone 150, an extremely affordable handset that retails unsubsidised at below US$15 depending on the local market. These innovations reduce the cost barriers to the adoption of mobile communication making new technologies available in developing countries – a target under the MDGs. In the 2010 financial year we shipped 5.4 million Vodafone branded handsets. Approximately 55% of these cost less than US$50.

Vodafone Group Plc Annual Report 2010  45

Corporate responsibility continued

Further to the rapid take-up of affordable handsets we commissioned research to better understand their socio-economic impact in India which quantified benefits for customers such as reduced transport costs and increased employment opportunities.

Our mobile money transfer product, named “M-PESA” in Kenya and Tanzania and “M-Paisa” in Afghanistan, continued to grow during the 2010 financial year in terms of customers, transactions and the volume of money moved. Across our markets there are 13 million registered customers who moved US$3.6 billion during the 2010 financial year.

Accessibility

We commissioned research to better understand the market sizes for accessible products and services. The research showed that age is closely correlated to capability loss and that we need to consider propositions that cater for multiple minor disabilities rather than only targeting a single capability loss.

Our centre of excellence for accessibility, led by Vodafone Spain, continues to develop the portfolio of accessible products and services. During the year a new wireless loopset was trialled in collaboration with Nokia and Oticon and we launched a new online training course for employees to raise awareness on disabilities and the products and services that we offer our customers. Our markets in Egypt, Germany, Portugal and Italy also launched new products and services for the deaf and hearing impaired.

Safe and responsible internet experience

Our reputation depends on earning and maintaining the trust of our customers. The way we deal with certain key consumer issues directly impacts trust in the business. These issues include responsible delivery of age-sensitive content and services, mobile advertising and protecting customers’ privacy.

Responsible delivery of content and services

We continue to be heavily involved in industry work in this area. Having implemented age-restricted content controls in the markets where such content is provided our work is focused on providing a safe and responsible internet experience when using new media applications. These have particular relevance to the mobile communications sector and have formed a key part of our activities during the 2010 financial year:

• In October 2009 we launched the first comprehensive website to help parents play an active and essential role in their children’s digital world and better understand their use of mobiles, and online social media. The Vodafone Parents’ Guide (www.vodafone.com/parents) offers up-to-date guidance on challenging issues such as children’s excessive use of technology, managing their reputations and online identities in social media, safe access to location-based technology, cyber-bullying and the risks of meeting strangers online.

• Together with other industry partners we have continued to develop the Teachtoday website (www.teachtoday.eu) providing advice for teachers and students to help create a safer online environment for children and young people.

• Vodafone continued to be a board member of the newly formed UK Council for Child Internet Safety (‘UKCCIS’). Board members include senior figures from government, industry, charities, academia and law enforcement. The board sets direction at a strategic level and there are a number of working groups including the industry and expert research panels in which we play an active role.

Consumer privacy and freedom of expression

We know that users increasingly wish to exercise control over how their personal information is made available and recognise the need to ensure that internet commerce over mobile and new business models, such as advertising, gains the trust of both consumers and regulators. We seek to ensure that our products and services are designed to address privacy risks and concerns, particularly those associated with social networking and media, as well as location-enabled applications and services.

To make our commitment to our customers’ privacy clearer to our staff, customers and external stakeholders, we are developing a set of core principles that will become a part of our global privacy policy. These will form the basis of all of our privacy standards and provide guidance on a wide range of privacy issues across our business.

In October 2009 we launched Vodafone 360, a new internet proposition which can be accessed by mobile or PC. Among the many features of Vodafone 360 is a rich visual address book that provides users with many ways to communicate including aggregating their social networks into one view, showing who’s connected to whom

and enabling them to share their locations. Vodafone 360 was developed with users’ privacy and safety uppermost in mind: mechanisms which promote safe and appropriate usage, and protect users’ privacy, are core to the proposition. In particular, users can review their profile and manage what, if any, information they wish to share with their groups of contacts on a single, easy-to-use ‘privacy settings’ page on the web, and from a privacy widget on the mobile device.

We have continued to work on the issues of privacy and freedom of expression in the human rights context throughout the financial year. In particular, we are now finalising a global policy on the way we provide assistance to Government law enforcement authorities to ensure respect for the human rights of our users.

Climate change

Our climate change strategy has three key elements: limiting our own carbon dioxide (‘CO₂’) emissions, developing products and services to reduce the emissions of our customers and working with our suppliers to develop joint strategies for CO₂ emissions reduction.

In 2008 we announced that by 2020 we will reduce our CO₂ emissions by 50% against the 2007 financial year baseline which included all operating companies within the Group throughout the 2007 financial year. We have now restated our target to include all of our operating companies based in countries obligated under the Kyoto protocol including those that have joined the Group since 31 March 2007; this reduced the 2007 baseline by 73,000 tonnes. In addition, Vodafone Australia has been removed from the target as it is no longer a subsidiary. We are now seeking a 50% reduction against a baseline of 1.04 million tonnes.

The primary strategy to achieve the 50% reduction is through direct reduction in CO₂ emissions through the evolution of network technology, investment in energy efficiency and by making greater use of renewably generated electricity. Energy use associated with the operation of the network accounts for around 80% of our CO₂ emissions. In the 2010 financial year the total energy use of our operations, excluding India, increased by 7.7% to 3,278 GWh. This increase reflects the continued growth of networks in existing markets. The total CO₂ emissions for those operating companies covered by the 50% reduction target decreased by 9%, to 0.94 million tonnes of CO₂^.

Climate change strategies and energy intensity targets are being developed for those operating companies which are not covered by the 50% target. In India activities have been focused on improving the quality of data to establish a baseline and support target setting. The instability and limited coverage of the national electricity grid requires diesel generation on the majority of sites. We are trialling the use of onsite micro-renewable generation and the use of batteries as the main power source to reduce diesel consumption in remote sites where there may be no access to the electricity grid. The majority of our network sites in India are managed by our joint venture, Indus Towers. Estimated CO₂ data for India has been reported alongside our consolidated totals for the 2010 financial year and we continue to work with our suppliers to capture more accurate information.

In the 2010 financial year the total CO₂ emissions of our operating companies, excluding India, were 1.2 million tonnes. The estimated CO₂ emissions of our operations in India were approximately 2.3 million tonnes which includes emissions from the network sites managed by Vodafone and the network sites managed by third parties, principally Vodafone’s joint venture, Indus Towers.

In the 2009 financial year we established a target to set joint CO₂ reduction strategies with suppliers accounting for 50% of relevant spend by 2012. The strategies will help Vodafone, our customers or our suppliers to reduce CO₂ emissions.

Sustainable products and services

The information and communications technology (‘ICT’) industry has a major role to play in delivering wider benefits to society beyond its own operations. Our industry is part of the solution to the challenge of climate change (www.vodafone.com/carbonconnections) and can also contribute to more efficient delivery of public services.

In the 2009 financial year we published a report in conjunction with Accenture: “Carbon connections: quantifying mobile’s role in tackling climate change”. The report provided detailed, quantified assessments of 13 wireless opportunities demonstrating that in 2020 these opportunities could save 2.4% of expected EU emissions or €43 billion in energy costs alone. This would require a billion mobile connections, 87% of which are machine-to-machine (‘M2M’), connecting one piece of equipment wirelessly with another. We have established a dedicated M2M service

46  Vodafone Group Plc Annual Report 2010

Performance  

platform which aims to meet the expected rise in demand for M2M services around the world as more companies look to improve efficiency. This unit has set a target of providing ten million carbon reducing M2M connections by 2013. This target has been restated from the 2009 financial year as we were not able to accurately define the global baseline.

We have established a new mobile health solutions business unit this year to accelerate the development of healthcare solutions. Mobile technology offers significant opportunities to improve the efficiency and effectiveness of health services. Much of this can be achieved using existing technologies and we are working with healthcare providers, governments and pharmaceutical companies to fully understand how we can help.

We are also working to reduce the environmental impact of our products and services and since November 2009 the Samsung Blue Earth phone has been introduced in seven of our markets. The phone is designed to be environmentally friendly and has a full touchscreen and other advanced multimedia features.

We continue to address the reuse and recycling of handsets, accessories and network equipment and we have worked with suppliers to ensure substances prohibited by the Restriction of Hazardous Substances Directive are phased out. We comply with the EU’s Waste Electronic and Electrical Equipment Directive through handset recycling programmes in all operating companies where it applies. During the 2010 financial year 1.33 million phones were collected for reuse and recycling through collection programmes in 15 local operating companies. 5,870 tonnes of network equipment waste was generated in all operating companies (not including India) with 98% of this sent for reuse or recycling.

Responsible business practices

Mobile phones, masts and health

We recognise that there is public concern about the safety of radio frequency (‘RF’) fields from mobile phones and base stations. For authoritative advice on potential health effects from mobile phones and masts we look to independent reviews of the entire body of evidence by panels of experts in the field, commissioned by recognised national or international health agencies. We provide access to such expert reviews of the science on our website (available at www.vodafone.com/responsibility/mpmh).

We understand that even with the current large body of scientific evidence, the World Health Organization (‘WHO’) considers there are a few areas where uncertainty remains and additional research is needed. In 2006 the WHO identified the following three main areas for additional research: long-term (more than 10 years) exposure to low-level RF fields, potential health effects of mobile device use in children and the way the levels of RF fields absorbed are calculated. We continue to contribute to the funding of independent scientific research in these areas via national and international research programmes. In 2010 the WHO plans to review again what further research may still be needed.

We require manufacturers of mobile devices to test for compliance with limits set by the International Commissions on Non-Ionizing Radiation Protection (‘ICNIRP’) limits for specific absorption rate (‘SAR’). Depending on the mobile device we require testing to be performed for use both at the ear and against, or near, the body. We have been actively engaged with the International Electrotechnical Commission (‘IEC’) standards organisation to develop a new global protocol for testing phones for use against, or near, the body. This new IEC standard, to be published in 2010, better reflects the ways customers now use mobile devices.

Responsible network deployment

We recognise that network deployment can cause concern to communities, usually regarding the visual impact of base stations or health issues concerning RF fields.

For many years we have implemented a responsible network deployment policy covering these issues. In recognition that we are increasingly working with outsourced partners in delivering the most efficient network we have commissioned an external party to analyse the systems and controls we have in place to ensure our contractors meet this policy.

We continue to engage closely with local communities as part of the planning process for new masts. Our long-term programme of engagement with a range of stakeholders demonstrates that we place importance on acting responsibly. In surveys of external stakeholder opinion conducted annually over the last three years, an average of 83% of respondents regarded Vodafone as acting responsibly regarding mobile phones, masts and health.

We aim to comply with local planning regulations but are sometimes found to be in breach. This is normally related to conflicting local, regional or national planning regulations. During the 2010 financial year we were found to be in breach of planning regulations relating to 370 of our total 104,344 mast sitings. Fines levied by regulatory bodies or courts in relation to offences under environmental law or regulations were approximately £89,000.

Supply chain

We continue to work to improve labour and environmental standards across our supply chain. This year we reviewed and updated our Code of Ethical Purchasing and Supplier Evaluation Scorecard. Both now include more stringent labour and environmental requirements for suppliers. During the 2010 financial year we:

• assessed 64 suppliers against our evaluation scorecard on social and environmental aspects. The scorecard allows us to identify strengths and weaknesses in our suppliers’ sustainability management and performance programmes and highlight areas where improvement is needed. Over the last four years we have evaluated over 638 suppliers; and

• carried out 24 on-site evaluations of high risk suppliers. During these visits we identified 139 areas for improvement, mainly concerning the inadequacy of practices on health and safety and working hours.

Social investment

The Vodafone Foundation and its network of 27 local operating company and associate foundations have continued to implement a global social investment programme. During the 2010 financial year the Company made a charitable grant of £18.0 million to the Vodafone Foundation. In addition, operating companies made charitable grants totalling a further £17 million to their foundations and a further £4 million directly to social causes. Total donations for the year ended 31 March 2010 were £41.7 million and included donations of £2.7 million towards foundation operating costs.

The Vodafone Foundation made grants to charitable partners engaged in a range of global projects. Its areas of focus are: utilising mobile technology for the benefit of all, sport and music as a means of benefiting some of the most disadvantaged young people and their communities, and disaster relief and preparedness.

The majority of the Vodafone Foundation funds are distributed in grants through operating company foundations to a variety of local charitable organisations meeting the needs of the communities in which they operate.

Key performance indicators⁽¹⁾

	2010(2)		2009(2)			2008(2)
Vodafone Group
Energy use (GWh) (direct and indirect)		3,278		3,044			2,920
Carbon dioxide emissions (millions of tonnes)		1.21		1.22			1.30
Percentage of energy sourced from renewables		23		19			18
Number of phones collected for reuse and recycling (millions)		1.33		1.53	(3)		1.14	(3)
Network equipment waste generated (tonnes)		5,870		4,944	(3)		4,199
Percentage of network equipment waste sent for reuse or recycling		98		97			95

Notes:
(1)	These performance indicators were calculated using actual or estimated data collected by our mobile operating companies. The data is sourced from invoices, purchasing requisitions, direct data measurement and estimations where required. The carbon dioxide emissions figures are calculated using the kWh/CO2 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 data excludes India, Ghana, Qatar and Vodacom. Our joint venture in Italy is included in all years. Amounts related to the 2008 financial year exclude Tele2 in Italy and Spain.
(2)	Australia is excluded as it is no longer a subsidiary; the comparative data for 2009 and 2009 has also been restated.
(3)	Amounts related to the 2009 and 2008 financial years have been amended. Refer to the online sustainability report for further information.

Vodafone Group Plc Annual Report 2010  47

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 18 May 2010 are as follows:

Board of directors

Chairman

1. Sir John Bond^†, aged 68, 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 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, USA. He is also an advisor to Northern Trust in Chicago.

Executive directors

2. Vittorio Colao, Chief Executive, aged 48, was appointed Chief Executive of Vodafone Group Plc after the AGM on 29 July 2008. He joined the Board in October 2006 as Chief Executive, Europe and Deputy Chief Executive. He spent the early part of his career as a partner in the Milan office of McKinsey & Co working on media, telecommunications and industrial goods and was responsible for recruitment. In 1996 he joined Omnitel Pronto Italia, which subsequently became Vodafone Italy, and he 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. He sits on the International Advisory Board of Bocconi University, Italy.

3. Andy Halford, Chief Financial Officer, aged 51, 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. He holds a bachelors 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 48, Chief Executive Officer, Europe Region, was appointed to the Board with effect from 1 June 2009. He 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 Chairman of the Supervisory Board of Assystem SA in France.

5. Stephen Pusey, aged 48, Group Chief Technology Officer, joined Vodafone in September 2006 and was appointed to the Board with effect from 1 June 2009. He is responsible for all aspects of Vodafone’s networks, IT capability, research and development and supply chain management. Prior to joining Vodafone he held the positions of Executive Vice President and President, Nortel EMEA, having joined Nortel in 1982 gaining 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 66, 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 and senior independent director of BHP Billiton Plc. He is Chairman of The International Chamber of Commerce (UK) and previous non-executive directorships include AstraZeneca plc and Boots plc.

Non-executive directors

7. Alan Jebson^§, aged 60, joined the Board in December 2006. He retired in May 2006 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

48  Vodafone Group Plc Annual Report 2010

Governance

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 60, was appointed to the Board on 1 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 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 Ghana, South Africa, Nigeria and Namibia. 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 62, 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 is a non-executive director of Royal Dutch Shell plc, Alliance Boots GmbH, BBA Aviation plc and the Ashmore Group plc. He is an advisor to the board of Denton Wilde Sapte, 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 Vodafone Foundation.

10. Anne Lauvergeon^§, aged 50, 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. Simon Murray CBE^‡, aged 70, joined the Board in July 2007. His career has been largely based in Asia where he has held positions with Jardine Matheson Limited, Deutsche Bank and Hutchison Whampoa Limited where, as Group Managing Director,

he oversaw the development and launch of mobile telecommunications networks in many parts of the world. He remains on the Boards of Cheung Kong Holdings Limited, Compagnie Financière Richemont SA and Orient Overseas (International) Limited. He also sits on the Advisory Board of Imperial College in London. He will retire from the Board on conclusion of the AGM on 27 July 2010.

12. Luc Vandevelde^†‡, aged 59, 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.

13. Anthony Watson CBE^‡, aged 65, was appointed to the Board in May 2006. He is currently Chairman of Marks & Spencer Pension Trust Ltd and the Asian Infrastructure Fund. He is the senior independent director of Hammerson plc and Witan Investment Trust, 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.

14. Philip Yea^‡, aged 55, became a member of the Board in September 2005. He is currently the Chairman of Majid Al Futtaim Properties LLC, a UAE based property group. He is also Chairman of the trustees of the British Heart Foundation. He is the Senior Business Advisor to HRH Duke of York in his role as the UK’s Special Representative for International Trade & Investment, and is a member of a number of Advisory Boards, including PricewaterhouseCoopers in the UK and Bridges Ventures. From July 2004 until January 2009 he was Chief Executive Officer of 3i Group plc. Prior to joining 3i he was Managing Director of Investcorp and from 1997 to 1999 Group Finance Director of Diageo plc following the merger of Guinness plc, where he was Finance Director, and Grand Metropolitan P.L.C. He has previously held non-executive roles at HBOS plc and Manchester United plc.

§	Audit Committee
†	Nominations and Governance Committee
‡	Remuneration Committee

Vodafone Group Plc Annual Report 2010  49

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 pages 48 and 49 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.

Wendy Becker, aged 44, Chief Marketing Officer, was appointed to this position and joined the Executive Committee in September 2009. She was previously Managing Director of Talk Talk, a subsidiary of the Carphone Warehouse. Prior to this role she was a partner at McKinsey & Company with responsibility for the UK consumer practice, which specialises in strategic marketing and brand roles at Procter & Gamble. She is a non-executive director of Whitbread plc.

Warren Finegold, aged 53, 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, business development and partner markets. 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 49, 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.

Terry Kramer, aged 50, Regional President – Vodafone Americas, joined Vodafone in January 2005 as Chief of Staff. Before moving to his present role he also served as Group Human Resources Director and Group Strategy and Business Improvement Director. He is a Board member of Verizon Wireless and the mobile industry association, GSMA, Chairman of Vodafone Ventures Limited and Chairman of the Vodafone Americas Foundation. Prior to joining Vodafone he was Chief Executive Officer of Q Comm International Inc., a publicly traded provider of transaction processing services for the telecommunications industry. He also worked for 12 years at PacTel/AirTouch Communications in a variety of roles including President AirTouch Paging, Vice President Human Resources-AirTouch Communications, Vice President Business Development-AirTouch Europe and Vice President & General Manager-AirTouch Cellular Southwest Market. Prior to that he was an Associate with Booz Allen & Hamilton Inc, a management consulting firm.

Morten Lundal, aged 45, Chief Executive Officer, Africa and Central Europe Region, was appointed to his current position and joined the Executive Committee in November 2008. 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 50, 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 45, Chief Executive Officer, Asia Pacific and Middle East Region, was appointed to this position and joined the Executive Committee in November 2008. 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 46, Group Human Resources Director, joined Vodafone and the Executive Committee in January 2009. Prior to joining Vodafone he was Executive Vice President Human Resources for Royal Dutch Shell plc’s global downstream business (refining, retail, commercial, lubricants, chemicals and Canadian Oil Sands) responsible for approximately 81,000 employees in 120 countries. Prior to working for Shell he spent nine years working for 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 Network Systems 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 2010 financial year: Stephen Scott was Group General Counsel and Company Secretary and a member of the Executive Committee until his retirement on 30 March 2010. Frank Rovekamp was Group Chief Marketing Officer and a member of the Executive Committee until 18 September 2009.

50  Vodafone Group Plc Annual Report 2010

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.

In March 2010 GovernanceMetrics International, a global corporate governance ratings agency, ranked us amongst the top UK companies with an overall global corporate governance rating of ten, the highest score assigned and achieved by only 1% of the 4,216 companies rated.

In our profile report by Institutional Shareholder Services Inc. (‘ISS’) dated 1 February 2010, our governance practices outperformed 98.6% of the companies in the ISS developed universe (excluding US), 98.2% of the companies in the telecommunications sector group and 98.1% of the companies in the UK.

In October 2009 we received the Golden Peacock Global Award for Excellence in Corporate Governance.

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 2010 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). The following section, together with the “Directors’ remuneration” section on pages 57 to 67, provides detail of how we apply the principles and comply with the provisions of the Combined Code. We intend to comply with the new UK Corporate Governance Code which was published by the FRC on 28 May 2010.

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 125 to 131.

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 periodically. It was last formally reviewed by the Nominations and Governance Committee in March 2009, 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 53 and 54.

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 papers, which are circulated one week before the meeting.

The following table shows the number of years directors have been on the Board at 31 March 2010 and their attendance at scheduled Board meetings they were eligible to attend during the 2010 financial year:

	Years		Meetings
	on Board		attended
Sir John Bond		5		8/8
John Buchanan		7		8/8
Vittorio Colao		3		8/8
Michel Combes (since 1 June 2009)		<1		7/7
Andy Halford		4		8/8
Alan Jebson		3		8/8
Samuel Jonah		1		8/8
Nick Land		3		7/8
Anne Lauvergeon		4		8/8
Simon Murray		3		7/8
Stephen Pusey (since 1 June 2009)		<1		7/7
Luc Vandevelde		6		7/8
Anthony Watson		4		8/8
Philip Yea		4		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 papers and 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 14 directors, 12 of whom served throughout the 2010 financial year. At 31 March 2010, in addition to the Chairman, Sir John Bond, there were four executive directors and nine non-executive directors. Michel Combes and Stephen Pusey were appointed as executive directors with effect from 1 June 2009.

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.

Vodafone Group Plc Annual Report 2010  51

Corporate governance continued

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, which is based on merit and against objective criteria, for the appointment of new directors to the Board. This is described in the section on the Nominations and Governance Committee set out on page 53.

Samuel Jonah was identified as a potential candidate by internal sources and subsequently recommended to the Board by the Nominations and Governance Committee on the basis of his wealth of business experience in Africa, particularly South Africa and Ghana where we have made important investments recently. Michel Combes and Stephen Pusey were proposed for appointment following assessment of their performance and their potential contribution by the Nominations and Governance Committee and the whole Board subsequently discussed the proposal before their appointments were confirmed.

Information and professional development

Each member of the Board has immediate access to a dedicated online team room and can access monthly information including actual financial results, reports from the executive directors in respect of their areas of responsibility and the Chief Executive’s report which deals, amongst other things, with investor relations, giving Board members an opportunity to develop an understanding of the views of major investors. These matters are discussed at each Board meeting. From time to time the Board receives detailed presentations from non-Board members on matters of significance or on new opportunities. 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 fit considering the director’s area of responsibility. Following discussion with the Chairman and senior independent director, the Company Secretary provides a programme of ongoing training for the directors which covers a number of sector specific and business issues as well as legal, accounting and regulatory changes and developments relevant to individual director’s areas 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 individual contributions, the effectiveness of the Board and its committees and the Group’s performance. This year the performance evaluation was conducted by an independent external advisor, MWM Consulting (‘MWM’). This process involved:

• MWM devising an appropriate questionnaire, with assistance from the Chairman, which was sent to all Board members;

• MWM undertaking individual meetings with each Board member and the Company Secretary on Board performance; and

• in conjunction with the Chairman, MWM producing a report on Board performance using the completed questionnaires and individual meetings which was sent to and considered by the Nominations and Governance Committee before being discussed with Board members at the following Board meeting.

The evaluation was 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. The evaluation also included a review of the administration of the Board covering its operation, its agenda, the reports and information produced for its consideration, committee processes and the Board’s relationship with its committees. MWM reported that the Board is strong and effective. The Board has chosen to broaden and deepen its focus on strategic topics and to continue to strengthen its capabilities in technology and is gaining insights into changing consumer behaviour.

The Chairman also held individual meetings with each non-executive director and the Chief Executive to discuss their individual performance. The Chief Executive undertook the performance reviews for the executive directors and the senior independent director conducted the review of the performance of the Chairman by having individual meetings with all the other directors and the Company Secretary. Following this process the senior independent director produced a written report which was discussed with the Chairman. The report’s findings reflected MWM’s view that the Chairman provides outstanding leadership in focusing the Board’s efforts and ensuring open and constructive debate.

The evaluation of each of the Board committees was undertaken using observations from the MWM report. These were then discussed by each of the committees. The evaluations found that the committees operate efficiently and effectively.

The evaluations undertaken in the 2010 financial year found the performance of each director to be effective and 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 re-election at the AGM in July 2010 continue to be effective and that the Company should support their re-election. The Board will continue to review its procedures, its effectiveness and development in the financial year ahead.

52  Vodafone Group Plc Annual Report 2010

Governance

Re-election of directors

Although not required by the articles, 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 annual re-election at each AGM. Accordingly, at the AGM to be held on 27 July 2010 all the directors will offer themselves for re-election with the exception of Simon Murray who is retiring from the Board.

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 is satisfied that the terms of reference for each of these committees satisfy the requirements of the Combined Code and are reviewed internally on an ongoing basis by the Board. 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 scheduled meetings which they were eligible to attend, are set out below:

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

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, 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 49.

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 for Section 404 of the Sarbanes-Oxley Act and receiving progress updates at each of its meetings.

At least twice a year the Audit Committee meets separately with the external auditors and the Group Audit Director without management being present. Further details on the work of the Audit Committee and its oversight of the relationships with the external auditors can be found under “Auditors” and the “Report from the Audit Committee” which are set out on pages 55 and 56.

Nominations and Governance Committee

The members of the Nominations and Governance 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
Sir John Bond, Chairman		3/3
John Buchanan		3/3
Luc Vandevelde		3/3

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.

The Nominations and Governance Committee meets periodically when required. 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
Simon Murray		3/5
Anthony Watson		5/5
Philip Yea		5/5

Samuel Jonah was appointed to the Remuneration Committee on 11 May 2010.

In addition to scheduled meetings there are 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.

Vodafone Group Plc Annual Report 2010  53

Corporate governance continued

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 57 to 67.

Executive Committee

The executive directors, together with certain other Group functional heads and regional chief executives, meet 12 times a year as the Executive Committee under the chairmanship of the Chief Executive. The Executive Committee is responsible for the day-to-day management of our businesses, our overall financial performance in fulfilment of strategy, plans and budgets and our capital structure and funding. It also reviews major acquisitions and disposals. The members of the Executive Committee and their biographical details are set out on pages 48 to 50.

Strategy Board

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

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 with institutional investors and analysts by the Chief Executive and the 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/shareholder 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 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 at www.vodafone. com/investor. For the 2010 financial 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. Shareholders continue to have the option to appoint proxies and 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 and the Board as well as the Chairmen of the Audit, Remuneration and Nominations and Governance Committees. 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 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 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 128 and 129 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 of in 2012 or 29 July 2012, whichever is earlier, up to a maximum aggregate amount of £100,000 per year. The Company and its subsidiaries have not 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 and risk management

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 “Corporate responsibility” on pages 45 to 47.

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 69 for management’s report on internal control over financial reporting.

54  Vodafone Group Plc Annual Report 2010

Governance

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 quality and timeliness of disclosures undertaken by the Chief Executive and the Chief Financial Officer which includes formal annual meetings with the operating company or regional chief executives and chief financial officers and the Disclosure Committee;

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

• reports from the external auditors on certain internal controls and relevant financial reporting matters presented to the Audit Committee and management.

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.

A Risk Council meets twice a year to evaluate the risks that the business is facing and reports back to the Executive Committee and the Audit Committee which in turn report to the Board. The Risk Council is chaired by the Group Chief Financial Officer, facilitated by the Group Audit Director and attended by representatives from the three geographic regions, finance, mergers and acquisitions, strategy, technology, legal, external affairs and human resources.

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 2009 to 18 May 2010, 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.

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 Securities and Exchange Commission 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 69.

Auditors

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 auditors will be put to the shareholders at the 2010 AGM. We do not indemnify our external auditors.

In its assessment of the independence of the auditors 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, policies provide for the pre-approval by the Audit Committee of permitted non-audit services by Deloitte LLP. 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 services which have not been pre-approved by the Audit Committee.

In addition to their statutory duties, Deloitte LLP are also employed where, as a result of their position as auditors, they either must, or are best placed to, perform the work 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 (2009: £8 million, 2008: £7 million) for audit and audit-related services and a further £1 million (2009: £1 million, 2008: £2 million) for non-audit assignments. An analysis of these fees can be found in note 4 to the consolidated financial statements.

US listing requirements

On 29 October 2009 the Company transferred its american depositary shares from the New York stock exchange to the NASDAQ Stock Market LLC (‘NASDAQ’). We are 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 18 May 2010 the Board comprised the Chairman, four executive directors and nine 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.

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

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

• The 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 of the Exchange Act.

Vodafone Group Plc Annual Report 2010  55

Corporate governance continued

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 Ethics in compliance with Section 406 of the US Sarbanes-Oxley Act of 2002 which is applicable to the senior financial and principal executive officers. We have made our Code of Ethics available to the public on our website at (www.vodafone.com/governance).

• We have also adopted a Group governance manual which provides the first level of the framework for governance within which our businesses operate. The manual is a reference for chief executives and their teams and applies to all directors and employees.

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.

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 Financial Services Authority 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 auditors.

The composition of the Audit Committee is shown in the table on page 53 and its terms of reference can be found on the Vodafone website (www.vodafone.com/ governance). 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 auditors also attend the Audit Committee meetings. Also invited to attend certain meetings are relevant people from the business to present sessions on issues designed to 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 2010 the principal activities of the Audit Committee were as follows:

Financial reporting

The Audit Committee reviewed and discussed with management and the external auditors the half-year and annual financial statements focusing on, without limitation, 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. 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 auditors, 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 and achievement against 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 throughout the year. An external evaluation of the internal audit department was undertaken during the year. It was confirmed to the Audit Committee that internal audit operates well within the standards expected of a company in the top ten of the FTSE.

External auditors

The Audit Committee reviewed and monitored the independence of the external auditors 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 auditors. The Audit Committee approved the scope and fees for audit and permitted non-audit services provided by Deloitte LLP.

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

Audit Committee effectiveness

The Audit Committee conducts a formal review of its effectiveness annually, and concluded its performance was effective. Further details on the evaluation process can be found under “Performance evaluation” on page 52.

/s/ Nick Land

Nick Land
On behalf of the Audit Committee

56  Vodafone Group Plc Annual Report 2010

Directors’ remuneration Governance

Dear Shareholder

This year the work of the Remuneration Committee took place against a background of very challenging business conditions in the global economy. In this environment the Committee 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.

At the start of the year a key focus for the Company was the generation of cash flow. This was reflected in the weighting applied to this measure in the short-term plan. As the focus now moves more to growing revenue and market share the weightings have been modified for the coming year to appropriately reflect this change.

The structure of the long-term plan has also been reviewed and the Committee believes that the current design remains appropriate with its strong continued focus on both cash flow and total shareholder return.

As well as considering the current package, the Remuneration Committee continues to monitor how well incentive awards made in previous years align with the Company’s performance. In this regard, the Committee is confident that there is a strong link between performance and reward.

The Remuneration Committee has appreciated the dialogue and feedback from investors and has taken account of their views when reviewing the incentive designs. This has been seen in two ways: i) in the alignment of the senior leadership population with the Board and the Executive Committee through the cascading down of the free cash flow performance condition in the long-term plan; and ii) in the greater differentiation that has been built into both short and long-term plans with individual performance being more rigorously measured and directly affecting award sizes. The 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 27 July 2010.

/s/ Luc Vandevelde

Luc Vandevelde
Chairman of the Remuneration Committee
18 May 2010

Contents

The detail of this remuneration report is set out over the following pages, as follows:

Page 57 –	Remuneration Committee
Page 58 –	Overview of remuneration philosophy
Page 59 –	The remuneration package
Page 61 –	Awards made to executive directors during the 2010 financial year
Page 61 –	Amounts executive directors will actually receive in the 2011 financial year
Page 62 –	Other considerations
Page 63 –	Audited information for executive directors
Page 66 –	Non-executive directors remuneration
Page 66 –	Audited information for non-executive directors’ serving during the year ended 31 March 2010
Page 67 –	Beneficial interests

Remuneration Committee

The Remuneration Committee is comprised to exercise independent judgement and consists only of independent non-executive directors. For further details, the terms of reference can be found on page 53.

Remuneration Committee

Chairman	Luc Vandevelde
Committee members	Simon Murray
	Anthony Watson
	Philip Yea
Management attendees
Chief Executive	Vittorio Colao
Group HR Director	Ronald Schellekens
Group Reward Director	Tristram Roberts (until 31 October 2009)
Head of Group Reward	Adam Parsons (1 November 2009 to 31 March 2010)

External advisors

During the year Towers Watson supplied market data and advice on market practice and governance. PricewaterhouseCoopers LLP provided performance analysis and advice on plan design and performance measures. Both advisors were appointed by the Remuneration Committee in 2007.

The advisors also provided advice to the Company on general human resource and compensation related matters. In addition, PricewaterhouseCoopers LLP also provided a broad range of tax, share scheme and advisory services to the Group during the 2010 financial year.

As noted in his biographical details on page 49 of this annual report, during the year Philip Yea joined an advisory board for PricewaterhouseCoopers LLP. In light of their role as advisor to the Remuneration Committee on remuneration matters, this appointment was considered by the Committee and it was determined that there is no conflict or potential conflict arising.

Meetings

The Remuneration Committee had five meetings during the year.

Vodafone Group Plc Annual Report 2010  57

Directors’ remuneration continued

Overview of remuneration philosophy

Remuneration policy

The Remuneration Committee commissioned a full review of the reward arrangements for the Company’s executive directors in the 2008 financial year and the remuneration policy was last updated at this point. The policy is felt to be appropriate for the coming financial year.

Vodafone wishes to provide a level of remuneration which attracts, retains and motivates executive directors of the highest calibre. To maximise the effectiveness of the remuneration policy careful consideration will be given to aligning the remuneration package with shareholder interests and best practice.

The aim is to target an appropriate level of remuneration for managing the business in line with the strategy. There will be the opportunity for executive directors to achieve significant upside for truly exceptional performance.

In setting total remuneration the Remuneration Committee will consider a relevant group of comparators which will be selected on the basis of the role being considered. Typically no more than three reference points will be used. These will be as follows: top European companies, top UK companies and, particularly for scarce skills, the relevant market in question.

These comparators reflect the fact that currently the majority of the business is in Europe, the Company’s primary listing is in the UK and that the Remuneration Committee is aware that, in some markets, the competition is tough for the very best talent.

A high proportion of total remuneration 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.

Finally, to fully embed the link to shareholder alignment, all executive directors are expected to comply with the rigorous and stretching share ownership requirements set by the Remuneration Committee.

Summary of key reward philosophies

Link to business strategy

• Performance conditions have been determined to align with business strategy and to maximise shareholder value.

• The annual bonus continues to support the short-term operational performance of the business by measuring against the business fundamentals of revenue, profit, cash flow and competitive performance.

• The long-term incentive measures performance against:

– free cash flow, which is believed to be the single most important operational measure; and

– total shareholder return (‘TSR’) relative to our key competitors.

Shareholder alignment

• The executives are required to meet stretching share ownership requirements which are supported by the opportunity to invest into the long-term incentive plan.

• The performance conditions on the long-term incentive plan are there to underpin shareholder value creation.

Summary of key reward philosophies (continued)

Risk and reward

• 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 towards long-term incentives;

• 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

• the enhanced weighting on non-financial measures in the short-term plan.

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

Changes to plans for the 2011 financial year

The table below sets out any changes to the individual elements of the reward package for the 2011 financial year:

Reward elements	2011 financial year
Base salary	No change to the benchmarking policy.
Annual bonus	There has been a re-balancing of the weighting for the performance measures to focus on service revenue. A competitive performance assessment has been introduced which incorporates net promotor score and in some markets customer delight index.
Long-term incentive plan	No change to the plan design.
Investment opportunity	No changes to the level of investment an individual may make.

Setting remuneration levels

The remuneration package for executive directors is benchmarked by reference to total data for the base salary, annual bonus and long-term incentive levels combined. The principal comparator group (used for benchmarking only) is made up of 28 top European companies excluding any in the financial services sector.

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 a market competitive level of remuneration.

Comparison of the ratio of fixed pay to variable pay

The base salary and pension contributions to executives are considered to be fixed levels of remuneration. The annual bonus and the long-term incentive awards are variable, i.e. the actual value the executive receives will depend on the performance of the Company.

As can be seen below the variable elements of the executive directors remuneration package are in excess of 77% assuming target performance, maximum co-investment and no movement in current share price.

Analysis of executive directors pay as a percentage of total package

58  Vodafone Group Plc Annual Report 2010

Governance

The remuneration package

The table below summarises the plans used to reward the executive directors in the 2010 financial year.

	Summary	Grant policy
Base salary
	•     Set by the Remuneration Committee as part of the overall benchmarking process (see previous page).	•    Base salaries set annually on 1 July.
	•     Benchmark assumed to be the market level for the role.
Annual bonus
Group Short-Term Incentive Plan (‘GSTIP’)(1)	Remuneration Committee reviews performance against targets over the financial year. Actual results measured against the budget set at the start of the year. Summary of the plan in the 2010 financial year •     2010 performance measures: –     Three key financial measures: operating profit (25%), service revenue (25%) and free cash flow (35%); and –     Customer delight (15%) – customer satisfaction is a key component in the Group’s success. Changes for the 2011 financial year •     Performance measures for the 2011 financial year: –     Rebalance of weightings to focus on service revenue to stimulate top line growth; –     Introduction of a competitive performance assessment to include customer satisfaction; and –     Split of measures for the 2011 financial year: operating profit (20%), service revenue (30%), free cash flow (20%) and competitive performance assessment (30%).	•     Bonus levels reviewed annually. Mix of performance measures and the performance targets also reviewed. •     Annual bonus paid in cash in June each year for performance over the previous financial year. •     Target bonus is 100% of base salary earned over the financial year. •     Maximum bonus is 200% of base salary earned and is only paid out for exceptional performance.
Long-term incentives (details on page 60)
Global long-term incentive plan (‘GLTI’) base awards	•     Long-term incentive all delivered in performance shares. •     Base award has vesting period of three years, subject to a matrix of two performance measures over this period: –     Firstly, an operational performance measure (free cash flow); and –     Secondly, an equity performance multiplier (relative TSR). •     Performance details set out in more detail on page 60.	•     Base award set annually and made in June. •     The Chief Executive’s base award will have a target face value of 137.5% of base salary (maximum 550%) in June 2010. •     The base award for other executive directors will have a target face value of 110% of base salary (maximum 440%) in June 2010.
Co-investment matching awards	•     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. •     Matching awards made under the GLTI plan have the same performance measures as the base award. •     Matching award used to encourage increased share ownership and supports the share ownership requirements set out below.	•     Matching award made annually in June in line with the investment made. •     Executive directors can co-invest up to two times net base salary. •     Matching award will have a face value equal to 50% of the equivalent multiple of gross basic salary invested.
Share ownership requirements	•     Option to co-invest into the GLTI plan designed to encourage executives to meet their share ownership requirements.	•     The Chief Executive is required to hold four times base salary.
	•     Ownership against the requirements must be met after five years. •     Progress towards this requirement reviewed by the Remuneration Committee before granting long-term awards.	•     Other executive directors are required to hold three times base salary.
Other remuneration Defined benefit pension	•     The Chief Financial Officer is a member of the UK defined benefit scheme for pensionable salary up to the scheme cap of £110,000. Details of this are set out in the pensions table on page 63. He receives the cash allowance set out below on pensionable salary over the scheme cap.	•     The Chief Financial Officer is the only executive director to receive this benefit. •     The UK defined benefit scheme closed to future accrual by existing members on 31 March 2010.
Defined contribution pension/cash allowance	•     The pension contribution or cash allowance is available for the executives to make provisions for their retirement.	•     30% of basic salary taken either as a cash payment or a pension contribution.
Benefits
	•     Company car or cash allowance worth £19,200 per annum.	•     Benefits reviewed from time to time.
	•     Private medical insurance.
	•     Chauffeur services, where appropriate, to assist with their role.

Note:

(1) GSTIP targets are not disclosed as they are commercially sensitive.

Vodafone Group Plc Annual Report 2010  59

Directors’ remuneration continued

Details of the GLTI performance shares

The number of shares vesting depends on the performance of two measures: free cash flow and relative TSR. This section sets out how the performance of each of the two measures is calculated.

Underlying operational performance – adjusted 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;

• Foreign exchange movements over the performance period; and

• Material one-off tax settlements.

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

	2011					2010					2009
			Vesting					Vesting					Vesting
Performance	£bn		percentage			£bn		percentage			£bn		percentage
Threshold		17.50		50	%		15.50		50	%		15.50		50	%
Target		20.50		100	%		18.00		100	%		17.50		100	%
Superior		21.75		150	%		19.25		150	%		18.50		150	%
Maximum		23.00		200	%		20.50		200	%		19.50		200	%

The target free cash flow level is set by reference to the Company’s three year plan and market expectations. The Remuneration Committee consider the 2011, 2010 and 2009 targets to be stretching ones.

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 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 statistical 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.

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

60  Vodafone Group Plc Annual Report 2010

Governance

Awards made to executive directors during the 2010 financial year

Reward elements	Vittorio Colao	Andy Halford	Michel Combes	Stephen Pusey
Base salary	Vittorio’s base salary was not increased from £975,000 in July 2009.	Andy’s base salary was not increased from £674,100 in July 2009.	Michel’s base salary increased from £720,000 to £740,000 on 1 June 2009 on promotion to	Stephen’s base salary increased from £445,200 to £500,000 on 1 June 2009 on promotion to
			the Board.	the Board.
Annual bonus	The target bonus was £975,000 and the maximum bonus was £1,950,000.	The target bonus was £674,100 and the maximum bonus was £1,348,200.	The target bonus was £736,667 and the maximum bonus was £1,473,334.	The target bonus was £490,867 and the maximum bonus was £981,734.
Long-term incentive plan	In June 2009 the base award for the Chief Executive had a face value of 137.5% of base salary at target.	In July 2009 the base award for the Chief Financial Officer had a face value of 110% of base salary at target.	In June 2009 the base award for the Chief Executive, Europe had a face value of 110% of base salary at target.	In June 2009 the base award for the Chief Technology Officer had a face value of 110% of base salary at target.
Investment opportunity	Vittorio invested 55% of the maximum into the GLTI plan (529,098 shares) and therefore received a matching award with a face value of 55% base salary at target.	Andy invested 73% of the maximum into the GLTI plan (486,146 shares) and therefore received a matching award with a face value of 73% base salary at target.	Michel invested 21% of the maximum into the GLTI plan (156,014) shares and therefore received a matching award with a face value of 21% base salary at target.	Stephen invested 30% of the maximum into the GLTI plan (147,896 shares) and therefore received a matching award with a face value of 30% base salary at target.

Amounts executive directors will actually receive in the 2011 financial year

As previously explained a very large percentage of the executive directors’ package is made up of variable pay subject to performance. The information below explains what the executive directors who were on the Board on 31 March 2010 will actually receive from awards made previously with performance conditions which ended on 31 March 2010 but that will vest in the 2011 financial year.

As previously noted there were no salary increases, other than for promotions, for the executive directors during the 2010 financial year. However the Remuneration Committee felt that it was appropriate to review base salary levels for the 2011 financial year. Accordingly, the new salaries shown below will become effective 1 July 2010. In the case of Vittorio Colao this is his first increase since his promotion to the role of Chief Executive two years ago and reflects his outstanding leadership of the Company in a very difficult environment.

The executive directors 2009/10 GSTIP is payable in June 2010 with actual payments detailed in the table below. 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. Group performance was at or above target for each of the key financial measures particularly with respect to free cash flow.

Later in 2010 the GLTI share options granted in 2007 will vest. The threshold relative TSR performance target for the 2007 GLTI performance shares was met and, as such, shares will vest from this award at 25%. In all cases performance was determined at 31 March 2010 year end. These figures are set out in the table below (only the 2009/10 GSTIP payment is included in the audited section towards the end of the directors’ remuneration report).

	Vittorio Colao			Andy Halford			Michel Combes			Stephen Pusey
Base salary
Base salary effective from July 2010	£	1,065,000		£	700,000		£	770,000		£	550,000
GSTIP (Annual bonus)(1)
Target (100% of base salary earned over 2010)	£	975,000		£	674,100		£	736,667		£	490,867
Percentage of target achieved for the 2010 financial year		128.7	%		128.7	%		111.0	%		128.7	%
Actual bonus payout in June 2010	£	1,254,825		£	867,567		£	817,700		£	631,746
GLTI share options
Exercise price		162.5p			162.5p			—			162.5p
GLTI share options awarded in July 2007		3,003,575			2,295,589			—			947,556
Vesting percentage based on three year earnings per share (‘EPS’) growth		100	%		100	%		—			100	%
GLTI share options vesting in 2010		3,003,575			2,295,589			—			947,556
GLTI performance shares
GLTI performance share awarded in July 2007		1,557,409			1,190,305			—			491,325
Vesting percentage based on relative TSR		25	%		25	%		—			25	%
GLTI performance shares vesting in 2010		389,352			297,576			—			122,831

Note:

(1) More information on key performance indicators, against which Group performance is measured, can be found in “Key performance indicators” on page 24.

Vodafone Group Plc Annual Report 2010  61

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 one year’s notice.

All current executive directors’ contracts have an indefinite term (to normal retirement date) and one year notice periods. No payments should normally be payable on termination other than the salary due for the notice period and such entitlements under incentive plans and benefits that are consistent with the terms of such plans.

	Date of
	service agreement	Notice period
Vittorio Colao	27 May 2008	12 months
Andy Halford	20 May 2005	12 months
Michel Combes	1 June 2009	12 months
Stephen Pusey	1 June 2009	12 months

Fees retained for external non-executive directorships

Executive directors may hold positions in other companies as non-executive directors. In the 2010 financial year Michel Combes was the only executive director with such a position held at AS System SA. He retained fees of €33,120 in relation to this position over the full financial year. Fees were retained in accordance with Group policy.

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 – 2010 financial year

Total remuneration and base salary

Methodology consistent with the executive directors.

Annual bonus

The annual bonus is based on the same measures. However in some circumstances these are measured within a region or business area rather than across the whole Group.

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

Global AllShare Plan

A significant number of employees were granted an award of 340 shares AllShares each on 1 July 2009. These awards vest after two years. In March 2010 the Remuneration Committee stated there would be no further grants.

Sharesave

The Vodafone Group 2008 Sharesave Plan is an HM Revenue & Customs (‘HMRC’) approved scheme open to all permanently employed UK staff. 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 65.

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 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 3.1% of the Company’s share capital at 31 March 2010 (3.3% at 31 March 2009).

Funding

A mixture of newly issued shares, treasury shares and shares purchased in the market by the employee benefit trust is 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.

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 subject to the satisfaction of any performance conditions at that time.

TSR performance

The following chart shows the performance of the Company relative to the FTSE100 index and FTSE Global Telecoms index. We were a constituent of both throughout the 2010 financial year.

Five year historical TSR performance growth in the value of a hypothetical £100 holding over five years. FTSE 100 and FTSE Global Telecoms comparison based on spot values

Notes:

(1)	Graph provided by Towers Watson and calculated according to a methodology that is compliant with the requirements of The Large and Medium Sized Companies and Groups (Accounts & Reports) Regulation 2008.
(2)	Data sources: FTSE and Datastream.
(3)	Performance of the Company shown by the graph is not indicative of vesting levels under the Company’s various incentive plans.

62  Vodafone Group Plc Annual Report 2010

Governance

Audited information for executive directors

Remuneration for the year ended 31 March 2010

The remuneration of executive directors was as follows:

	Salary/fees				Incentive schemes(1)				Cash in lieu of pension				Benefits/other(2)				Total
	2010		2009		2010		2009		2010		2009		2010		2009		2010		2009
	£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000		£’000
Chief Executive Vittorio Colao		975		932		1,255		881		292		280		146		171		2,668		2,264
Other executive directors Andy Halford		674		666		868		650		169		167		26		25		1,737		1,508
Michel Combes		737		—		818		—		221		—		52		—		1,828		—
Stephen Pusey		491		—		632		—		147		—		38		—		1,308		—
Former Chief Executive Arun Sarin		—		436		—		434		—		—		—		553		—		1,423
Total		2,877		2,034		3,573		1,965		829		447		262		749		7,541		5,195

Notes:
(1)	These figures are the cash payouts from the 2010 financial year Vodafone Group Short-Term Incentive Plan applicable to the year ended 31 March 2010. These awards are in relation to the performance against targets in adjusted operating profit, service revenue, free cash flow, total communications revenue and customer delight index for the financial year ended 31 March 2010.
(2)	Includes amounts in respect of cost of living allowance, private healthcare and car allowance.

The aggregate remuneration we paid to our collective senior management⁽¹⁾ for services for the year ended 31 March 2010 is set out below. The aggregate number of senior management at 31 March 2010 was eight, the same as at 31 March 2009.

	2010		2009
	£’000		£’000
Salaries and fees		3,655		3,896
Incentive schemes(2)		4,417		2,984
Cash in lieu of pension		164		399
Benefits/other		3,376		2,949
Total		11,612		10,228

Notes:
(1)	Aggregate remuneration for senior management is in respect of those individuals who were members of the Executive Committee during the year ended 31 March 2010, other than executive directors, and reflects compensation paid from either 1 April 2009 or date of appointment to the Executive Committee, to 31 March 2010 or date of leaving, where applicable.
(2)	Comprises the incentive scheme information for senior management 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 senior management are included in footnotes to “Long-term incentives” on page 64.

Pensions

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

Andy Halford was a contributing member of the Vodafone Group Pension Scheme, a UK defined benefit scheme approved by HMRC until 31 March 2010. The scheme provides a benefit of two-thirds of pensionable salary after a minimum of 20 years’ service. The normal retirement age is 60 but directors may retire from age 55 with a pension proportionately reduced to account for their shorter service, but with no actuarial reduction. Andy’s pensionable salary is capped in line with the Vodafone Group pension scheme rules at £110,000. Andy has elected to take a cash allowance of 30% of base salary in lieu of pension contributions on salary above the scheme cap. Liabilities in respect of the pension schemes in which the executive directors participate are funded to the extent described in note 23 to the consolidated financial statements. In January 2010 Vodafone confirmed it would close its UK defined benefit scheme to future accrual by existing members on 31 March 2010. From 1 April 2010 Andy Halford will be paid a cash allowance in lieu of pension of 30% of his full basic salary.

All the individuals referred to above 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 directors serving during the year ended 31 March 2010 were:

															Transfer value		Employer
										Change in		Change in			of increase		allocation/
			Change in							transfer value		accrued			in accrued		contribution
	Total accrued		accrued			Transfer		Transfer		over year less		benefit in			benefit net		to defined
	benefit at 31		benefit over			value at 31		value at 31		member		excess of			of member		contribution
	March 2010(1)		the year(1)			March 2010(2)		March 2009(2)		contributions		inflation			contributions		plans
	£’000		£’000			£’000		£’000		£’000		£’000			£’000		£’000
Vittorio Colao		—		—			—		—		—		—			—		—
Andy Halford		17.8		(6.5	)		628.0		543.6		80.6		(6.2	)		—		—
Michel Combes		—		—			—		—		—		—			—		—
Stephen Pusey		—		—			—		—		—		—			—		—

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. 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 accrued benefit of £17,800 shown above is Andy Halford’s pension after the application of an early retirement factor and after cash has been taken. There is therefore a negative change in accrued benefit over the year. The accrued pension benefits earned by the directors are those which would be paid annually on retirement, based on service to the end of the year, at the normal retirement age. The increase in accrued pension excludes any increase for inflation.
(2)	The transfer values 31 March 2010 have 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 values disclosed above do not represent a sum paid or payable to the individual director. Instead they represent a potential liability of the pension scheme.

In respect of senior management, the Group has made aggregate contributions of £851,000 into defined contribution pension schemes and had a total service cost of £360,000 for defined pension liabilities.

Vodafone Group Plc Annual Report 2010   63

Directors’ remuneration continued

Directors’ interests in the shares of the Company

Historic medium-term incentives

This table shows conditional awards of ordinary shares made in prior periods to executive directors under the Deferred Share Bonus (‘DSB’). Shares which vested during the year ended 31 March 2010 are also shown below:

			Shares forfeited		Shares vested
	Total interest		during the year in respect		during the year in respect
	in DSB at		of the 2008 and		of the 2008 and 2009		Total interest in DSB
	1 April 2009		2009 financial years		financial years(1)(2)		at 31 March 2010
	Number		Number		Number		Number		Total value
	of shares		of shares		of shares		of shares		£’000
Vittorio Colao		153,671		—		153,671		—		—
Andy Halford		275,820		—		275,820		—		—
Michel Combes		—		—		—		—		—
Stephen Pusey		93,670		—		93,670		—		—
Total		523,161		—		523,161		—		—

Notes:
(1)	The shares vesting gave rise to cash payments equal to the equivalent value of dividends over the vesting period. These cash payments equated to £23,481 for Vittorio Colao, £42,145 for Andy Halford and £14,313 for Stephen Pusey.
(2)	Shares granted on 15 June 2007 vested on 15 June 2009. The closing mid-market share prices at these dates were 163.2 pence and 112.9 pence respectively. The performance condition for this award was a requirement to achieve 85% of the cumulative planned free cash flow target for the 2008 and 2009 financial years, which was met in full.

No shares were awarded during the year under the deferred share bonus to any of the Company’s directors or senior management.

Long-term incentives

Performance shares

Conditional awards of ordinary shares made to executive directors under the Vodafone Group Plc 1999 Long-Term Stock Incentive Plan (‘LTSIP’) and 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 2010 are also shown below:

	Total interest
	in performance		Shares		Shares
	shares at		conditionally		forfeited			Shares		Total interest				Market
	1 April 2009		awarded		during			vested during		in performance				price at date
	or date of		during the 2010		the 2010			the 2010		shares at				awards
	appointment		financial year(1)		financial year(2)			financial year		31 March 2010(3)		Total value(4)		granted		Vesting date
	Number		Number		Number			Number		Number
	of shares		of shares		of shares			of shares		of shares		£’000		Pence
Vittorio Colao
2006		1,073,465		—		(1,073,465	)		—		—		—		115.75	Jul 2009
2007		1,557,409		—		—			—		1,557,409		2,367		156.00	Jul 2010
2008		7,127,741		—		—			—		7,127,741		10,834		129.95	Jul 2011
2009		—		6,382,861		—			—		6,382,861		9,702		117.20	Jul 2012
Total		9,758,615		6,382,861		(1,073,465	)		—		15,068,011		22,903
Andy Halford
2006		946,558		—		(946,558	)		—		—		—		115.75	Jul 2009
2007		1,190,305		—		—			—		1,190,305		1,809		156.00	Jul 2010
2008		4,357,399		—		—			—		4,357,399		6,623		129.95	Jul 2011
2009		—		4,201,690		—			—		4,201,690		6,387		117.20	Jul 2012
Total		6,494,262		4,201,690		(946,558	)		—		9,749,394		14,819
Michel Combes
2006		—		—		—			—		—		—		—	Jul 2009
2007		—		—		—			—		—		—		—	Jul 2010
2008		3,326,701		—		—			—		3,326,701		5,057		129.95	Jul 2011
2009		—		3,305,625		—			—		3,305,625		5,025		117.20	Jul 2012
Total		3,326,701		3,305,625		—			—		6,632,326		10,082
Stephen Pusey
2006		319,680		—		(319,680	)		—		—		—		115.75	Jul 2009
2007		491,325		—		—			—		491,325		747		156.00	Jul 2010
2008		1,442,976		—		—			—		1,442,976		2,193		129.95	Jul 2011
2009		—		2,383,697		—			—		2,383,697		3,623		117.20	Jul 2012
Total		2,253,981		2,383,697		(319,680	)		—		4,317,998		6,563

Notes:
(1)	The awards were granted during the year under the Vodafone Global Incentive Plan using an average of the closing share prices on each of the five working days prior to and including 29 June being 117.5 pence. These awards have a performance period running from 1 April 2009 to 31 March 2012. The performance conditions are a matrix of free cash flow performance and relative total shareholder return. The vesting date will be in June 2012.
(2)	Shares granted on 25 July 2006 were forfeited on 25 July 2009. The performance condition on these awards was a relative total shareholder return measure against the companies making up the FTSE Global Telecoms index at the start of the performance period. This condition was not met.
(3)	The total interest at 31 March 2010 includes awards over three different performance periods ending on 31 March 2010, 31 March 2011 and 31 March 2012. The performance condition for the award vesting in July 2010 is relative shareholder return measured against companies from the FTSE Global Telecoms index taken at the start of the performance period.
(4)	The total value is calculated using the closing mid-market share price at 31 March 2010 of 152.0 pence.

The aggregate number of shares conditionally awarded during the year to the Company’s senior management is 14,142,323 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 total shareholder return.

64    Vodafone Group Plc Annual Report 2010

Governance

Share options

No options have been granted to directors during the 2010 financial year. The following information summarises the directors’ options under the Vodafone Group 1998 Sharesave Scheme, the Vodafone Group 2008 Sharesave Plan, the Vodafone Group 1998 Company Share Option Scheme (‘CSOS’), the LTSIP and the GIP HMRC approved awards may be made under all of the schemes above. 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 may be 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 2009		during the		during the			during the			Options						Market
		or date of		2010 financial		2010 financial			2010 financial			held at		Option		Date from		price on
	Grant	appointment		year		year			year			31 March 2010		price		which	Expiry	exercise
	date(1)	Number		Number		Number			Number			Number		Pence(2)		exercisable	date	Pence
Vittorio Colao
GIP	Nov 2006		3,472,975		—		—			—			3,472,975		135.50	Nov 2009	Nov 2016		—
GIP	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			6,476,550		16,568		—			—			6,493,118
Andy Halford
CSOS	Jul 1999		11,500		—		—			(11,500	)		—		255.00	Jul 2002	Jul 2009		—
ESOS	Jul 1999		114,000		—		—			(114,000	)		—		255.00	Jul 2002	Jul 2009		—
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 2002		94,444		—		(94,444	)		—			—		90.00	Jul 2005	Jul 2012		146.70
LTSIP	Jul 2003		233,333		—		(233,333	)		—			—		119.25	Jul 2006	Jul 2013		146.70
LTSIP	Jul 2004		226,808		—		(226,808	)		—			—		119.00	Jul 2007	Jul 2014		146.70
LTSIP	Jul 2005		1,291,326		—		—			—			1,291,326		145.25	Jul 2008	Jul 2015		—
GIP	Jul 2006		3,062,396		—		(3,062,396	)		—			—		115.25	Jul 2009	Jul 2016		146.70
SAYE	Jul 2006		10,202		—		(10,202	)		—			—		91.64	Sep 2009	Feb 2010		131.95
GIP	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			7,558,898		9,669		(3,627,183	)		(125,500	)		3,815,884
Stephen Pusey
GIP	Nov 2006		1,034,259				—			—			1,034,259		135.50	Nov 2009	Nov 2016		—
GIP	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			1,981,815		9,669		—			—			1,991,484
Michel Combes
SAYE	Jul 2009		—		9,669		—			—			9,699		93.85	Sep 2012	Feb 2013		—
Total			—		9,669		—			—			9,699

Notes:
(1)	The unvested award granted in July 2007 has a performance period ending on 31 March 2010. The performance condition for this award is three year EPS growth ranges of 5% to 8% per annum.
(2)	The closing mid-market share price on 31 March 2010 was 152.0 pence. The highest mid-market share price during the year was 153.8 pence and the lowest price was 111.2 pence.

Vodafone Group Plc Annual Report 2010   65

Directors’ remuneration continued

Non-executive directors’ remuneration

The remuneration of non-executive directors is reviewed annually by the Board, excluding the non-executive directors. 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 current FTSE 15 companies. Following the 2010 review there will be an increase to the fees from 1 April 2010:

	Fees payable (£’000s)
	From		From
Position/role	1 April 2010		1 April 2009
Chairman(1)		600		575
Deputy Chairman		160		155
Non-executive director		115		110
Chairmanship of Audit Committee		25		25
Chairmanship of Remuneration Committee		20		20

Note:
(1)	From 1 April 2010 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 2010 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 one year’s notice. The date of his letter of appointment is 5 December 2005.

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 by any person 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	re-election
John Buchanan	28 April 2003	AGM 2010
Alan Jebson	7 November 2006	AGM 2010
Samuel Jonah	9 March 2009	AGM 2010
Nick Land	7 November 2006	AGM 2010
Anne Lauvergeon	20 September 2005	AGM 2010
Simon Murray	16 May 2007		n/a
Luc Vandevelde	24 June 2003	AGM 2010
Anthony Watson	6 February 2006	AGM 2010
Philip Yea	14 July 2005	AGM 2010

Audited information for non-executive directors serving during the year ended 31 March 2010⁽¹⁾:

	Salary/fees				Benefits				Total
	2010		2009		2010		2009		2010		2009
	£’000		£’000		£’000		£’000		£’000		£’000
Chairman Sir John Bond		575		575		3		27		578		602
Deputy Chairman John Buchanan		155		155		—		—		155		155
Non-executive directors Dr Michael Boskin		—		63		—		—		—		63
Alan Jebson		146		146		—		—		146		146
Samuel Jonah		140		—		—		—		140		—
Nick Land		135		127		—		—		135		127
Anne Lauvergeon		110		110		—		—		110		110
Simon Murray		110		110		—		—		110		110
Professor Jürgen Schrempp		—		37		—		—		—		37
Luc Vandevelde		130		130		—		—		130		130
Anthony Watson		110		110		—		—		110		110
Philip Yea		110		110		—		—		110		110
Total		1,721		1,673		3		27		1,724		1,700

Note:
(1)	Former Chairman, Lord MacLaurin, received consulting fees of £42,000 during the year, together with continued benefits valued at £4,700 from his previous arrangements. These arrangements ended in July 2009.

66  Vodafone Group Plc Annual Report 2010

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 2009 or
	17 May 2010		31 March 2010		date of appointment
Sir John Bond		357,584		357,584		237,345
John Buchanan		211,055		211,055		211,055
Vittorio Colao		1,575,567		1,575,567		1,046,149
Andy Halford		2,186,709		2,186,541		1,211,095
Michel Combes		392,389		392,223		232,827
Stephen Pusey		402,599		402,599		254,293
Alan Jebson		82,340		82,340		75,000
Samuel Jonah		—		—		—
Nick Land		35,000		35,000		35,000
Anne Lauvergeon		28,936		28,936		28,936
Simon Murray		246,250		246,250		157,500
Luc Vandevelde		72,829		72,829		72,500
Anthony Watson		115,000		115,000		115,000
Philip Yea		61,250		61,250		61,250

At 31 March 2010 and during the period from 1 April 2010 to 17 May 2010, 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 2010, members of the Group’s Executive Committee at 31 March 2010 had an aggregate beneficial interest in 3,229,762 ordinary shares of the Company. At 17 May 2010 the directors had an aggregate beneficial interest in 5,767,508 ordinary shares of the Company and the Executive Committee members had an aggregate beneficial interest in 3,230,262 ordinary shares of the Company. However 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 17 May 2010 there had been no change to the directors’ interests in share options from 31 March 2010 (see page 65).

Other than those individuals included in the table above, at 17 May 2010, members of the Group’s Executive Committee at that date held options for 4,302,914 ordinary shares at prices ranging from 91.6 pence to 167.8 pence per ordinary share, with a weighted average exercise price of 158.0 pence per ordinary share exercisable at dates ranging from July 2008 to July 2017.

Sir John Bond, John Buchanan, Alan Jebson, Samuel Jonah, Nick Land, Anne Lauvergeon, Simon Murray, Luc Vandevelde, Anthony Watson and Philip Yea held no options at 17 May 2010.

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.

/s/ Luc Vandevelde

Luc Vandevelde
On behalf of the Board

Vodafone Group Plc Annual Report 2010   67

Contents

Directors’ statement of responsibility	69
Audit report on internal controls	70
Critical accounting estimates	71
Audit report on the consolidated financial statements	73
Consolidated financial statements	74
Consolidated income statement	74
Consolidated statement of comprehensive income	74
Consolidated statement of financial position	75
Consolidated statement of changes in equity	76
Consolidated statement of cash flows	77
Notes to the consolidated financial statements:
1. Basis of preparation	78
2. Significant accounting policies	78
3. Segment analysis	84
4. Operating profit	86
5. Investment income and financing costs	87
6. Taxation	88
7. Equity dividends	90
8. Earnings per share	90
9. Intangible assets	91
10. Impairment	92
11. Property, plant and equipment	95
12. Principal subsidiaries	96
13. Investments in joint ventures	97
14. Investments in associates	98
15. Other investments	98
16. Inventory	99
17. Trade and other receivables	99
18. Cash and cash equivalents	100
19. Called up share capital	100
20. Share-based payments	101
21. Capital and financial risk management	103
22. Borrowings	105
23. Post employment benefits	109
24. Provisions	111
25. Trade and other payables	111
26. Acquisitions	112
27. Reconciliation of net cash flow from operating activities	113
28. Commitments	114
29. Contingent liabilities	114
30. Directors and key management compensation	116
31. Related party transactions	116
32. Employees	117

Audit report on the Company financial statements	118
Company financial statements of Vodafone Group Plc	119
Notes to the Company financial statements:	120
1. Basis of preparation	120
2. Significant accounting policies	120
3. Fixed assets	121
4. Debtors	121
5. Other investments	122
6. Creditors	122
7. Share capital	122
8. Share-based payments	123
9. Reserves and reconciliation of movements in equity shareholders’ funds	123
10. Equity dividends	123
11. Contingent liabilities	124
Separate financial statements required by Rule 3-09 of Regulation S-X	B-1
Report of Independent Registered Public Accounting Firm	B-29

68   Vodafone Group Plc Annual Report 2010

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 adopted for use in the EU;

• 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 of the Financial Services and Markets Act 2000.

Disclosure of information to auditors

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 auditors are 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 auditors are 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 41 to 44 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; 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 2010 based on the Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (‘COSO’). Based on management’s assessment management has concluded that the internal control over financial reporting was effective at 31 March 2010.

The assessment excluded the internal controls over financial reporting relating to Vodacom because it became a subsidiary during the year as described in note 26 to the consolidated financial statements. Vodacom’s controls will be included in the Group’s assessment at 31 March 2011.

Key sub-totals that result from the consolidation of Vodacom, whose internal controls have not been assessed, are set out below:

	£m
Total assets		8,996
Net assets		5,717
Revenue		4,450
Profit for the financial year		122

Management is not required to evaluate the internal controls of entities accounted for under the equity method. Accordingly, the internal controls of these entities, which contributed a net profit of £4,742 million (2009: £4,091 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 2010 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 70.

By Order of the Board

/s/ RES Martin

Rosemary Martin
Secretary
18 May 2010

Vodafone Group Plc Annual Report 2010   69

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 2010 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 control over financial reporting, management excluded from its assessment the internal control over financial reporting at Vodacom Group Limited (‘Vodacom’), which became a subsidiary during the year and whose financial statements constitute 6.3% and 5.7% of net and total assets, respectively, 10.0% of revenue, and 1.4% of profit for the financial year of the consolidated financial statements amounts as of and for the year ended 31 March 2010. Accordingly, our audit did not include the internal control over financial reporting at Vodacom. Management is not required to evaluate the internal controls of entities accounted for under the equity method. Accordingly, the internal controls of these entities, which contributed a net profit of £4,742 million (2009: £4,091 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 2010, 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 2010, 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 18 May 2010 expressed an unqualified opinion on those financial statements.

/s/ Deloitte LLP

Deloitte LLP
Chartered Accountants and Registered Auditors
London
United Kingdom
18 May 2010

70  Vodafone Group Plc Annual Report 2010

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 European Union, 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 a provision in respect of an enquiry from UK HMRC with regard to the CFC tax legislation (see note 29 to the consolidated financial statements), litigation with the Indian tax authorities in relation to the acquisition of Vodafone Essar (see note 29 to the consolidated financial statements) and 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). 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.

Vodafone Group Plc Annual Report 2010  71

Critical accounting estimates continued

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 related to losses, the availability of the losses to offset against forecast taxable profits is also considered.

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 2G and 3G licences, 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 2010 intangible assets, excluding goodwill, amounted to £22,420 million (2009: £20,980 million) and represented 14.3% (2009: 13.7%) of the Group’s total assets.

Estimation of useful life

The useful life used to amortise intangible assets relates to the 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 12.9% (2009: 12.6%) 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 29 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.

72   Vodafone Group Plc Annual Report 2010

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 2010 and 31 March 2009, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statement of cash flows for each of the three years in the period ended 31 March 2010. 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 2010 and 31 March 2009, and the results of its operations and its cash flows for each of the three years in the period ended 31 March 2010, 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 2010, 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 18 May 2010 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP
Deloitte LLP
Chartered Accountants and Registered Auditors
London, United Kingdom
18 May 2010

Vodafone Group Plc Annual Report 2010   73

Consolidated income statement

for the years ended 31 March

			2010			2009			2008
	Note		£m			£m			£m
Revenue		3		44,472			41,017			35,478
Cost of sales				(29,439	)		(25,842	)		(21,890	)
Gross profit				15,033			15,175			13,588
Selling and distribution expenses				(2,981	)		(2,738	)		(2,511	)
Administrative expenses				(5,328	)		(4,771	)		(3,878	)
Share of result in associates		14		4,742			4,091			2,876
Impairment losses, net		10		(2,100	)		(5,900	)		—
Other income and expense				114			—			(28	)
Operating profit		4		9,480			5,857			10,047
Non-operating income and expense				(10	)		(44	)		254
Investment income		5		716			795			714
Financing costs		5		(1,512	)		(2,419	)		(2,014	)
Profit before taxation				8,674			4,189			9,001
Income tax expense		6		(56	)		(1,109	)		(2,245	)
Profit for the financial year				8,618			3,080			6,756
Attributable to:
– Equity shareholders				8,645			3,078			6,660
– Non-controlling interests				(27	)		2			96
				8,618			3,080			6,756
Basic earnings per share		8		16.44p			5.84p			12.56p
Diluted earnings per share		8		16.36p			5.81p			12.50p

Consolidated statement of comprehensive income

for the years ended 31 March

	2010			2009			2008
	£m			£m			£m
Gains/(losses) on revaluation of available-for-sale investments, net of tax		206			(2,383	)		1,949
Foreign exchange translation differences, net of tax		(1,021	)		12,375			5,537
Net actuarial losses on defined benefit pension schemes, net of tax		(104	)		(163	)		(37	)
Revaluation gain		860			68			—
Foreign exchange gains transferred to the income statement		(84	)		(3	)		(7	)
Fair value losses/(gains) transferred to the income statement		3			—			(570	)
Other, net of tax		67			(40	)		37
Other comprehensive (loss)/income		(73	)		9,854			6,909
Profit for the financial year		8,618			3,080			6,756
Total comprehensive income for the year		8,545			12,934			13,665
Attributable to:
– Equity shareholders		8,312			13,037			13,912
– Non-controlling interests		233			(103	)		(247	)
		8,545			12,934			13,665

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

74   Vodafone Group Plc Annual Report 2010

Consolidated statement of financial position Financials  

at 31 March

			2010			2009
	Note		£m			£m
Non-current assets
Goodwill		9		51,838			53,958
Other intangible assets		9		22,420			20,980
Property, plant and equipment		11		20,642			19,250
Investments in associates		14		36,377			34,715
Other investments		15		7,591			7,060
Deferred tax assets		6		1,033			630
Post employment benefits		23		34			8
Trade and other receivables		17		2,831			3,069
				142,766			139,670
Current assets
Inventory		16		433			412
Taxation recoverable				191			77
Trade and other receivables		17		8,784			7,662
Other investments		15		388			—
Cash and cash equivalents		18		4,423			4,878
				14,219			13,029
Total assets				156,985			152,699
Equity
Called up share capital		19		4,153			4,153
Additional paid-in capital				153,509			153,348
Treasury shares				(7,810	)		(8,036	)
Retained losses				(79,655	)		(83,820	)
Accumulated other comprehensive income				20,184			20,517
Total equity shareholders’ funds				90,381			86,162
Non-controlling interests				3,379			1,787
Put options over non-controlling interests				(2,950	)		(3,172	)
Total non-controlling interests				429			(1,385	)
Total equity				90,810			84,777
Non-current liabilities
Long-term borrowings		22		28,632			31,749
Deferred tax liabilities		6		7,377			6,642
Post employment benefits		23		237			240
Provisions		24		497			533
Trade and other payables		25		816			811
				37,559			39,975
Current liabilities
Short-term borrowings		22		11,163			9,624
Current taxation liabilities				2,874			4,552
Provisions		24		497			373
Trade and other payables		25		14,082			13,398
				28,616			27,947
Total equity and liabilities				156,985			152,699

The consolidated financial statements were approved by the Board of directors on 18 May 2010 and were signed on its behalf by:

/s/ Vittorio Colao	/s/ Andy Halford
Vittorio Colao	Andy Halford
Chief Executive	Chief Financial Officer

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

Vodafone Group Plc Annual Report 2010   75

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 2007		4,172			152,889		(8,047	)		(85,253	)		101			(59	)		3,152			112		—			67,067			226			67,293
Issue or reissue of shares		10			129		191			(60	)		—			—			—			—		—			270			—			270
Redemption or cancellation of shares		—			7		—			(7	)		—			—			—			—		—			—			—			—
Share-based payment		—			114		—			—			—			—			—			—		—			114			—			114
Acquisition of subsidiaries		—			—		—			—			—			—			—			—		—			—			(1,435	)		(1,435	)
Comprehensive income		—			—		—			6,660			5,873			(37	)		1,379			—		37			13,912			(247	)		13,665
Profit		—			—		—			6,660			—			—			—			—		—			6,660			96			6,756
OCI – before tax		—			—		—			—			5,827			(47	)		1,949			—		37			7,766			(343	)		7,423
OCI – taxes		—			—		—			—			53			10			—			—		—			63			—			63
Transfer to the income statement		—			—		—			—			(7	)		—			(570	)		—		—			(577	)		—			(577	)
Dividends		—			—		—			(3,653	)		—			—			—			—		—			(3,653	)		(113	)		(3,766	)
Equity put rights and similar arrangements		—			—		—			333			—			—			—			—		—			333			—			333
Other		—			—		—			—			—			—			—			—		—			—			(3	)		(3	)
31 March 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		—			—			—			—			—			—		—			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		—			—			—			—			—			—		—			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

Note:
(1)	Includes share premium and the capital redemption reserve.

76   Vodafone Group Plc Annual Report 2010

Consolidated statement of cash flows Financials

for the years ended 31 March

			2010			2009			2008
	Note		£m			£m			£m
Net cash flow from operating activities		27		13,064			12,213			10,474
Cash flows from investing activities
Purchase of interests in subsidiaries and joint ventures, net of cash acquired				(1,777	)		(1,389	)		(5,957	)
Purchase of intangible assets				(2,134	)		(1,764	)		(846	)
Purchase of property, plant and equipment				(4,841	)		(5,204	)		(3,852	)
Purchase of investments				(522	)		(133	)		(96	)
Disposal of interests in subsidiaries, net of cash disposed				—			4			—
Disposal of interests in associates				—			25			—
Disposal of property, plant and equipment				48			317			39
Disposal of investments				17			253			785
Dividends received from associates				1,436			647			873
Dividends received from investments				141			108			72
Interest received				195			302			438
Net cash flow from investing activities				(7,437	)		(6,834	)		(8,544	)
Cash flows from financing activities
Issue of ordinary share capital and reissue of treasury shares				70			22			310
Net movement in short-term borrowings				227			(25	)		(716	)
Proceeds from issue of long-term borrowings				4,217			6,181			1,711
Repayment of borrowings				(5,184	)		(2,729	)		(3,847	)
Purchase of treasury shares				—			(963	)		—
B share capital redemption				—			(15	)		(7	)
Equity dividends paid				(4,139	)		(4,013	)		(3,658	)
Dividends paid to non-controlling shareholders in subsidiaries				(56	)		(162	)		(113	)
Amounts received from non-controlling shareholders				613			618			—
Interest paid				(1,601	)		(1,470	)		(1,545	)
Net cash flow from financing activities				(5,853	)		(2,556	)		(7,865	)
Net cash flow				(226	)		2,823			(5,935	)
Cash and cash equivalents at beginning of the financial year		18		4,846			1,652			7,458
Exchange (loss)/gain on cash and cash equivalents				(257	)		371			129
Cash and cash equivalents at end of the financial year		18		4,363			4,846			1,652

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

Vodafone Group Plc Annual Report 2010   77

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 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 71 and 72. 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 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

IFRIC 13 – “Customer Loyalty Programmes”

The Group adopted IFRIC 13 on 1 April 2009. The interpretation addresses how companies that grant their customers loyalty award credits when buying goods and services should account for their obligations to provide free or discounted goods and services. It requires that consideration received be allocated between the award credits and the other components of the sale. The adoption of this interpretation did not result in a material impact on the Group’s results or financial position.

IAS 23 (Revised) – “Borrowing Costs”

The Group adopted IAS 23 (Revised) on 1 April 2009. This standard requires the capitalisation of borrowing costs to the extent they are directly attributable to the acquisition, production or construction of a qualifying asset. The option of immediate recognition of those borrowing costs as an expense, previously used by the Group, has been removed. The adoption of this standard did not result in a material impact on the Group’s results or financial position.

IAS 1 (Revised) – “Presentation of Financial Statements”

The Group adopted IAS 1 (Revised) on 1 April 2009. A separate consolidated statement of changes in equity is now included as part of the primary financial statements. The Group changed the naming of the primary financial statements and adopted certain new terminology set out in the revised standard.

IFRS 7 – “Financial Instruments: Disclosure”

The Group adopted an amendment to IFRS 7 on 1 April 2009. The standard requires enhanced disclosure regarding fair value measurements and liquidity risk. The adoption of this standard did not impact the Group’s results or financial position.

New accounting pronouncements not yet adopted

IFRS 3 (Revised) “Business Combinations” was issued in January 2008 and will apply to business combinations occurring on or after 1 April 2010. The revised standard introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that a business combination occurs and future reported results. This standard is likely to have a significant impact on the Group’s accounting for business combinations post adoption.

An amendment to IAS 27 “Consolidated and Separate Financial Statements” was issued in January 2008 and is effective for annual periods beginning on or after 1 July 2009. 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 Group has historically entered into transactions that would have been within the scope of the amendment to this standard and may do so in the future.

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. The standard introduces changes to the classification and measurement of financial assets. The Group is currently assessing the impact of the standard on its results, financial position and cash flows. This standard has not yet been endorsed for use in the EU.

The Group has not adopted the following pronouncements, which have been issued by the IASB or the IFRIC. 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. These pronouncements have been endorsed for use in the EU, unless otherwise stated.

• “Amendment to IAS 39 Financial Instruments: Recognition and Measurement – Exposures Qualifying for Hedge Accounting”, effective for annual periods beginning on or after 1 July 2009.

• “Embedded derivatives: Amendments to IFRIC 9 and IAS 39”, effective for annual periods beginning on or after 30 June 2009.

• “Improvements to IFRSs” issued in April 2009 are effective over a range of dates, with the earliest being for annual periods beginning on or after 1 January 2010.

• IFRS 1, “Additional Exemptions for First-time Adopters”, effective for periods beginning on or after 1 January 2010. This standard has not yet been endorsed for use in the EU.

• “IFRS for Small and Medium-Sized Entities”, issued July 2009, effective immediately. This standard has not yet been endorsed for use in the EU.

• IFRS 2, “Group Cash-settled Share-based Payment Transactions”, effective for periods beginning on or after 1 January 2010.

• “Amendment to IAS 32, “Classification of Rights Issues”, effective for annual periods beginning on or after 1 February 2010.

• “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. This amendment has not yet been endorsed for use in the EU.

• Amendment to IFRIC 14, “Prepayments on a Minimum Funding Requirement”, effective for annual periods beginning on or after 1 January 2011. This interpretation has not yet been endorsed for use in the EU.

• IFRIC 17, “Distributions of Non-cash Assets to Owners”, effective for annual periods beginning on or after 1 July 2009.

• IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”, effective annual periods beginning on or after 1 July 2010 with early adoption permitted. This interpretation has not yet been endorsed for use in the EU.

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.

78   Vodafone Group Plc Annual Report 2010

Financials

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. Losses applicable to the non-controlling shareholders in excess of the non-controlling shareholders’ share of changes in equity are allocated against the interests of the Group except to the extent that the non-controlling shareholders have a binding obligation and are able to make an additional investment to cover the losses.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase 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, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets and liabilities are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders’ proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Where the Group increases its interest in an entity such that control is achieved, previously held identifiable assets, liabilities and contingent liabilities of the acquired entity are revalued to their fair value at the date of acquisition, being the date at which the Group achieves control of the acquiree. The movement in fair value is taken to the asset revaluation surplus.

Acquisition of interests from non-controlling shareholders

Acquisitions of non-controlling interests in subsidiaries are accounted for as transactions between shareholders. There is no remeasurement to fair value of net assets acquired that were previously attributable to non-controlling shareholders.

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 end of 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, 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.

Vodafone Group Plc Annual Report 2010   79

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

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 a straight-line 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 end of 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.

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 revenue 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.

80   Vodafone Group Plc Annual Report 2010

Financials

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 device 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 end of 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 on the end of 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.

The net foreign exchange gain recognised in the consolidated income statement is £35 million (2009: £131 million loss, 2008: £373 million gain).

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 end of 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.

Vodafone Group Plc Annual Report 2010   81

Notes to the consolidated financial statements continued

2. Significant accounting policies continued

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 end of 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 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 end of 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 end of 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.

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 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.

82   Vodafone Group Plc Annual Report 2010

Financials

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 end of reporting period 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 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.

Vodafone Group Plc Annual Report 2010   83

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 2010 the Group changed how it determines and discloses segmental adjusted EBITDA and adjusted operating profit in order to ensure the Group’s disclosures better reflect the contribution of each segment to the Group’s underlying operating performance and remain consistent with internal reporting to management. The changes do not impact Vodafone’s consolidated results. Intercompany revenue and expenses arising from royalty fees for the use of the Vodafone brand, which were previously included within operating expenses, are now excluded from the calculation of adjusted EBITDA and adjusted operating profit of each segment and Common Functions. In addition, intercompany charges for fixed asset usage, which were also previously included within operating expenses, are now reported within depreciation for purposes of calculating adjusted EBITDA of each segment. The tables below present segment information on the revised basis, with prior years amended to conform to the current year presentation.

	Segment		Common		Intra-region			Regional		Inter-region			Group		Adjusted
	revenue		Functions		revenue			revenue		revenue			revenue		EBITDA
	£m		£m		£m			£m		£m			£m		£m
31 March 2010
Germany		8,008				(37	)		7,971		(12	)		7,959		3,122
Italy		6,027				(37	)		5,990		(5	)		5,985		2,843
Spain		5,713				(79	)		5,634		(4	)		5,630		1,956
UK		5,025				(45	)		4,980		(12	)		4,968		1,141
Other Europe(1)		5,354				(51	)		5,303		(5	)		5,298		1,865
Europe		30,127				(249	)		29,878		(38	)		29,840		10,927
Vodacom(2)		4,450				—			4,450		(7	)		4,443		1,528
Other Africa and Central Europe(3)		3,576				—			3,576		(53	)		3,523		799
Africa and Central Europe		8,026				–			8,026		(60	)		7,966		2,327
India		3,114				(1	)		3,113		(20	)		3,093		807
Other Asia Pacific and Middle East(4)		3,368				—			3,368		(31	)		3,337		1,033
Asia Pacific and Middle East		6,482				(1	)		6,481		(51	)		6,430		1,840
Common Functions(5)		—		269		—			269		(33	)		236		(359	)
Group(6)		44,635		269		(250	)		44,654		(182	)		44,472		14,735
Verizon Wireless(6)		17,222														6,689
31 March 2009
Germany		7,847				(52	)		7,795		(16	)		7,779		3,225
Italy		5,547				(36	)		5,511		(6	)		5,505		2,565
Spain		5,812				(93	)		5,719		(4	)		5,715		2,034
UK		5,392				(46	)		5,346		(10	)		5,336		1,368
Other Europe(1)		5,329				(66	)		5,263		(5	)		5,258		1,957
Europe		29,927				(293	)		29,634		(41	)		29,593		11,149
Vodacom(2)		1,778				—			1,778		—			1,778		606
Other Africa and Central Europe(3)		3,723				—			3,723		(48	)		3,675		1,114
Africa and Central Europe		5,501				–			5,501		(48	)		5,453		1,720
India		2,689				(1	)		2,688		(19	)		2,669		717
Other Asia Pacific and Middle East(4)		3,131				—			3,131		(31	)		3,100		1,062
Asia Pacific and Middle East		5,820				(1	)		5,819		(50	)		5,769		1,779
Common Functions(5)		—		216		—			216		(14	)		202		(158	)
Group(6)		41,248		216		(294	)		41,170		(153	)		41,017		14,490
Verizon Wireless(6)		14,085														5,543
31 March 2008
Germany		6,866				(51	)		6,815		(11	)		6,804		2,816
Italy		4,435				(33	)		4,402		(6	)		4,396		2,148
Spain		5,063				(96	)		4,967		(4	)		4,963		1,908
UK		5,424				(46	)		5,378		(10	)		5,368		1,560
Other Europe(1)		4,583				(64	)		4,519		(3	)		4,516		1,735
Europe		26,371				(290	)		26,081		(34	)		26,047		10,167
Vodacom(2)		1,609				—			1,609		—			1,609		586
Other Africa and Central Europe(3)		3,337				—			3,337		(35	)		3,302		1,108
Africa and Central Europe		4,946				–			4,946		(35	)		4,911		1,694
India		1,822				—			1,822		(12	)		1,810		598
Other Asia Pacific and Middle East(4)		2,577				—			2,577		(26	)		2,551		906
Asia Pacific and Middle East		4,399				–			4,399		(38	)		4,361		1,504
Common Functions(5)		—		170		—			170		(11	)		159		(187	)
Group(6)		35,716		170		(290	)		35,596		(118	)		35,478		13,178
Verizon Wireless(6)		10,144														3,930

Notes:
(1)	Adjusted EBITDA is stated before £574 million (2009: £520 million; 2008: £425 million) representing the Group’s share of results in associates.
(2)	Adjusted EBITDA is stated before £(2) million (2009: £(1); 2008: £nil) representing the Group’s share of results in associates.
(3)	Adjusted EBITDA is stated before £50 million (2009: £27; 2008: £nil) representing the Group’s share of results in associates.
(4)	Adjusted EBITDA is stated before £6 million (2009: £4 million; 2008: £2 million) representing the Group’s share of results in associates.
(5)	Adjusted EBITDA is stated before £2 million (2009: £(1) million; 2008: £2 million) relating to the Group’s share of results in associates.
(6)	Values shown for Verizon Wireless are not included in the calculation of Group revenue or adjusted EBITDA as Verizon Wireless is an associate.

84   Vodafone Group Plc Annual Report 2010

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 74.

	2010			2009			2008
	£m			£m			£m
Adjusted EBITDA		14,735			14,490			13,178
Depreciation and amortisation including loss on disposal of fixed assets		(8,011	)		(6,824	)		(5,979	)
Share of results in associates		4,742			4,091			2,876
Impairment losses, net		(2,100	)		(5,900	)		—
Other income and expense		114			—			(28	)
Operating profit		9,480			5,857			10,047

					Other
					expenditure		Depreciation
	Non-current		Capital		on intangible		and			Impairment
	assets (1)		expenditure(2)		assets		amortisation			losses, net
	£m		£m		£m		£m			£m
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		8,862		618		—		781			—
Europe		66,737		3,031		78		4,536			—
Vodacom		7,783		520		—		1,005			—
Other Africa and Central Europe		6,357		869		228		811			(200	)
Africa and Central Europe		14,140		1,389		228		1,816			(200	)
India		8,665		853		—		848			2,300
Other Asia Pacific and Middle East		4,589		552		—		634			—
Asia Pacific and Middle East		13,254		1,405		—		1,482			2,300
Common Functions		769		367		19		76			—
Group		94,900		6,192		325		7,910			2,100
31 March 2009
Germany		21,617		750		16		1,378			—
Italy		18,666		521		—		735			—
Spain		13,324		632		—		606			3,400
UK		7,414		446		—		1,010			—
Other Europe		9,375		511		—		766			—
Europe		70,396		2,860		16		4,495			3,400
Vodacom		2,287		237		—		231			—
Other Africa and Central Europe		5,700		625		21		837			2,500
Africa and Central Europe		7,987		862		21		1,068			2,500
India		10,308		1,351		—		746			—
Other Asia Pacific and Middle East		4,687		524		1,101		484			—
Asia Pacific and Middle East		14,995		1,875		1,101		1,230			—
Common Functions		810		312		—		21			—
Group		94,188		5,909		1,138		6,814			5,900
31 March 2008
Germany				613		14		1,229			—
Italy				411		1		627			—
Spain				533		—		522			—
UK				465		—		1,016			—
Other Europe				469		11		650			—
Europe				2,491		26		4,044			—
Vodacom				204		2		219			—
Other Africa and Central Europe				702		5		698			—
Africa and Central Europe				906		7		917			—
India				1,030		—		562			—
Other Asia Pacific and Middle East				463		—		394			—
Asia Pacific and Middle East				1,493		—		956			—
Common Functions				185		8		(8	)		—
Group				5,075		41		5,909			—

Notes:
(1)	Includes goodwill, other intangible assets and property, plant and equipment.
(2)	Includes additions to property, plant and equipment and computer software, reported within intangible assets.

Vodafone Group Plc Annual Report 2010   85

Notes to the consolidated financial statements continued

4. Operating profit

Operating profit has been arrived at after charging/(crediting):

	2010			2009			2008
	£m			£m			£m
Net foreign exchange (gains)/losses		(29	)		30			(27	)
Depreciation of property, plant and equipment (note 11):
Owned assets		4,412			4,025			3,400
Leased assets		44			36			27
Amortisation of intangible assets (note 9)		3,454			2,753			2,482
Impairment losses, net (note 10)		2,100			5,900			—
Research and development expenditure		303			280			234
Staff costs (note 32)		3,770			3,227			2,698
Operating lease rentals payable:
Plant and machinery		71			68			43
Other assets including fixed line rentals		1,587			1,331			1,117
Loss on disposal of property, plant and equipment		101			10			70
Own costs capitalised attributable to the construction or acquisition of property, plant and equipment		(296	)		(273	)		(245	)

The total remuneration of the Group’s auditor, Deloitte LLP, and its affiliates for services provided to the Group is analysed below:

	2010		2009		2008
	£m		£m		£m
Audit fees:
Parent company		1		1		1
Subsidiaries(1)		7		5		5
		8		6		6
Fees for statutory and regulatory filings		1		2		1
Audit and audit-related fees		9		8		7
Other fees:
Taxation		1		1		1
Other		—		—		1
		1		1		2
Total fees		10		9		9

Note:
(1)	The increase primarily arises 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 £2 million (2009: £3 million; 2008: £2 million) and £7 million (2009: £6 million; 2008: £3 million) respectively to Deloitte LLP and its affiliates during the year. Deloitte LLP and its affiliates 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 55.

86   Vodafone Group Plc Annual Report 2010

Financials

5. Investment income and financing costs

	2010			2009			2008
	£m			£m			£m
Investment income:
Available-for-sale investments:
Dividends received		145			110			72
Loans and receivables at amortised cost		423			339			451
Fair value through the income statement (held for trading):
Derivatives — foreign exchange contracts		3			71			125
Other(1)		92			275			66
Equity put rights and similar arrangements(2)		53			—			—
		716			795			714
Financing costs:
Items in hedge relationships:
Other loans		888			782			612
Interest rate swaps		(464	)		(180	)		61
Dividends on redeemable preference shares		56			53			42
Fair value hedging instrument		228			(1,458	)		(635	)
Fair value of hedged item		(183	)		1,475			601
Cash flow hedges transferred from equity		82			—			—
Other financial liabilities held at amortised cost:
Bank loans and overdrafts		591			452			347
Other loans(3)		185			440			390
Potential interest on settlement of tax issues(4)		(178	)		(81	)		399
Equity put rights and similar arrangements(2)		94			627			143
Finance leases		7			1			7
Fair value through the income statement (held for trading):
Derivatives — forward starting swaps and futures		206			308			47
		1,512			2,419			2,014
Net financing costs		796			1,624			1,300

Notes:
(1)	Amounts include foreign exchange gains on certain intercompany balances and investments held following the disposal of Vodafone Japan to SoftBank.
(2)	Includes amounts in relation to the Group’s arrangements with non-controlling shareholders in India. Further information is provided in “Option agreements and similar arrangements” on page 44.
(3)	Amount for 2010 includes £48 million (2009: £94 million) of foreign exchange losses arising from net investments in foreign operations.
(4)	Amount for 2010 and 2009 includes a reduction of the provision for potential interest on tax issues.

Vodafone Group Plc Annual Report 2010   87

Notes to the consolidated financial statements continued

6. Taxation

Income tax expense

	2010			2009			2008
	£m			£m			£m
United Kingdom corporation tax (income)/expense:
Current year		40			(132	)		—
Adjustments in respect of prior years		(4	)		(318	)		(53	)
		36			(450	)		(53	)
Overseas current tax expense/(income):
Current year		2,377			2,111			2,539
Adjustments in respect of prior years		(1,718	)		(934	)		(293	)
		659			1,177			2,246
Total current tax expense		695			727			2,193
Deferred tax on origination and reversal of temporary differences:
United Kingdom deferred tax		(166	)		20			(125	)
Overseas deferred tax		(473	)		362			177
Total deferred tax (income)/expense		(639	)		382			52
Total income tax expense		56			1,109			2,245

Tax charged/(credited) directly to other comprehensive income

	2010			2009			2008
	£m			£m			£m
Current tax (credit)/charge		(38	)		133			—
Deferred tax charge/(credit)		137			(72	)		(63	)
Total tax charged/(credited) directly to other comprehensive income		99			61			(63	)

Tax (credited)/charged directly to equity

	2010			2009		2008
	£m			£m		£m
Current tax (credit)/charge		(1	)		1		(5	)
Deferred tax (credit)/charge		(10	)		8		(2	)
Total tax (credited)/charged directly to equity		(11	)		9		(7	)

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% for 2010 and 2009 and 30% for 2008, 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 26.

	2010			2009			2008
	£m			£m			£m
Profit before tax as shown in the consolidated income statement		8,674			4,189			9,001
Expected income tax expense on profit at UK statutory tax rate		2,429			1,173			2,700
Effect of taxation of associates, reported within operating profit		160			118			134
Impairment losses with no tax effect		588			1,652			—
Impact of agreement of German write down losses(1)		(2,103	)		—			—
Expected income tax expense at UK statutory rate on profit, before impairment losses and taxation of associates		1,074			2,943			2,834
Effect of different statutory tax rates of overseas jurisdictions		516			382			320
Effect of current year changes in statutory tax rates		35			(31	)		66
Deferred tax on overseas earnings		5			(26	)		255
Assets revalued for tax purposes		—			(155	)		(16	)
Effect of previously unrecognised temporary differences including losses		(1,040	)		(881	)		(833	)
Adjustments in respect of prior years(1)		(387	)		(1,124	)		(254	)
Expenses not deductible for tax purposes and other items		425			423			321
Exclude taxation of associates		(572	)		(422	)		(448	)
Income tax expense		56			1,109			2,245

Note:
(1)	See ‘Taxation’ on page 26.

88   Vodafone Group Plc Annual Report 2010

Financials

Deferred tax

Analysis of movements in the net deferred tax balance during the year:

	£m
1 April 2009		(6,012	)
Exchange movements		(15	)
Credited to the profit for the financial year		639
Debited to other comprehensive income		(137	)
Credited directly to equity		10
Reclassification from current tax		2
Arising on acquisition		(853	)
Change in consolidation status		22
31 March 2010		(6,344	)

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		(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 timing differences		745			4,796		(3,135	)		(2,295	)		(634	)
31 March 2010		639			33,239		(10,102	)		(29,481	)		(6,344	)

Analysed in the balance sheet, after offset of balances within countries, as:

	£m
Deferred tax asset		1,033
Deferred tax liability		(7,377	)
31 March 2010		(6,344	)

	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		(330	)		765		(2,488	)		(52	)		(1,775	)
Tax losses		(366	)		23,538		—			(23,386	)		152
Deferred tax on overseas earnings		26			—		(4,052	)		—			(4,052	)
Other short-term timing differences		288			3,927		(2,416	)		(1,848	)		(337	)
31 March 2009		(382	)		28,230		(8,956	)		(25,286	)		(6,012	)

Analysed in the balance sheet, after offset of balances within countries, as:

	£m
Deferred tax asset		630
Deferred tax liability		(6,642	)
31 March 2009		(6,012	)

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.

Vodafone is routinely subject to audit by tax authorities in the territories in which it operates, and the items discussed below have reached litigation. Provisions are held 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 our overall profitability and cash flows in future periods.

Following the conclusion of our legal challenge to the UK Controlled Foreign Company (‘CFC’) rules (see the legal proceedings section of note 29), HMRC are enquiring into the establishment and activities of certain Group holding companies in Luxembourg to determine whether they constitute ‘wholly artificial arrangements’, which the Group maintains that they do not. The Group carries provisions of £2.2 billion in relation to the potential tax exposure at 31 March 2010 (2009: £ 2.2 billion).

A Spanish subsidiary, Vodafone Holdings Europe SL (‘VHESL’), is in disagreement with the Spanish tax authorities regarding the tax treatment of interest expenses claimed by VHESL in the accounting periods ended 31 March 2003 and 31 March 2004. In October 2009 the first tier Spanish court ruled against VHESL. VHESL has appealed and the legal process is expected to continue for a number of years.

Vodafone Group Plc Annual Report 2010   89

Notes to the consolidated financial statements continued

6. Taxation continued

At 31 March 2010 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		12		—		4,070		4,082
Losses for which no deferred tax asset is recognised		1,820		57		100,396		102,273
		1,832		57		104,466		106,355

Included above are losses amounting to £1,909 million (2009: £1,940 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 £83,168 million (2009: £77,780 million) that have arisen in overseas holding companies as a result of revaluations of those companies’ investments for local GAAP purposes. Since it is uncertain whether these losses will be utilised, no deferred tax asset has been recognised.

During the year the German tax authorities decided to allow £13,513 million of a potential £46,716 million of losses arising on the write down of investments in Germany (see “Taxation” on page 26). These losses are available to use against both federal and trade tax liabilities in Germany. Losses of £3,922 million (£1,747 million for federal tax and £2,175 million for trade tax) are included in the above table on which the Group has recognised a deferred tax asset. The Group has not recognised a deferred tax asset on £14,544 million (£9,391 million for federal tax and £5,153 million for trade tax) of the losses as it is uncertain that these losses will be utilised.

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 £51,783 million (2009: £63,551 million) of unremitted earnings of subsidiaries, associates 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

	2010		2009		2008
	£m		£m		£m
Declared during the financial year:
Final dividend for the year ended 31 March 2009: 5.20 pence per share (2008: 5.02 pence per share, 2007: 4.41 pence per share)		2,731		2,667		2,331
Interim dividend for the year ended 31 March 2010: 2.66 pence per share (2009: 2.57 pence per share, 2008: 2.49 pence per share)		1,400		1,350		1,322
		4,131		4,017		3,653
Proposed after the end of the reporting period and not recognised as a liability:
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

8. Earnings per share

	2010		2009		2008
	Millions		Millions		Millions
Weighted average number of shares for basic earnings per share		52,595		52,737		53,019
Effect of dilutive potential shares: restricted shares and share options		254		232		268
Weighted average number of shares for diluted earnings per share		52,849		52,969		53,287

	£m		£m		£m
Earnings for basic and diluted earnings per share		8,645		3,078		6,660

90   Vodafone Group Plc Annual Report 2010

Financials

9. Intangible assets

				Licences and			Computer
	Goodwill			spectrum			software			Other			Total
	£m			£m			£m			£m			£m
Cost:
1 April 2008		91,762			22,040			5,800			1,188			120,790
Exchange movements		14,298			2,778			749			153			17,978
Arising on acquisition		613			199			69			130			1,011
Additions		—			1,138			1,144			—			2,282
Disposals		—			(1	)		(403	)		—			(404	)
Change in consolidation status		(9	)		(16	)		—			—			(25	)
31 March 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
Accumulated impairment losses and amortisation:
1 April 2008		40,426			5,132			4,160			741			50,459
Exchange movements		6,630			659			569			126			7,984
Amortisation charge for the year		—			1,522			885			346			2,753
Impairment losses		5,650			250			—			—			5,900
Disposals		—			—			(391	)		—			(391	)
Change in consolidation status		—			(11	)		—			—			(11	)
31 March 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, net		2,300			(200	)		—			—			2,100
Disposals		—			—			(87	)		—			(87	)
31 March 2010		53,158			8,918			5,924			1,774			69,774
Net book value:
31 March 2009		53,958			18,586			2,136			258			74,938
31 March 2010		51,838			18,629			2,320			1,471			74,258

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 £2,570 million (2009: £2,765 million) have been pledged as security against borrowings.

The net book value at 31 March 2010 and expiry dates of the most significant licences are as follows:

		2010		2009
	Expiry date	£m		£m
Germany	December 2020		4,802		5,452
UK	December 2021		3,914		4,246
Qatar	June 2028		1,328		1,482
Italy	December 2021		1,097		1,240

Vodafone Group Plc Annual Report 2010   91

Notes to the consolidated financial statements continued

10. Impairment

Impairment losses, net

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:

		2010			2009		2008
Cash generating unit	Reportable segment	£m			£m		£m
India	India		2,300			—		—
Spain	Spain		—			3,400		—
Turkey	Other Africa and Central Europe		(200	)		2,250		—
Ghana	Other Africa and Central Europe		—			250		—
			2,100			5,900		—

Year ended 31 March 2010

The net impairment losses were based on value in use calculations. The pre-tax adjusted discount rate used in the most recent value in use in the year ended 31 March 2010 calculation are as follows:

	Pre-tax adjusted
	discount rate
India		13.8	%
Turkey		17.6	%

India

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%.

Turkey

During the year ended 31 March 2010 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 rate used in the most recent value in use in the year ended 31 March 2009 calculation are as follows:

	Pre-tax adjusted
	discount rate
Spain		10.3	%
Turkey(1)		19.5	%
Ghana		26.9	%

Note:

(1) The pre-tax adjusted discount rate used in the value in use calculation at 30 September 2008 was 18.6%.

Spain

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. The pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 January 2008 was 10.6%.

Turkey

During the year ended 31 March 2009 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 pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 January 2008 was 16.2%.

Ghana

During the year ended 31 March 2009 the goodwill in relation to the Group’s operations in Ghana was impaired by £250 million following an increase in the discount rate. The cash flow projections within the business plan used for impairment testing was substantially unchanged from the acquisition business case in 2008.

Goodwill

The carrying value of goodwill at 31 March was as follows:

	2010		2009
	£m		£m
Germany		12,301		12,786
Italy		14,786		15,361
Spain		10,167		10,561
		37,254		38,708
Other		14,584		15,250
		51,838		53,958

92   Vodafone Group Plc Annual Report 2010

Financials

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 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 eight 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 based on the risk free rate for ten year bonds issued by the government in the respective market, where possible 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 2010

The estimated recoverable amount of the Group’s operations in India equalled its respective carrying value and, consequently, any adverse change in key assumption 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, £1,207 million respectively.

Vodafone Group Plc Annual Report 2010   93

Notes to the consolidated financial statements continued

10. Impairment continued

The tables below show the key assumptions used in the value in use calculation and, for India, Turkey, Germany, Ghana, Greece, Ireland, Italy, Portugal, Romania, Spain and the UK, 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.

	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.

	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.

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/ (reversal) recognised in the year ended 31 March 2010:

	India						Turkey						All other
	Increase			Decrease			Increase			Decrease			Increase			Decrease
	by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps			by 2 pps
	£bn			£bn			£bn			£bn			£bn			£bn
Pre-tax adjusted discount rate		(1.7	)		2.3			(0.3	)		n/a			(4.4	)		—
Long-term growth rate		2.3			(1.6	)		n/a			(0.1	)		—			(3.7	)
Budgeted adjusted EBITDA(1)		0.2			(0.2	)		n/a			—			—			—
Budgeted capital expenditure(2)		(0.2	)		0.2			—			n/a			—			—

Notes:

(1)	Represents the compound annual growth rate for 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)	Represents 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 2009

The estimated recoverable amount of the Group’s operations in Spain, Turkey and Ghana equalled their respective carrying value and, consequently, any adverse change in key assumption would, in isolation, cause a further impairment loss to be recognised. The estimated recoverable amount of the Group’s operations in the UK, Ireland, Romania, Germany and Italy exceeded their carrying value by approximately £900 million, £60 million, £300 million, £9,250 million and £2,200 million respectively. The tables below show the key assumptions used in the value in use calculation and, for the UK, Ireland, Romania, Germany and Italy, 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.

	Assumptions used in value in use calculation
	Spain			Turkey(1)		Ghana		UK			Ireland			Romania			Germany		Italy
	%			%		%		%			%			%			%		%
Pre-tax adjusted discount rate		10.3			19.5		26.9		8.6			10.2			14.8			8.5		11.8
Long-term growth rate		1.1			7.5		7.3		1.0			—			1.1			1.1		—
Budgeted adjusted EBITDA(2)		(3.9	)		22.3		37.2		(2.8	)		(3.5	)		(3.1	)		n/a		2.2
Budgeted capital expenditure(3)		9.1 - 11.8			8.2 - 69.8		7.7 - 91.6		n/a			n/a			n/a			5.5 - 9.7		7.7 - 9.9

Notes:

(1)	The assumptions listed in the table were used in the value in use calculation at 31 March 2009. The pre-tax adjusted discount rate, long-term growth rate, budgeted adjusted EBITDA and budgeted capital expenditure assumptions used in the value in use calculation at 30 September 2008 were 18.6%, 10.0%, 13.1% and 8.2% to 54.7%.
(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.

94   Vodafone Group Plc Annual Report 2010

Financials

	Change required for carrying value to equal the recoverable amount
	UK			Ireland			Romania			Germany			Italy
	pps			pps			pps			pps			pps
Pre-tax adjusted discount rate		0.9			0.2			2.2			3.3			1.4
Long-term growth rate		(1.1	)		(0.3	)		(3.4	)		(3.9	)		(1.5	)
Budgeted adjusted EBITDA(1)		(6.9	)		(1.6	)		(9.0	)		n/a			(9.1	)
Budgeted capital expenditure(2)		n/a			n/a			n/a			23.8			8.5

Notes:

(1)	Budgeted adjusted EBITDA is expressed as the compound annual growth rates in the initial five years 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 five years 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 2008		1,430			35,814			37,244
Exchange movements		191			4,775			4,966
Arising on acquisition		15			223			238
Additions		100			4,665			4,765
Disposals		(101	)		(1,450	)		(1,551	)
Transfer to investment in associates		—			(298	)		(298	)
Reclassifications		(214	)		214			—
31 March 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	)
Reclassifications		24			(58	)		(34	)
31 March 2010		1,577			46,845			48,422
Accumulated depreciation and impairment:
1 April 2008		522			19,987			20,509
Exchange movements		79			2,811			2,890
Charge for the year		91			3,970			4,061
Disposals		(17	)		(1,217	)		(1,234	)
Transfer to investment in associates		—			(112	)		(112	)
Reclassifications		(92	)		92			—
31 March 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	)
Reclassifications		(2	)		(22	)		(24	)
31 March 2010		633			27,147			27,780
Net book value:
31 March 2009		838			18,412			19,250
31 March 2010		944			19,698			20,642

The net book value of land and buildings and equipment, fixtures and fittings includes £91 million and £111 million respectively (2009: £106 million and £82 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 £45 million and £1,496 million respectively (2009: £44 million and £1,186 million). Property, plant and equipment with a net book value of £389 million (2009: £148 million) has been pledged as security against borrowings.

Vodafone Group Plc Annual Report 2010   95

Notes to the consolidated financial statements continued

12. Principal subsidiaries

At 31 March 2010 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
Gateway Group (Pty) Limited	Holding company	South Africa		65.3
Ghana Telecommunications Company Limited	Network operator	Ghana		70.0
VM, SA(3)	Network operator	Mozambique		55.5
Vodacom Congo (RDC) s.p.r.l.	Network operator	The Democratic Republic of Congo		33.3
Vodacom Group Limited(4)(5)	Network operator	South Africa		65.3
Vodacom Lesotho (Pty) Limited	Network operator	Lesotho		57.7
Vodacom Tanzania Limited	Network operator	Tanzania		42.4
Vodafone Albania Sh.A.	Network operator	Albania		99.9
Vodafone Americas Inc.(6)	Holding company	USA		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(7)	Network operator	India		57.6
Vodafone Europe B.V.	Holding company	Netherlands		100.0
Vodafone Group Services Limited(8)	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 Hungary Mobile Telecommunications Company Limited	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.(9)	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.
(2)	Effective ownership percentages of Vodafone Group Plc at 31 March 2010, rounded to nearest tenth of one percent.
(3)	The share capital of VM, SA consists of 1,380,000,000 ordinary shares and 9,158,334,043 preference shares.
(4)	Vodacom Group Limited was converted to a public company on 18 May 2009 and, accordingly, changed its name from Vodacom Group (Pty) Limited.
(5)	At 31 March 2010 the Group owned 65.0% of the issued share capital of Vodacom Group Limited (‘Vodacom’) with the 65.3% ownership interest in the outstanding shares in Vodacom resulting from the acquisition of treasury shares by Vodacom.
(6)	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.
(7)	The Group’s aggregate direct and indirect equity interest in Vodafone Essar Limited was 57.59% at 31 March 2010. The Group has call options to acquire shareholdings in three companies which indirectly own further 9.39% interests in Vodafone Essar Limited. 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 Indian law prevailing at the time of exercise, the Group would have a direct and indirect interest of 66.98% of Vodafone Essar Limited.
(8)	Share capital consists of 600 ordinary shares and one deferred share, of which 100% of the shares are held directly by Vodafone Group Plc.
(9)	38.6% of the issued share capital of Vodafone Portugal-Comunicações Pessoais, S.A. is held directly by Vodafone Group Plc.

96   Vodafone Group Plc Annual Report 2010

Financials

13. Investments in joint ventures

Principal joint ventures

At 31 March 2010 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		24.2	(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 57.6% 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 (see note 26) 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 following completion of the share allocation for the public offering of 25% of Safaricom’s shares previously held by the Government of Kenya and termination of the shareholding agreement with the Government of Kenya. The results of Australia are included from 9 June 2009 following its merger with Hutchison 3G Australia (see note 26) and results from the 4.8% stake in Polkomtel acquired during the 2009 financial year are included from 18 December 2008.

	2010			2009			2008
	£m			£m			£m
Revenue		7,896			7,737			6,448
Cost of sales		(4,216	)		(4,076	)		(3,225	)
Gross profit		3,680			3,661			3,223
Selling, distribution and administrative expenses		(1,369	)		(1,447	)		(1,155	)
Operating income and expense		(12	)		—			—
Operating profit		2,299			2,214			2,068
Net financing costs		(152	)		(170	)		(119	)
Profit before tax		2,147			2,044			1,949
Income tax expense		(655	)		(564	)		(829	)
Profit for the financial year		1,492			1,480			1,120

	2010		2009
	£m		£m
Non-current assets		20,787		22,688
Current assets		763		1,148
Total assets		21,550		23,836
Total shareholders’ funds		17,407		20,079
Non-controlling interests		—		20
Total equity		17,407		20,099
Non-current liabilities		833		865
Current liabilities		3,310		2,872
Total liabilities		4,143		3,737
Total equity and liabilities		21,550		23,836

Vodafone Group Plc Annual Report 2010   97

Notes to the consolidated financial statements continued

14. Investments in associates

At 31 March 2010 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	USA		45.0
Société Française du Radiotéléphone S.A.	Network operator	France		44.0
Safaricom Limited(3)(4)	Network operator	Kenya		40.0

Notes:

(1)	Rounded to nearest tenth of one percent.
(2)	Cellco Partnership trades under the name Verizon Wireless.
(3)	The Group also holds two non-voting shares.
(4)	At 31 March 2010 the fair value of Safaricom Limited was KES89 billion (£756 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.

	2010		2009		2008
	£m		£m		£m
Revenue		23,288		19,307		13,630
Share of result in associates		4,742		4,091		2,876
Share of discontinued operations in associates		93		57		—

	2010		2009
	£m		£m
Non-current assets		47,048		50,732
Current assets		4,901		4,641
Share of total assets		51,949		55,373
Non-current liabilities		8,295		8,668
Current liabilities		6,685		11,394
Non-controlling interests		592		596
Share of total liabilities and non-controlling interests		15,572		20,658
Share of equity shareholders’ funds in associates		36,377		34,715

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:

	2010		2009
	£m		£m
Included within non-current assets:
Listed securities:
Equity securities		4,072		3,931
Unlisted securities:
Equity securities		879		833
Public debt and bonds		11		20
Other debt and bonds		2,355		2,094
Cash held in restricted deposits		274		182
		7,591		7,060
Included within current assets:
Government bonds		388		—

The fair values of listed securities are based on quoted market prices and include the Group’s 3.2% investment in China Mobile Limited, which is listed on the Hong Kong and New York stock exchanges and incorporated under the laws of Hong Kong. China Mobile Limited is a mobile network operator and its principal place of operation is China.

Unlisted equity securities include a 26% interest in Bharti Infotel Private Limited, through which the Group has a 4.36% 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 from which their fair values can be derived.

For public debt and bonds and cash held in restricted deposits, the carrying amount approximates fair value.

Other debt and bonds include preferred equity and a subordinated loan received as part of the disposal of Vodafone Japan to SoftBank. The fair value of these instruments cannot be reliably measured as there is no active market in which these are traded. As discussed in note 29, 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 initial security takes the form of a Japanese law share pledge over 400,000 class 1 preferred shares of ¥200,000 in BB Mobile Corp, a subsidiary of SoftBank.

Current short-term investments of £388 million (2009: £nil) are classified as available-for-sale and consist of index linked government bonds which are held on an effective floating rate basis.

98   Vodafone Group Plc Annual Report 2010

Financials  

16. Inventory

	2010		2009
	£m		£m
Goods held for resale		433		412

Inventory is reported net of allowances for obsolescence, an analysis of which is as follows:

	2010		2009			2008
	£m		£m			£m
1 April		111		118			100
Exchange movements		5		13			11
Amounts charged /(credited) to the income statement		4		(20	)		7
31 March		120		111			118

Cost of sales includes amounts related to inventory amounting to £5,268 million (2009: £4,853 million; 2008: £4,320 million).

17. Trade and other receivables

	2010		2009
	£m		£m
Included within non-current assets:
Trade receivables		59		56
Other receivables		678		423
Prepayments and accrued income		148		132
Derivative financial instruments		1,946		2,458
		2,831		3,069
Included within current assets:
Trade receivables		4,008		3,751
Amounts owed by associates		24		50
Other receivables		1,122		744
Prepayments and accrued income		3,448		2,868
Derivative financial instruments		182		249
		8,784		7,662

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:

	2010			2009
	£m			£m
1 April		874			664
Exchange movements		(27	)		101
Amounts charged to administrative expenses		465			423
Trade receivables written off		(383	)		(314	)
31 March		929			874

The carrying amounts of trade and other receivables approximate their fair value. Trade and other receivables are predominantly non-interest bearing.

	2010		2009
	£m		£m
Included within “Derivative financial instruments”:
Fair value through the income statement (held for trading):
Interest rate swaps		1,031		16
Foreign exchange swaps		132		104
		1,163		120
Fair value hedges:
Interest rate swaps		965		2,587
		2,128		2,707

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 2010  99

Notes to the consolidated financial statements continued

18. Cash and cash equivalents

	2010			2009
	£m			£m
Cash at bank and in hand		745			811
Money market funds		3,678			3,419
Repurchase agreements		—			648
Cash and cash equivalents as presented in the statement of financial position		4,423			4,878
Bank overdrafts		(60	)		(32	)
Cash and cash equivalents as presented in the statement of cash flows		4,363			4,846

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 these assets approximates their fair value.

19. Called up share capital

	2010				2009
	Number		£m		Number			£m
Authorised:
Ordinary shares of 113/7 US cents each		68,250,000,000		4,875		68,250,000,000			4,875
B shares of 15 pence each		38,563,935,574		5,784		38,563,935,574			5,784
Deferred shares of 15 pence each		28,036,064,426		4,206		28,036,064,426			4,206
Ordinary shares allotted, issued and fully paid:(1)
1 April		57,806,283,716		4,153		58,255,055,725			4,182
Allotted during the year		2,963,016		—		51,227,991			3
Cancelled during the year		—		—		(500,000,000	)		(32	)
31 March		57,809,246,732		4,153		57,806,283,716			4,153
B shares allotted, issued and fully paid:(2)
1 April		—		—		87,429,138			13
Redeemed during the year		—		—		(87,429,138	)		(13	)
31 March		—		—		—			—

Notes:
(1)	At 31 March 2010 the Group held 5,146,112,159 (2009: 5,322,411,101) treasury shares with a nominal value of £370 million (2009: £382 million). The market value of shares held was £7,822 million (2009: £6,533 million). During the year 149,298,942 (2009: 41,146,589) treasury shares were reissued under Group share option schemes. The number of shares held by the Group as treasury shares, at 31 March 2010, has been adjusted down by 27 million which represents a number of shares that the Company previously reported as being purchased on the 10 September 2008, via Lehman Brothers International (Europe) (‘LBIE’), and held in treasury. As a result of LBIE being placed in administration on the 15 September 2008 the shares were not settled to the Company’s designated treasury account and are believed to be held in a proprietary account with the administrator. The Company has treated the transaction to buy back the shares as failed.
(2)	On 31 July 2006 the Company undertook a return of capital to shareholders via a B share scheme and associated share consolidation. A total of 66,271,035,240 B shares were issued on that day, and 66,271,035,240 existing ordinary shares of 10 US cents each were consolidated into 57,987,155,835 new ordinary shares of 113/7 US cents each. B shareholders were given the alternatives of initial redemption or future redemption at 15 pence per share or the payment of an initial dividend of 15 pence per share. The initial redemption took place on 4 August 2006 with future redemption dates on 5 February and 5 August each year until 5 August 2008 when the Company redeemed all B shares still in issue at their nominal value of 15 pence.

Allotted during the year

			Nominal		Net
			value		proceeds
	Number		£m		£m
UK share awards and option scheme awards		1,612,486		—		1
US share awards and option scheme awards		1,350,530		—		2
Total for share awards and option scheme awards		2,963,016		—		3

100  Vodafone Group Plc Annual Report 2010

Financials  

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 2010.

There are options outstanding under a number of plans: the Vodafone Group 1998 Executive Share Option Scheme and the Vodafone Group 1988 Share Option Scheme, the Vodafone Group 1999 Long-Term 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.

Other share option plans

Share option plans are operated by certain of the Group’s subsidiaries although awards are no longer made under these plans.

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.

Under the Vodafone Group Deferred Share Bonus Plan, directors and certain employees were able to defer their 2007 annual bonuses into shares. These shares were released in 2009 together with additional shares based on the outcome of a two year performance condition.

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.

Vodafone Group Global AllShare Plan

A significant number of employees received a conditional award of 340 shares (2009: 290) in the Company on 30 June 2009 under the Vodafone Group Global AllShare Plan. The awards vest after two years and are not subject to performance conditions but are subject to continued employment. There will be no further grants under this plan.

Movements in ordinary share options and ADS options outstanding

	ADS options							Ordinary share options
	2010		2009		2008			2010			2009			2008
	Millions		Millions		Millions			Millions			Millions			Millions
1 April		1		1		3			334			373			584
Granted during the year		—		—		—			13			7			46
Forfeited during the year		—		—		—			(2	)		(11	)		(30	)
Exercised during the year		—		—		(1	)		(47	)		(16	)		(204	)
Expired during the year		—		—		(1	)		(32	)		(19	)		(23	)
31 March		1		1		1			266			334			373
Weighted average exercise price:
1 April		$15.37		$18.15		$21.46			£1.41			£1.42			£1.35
Granted during the year		—		—		—			£0.94			£1.21			£1.63
Forfeited during the year		—		—		—			£1.50			£1.47			£1.67
Exercised during the year		—		—		$19.52			£1.11			£1.09			£1.20
Expired during the year		—		—		$28.50			£1.67			£1.55			£1.72
31 March		$15.07		$15.37		$18.15			£1.41			£1.41			£1.42

Vodafone Group Plc Annual Report 2010  101

Notes to the consolidated financial statements continued

20. Share-based payments continued

Summary of options outstanding and exercisable at 31 March 2010

	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		14		£0.94		40		—		—		—
£1.01 – £2.00		8		£1.24		24		—		—		—
		22		£1.04		35		—		—		—
Vodafone Group executive plans:
£1.01 – £2.00		8		£1.58		16		8		£1.58		16
£2.01 – £3.00		14		£2.79		4		14		£2.79		4
		22		£2.36		8		22		£2.36		8
Vodafone Group 1999 Long-Term Stock Incentive Plan:
£0.01 – £1.00		55		£0.90		27		55		£0.90		27
£1.01 – £2.00		165		£1.49		42		139		£1.46		33
£2.01 – £3.00		1		£2.92		4		1		£2.92		4
		221		£1.36		38		195		£1.31		31
Other share option plans:
£1.01 – greater than £3.01		1		£2.63		20		1		£2.63		20
Vodafone Group 1999 Long-Term Stock Incentive Plan:
$10.01 – $30.00		1		$15.07		30		1		$14.76		29

Fair value of options granted

	ADS options			Ordinary share options
				Board of directors and
	Other(1)			Executive Committee(1)			Other
	2008			2008			2010			2009			2008
Expected life of option (years)		4-5			4-5			3-5			3-5			4-5
Expected share price volatility		25.5-33.5	%		25.7-27.7	%		32.5-33.5	%		30.9-31.0	%		25.5-33.5	%
Dividend yield		3.8-4.2	%		4.0-4.4	%		6.62	%		5.04	%		3.8-4.2	%
Risk free rates		4.4-5.7	%		5.5	%		2.5-3.0	%		4.9	%		4.4-5.7	%
Exercise price(2)	£	1.67-1.76			£1.68			£0.94			£1.21		£	1.67-1.76

Notes:
(1)	There were no options granted in the years ended 31 March 2010 and 31 March 2009.
(2)	In the year ended 31 March 2008 there was more than one option grant.

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. Certain options granted to the Board of directors and Executive Committee have a market based performance condition attached and as a result the assumptions are disclosed separately.

Share awards

Movements in non-vested shares during the year ended 31 March 2010 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 2009		32			£1.43		288			£1.11		320			£1.15
Granted		21			£1.02		147			£0.90		168			£0.92
Vested		(17	)		£1.53		(74	)		£1.00		(91	)		£1.10
Forfeited		(2	)		£1.19		(21	)		£1.00		(23	)		£1.02
31 March 2010		34			£1.15		340			£1.05		374			£1.06

Other information

The weighted average grant date fair value of options granted during the 2010 financial year was £0.26 (2009: £0.39; 2008: £0.34).

The total fair value of shares vested during the year ended 31 March 2010 was £100 million (2009: £84 million; 2008: £75 million).

The compensation cost included in the consolidated income statement in respect of share options and share plans was £150 million (2009: £128 million; 2008: £107 million) which is comprised entirely of equity-settled transactions.

The average share price for the year ended 31 March 2010 was 132 pence.

102   Vodafone Group Plc Annual Report 2010

Financials  

21. Capital and financial risk management

Capital management

The following table summarises the capital of the Group:

	2010			2009
	£m			£m
Cash and cash equivalents		(4,423	)		(4,878	)
Borrowings		39,795			41,373
Other financial instruments		(2,056	)		(2,272	)
Net debt		33,316			34,223
Equity		90,810			84,777
Capital		124,126			119,000

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 annually by the Board, most recently on 28 July 2009. 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 auditors review 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. In light of the ongoing financial conditions within the banking sector the Group has reviewed the types of financial risk it faces and continues to monitor these on an ongoing basis. The Group considers that credit risk in the banking sector remains high and has mitigated this risk by the adoption of collateral support agreements for the majority of its bank counterparties.

Credit risk

The Group considers its exposure to credit risk at 31 March to be as follows:

	2010		2009
	£m		£m
Cash at bank and in hand		745		811
Cash held in restricted deposits		274		182
Government bonds		388		—
Repurchase agreements		—		648
Money market fund investments		3,678		3,419
Derivative financial instruments		2,128		2,707
Other investments — debt and bonds		2,366		2,114
Trade receivables		4,067		3,807
		13,646		13,688

The Group has invested in index linked government bonds for the first time this year on the basis that they generate a swap return in excess of £ LIBOR.

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.

The Group invests in repurchase agreements which are fully collateralised investments. The collateral is sovereign and supranational debt of major EU countries denominated in euros and US dollars and can be readily converted to cash. In the event of any default, ownership of the collateral would revert to the Group. At 31 March 2010 the Group had no outstanding repurchase agreements (2009: £648 million). The value of the collateral held by the Group at 31 March 2009 is shown below:

	2010		2009
	£m		£m
Sovereign		—		544
Supranational		—		104
		—		648

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 2010:

	2010		2009
	£m		£m
Cash collateral		604		691

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 2010 £2,111 million (2009: £1,987 million) of trade receivables were not yet due for payment. Total trade receivables consisted of £2,506 million (2009: £2,798 million) relating to the Europe region, £997 million (2009: £561 million) relating to the Africa and Central Europe region and £564 million (2009: £448 million) relating to the Asia Pacific and Middle East region. Accounts are monitored by management and provisions for bad and doubtful debts raised where it is deemed appropriate.

The following table presents ageing of receivables that are past due and are presented net of provisions for doubtful receivables that have been established.

	2010		2009
	£m		£m
30 days or less		1,499		1,430
Between 31 – 60 days		119		131
Between 61 – 180 days		155		121
Greater than 180 days		183		138
		1,956		1,820

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 2010 were £465 million (2009: £423 million, 2008: £293 million) (see note 17).

The Group has other investments in preferred equity and a subordinated loan received as part of the disposal of Vodafone Japan to SoftBank in the 2007 financial year. The carrying value of those investments at 31 March 2010 was £2,288 million (2009: £2,073 million). As discussed in notes 15 and 29 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 initial security takes the form of a Japanese law share pledge over 400,000 class 1 preferred shares of ¥200,000 in BB Mobile Corp, a subsidiary of SoftBank.

Vodafone Group Plc Annual Report 2010  103

Notes to the consolidated financial statements continued

21. Capital and financial risk management continued

Liquidity risk

At 31 March 2010 the Group had US$9.1 billion committed undrawn bank facilities and US$15 billion and £5 billion commercial paper programmes, supported by the US$9.1 billion 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 on capital markets.

US$4.1 billion of the committed facility has a maturity date of 28 July 2011 and the remaining US$5 billion has a maturity of 22 June 2012. 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 27 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 2010 amounted to £4,423 million (2009: £4,878 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 four years when at least 20% of net debt is fixed. 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 2010 36% (2009: 43%) 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 2010 there would be a reduction or increase in profit before tax by approximately £165 million (2009: increase or reduce by £175 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 2010 120% of net debt was denominated in currencies other than sterling (49% euro, 46% US dollar and 25% other) while 20% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via dividends. 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. A relative strengthening in the value of sterling against certain currencies in which the Group maintains cash and cash equivalents has resulted in a reduction in cash and cash equivalents of £257 million from currency translation differences in the year ended 31 March 2010 (2009: £371 million increase).

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. The Group is exposed to profit and loss account volatility on the retranslation of certain investments received upon the disposal of Vodafone Japan to SoftBank which

are yen denominated financial instruments but are owned by legal entities with either a sterling or euro functional currency. In addition, a US dollar denominated financial liability arising from the put rights granted over the Essar Group’s interests in Vodafone Essar in the 2008 financial year and discussed on page 44, were granted by a legal entity with a euro functional currency. A 19%, 8% or 12% (2009: 23%, 10% or 15%) change in the ¥/£, ¥/€ or US$/€ exchange rates would have a £146 million, £122 million or £393 million (2009: £164 million, £136 million and £496 million) impact on profit or loss in relation to these financial instruments.

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.

	2010
	£m
Euro 12% change — Operating profit		804
US dollar 15% change — Operating profit		617

At 31 March 2009 sensitivity of the Group’s operating profit was analysed for euro 12% change and US dollar 17% change, representing £347 million and £632 million respectively.

Equity risk

The Group has equity investments, primarily in China Mobile Limited and Bharti Infotel Private Limited, which are subject to equity risk. See note 15 to the consolidated financial statements for further details on the carrying value of these investments.

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 2010.

	Level 1(1)		Level 2(2)		Total
	£ m		£ m		£ m
Financial assets:
Derivative financial instruments:
Interest rate swaps		—		1,996		1,996
Foreign exchange contracts		—		132		132
Interest rate futures		—		20		20
		—		2,148		2,148
Financial investments available-for-sale:
Listed equity securities(3)		4,072		—		4,072
Unlisted equity securities(3)		—		623		623
		4,072		623		4,695
		4,072		2,771		6,843
Financial liabilities:
Derivative financial instruments:
Interest rate swaps		—		365		365
Foreign exchange contracts		—		95		95
		—		460		460

Notes:
(1)	Level 1 classification is used where fair value is determined by unadjusted quoted prices in active markets for identical assets or liabilities.
(2)	Level 2 classification is used where valuation inputs are observable directly or indirectly from quoted prices. Fair values for unlisted equity securities are derived from observable quoted market prices for similar items.
(3)	Details of listed and unlisted equity securities are included in note 15 “Other Investments”.

104  Vodafone Group Plc Annual Report 2010

Financials  

22. Borrowings

Carrying value and fair value information

	2010						2009
	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		3,460		4,183		7,643		893		5,159		6,052
Bank overdrafts		60		—		60		32		—		32
Redeemable preference shares		—		1,242		1,242		—		1,453		1,453
Commercial paper		2,563		—		2,563		2,659		—		2,659
Bonds		1,174		12,675		13,849		515		8,064		8,579
Other liabilities(1)(2)		3,906		385		4,291		1,015		4,122		5,137
Bonds in fair value hedge relationships		—		10,147		10,147		4,510		12,951		17,461
		11,163		28,632		39,795		9,624		31,749		41,373

Notes:
(1)	At 31 March 2010 amount includes £604 million (2009: £691 million) in relation to collateral support agreements.
(2)	Amounts at 31 March 2010 includes £3,405 million (2009: £3,606 million) in relation to the written put options disclosed in note 12 and written put options granted to the Essar Group that, if exercised, would allow the Essar Group to sell its 33% shareholding in Vodafone Essar to the Group for US$5 billion or to sell up to US$5 billion worth of Vodafone Essar shares at an independently appraised fair market value.

Banks loans include a ZAR 4.85 billion loan borrowed by Vodafone Holdings SA Pty Limited (‘VHSA’), which directly and indirectly owns the Group’s 65% 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 4.85 billion, being the carrying value of the bank loan at 31 March 2010 (2009: ZAR 6.4 billion). Bank loans also include INR175 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
	2010		2009		2010		2009			2010		2009
	£m		£m		£m		£m			£m		£m
Financial liabilities measured at amortised cost		11,023		5,131		11,130		5,108			11,163		5,114
Bonds in fair value hedge relationships:		—		4,320		—		4,397			—		4,510
4.25% euro 1,859 million bond due May 2009		—		1,720		—		1,722			—		1,780
4.75% euro 859 million bond due May 2009		—		794		—		798			—		831
7.75% US dollar 2,582 million bond due February 2010		—		1,806		—		1,877			—		1,899
Short-term borrowings		11,023		9,451		11,130		9,505			11,163		9,624

Vodafone Group Plc Annual Report 2010  105

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
	2010		2009		2010		2009		2010		2009
	£m		£m		£m		£m		£m		£m
Financial liabilities measured at amortised cost:
Bank loans		4,149		4,993		4,183		5,159		4,183		5,159
Redeemable preference shares		1,174		1,237		1,098		1,453		1,242		1,453
Other liabilities		385		4,314		385		4,186		385		4,122
Bonds:		11,455		6,976		11,961		6,559		12,675		8,064
US dollar floating rate note due June 2011		230		245		230		227		230		245
5.5% US dollar 750 million bond due June 2011		494		—		518		—		524		—
Euro floating rate note due January 2012		1,158		1,203		1,157		1,136		1,161		1,218
US dollar floating rate note due February 2012		329		350		329		322		329		350
5.35% US dollar 500 million bond due February 2012		329		—		351		—		352		—
3.625% euro 1,250 million bond due November 2012		1,113		—		1,157		—		1,149		—
6.75% Australian dollar 265 million bond due January 2013		160		—		161		—		167		—
Czech krona floating rate note due June 2013		19		18		19		18		19		18
Euro floating rate note due September 2013		757		786		756		714		758		788
5.0% US dollar 1,000 million bond due December 2013		658		—		704		—		718		—
6.875% euro 1,000 million bond due December 2013		891		—		1,024		—		936		—
Euro floating rate note due June 2014		1,113		1,157		1,099		1,029		1,114		1,158
4.15% US dollar 1,250 million bond due June 2014		823		—		856		—		852		—
5.125% euro 500 million bond due April 2015		445		463		496		470		475		495
3.375% US dollar 500 million bond due November 2015		329		—		327		—		330		—
5% euro 750 million bond due June 2018		668		694		721		699		694		721
7.875% US dollar 750 million bond due February 2030		494		525		589		577		814		876
6.25% US dollar 495 million bond due November 2032		326		346		328		333		453		485
6.15% US dollar 1,700 million bond due February 2037		1,119		1,189		1,139		1,034		1,600		1,710
Bonds in fair value hedge relationships:		9,395		11,823		10,085		11,982		10,147		12,951
5.875% euro 1,250 million bond due June 2010		—		1,157		—		1,195		—		1,258
5.5% US dollar 750 million bond due June 2011		—		525		—		544		—		575
5.35% US dollar 500 million bond due February 2012		—		350		—		357		—		385
3.625% euro 1,000 million bond due November 2012		—		925		—		919		—		967
6.75% Australian dollar 265 million bond due January 2013		—		128		—		127		—		140
5.0% US dollar 1,000 million bond due December 2013		—		699		—		713		—		786
6.875% euro 1,000 million bond due December 2013		—		925		—		1,005		—		973
4.625% sterling 350 million bond due September 2014		350		350		367		352		388		381
4.625% sterling 525 million bond due September 2014		525		525		550		526		532		519
2.15% Japanese yen 3,000 million bond due April 2015		21		21		22		22		22		22
5.375% US dollar 900 million bond due January 2015		592		630		636		632		650		711
5.0% US dollar 750 million bond due September 2015		494		525		529		516		543		598
6.25% euro 1,250 million bond due January 2016		1,113		1,157		1,278		1,208		1,168		1,182
5.75% US dollar 750 million bond due March 2016		494		525		536		527		556		614
4.75% euro 500 million bond due June 2016		445		463		477		448		503		512
5.625% US dollar 1,300 million bond due February 2017		856		909		919		904		960		1,070
5.375% sterling 600 million bond due December 2017		600		—		634		—		628		—
4.625% US dollar 500 million bond due July 2018		329		350		328		315		349		392
8.125% sterling 450 million bond due November 2018		450		450		553		535		487		483
5.45% US dollar 1,250 million bond due June 2019		823		—		857		—		849		—
4.65% euro 1,250 million bond January 2022		1,113		—		1,129		—		1,145		—
5.375% euro 500 million bond June 2022		445		463		481		433		525		534
5.625% sterling 250 million bond due December 2025		250		250		254		234		285		287
6.6324% euro 50 million bond due December 2028		45		46		64		46		54		50
5.9% sterling 450 million bond due November 2032		450		450		471		424		503		512
Long-term borrowings		26,558		29,343		27,712		29,339		28,632		31,749

During the year ended 31 March 2010 fair value hedge relationships relating to bonds with nominal value US$2,750 million (£1,810 million), €4,750 million (£4,125 million) and AUD 265 million (£161 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 end of reporting period date.

106  Vodafone Group Plc Annual Report 2010

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		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
Within one year		950			127			2,670			787			1,053			5,222			10,809
In one to two years		2,361			97			—			283			3,663			1,808			8,212
In two to three years		665			59			—			2,105			25			1,443			4,297
In three to four years		525			59			—			269			314			1,589			2,756
In four to five years		1,345			59			—			1,064			252			2,118			4,838
In more than five years		342			1,517			—			7,360			71			8,928			18,218
		6,188			1,918			2,670			11,868			5,378			21,108			49,130
Effect of discount/financing rates		(136	)		(465	)		(11	)		(3,289	)		(209	)		(3,647	)		(7,757	)
31 March 2009		6,052			1,453			2,659			8,579			5,169			17,461			41,373

The maturity profile of the Group’s financial derivatives (which include interest rate and foreign exchange swaps), using undiscounted cash flows, is as follows:

	2010				2009
	Payable		Receivable		Payable		Receivable
	£m		£m		£m		£m
Within one year		13,067		13,154		9,003		9,231
In one to two years		929		938		592		668
In two to three years		1,083		974		739		609
In three to four years		1,040		932		765		603
In four to five years		868		816		743		577
In more than five years		7,607		5,912		7,062		5,129
		24,594		22,726		18,904		16,817

The currency split of the Group’s foreign exchange derivatives, all of which mature in less than one year, is as follows:

	2010				2009
	Payable		Receivable		Payable		Receivable
	£m		£m		£m		£m
Sterling		—		8,257		—		6,039
Euro		8,650		3,177		5,595		13
US dollar		1,545		55		2,527		1,127
Japanese yen		548		21		214		20
Other		1,485		755		81		1,285
		12,228		12,265		8,417		8,484

Payables and receivables are stated separately in the table above as settlement is on a gross basis. The £37 million net receivable (2009: £67 million net receivable) in relation to foreign exchange financial instruments in the table above is split £95 million (2009: £37 million) within trade and other payables and £132 million (2009: £104 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:

	2010		2009
	£m		£m
Within one year		21		10
In two to five years		47		42
In more than five years		7		18

Vodafone Group Plc Annual Report 2010  107

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		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
Sterling		2,549		2,549		—			—
Euro		15,126		13,605		1,521			—
US dollar		17,242		10,565		3,071			3,606
Japanese yen		2,660		2,660		—			—
Other		3,796		3,323		473			—
31 March 2009		41,373		32,702		5,065			3,606

Notes:
(1)	The weighted average interest rate for the Group’s euro denominated fixed rate borrowings is 5.3% (2009: 5.1%). The weighted average time for which the rates are fixed is 3.4 years (2009: 6.7 years). The weighted average interest rate for the Group’s US dollar denominated fixed rate borrowings is 5.5% (2009: 6.6%). The weighted average time for which the rates are fixed is 12.3 years (2009: 25.4 years). The weighted average interest rate for the Group’s other currency fixed rate borrowings is 10.1% (2009: 10.1%). The weighted average time for which the rates are fixed is 1.5 years (2009: 2.5 years).
(2)	Other borrowings of £3,405 million (2009: £3,606 million) are the liabilities arising under put options granted 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 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.

At 31 March 2009 the Group had entered into foreign exchange contracts to decrease its sterling and other currency borrowings above by amounts equal to £6,039 million and £1,204 million respectively and to increase its euro, US dollar and Japanese yen borrowings above by amounts equal to £5,582 million, £1,400 million and £194 million respectively.

Further protection from euro and US dollar interest rate movements on debt is provided by interest rate swaps. At 31 March 2010 the Group had euro denominated interest rate swaps for amounts equal to £6,335 million and US dollar denominated interest rate swaps for amounts equal to £5,761 million. The average effective rate which has been fixed is 1.21% in relation to euro denominated interest rate swaps and 0.92% 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 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%.

At 31 March 2009 the Group had entered into euro and US dollar denominated interest rate futures. The euro denominated futures covered the period June 2009 to September 2009, September 2009 to December 2009 and December 2009 to March 2010 for amounts equal to £6,845 million, £6,061 million and £3,931 million respectively. The US dollar denominated interest rate futures cover the period June 2009 to September 2009, September 2009 to December 2009 and December 2009 to March 2010 for amounts equal to £7,003 million, £7,871 million, and £9,333 million respectively.

Borrowing facilities

At 31 March 2010 the Group’s most significant committed borrowing facilities comprised two bank facilities of US$4,115 million (£2,709 million) and US$5,025 million (£3,308 million) both expiring between one and three years (2009: two bank facilities of US$4,115 million (£2,878 million) and US$5,025 million (£3,514 million)), a US$650 million (£428 million) bank facility which expires in more than 5 years (2009: £nil), a ¥259 billion (£1,821 million, 2009: ¥259 billion (£1,820 million)) term credit facility, which expires within one year, two loan facilities of €400 million (£356 million) and €350 million (£312 million) both expiring between two and five years and a loan facility of €410 million (£365 million) which expires in more than five years (2009: two loan facilities of €400 million (£370 million) and €350 million (£324 million)). The US dollar bank facilities remained undrawn throughout the financial year, the ¥259 billion term credit facility was fully drawn down on 21 December 2005, 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 remains undrawn.

Under the terms and conditions of the US$4,115 million and US$5,025 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.

Substantially the same terms and conditions apply in the case of Vodafone Finance K.K.’s ¥259 billion term credit facility although the change of control provision is applicable to any guarantor of borrowings under the term credit facility. Additionally, the facility agreement requires Vodafone Finance K.K. to maintain a positive tangible net worth at the end of each financial year. As of 31 March 2010 the Company was the sole guarantor.

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.

In addition to the above, certain of the Group’s subsidiaries had committed facilities at 31 March 2010 of £5,759 million (2009: £4,725 million) in aggregate, of which £1,647 million (2009: £1,571 million) was undrawn. Of the total committed facilities £1,139 million (2009: £675 million) expires in less than one year, £2,880 million (2009: £2,275 million) expires between two and five years, and £1,740 million (2009: £1,775 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 £56 million (2009: £51 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.

108  Vodafone Group Plc Annual Report 2010

Financials  

23. Post employment benefits

Background

At 31 March 2010 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’s principal defined benefit pension scheme in the United Kingdom, a tax approved final salary scheme which was closed to new entrants from 1 January 2006, was closed to future accrual by current members on 31 March 2010. The assets of the scheme are held in an external trustee administered fund. In addition, the Group operates defined benefit schemes in Germany, Ghana, Greece, India, Ireland, Italy, Turkey 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.

Income statement expense

	2010		2009		2008
	£m		£m		£m
Defined contribution schemes		110		73		63
Defined benefit schemes		50		40		28
Total amount charged to the income statement (note 32)		160		113		91

Defined benefit schemes

The principal actuarial assumptions used for estimating the Group’s benefit obligations are set out below:

	2010(1)		2009(1)		2008(1)
	%		%		%
Weighted average actuarial assumptions used at 31 March:
Rate of inflation		3.5		2.6		3.1
Rate of increase in salaries		4.6		3.7		4.3
Rate of increase in pensions in payment and deferred pensions		3.5		2.6		3.1
Discount rate		5.7		6.3		6.1
Expected rates of return:
Equities		8.5		8.4		8.0
Bonds(2)		5.1		5.7		4.4
Other assets		2.8		3.7		1.3

Notes:
(1)	Figures shown represent a weighted average assumption of the individual schemes.
(2)	For the year ended 31 March 2010 the expected rate of return for bonds consisted of a 5.5% rate of return for corporate bonds (2009: 6.1%; 2008: 4.7%) and a 4.0% rate of return for government bonds (2009: 4.0%; 2008: 3.5%).

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 and property 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 and cash investments 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 22.3/25.4 years (2009: 22.0/24.8 years, 2008: 22.0/24.8 years) and a further life expectancy from age 65 for a male/ female non-pensioner member currently aged 40 of 24.6/27.9 years (2009: 23.2/26.0 years, 2008: 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 £172 million decrease or a £199 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:

	2010			2009			2008
	£m			£m			£m
Current service cost		29			46			53
Interest cost		77			83			69
Expected return on pension assets		(76	)		(92	)		(89	)
Curtailment/settlement		20			3			(5	)
Total included within staff costs		50			40			28
Actuarial losses recognised in the SOCI		149			220			47
Cumulative actuarial losses recognised in the SOCI		496			347			127

Vodafone Group Plc Annual Report 2010  109

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:

	2010			2009			2008
	£m			£m			£m
Movement in pension assets:
1 April		1,100			1,271			1,251
Exchange rate movements		(10	)		50			50
Expected return on pension assets		76			92			89
Actuarial gains/(losses)		286			(381	)		(176	)
Employer cash contributions		133			98			86
Member cash contributions		12			15			13
Benefits paid		(45	)		(45	)		(42	)
Other movements		(65	)		—			—
31 March		1,487			1,100			1,271
Movement in pension liabilities:
1 April		1,332			1,310			1,292
Exchange rate movements		(15	)		69			60
Arising on acquisition		—			33			—
Current service cost		29			46			53
Interest cost		77			83			69
Member cash contributions		12			15			13
Actuarial losses/(gains)		435			(161	)		(129	)
Benefits paid		(79	)		(45	)		(42	)
Other movements		(101	)		(18	)		(6	)
31 March		1,690			1,332			1,310

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
	2010			2009			2008			2007			2006			2010			2009			2008			2007			2006
	£m			£m			£m			£m			£m			£m			£m			£m			£m			£m
Analysis of net assets/(deficits):
Total fair value of scheme assets		1,131			755			934			954			835			1,487			1,100			1,271			1,251			1,123
Present value of funded scheme liabilities		(1,276	)		(815	)		(902	)		(901	)		(847	)		(1,625	)		(1,196	)		(1,217	)		(1,194	)		(1,128	)
Net (deficit)/assets for funded schemes		(145	)		(60	)		32			53			(12	)		(138	)		(96	)		54			57			(5	)
Present value of unfunded scheme liabilities		—			(8	)		—			—			—			(65	)		(136	)		(93	)		(98	)		(96	)
Net (deficit)/assets		(145	)		(68	)		32			53			(12	)		(203	)		(232	)		(39	)		(41	)		(101	)
Net (deficit)/assets are analysed as:
Assets		—			—			32			53			—			34			8			65			82			19
Liabilities		(145	)		(68	)		—			—			(12	)		(237	)		(240	)		(104	)		(123	)		(120	)

It is expected that contributions of £31 million will be paid into the Group’s defined benefit retirement schemes during the year ending 31 March 2011.

Actual return on pension assets

	2010		2009			2008
	£m		£m			£m
Actual return on pension assets		362		(289	)		(87	)
Analysis of pension assets at 31 March is as follows:		%		%			%
Equities		59.6		55.6			68.5
Bonds		37.5		41.9			17.7
Property		0.3		0.4			0.3
Other		2.6		2.1			13.5
		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.

110   Vodafone Group Plc Annual Report 2010

Financials  

History of experience adjustments

	2010			2009			2008			2007			2006
	£m			£m			£m			£m			£m
Experience adjustments on pension liabilities:
Amount		8			6			(5	)		(2	)		(4	)
Percentage of pension liabilities		—			—			—			—			—
Experience adjustments on pension assets:
Amount		286			(381	)		(176	)		26			121
Percentage of pension assets		19	%		(35	%)		(14	%)		2	%		11	%

24. Provisions

	Asset
	retirement			Other
	obligations			provisions			Total
	£m			£m			£m
1 April 2008		208			454			662
Exchange movements		34			75			109
Amounts capitalised in the year		111			—			111
Amounts charged to the income statement		—			194			194
Utilised in the year — payments		(4	)		(106	)		(110	)
Amounts released to the income statement		—			(72	)		(72	)
Other		12			—			12
31 March 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

Provisions have been analysed between current and non-current as follows:

	2010		2009
	£m		£m
Current liabilities		497		373
Non-current liabilities		497		533
		994		906

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 29. 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.

25. Trade and other payables

	2010		2009
	£m		£m
Included within non-current liabilities:
Other payables		76		91
Accruals and deferred income		379		322
Derivative financial instruments		361		398
		816		811
Included within current liabilities:
Trade payables		3,254		3,160
Amounts owed to associates		17		18
Other taxes and social security payable		998		762
Other payables		650		1,163
Accruals and deferred income		9,064		8,258
Derivative financial instruments		99		37
		14,082		13,398

Vodafone Group Plc Annual Report 2010  111

Notes to the consolidated financial statements continued

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.

	2010		2009
	£m		£m
Included within “Derivative financial instruments”:
Fair value through the income statement (held for trading):
Interest rate swaps		330		381
Foreign exchange swaps		95		37
		425		418
Fair value hedges:
Interest rate swaps		35		17
		460		435

26. Acquisitions

The aggregate cash consideration in respect of purchases of interests in subsidiaries and joint ventures, net of cash acquired, is 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

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 have been consolidated in the income statement from 18 May 2009. From 18 May 2009 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
	Book value			adjustments			Fair value
	£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.

112   Vodafone Group Plc Annual Report 2010

Financials  

Pro-forma full year information

The following unaudited pro-forma summary presents the Group as if the additional stake in Vodacom had been acquired on 1 April 2009. The pro-forma amounts include the results of Vodacom, amortisation of the acquired intangible assets recognised on acquisition and interest expense on the increase in net debt as a result of the acquisition. The pro-forma amounts do not include any possible synergies from the acquisition of an additional stake in Vodacom. The pro-forma information is provided for comparative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of future results of operations of the combined companies.

	2010
	£m
Revenue		44,677
Profit for the financial year		8,556
Profit attributable to equity shareholders		8,603

	Pence
Basic earnings per share		16.36
Diluted earnings per share		16.28

Australia

On 9 June 2009 Vodafone Australia completed its merger with Hutchison 3G Australia to form a 50:50 joint venture. Vodafone Hutchison Australia (Pty) Limited, which, in due course, will market its products and services solely under the Vodafone brand. The results of the combined business have been proportionately consolidated in the Group’s results as a joint venture from the date of the merger.

Other

During the 2010 financial year the Group completed a number of smaller acquisitions for net cash consideration of £26 million paid during the year. The aggregate goodwill and fair values of identifiable assets and liabilities of the acquired operations were £27 million, £23 million and £24 million respectively.

27. Reconciliation of net cash flow from operating activities

	2010			2009			2008
	£m			£m			£m
Profit for the financial year		8,618			3,080			6,756
Adjustments for:
Share-based payments		150			128			107
Depreciation and amortisation		7,910			6,814			5,909
Loss on disposal of property, plant and equipment		101			10			70
Share of result in associates		(4,742	)		(4,091	)		(2,876	)
Impairment losses, net		2,100			5,900			—
Other income and expense		(114	)		—			28
Non-operating income and expense		10			44			(254	)
Investment income		(716	)		(795	)		(714	)
Financing costs		1,512			2,419			2,014
Income tax expense		56			1,109			2,245
Decrease/(increase) in inventory		2			81			(78	)
(Increase)/decrease in trade and other receivables		(714	)		80			(378	)
Increase/(decrease) in trade and other payables		1,164			(145	)		460
Cash generated by operations		15,337			14,634			13,289
Tax paid		(2,273	)		(2,421	)		(2,815	)
Net cash flow from operating activities		13,064			12,213			10,474

Vodafone Group Plc Annual Report 2010  113

Notes to the consolidated financial statements continued

28. 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:

	2010		2009
	£m		£m
Within one year		1,200		1,041
In more than one year but less than two years		906		812
In more than two years but less than three years		776		639
In more than three years but less than four years		614		539
In more than four years but less than five years		512		450
In more than five years		2,235		2,135
		6,243		5,616

The total of future minimum sublease payments expected to be received under non-cancellable subleases is £246 million (2009: £197 million).

Capital commitments

	Company and subsidiaries				Share of joint ventures				Group
	2010		2009		2010		2009		2010		2009
	£m		£m		£m		£m		£m		£m
Contracts placed for future capital expenditure not provided in the financial statements(1)		1,800		1,706		219		401		2,019		2,107

Note:
(1)	Commitment includes contracts placed for property, plant and equipment and intangible assets.

29. Contingent liabilities

	2010		2009
	£m		£m
Performance bonds		246		157
Credit guarantees — third party indebtedness		76		61
Other guarantees and contingent liabilities		496		445

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 Spanish tax authorities of £221 million (2009: £229 million).

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 28.

The Company 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 initial security takes the form of a Japanese law share pledge over 400,000 class 1 preferred shares of ¥200,000 in BB Mobile Corp. The security may be replaced either on a voluntary or mandatory basis but while the security asset consists of the preferred shares, the percentage cover to the secured liabilities will be 100%. As and when alternative security is provided, the Company has agreed that the security cover should include additional headroom of 33% but (i) where cash is used as the security asset the ratio will revert to 100% of the relevant liabilities and (ii) 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%.

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 involved currently 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 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 is 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. We are not aware that the health risks alleged in such personal injury claims have been substantiated and we are vigorously defending 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

114  Vodafone Group Plc Annual Report 2010

Financials  

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 have 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 are expected to answer or move to dismiss the actions in June 2010.

In October 2004, one of our subsidiaries, Vodafone 2, instigated a legal challenge to an enquiry (‘the Vodafone 2 enquiry’) by HMRC with regard to the UK tax treatment of its Luxembourg holding company, Vodafone Investments Luxembourg SARL (‘VIL’), under the CFC Regime. Vodafone 2 argued that the CFC Regime was incompatible with EU law and the Vodafone 2 enquiry ought to be closed.

In September 2006, the European Court of Justice determined in the Cadbury Schweppes case (C-196/04) that the CFC Regime would be incompatible with EU law unless it could be interpreted as applying only to wholly artificial arrangements intended to escape national tax normally payable (‘wholly artificial arrangements’). On 22 May 2009, the Court of Appeal (‘CoA’) held that the CFC Regime could be so interpreted by reading a new exemption into the CFC Regime in respect of subsidiaries which are ‘actually established’ in another EU Member State and carry on ‘genuine economic activities’ there. The CoA ruled that the Vodafone 2 enquiry should be allowed to continue on this basis. The CoA’s decision became final when, on 17 December 2009, the Supreme Court refused Vodafone 2 permission to appeal.

The Vodafone 2 enquiry and other enquiries involving similar holding companies in Luxembourg are ongoing. The outcome of these enquiries, including whether further legal proceedings will be required to ultimately resolve them, is uncertain at this stage. We carried provisions of £2.2 billion (2009: £2.2 billion) in respect of the potential UK corporation tax exposure at 31 March 2010.

On 12 November 2007 the Company became aware of the filing of a purported class action complaint in the United States District Court for the Southern District of New York by The City of Edinburgh Council on behalf of the Lothian Pension Fund (‘Lothian’) against the Company and certain of the Company’s current and former officers and directors for alleged violations of US federal securities laws. The complaint alleged that the Company’s financial statements and certain disclosures between 10 June 2004 and 27 February 2006 were materially false and misleading, among other things, as a result of the Company’s alleged failure to report on a timely basis a write-down for the impaired value of Vodafone’s German, Italian and Japanese subsidiaries. The complaint sought compensatory damages of an unspecified amount and other relief on behalf of a putative class comprised of all persons who purchased publicly traded securities, including ordinary shares and American depositary receipts, of the Company between 10 June 2004 and 27 February 2006. The plaintiff subsequently served the complaint and, on or about 27 March 2008, the plaintiff filed an amended complaint asserting substantially the same claims against the same defendants on behalf of the same putative investor class. Thereafter an additional plaintiff, a US pension fund that purportedly purchased Vodafone ADRs on the New York Stock Exchange, was added as an additional plaintiff by stipulated order. We believe that the allegations are without merit and filed a motion to dismiss the amended complaint on 6 June 2008. By judgment entered on 1 December 2008 the court dismissed the amended complaint for lack of subject matter jurisdiction. The plaintiffs subsequently filed a motion for reconsideration of that dismissal arguing that the court overlooked the claims of the US pension fund, as to which there had been no subject matter jurisdiction challenge. On 9 April 2009 the court granted that motion to the extent that it sought reopening of the action for the purpose of adjudication of the claims asserted on behalf of the US pension fund but denied the motion with respect to the dismissal of Lothian’s claims. On 20 May 2009, the Court granted the Company’s motion to dismiss the claims of the US pension fund on the grounds that the complaint failed to plead securities fraud with the requisite specificity, but granted the plaintiff leave to file a motion to amend its complaint. The plaintiff filed a motion for leave to amend the complaint on 26 June 2009, which the Company opposed. On 22 January 2010 the Court denied that motion and on 30 January 2010 entered a judgment dismissing the action. The Company has not been served with a notice of appeal within the time permitted under the relevant civil procedure rules and now considers the case to be closed.

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 authorities 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 authorities take no further steps under the notices. Initial hearings have been held before the Bombay High Court and in the case of VIHBV the High Court heard the writ 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 believes that the tax authority does 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. VEL’s case continues to be stayed pending the outcome of the VIHBV hearing. VIHBV believes that neither it nor any other member of the Group is liable for such withholding tax and intends to defend this position vigorously.

Vodafone Group Plc Annual Report 2010 115

Notes to the consolidated financial statements continued

30. Directors and key management compensation

Directors

Aggregate emoluments of the directors of the Company were as follows:

	2010		2009		2008
	£m		£m		£m
Salaries and fees		5		4		5
Incentive schemes		3		2		4
Benefits		1		—		1
Other(1)		—		1		—
		9		7		10

Note:

(1) Other amounts in 2009 include the value of the cash allowance taken by some individuals in lieu of pension contributions and 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 2010 by directors who served during the year was £1 million (2009: £nil, 2008: £nil).

Further details of directors’ emoluments can be found in “Directors’ remuneration” on pages 57 to 67.

Key management compensation

Aggregate compensation for key management, being the directors and members of the Executive Committee, was as follows:

	2010		2009		2008
	£m		£m		£m
Short-term employee benefits		21		17		20
Post-employment benefits:
Defined benefit schemes		—		—		1
Defined contribution schemes		1		1		1
Share-based payments		20		14		10
		42		32		32

31. 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 30.

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.

	2010			2009			2008
	£m			£m			£m
Sales of goods and services to associates		281			205			165
Purchase of goods and services from associates		159			223			212
Purchase of goods and services from joint ventures		194			57			13
Net interest (receivable from)/payable to joint ventures(1)		(44	)		(18	)		27
Trade balances owed:
by associates		24			50			21
to associates		17			18			22
by joint ventures		27			10			16
to joint ventures		40			33			39
Other balances owed by joint ventures(1)		751			311			127

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.

116 Vodafone Group Plc Annual Report 2010

Financials

Transactions with directors other than compensation

During the three years ended 31 March 2010, and as of 17 May 2010, 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 2010, and as of 17 May 2010, 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.

32. Employees

The average employee headcount during the year by nature of activity and by segment is shown below:

	2010		2009		2008
	Employees		Employees		Employees
By activity:
Operations		14,099		13,889		12,891
Selling and distribution		27,398		25,174		22,063
Customer care and administration		43,493		40,034		37,421
		84,990		79,097		72,375
By segment:
Germany		13,507		13,788		13,631
Italy		6,207		6,247		6,669
Spain		4,326		4,354		4,057
UK		9,766		10,350		10,367
Other Europe		8,591		8,765		8,645
Europe		42,397		43,504		43,369
Vodacom		6,833		3,246		2,751
Other Africa and Central Europe		14,231		13,789		10,925
Africa and Central Europe		21,064		17,035		13,676
India		10,132		8,674		6,323
Other Asia Pacific and Middle East		7,905		6,765		6,051
Asia Pacific and Middle East		18,037		15,439		12,374
Common Functions		3,492		3,119		2,956
Total		84,990		79,097		72,375

The cost incurred in respect of these employees (including directors) was:

	2010		2009		2008
	£m		£m		£m
Wages and salaries		3,045		2,607		2,175
Social security costs		415		379		325
Share-based payments (note 20)		150		128		107
Other pension costs (note 23)		160		113		91
		3,770		3,227		2,698

Vodafone Group Plc Annual Report 2010 117

Audit report on the Company financial statements

Independent auditor’s report to the members of Vodafone Group Plc

We have audited the parent company financial statements of Vodafone Group Plc for the year ended 31 March 2010 which comprise the balance sheet and the related notes 1 to 11. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

We have reported separately on the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2010.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors’ responsibilities for preparing the annual report and the parent company financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the directors’ statement of responsibilities.

Our responsibility is to audit the parent company financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

Opinion on financial statements

In our opinion the parent company financial statements:

• give a true and fair view of the state of the parent company’s affairs as at 31 March 2010;

• have been properly prepared in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice); and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion:

• the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006; and

• the information given in the directors’ report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

/s/ P. Kakoullis

Panos Kakoullis (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London
United Kingdom
18 May 2010

118 Vodafone Group Plc Annual Report 2010

Financials

Company financial statements of Vodafone Group Plc

at 31 March

			2010			2009
	Note		£m			£m
Fixed assets
Shares in Group undertakings		3		65,085			64,937
Current assets
Debtors: amounts falling due after more than one year		4		1,914			2,352
Debtors: amounts falling due within one year		4		116,905			126,334
Other investments		5		388			—
Cash at bank and in hand				24			111
				119,231			128,797
Creditors: amounts falling due within one year		6		(78,185	)		(92,339	)
Net current assets				41,046			36,458
Total assets less current liabilities				106,131			101,395
Creditors: amounts falling due after more than one year		6		(23,840	)		(21,970	)
				82,291			79,425
Capital and reserves
Called up share capital		7		4,153			4,153
Share premium account		9		43,011			43,008
Capital redemption reserve		9		10,101			10,101
Capital reserve		9		88			88
Other reserves		9		988			957
Own shares held		9		(7,827	)		(8,053	)
Profit and loss account		9		31,777			29,171
Equity shareholders’ funds				82,291			79,425

The Company financial statements were approved by the Board of directors on 18 May 2010 and were signed on its behalf by:

/s/ Vittorio Colao	/s/ Andy Halford
Vittorio Colao	Andy Halford
Chief Executive	Chief Financial Officer

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

Vodafone Group Plc Annual Report 2010     119

Notes to the Company financial statements

1. Basis of preparation

The separate financial statements of the Company are drawn up in accordance with the Companies Act 2006 and UK GAAP.

The preparation of Company financial statements in conformity with generally accepted accounting principles 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 Company financial statements and the reported amounts of revenue and expenses during the reporting period. 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.

As permitted by section 408(3) of the Companies Act 2006, the profit and loss account of the Company is not presented in this annual report. These separate financial statements are not intended to give a true and fair view of the profit or loss or cash flows of the Company. The Company has not published its individual cash flow statement as its liquidity, solvency and financial adaptability are dependent on the Group rather than its own cash flows.

The Company has taken advantage of the exemption contained in FRS 8 “Related Party Disclosures” and has not reported transactions with fellow Group undertakings.

The Company has taken advantage of the exemption contained in FRS 29 “Financial Instruments: Disclosures” and has not produced any disclosures required by that standard, as disclosures that comply with FRS 29 are available in the Vodafone Group Plc annual report for the year ended 31 March 2010.

2. Significant accounting policies

The Company’s significant accounting policies are described below.

Accounting convention

The Company financial statements are prepared under the historical cost convention and in accordance with applicable accounting standards of the UK Accounting Standards Board and pronouncements of the Urgent Issues Task Force.

Investments

Shares in Group undertakings are stated at cost less any provision for impairment.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the recoverable amount of the cash-generating unit is less than the value of the investment, the investment is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised immediately in the profit and loss account.

For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the investment 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.

Foreign currencies

Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated into the Company’s functional currency at the rates prevailing on the balance sheet 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.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in the profit and loss account for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the profit and loss account for the period.

Borrowing costs

All borrowing costs are recognised in the profit and loss account in the period in which they are incurred.

Taxation

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided in full on timing differences that exist at the balance sheet date and that result in an obligation to pay more tax, or a right to pay less tax in the future. The deferred tax is measured at the rate expected to apply in the periods in which the timing differences are expected to reverse, based on the tax rates and laws that are enacted or substantively enacted at the balance sheet date. Timing differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in the Company financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. Deferred tax assets and liabilities are not discounted.

Financial instruments

Financial assets and financial liabilities, in respect of financial instruments, are recognised on the company balance sheet when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities and equity instruments

Financial liabilities and equity instruments issued by the Company 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 Company 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.

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 settlement or redemption of borrowings is recognised over the term of the borrowing.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issuance costs.

Derivative financial instruments and hedge accounting

The Company’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.

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 Company designates certain derivatives as hedges of the change of fair value of recognised assets and liabilities (‘fair value hedges’). Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, no longer qualifies for hedge accounting or the Company chooses to end the hedging relationship.

120 Vodafone Group Plc Annual Report 2010

Financials

Fair value hedges

The Company’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 Company designates these as fair value hedges of interest rate risk with changes in fair value of the hedging instrument recognised in the profit and loss account 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 profit and loss account.

Share-based payments

The Group operates a number of equity settled share-based compensation plans for the employees of subsidiaries using the Company’s equity instruments. The fair value of the compensation given in respect of these share-based compensation plans is recognised as a capital contribution to the Company’s subsidiaries over the vesting period. The capital contribution is reduced by any payments received from subsidiaries in respect of these share-based payments.

Dividends paid and received

Dividends paid and received are included in the Company financial statements in the period in which the related dividends are actually paid or received or, in respect of the Company’s final dividend for the year, approved by shareholders.

Pensions

The Company is the sponsoring employer of the Vodafone Group pension scheme, a defined benefit pension scheme. The Company is unable to identify its share of the underlying assets and liabilities of the Vodafone Group pension scheme on a consistent and reasonable basis. Therefore, the Company has applied the guidance within FRS 17 to account for defined benefit schemes as if they were defined contribution schemes and recognise only the contribution payable each year. The Company had no contributions payable for the years ended 31 March 2010 and 31 March 2009.

3. Fixed assets

Shares in Group undertakings

	£m
Cost:
1 April 2009		70,208
Additions		489
Capital contributions arising from share-based payments		150
Contributions received in relation to share-based payments		(119	)
Disposals		(12	)
31 March 2010		70,716
Amounts provided for:
1 April 2009		5,271
Amounts provided for during the year		360
31 March 2010		5,631
Net book value:
31 March 2009		64,937
31 March 2010		65,085

At 31 March 2010 the Company had the following principal subsidiaries:

		Country of	Percentage
Name	Principal activity	incorporation	shareholding
Vodafone European Investments	Holding company	England		100
Vodafone Group Services Limited	Global products and services provider	England		100

4. Debtors

	2010		2009
	£m		£m
Amounts falling due within one year:
Amounts owed by subsidiaries		116,521		126,010
Taxation recoverable		200		44
Other debtors		184		280
		116,905		126,334
Amounts falling due after more than one year:
Deferred taxation		12		18
Other debtors		1,902		2,334
		1,914		2,352

Vodafone Group Plc Annual Report 2010 121

Notes to the Company financial statements continued

5. Other investments

	2010		2009
	£m		£m
Investments		388		—

The short-term investments are classified as available-for-sale and consist of index linked government bonds which are held on an effective floating rate basis.

6. Creditors

	2010		2009
	£m		£m
Amounts falling due within one year:
Bank loans and other loans		4,360		7,717
Amounts owed to subsidiaries		73,663		84,394
Taxation payable		31		—
Other creditors		111		174
Accruals and deferred income		20		54
		78,185		92,339
Amounts falling due after more than one year:
Other loans		23,488		21,707
Other creditors		352		263
		23,840		21,970

Included in amounts falling due after more than one year are other loans of £12,468 million, which are due in more than five years from 1 April 2010 and are payable otherwise than by instalments. Interest payable on these loans ranges from 2.15% to 8.125%.

7. Share capital

	2010				2009
	Number		£m		Number			£m
Authorised:(1)
Ordinary shares of 113/7 US cents each		68,250,000,000		4,875		68,250,000,000			4,875
B shares of 15 pence each		38,563,935,574		5,784		38,563,935,574			5,784
Deferred shares of 15 pence each		28,036,064,426		4,206		28,036,064,426			4,206
Ordinary shares allotted, issued and fully paid:(2)
1 April		57,806,283,716		4,153		58,255,055,725			4,182
Allotted during the year		2,963,016		—		51,227,991			3
Cancelled during the year		—		—		(500,000,000	)		(32	)
31 March		57,809,246,732		4,153		57,806,283,716			4,153
B shares allotted, issued and fully paid:(3)
1 April		—		—		87,429,138			13
Redeemed during the year		—		—		(87,429,138	)		(13	)
31 March		—		—		—			—

Notes:

(1)	50,000 (2009: 50,000) 7% cumulative fixed rate shares of £1 each were authorised, allotted, issued and fully paid by the Company.
(2)	At 31 March 2010 the Company held 5,146,112,159 (2009: 5,322,411,101) treasury shares with a nominal value of £370 million (2009: £382 million). The number of shares held by the Group as treasury shares, at 31 March 2010, has been adjusted down by 27 million which represents a number of shares that the Company previously reported as being purchased on the 10 September 2008, via Lehman Brothers International (Europe) (‘LBIE’), and held in treasury. As a result of LBIE being placed in administration on the 15 September 2008 the shares were not settled to the Company’s designated treasury account and are believed to be held in a proprietary account with the Administrator. The Company has treated the transaction to buy back the shares as failed.
(3)	On 31 July 2006 Vodafone Group Plc undertook a return of capital to shareholders via a B share scheme and associated share consolidation. A total of 66,271,035,240 B shares were issued on that day, and 66,271,035,240 existing ordinary shares of 10 US cents each were consolidated into 57,987,155,835 new ordinary shares of 113/7 US cents each. B shareholders were given the alternatives of initial redemption or future redemption at 15 pence per share or the payment of an initial dividend of 15 pence per share. The initial redemption took place on 4 August 2006 with future redemption dates on 5 February and 5 August each year until 5 August 2008 when the Company redeemed all B shares still in issue at their nominal value of 15 pence.

Allotted during the year

			Nominal		Net
			value		proceeds
	Number		£m		£m
UK share awards and option scheme awards		1,612,486		—		1
US share awards and option scheme awards		1,350,530		—		2
Total for share awards and option scheme awards		2,963,016		—		3

122 Vodafone Group Plc Annual Report 2010

Financials

8. Share-based payments

The Company currently uses a number of equity settled share plans to grant options and shares to the directors and employees of its subsidiaries, as listed below.

Share option plans

• Vodafone Group savings related and sharesave plans    

• Vodafone Group executive plans    

• Vodafone Group 1999 Long-Term Stock Incentive Plan and ADSs    

• Other share option plans    

Share plans

• Share Incentive Plan    

• Other share plans    

At 31 March 2010 the Company had 266 million ordinary share options outstanding (2009: 333 million) and 1 million ADS options outstanding (2009: 1 million).

The Company has made a capital contribution to its subsidiaries in relation to share-based payments. At 31 March 2010 the cumulative capital contribution net of payments received from subsidiaries was £359 million (31 March 2009: £328 million, 1 April 2008: £313 million). During the year ended 31 March 2010 the capital contribution arising from share-based payments was £150 million (2009: £128 million), with payments of £119 million (2009: £113 million) received from subsidiaries.

Full details of share-based payments, share option schemes and share plans are disclosed in note 20 to the consolidated financial statements.

9. Reserves and reconciliation of movements in equity shareholders’ funds

			Share		Capital							Own			Profit			Total equity
	Share		premium		redemption		Capital		Other			shares			and loss			shareholders’
	Capital		account		reserve		reserve		reserves			held			account			funds
	£m		£m		£m		£m		£m			£m			£m			£m
1 April 2009		4,153		43,008		10,101		88		957			(8,053	)		29,171			79,425
Allotment of shares		—		3		—		—		—			—			—			3
Own shares released on vesting of share awards		—		—		—		—		—			189			—			189
Profit for the financial year		—		—		—		—		—			—			6,693			6,693
Dividends		—		—		—		—		—			—			(4,131	)		(4,131	)
Capital contribution given relating to share-based payments		—		—		—		—		150			—			—			150
Contribution received relating to share-based payments		—		—		—		—		(119	)		—			—			(119	)
Other movements		—		—		—		—		—			37			44			81
31 March 2010		4,153		43,011		10,101		88		988			(7,827	)		31,777			82,291

The profit for the financial year dealt with in the accounts of the Company is £6,693 million (2009: £5,853 million). Under English law, the amount available for distribution to shareholders is based upon the profit and loss reserve of the Company and is reduced by the amount of own shares held and is limited by statutory or other restrictions.

The auditor’s remuneration for the current year in respect of audit and audit related services was £0.9 million (2009: £1.3 million) and for non-audit services was £0.5 million (2009: £0.2 million).

The directors are remunerated by the Company for their services to the Group as a whole. No remuneration was paid to them specifically in respect of their services to Vodafone Group Plc for either year. Full details of the directors’ remuneration are disclosed in “Directors’ remuneration” on pages 57 to 67.

There were no employees other than directors of the Company throughout the current or the preceding year.

10. Equity dividends

	2010		2009
	£m		£m
Declared during the financial year:
Final dividend for the year ended 31 March 2009: 5.20 pence per share (2008: 5.02 pence per share)		2,731		2,667
Interim dividend for the year ended 31 March 2010: 2.66 pence per share (2009: 2.57 pence per share)		1,400		1,350
		4,131		4,017
Proposed after the balance sheet date and not recognised as a liability:
Final dividend for the year ended 31 March 2010: 5.65 pence per share (2009: 5.20 pence per share)		2,976		2,731

Vodafone Group Plc Annual Report 2010     123

Notes to the Company financial statements continued

11. Contingent liabilities

	2010		2009
	£m		£m
Performance bonds		5		35
Credit guarantees — third party indebtedness		5,112		5,317
Other guarantees and contingent liabilities		224		231

Performance bonds

Performance bonds require the Company to make payments to third parties in the event that the Company or its subsidiaries do not perform what is expected of them under the terms of any related contracts.

Credit guarantees — third party indebtedness

Credit guarantees comprise guarantees and indemnities of bank or other facilities.

A subsidiary of the Company has granted put options exercisable between 8 May 2010 and 8 May 2011 to members of the Essar group of companies that, if exercised, would allow the Essar group to sell its 33% shareholding in Vodafone Essar to the Group for US$5 billion or to sell up to US$5 billion worth of Vodafone Essar shares to the Group at an independently appraised fair market value. The Company has guaranteed payment of up to US$5 billion related to these options.

At 31 March 2010 the Company had also guaranteed debt of Vodafone Finance K.K. amounting to £1,821 million (2009: £1,820 million). This facility expires in March 2011.

Other guarantees and contingent liabilities

Other guarantees principally comprise of a guarantee relating to a commitment to the Spanish tax authorities of £221 million (2009: £229 million).

As discussed in note 29 to the consolidated financial statements the Company 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.

Legal proceedings

Details regarding certain legal actions which involve the Company are set out in note 29 to the consolidated financial statements.

124   Vodafone Group Plc Annual Report 2010

Additional information  

Shareholder information

Financial calendar for the 2011 financial year

Interim management statement	23 July 2010
Half-year financial results announcement	9 November 2010

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 40. Set out below is information relevant to the final dividend for the year ended 31 March 2010.

Ex-dividend date	2 June 2010
Record date	4 June 2010
Dividend reinvestment plan last election date	16 July 2010
Dividend payment date(1)	6 August 2010

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; or

• 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 shortly before the payment date in accordance with the Company’s articles of association.

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 BuyDIRECT 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 Registrar	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: 0818 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, USA
Telephone: +1 800 233 5601 (toll free) or, for calls outside the USA,
+1 201 680 6837 (not toll free) and enter company number 2160
Email: shrrelations@bnymellon.com

Vodafone Group Plc Annual Report 2010     125

Shareholder information continued

Internet share dealing

An internet share dealing service is available for holders of ordinary shares who want either 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 a live webcast of the AGM of the Company on 27 July 2010. A recording will be available to view after that date;

• view and/or download the 2010 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 e-mailed to them.

Annual general meeting

The twenty-sixth AGM of the Company will be held at The Queen Elizabeth II Conference Centre, Broad Sanctuary, Westminster, London SW1 on 27 July 2010 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 or 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: +44 207 930 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 0870 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 2010 was 152.0 pence (31 March 2009: 122.8 pence). The closing share price on 17 May 2010 was 136.4 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
2006		1.55		1.09		28.04		19.32
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

	London Stock
	Exchange
	Pounds per				NYSE/NASDAQ(1)
	ordinary share				Dollars per ADS
Quarter	High		Low		High		Low
2008/2009
First quarter		1.70		1.40		32.87		27.72
Second quarter		1.58		1.18		31.21		21.01
Third quarter		1.41		0.96		23.06		15.30
Fourth quarter		1.48		1.13		21.88		15.46
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(2)		1.53		1.32		23.79		19.41

	London Stock
	Exchange
	Pounds per				NYSE/NASDAQ(1)
	ordinary share				Dollars per ADS
Month	High		Low		High		Low
November 2009		1.40		1.33		23.61		21.86
December 2009		1.45		1.38		24.04		22.21
January 2010		1.44		1.32		23.31		21.42
February 2010		1.44		1.34		22.51		21.39
March 2010		1.54		1.42		23.32		21.32
April 2010		1.53		1.40		23.79		21.58
May 2010(2)		1.48		1.32		22.61		19.41

Notes:

(1)	The Company transferred its ADSs from the NYSE to NASDAQ on 29 October 2009.
(2)	Covering period up to 17 May 2010.

126   Vodafone Group Plc Annual Report 2010

Additional information

The current authorised share capital comprises 68,250,000,000 ordinary shares of 11³/₇ US cents each and 50,000 7% cumulative fixed rate shares of £1.00 each and 38,563,935,574 B shares of 15 pence each and 28,036,064,426 deferred shares of 15 pence each.

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 2010.

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 United States.

	31 March				%
Currency (=£1)	2010		2009		change
Average:
Euro		1.13		1.20		(5.8	)
US dollar		1.60		1.72		(7.0	)
At 31 March:
Euro		1.12		1.08		3.7
US dollar		1.52		1.43		6.3

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
2006		1.74		1.79		1.92		1.71
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

Month	High		Low
November 2009		1.68		1.64
December 2009		1.67		1.59
January 2010		1.64		1.59
February 2010		1.60		1.52
March 2010		1.54		1.48
April 2010		1.55		1.52

Markets

Ordinary shares of Vodafone Group Plc are traded on the London Stock Exchange and with effect from 29 October 2009 its listing of ADSs was transferred from the NYSE to NASDAQ. The Company had a total market capitalisation of approximately £71.8 billion at 17 May 2010 making it the third largest listing in The Financial Times Stock Exchange 100 index and the 38^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 128.

Shareholders at 31 March 2010

	Number of		% of total
Number of ordinary shares held	accounts		issued shares
1 – 1,000		435,142		0.21
1,001 – 5,000		80,280		0.31
5,001 – 50,000		26,783		0.58
50,001 – 100,000		1,130		0.14
100,001 – 500,000		1,066		0.43
More than 500,000		1,663		98.33
		546,064		100.00

Geographical analysis of shareholders

At 31 March 2010 approximately 48.8% of the Company’s shares were held in the UK, 27.4% in North America, 16.4% in Europe (excluding the UK) and 7.4% in the rest of the world.

Major shareholders

BNY Mellon, as custodian of the Company’s ADR programme, held approximately 14% of the Company’s ordinary shares of 11³/₇ US cents each at 17 May 2010 as nominee. The total number of ADRs outstanding at 17 May 2010 was 740,793,229. At this date 1,313 holders of record of ordinary shares had registered addresses in the United States and in total held approximately 0.006% of the ordinary shares of the Company. At 17 May 2010 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		5.74	%
Legal & General Group Plc		4.07	%

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 17 May 2010, 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 129.

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, a company can remove the object clauses which become part of its articles of association and as a result the company’s objects will be unrestricted.

A special resolution will be proposed at the 2010 AGM to i) remove the Company’s object clause together with all other provisions of its memorandum which, by virtue of the Companies Act 2006, are treated as forming part of the Company’s articles of association and ii) adopt new articles of association in order to update the Company’s existing articles of association to take account of the implementation on 3 August 2009 of the Shareholders’ Rights Regulations and the implementation of the remaining parts of the Companies Act 2006.

Vodafone Group Plc Annual Report 2010     127

Shareholder information continued

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.

No person is disqualified from being a director or is required to vacate that office by reason of attaining a maximum age.

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 57 to 67). The report is also subject to a shareholder vote.

Rights attaching to the Company’s shares

At 31 March 2010 the issued share capital of the Company was comprised of 50,000 7% cumulative fixed rate shares of £1.00 each and 52,663,134,573 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 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.

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 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.

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.

128   Vodafone Group Plc Annual Report 2010

Additional information

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 up to five years 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 rights issue up to an amount specified by the shareholders and free of the pre-emption restriction. In accordance with institutional investor guidelines, the amount of relevant securities to be fixed by shareholders is normally restricted to one third of the existing issued ordinary share capital and the amount of equity securities to be issued for cash other than in connection with a rights issue is restricted to 5% of the existing issued ordinary share capital.

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 by 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 twenty-one days’ notice in writing. Subject to obtaining shareholder approval on an annual basis, the Company may call other general meetings on 14 clear 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, which shall not be more than forty-eight hours before the time fixed for the meeting (non-working days must be excluded, pursuant to 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 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 may, subject to and in accordance with the Companies Act 2006, communicate all shareholder information by electronic means, including by making such information available on a website, with notification that such information shall be 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 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.

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 the Vodafone website at www.vodafone.com/governance or from the Company’s registered office.

Debt securities

Pursuant to an Agreement of Resignation, Appointment and Acceptance, dated as of 24 July 2007, by and among the Company, BNY Mellon and Citibank N.A, BNY Mellon became the successor trustee to Citibank N.A. under the Company’s Indenture dated as of 10 February 2000.

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$9.1 billion credit facilities which are discussed under “Financial position and resources” on page 43.

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 except as otherwise set out under “Taxation” on the following page.

Vodafone Group Plc Annual Report 2010     129

Shareholder information continued

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 United States;

• 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 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 on the following page).

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 2011 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.

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 2011 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.

130   Vodafone Group Plc Annual Report 2010

Additional information

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 2010     131

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 subsidiaries 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 2007 are as follows:

9 May 2007 — India: A Bharti group company irrevocably agreed to purchase our 5.60% direct shareholding in Bharti Airtel Limited.

3 December 2007 — Italy and Spain: Acquired Tele2 Italia SpA and Tele2 Telecommunications Services SLU from Tele2 AB Group for €747 million (£532 million).

11 December 2007 — Qatar: A consortium comprising Vodafone and The Qatar Foundation was named as the successful applicant in the auction to become the second mobile operator in Qatar.

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.

18 December 2008 — Poland: We increased our stake in Polkomtel S.A. by 4.8% to 24.4% for net cash consideration of €186 million (£171 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 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 (see note 26 to the consolidated financial statements).

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 (see note 26 to the consolidated financial statements).

132   Vodafone Group Plc Annual Report 2010

Additional information   

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. Some regulation implements commitments made by governments under the Basic Telecommunications Accord of the World Trade Organisation to facilitate market entry and establish regulatory frameworks.

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’)

In November 2007 the European Commission (the ‘Commission’) published proposals to amend the EU framework. These new rules were approved by the European Parliament and the Council of Member States (the ‘Council’) in November 2009 and became EU law following their publication in the Official Journal of the European Union on 18 December 2009. The new rules consist of the Better Regulation Directive and the Citizens’ Rights Directive which will need to be transposed into national laws of the 27 EU Member States by June 2011. The new rules include:

• the creation of a new European Telecoms Authority called the Body of European Regulators for Electronic Communications (‘BEREC’) effective from 7 January 2010;

• changes to the licensing of spectrum, introducing a multi-year spectrum policy programme, more flexibility, trading and market-based approaches;

• adjustments to the Article 7 process in which regulatory decisions are reviewed by the Commission and BEREC;

• the addition of functional separation as a remedy which may be imposed by national regulatory authorities (‘NRAs’) subject to certain conditions being fulfilled;

• provisions to safeguard “net neutrality” to address the concerns that the services of some internet service providers will be blocked or otherwise discriminated against by network operators;

• an obligation to complete number portability in one day on all networks in the EU and various other measures regarding consumer protection and user rights;

• various measures regarding network security; and

• obligations for telecommunication providers to register any serious data breaches and to inform NRAs and their customers.

The Commission’s Competition Directorate General has indicated that it is not currently pursuing its investigation into the provision of voice over internet protocol (‘VOIP’) and other internet services over mobile networks.

The Commission has begun to consult on future obligations to provide universal services 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. Future obligations could extend to the provision of broadband data services, whether by mobile or fixed means.

Roaming

A revised roaming regulation (the ‘roaming regulation’) entered into force in July 2009 amending and extending the requirements on mobile operators to supply voice roaming by means of a euro-tariff (from which customers may opt out) under which the cost of making and receiving calls within the EU is capped. New caps for making calls are set at 39 eurocents and 35 eurocents and new caps for the costs of receiving calls at 15 eurocents and 11 eurocents effective July 2010 and July 2011 respectively. The revised regulation requires roaming voice charges to be levied in per second units although operators may establish certain initial charges for making calls.

The roaming regulations also regulate roaming text messages and data roaming including a retail cap of 11 eurocents, a wholesale cap of 4 eurocents on roaming text messages and an average wholesale price cap for data roaming services of €1 per megabyte. This price cap reduces to 80 eurocents in July 2010 and to 50 eurocents in July 2011. In addition, the regulation sets out a number of transparency measures

to be fully implemented by July 2010. The Commission is required to publish an interim report on developments in international roaming during 2010.

Call termination

Call termination rates are subject to regulation by the appropriate NRA in all of our EU subsidiaries and joint ventures. The Commission adopted a recommendation in May 2009 on the treatment of termination rates from 31 December 2012 (or later under certain circumstances) aimed at achieving further convergence of termination rates in Europe. The recommendation states that NRAs should set symmetric rates for all mobile network operators using an incremental cost methodology. NRAs are required to take utmost account of the recommendation but may depart from it in justified circumstances.

In December 2009 the European Regulators Group, now incorporated into BEREC, conducted a consultation on the potential adoption of zero termination rates (“bill and keep”) for voice call termination. Responses have not yet been published.

At 31 March 2010 the termination rates effective for our subsidiaries and joint ventures within the EU, which differs from our Europe region, ranged from 4.3 eurocents per minute (3.9 pence) to 9.0 eurocents per minute (8.0 pence), at the relevant 31 March 2010 exchange rate.

Fixed network regulation

In June 2009 the Commission published the second draft of proposals for a recommendation on the future regulation of fibre ‘next generation’ broadband access networks. A final recommendation is expected to be published during 2010.

In September 2009 the Commission adopted Guidelines on the application of EC Treaty state aid rules to the public funding of broadband networks. Virtually all European governments have stated their intent to stimulate the provision of, partially fund or provide, fast and superfast broadband networks. The Commission has proposed a target of making broadband available to all households by 2013 and being available with at least 30 Mbps by 2020, with at least 50% of households able to subscribe to speeds of 100 Mbps or more.

Spectrum

In February 2007 the Commission published a communication on its plans to introduce greater flexibility in the use of spectrum in selected bands, including 2G and 3G bands, through the use of decisions agreed with the Radio Spectrum Committee (an EU level committee comprising the Commission and member states). In July 2009 the Council adopted the amended GSM directive allowing the use of the 900 MHz and 1800 MHz GSM bands for UMTS technology (‘refarming’) and, in the future, other technologies. It must be implemented by member states by May 2010.

In November 2007 the Commission made a policy announcement on part of the UHF band known as the 800 MHz ‘digital dividend’ spectrum (to be released following the transition from analogue to digital TV) and urged the member states to identify new harmonised bands of spectrum for mobile broadband services and mobile TV. In December 2009 the Commission published a draft decision on the technical harmonisation of the digital dividend 790-862 MHz sub-band. Final adoption is expected in 2010. The decision does not oblige a member state to open the sub-band for new uses other than broadcasting, but if and when a member state does so, it will have to follow the common technical parameters.

Europe region

Germany

The current termination rates of 6.59 eurocents per minute will remain effective until 30 November 2010. Proposals for future rates are expected in October 2010.

The rates that access seekers have to pay in order to unbundle Deutsche Telekom’s VDSL network were set by the NRA on 26 March 2010. We have appealed against these rates.

The auction for 800 MHz (digital dividend), 1800 MHz, 2.1 GHz and 2.6 GHz spectrum began on 12 April 2010.

On 20 May 2010 Vodafone 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 1.43 billion (£1.23 billion).

Vodafone Group Plc Annual Report 2010     133

Regulation continued

Italy

In July 2008 the NRA reduced our termination rate to 8.85 eurocents per minute and in July 2009 to 7.70 eurocents. The NRA foresees further reductions to 6.60 eurocents in July 2010, 5.30 eurocents in July 2011 and 4.50 eurocents in July 2012 subject to the findings of its cost model analysis.

Following the auction of 2.1 GHz spectrum in June 2009 we and two of the other existing network operators (Telecom Italia and Wind) each acquired an additional 2x5MHz of spectrum at 2.1GHz. We paid €90 million for this additional spectrum. The NRA also reorganised the 900 MHz spectrum during the 2009 calendar year and as a result we increased our 900 MHz spectrum assignment to 12 MHz.

Spain

The NRA reduced our termination rate to 7.87 eurocents per minute in October 2008 and to 7.00 eurocents in April 2009. The NRA has adopted a glide path of termination rate reductions from 6.13 eurocents in October 2009 to 4.00 eurocents by October 2011 (on a per second charging basis).

The National Competition Authority (‘NCA’) issued a statement of objections in the procedure opened for an alleged anti-competitive practice in January 2007, concerning alleged concerted practice by Vodafone and others to establish the same call set-up charges. The NCA has decided to close the file.

After an initial decision determining the net cost and industry contributions corresponding to universal service provision in the years 2003 to 2005, the NRA has adopted new decisions with the same principles for years 2006 and 2007. In its decision for 2006 it declared an amount of €75.3 million payable by the industry. We have been held liable for between approximately 15% and 20% of the industry total for the years 2003 to 2006 with a decision for 2007 pending.

The Spanish Government removed advertising from state television and radio services in September 2009 but sought to replace advertising revenue through imposition of a new tax on revenue earned by Spanish telecommunication operators. In January 2010 the European Commission announced that it had initiated an enquiry as to whether these provisions breach European laws on State Aid.

United Kingdom

Our regulated average termination rate from April 2008 to March 2009 was 5.75 pence per minute. From 1 April 2009 the rate declined to 4.72 pence following appeals by BT and H3G to the competition appeals tribunal. On 1 April 2010 the rate declined to 4.43 pence. The NRA is currently consulting upon the rates to apply from 1 April 2011 to 31 March 2015. It currently proposes a reduction to 0.50 pence during 2014/15.

An auction of the digital dividend spectrum in the 790-862 MHz range and 2.6 GHz spectrum is expected during 2011.

The UK Government’s proposals to permit refarming, restructure 2G spectrum and determine the basis upon which existing operators could participate in the 2.6 GHz and digital dividend spectrum auctions failed to pass through Parliament before its dissolution. As part of the conditions for clearance of the merger between Orange UK and T-Mobile UK, the European Commission has required them to dispose of 15 MHz of spectrum in the 1800 MHz band.

Other Europe

Greece

In January 2009 the termination rate reduced from 9.91 eurocents to 7.86 eurocents per minute. In January 2010 the rate fell to 6.24 eurocents and a further reduction to 4.95 eurocents will take place in January 2011.

Vodafone Greece and other mobile operators have encountered difficulties in obtaining authorisations to install and maintain base stations and antennae. Operators have proposed amendments to the relevant law and have requested that the Government extend the deadline for obtaining such approvals. In May 2009 the Government set a new deadline of March 2010 which has been extended further until March 2011. Vodafone Greece is negotiating a co-location agreement to site base stations on the premises of OTE, following a regulatory decision in February 2009 mandating co-location.

Vodafone Greece continues to appeal findings and sanctions arising from the 2007 interception incident. A number of civil lawsuits are also pending in the Greek courts.

A new tax law passed by the Parliament in July 2009 has introduced a 12% levy on prepaid subscriptions and changed the method of assessment thereby increasing the levy on contract subscriptions, both of which are paid by the customer.

Mobile subscriber registration was implemented in Greece on 7 November 2009 and all prepaid subscribers should be registered by the end of July 2010. Any remaining anonymous prepaid accounts are to be disconnected by 31 July 2010.

Ireland

The NRA has proposed re-auctioning all licences in the 900MHz spectrum band on expiry of their existing term in (in our case) 2011.

Netherlands

Following an appeal by one stakeholder against the NRA’s decision setting of call termination rates, Vodafone’s termination rate reduced to 7.00 eurocents per minute in July 2009. This is likely to be reduced in July 2010 following a cost model analysis by the NRA which proposes reducing to 1.2 eurocents per minute by September 2012.

Auctions of 2.6 GHz spectrum concluded in April 2010. We acquired 2x10MHz of 2.6 GHz of spectrum for the reserve price of €200,000.

Portugal

The NRA has adopted a glide path of termination rate reductions from May 2010 to take the rate from 6.50 eurocents to 3.50 eurocents per minute by April 2011.

The NRA is expected to auction 2.6 GHz spectrum in 2010.

Africa and Central Europe region

South Africa

The NRA has released draft regulations proposing adoption of a uniform mobile termination rate and further reductions to ZAR 0.65 per minute in July 2010, ZAR 0.50 in July 2011 and ZAR 0.40 in July 2012.

In January 2009 the NRA published a notice that it was issuing converted licences to close the licence conversion process which commenced in 2006. Vodacom’s mobile cellular telecommunications licence was transformed into two distinct licences: an individual electronic communications network service (‘I ECNS’) licence and an individual electronic communications services (‘I ECS’) licence. The NRA gazetted a further document setting out a process through which it will determine standard terms and conditions regulations, licence fees, spectrum fees and universal service obligations.

In July 2009 the NRA published proposals for the future allocation of spectrum licences including the 2.6 GHz band.

Other Africa and Central Europe

Romania

The NRA awarded us an additional 2x2.8 MHz of 1800 MHz spectrum in August 2009.

Czech Republic

The NRA awarded us an additional 2x3.8 MHz of 900 MHz spectrum in June 2009.

Hungary

Proposals to award additional 900 MHz spectrum have been delayed and are expected in 2010.

Turkey

The Government undertook an auction of four 2.1 GHz licences in November 2008. Each of the three existing operators obtained licences. Concession agreements were awarded to the successful bidders in April 2009. The fourth licence was not awarded.

The NRA adopted rules in April 2009 which require Turkcell to ensure that on-net tariffs do not fall below a level determined by reference to the prevailing mobile termination rate. In May 2009 the termination rate was reduced from Kr 9.5 per minute to Kr 6.8. A further reduction to Kr 3.2 took place in April 2010.

134   Vodafone Group Plc Annual Report 2010

Additional information   

Ghana

In May 2009 the Government of Ghana initiated an Inter-Ministerial review of the transaction in which we acquired 70% of Ghana Telecommunications. Following this review the Government announced in October 2009 that it would not abrogate the sale and purchase agreement with us.

In December 2008 the NRA awarded Ghana Telecommunications one of five national 3G licences. The licences have been issued as provisional authorisations, pending conversion to formal licences.

Asia Pacific and Middle East region

India

The NRA announced a new interconnect charge usage regime effective 1 April 2009 under which mobile termination rates were reduced to 20 paisa per minute. Vodafone Essar and a number of other operators and industry bodies have appealed this decision to the Telecom Dispute Settlement and Appellate Tribunal which held hearings in February 2010.

An auction of 2.1 GHz and 2.3 GHz 3G and broadband wireless access spectrum commenced on 9 April 2010. From 1 April 2010 spectrum fees were increased by 1% to 2% of Vodafone Essar’s adjusted gross revenue. We have appealed against this decision.

On 11 May 2010 the NRA published recommendations on a spectrum management and licensing framework. These recommendations will be reviewed by the Department of Telecommunications before a final decision on implementation is made. If implemented, these recommendations would have a significant impact on spectrum allocations and the cost of spectrum.

In September 2009 the NRA made regulations for the implementation of mobile number portability with a deadline of 31 March 2010 for its introduction. Subsequently the Department of Telecommunications has indicated that the implementation date will be delayed.

On 19 May 2010 Vodafone secured 20 year licences for 2x5 MHz of 3G spectrum in nine circles in the Indian auction for a total price of INR 11.6 billion (£1.74 billion). These circles include Delhi, Mumbai, Kolkata and a further 3 ‘A’ circles and 3 ‘B’ circles providing a footprint covering 66% of Vodafone Essar Limited’s current revenue base.

Other Asia Pacific and Middle East

Australia

The Australian Government has announced that it intends to underwrite the roll out of a national broadband network, which will provide wholesale fibre access to third parties. The Government is also undertaking a comprehensive review of the regulatory framework, including consideration of the existing arrangements for the regulation of services such as call termination, universal service arrangements (to which we currently contribute) and consumer measures. Legislation that could see the incumbent, Telstra, split its retail and wholesale businesses is expected to be put to a Senate vote by June 2010. The Government has announced that it intends to extend all existing GSM licences until 2028, subject to agreement of satisfactory financial terms.

Egypt

Applicable from the 2010 financial year Vodafone Egypt is required to pay up to 0.5% of its revenue into a universal service fund. The NRA has issued a request for information for the provision and operation of basic telecommunications services to unserved, low income areas in five regions as a preliminary step towards a universal service tender. The NRA has set termination rates at 65% of each operator’s average on-net retail revenue per minute.

New Zealand

In September 2009 the New Zealand government released its final proposal for the ultra-fast broadband initiative, committing up to NZ$1.5 billion to deploy an open access, dark fibre infrastructure. We are currently exploring how to participate in this government initiative.

Qatar

We launched commercial mobile services on 7 July 2009. In April 2010 the NRA issued a fixed licence to Vodafone Qatar.

In November 2009 the Qatar NRA imposed a price floor on retail services offered by us and QTel, although only QTel is designated a dominant service provider. The NRA is expected to review this regulation by July 2010.

Licences

The table below summarises the most significant mobile licences held by our operating subsidiaries and our joint venture in Italy at 31 March 2010.

Mobile licences

Country by region	2G licence expiry date		3G licence expiry date
Europe
Germany	December 2016		December 2020
Italy	February 2015		December 2021
Spain	July 2023	(1)	April 2020
UK	See note 2		December 2021
Albania	June 2016		None issued
Greece	August 2016	(3)	August 2021
Ireland	May 2011	(4)	October 2022
Malta(5)	September 2010		August 2020
Netherlands	March 2013		December 2016
Portugal	October 2021		January 2016
Africa and Central Europe
Vodacom: South Africa	Annual	(6)	Annual	(6)
Romania(7)	December 2011		March 2020
Turkey	April 2023		April 2029
Czech Republic(8)	January 2021		February 2025
Ghana	December 2019		December 2023	(9)
Hungary	July 2014	(10)	December 2019	(11)
Asia Pacific and Middle East
India(12)	November 2014 — December 2026		None issued
Egypt(13)	January 2022		January 2022
New Zealand	See note 13		March 2021	(14)
Qatar	June 2028		June 2028

Notes:

(1)	Date relates to 1800 MHz spectrum licence. Spain also has a separate 900 MHz spectrum licence which expires in February 2020.
(2)	Indefinite licence with a one year notice of revocation.
(3)	The licence granted in 1992 (900 MHz spectrum) will expire in September 2012. The licence granted in 2001 (900 and 1800 MHz spectrum) will expire in August 2016.
(4)	Date refers to 900 MHz licence. Ireland also has a separate 1800 MHz spectrum licence which expires in December 2015.
(5)	Malta also holds a WiMAX licence, granted in October 2005, which expires in October 2020.
(6)	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 a 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.
(7)	Romania was awarded an additional 2x28 MHz of 1800 MHz spectrum in August 2009.
(8)	Czech Republic was awarded an additional 2x3.8 MHz of 900 MHz spectrum in June 2009.
(9)	The NRA has issued provisional licences with the intention of converting these to full licences once the NRA board has been reconvened.
(10)	There is an option to extend this licence for seven years.
(11)	There is an option to extend this licence.
(12)	India is comprised of 23 service areas with a variety of expiry dates. There is an option to extend these licences by ten years.
(13)	Egypt acquired an additional 3G carrier at 2.1 GHz (2 x 5 MHz) in July 2009 for EGP 1.1. billion.
(14)	New Zealand owns two 900 MHz licences which expire in November 2011 and in June 2012. These licences are expected to be renewed until November 2031. Additionally Vodafone New Zealand owns a 1800 MHz spectrum licence and a 2100 MHz licence which expire in March 2021. All licences can be used for 2G and 3G at our discretion.

Vodafone Group Plc Annual Report 2010     135

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 85.

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 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 measure, operating profit and basic earnings per share, are provided in “Operating results” beginning on page 25.

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 41.

Other

Certain of the statements within the section titled “Chief Executive’s review” on pages 6 to 9 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 37 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.

136   Vodafone Group Plc Annual Report 2010

Additional information   

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 2010
Group
Data revenue		19.3			6.9			6.8			33.0
Fixed line revenue		7.9			6.0			6.7			20.6
Service revenue		(1.6	)		4.9			5.6			8.9
VGE service revenue		2			1			6			9
Europe
Enterprise revenue		(4.1	)		—			4.7			0.6
Fixed line revenue		7.7			—			6.3			14.0
Service revenue for the quarter ended 31 March 2010		(1.7	)		(0.1	)		(2.0	)		(3.8	)
Germany — service revenue for the quarter ended 31 March 2010		(1.6	)		—			(2.4	)		(4.0	)
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	)
Netherlands — service revenue		3.0			—			6.4			9.4
Greece — service revenue		(14.5	)		—			5.6			(8.9	)
Portugal — service revenue		(4.9	)		—			6.1			1.2
Africa and Central Europe
Service revenue for the quarter ended 31 March 2010		2.4			45.5			8.4			56.3
Vodacom — revenue		3.2			108.6			38.5			150.3
Vodacom — data revenue		32.9			155.3			57.3			245.5
Vodacom — service revenue for the quarter ended 31 March 2010		4.6			123.7			29.3			157.6
Romania — service revenue		(19.9	)		—			5.2			(14.7	)
Romania — adjusted EBITDA		(26.5	)		—			4.7			(21.8	)
Turkey — service revenue		5.3			—			(1.6	)		3.7
Turkey — service revenue for the quarter ended 31 March 2010		31.3			—			1.5			32.8
Asia Pacific and Middle East
Service revenue for the quarter ended 31 March 2010		5.0			(3.5	)		5.1			6.6
India — service revenue for the quarter ended 31 March 2010		6.5			—			0.1			6.6
Egypt — service revenue		1.3			—			4.7			6.0
Egypt — data and fixed line revenue		64.2			—			4.4			68.6
Verizon Wireless
Service revenue		6.3			11.7			5.6			23.6
Revenue		5.0			11.8			5.5			22.3
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
Data revenue		25.9			0.7			17.1			43.7
Service revenue		(0.3	)		3.1			13.1			15.9
Pro-forma revenue		1			2			13			16
Pro-forma adjusted EBITDA		(3	)		—			13			10
Europe
Service revenue for the quarter ended 31 March 2009		(3.3	)		0.1			15.7			12.5
Spain — service revenue for the quarter ended 31 March 2009		(8.6	)		—			18.1			9.5
Other Europe — service revenue for the quarter ended 31 March 2009		(5.0	)		(0.3	)		18.8			13.5
Africa and Central Europe
Vodacom — data revenue		59.7			—			(5.0	)		54.7
Asia Pacific and Middle East
Pro-forma revenue		19			3			10			32
Pro-forma adjusted EBITDA		7			1			10			18
India — pro-forma revenue		33			9			6			48
India — pro-forma adjusted EBITDA		6			9			5			20
Australia — service revenue		6.1			0.7			6.4			13.2
Australia — adjusted EBITDA		(16.9	)		(4.3	)		4.7			(16.5	)
Verizon Wireless
Service revenue		10.5			5.3			23.3			39.1
Revenue		10.4			5.2			23.3			38.9
Adjusted EBITDA		13.0			4.3			23.7			41.0
Group’s share of result of Verizon Wireless		21.6			(0.7	)		23.8			44.7

Vodafone Group Plc Annual Report 2010     137

Form 20-F cross reference guide

This annual report on Form 20-F for the fiscal year ended 31 March 2010 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		142
		Shareholder information — Inflation and foreign currency translation		127
	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		38
4	Information on the Company
	4A History and development of the company	History and development		132
		Contact details	IBC
	4B Business overview	Global presence		10
		Customers and distribution		12
		Products and services		14
		Value added services		16
		Operating results		25
		Telecommunications industry		4
	4C Organisational structure	Note 12 “Principal subsidiaries”		96
		Note 13 “Investments in joint ventures”		97
		Note 14 “Investments in associates”		98
		Note 15 “Other investments”		98
	4D Property, plant and equipment	Technology and resources		18
		Financial position and resources		40
		Corporate responsibility		45
4A	Unresolved staff comments	None		—
5	Operating and financial review and prospects
	5A Operating results	Operating results		25
		Note 22 “Borrowings”		105
		Shareholder information — Inflation and foreign currency translation		127
		Regulation		133
	5B Liquidity and capital resources	Financial position and resources — Liquidity and capital resources		41
		Note 21 “Capital and financial risk management”		103
		Note 22 “Borrowings”		105
	5C Research and development, patents and licences, etc	Technology and resources		18
	5D Trend information	Telecommunications industry		4
	5E Off-balance sheet arrangements	Financial position and resources — Off-balance sheet arrangements		44
		Note 28 “Commitments”		114
		Note 29 “Contingent liabilities”		114
	5F Tabular disclosure of contractual obligations	Financial position and resources — Contractual obligations		40
	5G Safe harbor	Forward-looking statements		140
6	Directors, senior management and employees
	6A Directors and senior management	Board of directors and Group management		48
	6B Compensation	Directors’ remuneration		57
	6C Board practices	Corporate governance		51
		Directors’ remuneration		57
		Board of directors and Group management		48
	6D Employees	People		22
		Note 32 “Employees”		117
	6E Share ownership	Directors’ remuneration		57
		Note 20 “Share-based payments”		101
7	Major shareholders and related party transactions
	7A Major shareholders	Shareholder information — Major shareholders		127
	7B Related party transactions	Directors’ remuneration		57
		Note 29 “Contingent liabilities”		114
		Note 31 “Related party transactions”		116
	7C Interests of experts and counsel	Not applicable		—

138   Vodafone Group Plc Annual Report 2010

Additional information  

Item	Form 20-F caption	Location in this document	Page
8	Financial information
	8A Consolidated statements and other financial information	Financials(1)		68
		Audit report on the consolidated financial statements		73
		Note 29 “Contingent liabilities”		114
		Financial position and resources		40
	8B Significant changes	Subsequent events		A-1
9	The offer and listing
	9A Offer and listing details	Shareholder information — Share price history		126
	9B Plan of distribution	Not applicable		—
	9C Markets	Shareholder information — Markets		127
	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		127
	10C Material contracts	Shareholder information — Material contracts		129
	10D Exchange controls	Shareholder information — Exchange controls		129
	10E Taxation	Shareholder information — Taxation		130
	10F Dividends and paying agents	Not applicable		—
	10G Statement by experts	Not applicable		—
	10H Documents on display	Shareholder information — Documents on display		129
	10I Subsidiary information	Not applicable		—
11	Quantitative and qualitative disclosures about market risk	Note 21 “Capital and financial risk management”		103
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		C-1
13	Defaults, dividend arrearages and delinquencies	Not applicable		—
14	Material modifications to the rights of security holders and use of proceeds	Shareholder information — Debt securities		129
15	Controls and procedures	Corporate governance		51
		Directors’ statement of responsibility — Management’s report on internal control over financial reporting		69
		Audit report on internal controls		70
16	16A Audit Committee financial expert	Corporate governance — Board committees		53
	16B Code of ethics	Corporate governance		51
	16C Principal accountant fees and services	Note 4 “Operating profit”		86
		Corporate governance — Auditors		55
	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		42
	16F Change in registrant’s certifying accountant	Not applicable		—
	16G Corporate governance	Corporate governance — US listing requirements		55
17	Financial statements	Not applicable		—
18	Financial statements	Financials(1)		68
	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-29
19	Exhibits	Filed with the SEC	Index to Exhibits

Note:

(1) The Company financial statements, and the audit report and notes relating thereto, on pages 118 to 124 should not be considered to form part of the Company’s annual report on Form 20-F.

Vodafone Group Plc Annual Report 2010     139

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 6 to 9, the Group’s 7% dividend per share growth target contained on pages 8 and 37 and the Guidance statement on page 37 of this document, and the performance of joint ventures, associates, including Verizon Wireless, 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 Money Transfer System and an increase in download speeds;

• 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;

• 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, the Group’s ability to acquire spectrum, expected growth prospects in Europe, Africa and Central Europe, Asia Pacific and Middle East regions and growth in customers and usage generally;

• expected benefits associated with the merger of Vodafone Australia and Hutchison 3G Australia including receipt of deferred payments;

• anticipated benefits to the Group from cost efficiency programmes, including the recently initiated £1 billion cost reduction programme, the two-year working capital reduction programme and the outsourcing of IT functions and network sharing agreements;

• 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, tax rates and capital expenditure;

• expectations regarding the Group’s access to adequate funding for its working capital requirements 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 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 of directors 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 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 38 and 39 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.

140   Vodafone Group Plc Annual Report 2010

Additional information  

Definition of terms

3G broadband	3G services enabled with high speed downlink packet access (‘HSDPA’) technology which enables data transmission at speeds of up to 7.2 megabits per second.
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.
Churn	Total gross customer disconnections in the period divided by the average total customers in the period.
Contribution margin	The contribution margin is stated after direct costs, acquisition and retention costs and ongoing commissions.
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.
Customer delight	The Group uses a proprietary ‘customer delight’ system to track customer satisfaction across its controlled markets and jointly controlled market in Italy. Customer delight is measured by an index based on the results of surveys performed by an external research company which cover all aspects of service provided by Vodafone and incorporates the results of the relative satisfaction of the competitors’ customers. An overall index for the Group is calculated by weighting the results for each of the Group’s operations based on service revenue.
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 high speeds.
Fixed broadband customer	A fixed broadband customer is defined as a physical connection or access point to a fixed line network.
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
Handheld business device	A wireless connection device which allows access to business applications and push and pull email.
HSDPA	High speed downlink packet access is a wireless technology enabling network to mobile data transmission speeds of up to 28.8 Mbps.
HSUPA	High speed uplink packet access is a wireless technology enabling mobile to network data transmission speeds of up to 5.8 Mbps.
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.
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 PC connectivity device	A connection device which provides access to 3G services to users with an active PC or laptop connection. This includes Vodafone Mobile Broadband data cards, Vodafone Mobile Connect 3G/GPRS data cards and Vodafone Mobile Broadband USB modems.
Net debt	Long-term borrowings, short-term borrowings and mark-to-market adjustments on financing instruments less cash and cash equivalents.
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 brand reach into such new markets.
Penetration	Number of customers 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.
Pro-forma growth	Pro-forma growth is organic growth adjusted to include acquired business for the whole of both periods.
Proportionate mobile customers	The proportionate customer number represents the number of mobile customers in ventures which the Group either controls or in which it invests, based on the Group’s ownership in such ventures.
Reported growth	Reported growth is based on amounts reported in pounds sterling as determined under IFRS.
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.
Smartphones	A smartphone is a mobile phone offering advanced capabilities including access to email and the internet.
Termination rate	A per minute charge paid by a telecommunications network operator when a customer makes a call to another mobile or fixed line network operator.
Total communications	Comprises all fixed location services, data services, fixed line services, visitor revenue and other services.
Visitor revenue	Amounts received by a Vodafone operating company when customers of another operator, including those of other Vodafone companies, roam onto its network.

Vodafone Group Plc Annual Report 2010     141

Selected financial data

At/for the year ended 31 March	2010			2009			2008			2007			2006
Consolidated income statement data (£m)
Revenue		44,472			41,017			35,478			31,104			29,350
Operating profit/(loss)		9,480			5,857			10,047			(1,564	)		(14,084	)
Profit/(loss) before taxation		8,674			4,189			9,001			(2,383	)		(14,853	)
Profit/(loss) for the financial year from continuing operations		8,618			3,080			6,756			(4,806	)		(17,233	)
Profit/(loss) for the financial year		8,618			3,080			6,756			(5,222	)		(20,131	)
Consolidated statement of financial position data (£m)
Total assets		156,985			152,699			127,270			109,617			126,502
Total equity		90,810			84,777			76,471			67,293			85,312
Total equity shareholders’ funds		90,381			86,162			78,043			67,067			85,425
Earnings per share(1)
Weighted average number of shares (millions)
— Basic		52,595			52,737			53,019			55,144			62,607
— Diluted		52,849			52,969			53,287			55,144			62,607
Basic earnings/(loss) per ordinary share (pence)
— Profit/(loss) from continuing operations		16.44	p		5.84	p		12.56	p		(8.94	)p		(27.66	)p
— Profit/(loss) for the financial year		16.44	p		5.84	p		12.56	p		(9.70	)p		(32.31	)p
Diluted earnings/(loss) per ordinary share
— Profit/(loss) from continuing operations		16.36	p		5.81	p		12.50	p		(8.94	)p		(27.66	)p
— Profit/(loss) for the financial year		16.36	p		5.81	p		12.50	p		(9.70	)p		(32.31	)p
Cash dividends(1)(2)
Amount per ordinary share (pence)		8.31	p		7.77	p		7.51	p		6.76	p		6.07	p
Amount per ADS (pence)		83.1	p		77.7	p		75.1	p		67.6	p		60.7	p
Amount per ordinary share (US cents)		12.62	c		11.11	c		14.91	c		13.28	c		10.56	c
Amount per ADS (US cents)		126.2	c		111.1	c		149.1	c		132.8	c		105.6	c
Other data
Ratio of earnings to fixed charges(3)		3.6			1.2			3.9			—			—
Ratio of earnings to fixed charges deficit(3)		—			—			—			(4,389	)		(16,520	)

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 2010 was proposed by the directors on 18 May 2010 and is payable on 6 August 2010 to holders of record as of 4 June 2010. The total dividends have been translated into US dollars at 31 March 2010 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 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 and preferred share dividends.

142   Vodafone Group Plc Annual Report 2010

Financials

Notes

Vodafone Group Plc Annual Report 2010     143

Notes

144   Vodafone Group Plc Annual Report 2010

Contact details Investor Relations Telephone: +44 (0) 1635 33251 Media Relations Telephone: +44 (0) 1635 664444 Corporate Responsibility Fax: +44 (0) 1635 674478 E-mail: responsibility@vodafone.com Website: www.vodafone.com/responsibility 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

Vodafone Group Plc Registered Office Vodafone House The Connection Newbury Berkshire RG14 2FN England Registered in England No. 1833679 Tel: +44 (0) 1635 33251 Fax: +44 (0) 1635 45713 www.vodafone.com

Events occurring subsequent to the approval of the Company’s Annual Report on 18 May 2010

India licence auction

On 19 May 2010 Vodafone secured 20 year licences for 2x5 MHz of 3G spectrum in nine circles in the Indian auction for a total price of INR 11.6 billion (£1.74 billion). These circles include Delhi, Mumbai, Kolkata and a further 3 ‘A’ circles and 3 ‘B’ circles providing a footprint covering 66% of Vodafone Essar Limited’s current revenue base.

German licence auction

On 20 May 2010 Vodafone 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 €1.43 billion (£1.23 billion).

Legal proceedings

On 31 May 2010 VIHBV received an order from the Indian tax authorities confirming their view that they do have jurisdiction 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 continues to believe that neither it nor any other member of the Group is liable for any tax and intends to defend this position vigorously, including if necessary through appeal to the Courts as permitted by the Supreme Court in its judgment of 23 January 2009 (see note 29 for further details).

A-1

Cellco Partnership
(d/b/a Verizon Wireless)

Report of Independent Registered Public Accounting Firm

Consolidated Financial Statements
For the years ended
December 31, 2009, 2008 and 2007

B-1

Table of Contents

Cellco Partnership (d/b/a Verizon Wireless)

Consolidated Statements of Income
For the years ended December 31, 2009, 2008 and 2007	B-3
Consolidated Balance Sheets
December 31, 2009 and 2008	B-4
Consolidated Statements of Cash Flows
For the years ended December 31, 2009, 2008 and 2007	B-5
Consolidated Statements of Changes in Partners’ Capital
For the years ended December 31, 2009, 2008 and 2007	B-6
Notes to Consolidated Financial Statements	B-7-28

B-2

Consolidated Statements of Income
Cellco Partnership (d/b/a Verizon Wireless)

	Years Ended December 31,
(Dollars in Millions)	2009			2008			2007
Operating Revenue (including $102, $106 and $105 from affiliates)
Service revenue	$	53,497		$	42,635		$	38,016
Equipment and other		8,634			6,697			5,866
Total operating revenue		62,131			49,332			43,882
Operating Costs and Expenses (including $1,651, $1,541 and $1,304 from affiliates)
Cost of service (exclusive of items shown below)		7,722			6,015			5,294
Cost of equipment		12,222			9,705			8,162
Selling, general and administrative		18,289			14,220			13,477
Depreciation and amortization		7,347			5,405			5,154
Total operating costs and expenses		45,580			35,345			32,087
Operating Income		16,551			13,987			11,795
Other Income (Expenses)
Interest expense, net (see Note 11)		(1,141	)		(161	)		(251	)
Interest income and other, net		71			265			30
Income Before Provision for Income Taxes		15,481			14,091			11,574
Provision for income taxes		(797	)		(802	)		(714	)
Net Income	$	14,684		$	13,289		$	10,860
Net income attributable to noncontrolling interest		286			263			255
Net income attributable to Cellco Partnership		14,398			13,026			10,605
Net Income	$	14,684		$	13,289		$	10,860

See Notes to Consolidated Financial Statements.

B-3

Consolidated Balance Sheets
Cellco Partnership (d/b/a Verizon Wireless)

	As of December 31,
(Dollars in Millions)	2009		2008
Assets
Current assets
Cash and cash equivalents	$	607	$	9,227
Receivables, net of allowances of $356 and $244		5,721		4,618
Due from affiliates, net		58		155
Inventories, net		1,373		1,046
Prepaid expenses and other current assets		3,335		579
Total current assets		11,094		15,625
Plant, property and equipment, net		30,850		27,136
Wireless licenses		72,005		62,392
Goodwill		17,303		955
Investment in debt obligations, net		—		4,781
Deferred charges and other assets, net		3,100		987
Total assets	$	134,352	$	111,876
Liabilities and Partners’ Capital
Current liabilities
Short-term debt, including current maturities	$	2,998	$	444
Due to affiliates		5,003		2,941
Accounts payable and accrued liabilities		6,123		5,395
Advance billings		1,695		1,403
Other current liabilities		415		220
Total current liabilities		16,234		10,403
Long-term debt		18,661		9,938
Due to affiliates		—		9,363
Deferred tax liabilities, net		10,593		6,213
Other non-current liabilities		1,877		973
Total liabilities		47,365		36,890
Commitments and contingencies (see Note 13)		—		—
Partners’ capital
Capital		84,886		73,410
Accumulated other comprehensive income (loss)		113		(116	)
Noncontrolling interest		1,988		1,692
Total partners’ capital		86,987		74,986
Total liabilities and partners’ capital	$	134,352	$	111,876

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)	2009			2008			2007
Cash Flows from Operating Activities
Net income	$	14,684		$	13,289		$	10,860
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization		7,347			5,405			5,154
Provision for uncollectible receivables		696			507			395
Provision for deferred income taxes		147			176			98
Changes in current assets and liabilities (net of the effects of acquisitions):
Receivables, net		(1,000	)		(1,032	)		(914	)
Inventories, net		(127	)		60			(209	)
Prepaid expenses and other current assets		(42	)		(74	)		14
Accounts payable and accrued liabilities		(607	)		(365	)		71
Other operating activities, net		830			181			689
Net cash provided by operating activities		21,928			18,147			16,158
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)		(7,152	)		(6,510	)		(6,503	)
Acquisition of businesses and licenses, net of cash acquired		(4,881	)		(10,277	)		—
Investment in debt obligations		—			(4,766	)		—
Other investing activities, net		(29	)		(526	)		(520	)
Net cash used in investing activities		(12,062	)		(22,079	)		(7,023	)
Cash Flows from Financing Activities
Proceeds from affiliates		—			9,363			—
Repayments to affiliates		(6,291	)		(3,891	)		(5,609	)
Net increase (decrease) in revolving affiliate borrowings		(457	)		307			(1,355	)
Issuance of long-term debt		9,223			10,324			—
Repayment of long-term debt		(17,028	)		(1,505	)		—
Distributions to partners		(3,138	)		(1,529	)		(1,918	)
Other financing activities, net		(795	)		(318	)		(228	)
Net cash provided by (used in) financing activities		(18,486	)		12,751			(9,110	)
Increase (decrease) in cash and cash equivalents		(8,620	)		8,819			25
Cash and cash equivalents, beginning of year		9,227			408			383
Cash and cash equivalents, end of year	$	607		$	9,227		$	408

See Notes to Consolidated Financial Statements.

B-5

Consolidated Statements of Changes in Partners’ Capital
Cellco Partnership (d/b/a/ Verizon Wireless)

	Years Ended December 31,
(Dollars in Millions)	2009			2008			2007
Partners’ Capital
Balance at beginning of year	$	73,410		$	62,404		$	43,677
Cumulative effect of adoption of tax accounting standard (Note 1)		—			—			(19	)
Adjusted balance at beginning of year		73,410			62,404			43,658
Net income		14,398			13,026			10,605
Contributed capital		(344	)		—			—
Distributions declared to partners		(2,582	)		(2,085	)		(1,918	)
Reclassification of portion of Vodafone’s partners’ capital		—			—			10,000
Other		4			65			59
Balance at end of year		84,886			73,410			62,404
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of year		(116	)		(50	)		(63	)
Unrealized gains (losses) on cash flow hedges, net		175			(53	)		—
Defined benefit pension and postretirement plans		54			(13	)		13
Other comprehensive income (loss)		229			(66	)		13
Balance at end of year		113			(116	)		(50	)
Total Partners’ Capital Attributable to Cellco Partnership		84,999			73,294			62,354
Noncontrolling Interest
Balance at beginning of year		1,692			1,681			1,659
Net income attributable to noncontrolling interest		286			263			255
Contributed capital		31			—			—
Noncontrolling interests in acquired company		497			—			—
Distributions		(280	)		(249	)		(228	)
Acquisitions of noncontrolling partnership interests		(240	)		—			—
Other		2			(3	)		(5	)
Balance at end of year		1,988			1,692			1,681
Total Partners’ Capital	$	86,987		$	74,986		$	64,035
Comprehensive Income
Net income	$	14,684		$	13,289		$	10,860
Other comprehensive income (loss) per above		229			(66	)		13
Total Comprehensive Income	$	14,913		$	13,223		$	10,873
Comprehensive income attributable to noncontrolling interest	$	286		$	263		$	255
Comprehensive income attributable to Cellco Partnership		14,627			12,960			10,618
Total Comprehensive Income	$	14,913		$	13,223		$	10,873

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 partnership doing business as Verizon Wireless, provides wireless voice and data services and related equipment to consumers and business customers across one of the most extensive wireless networks in the United States. 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. With our acquisition of Alltel Corporation (“Alltel”) in January 2009, we are the largest wireless service provider in the United States, as measured by total number of customers.

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 in 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 in 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 1, 2010, the date these consolidated financial statements were issued.

We have reclassified certain prior year amounts to conform to the current year presentation.

Use of Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates. Estimates are used for, but not limited to, 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 reserves, unrealized tax benefits, valuation allowances on tax assets, contingencies and allocation of purchase prices in connection with business combinations. Estimates and assumptions are periodically reviewed and the effects of any material revisions are reflected in the consolidated financial statements in the periods that they are determined to be necessary.

Revenue Recognition

The Partnership earns revenue by providing access to our network (access revenue) and for usage of our network (usage revenue), 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 recognized when service is rendered and included in unbilled revenue, within Receivables, net in the consolidated balance sheets, until billed. Equipment sales revenue associated with the sale of wireless devices 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. Customer activation fees charged to customers are considered additional consideration and are recorded in Equipment and other revenue, generally, at the time of customer acceptance. 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.

B-7

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. 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 market value, and includes approximately $192 million and $8,941 million at December 31, 2009 and 2008, respectively, held in money market funds that are considered cash equivalents.

Investments

Available-for-sale investments are required to be carried at their fair value, with unrealized gains and losses that are considered temporary in nature recorded as a separate component of accumulated other comprehensive income (loss). To the extent we determine that any decline in the investment is other-than-temporary, a charge to earnings would be recorded. There were no significant available-for-sale investments as of December 31, 2009. The Partnership’s principal investment at December 31, 2008 consists of an available-for-sale investment in debt obligations.

As of December 31, 2009 and 2008, we held $42 million and $126 million, respectively, with respect to funds of the Partnership being held in a money market fund managed by a third party that is in the process of being liquidated. This balance is classified in Prepaid expenses and other current assets in the consolidated balance sheets. On January 29, 2010, we collected $40 million of this receivable and expect to collect the remaining balance in the next 12 months.

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 maintains estimated inventory valuation reserves of $106 million and $131 million as of December 31, 2009 and 2008, 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 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 a net increase in depreciation expense of $319 million, $228 million, and $295 million for the years ended December 31, 2009, 2008, and 2007, respectively. Leasehold improvements are amortized over the shorter of their estimated useful lives or the term of the related lease. 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.

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.

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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 life intangible asset, and are not amortized but rather are tested for impairment. 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 to develop wireless licenses for service are underway, is capitalized as part of wireless licenses. The capitalization period ends when the development is completed.

Goodwill

Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Impairment testing for 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 at the reporting unit level. We have one reporting unit for purposes of goodwill impairment testing. 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. The Partnership completed step one of the impairment test as of December 15, 2009. This test resulted in no impairment of the Partnership’s goodwill.

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 to sell 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.

B-9

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. The derivative instruments discussed below 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, 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 provides long-term incentive compensation awards that are classified as liability awards. The Partnership records a charge or benefit in the consolidated statements of income each reporting period based on the change in estimated fair value of the awards during the period. See Note 8 for further details on our long-term incentive compensation.

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.

Effective January 1, 2007, the Partnership adopted the accounting standard which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and 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 maintains allowances for uncollectible accounts receivable for estimated losses resulting from the inability of customers to make required payments. Estimates are based on historical net write-off experience, taking into account general economic factors and current collection trends which may impact the expected collectibility of accounts receivable. No single customer receivable is large enough to present a significant financial risk to the Partnership.

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. We also rely on Qualcomm for its binary run-time environment for wireless technology which enables many of our handsets and other devices to access key wireless data services. 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.

B-10

Recently Adopted Accounting Standards

On January 1, 2009, we adopted the accounting standard relating to business combinations, including assets acquired and liabilities assumed arising from contingencies. This standard requires the use of the acquisition method of accounting, defines the acquirer, establishes the acquisition date and applies to all transactions and other events in which one entity obtains control over one or more other businesses. Upon our adoption of this standard, we were required to expense certain transaction costs and related fees associated with business combinations that were previously capitalized. In addition, with the adoption of this standard, changes to valuation allowances for acquired deferred income tax assets and adjustments to unrecognized tax benefits acquired generally are to be recognized as adjustments to income tax expense rather than goodwill.

The adoption of the following accounting standards and updates during 2009 did not result in a significant impact to our consolidated financial statements:

On January 1, 2009, we adopted the accounting standard relating to disclosures about derivative instruments and hedging activities, which requires additional disclosures that include how and why an entity uses derivatives, how these instruments and the related hedged items are accounted for and how derivative instruments and related hedged items affect the entity’s financial position, results of operations and cash flows.

On January 1, 2009, we adopted the accounting standard that modifies the determination of the useful life of intangible assets from a requirement to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions to one that requires an entity consider its own historical experience in renewing similar arrangements, or a consideration of market participant assumptions in the absence of historical experience. This standard also requires disclosure of information that enables users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and ability to renew or extend the arrangements.

On June 15, 2009, we prospectively adopted the accounting standard regarding the accounting for, and disclosure of, events that occur after the balance sheet date but before the financial statements are issued.

On June 15, 2009, we prospectively adopted the accounting standard that amends the requirements for disclosures about fair value of financial instruments, for annual, as well as interim, reporting periods.

On June 15, 2009, we prospectively adopted the accounting standard that amends requirements for recognizing and measuring other-than-temporary impairment of debt securities classified as held to maturity or held for sale. The presentation and disclosure requirements apply to both debt and equity securities.

On June 15, 2009, we prospectively adopted the accounting standard regarding estimating fair value measurements when the volume and level of activity for the asset or liability has significantly decreased, which also provides guidance for identifying transactions that are not orderly.

On August 28, 2009, we prospectively adopted the accounting standard update regarding the measurement of liabilities at fair value. This standard update provides techniques to use in measuring fair value of a liability in circumstances in which a quoted price in an active market for the identical liability is not readily available.

Other Recent Accounting Standards

In June 2009, the accounting standard regarding the requirements of consolidation accounting for variable interest entities was updated to require 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. The adoption of this standard, effective January 1, 2010, is not expected to have a significant impact on our consolidated financial statements.

In September 2009, the accounting standard regarding revenue recognition for multiple deliverable arrangements was updated to require the use of the relative selling price method when allocating revenue in these types of arrangements. This method allows a vendor to use its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists when evaluating multiple deliverable arrangements. This standard update is effective January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all periods presented. We are currently evaluating the impact this standard update will have on our consolidated financial statements.

In September 2009, the accounting standard regarding revenue recognition for arrangements that include software elements was updated to require 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. This standard update is effective January 1, 2011 and may be adopted prospectively for revenue arrangements entered into or materially modified after the date of adoption or retrospectively for all revenue arrangements for all periods presented. Early adoption is permitted only at the beginning of the company’s fiscal year. We are currently evaluating the impact this standard update will have on our consolidated financial statements.

B-11

2. Acquisitions

Acquisition of Alltel Corporation

On June 5, 2008, the Partnership entered into an agreement and plan of merger with 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.

We expect to experience substantial operational benefits from the acquisition of Alltel, including additional combined overall cost savings from reduced roaming costs by moving more traffic to our own network, reduced network-related costs from the elimination of duplicate facilities, consolidation of platforms, efficient traffic consolidation, and reduced overall expenses relating to advertising, overhead and headcount. We expect reduced combined capital expenditures as a result of greater economies of scale and the rationalization of network assets. We believe that the use of the same technology platform is facilitating the integration of Alltel’s network operations with ours.

The Partnership has substantially completed the appraisals necessary to assess the fair values of the tangible and intangible assets acquired and liabilities assumed, the fair value of noncontrolling 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 income approach indicates value for a subject asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a required market rate of return that reflects the relative risk of achieving the cash flows and the time value of money. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used as appropriate for plant, property and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation. The market approach, which indicates value for a subject asset based on available market pricing for comparable assets, 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 noncontrolling interests in these Managed Partnerships as of the acquisition date of approximately $586 million was estimated by using a market approach. The market approach indicates value based on financial multiples available for similar entities and adjustments for the lack of control or lack of marketability that market participants would consider in determining fair value of the Managed Partnerships. 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 noncontrolling 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
Noncontrolling interest		(458	)
Contributed capital		333
Total cash consideration	$	5,925

Included in the above purchase price allocation is $2,064 million of net assets to be 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 is 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. Goodwill of approximately $1,363 million is expected to be deductible for tax purposes.

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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.

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 Debt Acquired

After the completion of the Alltel acquisition and repayments of Alltel debt, including repayments completed through December 31, 2009, approximately $2,334 million principal amount of Alltel debt that is owed to third parties remains outstanding as of December 31, 2009.

Alltel Divestiture Markets

As a condition of the regulatory approvals by the Department of Justice (“DOJ”) and the FCC that were required to complete the Alltel acquisition, the Partnership will divest overlapping properties in 105 operating markets in 24 states (the “Alltel Divestiture Markets”). These markets consist primarily of Alltel operations, but also include the pre-merger, Verizon Wireless-branded operations of the Partnership in four markets, as well as operations in southern Minnesota and western Kansas that were acquired from Rural Cellular Corporation (“Rural Cellular”). As of December 31, 2009, total assets to be divested of $2,572 million, principally comprised of network assets, wireless licenses and customer relationships, and total liabilities to be divested of $135 million are included in Prepaid expenses and other current assets and Other current liabilities, respectively, on the accompanying consolidated balance sheets as a result of entering into the transactions described below.

On May 8, 2009, we entered into a definitive agreement with AT&T Mobility LLC (“AT&T Mobility”), a subsidiary of AT&T Inc. (“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, we entered into a definitive agreement with Atlantic Tele-Network, Inc. (“ATN”), pursuant to which ATN agreed to acquire the remaining 26 Alltel Divestiture Markets that were not included in the transaction with AT&T Mobility, including licenses and network assets for $200 million in cash. The Partnership expects to close both the AT&T and ATN transactions during the first half of 2010. Completion of each of the foregoing transactions is subject to receipt of regulatory approvals (See Note 14).

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Acquisition of Rural Cellular Corporation

On August 7, 2008, the Partnership acquired 100% of the outstanding common stock and redeemed all of the preferred stock of Rural Cellular in a cash transaction valued at approximately $1.3 billion. Rural Cellular was a wireless communications service provider operating under the trade name of “Unicel,” focusing primarily on rural markets in the United States. We believe that the acquisition has enhanced the Partnership’s network coverage in markets adjacent to its existing service areas and has enabled the Partnership to achieve operational benefits through realizing synergies in reduced roaming and other operating expenses.

Had this acquisition been consummated on January 1, 2008, the results of Rural Cellular’s acquired operations would not have had a significant impact on the Partnership’s consolidated net income.

The acquisition of Rural Cellular has been accounted for as a business combination under the purchase method. The following table summarizes the allocation of the acquisition cost to the assets acquired, including cash acquired of $42 million, and liabilities assumed as of the acquisition date:

(dollars in millions)
Assets acquired
Wireless licenses	$	1,095
Goodwill		947
Intangible assets subject to amortization		206
Other acquired assets		971
Total assets acquired		3,219
Liabilities assumed
Long-term debt		1,505
Deferred income taxes and other liabilities		398
Total liabilities assumed		1,903
Net assets acquired	$	1,316

As part of its regulatory approval for the Rural Cellular acquisition, the FCC and DOJ required the divestiture of six operating markets, including all of Rural Cellular’s operations in Vermont and New York as well as its operations in Okanogan and Ferry, WA. Included in Other acquired assets in the table above are assets that were divested of $485 million. On December 22, 2008, we exchanged these assets and an additional cellular license with AT&T for assets having a total aggregate value of approximately $495 million.

Other

On May 8, 2009, we entered into an agreement with AT&T to purchase certain assets of Centennial Communications Corporation for $240 million in cash. Completion of the foregoing transaction is subject to receipt of regulatory approvals.

3. Wireless Licenses, Goodwill and Other Intangibles, Net

The changes in the carrying amount of wireless licenses are as follows:

(dollars in millions)	Wireless Licenses (a)
Balance as of January 1, 2008	$	51,485
Acquisitions		10,644
Capitalized interest on wireless licenses		267
Reclassifications, adjustments and other		(4	)
Balance as of December 31, 2008		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

(a)	Wireless licenses of approximately $12.2 billion and $12.4 billion were not in service at December 31, 2009 and 2008, respectively.
(b)	Reclassifications, adjustments and other 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, 2009 and December 15, 2008. These evaluations resulted in no impairment of the Partnership’s wireless licenses.

B-14

On March 20, 2008, the FCC announced the results of Auction 73 of wireless spectrum licenses in the 700 MHz band. The Partnership was the successful bidder for twenty-five 12 MHz licenses in the A-Block frequency, seventy-seven 12 MHz licenses in the B-Block frequency and seven 22 MHz licenses (nationwide with the exception of Alaska) in the C-Block frequency, with an aggregate bid price of $9,363 million. The Partnership has made all required payments to the FCC for these licenses by April 2008. The FCC granted the Partnership these licenses on November 26, 2008.

The average remaining renewal period of our wireless license portfolio was 8.0 years as of December 31, 2009.

The changes in the carrying amount of goodwill are as follows:

(dollars in millions)	Goodwill
Balance as of January 1, 2008	$	—
Acquisitions		957
Reclassifications, adjustments and other		(2	)
Balance as of December 31, 2008		955
Acquisitions		16,242
Reclassifications, adjustments and other(a)		106
Balance as of December 31, 2009	$	17,303

(a) Reclassifications, adjustments and other 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 Divestiture Markets (see Note 2) and included in Prepaid expenses and other current assets in the accompanying consolidated balance sheets.

Other intangibles, net are included in Deferred charges and other assets, net and consist of the following:

	At December 31, 2009							At December 31, 2008
	Gross		Accumulated			Net		Gross		Accumulated			Net
(dollars in millions)	Amount		Amortization			Amount		Amount		Amortization			Amount
Customer lists (6 to 8 years)	$	2,122	$	(497	)	$	1,625	$	226	$	(31	)	$	195
Capitalized software (2 to 5 years)		879		(377	)		502		816		(476	)		340
Other (1 to 3 years)		397		(235	)		162		38		(17	)		21
Total(a)	$	3,398	$	(1,109	)	$	2,289	$	1,080	$	(524	)	$	556

(a) Based on amortizable intangible assets existing at December 31, 2009, the estimated amortization expense for the five succeeding fiscal years and thereafter is as follows:

2010	$	679
2011		502
2012		393
2013		311
2014		199
Thereafter		205
Total	$	2,289

At December 31, 2009, the gross amount of Customer lists, Capitalized software and Other include $2,391 million related to the Alltel acquisition.

B-15

4. Fair Value Measurements

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2009:

(dollars in millions)	Level 1		Level 2		Level 3		Total
Assets:
Deferred charges and other assets, net	$	—	$	315	$	—	$	315

Investment in Debt Obligations

On June 10, 2008, in connection with the agreement to acquire Alltel, the Partnership purchased from third parties $4,985 million aggregate principal amount of debt obligations of certain subsidiaries of Alltel for approximately $4,766 million, plus accrued and unpaid interest. Upon closing of the Alltel acquisition (see Note 2), the $4,781 million investment in Alltel debt, which was classified as Level 3 at December 31, 2008, became an intercompany loan that is eliminated in consolidation.

The following table provides additional information about our other significant financial instruments:

	At December 31, 2009				At December 31, 2008
	Carrying		Fair		Carrying		Fair
(dollars in millions)	Value		Value		Value		Value
Term notes due to affiliates	$	5,003	$	5,008	$	11,748	$	11,594
Short and long-term debt	$	21,659	$	23,597	$	10,382	$	11,066

The fair value of our term notes due to affiliate is 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.

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

During the fourth quarter of 2008, we entered into cross currency swaps designated as cash flow hedges to exchange approximately $2.4 billion of the net proceeds from the December 18, 2008 offering 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 were $315 million in an asset position as of December 31, 2009 and $64 million in an asset position and $59 million in a liability position as of December 31, 2008 and are included in Deferred charges and other assets, net and Other non-current liabilities, respectively, in the consolidated balance sheets. For the years ended December 31, 2009 and 2008, a pretax $310 million and $5 million gain, respectively, on the cross currency swaps has been recognized in Other comprehensive income and $135 million and $58 million, respectively, was reclassified from Accumulated other comprehensive income (loss) to Interest income and other, net to offset the related pretax foreign-currency transaction loss on the underlying debt obligations.

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. We settled all of these agreements using cash generated from operations for a gain that was not significant. Changes in the fair value of these swaps were recorded in earnings through settlement.

B-16

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.

5. Noncontrolling Interest

	December 31,
(dollars in millions)	2009		2008
Verizon Wireless of the East	$	1,179	$	1,179
Cellular partnerships		809		513
Noncontrolling interest in consolidated entities	$	1,988	$	1,692

Verizon Wireless of the East

Verizon Wireless of the East LP is a limited partnership formed in 2002 and is controlled and managed by the Partnership. Verizon held the noncontrolling interest of Verizon Wireless of the East LP at December 31, 2009 and 2008. Verizon is not allocated any of the profits of Verizon Wireless of the East LP.

B-17

6. Supplementary Financial Information

Supplementary Balance Sheet Information

	December 31,
(dollars in millions)	2009			2008
Receivables, Net:
Accounts receivable	$	4,953		$	4,030
Other receivables		842			578
Unbilled revenue		282			254
		6,077			4,862
Less: allowance for doubtful accounts		(356	)		(244	)
Receivables, net	$	5,721		$	4,618

	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:
2009	$	244	$	696	$	(584	)	$	356
2008		217		507		(480	)		244
2007		201		395		(379	)		217

	December 31,
(dollars in millions)	2009			2008
Plant, Property and Equipment, Net:
Land	$	268		$	148
Buildings (20-40 yrs.)		8,849			7,671
Wireless plant and equipment (3-15 yrs.)		40,862			36,079
Furniture, fixtures and equipment (5 yrs.)		4,245			3,806
Leasehold improvements (5 yrs.)		3,501			2,660
Construction-in-progress(b)		1,979			1,760
		59,704			52,124
Less: accumulated depreciation		(28,854	)		(24,988	)
Plant, property and equipment , net(a)	$	30,850		$	27,136

(a)	Interest costs of $88 and $62 and network engineering costs of $351 and $250 were capitalized during the years ended December 31, 2009 and 2008, respectively.
(b)	Construction-in-progress includes $784 and $624 of accrued but unpaid capital expenditures as of December 31, 2009 and 2008, respectively.

	December 31,
(dollars in millions)	2009		2008
Accounts Payable and Accrued Liabilities:
Accounts payable and accrued expenses	$	3,633	$	3,056
Accrued payroll		390		320
Related employee benefits		945		1,320
Taxes payable		516		348
Accrued commissions		385		280
Accrued interest		254		71
Accounts payable and accrued liabilities	$	6,123	$	5,395

B-18

Supplementary Statements of Income Information

	For the Years Ended December 31,
(dollars in millions)	2009			2008			2007
Service Revenue:
Voice revenue	$	37,483		$	31,984		$	30,630
Data revenue		16,014			10,651			7,386
Total service revenue	$	53,497		$	42,635		$	38,016
Advertising and Promotional Costs:	$	2,036		$	1,779		$	1,661
Employee Benefit Plans:
Matching contribution expense	$	216		$	185		$	174
Profit sharing expense		94			103			92
Depreciation and Amortization:
Depreciation of plant, property and equipment	$	6,545		$	5,258		$	5,028
Amortization of other intangibles		802			147			126
Total depreciation and amortization	$	7,347		$	5,405		$	5,154
Interest Expense, Net:
Interest expense	$	(1,497	)	$	(490	)	$	(547	)
Capitalized interest		356			329			296
Interest expense, net	$	(1,141	)	$	(161	)	$	(251	)

Supplementary Cash Flows Information

	For the Years Ended December 31,
(dollars in millions)	2009		2008		2007
Net cash paid for income taxes	$	384	$	575	$	564
Interest paid, net of amounts capitalized		738		90		264

B-19

7. Debt

			December 31,			December 31,
(dollars in millions)	Maturities		2009			2008
Debt:
Three-year term loan facility		2010-2011	$	3,996		$	4,440
$1,250 million floating rate notes		2011		1,250			—
$2,750 million 3.75% notes		2011		2,750			—
$1,000 million floating rate put/call notes		2011		1,000			—
€650 million 7.625% notes		2011		931			908
$750 million 5.25% notes		2012		750			—
$1,250 million 7.375% notes		2013		1,250			1,250
$3,500 million 5.55% notes		2014		3,500			—
€500 million 8.750% notes		2015		716			699
$2,250 million 8.500% notes		2018		2,250			2,250
£600 million 8.875% notes		2018		970			876
Assumed Alltel notes		2012-2032		2,334			—
Unamortized discount, net				(38	)		(41	)
Total debt, including current maturities				21,659			10,382
Less: current maturities				(2,998	)		(444	)
Total long-term debt			$	18,661		$	9,938
Term notes payable to Affiliate(a) :
$2,431 million floating rate promissory note		2009	$	—		$	1,931
$9,363 million floating rate promissory note		2010		5,003			9,363
$750 million fixed rate promissory note		2010		—			454
Total due to affiliates, including current maturities				5,003			11,748
Less: current maturities				(5,003	)		(2,385	)
Total long-term due to affiliates			$	—		$	9,363

(a) All affiliate term notes are payable to Verizon Financial Services LLC (“VFSL”), a wholly-owned subsidiary of Verizon.

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.

Discounts and capitalized debt issuance costs are amortized using the effective interest method.

During, 2009, the Partnership and Verizon Wireless Capital LLC completed an exchange offer to exchange the privately placed notes issued in November of 2008, as well as February and May of 2009 for new notes with similar terms.

On June 25, 2009, the Partnership issued $1,000 million in aggregate principal amount of our Put/Call Floating Rate Notes due 2011 (“Put/Call Notes”). The interest on the Put/Call Notes will be equal to the three-month LIBOR plus an applicable margin ranging from 50 to 80 basis points that will be reset quarterly. Commencing on December 27, 2009 and on each quarterly interest payment date thereafter, both the noteholders and the Partnership have the right to require settlement of all or a portion of these notes at par. Accordingly, the Put/Call Notes are classified as current maturities in the consolidated balance sheet. As of December 31, 2009, neither the Partnership nor the note holders have exercised their right to require settlement of any portion of the Put/Call Notes.

On May 22, 2009, the Partnership and Verizon Wireless Capital LLC co-issued $1,250 million in aggregate principal amount floating rate notes due 2011 that bear interest equal to three-month LIBOR plus 2.60% that will be reset quarterly and $2,750 million in aggregate principal amount 3.75% notes due 2011 resulting in cash proceeds of $3,989 million, net of discounts and direct issuance costs (collectively the “May 2009 Notes”).

On February 4, 2009, the Partnership and Verizon Wireless Capital LLC co-issued $750 million in aggregate principal amount 5.25% notes due 2012 and $3,500 million in aggregate principal amount 5.55% notes due 2014, resulting in cash proceeds of $4,211 million, net of discounts and direct issuance costs (collectively the “February 2009 Notes”).

On December 19, 2008, the Partnership and Verizon Wireless Capital LLC, as the borrowers, entered into a $17 billion credit facility (the “Acquisition Bridge Facility”). On December 31, 2008, the Acquisition Bridge Facility was reduced to $12.5 billion. On January 9, 2009, the Partnership and Verizon Wireless Capital LLC co-borrowed $12,350 million under the Acquisition Bridge

B-20

Facility in order to complete the acquisition of Alltel and repay certain of Alltel’s outstanding debt. We used cash generated from operations and the net proceeds from the sale of the February 2009 Notes, the May 2009 Notes and the Put/Call Notes to repay all of the $12,350 million of borrowings under the Acquisition Bridge Facility. No borrowings remain outstanding under the Acquisition Bridge Facility and the commitments under the Acquisition Bridge Facility have been terminated.

Upon completion of the Alltel acquisition and repayments of Alltel debt, including repayments through December 31, 2009, $2,300 million aggregate principal amount of Alltel Corporation notes remained outstanding and were held by third parties. The Alltel Corporation notes are not guaranteed by the Partnership or by any subsidiary of Alltel and are unsecured. Additionally, under the terms of a tender offer that was completed on March 20, 2009, $155 million aggregate principal amount of the $190 million 10.375% Senior PIK Toggle notes co-issued by Alltel Communications and Alltel Communications Finance were tendered and redeemed for total consideration of $191 million, including accrued interest. As of December 31, 2009, $34 million aggregate principal amount of these notes remains outstanding.

On December 18, 2008, the Partnership and Verizon Wireless Capital LLC co-issued €650 million 7.625% notes due 2011, €500 million 8.750% notes due 2015 and £600 million 8.875% notes due 2018. Concurrent with these offerings, we entered into cross currency swaps to fix our future interest and principal payments in U.S. dollars and exchanged the proceeds of the notes from British Pounds Sterling and Euros into dollars. The net cash proceeds were $2,410 million, net of discounts and issuance costs. The net proceeds from the sale of these notes were used in connection with the acquisition of Alltel on January 9, 2009.

On November 21, 2008, the Partnership and Verizon Wireless Capital LLC co-issued a private placement of $1,250 million 7.375% notes due 2013 and $2,250 million 8.500% notes due 2018, resulting in cash proceeds of $3,451 million, net of discounts and direct issuance costs. The net proceeds from the sale of these notes were used in connection with the acquisition of Alltel on January 9, 2009.

On September 30, 2008, the Partnership and Verizon Wireless Capital LLC, as co-borrowers, entered into a $4,440 million Three-Year Term Loan Facility Agreement (the “Three-Year Term Facility”) with a maturity date of September 30, 2011. We borrowed $4,440 million under the Three-Year Term Facility in order to repay a portion of the 364-day Credit Agreement, as described below. Borrowings under the Three-Year Term Facility currently bear interest at a variable rate based on LIBOR plus 100 basis points. The Three-Year Term Facility includes a requirement to maintain a certain leverage ratio. On August 28, 2009, we repaid $444 million of the Three-Year Term Facility using cash generated from operations, reducing the total outstanding borrowings under this facility to $3,996 million.

On June 5, 2008, the Partnership entered into a $7,550 million 364-day Credit Agreement. During 2008, we utilized this facility primarily to complete the purchase of Alltel debt obligations, finance the acquisition of Rural Cellular and repay Rural Cellular debt. During 2008, the borrowings under this facility were repaid.

Term Notes Payable to Affiliate

On July 30, 2009, the Partnership entered into an amendment of our $9,000 million fixed rate promissory note payable, due August 1, 2009, to VFSL. The fixed rate note, as amended, allows the Partnership to borrow, repay and re-borrow up to a maximum principal amount of $750 million and extends the maturity date to August 1, 2010. Amounts borrowed under this note bear interest at a rate of 5.8% per annum.

We used cash generated from operations to repay all of the remaining borrowings under a $2,431 million floating rate promissory note payable to VFSL. No borrowings remained outstanding under this note as of the maturity date of August 1, 2009.

On May 30, 2008, we repaid a $2,500 million fixed rate note due to VFSL with proceeds obtained through intercompany borrowings.

On March 31, 2008, the Partnership signed a floating rate promissory note that permits the Partnership to borrow up to a maximum principal amount of approximately $9,363 million from VFSL, with a maturity date of March 31, 2010. Amounts outstanding under this note bear interest at a rate per annum equal to one-month LIBOR plus 28 basis points for each interest period, with the interest rate being adjusted on the first business day of each month. Proceeds from the note were used to fund the acquisition of wireless spectrum licenses in the 700 MHz wireless spectrum auction conducted by the FCC. Through December 31, 2009, we used cash generated from operations to repay $4,360 million of this note. As of December 31, 2009, $5,003 million remained outstanding under this note (see Note 14).

On February 22, 2008, we repaid a $6,500 million floating rate note with proceeds obtained through intercompany borrowings.

Debt Covenants

As of December 31, 2009, we are in compliance with all of our debt covenants.

B-21

Maturities of Long-Term Debt

Maturities of long-term debt outstanding at December 31, 2009 are as follows:

Years	(dollars in million)
2010	$	2,998
2011		6,929
2012		1,550
2013		1,450
2014		3,500
Thereafter		5,270

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. The aggregate number of VARs that may be issued under the plan is approximately 343 million.

VARs reflect the change in the value of the Partnership, as defined in the plan, similar to stock options. 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, 2009, 2008 and 2007:

	2009	2008	2007
	Ranges	Ranges	Ranges
Risk-free rate	0.15% – 1.63%	0.6% – 3.3%	3.2% – 5.1%
Expected term (in years)	0.38 – 2.5	1.2 – 3.0	0.9 – 3.4
Expected volatility	35.37% – 61.51%	33.9% – 58.5%	18.1% – 23.4%

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, and calculated on a monthly basis. The Partnership does not pay dividends related to the VARs.

For the years ended December 31, 2009, 2008, and 2007, the intrinsic value of VARs exercised during the period was $178 million, $554 million, and $488 million, respectively.

There were no VARs that became vested during the years ended December 31, 2009 and 2008, respectively. For the year ended December 31, 2007, the fair value of VARs vested during the period was $716 million.

Cash paid to settle VARs for the years ended December 31, 2009, 2008, and 2007 was $169 million, $549 million, and $452 million, respectively.

B-22

Awards outstanding at December 31, 2009, 2009 and 2007 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, 2007		94,467		$	16.99		52,042
Granted		134			13.89
Exercised		(30,848	)		15.07
Cancelled/Forfeited		(3,341	)		24.12
Outstanding, December 31, 2007		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

(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, 2009:

	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		10,553		3.70	$	12.23
$14.80 - $22.19		2,706		1.78		16.77
$22.20 - $30.00		3,332		0.52		30.00
Total		16,591			$	16.54

(a) As of December 31, 2009 the aggregate intrinsic value of VARs outstanding and vested was $333 million.

Verizon Communications Inc. Long Term Incentive Plan

In May 2009, Verizon shareholders approved the 2009 Verizon Communications Inc. Long-Term Incentive Plan (the “Verizon Plan”) which permits the granting of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and other awards. The maximum number of shares available for awards from the Plan is 115 million shares. The Verizon Plan amends and restates their previous long-term incentive plan.

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 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’s stock. 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 3.5 million and 3.7 million RSUs outstanding under the Verizon Plans as of December 31, 2009 and 2008, 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.

B-23

The Partnership had approximately 5.2 million and 5.5 million PSUs outstanding under the Verizon Plans as of December 31, 2009 and 2008, respectively.

As of December 31, 2009, unrecognized compensation expense related to the unvested portion of the Partnership’s RSUs and PSUs was approximately $79 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, 2009, 2008 and 2007, the Partnership recognized compensation expense for stock based compensation related to VARs, RSUs and PSUs of $169 million, $19 million and $631 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)	2009			2008			2007
Current tax provision:
Federal	$	356		$	413		$	437
State and local		294			213			179
		650			626			616
Deferred tax provision:
Federal		335			217			93
State and local		(188	)		(41	)		5
		147			176			98
Provision for income taxes	$	797		$	802		$	714

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)	2009			2008			2007
Income tax provision at the statutory rate	$	5,418		$	4,932		$	4,051
State income taxes, net of U.S. federal benefit		27			120			130
Interest and penalties		28			(8	)		4
Partnership income not subject to federal or state income taxes		(4,676	)		(4,242	)		(3,471	)
Provision for income tax	$	797		$	802		$	714

B-24

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)	2009			2008
Deferred tax assets:
Net operating loss carryforward	$	505		$	149
Valuation allowance		(23	)		(14	)
State tax deductions		103			107
Other		262			37
Total deferred tax assets	$	847		$	279
Deferred tax liabilities:
Intangible assets	$	(9,555	)	$	(5,845	)
Plant, property and equipment		(1,452	)		(496	)
Other		(116	)		—
Total deferred tax liabilities	$	(11,123	)	$	(6,341	)
Net deferred tax asset-current(a)	$	317		$	151
Net deferred tax liability-non-current		(10,593	)		(6,213	)

(a) Included in prepaid expenses and other current assets in the accompanying consolidated balance sheets.

At December 31, 2009, the Partnership had net operating loss carryforwards of $3,329 million. These net operating loss carryforwards expire at various dates principally from December 31, 2017 through December 31, 2025.

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(dollars in millions)
Balance as of January 1, 2007	$	70
Additions based on tax positions related to the current year		12
Additions for tax positions of prior years		1
Reductions due to lapse of applicable statute of limitations		(16	)
Settlements		—
Balance as of December 31, 2007		67
Additions based on tax positions related to the current year		25
Additions for tax positions of prior years		16
Reductions due to lapse of applicable statute of limitations		(14	)
Settlements		(17	)
Balance as of December 31, 2008		77
Additions based on tax positions related to the current year		212
Additions for tax positions of prior years		222
Reductions due to lapse of applicable statute of limitations		(5	)
Settlements		—
Balance as of December 31, 2009	$	506

Upon the acquisition of Alltel on January 9, 2009, the Partnership assumed a liability of $222 for unrecognized tax benefits. As of December 31, 2009, there has been no change in this acquired unrecognized tax benefit liability. 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.

Included in the total unrecognized tax benefits balance as of December 31, 2009, is $277 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 $50 million for the payment of interest and penalties accrued as of December 31, 2009, relating to the $506 million of unrecognized tax benefits reflected above.

B-25

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.

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. The noncancellable lease term used to calculate the amount of the straight-line rent expense 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 noncancellable lease term. For the years ended December 31, 2009, 2008, and 2007, the Partnership recognized rent expense related to payments under these operating leases of $1,149 million, $845 million, and $737 million, respectively, in Cost of service and $504 million, $391 million, and $339 million, respectively, in Selling, general and administrative expense in the accompanying consolidated statements of income.

The aggregate future minimum rental commitments under noncancellable operating leases, excluding renewal options that are not reasonably assured for the periods shown at December 31, 2009, are as follows:

	Operating
(dollars in millions)		Leases
Years
2010	$	1,377
2011		1,214
2012		1,034
2013		863
2014		710
Thereafter		4,229
Total minimum payments	$	9,427

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)	2009		2008		2007
Revenue related to transactions with affiliated companies	$	102	$	106	$	105
Cost of service(a)		1,377		1,252		1,139
Certain selling, general and administrative expenses(b)		274		289		165
Interest incurred(c)		66		319		532

(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 $56, $252 and $296 were capitalized in Wireless licenses and Plant, property and equipment, net in the years ended December 31, 2009, 2008 and 2007, 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.

Distributions to Affiliates

As required under the Partnership Agreement, the Partnership paid tax distributions of $3,138 million, $1,529 million and $1,918 million to our Partners during the years ended December 31, 2009, 2008 and 2007, 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. The

B-26

Partnership made such supplemental tax distributions in the aggregate amount of $278 million on August 14, 2009 and November 13, 2009, respectively, for a total supplemental distribution of $556 million which is included in the total distributions paid during the year ended December 31, 2009. Three subsequent annual supplemental tax distributions in the amount of $667 million, comprised of $300 million of Vodafone and $367 million to Verizon in each of 2010, 2011, and 2012 will be paid in equal quarterly installments during each of those years on the same dates that the established regular quarterly tax distributions are made.

In November 2008, the Partnership 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 and Vodafone agreed to defer payment until the first to occur of either distribution by us or the passage of five business days after receipt of a written request for distribution delivered to us by Verizon or Vodafone. The deferred distribution of $556 million is presented in Due to affiliates within Current liabilities in the consolidated balance sheet as of December 31, 2008. On April 23, 2009, the Partnership made payment of the deferred distribution in full (without interest, premium or other adjustment) of the applicable amounts to our Partners. No deferred distributions remain outstanding as of December 31, 2009.

12. Accumulated Other Comprehensive Income (Loss)

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 (loss) are as follows:

	December 31,
(dollars in millions)	2009			2008
Unrealized gains (losses) on cash flow hedges, net	$	122		$	(53	)
Defined benefit pension and postretirement plans		(9	)		(63	)
Accumulated other comprehensive income (loss)	$	113		$	(116	)

13. Commitments and Contingencies

Under the terms of an agreement entered into among the Partnership, Verizon, and Vodafone on April 3, 2000, Vodafone obtained the right to require the Partnership to purchase up to an aggregate of $20 billion of Vodafone’s interest in the Partnership, at its then fair market value. Vodafone did not exercise its redemption rights. Accordingly, $10 billion of partners’ capital classified as redeemable was reclassified to partners’ capital in the accompanying consolidated statements of changes in partners’ capital in the year ended December 31, 2007.

The Alliance Agreement contains a provision, subject to specified limitations, that requires Vodafone and Verizon 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, 2009 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.

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. As of December 31, 2009, an aggregate of $12 million of letters of credit were outstanding on behalf of the Partnership pursuant to those reimbursement agreements, including approximately $9 million of letters of credit outstanding on behalf of Alltel.

We have commitments primarily to purchase network services, equipment and software from suppliers totaling $251 million. Of this total amount, $132 million, $47 million, $42 million, $18 million and $12 million are expected to be purchased in 2010, 2011, 2012, 2013 and 2014 and thereafter, respectively.

B-27

14. Subsequent Events

Distributions to Affiliates

On February 12, 2010, we paid tax distributions to our Partners of $867 million, including an aggregate tax distribution of $700 million for the quarter ended December 31, 2009 as well as the $167 million supplemental tax distribution.

On May 14, 2010, we paid tax distributions to our Partners of $1,247 million, including an aggregate tax distribution of $1,080 million for the quarter ended March 31, 2010 as well as the $167 million supplemental tax distribution.

Dispositions

During April 2010, the Partnership received the regulatory approvals necessary to complete the sale of the markets to ATN and completed the transaction. The Partnership expects to close the transaction with AT&T Mobility during the second quarter of 2010 subject to receipt of regulatory approval.

Debt

Through the date these consolidated financial statements were issued, the Partnership repaid $990 million of borrowings under our Three-Year Term Facility, reducing the outstanding borrowings under this facility to $3,006 million.

Term Notes Payable to Affiliate

On March 12, 2010, the Partnership and VFSL amended certain provisions of our $9,363 million Auction 73 floating rate note to extend the term of this note to October 31, 2010. The amendment also requires the repayment of any unpaid principal, plus accrued interest, with the cash proceeds received from the sale of any Alltel Divestiture Markets within 5 business days of receipt of such cash proceeds. Amounts outstanding under the amended note will bear interest at a rate of LIBOR plus 1.10% for each interest period.

On April 29, 2010, VFSL waived the mandatory prepayment on the $9,363 million Auction 73 floating rate note with respect to the cash proceeds from the sale of the markets to ATN provided that the Partnership uses at least $220 million of such proceeds to repay $220 million of borrowings under our Three-Year Term Facility.

On April 30, 2010, the Partnership and VFSL further amended certain provisions of the $9,363 million Auction 73 floating rate note such that the note will bear interest at a rate of LIBOR plus 50 basis points beginning retrospectively on April 16, 2010, and begin to accrue additional margins commencing on specified dates prior to maturity.

Through the date these consolidated financial statements were issued, the Partnership repaid $3,963 million of our $9,363 million Auction 73 floating rate note, reducing the outstanding borrowings under this note to $1,040 million.

B-28

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, 2009 and 2008, 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, 2009. 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 and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
New York, New York
March 12, 2010 (June 1, 2010 as to Note 14)

B-29

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

From 1 April 2009 to 31 December 2009, pursuant to our then-existing fee agreement with the depositary, we received $650,000 from the depositary for our standard out-of-pocket maintenance costs (including expenses arising out of annual and interim financial report delivery to holders, corporate action reporting, corporate announcement notifications, coordinating Depository Trust Company participant searches, engaging in registered holder analysis, coordinating proxy services, printing ADR certificates, distributing dividend funds and preparing and filing of US and UK tax information). As of 31 December 2009, the depositary’s obligation to pay our out-of pocket maintenance costs up to $650,000 per calendar year ceased.

We have also agreed 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.

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 2010, we have received approximately $5.6 million arising out of fees charged in respect of dividends paid.

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: 2 June 2010

Index to Exhibits to Form 20-F for year ended 31 March 2010

1.1	Memorandum, as adopted on June 13, 1984 and including all amendments made on July 28, 2000, July 26, 2005 (incorporated by reference to Exhibit 1 to the Company’s Annual Report of Form 20-F for the financial year ended March 31, 2006).
1.2	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 and July 28 2009 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
4.1	Agreement for US $5,525,000,000 5 year Revolving Credit Facility (subsequently increased by accession of further lenders to US$5,925,000,000), dated 24 June 2004, among the Company and various lenders, as amended and restated on 24 June 2005 by a Supplemental Agreement (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2006)
4.2	Lender Accession Agreement with Merrill Lynch International Bank Limited, effective as of May 8, 2007 (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2007).
4.3	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)
4.4	Lender Accession Agreement with Merrill Lynch International Bank Limited, effective as of May 8, 2007 (incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2007).
4.5	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).
4.6	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).
4.7	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).

4.8	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).
4.9	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).
4.10	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).
4.11	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).
4.12	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).
4.13	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).
4.14	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).
4.15	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).
4.16	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).
4.17	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).
4.18	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).
4.19	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).
4.20	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).
4.21	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).
4.22	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).
4.23	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).
4.24	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).
4.25	Letter of indemnification for Andy Halford
4.26	Letter of indemnification for Michel Combes
4.27	Letter of indemnification for Steve Pusey

4.28	Letter of indemnification for Dr. John Buchanan
4.29	Letter of indemnification for Philip Yea
4.30	Letter of indemnification for Luc Vandevelde
4.31	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)
4.32	Notice of cancellation dated 28 July 2008 in respect of the US$5,525,000,000 Revolving Credit Facility dated 24 June 2004 (as amended and restated by a Supplemental Agreement dated 24 June 2005). (incorporated by reference to Exhibit 4.30 to the Company’s Annual Report on Form 20-F for the financial year ended March 31, 2009)
7.	Computation of ratio of earnings to fixed charges for the years ended March 31, 2010, 2009, 2008, 2007, and 2006.
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.
15.3	Capitalisation and Indebtedness table.

EX-1.2

Exhibit 1.2

Company Number: 1833679

The Companies Acts

Public Company Limited by Shares

ARTICLES OF ASSOCIATION

OF

VODAFONE GROUP PUBLIC LIMITED COMPANY

TABLE OF CONTENTS

	Article No.		Page No.
Preliminary Articles
Table A and other standard regulations do not apply		1		1
The meaning of words and phrases used in the Articles		2		1
Share Capital
Form of the Company’s share capital		3		7
Fixed Rate Shares
Right of Fixed Rate Shares to profits		4		8
Right of Fixed Rate Shares to capital		5		8
Voting rights of Fixed Rate Shares		6		9
Varying the rights of Fixed Rate Shares		7		9
Changing Capital
The power to increase capital		8		10
Application of the Articles to new shares		9		10
The power to change capital		10		10
Fractions of shares		11		10
The power to reduce capital		12		11
Buying back shares		13		11
Shares
The special rights of new shares		14		11
The directors’ power to deal with shares		15		12
The directors’ authority to allot “relevant securities” and “equity securities”		16		12
Power to pay commission and brokerage		17		13
Renunciations of allotted but unissued shares		18		14
No trusts or similar interests recognised		19		14
Shares in Uncertificated Form
Holding shares in uncertificated form and effect of the CREST Regulations		20		14
Share Certificates
Certificates		21		15
Replacement share certificates		22		16
Calls on Shares
The directors can make calls on shares		23		16
The liability for calls		24		17
Interest and expenses on unpaid calls		25		17

- i -

	Article No.		Page No.
Sums which are payable when a share is allotted are treated as a call		26		17
Calls can be for different amounts		27		17
Paying calls early		28		17
Forfeiting Shares
Notice following non-payment of a call		29		18
Contents of the notice		30		18
Forfeiture if the notice is not complied with		31		18
Forfeiture will include unpaid dividends		32		18
Dealing with forfeited shares		33		18
Cancelling forfeiture		34		19
The position of shareholders after forfeiture		35		19
Liens on Partly Paid Shares
The Company’s lien on shares		36		19
Enforcing the lien by selling the shares		37		19
Using the proceeds of the sale		38		20
Evidence of forfeiture or enforcement of lien		39		20
Changing Shares Rights
Changing the special rights of shares		40		20
More about the special rights of shares		41		21
Transferring Shares
Share transfers		42		21
More about transfers of shares in certificated form		43		21
The Company can refuse to register certain transfers		44		22
Closing the Register		45		22
Overseas branch registers		46		23
Persons Automatically Entitled to Shares by Law
When a shareholder dies		47		23
Registering personal representatives		48		23
A person who wants to be registered must give notice		49		23
Having another person registered		50		23
The rights of people automatically entitled to shares by law		51		24
Shareholders Who Cannot Be Traced
Shareholder who cannot be traced		52		24
General Meetings
The Annual General Meeting		53		25
Calling a General Meeting		54		25
Notice of General Meetings		55		25

- ii -

	Article No.		Page No.
Proceedings at General Meetings
The chairman of a General Meeting		56		26
Security, and other arrangements at General Meetings		57		27
Overflow meeting rooms		58		27
The quorum needed for General Meetings		59		27
The procedure if there is no quorum		60		28
Adjourning meetings		61		28
Amending resolutions		62		28
Voting Procedures
How votes are taken		63		28
How a poll is taken		64		29
Where there cannot be a poll		65		29
A General Meeting continues after a poll is demanded		66		29
Timing of a poll		67		29
The chairman’s casting vote		68		30
The effect of a declaration by the chairman		69		30
Voting Rights
The votes of shareholders		70		30
Shareholders who owe money to the Company		71		30
Suspension of rights on non-disclosure of interest		72		31
Votes of shareholders who are of unsound mind		73		33
The votes of joint holders		74		33
Proxies
Appointment of proxies		75		34
Completing proxy forms		76		34
Delivering proxy forms		77		35
Cancellation of proxy’s authority		78		36
Authority of proxies		79		36
Representatives of companies		80		36
Challenging votes		81		36
Directors
The number of directors		82		37
Qualification to be a director		83		37
Directors’ fees and expenses		84		37
Special pay		85		37
Directors’ expenses		86		38
Directors’ pensions and other benefits		87		38
Appointing directors to various posts		88		38
Changing Directors
Retiring directors		89		39

- iii -

	Article No.		Page No.
Eligibility for re-election		90		39
Re-electing a director who is retiring		91		39
Election of two or more directors		92		39
People who can be directors		93		39
The power to fill vacancies and appoint extra directors		94		40
Removing and appointing directors by an ordinary resolution		95		40
When directors are disqualified		96		40
Directors’ Meetings
Directors’ meetings		97		41
Who can call directors’ meetings		98		41
How directors’ meetings are called		99		41
Quorum		100		41
The Chairman of directors’ meetings		101		42
Voting at directors’ meetings		102		42
Directors can act even if there are vacancies		103		42
Directors’ meetings by video conference and telephone		104		42
Directors’ written resolutions		105		43
The validity of directors’ actions		106		43
Directors’ Interests
Authorisation of directors’ interests		107		43
Directors may have interests		108		44
Restrictions on quorum and voting		109		45
Confidential information		110		47
Directors’ interests – general		111		47
Directors’ Committees
Delegating powers to committees		112		48
Committee procedure		113		48
Directors’ Powers
The directors’ management powers		114		48
The power to establish local boards		115		49
The power to appoint attorneys		116		49
Borrowing powers		117		50
Borrowing restrictions		118		50
Alternate Directors
Alternate directors		119		51
The Secretary
The Secretary and Deputy and Assistant Secretaries		120		52
The Seal
The Seal		121		53

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	Article No.		Page No.
Authenticating Documents
Establishing that documents are genuine		122		54
Reserves
Setting up reserves		123		54
Dividends
No dividends are payable except out of profits		124		54
Final dividends		125		55
Fixed and interim dividends		126		55
Dividends not in cash		127		55
Calculation and currency of dividends		128		55
Deducting amounts owing from dividends and other money		129		56
Payments to shareholders		130		56
Record dates for payments and other matters		131		57
Dividends which are not claimed		132		57
Waiver of dividends		133		57
Capitalising Reserves
Capitalising reserves		134		58
Scrip Dividends
Ordinary Shareholders can be offered the right to receive extra shares instead of cash dividends		135		58
Accounts
Accounting and other records		136		61
Location and inspection of records		137		61
Sending copies of accounts and other documents		138		61
Auditors
Actions of auditors		139		62
Auditors at General Meetings		140		62
Communications with Shareholders
Serving and delivering notices and other documents		141		62
Notices to joint holders		142		62
Notices for shareholders with foreign addresses		143		63
When notices are served		144		63
Serving notices and documents on shareholders who have died or are bankrupt		145		63
If documents are accidentally not sent or the postal services are suspended		146		64
Signature or authentication of documents		147		64

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	Article No.		Page No.
Minutes and Records
Minutes		148		65
Availability of records for inspection and notifying the Registrar of Companies		149		65
Winding Up
Directors’ power to petition		150		65
Distribution of assets in kind		151		66
Destroying Documents
Destroying documents		152		66
Directors’ Liabilities
Indemnity		153		67
Insurance and Defence funding		154		68
Share Warrants
Issue of Share Warrants		155		69
Directors can accept a certificate instead of a Share Warrant		156		69
Requesting a Share Warrant		157		70
Replacing Share Warrants		158		70
Rights of the Bearer		159		70
Bearers of Share Warrants participating in securities offers		160		71
Communications with Bearers of Share Warrants		161		71
Issuing shares to which the Share Warrant relates		162		72
ADR Depositary
ADR Depositary can appoint proxies		163		72
The ADR Depositary must keep a Proxy Register		164		73
Appointed Proxies can only attend General Meetings if properly appointed		165		73
Rights of Appointed Proxies		166		73
Sending information to an Appointed Proxy		167		73
The Company can pay dividends to an Appointed Proxy		168		74
The Proxy Register may be fixed at a certain date		169		74
The nature of an Appointed Proxy’s interest		170		74
Validity of the appointment of Appointed Proxies		171		74
Rights and Restrictions Attached to the B Shares
Definitions		172		75
Income		173		76
Capital		174		77
Redemption		175		77
Initial B Share Dividend		176		78
Voting at General Meetings		177		78
Purchase of Shares		178		78

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	Article No.		Page No.
Class Rights		179		79
Form		180		79
Deletion of Articles 172 to 181 when no B Shares in existence		181		79
Rights and Restrictions Attached to the Deferred Shares
Income		182		79
Capital		183		79
Redemption		184		80
Attendance and Voting at General Meetings		185		80
Form		186		80
Class Rights		187		80
Transfer and Purchase		188		81
Deletion of Articles 182 to 189 when no Deferred Shares in existence		189		81
Approved Depositaries
Appointments		190		81
Rights of Nominated Proxies		191		82
Glossary				83

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Company Number: 1833679

The Companies Acts

Company Limited by Shares

ARTICLES OF ASSOCIATION

Adopted on 28 July 2009 pursuant to a Special Resolution passed on 28 July 2009.

of

VODAFONE GROUP PUBLIC LIMITED COMPANY

PRELIMINARY ARTICLES

1	Table A and other standard regulations do not apply
	The regulations in Table A of the Companies Act 1948, and any similar regulations in the Companies Acts do not apply to the Company.
2	The meaning of words and phrases used in the Articles
2.1	The following table gives the meaning of certain words and phrases as they are used in these Articles. However, the meaning given in the table does not apply if that is inconsistent with the context in which a word or phrase appears. After the Articles there is a Glossary which explains various words and phrases. The Glossary is not part of the Memorandum or Articles, and it does not affect their meaning. Throughout the Articles, those words and expressions explained in this Article 2.1 are printed in bold and those explained in the Glossary are printed in italics.

Words and Phrases	Meaning
Act	This means any act of Parliament, enactment or statutory legislation.
Adjusted Total of Capital and Reserves	This is defined in Article 118.2.

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Words and Phrases	Meaning
ADR Depositary	A custodian or other person or persons approved by the directors who:
	holds shares in the Company under arrangements where either the custodian or some other person issues American Depositary Receipts which evidence American Depositary Shares representing shares in the Company; and/or
	is appointed by or on behalf of the Company to hold Share Warrants.
alternate director	This is defined in Article 119.1.
American Depositary Shares	These represent shares in the Company and are evidenced by American Depositary Receipts.
American Depositary Receipts	These represent American Depositary Shares either physically or in the form of Direct Registration Receipts.
Appointed Proxy	This is defined in Article 163.1.
Appointed Number	The number of Depositary Shares to which each appointment as a Nominated Proxy relates.
Approved Depositary	This means someone appointed:
	to hold the Company’s shares or any rights or interests in any of the Company’s shares; and
	to issue securities, documents of title or other documents which evidence that the holder of them owns or is entitled to receive the shares, rights or interests held by the Approved Depositary.
	A nominee acting for someone appointed to do these things will also be treated as an Approved Depositary. But the arrangements for the Approved Depositary to do the things described above must be approved by the directors. The trustees of any scheme or arrangements for or principally for the benefit of employees of the Group will also be treated as an Approved Depositary unless the directors decide otherwise. References in the Articles to an Approved Depositary or to shares held by it refer only to an Approved Depositary and to its shares held in its capacity as an Approved Depositary.
approved transfer	This is defined in Article 72.11, for the purposes of Article 72.
Articles	The Company’s Articles of Association, including any changes made to them.
Associated Company	This is defined in Article 154.6.
Bearer	This is defined in Article 155.1.

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Words and Phrases	Meaning
Borrowings	This is defined in Article 118.2.
class meeting	This is defined in Article 40.1.
Common Seal	Any seal which the Company may have under the Companies Acts and which the Company may use to execute documents.
Companies Act 1985	The Companies Act 1985, as amended by the Companies Act 1989 and the Companies Act 2006.
Companies Act 2006	The company law provisions of the Companies Act 2006 (as defined therein), for the time being in force.
Companies Acts	The Companies Acts as defined in Section 2 of the Companies Act 2006 (where provisions are for the time being in force), the CREST Regulations and other legislation relating to companies and affecting the Company (including any orders, regulations or other subordinated legislation made under them) in force from time to time.
Companies Communications Provisions	The meaning of companies communications provisions is given in the Companies Acts.
company	Includes any company, corporate body and any corporation established anywhere in the world.
company representative	This is defined in Article 80.
the Company	Vodafone Group Public Limited Company.
CREST Regulations	The Uncertificated Securities Regulations 2001.
default shares	This is defined in Article 72.1, for the purposes of Article 72.
Depositary Shares	The total number of Ordinary Shares which are registered in the name of the Approved Depositary or its nominee at that time.
Direct Registration Receipt	An American Depositary Receipt in uncertificated form, the ownership of which is recorded in the Direct Registration System.
Direct Registration System	The system maintained by the ADR Depositary in which the ADR Depositary records the ownership of Direct Registration Receipts.
direction notice	This is defined in Article 72.3 for the purposes of Article 72.
elected shares	This is defined in Article 135.10.
equity securities	The meaning of equity securities is given in Section 94 Companies Act 1985.
equity shares	Shares in the capital of the Company which are regarded as equity share capital pursuant to Section 744 Companies Act 1985.

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Words and Phrases	Meaning
Fixed Rate Shares	The 7 per cent cumulative fixed rate shares of £1 each in the Company.
Group	This is defined in Article 118.2, for the purposes of Article 118.
London Stock Exchange	London Stock Exchange plc.
Memorandum	The Memorandum of Association of the Company.
Nominated Proxy	Each person the Approved Depositary has appointed as a proxy under Article 190.1.
Nominated Proxy Register	This is defined in Article 190.2, for the purposes of Articles 190 and 191.
non equity securities	Securities which are not equity securities.
operator	CRESTCo Limited or any other operator of a relevant system under the CREST Regulations.
Ordinary Shareholder	A holder of the Company’s Ordinary Shares.
Ordinary Shares	Ordinary shares of US$0.113/7 each in the Company.
paid-up share or other security	Includes a share or other security which is treated or credited as paid up.
pay	Includes any kind of reward or payment for services.
prescribed period	This is defined in Article 16.5, for the purposes of Article 16.
Procedural Resolution	A resolution or question put to the vote of a General Meeting of a procedural nature (such as a resolution on a simple clerical amendment to correct an obvious error in a Substantive Resolution, a resolution to adjourn a General Meeting or a resolution on the choice of chairman of a General Meeting).
proxy form	This includes any document, electronic form or website based form which appoints a proxy.
Proxy Register	This is defined in Article 164.1.
recognised clearing house	A clearing house granted recognition under the Financial Services and Markets Act 2000.
recognised investment exchange	An investment exchange granted recognition under the Financial Services and Markets Act 2000.
Record Date	This is defined in Article 169.1, for the purposes of Article 169.
Record Time	This is defined in Article 191.4, for the purposes of Article 191.
Register	The Company’s register of members.

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Words and Phrases	Meaning
Registered Office	The Company’s registered office or in the case of sending or supplying any document or information by electronic means or by means of a website in accordance with the Companies Acts and these Articles, the address stated for the purpose of receiving such document or information by electronic means or by means of a website.
Relevant Company	This is defined in Article 154.1, for the purposes of Article 154.
relevant securities	The meaning of relevant securities is given in Section 80 of the Companies Act 1985.
relevant system	A relevant system under the CREST Regulations whose operator allows shares or other securities of the Company to be transferred using that system.
relevant value	This is defined in Article 135.5, for the purposes of Article 135.
rights of any share	The rights attached to a share when it is issued, or afterwards.
rights issue Secretary	This is defined in Article 16.5, for the purposes of Article 16. Any person appointed by the directors to do work as the company secretary including where the context allows any assistant or deputy secretary.
securities offer	This is defined in Article 160.3, for the purposes of Article 160.
Securities Seal	An official seal kept by the Company for sealing securities issued by the Company, or for sealing documents creating or evidencing securities so issued, as permitted by the Companies Acts.
Share Warrant	A share warrant to bearer issued by the Company.
shareholder	A holder of the Company’s shares.
shareholders’ meeting	A meeting of shareholders including both a General Meeting of the Company and a class meeting.
shares	Shares which are in issue at the relevant time.
sterling	The currency of the United Kingdom.
subsidiary	A subsidiary as defined in Section 1159 of the Companies Act 2006.
subsidiary undertaking	A subsidiary undertaking as defined in Section 1162 of the Companies Act 2006.
Substantive Resolution	Any resolution or question put to the vote of a General Meeting which is not a Procedural Resolution.

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Words and Phrases	Meaning
takeover offer	A takeover offer as defined in Section 974 of the Companies Act 2006.
terms of a share	The terms on which a share was issued.
Transfer Office	The place where the Register is kept or in the case of sending or supplying any document or information by electronic means or by means of a website in accordance with the Companies Acts and these Articles, the address stated for the purpose of receiving such document or information by electronic means or by means of a website.
UK Listing Authority	The Financial Services Authority in its capacity as the competent authority for official listing under Part VI of the Financial Services and Markets Act 2000.
United Kingdom	Great Britain and Northern Ireland.
US dollars	The currency of the United States of America.
working day	A day on which banks in the United Kingdom are generally open for business, excluding Saturdays, Sundays and public holidays.

2.2	References to a debenture include debenture stock and references to a debenture holder include a debenture stockholder.
2.3	Where the Articles refer to a person who is automatically entitled to a share by law, this includes a person who is entitled to the share as a result of the death, or bankruptcy, of a shareholder.
2.4	Words which refer to a single number also refer to plural numbers, and the other way around.
2.5	Words which refer to males also refer to females and to other persons.
2.6	References to a person or people include companies, unincorporated associations and so on.
2.7	References to officers include directors, managers and the Secretary, but not the Company’s auditors.
2.8	References to the directors are to the board of directors unless the way in which directors is used does not allow this meaning.
2.9	Any headings in these Articles are only included for convenience. They do not affect the meaning of the Articles.
2.10	When an Act or the Articles are referred to, the version which is current at any particular time will apply.
2.11	Where the Articles give any power or authority to anybody, this power or authority can be used on any number of occasions, unless the way in which the word is used does not allow this meaning.
2.12	Any word or phrase which is defined in the Companies Acts (excluding any modification to them by a further Act which is not in force when these Articles are adopted) means the

- 6 -

	same in the Articles, unless the Articles define it differently, or the way in which the word or phrase is used is inconsistent with the definition given in the Companies Acts.
2.13	Where the Articles say that anything can be done by passing an ordinary resolution, this can also be done by passing a special resolution.
2.14	Where the Articles refer to changing the amount of shares this means doing any or all of the following:

• subdividing the shares into other shares with a smaller nominal value;

• consolidating the shares into other shares with a larger nominal value; and

• dividing shares which have been consolidated into shares with a larger nominal value than the original shares had.

2.15	Where the Articles refer to any document being made effective this means being signed, sealed, authenticated or executed in some other legally valid way.
2.16	Where the Articles refer to months or years, these are calendar months or years.
2.17	Articles which apply to fully-paid shares can also apply to stock. References in those Articles to share or shareholder include stock or stockholder.
2.18	Where the Articles refer to shares in certificated form, this means that ownership of the shares can be transferred using a transfer document (rather than in accordance with the CREST Regulations) and that a share certificate is usually issued to the owner.
2.19	Where the Articles refer to shares in uncertificated form, this means that ownership of the shares can be transferred in accordance with the CREST Regulations without using a transfer document and that no share certificate is issued to the owner.
2.20	Where the Articles refer to a period of clear days, the period does not include the date the notice is delivered, or treated as being delivered, nor the date of the General Meeting or other relevant event.
2.21	The expressions “hard copy form”, “electronic form” and “electronic means” shall have the same respective meanings as in the Company Communications Provisions.
2.22	The term address when used in relation to communications via electronic means or by means of a website includes any number or address used for the purposes of such communication.
2.23	Where the Articles refer to anything that should be in writing, this means it should be written or produced by any substitute for writing (including anything in electronic form) or partly one and partly another.

SHARE CAPITAL

3	Form of the Company’s share capital
	1 The Company’s share capital at the date when these Articles are adopted is £9,990,050,000 and U.S.$7,800,000,000. This is made up of 50,000 7 per cent. cumulative

¹ On 21 July 1999 the share capital of the Company was increased to £50,000 and US$4,080,000,000 by the creation of an additional 32,640,000,000 ordinary shares of US$0.10 each.

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fixed rate shares of £1 each 38,563,935,574 B Shares of 15 pence each, 28,036,064,426 Deferred Shares of 15 pence each and 68,250,000,000 ordinary shares of U.S.$0.11³/₇ each.

FIXED RATE SHARES

4	Right of Fixed Rate Shares to profits
4.1	If the Company has profits which are available for distribution and the directors resolve that these should be distributed, the holders of the Fixed Rate Shares are entitled, before the holders of any other class of shares, to be paid in respect of each financial year or other accounting period of the Company a fixed cumulative preferential dividend (“preferential dividend”) at the rate of 7 per cent. per annum on the nominal value of the Fixed Rate Shares which is paid up or treated as paid up.
4.2	Subject to Article 4.3 below, the preferential dividend will be paid yearly, on 31 March in respect of each financial year ending on or before that date. If this date is not a working day, the payment will be made on the next working day.
4.3	When the Company has to calculate a dividend on the Fixed Rate Shares for a period other than a calendar year ending on 31 March (being another accounting period, the first dividend period arising for the Fixed Rate Shares or otherwise), the daily dividend rate will be worked out by dividing the yearly dividend rate by 365 days. This daily rate will then be multiplied by the actual number of days which have passed in the relevant period, but not including the date of payment, to give the amount payable for that period.
4.4	Except as provided in this Article, the Fixed Rate Shares do not have any other right to share in the Company’s profits.
5	Right of Fixed Rate Shares to capital
5.1	If the Company is wound up (but in no other circumstances involving a repayment of capital or distribution of assets to shareholders whether by reduction of capital, redeeming or buying back shares or otherwise), the holders of the Fixed Rate Shares will be entitled, before the holders of any other class of shares to:

• repayment of the amount paid up or treated as paid up on the nominal value of each Fixed Rate Share;

• the amount of any dividend which is due for payment on, or after, the date the winding up commenced which is payable for a period ending on or before that date. This applies even if the dividend has not been declared or earned;

The share capital of the Company was increased to £50,000 and US$7,800,000,000 by the creation of an additional 37,200,000,000 ordinary shares of US$0.10 each with effect from 9 February 2000.

Following the admission to the Official List of the consolidated Ordinary Shares, the share capital of the Company was altered to £9,990,050,000 and US$7,800,000,000 divided into 50,000 Fixed Rate Shares of £1 each, 66,600,000,000 B Shares of 15 pence each and 68,250,000,000 Ordinary Shares of 11³/₇ cents each on 31 July 2006.

On 7 August 2006, the share capital of the Company was altered following the conversion of 28,036,064,426 B Shares of 15 pence each into 28,036,064,426 Deferred Shares of 15 pence each in accordance with the Company’s Articles of Association.

- 8 -

• any arrears of dividend on any Fixed Rate Shares held by them. This applies even if the dividend has not been declared or earned; and

• a proportion of any dividend in respect of the financial year or other accounting period which began before the winding up commenced but ends after that date. The proportion will be the amount of the dividend that would otherwise have been payable for the period which ends on that date. This applies even if the dividend has not been declared or earned.

5.2	If there is a winding up to which Article 5.1 applies, and there is not enough to pay the amounts due on the Fixed Rate Shares, the holders of the Fixed Rate Shares will share what is available in proportion to the amounts to which they would otherwise be entitled. The holders of the Fixed Rate Shares will be given preference over the holders of other classes of shares which rank behind them in sharing in the Company’s assets.
5.3	Except as provided in this Article 5, the Fixed Rate Shares do not have any other right to share in the Company’s surplus assets.
6	Voting rights of Fixed Rate Shares
6.1	The holders of the Fixed Rate Shares are only entitled to receive notice of General Meetings, or to attend, speak and vote at General Meetings, as set out below.

• If a resolution is to be proposed at the General Meeting to wind up the Company, they are entitled to receive notice of the General Meeting and can attend, but are not entitled to speak or vote.

• If a resolution is to be proposed at the General Meeting which would vary or abrogate the rights attached to the Fixed Rate Shares, they are entitled to receive notice of the General Meeting and are entitled to attend, speak and vote but only in respect of such resolution or any motion to adjourn the General Meeting before such resolution is voted on.

6.2	If the holders of the Fixed Rate Shares are entitled to vote at a General Meeting, each holder present in person or by proxy (or, being a company, by a company representative) has one vote on a show of hands and on a poll every holder who is present in person or by proxy (or, being a company, by a company representative) shall have one vote in respect of each fully paid Fixed Rate Share.
7	Varying the rights of Fixed Rate Shares
	The rights of the holders of the Fixed Rate Shares will be regarded as being varied or abrogated if any resolution is passed for the reduction of the amount of capital paid up on the Fixed Rate Shares but not for the repayment of the Fixed Rate Shares at par.
	Accordingly, this can only take place if:

• holders of at least three quarters in nominal value of the Fixed Rate Shares agree in writing; or

• a special resolution is passed at a separate class meeting by the holders of the Fixed Rate Shares approving the proposal,

in accordance with Article 40.

- 9 -

CHANGING CAPITAL

8	The power to increase capital
	The shareholders can increase the Company’s share capital by passing an ordinary resolution. The resolution must fix the:

• amount of the increase;

• nominal value of the new shares; and

• currency or currencies in which the nominal value of such shares is to be expressed.

9	Application of the Articles to new shares
	The provisions of the Articles about allotment, payment of calls, transfers, automatic entitlement by law, forfeiture, lien and all other things apply to new shares under Article 8 in the same way as if they were part of the Company’s existing share capital.
10	The power to change capital
	The shareholders can pass ordinary resolutions to do any of the following:

• consolidate, or consolidate and then divide, all or any part of the Company’s share capital into new shares of a larger nominal value than the existing shares;

• cancel any shares which have not been taken, or agreed to be taken, by any person at the date of the resolution, and reduce the amount of the Company’s share capital by the amount of the cancelled shares;

• divide some or all of the shares into shares which are of a smaller nominal value than is fixed in the Memorandum. This is subject to any restrictions under the Companies Acts. The resolution can provide that, as between the shares resulting from such sub-division, different rights and restrictions which the Company can apply to new shares may apply to all or any of the different divided shares.

11

Fractions of shares

11.1

If any shares are consolidated or divided, the directors have power to deal with any fractions of shares which result or any other difficulty that arises. If the directors decide to sell any shares representing fractions, they must do so for the best price reasonably obtainable and distribute the net proceeds of sale among shareholders in proportion to their fractional entitlements in accordance with their rights and interests. The directors can sell to any person (including the Company, if the Companies Acts allow this) and can authorise any person to transfer those shares to the buyer or in accordance with the buyer’s instructions. The buyer does not need to take any steps to see how any money he paid is used. Nor will his ownership be affected if the sale was irregular or invalid in any way.

- 10 -

11.2	So far as the Companies Acts allow, when shares are consolidated or divided, the directors can treat a shareholder’s shares which are held in certificated form and in uncertificated form as separate shareholdings. The directors can also arrange for any shares which result from a consolidation or division and which represent rights to fractions of shares to be entered in the Register as shares in certificated form where this makes it easier to sell them.
12	The power to reduce capital
	The Company’s shareholders can pass a special resolution to reduce in any way:

• the Company’s share capital; or

• any capital redemption reserve, share premium account or other undistributable reserve.

	This is subject to any restrictions under the Companies Acts.
13	Buying back shares
	The Company can buy back, or agree to buy back in the future, any shares of any class (including redeemable shares) in accordance with the Companies Acts. However, if the Company has other shares in issue which are admitted to the official list maintained by the UK Listing Authority and which are convertible at any time into the class of equity shares to be repurchased, the holders of the convertible shares must first pass a special resolution approving the buy-back at a separate class meeting. A resolution is not required, however, if the terms on which the convertible shares were issued allow the buy-back.

SHARES

14	The special rights of new shares
14.1	If the Company issues new shares, the new shares can have any rights or restrictions attached to them. The rights can take priority over the rights of existing shares, or existing shares can take priority over them, or the new shares and the existing shares can rank equally. These rights and restrictions can apply to sharing in the Company’s profits or assets. Other rights and restrictions can also apply, for example to the right to vote.
14.2	The powers conferred by Article 14.1 are subject to the provisions of Article 14.5.
14.3	The rights and restrictions referred to in Article 14.1 can be decided by an ordinary resolution passed by the shareholders. The directors can also take these decisions if they do not conflict with any resolution passed by the shareholders.
14.4	If the Companies Acts allow this, the rights of any new shares can include rights for the holder and/or the Company to have them redeemed.
14.5	The ability to attach particular rights and restrictions to new shares may be restricted by special rights previously given to holders of any existing shares.

- 11 -

15	The directors’ power to deal with shares
15.1	The directors can decide how to deal with any shares which have not been issued. The directors can:

• allot them on any terms, which can include the right to transfer the allotment to another person before any person has been entered on the Register. This is known as the right to renounce the allotment (see also Article 18);

• grant options to give people a right to acquire shares in the future; or

• dispose of the shares in any other way.

15.2	The directors are free to decide with whom they deal, when they deal with the shares, and the terms on which they deal.
15.3	For the purposes of Article 15.1, the directors must comply with:

• the provisions of the Companies Acts relating to authority, pre-emption rights and other matters; and

• any resolution of a General Meeting which is passed under the Companies Acts.

16	The directors’ authority to allot “relevant securities” and “equity securities”
16.1	This Article regulates the authority of the directors to allot relevant securities and their power to allot equity securities for cash.
16.2	The directors are authorised, generally and without conditions, under Section 80 of the Companies Act 1985, to allot relevant securities. They are authorised to allot them for any prescribed period. The maximum amount of relevant securities which the directors can allot in each prescribed period is the Section 80 Amount.
16.3	Under the directors’ general authority in Article 16.2, they have the power to allot equity securities, entirely paid for in cash, free of the restriction in Section 89(1) of the Companies Act 1985. They have the power to allot them for any prescribed period. There is no maximum amount of equity securities which the directors can allot when the allotment is in connection with a rights issue. In all other cases, the maximum amount of equity securities which the directors can allot is the Section 89 Amount.
16.4	During any prescribed period, the directors can make offers and enter into agreements which would, or might, require shares or other securities to be allotted after that period has ended.
16.5	For the purposes of this Article:

• rights issue means an offer of equity securities which is open for a period decided on by the directors to the people who are registered on a particular date (chosen by the directors) as holders of:

(i)	Ordinary Shares, in proportion to their holdings of Ordinary Shares; and
(ii)	other classes of equity securities or non equity securities which give them the right to receive the offer in accordance with their rights.

However, the directors can do the following things (and the issue will still be treated as a rights issue for the purpose of this Article if they do so):

- 12 -

• sell any fractions of equity securities to which people would be entitled and keep the net proceeds for the Company’s benefit or make other appropriate arrangements to deal with such fractions;

• make the rights issue subject to any limits or restrictions which the directors think are necessary or appropriate to deal with legal or practical problems under the laws of any territory, or under the requirements of any recognised regulatory body, or stock exchange, in any territory or as a result of shares being represented by American Depositary Shares; or

• treat a shareholder’s holdings in certificated form and uncertificated form as separate shareholdings.

• prescribed period means in the first instance the period ending on the date of the Annual General Meeting in 2000 or on 24 August 2000, whichever is the earlier. After this, the prescribed period means a period of no more than five years fixed by the shareholders by passing a resolution at a General Meeting. The shareholders can, by passing further resolutions, renew or extend this power (including the first prescribed period), for periods of no more than five years each. Such resolutions can take the form of:

• an ordinary resolution fixing a period under Article 16.2; or

• a special resolution fixing a period under Article 16.3; or

• a special resolution fixing identical periods under Article 16.2 and under Article 16.3; or

• a special resolution fixing different periods under Article 16.2 and under Article 16.3.

• The Section 80 Amount for the first prescribed period is that fixed at the Extraordinary General Meeting of the Company held on 24 May 1999, being U.S.$816,000,000. For any subsequent prescribed period the Section 80 Amount is that stated in a relevant resolution passed by the shareholders at a General Meeting.

• The Section 89 Amount for the first prescribed period is that fixed at the Extraordinary General Meeting of the Company held on 24 May 1999, being U.S.$30,223,864. For any subsequent prescribed period the Section 89 Amount is that stated in a relevant special resolution passed by the shareholders at a General Meeting.

• In working out any maximum amounts of securities referred to in this Article, the nominal value of rights to subscribe for shares, or to convert any securities into shares, will be taken as the nominal value of the shares which would be allotted if the subscription or conversion takes place.

17	Power to pay commission and brokerage
17.1	The Company can use all the powers given by the Companies Acts to pay commission or brokerage to any person who:

• applies, or agrees to apply, for any new shares; or

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• gets anybody else to apply, or agree to apply for, any new shares.

17.2	The rate per cent or amount of the commission paid or agreed to be paid must be disclosed as required by the Companies Acts and must not exceed 10 per cent of the price at which the shares in respect of which the commission is paid are issued (or an equivalent amount).
18	Renunciations of allotted but unissued shares
	Where a share has been allotted to a person but that person has not yet been entered on the Register, the directors can recognise a transfer (called a renunciation) by that person of his right to the share in favour of some other person. The ability to renounce allotments only applies if the terms on which the share is allotted are consistent with renunciation. The directors can impose terms and conditions regulating renunciation rights and can allow renunciation rights to be participating securities (as defined in the CREST Regulations) in their own right.
19	No trusts or similar interests recognised
19.1	The Company will only be affected by, or recognise, a current and absolute right to whole shares. The fact that any share, or any part of a share, may not be owned outright by the registered owner is not of any concern to the Company, for example if a share is held on any kind of trust.
19.2	The only exception to what is said in Article 19.1 is for any right:

• which is expressly given by these Articles; or

• which the Company has a legal duty to recognise.

SHARES IN UNCERTIFICATED FORM

20	Holding shares in uncertificated form and effect of the CREST Regulations
20.1	Subject to the Articles and so far as the Companies Acts allow this, the directors can decide that any class of shares can:

• be held in uncertificated form and that title to such shares can be transferred using a relevant system; or

• no longer be held and transferred in uncertificated form.

20.2 These Articles do not apply to shares of any class which are held in uncertificated form to the extent that the Articles are inconsistent with the:

• holding of shares of that class in uncertificated form;

• transfer of title to shares of that class by means of a relevant system; or

• CREST Regulations.

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SHARE CERTIFICATES

21	Certificates
21.1	When a shareholder is first registered as the holder of any class of shares in certificated form, he is entitled to receive, free of charge, one certificate for all the shares in certificated form of that class which he holds. If he holds shares of more than one class in certificated form, he is entitled to receive a separate share certificate for each class.
21.2	The Company must also observe any requirements of the CREST Regulations when issuing share certificates. Where the Companies Acts allow, the Company does not need to issue share certificates.
21.3	If a shareholder receives more shares in certificated form of any class he is entitled, without charge, to another certificate for the additional shares.
21.4	If a shareholder transfers part of his shares covered by a certificate, he is entitled, free of charge, to a new certificate for the balance if the balance is also held in certificated form. The old certificate will be cancelled.
21.5	The Company does not have to issue more than one certificate for any share in certificated form, even if that share is held jointly.
21.6	When the Company delivers a certificate to one joint holder of shares in certificated form, this is treated as delivery to all of the joint shareholders.
21.7	If requested in writing to do so, the Company can deliver a certificate to a broker or agent who is acting for a person who is buying shares in certificated form, or who is having shares transferred to him in certificated form.
21.8	The directors can decide how share certificates are made effective. For example, they can be:

• signed by two directors or one director and the Secretary;

• sealed with the Common Seal or the Securities Seal (or in the case of shares on a branch Register, an official seal for use in the relevant territory); or

• printed, in any way, with a copy of the signature of those directors and the Secretary. The copy can be made or produced mechanically, electronically or in any other way the directors approve.

21.9	A share certificate must state the number and class of shares to which it relates and the amount paid-up on those shares. It cannot be for shares of more than one class.
21.10	If all the issued shares of the Company, or a particular class of shares, are fully paid up and rank equally with each other for all purposes, none of those shares will (unless the directors pass a resolution to the contrary) have a distinguishing number as long as it remains fully paid up and ranks equally for all purposes with all the shares of the same class which are issued and fully paid up.
21.11	The time limit for the Company to prepare a share certificate for shares in certificated form is:

• one month after the allotment of a new share;

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• five working days after a valid transfer of fully-paid shares is presented for registration;

• two months after a valid transfer of partly-paid shares is presented for registration; or

• where a request relating to Share Warrants has been made in accordance with Article 162.1, as set out in Article 162.3.

21.12	Article 21.11 only applies to the extent that the terms of issue of shares do not provide otherwise.
21.13	Share certificates will also be prepared and sent earlier where either the London Stock Exchange or the UK Listing Authority requires it.
22	Replacement share certificates
22.1	If a shareholder has four or more share certificates for shares of the same class which are in certificated form, he can ask the Company for these to be cancelled and replaced by a single new certificate. The Company must comply with this request, without making a charge for doing so.
22.2	A shareholder can ask the Company to cancel and replace a single share certificate with two or more certificates, for the same total number of shares. The Company, upon the payment by the shareholder of a reasonable sum determined by the directors, must comply with this request.
22.3	A shareholder can ask the Company for a new certificate if the original is:

• damaged or defaced; or

• lost, stolen, or destroyed.

22.4	If a certificate has been damaged or defaced, the Company can require satisfactory evidence and for the certificate to be delivered to it before issuing a replacement. If a certificate is lost, stolen or destroyed, the Company can require satisfactory evidence, together with an indemnity, before issuing a replacement. In each case the directors can impose such other terms as they think fit.
22.5	The directors can require the shareholder to pay the Company’s exceptional out-of-pocket expenses for issuing any share certificates under Article 22.3.
22.6	Any one joint shareholder can request replacement certificates under this Article.

CALLS ON SHARES

23	The directors can make calls on shares
	The directors can call on shareholders to pay any money which has not yet been paid to the Company for their shares. This includes both the nominal value of the shares and any premium which may be payable. If the terms of issue of the shares allow this, the directors can:

• make calls as often, and whenever, they think fit;

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• decide when and where the money is to be paid;

• decide that the money can be paid by instalments; or

• wholly or partly revoke or postpone any call.

	A call is treated as having been made as soon as the directors pass a resolution authorising it.
24	The liability for calls
24.1	A shareholder who has received at least 14 days’ notice giving details of the amount called, the time (or times) and place or address for payment must pay the call as required by the notice. Joint shareholders are liable jointly and severally to pay any money called for in respect of their shares.
24.2	A shareholder due to pay the amount called shall still have to pay the call even if, after the call was made, he transfers the shares to which the call related.
25	Interest and expenses on unpaid calls
	If a call is made and the money due remains unpaid, the shareholder is liable to pay interest on the money and any expenses incurred by the Company because of his failure to pay the call on time. The interest will run from the day the money is due until it has actually been paid. The yearly interest rate will be a reasonable rate fixed by the directors (or, where they do not fix a reasonable rate, 10 per cent). The directors can decide not to charge any or all of such expenses and interest.
26	Sums which are payable when a share is allotted are treated as a call
	If the terms of a share require any money to be paid at the time the share is allotted, or at any fixed date (whether in relation to the nominal value of the shares or any premium which may apply), then the liability to pay the money will be treated in the same way as a liability for a valid call for money on shares which is due on the same date. If this money is not paid, everything in the Articles relating to non-payment of calls applies. This includes Articles which allow the Company to forfeit or sell shares and to claim interest.
27	Calls can be for different amounts
	On an issue of shares, if the terms of such shares allow, the directors can decide that allottees or the subsequent holders of such shares can be called on to pay different amounts, or that they can be called on at different times.
28	Paying calls early
28.1	The directors can accept payment in advance of some or all of the money due from a shareholder before he is called on to pay the money. The directors can agree to pay interest on money paid in advance until it would otherwise be due to the Company at a rate (up to a maximum yearly interest rate of 10 per cent) agreed between the directors and the shareholder.

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28.2 The money which is paid in advance in this way shall not be included in calculating the dividend payable on the shares in respect of which the money paid in advance has been paid.

FORFEITING SHARES

29	Notice following non-payment of a call
	Articles 29 to 39 apply if a shareholder fails to pay the whole amount of a call, or an instalment of a call, by the date on which it is due. The directors can serve a notice on him any time after the date on which the call or the instalment is due, if the whole amount immediately due has not been paid.
30	Contents of the notice
	A notice served under Article 29 must:

• demand payment of the amount immediately payable, plus any interest;

• give a date by when the total must be paid, but this must be at least 14 days after the notice is served on the shareholder;

• state where the payment(s) must be made; and

• state that if the full amount demanded is not paid by the time and at the place or address stated, the Company can forfeit the shares on which the call or instalment was due.

31	Forfeiture if the notice is not complied with
	If a notice served under Article 29 is not complied with, the shares to which it relates can be forfeited at any time while any amount (including interest) is still outstanding. This is done by the directors passing a resolution stating that the shares have been forfeited.
32	Forfeiture will include unpaid dividends
	All dividends which are due on (and other money payable in respect of) the forfeited shares, but not yet paid, will also be forfeited.
33	Dealing with forfeited shares
33.1	The directors can sell, dispose of or re-allot any forfeited share on any terms and in any way that they decide. The Company may keep the consideration received from doing this. The directors can, if necessary, authorise any person to transfer a forfeited share to any other person and may cause such other person to be registered as the holder of the share.
33.2	The new shareholder’s ownership of the share will not be affected if the steps taken to forfeit the share, or the sale or disposal of the share, were invalid or irregular, or if anything that should have been done was not done, and the new shareholder is not obliged to enquire as to how the purchase money (if any) is used.

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34	Cancelling forfeiture
34.1	After a share has been forfeited, the directors can cancel the forfeiture. But they can only do this before the share has been sold, re-allotted or disposed of. This can be on any terms that they decide.
34.2	If a share has not been sold or disposed of after three years from the date of forfeiture, the directors must cancel the share.
35	The position of shareholders after forfeiture
35.1	A shareholder loses all rights in connection with forfeited shares. If the shares are in certificated form, he must surrender any certificate for those shares to the Company for cancellation. A person is still liable to pay calls which have been made, but not paid, before the forfeiture of his shares. He must also pay interest on the unpaid amount (at the rate of interest which was payable on the unpaid amount before the forfeiture) until it is paid. If no interest was payable before the forfeiture on the unpaid amount, the directors can fix the rate of interest on the unpaid amount, but it must not be more than 10 per cent a year, until it is paid.
35.2	The shareholder continues to be liable for all claims and demands which the Company could have made relating to the forfeited share. He is not entitled to any credit for the value of the share when it was forfeited or for money received by the Company under Article 33, unless the directors decide to allow credit for all or any of that value. The directors may also decide to waive any payment due either completely or in part.

LIENS ON PARTLY PAID SHARES

36	The Company’s lien on shares
	The Company has a lien on all partly-paid shares. This lien has priority over claims of others to the shares and extends to all dividends and other money payable on the shares or in respect of them. This lien is for any money owed to the Company for the shares. The directors can decide to give up any lien which has arisen or that any share for a specified period of time be entirely or partly exempt from this Article. They can also decide to suspend any lien which would otherwise apply to particular shares. Unless otherwise agreed, the registration of a transfer of any share over which the Company has a lien shall operate as a waiver of that lien.
37	Enforcing the lien by selling the shares
37.1	If the directors want to enforce the lien referred to in Article 36, they can sell some or all of the shares in any way they decide. The directors can authorise someone to transfer the shares sold. But they cannot sell the shares until all of the following conditions are met:

• the money owed by the shareholder must be immediately payable;

• the directors must have given a notice in writing to the shareholder. This notice must say how much is due. It must also demand that this money is paid, and say that the shareholder’s shares can be sold if the money is not paid;

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• the notice in writing must have been sent to or served on the shareholder, or on any person who is automatically entitled to the shares by law; and

• the money has not been paid by at least 14 days after the notice has been served.

37.2	The new shareholder’s ownership of the share will not be affected if the sale or disposal of the share was invalid or irregular, or if anything that should have been done was not done and is not obliged to enquire as to how the purchase money (if any) is used.
38	Using the proceeds of the sale
	If the directors sell any shares under Article 37, the net proceeds will first be used to pay off the amount which is then payable to the Company. The directors will pay any money left over to the former shareholder, or to any person who would otherwise be automatically entitled to the shares by law provided that the Company’s lien will also apply to any money left over, to cover any money still due to the Company which is not yet payable: the Company has the same rights over this money as it had over the shares immediately before they were sold. If the shares are in certificated form, the Company need not pay over anything left under this Article until the certificate representing the shares sold has been delivered to the Company for cancellation.
39	Evidence of forfeiture or enforcement of lien
	A director, or the Secretary, can make a statutory declaration declaring:

• that he is a director or the Secretary of the Company;

• that a share has been properly forfeited or sold to satisfy a lien under the Articles; and

• when the share was forfeited or sold.

This will be conclusive evidence of these facts which cannot be disputed as against all persons claiming to be entitled to the share.

CHANGING SHARE RIGHTS

40	Changing the special rights of shares
40.1	If the Company’s share capital is split into different classes of share, and if the Companies Acts allow this and unless the Articles or rights attached to any class of share say otherwise, the special rights which are attached to any of these classes of share can be varied or abrogated if this is approved by a special resolution in accordance with Articles 40 and 41. This must be passed at a separate meeting of the holders of the relevant class of shares. This is called a class meeting. Alternatively, the holders of at least three-quarters of the existing shares of the relevant class (by nominal value) can give their consent in writing.
40.2	The special rights of a class of shares can be varied or abrogated while the Company is a going concern, or while the Company is being wound up, or if winding up is being considered.

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40.3 All the Articles relating to General Meetings apply, with any necessary changes, to a class meeting, but with the following adjustments:

• At least two people who hold (or who act as proxies for) at least one third of the total nominal value of the existing shares of the class are a quorum. However, if this quorum is not present at an adjourned class meeting, one person who holds shares of the class, or his proxy, is a quorum, regardless of the number of shares he holds.

• Anybody who is personally present, or who is represented by a proxy, can demand a poll.

• On a poll, the holders of shares will have one vote for every share of the class which they hold.

40.4	This Article also applies to the variation or abrogation of special rights of shares forming part of a class. Each part of the class which is being treated differently is viewed as a separate class in operating this Article.
41	More about the special rights of shares
	The special rights of shares or of any class of shares are not regarded as varied or abrogated if:

• new shares are created, or issued, which rank equally with or behind those shares or that class of shares in sharing in profits or assets of the Company;

• the Company redeems or buys back its own shares.

But this does not apply if the terms of the shares or class of shares expressly provide otherwise.

TRANSFERRING SHARES

42	Share transfers
42.1	Unless the Articles provide otherwise, any shareholder can transfer some or all of his shares to another person.
42.2	Every transfer of shares in certificated form must be in writing, and either in the usual standard form, or in any other form approved by the directors.
42.3	Transfers of uncertificated shares are to be carried out using a relevant system and must comply with the CREST Regulations.
43	More about transfers of shares in certificated form
43.1	The transfer form for shares in certificated form must be delivered to the Transfer Office (or any other place the directors may decide). The directors may refuse to recognise a transfer unless the transfer form:

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• has with it the share certificate for the shares to be transferred and any other evidence which the directors ask for to prove that the person wishing to make the transfer is entitled to do this;

• is properly stamped (for payment of stamp duty) where this is required;

• is being used to transfer only one class of shares; and

• is in favour of not more than four joint holders.

43.2	However, if a transfer is by a recognised clearing house or its nominee or by a recognised investment exchange, a share certificate is only needed if a certificate has been issued for the shares in question.
43.3	If the share being transferred is a fully paid-up share, a share transfer form must be signed by the person making the transfer. If the transfer is being made by a company, the share transfer form does not need to be under that company’s seal.
43.4	If the share being transferred is not a fully paid-up share a share transfer form must also be signed by the person to whom the share is being transferred. If the transfer is being made to a company, the transfer form does not need to be under that company’s seal.
43.5	The person making a transfer of shares will be treated as continuing to be the shareholder until the name of the person to whom a share is being transferred is put on the Register for that share.
43.6	No fee is payable to the Company for transferring shares or registering changes relating to the ownership of shares.
44	The Company can refuse to register certain transfers
44.1	The directors can refuse to register a transfer of any shares in certificated form which are not fully paid-up. If any of those shares are admitted to the official list maintained by the UK Listing Authority, the directors cannot refuse to register a transfer if this would stop dealings in the shares from taking place on an open and proper basis.
44.2	If the directors decide not to register a transfer of a share, they must notify in writing the person to whom such share was to be transferred and the person intending to transfer such share, of the decision not to register the transfer. Such notice shall give reasons for the decision to refuse registration. This must be done no later than two months after the Company receives either the transfer (in the case of a share in certificated form) or the operator instruction (in the case of a share in uncertificated form).
45	Closing the Register
	The directors can decide to suspend the registration of transfers by closing the Register. This can be for part of a day, a day, or more than a day. Suspension periods can vary between different classes of shares. But the Register cannot be closed for more than 30 days a year. In the case of shares in uncertificated form, the Register must not be closed without the consent of the operator of a relevant system.

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46	Overseas branch registers
	The Company can use all the powers that the Companies Acts give to keep an overseas branch register. The directors can make and change any regulations they decide on relating to this register, as long as the Companies Acts allow this.

PERSONS AUTOMATICALLY ENTITLED TO SHARES BY LAW

47	When a shareholder dies
47.1	When a sole shareholder dies (or a shareholder who is the last survivor of joint shareholders dies), his legal personal representatives will be the only people whom the Company will recognise as being entitled to his shares.
47.2	If a shareholder who is a joint shareholder dies, the remaining joint shareholder or shareholders will be the only people who the Company will recognise as being entitled to his shares.
47.3	This Article does not discharge the estate of any joint shareholder from any liability.
48	Registering personal representatives
	A person who becomes automatically entitled to a share by law can either be registered as the shareholder, or can select some other person to whom the share is to be transferred. The person who is automatically entitled by law must provide any evidence of his entitlement which is reasonably required by the directors.
49	A person who wants to be registered must give notice
	If a person who is automatically entitled to shares by law wants to be registered as a shareholder, he must deliver or send a notice to the Company saying that he has made this decision. He must sign or authenticate this notice in accordance with Article 147, and it must be in the form which the directors require. This notice will be treated as a transfer form and all of the provisions of these Articles about registering transfers of shares apply to it. The directors have the same power to refuse to register the automatically entitled person as they would have had in deciding whether to register a transfer by the person who was previously entitled to the shares.
50	Having another person registered
	If a person who is automatically entitled to a share by law wants the share to be transferred to another person, he must do the following:

• for a share in certificated form sign a transfer form to the person he has selected; and

• for a share in uncertificated form transfer such share using a relevant system.

The directors have the same power to refuse to register the person selected as they would have had in deciding whether to register a transfer by the person who was previously entitled to the shares.

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51	The rights of people automatically entitled to shares by law
51.1	A person who is automatically entitled to a share by law is entitled to any dividends or other money relating to the share, even though he is not registered as the holder of that share. However, if the directors have served a notice on any such person requesting him to choose between registering himself or transferring the share, and such person does not comply with the notice within 90 days, the directors can withhold the dividend and other money until the notice has been properly complied with.
51.2	Unless and until he is registered as a shareholder the person automatically entitled to a share by law is not entitled:

• to receive notices of General Meetings, or to attend or vote at these meetings; and

• (subject to Article 51.1) to any of the other rights and benefits of being a shareholder,

unless the directors decide to allow this.

SHAREHOLDERS WHO CANNOT BE TRACED

52	Shareholder who cannot be traced
52.1	The Company can sell any shares at the best price reasonably obtainable if:

• during the previous 12 years, at least three dividends on the shares have been payable and none has been claimed;

• after this 12-year period, the Company announces that it intends to sell the shares by placing an advertisement in a United Kingdom national newspaper and in a newspaper appearing in the area which includes the address held by the Company for serving notices relating to the shares; and

• during this 12-year period, and for three months after the last advertisement appears in the newspapers, the Company has received no indication as to the whereabouts or existence of the shareholder or any person who is automatically entitled to the shares by law.

52.2	To sell any shares in this way, the Company can authorise any person to transfer the shares. This transfer will be just as effective as if it had been made by the registered holder of the shares, or by a person who is automatically entitled to the shares by law. The ownership of the person to whom the shares are transferred will not be affected even if the sale is irregular or invalid in any way.
52.3	The net sale proceeds belong to the Company until claimed under this Article, but it must pay these to the shareholder who could not be traced, or to the person who is automatically entitled to the shares by law, if that shareholder, or that other person, asks for it.
52.4	The Company must record the name of that shareholder, or the person who was automatically entitled to the shares by law, as a creditor for this money in its accounts. The money is not held on trust, and no interest is payable on the money. The Company can keep any money which it has earned on the net sale proceeds. The Company can use the money for its business, or it can invest the money in any way that the directors decide. But

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	the money cannot be invested in the Company’s shares, or in the shares of any holding company of the Company.
52.5	In the case of uncertificated shares, this Article is subject to any restrictions which apply under the CREST Regulations.

GENERAL MEETINGS

53	The Annual General Meeting
	Except as provided in the Companies Acts, the Company must hold an Annual General Meeting once in each period of six months beginning with the day following the Company’s accounting reference date, in addition to any other General Meetings which are held in the year. The notice calling the Annual General Meeting must say that the meeting is the Annual General Meeting. The Annual General Meeting must be held in accordance with the Companies Acts. The directors must decide when and where to hold the Annual General Meeting.
54	Calling a General Meeting
	The directors can decide to call a General Meeting at any time. General Meetings must also be called promptly in response to a requisition by shareholders under the Companies Acts. If a General Meeting is not called in response to such a request by shareholders, it can be called by the shareholders who requested the General Meeting in accordance with the Companies Acts. Any General Meeting requisitioned in this way by shareholders shall be called in the same manner as nearly as possible to that in which General Meetings are called by the directors. The directors must decide when and where to hold a General Meeting.
55	Notice of General Meetings
55.1	At least 21 clear days’ notice in writing must be given for every Annual General Meeting. For every other General Meeting at least 14 clear days’ notice in writing must be given.
	However, a shorter period of notice can be given:

• for an Annual General Meeting, if all the shareholders entitled to attend and vote agree; or

• for any other General Meeting, if a majority of the shareholders entitled to attend and vote agree and those shareholders hold at least 95 per cent by nominal value of the shares which can be voted at the meeting.

55.2 Any notice of General Meeting must state:

• where the General Meeting is to be held;

• the date and time of the General Meeting;

• the general nature of the business of the General Meeting;

• if any resolution will be proposed as a special resolution; and

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• in a reasonably prominent place that a shareholder entitled to attend and vote can appoint one or more proxies (who need not be shareholders) to exercise all or any of his rights to attend, speak and vote instead of that shareholder.

55.3

Notices of General Meetings must be given to the shareholders, except in cases where the Articles or the rights attached to the shares state that the holders are not entitled to receive them from the Company. Notice must also be given to the Company’s auditors. The day when the notice is served (see Article 144), or is treated as served, and the day of the General Meeting do not count towards the period of notice. In relation to any class of shares some of which are in uncertificated form the Company can decide that only people who are entered on the Register at the close of business on a particular day are entitled to receive such a notice. That day shall be a day chosen by the Company and falling not more than 21 days before the notice is sent.

55.4

Unless the Companies Act 2006 does not require it, the Company must, on the requisition in writing of such number of shareholders as is specified in the Companies Act 2006, send to shareholders:

• entitled to receive notice of the next Annual General Meeting notice of any resolution which may properly be proposed and is intended to be proposed at that meeting; and

• entitled to receive notice of any General Meeting any statement of not more than one thousand words with respect to the matter referred to in any proposed resolution or the business to be dealt with at that meeting.

Notice of any such resolution shall be given, and any such statement shall be circulated, to shareholders of the Company entitled to have notice of the General Meeting sent to them. Subject to the Companies Act 2006, the cost of this, unless the Company decides otherwise, must be borne by the requisitionists.

PROCEEDINGS AT GENERAL MEETINGS

56	The chairman of a General Meeting
56.1	The Chairman of the directors will be the chairman at every General Meeting, if he is present and willing to take the chair.
56.2	If the Company does not have a Chairman, or if the Chairman is not present and willing to chair the General Meeting, a Deputy Chairman will chair the meeting if he is present and willing to take the chair.
56.3	Where there is more than one Deputy Chairman at a General Meeting and there is more than one present, and the Chairman is not there, the Deputy Chairman to take the chair will be the longest serving Deputy Chairman present.
56.4	If the Company does not have a Chairman or a Deputy Chairman, or if neither the Chairman or any Deputy Chairman are present and willing to chair the General Meeting, after waiting ten minutes from the time that a meeting is due to start, the directors who are present will choose one of themselves to act as chairman. If there is only one director present, he will be chairman if he is willing.

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56.5	If there is no director present and willing to be chairman, then a shareholder may be elected to be the chairman by a resolution of the Company passed at the General Meeting.
56.6	To avoid any doubt, nothing in these Articles restricts or excludes any of the powers or rights of a chairman of a meeting which are given by the general law.
57	Security, and other arrangements at General Meetings
	Either the chairman of a General Meeting, or the Secretary, can take any action he considers necessary (including adjourning the General Meeting) for:

• the safety of people attending a General Meeting (for example, if there is not enough room for the shareholders and proxies who want to attend the General Meeting); or

• proper and orderly conduct at a General Meeting (for example, where the behaviour of someone present could prevent the business of the General Meeting being carried out in an orderly way); or

• any other reason to make sure that the business of the General Meeting can be properly carried out.

	Where the chairman of a General Meeting or the Secretary decides to adjourn a General Meeting in this way, he can adjourn the General Meeting to a time, date and place he decides (or indefinitely). He does not need the agreement of those present at the General Meeting to do this.
58	Overflow meeting rooms
	The directors can arrange for any people who they consider cannot be seated in the main meeting room, where the chairman will be, to attend and take part in a General Meeting in an overflow room or rooms. Any overflow room must have a live video and two way sound link with the main room for the General Meeting, where the chairman will be. The video and sound link must enable those in all the rooms to see and hear what is going on in the other rooms. The notice of the General Meeting does not have to give details of any arrangements under this Article. The directors can decide on how to divide people between the main room and any overflow room. If any overflow room is used, the General Meeting will be treated as being held, and taking place, in the main room.
59	The quorum needed for General Meetings
	Before a General Meeting starts to conduct business, there must be a quorum present. If there is not, the meeting cannot carry out any business. Unless other Articles say otherwise, a quorum for all purposes is two people who are entitled to vote. They can be personally present or proxies for shareholders or duly authorised company representatives or a combination of shareholders, duly authorised company representatives for companies and proxies.

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60	The procedure if there is no quorum
60.1	This Article 60 applies if a quorum is not present either within 30 minutes of the time fixed for a General Meeting to start or within any longer period (being no longer than an hour from the time fixed for the General Meeting to start) on which the chairman may decide and if during the meeting a quorum ceases to be present. If the General Meeting was called by shareholders it is cancelled. Any other General Meeting is adjourned to the same day in the next week (or if that day is a public holiday, then the next day which is not a Saturday, Sunday or public holiday) at the same time and place or to any other day and time and place which the directors decide.
60.2	If a quorum is not present within 15 minutes of the time fixed for the start of the adjourned meeting, the adjourned General Meeting shall be cancelled.
61	Adjourning meetings
61.1	Subject to Article 57, the chairman of a General Meeting can adjourn a meeting which has a quorum present, if this is agreed by those present at the General Meeting. This can be to a time, date and place proposed by the chairman or may be an indefinite adjournment. The chairman must adjourn the General Meeting if the General Meeting directs him to. In these circumstances the General Meeting will decide how long the adjournment will be, and where it will adjourn to. If a General Meeting is adjourned indefinitely, the directors will fix the time, date and place of the adjourned General Meeting.
61.2	General Meetings can be adjourned more than once. But if a General Meeting is adjourned for more than 30 days or indefinitely, at least seven days’ notice must be given of the adjourned General Meeting in the same way as was required for the original General Meeting. If a General Meeting is adjourned for less than 30 days, there is no need to give notice of the adjourned General Meeting, or about the business to be considered there.
61.3	An adjourned General Meeting can only deal with business that could have been dealt with at the original General Meeting before it was adjourned.
62	Amending resolutions
	If the chairman of a General Meeting, acting in good faith, rules an amendment to a resolution out of order, any error in that ruling will not affect the validity of a vote on the original resolution.

VOTING PROCEDURES

63	How votes are taken
63.1	All Substantive Resolutions will only be decided on a poll. All Procedural Resolutions will be decided by a show of hands, unless a poll is demanded before the resolution is put to the vote on a show of hands or on the result of the show of hands being declared by the chairman. A poll can be demanded by:

• the chairman of the General Meeting;

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• at least two shareholders at the General Meeting (including proxies of shareholders entitled to vote) who are entitled to vote;

• one or more shareholders at the General Meeting who are entitled to vote (including proxies of shareholders entitled to vote) and who have, between them, at least 10 per cent of the total votes of all shareholders who have the right to vote at the General Meeting; or

• one or more shareholders who have shares which allow them to vote at the General Meeting (including proxies of shareholders entitled to vote), where the total amount which has been paid up on their shares is at least 10 per cent of the total sum paid up on all shares which give the right to vote at the General Meeting.

63.2	A demand for a poll can be withdrawn if the chairman agrees to this. If a poll is demanded, and this demand is then withdrawn, any declaration by the chairman of the result of a vote on that resolution by a show of hands, which was made before the poll was demanded, will stand.
64	How a poll is taken
64.1	If a poll is demanded or held in the way allowed by the Articles, the chairman of the General Meeting can decide where, when and how it will be carried out. The result is treated as the decision of the General Meeting where the poll was demanded, even if the poll is carried out after the General Meeting.
64.2	The chairman can:

• decide that a ballot, voting papers or tickets will be used;

• appoint one or more scrutineers (who need not be shareholders);

• decide to adjourn the General Meeting to such day, time and place as he decides for the result of the poll to be declared.

64.3	If a poll is called, a shareholder can vote either personally or by his proxy. If a shareholder votes on a poll, he does not have to use all of his votes or cast all his votes in the same way.
65	Where there cannot be a poll
	Notwithstanding any other provision in these Articles, a poll is not allowed on a vote to elect a chairman of a General Meeting, nor is a poll allowed on a vote to adjourn a General Meeting, unless the chairman of the General Meeting demands a poll.
66	A General Meeting continues after a poll is demanded
	A demand for a poll on a particular matter does not stop a General Meeting from continuing and dealing with matters other than the question on which the poll was demanded.
67	Timing of a poll
	A poll on a resolution to adjourn the General Meeting must be taken immediately at the General Meeting. Any other poll can either be taken immediately at the General Meeting or

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	within 30 days from the date it was demanded and at a time and place decided on by the chairman. No notice is required for a poll which is not taken immediately if the time and place at which it is to be taken are announced at the General Meeting at which it is demanded. In any other case, at least seven clear days’ notice must be given specifying the time and place at which the poll is to be taken.
68	The chairman’s casting vote
	Where voting has taken place on an ordinary resolution and the votes are equal, either on a show of hands or on a poll, the chairman of the General Meeting is entitled to a further, casting vote. This is in addition to any other votes which the chairman may have as a shareholder, or as a proxy.
69	The effect of a declaration by the chairman
	On a vote on a resolution at a General Meeting on a show of hands, a declaration by the chairman that the resolution:

• has or has not been passed; or

• has or has not been passed with a particular majority,

is conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. An entry in respect of such a declaration in minutes of the meeting recorded in accordance with the Companies Acts is also conclusive evidence of that fact without such proof. This Article does not have effect if a poll is demanded in respect of the resolution (and the demand is not subsequently withdrawn).

VOTING RIGHTS

70	The votes of shareholders
	At a General Meeting:

• on a show of hands every shareholder (who is entitled to be present and to vote) who is present in person or by proxy (who has been duly appointed) or, being a company, by a company representative shall have one vote; and

• on a poll, every shareholder (who is entitled to be present and to vote) who is present in person or by proxy (who has been duly appointed) or, being a company, by a company representative shall have one vote for every share which he holds.

	This is subject to any special rights or restrictions which are given to any class of shares by, or in accordance with, the Articles.
71	Shareholders who owe money to the Company
	Unless the Articles provide otherwise, the only people who are entitled to attend and/or vote at General Meetings or to exercise any other right conferred by being a shareholder in relation to General Meetings, are shareholders who have paid the Company all calls,

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	and all other sums, relating to their shares which are due at the time of the General Meeting. This applies both to attending the General Meeting personally and to appointing a proxy.
72	Suspension of rights on non-disclosure of interest
72.1	This Article applies if any shareholder, or any person appearing to be interested in shares (within the meaning of Part 22 of the Companies Act 2006) held by that shareholder, has been properly served with a notice under Section 793 of the Companies Act 2006, requiring information about interests in shares, and has failed for a period of 14 days from the date of the notice to supply to the Company the information required by that notice. Then (subject to the provisions of the Companies Acts and this Article, and unless the directors otherwise decide) the shareholder is not (for so long as the failure continues) entitled to attend or vote either personally or by proxy at a shareholders’ meeting or to exercise any other right in relation to a shareholders’ meeting as holder of:

• the shares in relation to which the default occurred (called default shares);

• any further shares which are issued in respect of default shares; and

• any other shares held by the shareholder holding the default shares.

72.2 Any person who acquires shares subject to restrictions under Article 72.1 is subject to the same restrictions, unless:

• the transfer was an approved transfer (see Article 72.11); or

• the transfer was by a shareholder who was not himself in default in supplying the information required by the notice under Article 72.1 and a certificate in accordance with Article 72.3 is provided.

72.3 Where the default shares represent 0.25 per cent or more of the existing shares of a class, the directors can in their absolute discretion by notice in writing (a direction notice) to the shareholder direct that:

• any dividend or part of a dividend or other money which would otherwise be payable on the default shares shall be retained by the Company (without any liability to pay interest when that dividend or money is finally paid to the shareholder);

• the shareholder will not be allowed to choose to receive shares in place of dividends in accordance with Article 135; and/or

• subject to Article 72.4, no transfer of any of the shares held by the shareholder will be registered unless:

• either the transfer is an approved transfer (see Article 72.11);

• or the shareholder is not himself in default as regards supplying the information required; and (in this case)

• the transfer is of part only of his holding; and

• when presented for registration, the transfer is accompanied by a certificate by the shareholder. This certificate must be in a form satisfactory to the directors and state that after due and careful

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enquiry the shareholder is satisfied that none of the shares included in the transfer are default shares.

72.4	Any direction notice can treat shares of a shareholder in certificated and uncertificated form as separate shareholdings and either apply only to shares in certificated form or to shares in uncertificated form or apply differently to shares in certificated and uncertificated form. In the case of shares in uncertificated form the directors can only use their discretion to prevent a transfer if this is allowed by the CREST Regulations.
72.5	The Company must send a copy of the direction notice to each other person who appears to be interested in the shares covered by the notice, but if it fails to do so, this does not invalidate the direction notice.
72.6	A direction notice has the effect which it states while the default resulting in the notice continues. It then ceases to apply when the directors decide (which they must do within one week of the default being cured). The Company must give the shareholder immediate notice in writing of the directors’ decision.
72.7	A direction notice also ceases to apply to any shares which are transferred by a shareholder in a transfer permitted under Article 72.3 even where a direction notice restricts transfers.
72.8	Where a person who appears to be interested in shares has been served with a notice under Section 793 of the Companies Act 2006 and the shares in which he appears to be interested are held by an Approved Depositary, this Article shall be treated as applying only to the shares which are held by the Approved Depositary in which that person appears to be interested and not (so far as that person’s apparent interest is concerned) to any other shares held by the Approved Depositary.
72.9	Where the shareholder on which a notice under Section 793 of the Companies Act 2006 is served is an Approved Depositary, the obligations of the Approved Depositary as a shareholder will be limited to disclosing to the Company any information relating to any person who appears to be interested in the shares held by it which has been recorded by it in accordance with the arrangement under which it was appointed as an Approved Depositary.
72.10	For the purposes of this Article a person is treated as appearing to be interested in any shares if the shareholder holding those shares has been served with a notice under Section 793 of the Companies Act 2006 and:

• the shareholder has named that person as being so interested; or

• (after taking into account the response of the shareholder to the notice and any other relevant information) the Company knows or reasonably believes that the person in question is or may be interested in the shares.

72.11 For the purposes of this Article a transfer of shares is an approved transfer if:

• it is a transfer of shares to an offeror under an acceptance of a takeover offer; or

• the directors are satisfied that the transfer is made in connection with a sale in good faith of the whole of the beneficial ownership of the shares to a person unconnected with the shareholder or with any person appearing to be interested in the shares. This includes such a sale made through a recognised investment

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exchange or any other stock exchange outside the United Kingdom on which the Company’s shares are normally traded. For this purpose any associate (as that word is defined in Section 435 of the Insolvency Act 1986) is included amongst the people who are connected with the shareholder or any person appearing to be interested in the shares.

72.12	Where a person who has an interest in American Depositary Shares receives a notice under this Article 72, that person is considered for the purposes of this Article 72 to have an interest in the number of shares represented by those American Depositary Shares which is specified in the notice and not in the remainder of the shares held by the ADR Depositary.
72.13	Where the ADR Depositary receives a notice under this Article 72, the ADR Depositary shall only be required to supply information relating to any person who has an interest in the shares held by the ADR Depositary which has been recorded by the ADR Depositary under the arrangements made with the Company (including in the Proxy Register maintained under Article 164) when it was appointed as the ADR Depositary.
72.14	This Article does not restrict in any way the provisions of the Companies Acts which apply to failures to comply with notices under Section 793 of that Companies Act 2006.
73	Votes of shareholders who are of unsound mind
73.1	This Article 73 applies where a court which claims jurisdiction to protect people who are unable to manage their own affairs has made an order detaining a shareholder or appointing a person to manage his property or affairs.
73.2	The receiver or other person appointed by the court order to act for the shareholder can vote for the shareholder on a show of hands or on a poll at General Meetings. However, this Article only applies if the receiver or other person appointed by the court delivers to the Transfer Office (or the place or address stated in the notice for the delivery of the proxy form) at least 48 hours before the relevant General Meeting (or adjourned General Meeting) such evidence as the directors may require of such person’s authority to act.
73.3	If the receiver or other person appointed by the court fails to deliver the appropriate evidence to the Transfer Office (or the place or address stated in the proxy form) in accordance with Article 73.2, the right to vote shall not be exercisable.
74	The votes of joint holders
	Where a share is held by joint shareholders any one joint shareholder can vote at any General Meeting (either personally or by proxy) in respect of such share as if he were the only shareholder. If more than one of the joint shareholders votes (either personally or by proxy), the only vote which will count is the vote of that one of them who is listed first on the Register for the share.

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PROXIES

75	Appointment of proxies
75.1	Any shareholder may appoint a proxy or (subject to Article 75.3) proxies to exercise all or any of his rights to attend or speak and vote at a General Meeting of the Company. A proxy need not be a shareholder.
75.2	Proxies may also be appointed to act at General Meetings in the circumstances, and in the manner, provided for in Articles 159.2, 163, 165, 166 and 169, and Articles 75 to 79 should be read subject to their terms.
75.3	A shareholder may appoint more than one proxy in relation to a General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him or (as the case may be) a different £10, or multiple of £10, of stock held by him.
76	Completing proxy forms
76.1	A proxy form:

• must be in writing; and

• can be in any form which is commonly used, or in any other form which the directors approve.

76.2 A proxy form given by:

• an individual must be signed by the shareholder appointing the proxy, or by an agent who has been properly appointed in writing or authenticated in accordance with Article 147; or

• a company must be sealed with the company’s seal or signed by an officer who is authorised to act on behalf of the company or authenticated in accordance with Article 147.

	Unless the contrary is shown, the directors are entitled to assume that where a proxy form purports to have been signed or authenticated in accordance with Article 147 by an officer on behalf of a company that such officer was duly authorised by such company without requiring any further evidence. Signatures and authentications need not be witnessed.
76.3	All notices convening General Meetings which are sent to shareholders entitled to vote at the General Meeting, must, at the expense of the Company, be accompanied by a proxy form. The proxy form must make provision for three-way voting on all resolutions intended to be proposed, other than resolutions which are merely procedural.
76.4	The accidental omission to send a proxy form to a shareholder entitled to it (or non receipt by him of the proxy form) will not invalidate any resolution passed or proceedings at the General Meeting to which the proxy form relates.

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77	Delivering proxy forms
77.1	The appointment of a proxy (together with any supporting documentation required under this Article 77 or otherwise) must be received at the address or one of the addresses (if any) specified for that purpose in, or by way of note to, or in any document accompanying, the notice convening the meeting (or if no address is so specified, at the Transfer Office):

• in the case of a meeting or adjourned meeting, not less than 48 hours before the commencement of the meeting or adjourned meeting to which it relates;

• in the case of a poll taken following the conclusion of a meeting or adjourned meeting, but not more than 48 hours after the poll was demanded, not less than 48 hours before the commencement of the meeting or adjourned meeting at which the poll was demanded; and

• in the case of a poll taken more than 48 hours after it was demanded, not less than 24 hours before the time appointed for the taking of the poll,

	and in default shall not be treated as valid.
77.2	The directors may at their discretion determine that, in calculating the periods mentioned in Article 77.1, no account shall be taken of any part of any day that is not a working day (within the meaning of Section 1173 of the Companies Act 2006).
77.3	Directors can decide to accept proxies delivered by electronic means or by means of a website, subject to any limitations, restrictions or conditions they decide to apply.
77.4	If a proxy form is signed or authenticated in accordance with Article 147 by an agent, the power of attorney or other authority relied on to sign or authenticate it, or a copy which has been certified by a notary, or certified in some other way specified by the directors, must (if required by the Company) be delivered with the proxy form in accordance with the instructions for delivery of proxy forms which are set out in the notice of General Meeting or on the proxy form, unless the power of attorney or other form of authority has already been registered with the Company.
77.5	If this Article 77 is not complied with, the proxy will not be able to act for the person who appointed him.
77.6	A proxy form delivered by an Approved Depositary except in respect of a person appointed in accordance with Articles 190 and 191 may be delivered to the appropriate place or address referred to in Article 77.1 by electronic means or in any other way the directors decide.
77.7	If a proxy form which relates to several General Meetings has been properly delivered for one General Meeting or adjourned General Meeting, it does not need to be delivered again for any later General Meeting which the proxy form covers.
77.8	Unless the proxy form says otherwise, it will be valid at an adjourned General Meeting as well as for the original General Meeting to which it relates.
77.9	A shareholder can attend and vote at a General Meeting on a show of hands or on a poll even if he has appointed a proxy to attend and vote at that meeting. However, if he votes in person on a resolution, then as regards that resolution his appointment of a proxy will not be valid.

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78	Cancellation of proxy’s authority
78.1	Neither the death or insanity of a shareholder who has appointed a proxy, nor the revocation or termination by a shareholder of the appointment of a proxy (or of the authority under which the appointment was made), shall invalidate the proxy or the exercise of any of the rights of the proxy thereunder, unless notice of such death, insanity, revocation or termination shall have been received by the Company in accordance with Article 78.2.
78.2	Any such notice of death, insanity, revocation or termination must be received at the address or one of the addresses (if any) specified for receipt of proxies in, or by way of note to, or in any document accompanying, the notice convening the meeting to which the appointment of the proxy relates (or if no address is so specified, at the Transfer Office):

• in the case of a meeting or adjourned meeting, not less than one hour before the commencement of the meeting or adjourned meeting to which the proxy appointment relates;

• in the case of a poll taken following the conclusion of a meeting or adjourned meeting, but not more than 48 hours after it was demanded, not less than one hour before the commencement of the meeting or adjourned meeting at which the poll was demanded; or

• in the case of a poll taken more than 48 hours after it was demanded, not less than one hour before the time appointed for the taking of the poll.

79	Authority of proxies
79.1	A proxy shall have the right to exercise all or any of the rights of his appointor, or (where more than one proxy is appointed) all or any of the rights attached to the shares in respect of which he is appointed the proxy to attend, and to speak and vote, at a General Meeting of the Company.
79.2	Unless his appointment provides otherwise, a proxy may vote or abstain at his discretion on any resolution put to the vote.
80	Representatives of companies
	Subject to the Companies Acts, a company which is a shareholder can authorise any person or persons to act as its representative or representatives at any General Meeting which it is entitled to attend. Such person or persons are each called a company representative. The directors of that company must pass a resolution to appoint a company representative. If the governing body of that company is not a board of directors, the resolution can be passed by its governing body.
81	Challenging votes
	Any objection to the right of any person to vote or the way in which the votes have been counted must be made at the General Meeting (or adjourned General Meeting) at which the vote is cast. If a vote is not disallowed at the General Meeting, it is valid for all purposes. Any such objection must be raised with the chairman of the General Meeting and will only change the decision of the General Meeting on any resolution if the chairman

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of the General Meeting decides that the vote cast may have affected the decision of the General Meeting. His decision on matters referred to him under this Article is final.

DIRECTORS

82	The number of directors
	There must be at least three directors (other than alternate directors), but the shareholders can vary the number of directors by passing an ordinary resolution.
83	Qualification to be a director
	A director need not be a shareholder, but a director who is not a shareholder is entitled to attend and speak at shareholders’ meetings.
84	Directors’ fees and expenses
84.1	Each of the directors shall be paid a fee for his services. The directors can decide on the amount, timing and manner of payment of directors’ fees, but the total of the fees paid to all of the directors (excluding amounts paid as special pay under Article 85, amounts paid as expenses under Article 86 and any payments under Article 87) must not exceed:

• £1.5 million a year; or

• any higher sum decided on by an ordinary resolution at a General Meeting.

This remuneration shall accrue from day to day.

84.2	Unless an ordinary resolution is passed which provides otherwise, the fees will be divided between some or all of the directors in the way that they decide. If they fail to decide, the fees will be shared equally by the directors, except that any director holding office as a director for only part of the period covered by the fee is only entitled to a pro rata share covering that broken period.
85	Special pay
85.1	The directors can award special pay if any director performs extra or special services of any kind including:

• holding any executive post;

• acting as chairman or deputy chairman (whether or not this office is executive or non-executive);

• travelling or staying outside his main residence for any business or purposes of the Company; and

• serving on any committee of the directors.

85.2 Special pay can take the form of salary, commission or other benefits or expenses or more than one of such forms or can be paid in some other way. This is decided on by the directors and may be a fixed sum or percentage of profits or otherwise. Such special pay

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	can be either in addition to or instead of any other fees, expenses and other benefits a director may be entitled to receive.
86	Directors’ expenses
	In addition to any fees and expenses paid under Articles 84 and 85, the Company will repay to a director all expenses properly incurred in:

• attending and returning from shareholders’ meetings;

• attending and returning from directors’ meetings;

• attending and returning from meetings of committees of the directors; or

• in or with a view to the performance of their duties.

87	Directors’ pensions and other benefits
87.1	The directors may pay or provide:

• pensions;

• annual payments;

• gratuities; or

• other allowances or benefits

	to any people who are, or who were, directors who had a salary or place of profit with the Company or with any company which is or has been a subsidiary of the Company or a predecessor in business of the Company or any such subsidiary. The directors can decide to extend these arrangements to any member of his family (including a spouse and a former spouse) or to any person who was or is dependent on him. The directors can also decide to contribute (before as well as after he ceases to receive a salary or occupy a place of profit) to any scheme or fund or to pay premiums to a third party for these purposes.
87.2	No director or former director is accountable to the Company or its shareholders for a benefit of any kind given in accordance with this Article. The receipt of a benefit of any kind given in accordance with this Article does not prevent a person from being or becoming a director.
88	Appointing directors to various posts
88.1	The directors can appoint any director as chairman, or a deputy chairman, or to any executive position on which they decide. So far as the Companies Acts allow, they can decide on how long these appointments will be for, and on their terms. Subject to the terms of any contract with the Company, they can also vary or end these appointments.
88.2	A director will automatically stop being chairman, deputy chairman, managing director, deputy managing director, joint managing director or assistant managing director if he is no longer a director. Other executive appointments will only stop if the contract or resolution appointing the director to a post says so. If a director’s appointment ends because of this

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Article, this does not prejudice any claim for breach of contract against the Company which may otherwise apply.

88.3

The directors can delegate to a director appointed to an executive post any of the powers which they jointly have as directors. These powers can be delegated on such terms and conditions as decided by the directors either in parallel with, or in place of, the powers of the directors acting as a board. The directors can change the basis on which these powers are given or withdraw them from the executive.

CHANGING DIRECTORS

89	Retiring directors
	At each Annual General Meeting all those directors who were elected or last re-elected at or before the Annual General Meeting held in the third calendar year before the current year shall automatically retire.
90	Eligibility for re-election
	A retiring director is eligible for re-election.
91	Re-electing a director who is retiring
91.1	At a General Meeting at which a director retires (whether at an Annual General Meeting or otherwise), he may be re-elected (as long as the director has not told the Company in writing that he does not wish to be re-elected) if the shareholders pass an ordinary resolution to re-elect him.
91.2	A director retiring at a General Meeting retires at the end of that meeting (or adjourned meeting). Where a retiring director is re-elected he continues as a director without a break.
92	Election of two or more directors
	A single resolution for the election of two or more directors is void unless the shareholders first approve the putting of a resolution in this form by an earlier procedural vote taken at the General Meeting, with no votes cast against.
93	People who can be directors
93.1	Only the following people can be elected as directors at a General Meeting:

• A director who is retiring at the General Meeting;

• A person who is recommended by the directors; and

• A person who has been proposed by a shareholder who is entitled to attend and vote at the General Meeting.

93.2 A shareholder proposing a director in accordance with Article 93.1 must deliver to the Registered Office at least seven days before the General Meeting, but not more than 42 days before the meeting (this period includes the date on which the notice is given):

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• a letter stating that he intends to propose another person for election as director, signed or authenticated in accordance with Article 147; and

• confirmation in writing from the person to be proposed that he is willing to be elected, signed or authenticated in accordance with Article 147 by such person;.

94	The power to fill vacancies and appoint extra directors
94.1	The directors can appoint any person as an extra director or to fill a casual vacancy. Any director appointed in this way automatically retires at the next General Meeting after his appointment. At this General Meeting he can be elected by the shareholders as a director.
94.2	At a General Meeting the shareholders can also pass an ordinary resolution to fill a casual vacancy or to appoint an extra director.
94.3	Extra directors can only be appointed under this Article up to the limit (if any) on the total number of directors under the Articles (or any variation of the limit approved by the shareholders in accordance with the Articles).
95	Removing and appointing directors by an ordinary resolution
95.1	The shareholders can pass an ordinary resolution to remove a director, even though his time in office has not ended. This applies despite anything else in the Articles, or in any agreement between him and the Company. Special notice of the ordinary resolution must be given to the Company as required by the Companies Acts. But if a director is removed in this way, it will not affect any claim which he may have for damages for breach of any contract of service between him and the Company.
95.2	Subject to Article 93, the shareholders can pass an ordinary resolution to elect a person to replace a director who has been removed in the way described in Article 95.1. If no director is appointed under this Article, the vacancy can be filled under Article 94.
95.3	Any person appointed under Article 95.2 will be treated, for the purpose of determining the time at which he is to retire, as if he had become a director on the day on which the director he replaced was last elected.
96	When directors are disqualified
96.1	Any director automatically ceases to be a director in any of the following circumstances if:

• a bankruptcy order is made against him;

• he makes any arrangement or composition with his creditors or applies for an interim order under Section 253 of the Insolvency Act 1986 in connection with a voluntary arrangement under that Act;

• a court which claims jurisdiction to protect people who are unable to manage their own affairs has made an order detaining him or appointing a person to manage his property or affairs;

• he has missed directors’ meetings for a continuous period of six months, without permission from the directors, and the directors pass a resolution removing him from office;

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• he is prohibited from being a director by law or any power conferred on the directors or shareholders under these Articles;

• except where his contract of service prevents him from resigning, he:

(i)	delivers to the Company a resignation notice in writing, signed or authenticated in accordance with Article 147 by him or on his behalf; or
(ii)	offers in writing to resign and the directors pass a resolution accepting the offer;

• all the other directors serve a notice in writing upon him requiring him to resign. He will cease to be a director when the notice is served on him. Such a notice can consist of several documents in the same form signed or authenticated in accordance with Article 147 by one or more directors.

96.2 When a director stops being a director for any reason, he will also automatically cease to be a member of any committee. Removal from office will be without prejudice to any claim which he or the Company might bring in relation to any contract of service between him and the Company.

DIRECTORS’ MEETINGS

97	Directors’ meetings
	The directors can decide when and where to have directors’ meetings and how they shall be conducted, and on the quorum. They can also adjourn their meetings.
98	Who can call directors’ meetings
	A directors’ meeting can be called by any director. The Secretary must also call a directors’ meeting if a director asks him to.
99	How directors’ meetings are called
	Directors’ meetings are called by giving notice to all the directors. This notice may be given to a director personally, by word of mouth, by notice in writing (sent to him at his last known address) or by electronic means (sent to him at his last known electronic address or number). Any director can waive notice of any directors’ meeting, including one which has already taken place.
100	Quorum
100.1	If no other quorum is fixed by the directors, three directors are a quorum. A directors’ meeting at which a quorum is present can exercise all the powers, authorities and discretions of the directors whether by or under these Articles or exercisable by the directors generally.
100.2	A person who holds office only as an alternate director shall, if his appointor is not present, be counted in the quorum.

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100.3	A director who ceases to be a director at a directors’ meeting can continue to be present and act as a director and be counted in the quorum until the end of that meeting if no other director objects and a quorum would not otherwise be present.
101	The Chairman of directors’ meetings
101.1	The directors can elect any director as Chairman or as one or more Deputy Chairmen for such periods as the directors decide. If the Chairman is at a directors’ meeting, he will chair it. In his absence, the chair will be taken by a Deputy Chairman, if one is present. If there is no Chairman or Deputy Chairman present within five minutes of the time when the directors’ meeting is due to start, the directors who are present can choose which one of them will be the Chairman of the directors’ meeting.
101.2	Where there is more than one Deputy Chairman present at a meeting, and the Chairman is not there, the Deputy Chairman to take the chair will be the longest serving Deputy Chairman present.
102	Voting at directors’ meetings
	Matters for decision which arise at a directors’ meeting will be decided by a majority vote. The chairman of the meeting will not have a second, casting vote.
103	Directors can act even if there are vacancies
103.1	The remaining directors can continue to act even if one or more of them ceases to be a director. But if the number of directors falls below the minimum which applies under Article 82 (including any variation of that minimum approved by an ordinary resolution of shareholders), the remaining director(s) can only:

• either appoint further directors to make up the shortfall; or

• call a General Meeting.

103.2	If no director or directors are willing or able to act under this Article, any two shareholders can call a General Meeting to appoint extra directors.
104	Directors’ meetings by video conference and telephone
104.1	Any or all of the directors, or members of a committee, can take part in a directors’ meeting of the directors or of a committee by way of a video conference or conference telephone, or similar equipment, designed to allow everybody to take part in the directors’ meeting.
104.2	Taking part in this way will be counted as being present at the directors’ meeting. A directors’ meeting which takes place by way of video conference, conference telephone or similar equipment will be treated as taking place where most of the participants are. If there is no largest group, directors’ meetings will be treated as taking place where the Chairman is.
104.3	A directors’ meeting held in the way described in Article 104.1 will be valid as long as in one single place, or in places connected by way of video conference, telephone conference, or similar equipment, a quorum is present.

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105	Director’s written resolutions
105.1	A directors’ written resolution is adopted when all the directors entitled to vote on such a resolution have signed one or more copies of it, or otherwise indicated their agreement to it in writing.
105.2	A directors’ written resolution is not adopted if the number of directors who have signed it or agreed to it is less than the quorum for a directors’ meeting.
105.3	A directors’ written resolution signed or agreed to by an alternate director does not need also to be approved by his appointor. If the directors’ written resolution is signed or agreed to by a director who has appointed an alternate director, it does not need to be approved by the alternate director acting in that capacity.
105.4	Once a directors’ written resolution has been adopted, it must be treated as if it had been a resolution passed at a directors’ meeting in accordance with these Articles.
105.5	A directors’ written resolution will be valid at the time it is signed or agreed to by the last director.
106	The validity of directors’ actions
	Everything which is done by any directors’ meeting, or by a committee of the directors, or by a person acting as a director, or as a member of a committee, will, in favour of anyone dealing with the Company in good faith, be valid even though it is discovered later that any director, or person acting as a director, was not properly appointed or elected. This also applies if it is discovered later that anyone was disqualified from being a director, or had ceased to be a director, or was not entitled to vote. In any of these cases, in favour of anyone dealing with the Company in good faith, anything done will be as valid as if there was no defect or irregularity of the kind referred to in this Article.

DIRECTORS’ INTERESTS

107	Authorisation of directors’ interests
107.1	For the purposes of Section 175 of the Companies Act 2006, the directors shall have the power to authorise any matter which would or might otherwise constitute or give rise to a breach of the duty of a director under that Section to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company.
107.2	Authorisation of a matter under Article 107.1 shall be effective only if:

• the matter in question shall have been proposed in writing for consideration at a meeting of the directors, in accordance with the board of directors’ normal procedures or in such other manner as the directors may determine;

• any requirement as to the quorum at the meeting of the directors at which the matter is considered is met without counting the director in question and any other interested director (together the “Interested Directors”); and

• the matter was agreed to without the Interested Directors voting or would have been agreed to if the votes of the Interested Directors had not been counted.

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107.3	Any authorisation of a matter under Article 107.1 extends to any actual or potential conflict of interest which may reasonably be expected to arise out of the matter so authorised.
107.4	Any authorisation of a matter under Article 107.1 shall be subject to such conditions or limitations as the directors may determine, whether at the time such authorisation is given or subsequently and may be terminated by the directors at any time. A director shall comply with any obligations imposed on him by the directors pursuant to any such authorisation.
107.5	Subject to any conditions or limitations imposed under Article 107.4, a director shall not, save as otherwise agreed by him, be accountable to the Company for any benefit which he (or a person connected with him) derives from any matter authorised by the directors under Article 107.1 and any contract, transaction, arrangement or proposal relating thereto shall not be liable to be avoided on the grounds of any such benefit.
107.6	This Article does not apply to a conflict of interest arising in relation to a transaction or arrangement with the Company.
108	Directors may have interests
108.1	Subject to compliance with Article 108.2, a director, notwithstanding his office, may have an interest of the following kind:

• where a director (or a person connected with him) is a director or other officer of, or employed by, or otherwise interested (including by the holding of shares) in any Relevant Company;

• where a director (or a person connected with him) is a party to, or otherwise interested in, any contract, transaction, arrangement or proposal with a Relevant Company, or in which the Company is otherwise interested;

• where the director (or a person connected with him) acts (or any firm of which he is a partner, employee or member acts) in a professional capacity for any Relevant Company (other than as auditor) whether or not he or it is remunerated therefor;

• an interest which cannot reasonably be regarded as likely to give rise to a conflict of interest;

• an interest, or a transaction, arrangement or proposal giving rise to an interest, of which the director is not aware;

• any matter already authorised under Article 107.1; or

• any other interest authorised by ordinary resolution.

	No authorisation under Article 107.1 shall be necessary in respect of any such interest.
108.2	Subject to Sections 177 and 182 of the Companies Act 2006 the director shall declare the nature and extent of any interest permitted under Article 108.1, and not falling within Article 108.3, at a meeting of the directors, by written declaration to the Company or in such other manner as the directors may determine.
108.3	No declaration of an interest shall be required by a director in relation to an interest:

• falling within the fourth, fifth and sixth bullet paragraph of Article 108.1;

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• if, or to the extent that, the other directors are already aware of such interest (and for this purpose the other directors are treated as being aware of anything of which they ought reasonably to be aware); or

• if, or to the extent that, it concerns the terms of his service contract (as defined in Section 227 of the Companies Act 2006) that have been or are to be considered by a meeting of the directors, or by a committee of directors appointed for the purpose under these Articles.

108.4	A director shall not, save as otherwise agreed by him, be accountable to the Company for any benefit which he (or a person connected with him) derives from any interest referred to in Article 108.1, and no contract, transaction, arrangement or proposal shall be liable to be avoided on the grounds of any such interest.
108.5	For the purposes of this Article 108, “Relevant Company” shall mean the Company; a subsidiary undertaking of the Company; any holding company of the Company or a subsidiary undertaking of any such holding company; any body corporate promoted by the Company; or any body corporate in which the Company is otherwise interested.
109	Restrictions on quorum and voting
109.1	Save as provided in this Article 109, and whether or not the interest is one which is authorised pursuant to Article 107.1 or permitted under Article 108.1, a director shall not be entitled to vote on any resolution in respect of any contract, transaction, arrangement or proposal, in which he (or a person connected with him) is interested. Any vote of a director in respect of a matter where he is not entitled to vote shall be disregarded.
109.2	A director shall not be counted in the quorum for a meeting of the directors in relation to any resolution on which he is not entitled to vote.
109.3	Subject to the provisions of the Companies Acts, a director shall (in the absence of some other interest than is set out below) be entitled to vote, and be counted in the quorum, in respect of any resolution concerning any contract, transaction, arrangement or proposal:

• in which he has an interest of which he is not aware;

• in which he has an interest which cannot reasonably be regarded as likely to give rise to a conflict of interest;

• in which he has an interest only by virtue of interests in shares, debentures or other securities of the Company, or by reason of any other interest in or through the Company;

• which involves the giving of any security, guarantee or indemnity to the director or any other person in respect of (i) money lent or obligations incurred by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertakings; or (ii) a debt or other obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part under a guarantee or indemnity or by the giving of security;

• concerning an offer of shares or debentures or other securities of or by the Company or any of its subsidiary undertakings (i) in which offer he is or may be entitled to participate as a holder of securities; or (ii) in the underwriting or sub-underwriting of which he is to participate;

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• concerning any other body corporate in which he is interested, directly or indirectly and whether as an officer, shareholder, creditor, employee or otherwise, provided that he (together with persons connected with him) is not the holder of, or beneficially interested in, one per cent. or more of the issued equity share capital of any class of such body corporate or of the voting rights available to members of the relevant body corporate;

• relating to an arrangement for the benefit of the employees or former employees of the Company or any of its subsidiary undertakings which does not award him any privilege or benefit not generally awarded to the employees or former employees to whom such arrangement relates;

• concerning the purchase or maintenance by the Company of insurance for any liability for the benefit of directors or for the benefit of persons who include directors;

• concerning the giving of indemnities in favour of directors;

• concerning the funding of expenditure by any director or directors on (i) defending criminal, civil or regulatory proceedings or actions against him or them, (ii) in connection with an application to the court for relief, or (iii) defending him or them in any regulatory investigations;

• concerning the doing of anything to enable any director or directors to avoid incurring expenditure as described in the tenth bullet paragraph of this Article 109.3 immediately above; and

• in respect of which his interest, or the interest of directors generally, has been authorised by ordinary resolution.

109.4

Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment) of two or more directors to offices or employments with the Company (or any body corporate in which the Company is interested), the proposals may be divided and considered in relation to each director separately. In such case, each of the directors concerned (if not debarred from voting under the sixth bullet paragraph of Article 109.3) shall be entitled to vote, and be counted in the quorum, in respect of each resolution except that concerning his own appointment or the fixing or variation of the terms thereof.

109.5

If a question arises at any time as to whether any interest of a director prevents him from voting, or being counted in the quorum, under this Article 109, and such question is not resolved by his voluntarily agreeing to abstain from voting, such question shall be referred to the chairman of the meeting and his ruling in relation to any director other than himself shall be final and conclusive, except in a case where the nature or extent of the interest of such director has not been fairly disclosed. If any such question shall arise in respect of the chairman of the meeting, the question shall be decided by resolution of the directors and the resolution shall be conclusive except in a case where the nature or extent of the interest of the chairman of the meeting (so far as it is known to him) has not been fairly disclosed to the directors.

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110	Confidential information
110.1	Subject to Article 110.2, if a director, otherwise than by virtue of his position as director, receives information in respect of which he owes a duty of confidentiality to a person other than the Company, he shall not be required to disclose such information to the Company or to the directors, or to any director, officer or employee of the Company, or otherwise use or apply such confidential information for the purpose of or in connection with the performance of his duties as a director.
110.2	Where such duty of confidentiality arises out of a situation in which the director has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company, Article 110.1 shall apply only if the conflict arises out of a matter which has been authorised under Article 107.1 above or falls within Article 108 above.
110.3	This Article 110 is without prejudice to any equitable principle or rule of law which may excuse or release the director from disclosing information, in circumstances where disclosure may otherwise be required under this Article 110.
111	Directors’ interests — general
111.1	For the purposes of Articles 107 to 110:

• where the context permits, any reference to an interest includes a duty and any reference to a conflict of interest includes a conflict of interest and duty and a conflict of duties;

• an interest of a person who is connected with a director shall be treated as an interest of the director; and

• Section 252 of the Companies Act 2006 shall determine whether a person is connected with a director.

111.2 Where a director has an interest which can reasonably be regarded as likely to give rise to a conflict of interest, the director may, and shall if so requested by the directors take such additional steps as may be necessary or desirable for the purpose of managing such conflict of interest, including compliance with any procedures laid down from time to time by the directors for the purpose of managing conflicts of interest generally and/or any specific procedures approved by the directors for the purpose of or in connection with the situation or matter in question, including without limitation:

• absenting himself from any meeting or part of a meeting of the directors at which the relevant situation or matter falls to be considered; and

• not reviewing documents or information made available to the directors generally in relation to such situation or matter and/or arranging for such documents or information to be reviewed by a professional adviser to ascertain the extent to which it might be appropriate for him to have access to such documents or information.

111.3 The Company may by ordinary resolution ratify any contract, transaction, arrangement or proposal, not properly authorised by reason of a contravention of any provisions of Articles 107 to 110.

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DIRECTORS’ COMMITTEES

112

Delegating powers to committees

The directors can delegate any of their powers, or discretions, to committees of one or more directors. This includes powers or discretions relating to directors’ pay or giving benefits to directors. If the directors have delegated any power or discretion to a committee, any references in these Articles to using that power or discretion include its use by the committee. Any committee must comply with any regulations laid down by the directors. These regulations can require or allow people who are not directors to be coopted onto the committee, and can give voting rights to co-opted members. But:

• there must be more directors on a committee than co-opted members; and

• a resolution of the committee is only effective if a majority of the members of the committee present at the time of the resolution were directors.

113	Committee procedure
	If a committee includes two or more people, the Articles which regulate directors’ meetings and their procedure will also apply to committee meetings (if possible), unless these are inconsistent with any regulations for the committee which have been laid down under Article 112.

DIRECTORS’ POWERS

114	The directors’ management powers
114.1	The Company’s business will be managed by the directors. They can use all the Company’s powers except where the Articles, or the Companies Acts, provide that powers can only be used by the shareholders voting to do so at a General Meeting. The general management powers under this Article are not limited in any way by specific powers given to the directors by other Articles.
114.2	The directors are, however, subject to:

• the provisions of the Companies Acts;

• the requirements of the Memorandum or these Articles; and

• any other requirements (whether or not consistent with these Articles) which are approved by the shareholders by passing a special resolution at a General Meeting.

However, if any change is made to the Memorandum or these Articles or if the shareholders approve a requirement relating to something which the directors have already done which was within their powers, this will not invalidate any prior act of the directors which would otherwise have been valid.

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115	The power to establish local boards
115.1	The directors can set up local committees, local boards or local agencies to manage any of the Company’s business. These can be either in or outside the United Kingdom. The directors can appoint, remove and re-appoint anybody (who need not be a director) to be:

• members of any local committee, board or agency; or

• managers or agents of the Company.

115.2 The directors can:

• decide on the pay and other benefits of people appointed under this Article;

• delegate any of their authority, powers or discretions to:

(i)	any local board or committee; or
(iii)	any manager, or agent of the Company;

• allow local committees or boards, managers or agents to delegate to another person;

• allow the members of local committees, boards or agencies to fill any vacancies on them;

• allow the members of local committees, boards or agencies to continue to act even though there are vacancies on them;

• remove any people they have appointed under this Article; and

• cancel or change an appointment or delegation made under this Article, although this will not affect anybody who acts in good faith who has not had any notice of any cancellation or variation.

	Any appointment or delegation by the directors which is referred to in this Article can be on any terms and conditions decided on by the directors.
115.3	A person who is employed by, or occupies an office with, the Company may be given a title which includes the words “Associate Director”. This will not imply that such person is a director of the Company or that he is entitled to act as a director or be deemed to be a director for the purposes of these Articles.
116	The power to appoint attorneys
116.1	The directors can appoint anyone (including the members of a group which changes over time) as the Company’s attorney or attorneys by granting a power of attorney or by authorising him or them in some other way. The attorney or attorneys can either be appointed directly by the directors, or the directors can give someone else the power to select attorneys. The directors can decide on the purposes, powers, authorities and discretions of attorneys.
116.2	The directors can decide for how long a power of attorney will last and they can apply any terms and conditions to it. The power of attorney can also include any provisions which the directors decide on for the protection and convenience of anybody dealing with the attorney. The power of attorney can also allow the attorney to sub-delegate any or all of his power, authority or discretion to any other person.

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117	Borrowing powers
	So far as the Companies Acts allow, the directors can exercise all the powers of the Company to:

• borrow money;

• issue (subject to the provisions of the Companies Acts regarding authority to allot debentures convertible into shares) debentures and other securities; and

• give any form of:

• guarantee; and

• security, either outright or as collateral and over all or any of the Company’s undertaking, property and uncalled capital,

for any debt, liability or obligation of the Company or of any third party.

118	Borrowing restrictions
118.1	The directors must:

• limit the Borrowings of the Company and

• exercise all voting and other rights or powers of control exercisable by the Company in relation to its subsidiary undertakings

• to ensure that the total amount of all Borrowings by the Group outstanding at any time will not exceed 1.5 times the Adjusted Total of Capital and Reserves at such time.

	This limitation on Borrowings will only affect subsidiary undertakings to the extent that the directors can restrict the borrowings of the subsidiary undertakings by exercising the rights or powers of control which the Company has over its subsidiary undertakings. The Company may consent in advance to exceeding the borrowing limit by passing an ordinary resolution at a General Meeting.
118.2	In this Article:
	Group means the Company and its subsidiary undertakings for the time being;
	Adjusted Total of Capital and Reserves means the aggregate of the share capital and reserves as shown in the latest audited consolidated balance sheet of the Group (including the amount paid up or credited as paid up on the issued share capital of the Company, the share premium account, capital redemption reserve, profit and loss account and other reserves included within the Group’s equity shareholders’ funds) (the “Reserves”) but:

• adjusted as appropriate in respect of any variation to the paid up share capital or reserves since the date of the latest audited consolidated balance sheet as recorded within the monthly management accounting records of the Group prepared in accordance with the accounting bases and principles applied in the preparation of its latest audited consolidated balance sheet;

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• adding any amount which has been deducted at any time from the Reserves of the Group for goodwill arising on consolidation either by direct charge to Reserves or by charge to the Group’s consolidated profit and loss account; and

• making such other adjustments (if any) as the auditors of the Company consider appropriate.

Borrowings means the aggregate amount of all liabilities and obligations of the Group which in accordance with the accounting bases and principles of the Group are treated as borrowings in the latest audited consolidated balance sheet of the Group but:

• adjusted as appropriate in respect of any variation to borrowings since the date of the latest audited consolidated balance sheet as recorded within the monthly management accounting records of the Group prepared in accordance with the accounting bases and principles applied in its latest audited consolidated balance sheet;

• excluding any borrowings under finance or structured tax lease arrangements to the extent matched as part of those arrangements by deposits of cash or cash equivalent investments which are treated by the creditor concerned as available to reduce its net exposure; and

• making such other adjustments (if any) as the auditors of the Company consider appropriate.

118.3

The determination of the Company’s auditors as to the amount of the Adjusted Total of Capital and Reserves and the total amount of Borrowings at any time shall be conclusive and binding on all concerned and for the purposes of their computation the Company’s auditors may at their discretion make such further or other adjustments (if any) or determinations as they think fit. Nevertheless the directors may act in reliance on a bona fide estimate of the amount of the Adjusted Total of Capital and Reserves and the total amount of Borrowings at any time and if in consequence the borrowing limit is inadvertently exceeded an amount of borrowings equal to the excess may be disregarded until the expiration of three months after the date on which by reason of a determination of the Company’s auditors or otherwise the directors became aware that such a situation has or may have arisen.

118.4

No lender or other person dealing with the Group need be concerned whether the borrowing limit is observed. No debt incurred or security given in breach of the borrowing limit will be invalid or ineffective unless the lender or the recipient of the security had express notice at the time when the debt was incurred or security given, that the limit had been or would as a result be breached.

ALTERNATE DIRECTORS

119	Alternate directors
119.1	Any director may appoint any person (including another director) to act in his place (such person is called an alternate director). Such appointment requires the approval of the directors, unless the proposed alternate director is another director. A director appoints an alternate director by delivering an appointment notice signed or authenticated in

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	accordance with Article 147 by him (or in any other manner which has been approved by the directors) to the Registered Office. An alternate director need not be a shareholder.
119.2	The appointment of an alternate director ends if the director appointing him ceases to be a director, unless that director retires at a General Meeting at which he is re-elected under Article 91.1. A director can also remove his alternate by delivering a notice signed or authenticated in accordance with Article 147 by him (or doing something else which has been approved by the directors) delivered to the Registered Office. An alternate director can also be removed as an alternate by a resolution of the directors.
119.3	An alternate director is entitled to receive notices of directors’ meetings once he has given the Company an address to which notices may be served on him. He is entitled to attend and vote as a director at any such meeting at which the director appointing him is not personally present and generally at such meeting to perform all functions of the director appointing him as a director. If he is himself a director or attends any such meeting as an alternate for more than one director, he will have one vote for each director for whom he acts as an alternate, in addition to his own vote as a director. However, he may not be counted more than once for the purposes of the quorum. If his appointor is temporarily unable to act through ill health or disability his signature of or authentication of any directors’ written resolution is as effective as the signature or authentication of his appointor.
119.4	If the directors decide to allow this, Article 119.3 also applies in a similar fashion to any meeting of a committee of which his appointor is a member.
119.5	An alternate director shall be an officer of the Company and shall alone be responsible to the Company for his own actions and mistakes. Except as said in this Article 119, an alternate director:

• does not have power to act as a director;

• is not considered to be a director for the purposes of the Articles;

• is not considered to be the agent of his appointor; and

• cannot appoint an alternate director.

119.6 Subject to the Companies Acts, an alternate director is entitled to contract and be interested in and benefit from contracts or arrangements or transactions and to be repaid expenses and to be indemnified to the same extent as if he were a director. However, he is not entitled to receive from the Company as alternate director any pay, except only such part (if any) of the pay otherwise payable to his appointor as such appointor may direct the Company in writing to pay to his alternate.

THE SECRETARY

120	The Secretary and Deputy and Assistant Secretaries
120.1	The Secretary is appointed by the directors. The directors decide on the terms and period of his appointment so long as allowed to do so by the Companies Acts. The directors can also remove the Secretary, but this does not affect any claim for damages against the Company for breach of any contract between him and the Company.

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120.2

The directors can also appoint one or more people to be deputy or assistant secretary. Anything which the Companies Acts allow to be done by or to the Secretary can, if there is no Secretary, or the Secretary is for any reason not capable of doing what is required of him, also be done by or to any deputy or assistant secretary. If there is no deputy or assistant secretary capable of acting, the directors can appoint any officer to do what would be required of the deputy or assistant secretary.

120.3

Anything which the Companies Acts allow to be done by or to a director and the Secretary, cannot be done by or to one person acting as both a director and a Secretary.

THE SEAL

121	The Seal
121.1	The directors are responsible for arranging for the Common Seal and any Securities Seal to be kept safely. The Common Seal and any Securities Seal can only be used with the authority of the directors or of a committee authorised by the directors to use it. The Securities Seal can be used only for sealing securities issued by the Company in certificated form and sealing documents creating or evidencing securities issued by the Company.
121.2	Subject to the provisions of these Articles which relate to share certificates, every document which is sealed using the Common Seal must be signed personally by:

• one director and the Secretary; or

• two directors; or

• any other persons who are authorised to do so by the directors.

121.3	Where a signature is required to witness the Common Seal, the directors may decide that the individual need not sign the document personally but that his signature may be printed on it mechanically, electronically or in any other way the directors approve.
121.4	Securities and documents which have the Securities Seal stamped on them do not need to be signed unless the directors or the Companies Acts require this.
121.5	The directors can use all the powers given by the Companies Acts relating to official seals for use abroad.
121.6	Certificates for debentures or other securities of the Company may be printed in any way and may be sealed and/or signed for in any manner allowed by these Articles.
121.7	As long as it is allowed by the Companies Acts, any document signed by:

• one director and the Secretary; or

• by two directors; or

• one director in the presence of a witness who attests to the signature,

and expressed to be entered into by the Company shall have the same effect as if it had been made effective by using the Common Seal. However no document which states that it is intended to have effect as a deed shall be signed in this way without the authority of the directors or of a committee authorised by the directors to give such authority.

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AUTHENTICATING DOCUMENTS

122	Establishing that documents are genuine
122.1	Any director, or the Secretary, has power to identify as genuine any of the following and to certify copies or extracts from them as true copies or extracts:

• any documents relating to the Company’s constitution;

• any resolutions passed by the shareholders or any class of shareholders, or by the directors or by a committee of the directors; and

• any books, documents, records or accounts which relate to the Company’s business.

	The directors can also delegate this power to other people.
122.2	When any books, documents, records or accounts are not kept at the Registered Office, the officer of the Company who has custody of them is treated as a person who has been authorised by the directors to identify them as genuine and to provide certified copies or extracts from them.
122.3	A document which appears to be a copy of a resolution or an extract from the minutes of any meeting, and which is certified as a copy or extract as described in Article 122.1 or 122.2 is conclusive evidence for anyone who deals with the Company on the strength of the document that:

• the resolution has been properly passed; or

• the extract is a true and accurate record of the proceedings of a valid meeting.

RESERVES

123

Setting up reserves

The directors can, before recommending any dividend, set aside any profits of the Company and hold them in a reserve. The directors can decide to use these sums for any purpose for which the profits of the Company can lawfully be used. Sums held in a reserve can either be employed in the business of the Company or be invested. The directors can divide the reserve into separate funds for particular purposes and alter the funds into which the reserve is divided. The directors can also carry forward any profits without holding them in a reserve.

DIVIDENDS

124	No dividends are payable except out of profits
124.1	No dividend can be paid otherwise than out of profits available for distribution under the Companies Acts.

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124.2	The profits of the Company which are determined to be distributed will be used in the payment of dividends to shareholders in accordance with their respective rights and priorities.
125	Final dividends
	The directors may recommend the amount of any final dividend. The shareholders can then declare dividends by passing an ordinary resolution, but the amount declared cannot exceed the amount recommended by the directors.
126	Fixed and interim dividends
126.1	If the directors consider that the profits of the Company justify such payments, they can pay:

• fixed dividends on any class of shares carrying a fixed dividend on the dates fixed for the payment of those dividends; and

• interim dividends on shares of any class of any amounts and on any dates and for any period which they decide.

126.2	If the directors act in good faith, they are not liable to any shareholders for any loss they may suffer because a lawful dividend has been paid under this Article on other shares which rank equally with or behind their shares.
127	Dividends not in cash
	If the directors recommend this, shareholders can pass an ordinary resolution to direct all or part of a dividend to be paid by distributing specific assets (and in particular paid-up shares or debentures of any other company) rather than cash. The directors must give effect to that resolution. Where any difficulty arises on the distribution and valuation of the assets, the directors can settle it as they decide. In particular, they can:

• issue fractional certificates;

• value assets for distribution purposes;

• pay cash of a similar value to adjust the rights of persons entitled to the dividend; and/or

• transfer any assets to trustees for persons entitled to the dividend.

128

Calculation and currency of dividends

128.1

All dividends will be divided and paid in proportions based on the amounts which have been paid-up on the shares during any period for which the dividend is paid. Sums which have been paid-up in advance of calls do not count in calculating the amount of a dividend to be paid on a share. If the terms on which any share is issued provide that such share will be entitled to a dividend as if it were a fully paid-up, or partly paid-up, share from a particular date (in the past or the future), it will be entitled to a dividend on this basis. This Article applies unless the rights attached to any shares, or the terms of any shares, provide otherwise.

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128.2	Unless the rights attached to any shares, or the terms of any shares, or the Articles provide otherwise, a dividend, or any other money payable in respect of any share, can be paid to a shareholder in whatever currency the directors decide, using an appropriate exchange rate selected by the directors for any currency conversions which are required.
128.3	The directors can decide that a particular Approved Depositary should be able to receive dividends in a currency other than the currency in which it is declared and can make arrangements accordingly. In particular, if an Approved Depositary has chosen or agreed to receive dividends in another currency, the directors can make arrangements with the Approved Depositary for payment to be made to the Approved Depositary for value on the date on which the relevant dividend is paid, or a later date decided on by the directors.
129	Deducting amounts owing from dividends and other money
	If a shareholder owes any money for calls on shares, or money relating in any other way to shares, the directors can deduct any of this money (as long as it is immediately payable) from:

• any dividend on any shares held by the shareholder; or

• any other money payable by the Company in connection with the shares.

	Money deducted in this way can be used to pay amounts owed to the Company in connection with the shares.
130	Payments to shareholders
130.1	Any dividend or other money payable in cash (whether in sterling or foreign currency) relating to a share can be paid by such method as the directors, in their absolute discretion, may decide. Different methods of payment may apply to different shareholders or groups of shareholders (such as overseas shareholders). Without limiting any other method of payment which the Company may adopt, the directors may decide that payment can be made wholly or partly:

• by inter-bank transfer, electronic form, electronic means or by such other means approved by the directors directly to an account (of a type approved by the directors) nominated in writing by the shareholder or the joint shareholders; or

• by cheque or warrant or any other similar financial instrument made payable to the shareholder who is entitled to it and sent direct to his registered address or, in the case of joint shareholders, to the shareholder who is first named in the Register and sent direct to his registered address, or to someone else named in an instruction in writing from the shareholder (or from all joint shareholders).

130.2 If the directors decide that payments will be made by electronic transfer to an account (of a type approved by the directors) nominated by a shareholder or joint shareholders, but no such account is nominated by the shareholder or joint shareholders or an electronic transfer into a nominated account is rejected or refunded, the Company may credit the amount payable to an account of the Company to be held until the shareholder nominates a valid account.

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130.3	An amount credited to an account under Article 130.2 is to be treated as having been paid to the shareholder at the time it is credited to that account. The Company will not be a trustee of the money and no interest will accrue on the money.
130.4	The Company will not pay interest on any dividend or other money due to a shareholder in respect of his shares, unless the rights of the shares provide otherwise.
130.5	Payment by electronic transfer, cheque or warrant, or in any other way, is made at the risk of the people who are entitled to the money. The Company is treated as having paid a dividend if a payment using electronic or other means approved by the directors is made in accordance with instructions given by the Company or if such a cheque or warrant is cleared. The Company will not be responsible for a payment which is lost or delayed.
130.6	For joint shareholders, the Company can rely on a receipt for a dividend or other money paid on shares from any one of them.
131	Record dates for payments and other matters
	Any dividend or distribution on shares of any class can be paid to the holder or holders of the shares shown on the Register, at the close of business on whatever day may be provided in the resolution declaring the dividend or providing for the distribution. The dividend or distribution will be based on the number of shares registered on that day. This Article applies whether what is being done is the result of a resolution of the directors or a resolution passed at a General Meeting. The date can be before any relevant resolution was passed. This Article does not affect the rights to the dividend or distribution as between past and present shareholders.
132	Dividends which are not claimed
132.1	If an amount is held in an account pursuant to Article 130.2, or a payment made by cheque, warrant or any other written financial instrument for an amount payable under Article 130.1 has not been claimed, for one year after the passing of either 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 a dividend has not been claimed for 12 years after either the passing of the relevant resolution either declaring that dividend or providing for payment of that dividend, it will be forfeited and belong to the Company again.
132.2	If an amount is held in an account pursuant to Article 130.2, or a cheque, warrant or other written financial instrument for an amount payable under Article 130.1 has been sent back or is not cashed, for two dividends in a row, the Company can stop paying dividends. If the shareholder or a person automatically entitled to the shares by law claims those dividends in writing (before they are forfeited under Article 132.1), the Company must start paying dividends by any payment method approved by the directors in accordance with Article 130.
133	Waiver of dividends
	Where a shareholder wants to waive his entitlement to all or any part of a dividend, he may do so by delivering a notice in writing to that effect, signed or authenticated in

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accordance with Article 147 by him, to the Company. If appropriate, the notice in writing may be signed or authenticated in accordance with Article 147 by whoever has become automatically entitled to the shares by law. For the waiver to be effective, the Company must accept the notice in writing and act on it. The Company may, however, decline to act on the notice in writing and continue to pay dividends to the shareholder accordingly.

CAPITALISING RESERVES

134	Capitalising reserves
134.1	Subject to any special rights attaching to any class of shares, the shareholders can pass an ordinary resolution to allow the directors to change into capital any sum which:

• is part of any of the Company’s reserves (including premiums received when any shares were issued, capital redemption reserves or other undistributable reserves); or

• the Company is holding as undistributed profits.

134.2	Unless the ordinary resolution states otherwise the directors will use the sum which is changed into capital for the Ordinary Shareholders on the Register at the close of business on the day the resolution is passed (or another date stated in the resolution or fixed as stated in the resolution). The sum set aside must be used to pay up in full shares of the Company and to allot such shares and distribute them to holders of Ordinary Shares as bonus shares in proportion to their holdings of Ordinary Shares at the time. The shares can be Ordinary Shares or, if the rights of other existing shares allow this, shares of some other class.
134.3	If any difficulty arises in operating this Article, the directors can resolve it in any way which they decide. For example they can deal with entitlements to fractions of a share. They can decide that the benefit of fractions of a share belongs to the Company or that fractions of a share are ignored or deal with fractions of a share in some other way.
134.4	The directors can appoint any person to sign any contract with the Company on behalf of those who are entitled to shares under the resolution. Such a contract is binding on all concerned.

SCRIP DIVIDENDS

135	Ordinary Shareholders can be offered the right to receive extra shares instead of cash dividends
135.1	The directors can offer Ordinary Shareholders the right to choose to receive extra Ordinary Shares, which are credited as fully paid-up, instead of some or all of their cash dividend. Before they can do this, the shareholders must have passed an ordinary resolution authorising the directors to make this offer.
135.2	The ordinary resolution can apply to a particular dividend or dividends (whether declared or not). Alternatively, it can apply to some or all of the dividends which may be declared or

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	paid in a specified period. The specified period must end no later than five years after the ordinary resolution is passed.
135.3	The directors can offer Ordinary Shareholders or persons automatically entitled by operation of law the right to request new Ordinary Shares instead of cash for:

• the next dividend; or

• all future dividends (if shares are made available as an alternative to a cash dividend), until they tell the Company that they no longer wish to receive new Ordinary Shares.

	The directors can also allow Ordinary Shareholders to choose between these alternatives.
135.4	An Ordinary Shareholder opting for new shares is entitled to Ordinary Shares whose total relevant value is as near as possible to the cash dividend (disregarding any tax credit) he would have received, but no greater than such cash dividend.
135.5	The relevant value of an Ordinary Share is a value calculated in the manner set out in the ordinary resolution or, if the ordinary resolution does not set out how the relevant value of an Ordinary Share is to be calculated, then the relevant value of an Ordinary Share is the average value of the Ordinary Shares for the five dealing days starting from, and including, the day when the shares are first quoted “ex dividend ”. This average value is worked out from the average middle market quotations for the Ordinary Shares on the London Stock Exchange, as published in its Daily Official List. A certificate or report from the Company’s auditors as to the amount of the relevant value will be conclusive evidence of that amount.
135.6	After the directors have decided to apply this Article to a dividend, they must notify eligible Ordinary Shareholders in writing of their right to choose new Ordinary Shares. This notice should also set out the procedure by which the Ordinary Shareholders must notify the Company if they wish to receive new Ordinary Shares. Where Ordinary Shareholders have already chosen to receive new Ordinary Shares in place of all cash future dividends, if new Ordinary Shares are available, the Company will not notify them of a right to receive new Ordinary Shares. Instead, the Company will remind them that they have already chosen to receive new Ordinary Shares and explain to them how to tell the Company if they wish to start receiving cash dividends again.
135.7	The directors can set a minimum number of Ordinary Shares in respect of which the right to choose new Ordinary Shares can be exercised. No Ordinary Shareholder or person who is automatically entitled to an Ordinary Share by law will receive a fraction of a share. The directors can decide how to deal with any fractions left over and the Company can, if the directors decide, receive the benefit of any or all of these.
135.8	The directors can exclude or restrict the right to choose new Ordinary Shares, or make any other arrangements where they decide that:

• this is necessary or convenient to deal with any legal or practical problems in relation to holders of Ordinary Shares with registered addresses in any particular territory under the laws of any territory, or requirements of any recognised regulatory body or stock exchange in any territory; or

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• special formalities would otherwise apply in connection with the offer of new Ordinary Shares (including Ordinary Shares being represented by American Depositary Shares); or

• it would be impractical or unduly onerous to give the right to any Ordinary Shareholder or that for some other reason the offer should not be made to them.

135.9	The directors can exclude or restrict the right to choose new Ordinary Shares in the case of any shareholder who is an Approved Depositary or a nominee for an Approved Depositary. They can do this if the offer or exercise of the right to or by the people on whose behalf the Approved Depositary holds the shares would suffer from legal or practical problems of the kind mentioned in Article 135.8. If other Ordinary Shareholders (other than those excluded under Article 135.8) have the right to choose new Ordinary Shares, the directors must be satisfied that an appropriate dividend reinvestment plan or similar arrangement is available to a substantial majority of the people on whose behalf the Approved Depositary holds shares or that such arrangements will be available promptly. The first sentence of this Article 135.9 does not apply until the directors are satisfied of this.
135.10	If an Ordinary Shareholder chooses to receive new Ordinary Shares, no dividend on the Ordinary Shares for which he has chosen to receive new Ordinary Shares (which are called the elected shares), will be declared or payable. Instead, new Ordinary Shares will be allotted on the basis set out earlier in this Article. To do this the directors will convert into capital a sum equal to the total nominal value of the new Ordinary Shares to be allotted. They will use this sum to pay up in full the appropriate number of new Ordinary Shares. These will then be allotted and distributed to the holders of the elected shares as set out above. The sum to be converted into capital can be taken from any amount which is then in any reserve or fund (including the share premium account, any capital redemption reserve and the profit and loss account). Article 134 applies to this process, so far as it is consistent with this Article 135.
135.11	The new Ordinary Shares rank equally in all respects with the existing fully paid-up Ordinary Shares at the time the new Ordinary Shares are allotted. The new Ordinary Shares are not entitled to share in the dividend from which they arose or any other dividend or distribution or other entitlement which has been declared, made or paid or is payable by reference to such record date or earlier record date.
135.12	Unless the directors decide otherwise or the CREST Regulations or the rules of a relevant system require otherwise, any new Ordinary Shares which an Ordinary Shareholder has chosen to receive instead of some or all of his cash dividend will be:

• shares in uncertificated form if the corresponding elected shares were uncertificated shares on the record date for that dividend; and

• shares in certificated form if the corresponding elected shares were shares in certificated form on the record date for that dividend.

135.13	The directors can decide that new Ordinary Shares will not be available in place of any cash dividend. They can decide this at any time before new Ordinary Shares are allotted in place of such dividend, whether before or after Ordinary Shareholders have chosen to receive new Ordinary Shares.
135.14	The directors have the power to do all acts and things they consider necessary to give effect to this Article.

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ACCOUNTS

136	Accounting and other records
136.1	The directors must make sure that proper accounting records that comply with the Companies Acts are kept. These records must explain the Company’s transactions and show its financial position at any time with reasonable accuracy.
136.2	The directors must, in accordance with the Companies Acts, ensure that the Company’s annual accounts and reports specified in the Companies Acts are prepared and laid before the Company at a General Meeting.
136.3	The auditors’ report must be laid before the Company in General Meeting and must be open for inspection as required by the Companies Acts.
137	Location and inspection of records
137.1	The accounting records must be kept:

• at the Registered Office; or

• at any other place which the Companies Acts allow and the directors decide on.

137.2	The Company’s officers always have the right to inspect the accounting records.
137.3	No shareholder (other than a shareholder who is also an officer) has any right to inspect any books or papers of the Company unless:

• the Companies Acts or a proper court order give him that right; or

• the directors authorise him to do so; or

• he is authorised by an ordinary resolution to do so.

138	Sending copies of accounts and other documents
138.1	This Article applies to every auditors’ report and Company’s annual accounts and reports to be laid before the shareholders at a General Meeting with any other document which the Companies Acts requires to be attached to these.
138.2	Copies of the documents set out in Article 138.1 must be delivered or sent to the shareholders and debenture holders at their registered addresses and to all other people to whom the Articles, or the Companies Acts or the requirements of the UK Listing Authority or the London Stock Exchange (or of any other stock exchange on which all or any of the shares of the Company have been admitted for listing) require the Company to send them. This must be done at least 21 days before the relevant General Meeting. However, the Company need not send these documents to shareholders who are sent summary financial statements in accordance with the Companies Acts.
138.3	Shareholders or debenture holders who are not sent copies of the above documents in Article 138.2 can receive a copy free of charge by applying to the Company at the Registered Office.

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AUDITORS

139	Actions of auditors
	The directors must appoint auditors for the Company. The duties of the auditors will be regulated in accordance with the Companies Acts. So far as the Companies Acts allow, the actions of a person acting as an auditor are valid in favour of anyone dealing with the Company in good faith, even if there was some defect in the person’s appointment or qualification to act as an auditor.
140	Auditors at General Meetings
	The Company’s auditor can attend any General Meeting. He can speak at General Meetings on any business which is relevant to him as auditor.

COMMUNICATIONS WITH SHAREHOLDERS

141	Serving and delivering notices and other documents
141.1	To the extent permitted and unless required otherwise by the Companies Acts, any other Act applying to the Company or these Articles, the Company can send, serve, supply or deliver any offer, notice, information or any other document, including a share certificate, on or to a shareholder:

• personally;

• by posting it in a letter (with postage paid) to the shareholder’s registered address or by causing it to be left at that address in some other way; or

• by electronic means and/or by making such offers, notices, information or documents available on a website.

141.2	The Company Communication Provisions have effect for the purposes of any provisions of the Companies Acts or these Articles that authorise or requires offers, notices, information or any other documents to be sent, served, supplied or delivered by or to the Company.
141.3	Articles 141 to 147 do not affect any provision of the Companies Acts requiring offers, notices, information or documents to be sent, served, supplied or delivered in a particular way.
142	Notices to joint holders
142.1	Anything which needs to be agreed or specified by the joint holders of a share shall for all purposes be taken to be agreed or specified by all the joint holders where it has been agreed or specified by the joint holder whose name stands first in the Register in respect of the share.
142.2	Any offer, notice, information or any other document which is authorised or required to be sent or supplied to joint holders of a share may be sent or supplied to the joint holder whose name stands first in the Register in respect of the share, to the exclusion of the

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	other joint holders. For such purpose, a joint holder having no registered address in the United Kingdom and not having supplied an address within the United Kingdom for the service of notices may, subject to any Act applying to the Company, be disregarded.
142.3	The provisions of this Article shall have effect, subject to the Companies Acts, in place of the Company Communications Provisions regarding notices to joint holders.
143	Notices for shareholders with foreign addresses
	Subject to the Companies Acts and any other Act applying to the Company, the Company shall not be required to send offers, notices, information or any other documents to a shareholder who (having no registered address within the United Kingdom) has not supplied to the Company a postal address within the United Kingdom for the service of notices.
144	When notices are served
144.1	If an offer, notice, information or any other document is delivered or served by hand, it is treated as being delivered or served at the time it is handed to the shareholder or left at his registered address.
144.2	If an offer, notice, information or any other document (including a share certificate) is sent or supplied by the Company in hard copy form, or in electronic form, but to be delivered other than by electronic means, and which is sent by pre-paid post and properly addressed shall be deemed to have been received by the intended recipient at the expiration of 24 hours after the time it was posted, and in proving such receipt it shall be sufficient to show that such offer, notice, information or other document was properly addressed, pre-paid and posted.
144.3	If an offer, notice, information or any other document is sent or supplied by the Company by electronic means it shall be deemed to have been received by the intended recipient two hours after it was transmitted, and in proving such receipt it shall be sufficient to show that such offer, notice, information or other document was properly addressed.
144.4	If an offer, notice, information or any other document is sent or supplied by the Company by means of a website it shall be deemed to have been received when the material was first made available on the website or, if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website.
144.5	This Article shall have effect, subject to any mandatory provision of the Companies Acts and any other Act applying to the Company, in place of the Company Communications Provisions relating to when offers, notices, information or any other documents are deemed delivered.
145	Serving notices and documents on shareholders who have died or are bankrupt
145.1	A person who claims to be entitled to a share in consequence of the death or bankruptcy of a shareholder or otherwise by operation of law shall supply to the Company:

• such evidence as the directors may reasonably require to show his title to the share; and

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• an address within the United Kingdom for the service of notices,

	whereupon he shall be entitled to have served upon or delivered to him at such address any offer, notice, information or any other document to which the said shareholder would have been entitled, and such service or delivery shall for all purposes be deemed a sufficient service or delivery of such offer, notice, information or any other document on all persons interested (whether jointly with or claiming through or under him) in the share.
145.2	Save as provided by Article 145.1, any offer, notice, information or any other document delivered or sent to the address of any shareholder in pursuance of these Articles shall, notwithstanding that such shareholder be then dead or bankrupt or in liquidation, and whether or not the Company has notice of his death or bankruptcy or liquidation, be deemed to have been duly delivered or sent in respect of any share registered in the name of such shareholder as sole or first-named joint holder.
145.3	The provisions of this Article shall have effect in place of the Company Communications Provisions regarding the death or bankruptcy of a holder of shares in the Company.
146	If documents are accidentally not sent or the postal services are suspended
146.1	The accidental failure to send, or the non-receipt by any person entitled to any offer, notice, information or any other document relating to any meeting or other proceeding shall not invalidate the meeting or other proceeding.
146.2	If at any time by reason of the suspension or curtailment of postal services within the United Kingdom the Company is unable to give notice by post in hard copy form of a shareholders’ meeting, such notice shall be deemed to have been given to all shareholders entitled to receive such notice in hard copy form if such notice is advertised in at least one national newspaper and such notice shall be deemed to have been given on the day when the advertisement appears. In any such case, the Company shall (i) make such notice available on its website from the date of such advertisement until the conclusion of the meeting or any adjournment thereof and (ii) send confirmatory copies of the notice by post to such shareholders if at least seven days prior to the meeting the posting of notices again becomes practicable.
147	Signature or authentication of documents
147.1	Where these Articles require an offer, notice, information or any other document to be signed or authenticated by a shareholder or any other person then any such offer, notice or other document sent or supplied in electronic form or by means of a website shall be sufficiently authenticated in any manner authorised by the Company Communications Provisions or in such other manner approved by the directors.
147.2	The directors may determine procedures for validating offers, notices, information or any other documents sent or supplied in electronic form or by means of a website, and any offer, notice, information or any other document, not validated in accordance with such procedures shall be deemed not to have been received by the Company.

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MINUTES AND RECORDS

148	Minutes
148.1	The directors must ensure that minutes are entered in books kept for the purpose of:

• all appointments of officers made by the directors;

• the names of the directors present at each directors’ meeting and of any committee of the directors;

• all resolutions and proceedings at all General Meetings of the Company, the holders of any class of shares in the Company, the directors and any committees of the directors;

	and every director present at any directors’ meeting or committee meeting must sign his name in a book to be kept for that purpose.
148.2	If any such minute purports to be signed or authenticated by the chairman of the meeting at which the proceedings took place or by the chairman of the next succeeding meeting this shall be conclusive evidence of the proceedings.
149	Availability of records for inspection and notifying the Registrar of Companies
149.1	The Company must keep and make available for inspection as required by the Companies Acts:

• a register of the directors and Secretary which must include all information required by the Companies Acts (and from time to time the Company must notify the registrar of companies of changes to the register and the date of the change in the manner required by the Companies Acts);

• copies and memoranda of directors’ service contracts with the Company and any of its subsidiaries;

• a register for recording information relating to interests in the share capital of the Company.

149.2 The directors must ensure that a register is kept in accordance with the Companies Acts of all charges specifically affecting property of the Company and of all floating charges on the whole or part of the Company’s property or undertaking, and the directors must comply with the Companies Acts in relation to registration of charges.

WINDING UP

150	Directors’ power to petition
	The directors can present a petition to the Court in the name and on behalf of the Company for the Company to be wound up.

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151

Distribution of assets in kind

If the Company is wound up (whether the liquidation is voluntary, under supervision of the Court, or by the Court) the liquidator can, with the authority of a special resolution passed by the shareholders and any other sanction required by the Companies Acts or any other Act, divide among the shareholders the whole or any part of the assets of the Company. This applies whether the assets consist of property of one kind or different kinds. For this purpose, the liquidator can place whatever value he considers fair upon any property and decide how the division is carried out as between shareholders or different classes of shareholders. The liquidator can also, with the authority of a special resolution passed by the shareholders and any other sanction required by the Companies Acts or any other Act, transfer any part of the assets to trustees upon any trusts for the benefit of shareholders which the liquidator decides. However no past or present shareholder can be compelled to accept any shares or other securities under this Article which carry a liability.

DESTROYING DOCUMENTS

152	Destroying documents
152.1	The Company can destroy all:

• forms of transfer of shares, and documents sent to support a transfer, and any other documents which were the basis for making an entry on the Register, after six years from the date of registration;

• dividend payment instructions and notifications of a change of address or name, after two years from the date these were registered; and

• cancelled share certificates, one year after the date they were cancelled.

152.2	A document destroyed in accordance with Article 152.1 is conclusively treated as having been a valid and effective document in accordance with the Company’s records relating to the document. Any action of the Company in dealing with the document in accordance with its terms before it was destroyed is conclusively treated as properly taken.
152.3	Articles 152.1 and 152.2 only apply to documents which are destroyed in good faith and if the Company has not been informed that keeping the documents is relevant to any claim.
152.4	For documents relating to shares in uncertificated form, the Company must also comply with any rules (as defined in the CREST Regulations) which limit its ability to destroy these documents.
152.5	This Article does not make the Company liable if it:

• destroys a document earlier than referred to in Article 152.1; or

• would not be liable if this Article did not exist.

152.6 This Article applies whether a document is destroyed or disposed of in any other manner.

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DIRECTORS’ LIABILITIES

153	Indemnity
153.1	Subject to the provisions of, and so far as may be permitted by and consistent with, the Companies Acts, rules made by the UK Listing Authority and local law as applicable, every director, Secretary and officer of the Company and of each Associated Company of the Company may be indemnified by the Company out of its own funds against:

• any liability incurred by or attaching to him in connection with any negligence, default, breach of duty or breach of trust by him in relation to the Company or any Associated Company of the Company other than in the case of a director of the Company or any Associated Company:

(i)	any liability to the Company or any Associated Company; and
(ii)	any liability of the kind referred to in Section 234(3) of the Companies Act 2006; and

• any other liability incurred by or attaching to him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office.

153.2 Subject to the provisions of, and so far as may be permitted by and consistent with, the Companies Acts, the rules of the UK Listing Authority and local law as applicable, every director, Secretary and officer of the Company and of each Associated Company of the Company may be indemnified by the Company out of its own funds against:

• any liability incurred by or attaching to him in connection with any negligence, default, breach of duty or breach of trust by him in relation to the Company or any Associated Company of the Company, if it is the trustee of an occupational pension scheme (within the meaning of Section 235(6) of the Companies Act 2006), in so far as such liability relates to the Company’s or any such Associated Companies’ activities as trustee of such occupational pension scheme and other than in the case of a director of the Company or any Associated Company any liability of the kind referred to in Section 235(3) of the Companies Act 2006; and

• any other liability incurred by or attaching to him in the actual or purported execution and/or discharge of his duties and/or the exercise or purported exercise of his powers and/or otherwise in relation to or in connection with his duties, powers or office.

153.3	Where a director, Secretary or officer is indemnified against any liability in accordance with this Article 153, such indemnity shall extend to all costs, charges, losses, expenses and liabilities incurred by him in relation thereto.
153.4	In this Article Associated Company shall have the meaning given by Section 256 of the Companies Act 2006.
153.5	So far as the Companies Acts allow, the Secretary and other officers, who are not directors of the Company or an Associated Company of the Company of the Company are exempted from any liability to the Company or any Associated Company of the Company where that liability would be covered by the indemnity in Article 153.1.

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154	Insurance and Defence funding
154.1	For the purpose of this Article each of the following is a Relevant Company:

• the Company;

• any holding company of the Company;

• any company in which the Company or its holding company or any of the predecessors of the Company or of its holding company has or had any interest, whether direct or indirect; and

• any company which is in any way allied to or associated with the Company, or any subsidiary undertaking of the Company or such other company.

154.2 Without limiting Article 153 in any way, the directors can arrange for the Company to purchase and maintain insurance for or for the benefit of any persons who are or were at any time:

• directors, officers or employees of any Relevant Company; or

• trustees of any pension fund or employees’ share scheme in which employees of any Relevant Company are interested.

This includes, for example, insurance against any liability incurred by them for any act or omission:

• in performing or omitting to perform their duties; and/or

• in exercising or omitting to exercise their powers; and/or

• in claiming to do any of these things; and/or

• otherwise in relation to their duties, powers or offices.

154.3 Subject to the provisions of and so far as may be permitted by the Companies Act, rules made by the UK Listing Authority and local law as applicable, the Company:

• may provide a director, Secretary or officer of the Company or any Associated Company of the Company with funds to meet expenditure incurred or to be incurred by him in:

(i)	defending any criminal or civil proceedings in connection with any negligence, default, breach of duty or breach of trust by him in relation to the Company or an Associated Company of the Company; or
(ii)	in connection with any application for relief under the provisions mentioned in Section 205(5) of the Companies Act 2006; and

• may do anything to enable any such director, Secretary or officer to avoid incurring such expenditure.

154.4 The terms set out in Section 205(2) of the Companies Act 2006 shall apply to any provision of funds or other things done under Article 154.3.

154.5 Subject to the provisions of and so far as may be permitted by the Companies Acts, rules made by the UK Listing Authority and local law as applicable, the Company:

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• may provide a director, Secretary or officer of the Company or any Associated Company of the Company with funds to meet expenditure incurred or to be incurred by him in defending himself in an investigation by a regulatory authority or against action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by him in relation to the Company or any Associated Company of the Company; and

• may do anything to enable any such director, Secretary or officer to avoid incurring such expenditure.

154.6 In this Article Associated Company shall have the meaning given thereto by Section 256 of the Companies Act 2006.

SHARE WARRANTS

155	Issue of Share Warrants
155.1	The Company can issue Share Warrants which state that the bearer of the Share Warrant (“Bearer”) is entitled to the shares specified in the Share Warrant. The Company can only do this in a way which is allowed under the Companies Acts and in Articles 155 to 162. Share Warrants can provide for the payment of future dividends and other distributions relating to the shares. Payment can be made by exchanging coupons which can be attached to the Share Warrants, or in any other way which the directors determine.
155.2	The Bearer of a Share Warrant is entitled to the number of shares which are specified in it. These shares can be transferred by one person delivering the Share Warrant to another.
155.3	Subject to Article 155.2, the provisions of the Articles relating to share certificates and transferring shares do not apply to Share Warrants.
155.4	Each Share Warrant must be issued under the Seal.
155.5	The directors can decide on the language and form of, and the number of shares represented by, each Share Warrant.
156	Directors can accept a certificate instead of a Share Warrant
156.1	The directors can accept a certificate from the persons referred to in Article 156.2 stating that they hold Share Warrants on behalf of someone named in the certificate as proof of matters set out in such certificate. The certificate will be in such form as the directors decide (including details of the number of shares to which the Share Warrant relates).
156.2	The only people who may deliver a certificate to the Company are the ADR Depositary or any bank or agent which has been appointed by the Company. For the purposes of Articles 155 to 161, the Company can treat the deposit of the certificate as though the Share Warrant itself had been deposited at the Transfer Office.
156.3	As long as the certificate is in a form agreed by the directors, the Company does not need to make any further enquiry into the accuracy of the information contained in the certificate.

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157	Requesting a Share Warrant
157.1	A Share Warrant will only be issued if a shareholder requests in writing that a Share Warrant is issued for some or all of the shares which are registered in his name.
157.2	The request must be addressed to the directors at the Transfer Office. The directors can specify the form of the request, and can require that evidence is sent with the request to prove the identity of the person making the request and his right to the shares. The directors do not have to agree to this request.
157.3	Where a shareholder requests that Share Warrants are issued in relation to shares registered in his name, and there are share certificates in respect of those shares, a Share Warrant will only be issued once the share certificates have been delivered to the Transfer Office for cancellation.
157.4	A person who requests a Share Warrant (including a person requesting a Share Warrant in the circumstances described in Article 158) is responsible (and will re-imburse the Company) for all and any stamp duties, stamp duty reserve tax, bearer instrument duty, taxes, charges, fees, interest and penalties payable in connection with the issue of the Share Warrants. This Article 157.4 applies unless the person requesting the Share Warrant agrees otherwise with the Company.
158	Replacing Share Warrants
158.1	If a Share Warrant is damaged or defaced, the Bearer can request a new one, once he returns the damaged or defaced Share Warrant to the directors at the Transfer Office. Once any payments of the types described in Article 157.4 are made (if any), a new Share Warrant will be issued.
158.2	If a Share Warrant is said to have been lost, stolen or destroyed, the directors can issue a replacement (although they do not have to do so). The directors can require satisfactory evidence of the loss, theft or destruction, an indemnity, the payment of any exceptional out of pocket expenses, and payments of the types described in Article 157.4 before issuing a replacement.
158.3	The Bearer can ask the directors to cancel his existing Share Warrant and replace it with two (or more) Share Warrants which together represent the same number of shares which the original single Share Warrant represented. The directors do not have to comply with this request. If they do, the Bearer will have to surrender his original Share Warrant and can be required by the directors to make any payments of the types described in Article 157.4 before the new Share Warrants are issued.
159	Rights of the Bearer
159.1	The Bearer (or a person who has deposited his Share Warrant in accordance with Article 159.2 or if the directors so decide, Article 156.2) shall be entitled to the same rights and be subject to the same obligations as those to which he would be entitled or subject if he were the registered holder of the shares to which the Share Warrant relates. This is subject to the provisions of Articles 155 to 162.
159.2	Where a Bearer deposits his Share Warrant, together with a declaration in writing giving his name and address, at the Transfer Office (or some other place specified by the

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directors) he has certain rights at any General Meeting provided that such Share Warrant is deposited at least 48 hours in advance of such meeting. For as long as the Share Warrant remains so deposited, the person who deposited it will have the following rights as if he were the registered holder from the time of deposit of the shares specified in the Share Warrant at a General Meeting:

• the right to sign a form requiring a General Meeting;

• the right to give notice of his intention to submit a resolution at a General Meeting;

• the right to attend, speak and vote, appoint a proxy and exercise the other rights of a shareholder at a General Meeting.

159.3	Any Share Warrant which is deposited in accordance with Article 159.2 must remain deposited until the end of the General Meeting at which the person who deposited the Share Warrant desires to attend or be represented.
159.4	If a person presents a Share Warrant at the Transfer Office, the Company is entitled to assume that this person is the owner of the Share Warrant. The Company can pay dividends or moneys relating to the shares specified in the Share Warrant which are due to this person either to such person or to an account specified by him. If the Company does this, it shall have performed its obligation to pay that dividend or those moneys.
160	Bearers of Share Warrants participating in securities offers
160.1	In the case of a securities offer, there is no need to contact any Bearer individually. Instead, all the Company need do is advertise the details of the securities offer in a leading United Kingdom national daily newspaper (and any other newspapers the directors decide on).
160.2	If, following the publication of the advertisement referred to above, the Bearer deposits the Share Warrant (or, if appropriate, the coupon attached to the Share Warrant) at the Transfer Office (or some other place mentioned in the advertisement), within the time limit set out in the securities offer, he shall have the same right to participate in the securities offer as if he were the registered holder of the shares specified in the Share Warrant.
160.3	For the purposes of this Article, a securities offer means an offer of shares, securities or debentures to shareholders or any class of shareholders, or a proposed issue of shares pursuant to Article 134.
161	Communications with Bearers of Share Warrants
161.1	In the case of any communication (for example, a notice of General Meeting, a circular or annual report) with shareholders, there is no need for the Company to contact any Bearer individually. Instead, all the Company need do is advertise the communication in a leading United Kingdom national daily newspaper (and any other newspapers the directors decide on), giving an address where copies of the communication may be obtained by the Bearer.
161.2	The Company must communicate with the Bearer in a different way, if the London Stock Exchange requires this.

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162	Issuing shares to which the Share Warrant relates
162.1	The Bearer can ask to be registered as a shareholder (or that another person be so registered) in respect of all or any of the shares specified in the Share Warrant. In order to do so he must deposit at the Transfer Office (or another place specified by the directors):

• the Share Warrant; and

• a signed declaration in a form agreed by the directors which sets out the names and addresses of the persons, and the numbers of shares, in whose name he wishes such shares to be registered.

162.2	The Company will comply with a request made in accordance with Article 162.1 only upon the payment (or reimbursement) by the Bearer of all and any stamp duties, stamp duty reserve tax, bearer instrument duty, taxes, charges, fees, interest and penalties payable in connection with the issue of the shares. The Company may, however, agree that any such taxes or costs do not have to be paid by the Bearer.
162.3	If the Company complies with a request made in accordance with Article 162.1, the person named in the declaration will be entitled to have his name entered as a member in the Register in respect of the shares specified in the declaration and to receive a share certificate for them. The time limit for the Company to prepare a share certificate under this Article 162.3 is two months from the decision to comply with a request made in accordance with Article 162.1.
162.4	If the declaration does not deal with all the shares to which the Share Warrant relates, a new Share Warrant for the remaining shares will be issued, without charge, to the person who deposited the old Share Warrant. The new Share Warrant will only be issued upon the cancellation of the old Share Warrant.

ADR DEPOSITARY

163	ADR Depositary can appoint proxies
163.1	The ADR Depositary can appoint more than one person to be its proxy. As long as the appointment complies with the requirements in Article 163.2, the appointment can be made in any way and on any terms which the ADR Depositary thinks fit. Each person appointed in this way is called an Appointed Proxy.
163.2	The appointment must set out the number of shares in relation to which an Appointed Proxy is appointed. This number is called the Appointed Number. The Appointed Numbers of all Appointed Proxies appointed by the ADR Depositary, when added together, must not be more than the number of Depositary Shares (as calculated in Article 163.3).
163.3	The Depositary Shares attributable to the ADR Depositary consist of the total of the number of shares:

• registered in the name of the ADR Depositary;

• represented by Share Warrants which have been deposited by the ADR Depositary with the Company in accordance with Article 159; and

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• represented by Share Warrants which are set out in a certificate from the ADR Depositary accepted by the directors in accordance with Article 156.

164	The ADR Depositary must keep a Proxy Register
164.1	The ADR Depositary must keep a register of the names and addresses of all the Appointed Proxies. This is called the Proxy Register. The Proxy Register will also set out the Appointed Number of shares of each Appointed Proxy. This can be shown by setting out the number of American Depositary Receipts which each Appointed Proxy holds and stating that the Appointed Number of shares can be ascertained by multiplying the said number of American Depositary Receipts by such number which for the time being is equal to the number of shares which any one American Depositary Receipt represents.
164.2	The ADR Depositary must let anyone whom the directors nominate inspect the Proxy Register during usual business hours on a working day. The ADR Depositary must also provide, as soon as possible, any information contained in the Proxy Register if it is demanded by the Company or its agents.
165	Appointed Proxies can only attend General Meetings if properly appointed
	An Appointed Proxy may only attend a General Meeting if he provides the Company with evidence in writing of his appointment by the ADR Depositary for that General Meeting. This must be in a form agreed between the directors and the ADR Depositary.
166	Rights of Appointed Proxies
	Subject to the Companies Acts and these Articles and so long as the Depositary Shares are sufficient to include an Appointed Proxy’s Appointed Number:

• at a General Meeting which an Appointed Proxy is entitled to attend, he is entitled to the same rights and has the same obligations in relation to his Appointed Number of shares as if the ADR Depositary was the registered holder of such shares and he had been validly appointed in accordance with Articles 75 to 77 by the ADR Depositary as its proxy in relation to those shares; and

• an Appointed Proxy can himself appoint another person to be his proxy in relation to his Appointed Number of shares, as long as the appointment is made and deposited in accordance with Articles 75 to 77 and, if it is, the provisions of these Articles will apply to such an appointment as though the Appointed Proxy was the registered holder of such shares and the appointment was made by him in that capacity.

167	Sending information to an Appointed Proxy
	The Company can send to an Appointed Proxy at his address in the Proxy Register all the same documents which are sent to shareholders.

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168	The Company can pay dividends to an Appointed Proxy
	The Company can pay to an Appointed Proxy at his address in the Proxy Register all dividends or other moneys relating to the Appointed Proxy’s Appointed Number of shares instead of paying this amount to the ADR Depositary. If the Company does this, it will not have any obligation to make this payment to the ADR Depositary as well.
169	The Proxy Register may be fixed at a certain date
169.1	In order to determine which persons are entitled as Appointed Proxies to:

• exercise the rights conferred by Article 166;

• receive documents sent pursuant to Article 167; and

• be paid dividends pursuant to Article 168

	and the Appointed Number of shares in respect of which a person is to be treated as having been appointed as an Appointed Proxy for such purpose, the ADR Depositary may determine that the Appointed Proxies who are entitled are the persons entered in the Proxy Register at the close of business on a date (a Record Date) determined by the ADR Depositary in consultation with the Company.
169.2	When a Record Date is determined for a particular purpose:

• the Appointed Number of shares in respect of an Appointed Proxy will be treated as the number appearing against his name in the Proxy Register as at the close of business on the Record Date;

• this can be shown by setting out the number of American Depositary Receipts which each Appointed Proxy holds and stating that the number of shares can be ascertained by multiplying the said number of American Depositary Receipts by such number which for the time being is equal to the number of shares which any one American Depositary Receipt represents; and

• changes to entries in the Proxy Register after the close of business on the Record Date will be ignored in determining the entitlement of any person for the purpose concerned.

170	The nature of an Appointed Proxy’s interest
	Except as required by the Companies Acts, no Appointed Proxy will be recognised by the Company as holding any interest in shares upon any trust. Except for recognising the rights given in relation to General Meetings by appointments made by Appointed Proxies pursuant to Article 166, the Company is entitled to treat any person entered in the Proxy Register as an Appointed Proxy as the only person (other than the ADR Depositary) who has any interest in the shares in respect of which the Appointed Proxy has been appointed.
171	Validity of the appointment of Appointed Proxies
171.1	If any question arises as to whether any particular person or persons has or have been validly appointed to vote (or exercise any other right) in respect of any shares (for example

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because the total number of shares in respect of which appointments are recorded in the Proxy Register is more than the number of Depositary Shares) this question will, if it arises at or in relation to a General Meeting be determined by the chairman of the General Meeting. His decision (which can include declining to recognise a particular appointment or appointments as valid) will, if made in good faith, be final and binding on all persons interested.

171.2

If a question of the type described in Article 171.1 arises in any circumstances other than at or in relation to a General Meeting, the question will be determined by the directors. Their decision (which can include declining to recognise a particular appointment or appointments as valid) will also, if made in good faith, be final and binding on all persons interested.

Rights and Restrictions Attached to the B Shares

172	Definitions
	The following definitions will apply solely in Articles 172 to 189:

• B Share Continuing Dividend means the non-cumulative preferential dividend payable on a Dividend Payment Date in relation to each B Share at the rate (on the nominal value thereof) of 75 per cent. of Sterling LIBOR calculated in accordance with these Articles;

• B Share Dividend Calculation Period means each six month period within the Future Redemption Period ending on either 4 February or 4 August used for the calculation of the B Share Continuing Dividend on the B Shares, the first such period commencing on 5 August 2006 and ending on 4 February 2007 provided that B Shares which are redeemed on the First Redemption Date or converted into Deferred Shares on 7 August 2006 will not qualify for the payment of any B Share Continuing Dividend;

• B Shares means redeemable non-cumulative preference shares of 15 pence each in the capital of the Company;

• Business Day means a day (other than a Saturday, Sunday or public holiday) on which pounds sterling deposits may be dealt in on the London inter-bank market and commercial banks are open for general business in London;

• CREST means the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which CRESTCo Limited is the Operator (as defined in such regulations);

• Deferred Shares means the unlisted deferred shares of 15 pence each, the rights and restrictions attached to which are set out in Articles 182 to 188;

• Dividend Payment Dates means 5 February and 5 August in each year within the Future Redemption Period (or, if not a Business Day, the next Business Day (without any interest or payment in respect of the delay)) and Dividend Payment Date will be construed accordingly;

• Election means an election by shareholders in relation to their B Shares to (i) accept an initial redemption of the B Shares; (ii) receive an initial dividend on the B

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	Shares; or (iii) accept a future redemption of the B Shares, either by completing, signing and returning the election form which was enclosed with the circular to shareholders dated 13 June 2006, or by submitting an Unmatched Stock Event instruction through CREST;
•	First Redemption Date means 4 August 2006;
•	Future Redemption Date means 5 February and/or 5 August in any calendar year within the Future Redemption Period;
•	Future Redemption Form means the form, printed on the reverse of each B Share certificate, by means of which shareholders holding their B Shares in certificated form may elect to have their B Shares redeemed on a Future Redemption Date;
•	Future Redemption Period means the period beginning on 5 August 2006 and ending on 4 August 2008;
•	Sterling LIBOR means the rate for six-month deposits in pounds sterling for a period of designated maturity which appears on the Reuters screen ISDA page (or such other page or service as may replace it for the purpose of displaying London inter-bank offered rates of leading banks for pounds sterling deposits as determined by the Company) as at 11.00 a.m. on the first Business Day of each B Share Dividend Calculation Period;
•	US Shareholders means shareholders (beneficial or otherwise) who have an address in the United States on the Company’s register of members or who are physically located in the United States.

173	Income
173.1	If the Company has profits which are available for distribution and the directors resolve that these should be distributed, the holders of the B Shares will be entitled, before the payment of dividends or other distributions to the holders of Ordinary Shares but after the payment of the preferential dividend on the Fixed Rate Shares, to be paid the B Share Continuing Dividend. The B Share Continuing Dividend will be paid at the rate (on the nominal value of the B Shares which is paid up or treated as paid up) of 75 per cent. of Sterling LIBOR, in arrears half yearly on the Dividend Payment Dates. The first Dividend Payment Date will be 5 February 2007 which will cover the period from 5 August 2006 to 4 February 2007. B Shares which are redeemed on the First Redemption Date or which are converted into Deferred Shares will not qualify for the payment of any B Share Continuing Dividend.
173.2	Payments of B Share Continuing Dividends will be made to holders of B Shares whose names appear on the relevant register of members of the Company, if the relevant Dividend Payment Date is 5 February at the close of business on 21 January in the same calendar year and if the relevant Dividend Payment Date is 5 August at the close of business on 21 July in the same calendar year. The aggregate entitlement on a Dividend Payment Date of each holder of B Shares in respect of the B Share Continuing Dividend on all B Shares held by him will be rounded down to the nearest whole penny.
173.3	The B Shares will not confer any other right to share in the Company’s profits.

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174	Capital
174.1	If the Company is wound up (but in no other circumstances involving a repayment of capital or distribution of assets to shareholders whether by reduction of capital, redeeming or buying back shares or otherwise), the holders of B Shares will be entitled, before any payment to the holders of Ordinary Shares but after any payment to the holders of Fixed Rate Shares, to repayment of the amount paid up or treated as paid up on the nominal value of each B Share, together with any outstanding entitlement to the B Share Continuing Dividend up to the Dividend Payment Date immediately before the winding-up. The aggregate entitlement of each holder of B Shares on a winding-up in respect of all of the B Shares held by him will be rounded down to the nearest whole penny.
174.2	The holders of B Shares will not have any other right to share in the Company’s surplus assets. If there is a winding-up to which Article 174.1 applies and there is not enough to pay the amounts due on the B Shares, the holders of the B Shares will share what is available in proportion to the amounts to which they would otherwise be entitled.
175	Redemption
	The Company may (in accordance with the Companies Acts and the provisions of these Articles) redeem the B Shares in accordance with the following provisions:
175.1	Unless redeemed earlier, on 5 August 2008.
175.2	Holders of B Shares who have made an Election by 3.00 p.m. on 3 August 2006 (or any later date the directors may decide) to have some or all of their B Shares redeemed will be able to have that number of B Shares redeemed on the First Redemption Date.
175.3	After the First Redemption Date, holders of B Shares will be able to elect to have any outstanding B Shares redeemed on a Future Redemption Date (or, if not a Business Day, the next Business Day (without any interest or payment in respect of the delay)) by returning a Future Redemption Form or submitting an Unmatched Stock Event instruction, as applicable. If a Future Redemption Form or an Unmatched Stock Event instruction is returned for settlement for all or part of their B Shares then in issue by:

• 5.00 p.m. on 21 January (or any later date the directors may decide) in the calendar years 2007 and/or 2008, the relevant B Shares will be redeemed on 5 February (or, if not a Business Day, the next Business Day (without any interest or payment for the delay)) in such calendar year; and

• 5.00 p.m. on 21 July (or any later date the directors may decide) in the calendar years 2007 and/or 2008, the relevant B Shares will be redeemed on 5 August (or, if not a Business Day, the next Business Day (without any interest or payment for the delay)) in such calendar year.

175.4 Each holder of a B Share that is redeemed (excluding B Shares that are redeemed on the First Redemption Date), will be paid a sum equal to the nominal value of that B Share, plus the B Share Continuing Dividend for the relevant B Share Dividend Calculation Period. Each holder of a B Share that is redeemed on the First Redemption Date will be paid a sum equal to the nominal value of that B Share but no B Share Continuing Dividend will be payable on such B Share. The total entitlement of a holder of B Shares to the nominal value of the B Shares being redeemed, plus any B Share Continuing Dividend payable on those B Shares, will be rounded down to the nearest whole penny.

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175.5	On or after the redemption of any B Shares (in accordance with these Articles), the directors may (in accordance with the Companies Acts) consolidate and/or subdivide and/or convert and/or reclassify the authorised B Share capital of the Company (including any unissued authorised B Share capital) (i) into shares of another class (provided the authorised share capital of the Company now or at that time includes shares of that class) and/or (ii) into unclassified shares.
175.6	US Shareholders and holders of American Depositary Receipts are not eligible to participate in any redemption of the B Shares. Any purported Elections to redeem B Shares by US Shareholders or holders of American Depositary Receipts will be treated as invalid and disregarded.
176	Initial B Share Dividend
176.1	The holders of B Shares will be entitled to a dividend of 15 pence per B Share (the Initial B Share Dividend) provided their names are entered on the register of members of the Company on issue of the B Shares and they have notified the Company’s registrar by validly making an Election on or before 3.00 p.m. on 3 August 2006 (or any later date the Directors may decide) indicating that they wish to receive the Initial B Share Dividend. Each B Share, in respect of which the Initial B Share Dividend is payable, will at 9.00 a.m. on 7 August 2006 (or any other date the directors may decide) be converted into a Deferred Share of 15 pence nominal value. The rights and restrictions attaching to the Deferred Shares are set out in Articles 182 to 188.
176.2	US Shareholders and holders of American Depositary Receipts will automatically receive the Initial B Share Dividend without making an Election.
177	Voting at General Meetings
177.1	The holders of B Shares will only receive notice of General Meetings of the Company and will only be able to attend, speak and vote at such general meetings if a resolution is to be proposed at the general meeting to wind up the Company, in which case the holders of B Shares will receive notice of the General Meeting and will have the right to attend, speak and vote on that resolution only.
177.2	If the holders of the B Shares are entitled to vote at a general meeting of the Company, each holder present in person or by proxy (or, being a company, by representative) will have one vote on a show of hands, and on a poll every holder who is present in person or by proxy (or, being a company, by a company representative) will have one vote for each fully paid B Share.
178	Purchase of Shares
	The Company will not require the sanction or the consent of the holders of B Shares for the purchase or redemption of shares of any class in the Company (including, without limitation, Fixed Rate Shares, Ordinary Shares and/or B Shares).

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179	Class Rights
179.1	The Company may from time to time issue new shares which have rights or restrictions attaching to them. The rights of the new shares can take priority over the rights of the B Shares. The issue of any such new shares will be in accordance with the rights attaching to the B Shares and will not involve a variation of those rights or require the consent of holders of the B Shares.
179.2	The Company may reduce the share capital paid up or treated as paid up on the B Shares in any way (in accordance with the Companies Acts). Any such reduction will be in accordance with the rights attaching to the B Shares and will not involve a variation of those rights. The Company can reduce its capital (in accordance with the Companies Acts) at any time without the consent of the holders of the B Shares including by paying to the holders of B Shares the preferential amounts they are entitled to as set out in Article 174.
180	Form
	The holders of B Shares cannot renounce their B Shares. Any transfer of B Shares must be effected in writing and either in the usual or standard form or in any other form approved by the directors. Every transfer of uncertificated B Shares must be carried out using a relevant system (e.g. CREST). For the avoidance of doubt B Shares will be redeemed in accordance with Article 175.
181	Deletion of Articles 172 to 181 when no B Shares in existence
181.1	Articles 172 to 181 shall remain in force until there are no longer any B Shares in existence whether by way of conversion into Deferred Shares or redemption and cancellation or until 31 December 2008, whichever is earlier, notwithstanding any provision in these Articles to the contrary. Thereafter Articles 172 to 181 shall be and shall be deemed to be of no effect (save to the extent that the provisions of 172 to 181 are referred to in other Articles) and shall be deleted and replaced with the wording “Articles 172 to 181 have been deleted”, and the separate register for the holders of B Shares shall no longer be required to be maintained by the Company; but the validity of anything done under Articles 172 to 181 before that date shall not otherwise be affected and any actions taken under Articles 172 to 181 before that date shall be conclusive and shall not be open to challenge on any grounds whatsoever.

Rights and Restrictions Attached to the Deferred Shares

182	Income
	The Deferred Shares will confer no right to share in the Company’s profits.
183	Capital
183.1	If the Company is wound up (but in no other circumstances involving a repayment of capital or distribution of assets to shareholders whether by reduction of capital, redeeming

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or buying back shares or otherwise), the holders of Deferred Shares will be entitled to the amount paid up or treated as paid up on the nominal value of each Deferred Share after:

• first, paying to the holders of Fixed Rate Shares the amount paid up or treated as paid up on the nominal value of each Fixed Rate Share, together with any dividend, arrears of dividend or proportion of any dividend to which they are entitled under these Articles;

• secondly, paying to the holders of B Shares the amount paid up or treated as paid up on the nominal value of each B Share together with any outstanding entitlement to the B Share Continuing Dividend up to the Dividend Payment Date immediately before the winding-up; and

• thirdly, paying to the holders of Ordinary Shares the amount paid up or treated as paid up on the nominal value of each Ordinary Share together with the sum of £1,000 on each Ordinary Share.

183.2	The holders of Deferred Shares have no further right to share in the Company’s surplus assets.
184	Redemption
184.1	The Company may, at any time (in accordance with the Companies Acts and the provisions of these Articles) without prior notice, redeem all Deferred Shares for a total price of not more than one penny for all Deferred Shares redeemed.
185	Attendance and voting at general meetings
	The holders of the Deferred Shares will not receive notice of any general meeting of the Company or be able to attend, speak or vote at any general meeting.
186	Form
	The Deferred Shares will not be listed on any stock exchange and no share certificates will be issued for the Deferred Shares. The Deferred Shares will not be transferable except in accordance with Article 188 or with the consent in writing of the Directors.
187	Class rights
187.1	The Company may from time to time issue new shares which have rights or restrictions attaching to them. The rights of the new shares can take priority over the rights of the Deferred Shares. The issue of any such new shares will be in accordance with the rights attaching to the Deferred Shares and will not involve a variation of those rights or require the consent of the holders of the Deferred Shares.
187.2	The Company may reduce the share capital paid up or treated as paid up on the Deferred Shares in any way (in accordance with the Companies Acts). Any such reduction will be in accordance with the rights attaching to the Deferred Shares and will not involve a variation of those rights. The Company can reduce its capital (in accordance with the Companies Acts) at any time without the consent of the holders of the Deferred Shares.

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188	Transfer and purchase
	The Company can at any time (in accordance with the Companies Acts) without the consent of the holders of the Deferred Shares:

• appoint any person to sign (on behalf of the holders of the Deferred Shares) a transfer of all or any part of their holding to the Company or any other person the Directors decide (whether or not an officer of the Company), for a total price of not more than one penny for all Deferred Shares transferred; and

• cancel all the Deferred Shares purchased by the Company (in accordance with the Companies Acts).

189

Deletion of Article 182 to 189 when no Deferred Shares in existence

Articles 182 to 189 shall remain in force until there are no longer any Deferred Shares in existence or until 31 December 2008, whichever is earlier, notwithstanding any provision in these Articles to the contrary. Thereafter Articles 182 to 189 shall be and shall be deemed to be of no effect (save to the extent that the provisions of Articles 182 to 189 are referred to in other Articles) and shall be deleted and replaced with the wording “Articles 182 to 189 have been deleted”, and the separate register for the holders of Deferred Shares shall no longer be required to be maintained by the Company; but the validity of anything done under Articles 182 to 189 before that date shall not otherwise be affected and any actions taken under Articles 182 to 189 before that date shall be conclusive and shall not be open to challenge on any grounds whatsoever.

Approved Depositaries

190	Appointments
190.1	Subject to these Articles and the relevant Act or Acts, an Approved Depositary can appoint as its proxy or proxies in relation to any Ordinary Shares which it holds, anyone it thinks fit and can decide how and on what terms to appoint them. Each appointment must state the number of Ordinary Shares it relates to and the total number of Ordinary Shares in respect of which appointments exist at any time must not be more than the total number of Depositary Shares which are registered in the name of the Approved Depositary or its nominee at that time.
190.2	The Approved Depositary must keep a register (the Nominated Proxy Register) of each person it has appointed as a Nominated Proxy under Article 190.1 and the Appointed Number. The directors will decide what information about each Nominated Proxy is to be recorded in the Nominated Proxy Register. Any person authorised by the Company may inspect the Nominated Proxy Register during usual business hours and the Approved Depositary will give such person any information which he requests as to the contents of the Nominated Proxy Register.

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191	Rights of Nominated Proxies
191.1	A Nominated Proxy may only attend a General Meeting if he provides the Company with evidence in writing of his appointment as such. This must be in a form agreed between the directors and the Approved Depositary.
191.2	Subject to these Articles and the relevant Act or Acts, and so long as the Approved Depositary or a nominee of the Approved Depositary holds at least his Appointed Number of Ordinary Shares, a Nominated Proxy is entitled to attend a General Meeting which holders of Ordinary Shares are entitled to attend, and he is entitled to the same rights, and subject to the same obligations, in relation to his Appointed Number of Depositary Shares as if he had been validly appointed in accordance with Articles 75 to 79 by the registered holder of these shares as its proxy in relation to those shares.
191.3	A Nominated Proxy may appoint another person as his proxy for his Appointed Number of Depositary Shares, as long as the appointment is made and deposited in accordance with Articles 75 to 79, and these Articles apply to that appointment and to the person so appointed as though those Depositary Shares were registered in the name of the Nominated Proxy and the appointment was made by him in that capacity. The directors may require such evidence as they think appropriate to decide that such appointment is effective.
191.4	For the purposes of determining who is entitled as a Nominated Proxy to exercise the rights conferred by Articles 191.2 and 191.3 and the number of Depositary Shares in respect of which a person is to be treated as having been appointed as a Nominated Proxy for these purposes, the Approved Depositary can decide that the Nominated Proxies who are so entitled are the people entered in the Nominated Proxy Register at a time and on a date (a Record Time) agreed between the Approved Depositary and the Company.
191.5	When a Record Time is decided for a particular purpose:-

• a Nominated Proxy is to be treated as having been appointed for that purpose for the number of shares appearing against his name in the Nominated Proxy Register as at the Record Time; and

• changes to entries in the Nominated Proxy Register after the Record Time will be ignored for this purpose.

191.6

Except for recognising the rights given in relation to General Meetings by appointments made by Nominated Proxies pursuant to Article 191.3, the Company is entitled to treat any person entered in the Nominated Proxy Register as a Nominated Proxy as the only person (other than the Approved Depositary) who has any interest in the Depositary Shares in respect of which the Nominated Proxy has been appointed.

191.7

At a General Meeting the Chairman has the final decision as to whether any person has the right to vote or exercise any other right relating to any Depositary Shares. In any other situation, the Directors have the final decision as to whether any person has the right to exercise any right relating to any Depositary Shares.

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Glossary

About the glossary

This glossary is to help readers understand the Company’s Articles of Association. Words are explained as they are used in the Articles - they might mean different things in other documents. The glossary is not legally part of the Articles, and it does not affect their meaning. The definitions are intended to be a general guide — they are not precise.

abrogate If the special rights of a share are abrogated, they are cancelled or withdrawn.

accrue If interest is accruing, it is running or mounting up, day by day.

adjourned In relation to a shareholders’ meeting, means that the meeting has come to an end for the time being, to be continued at a later time or day, at the same or a different place and adjourned and adjourn shall be construed accordingly.

agent A person who has been appointed to act for another person.

allot When new shares are allotted, they are set aside for the person they are intended for. This will normally be after the person has agreed to pay for a new share, or has become entitled to a new share for any other reason. As soon as a share is allotted, that person gets the right to have his name put on the register of shareholders. When he has been registered, the share has also been issued.

allottee A person to whom a share is allotted (see renunciation).

asset Any property of any description which is of any value to its owner.

attorney An attorney is a person who has been appointed to act for another person in a particular way. The person is appointed by a formal document, called a power of attorney.

automatically entitled to a share by law In some situations, a person will be entitled to have shares which are registered in somebody else’s name registered in his own name. Or he can require the shares to be transferred to another person. When a shareholder dies, or the sole survivor of joint shareholders dies, his personal representatives have this right. If a shareholder is made bankrupt, his trustee in bankruptcy has the right.

beneficial interest A person on whose behalf or for whose benefit a trustee holds shares has a beneficial interest in those shares.

brokerage Commission which is paid to a broker by a company issuing shares, where the broker’s clients have applied for shares.

call A call to pay money which is due on shares which has not yet been paid. This happens if the Company issues shares which are partly paid, where money remains to be paid to the Company for the shares. The money which has not been paid can be “called” for. If all the money to be paid on a share has been paid, the share is called a fully paid share.

capitalise To convert some or all of the reserves of a company into capital (such as shares).

capital redemption reserve A reserve of funds which a company may have to set up to ensure that the Company’s capital base remains the same when shares are redeemed or bought back. It is equivalent to the amount by which the Company’s issued share capital is reduced by the redemption or purchase.

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casual vacancy A vacancy amongst the directors which occurs by reason of the death, resignation or disqualification of a director, or from the failure of an elected director to accept his appointment, or for any other reason except the retirement of a director in accordance with the Articles.

charge See lien and charge.

company representative If a company owns shares, it can appoint a company representative to attend a shareholders’ meeting to speak and vote for it.

consolidate When shares are consolidated, they are combined with other shares. For example, every three £1 shares might be consolidated into one new £3 share.

cumulative dividends If a dividend which is cumulative cannot be paid in one year because the company does not have enough profits to cover the payment, the shareholder has the right to receive the dividend in a future year, when the company has enough profits to pay the dividend. Compare this with a non-cumulative dividend.

debenture A typical debenture is a type of long-term borrowing by a company. The loan usually has to be repaid at a fixed date in the future, and carries a fixed rate of interest.

declare Generally, when a final dividend is declared, it becomes due to be paid.

dividend arrears Any dividend arrears. This includes any dividends on shares with cumulative rights which could not be paid, but which have been carried forward.

dividend warrant A dividend warrant is similar to a cheque for a dividend.

documents of title The documents which show that a person owns something.

ex-dividend When a share goes “ex-dividend”, a person who buys it will not be entitled to the dividend which has been declared shortly before he bought it. When a share has gone “ex-dividend”, the seller is entitled to this dividend, even though it will be paid after he has sold his share.

executed A document is executed when it is signed, authenticated or sealed or made valid in some other way.

exercise When a power is exercised, it is put to use.

forfeit When a share is forfeited it is taken away from the shareholder and becomes the property of the Company which can do with it as it likes. This process is called “forfeiture”. This can happen if a call on a partly-paid share is not paid on time.

fully-paid shares When all of the money which is due to the Company for a share has been paid, a share is called a fully paid share.

good title If a person has good title to a share, he owns it outright.

holding company A company which controls another company (for example by owning a majority of its shares) is called the holding company of that other company. The other company is the subsidiary of the holding company.

indemnity If a person gives another person an indemnity, he promises to make good any losses or damage which the other might suffer. The person who gives the indemnity is said to “indemnify” the other person.

in issue See issue.

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instruments Formal legal documents.

issue When a share has been issued, everything has been done to make the shareholder the owner of the share. In particular, the shareholder’s name has been put on the Register of shareholders. Existing shares which have been issued are “in issue”.

liabilities Debts and other obligations.

liable jointly and severally Where more than one person is liable jointly and severally it means that any one of them may be sued, or they can all be sued together.

lien and charge Where the Company has a lien and charge over shares, it can take the dividends, and any other payments relating to the shares which it has a charge over, or it can sell the shares, to repay the debt and so on.

members means shareholders.

negotiable instrument A document such as a cheque, which can be freely transferred from one person to another.

nominal value The nominal value of the share. The nominal value of the US$0.11³/₇ Ordinary Shares is US$0.11³/₇. This value is shown on the share certificate for a share, if there is one. When the Company issues new shares this can be for a price which is at a premium to the nominal value. When shares are bought and sold on the stock market this can be for more, or less, than the nominal value. The nominal value is sometimes also called the “par value”.

non-cumulative dividends If a dividend which is non-cumulative cannot be paid in one year because the Company does not have enough profits available to cover the payment, the shareholder does not have the right to receive the dividend in a future year. This is the opposite to a cumulative dividend.

objects of a Company The business activities that the Company is authorised to carry on. The Company’s objects are set out in Clause 4 of its Memorandum.

office copy An exact copy of an official document, supplied by the office which holds, or issued, the original.

ordinary resolution A decision reached by a simple majority of votes — that is by more than 50 per cent. of the votes cast.

par value See nominal value.

partly paid shares If any money remains to be paid on a share, it is said to be partly paid. The unpaid money can be “called” for.

personal representatives A person who is entitled to deal with the property (“the estate”) of a person who has died. If the person who has died left a valid will, the will appoints “executors” who are personal representatives. If the person died without a will, the courts will appoint one or more “administrators” to be the personal representatives.

poll A poll vote is usually a card vote but to the extent permitted by the Companies Acts may be an electronic vote. On a poll vote, the number of votes which a shareholder has will depend on the number of shares which he owns. An Ordinary Shareholder has one vote for each share he owns. A poll vote is different to a show of hands vote, where each person who is entitled to vote has just one vote, however many shares he owns.

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power of attorney A formal document which legally appoints one or more persons to act on behalf of another person.

pre-emption rights The right of some shareholders which is given by the Companies Acts to be offered a proportion of certain classes of newly issued shares and other securities before they are offered to anyone else. This offer must be made on terms which are at least as favourable as the terms offered to anyone else.

premium If the Company issues a new share for more than its nominal value (for example because the market value is more than the nominal value), the amount above the nominal value is the premium.

proxy A proxy is a person who is appointed by a shareholder to attend a shareholders’ meeting and vote for that shareholder. A proxy is appointed by using a proxy form. A proxy does not have to be a shareholder. At a shareholders’ meeting a proxy can exercise the rights of the shareholder that appointed him.

proxy form A form which a shareholder uses to appoint a proxy to attend a shareholders’ meeting and vote for him. The proxy form must be delivered to the Company before the meeting to which it relates.

quorum The minimum number of shareholders or directors who must be present before a meeting can start. When this number is reached, the meeting is said to be “quorate”.

rank & ranking When either capital or income is distributed to shareholders, it is paid out according to the rank (or ranking) of the shares. For example, a share which ranks before (or ahead of) another share in sharing in the Company’s income is entitled to have its dividends paid first, before any dividends are paid on shares which rank behind (or after) it. If there is not enough income to pay dividends on all shares, the available income must be used first to pay dividends on shares which rank ahead, and then to shares which rank behind. The same applies for repayments of capital. Capital must be paid first to shares which rank ahead in sharing in the Company’s capital, and then to shares which rank behind. The Company’s Fixed Rate Shares rank ahead of its Ordinary Shares. Where certain shares rank equally with other shares, both types of shares have the same rights as each other.

recognised clearing house A “clearing house” which has been authorised to carry on business by the UK authorities. A clearing house is a central computer system for settling transactions between members of the clearing house.

recognised investment exchange An “investment exchange” which has been officially recognised by the UK authorities. An investment exchange is a place where investments, such as shares, are traded. The London Stock Exchange is a recognised investment exchange.

redeem and redemption When a share is redeemed, it is effectively bought back by the Company in return for a sum of money (the “redemption price”) which was fixed before the share was issued. This process is called redemption. A share which can be redeemed is called a “redeemable” share.

relevant system This is a term used in the CREST Regulations for a computer-based system which allows shares without share certificates to be transferred without using transfer forms. The CREST system for paperless share dealing is a “relevant system”.

renunciation Where a share has been allotted, but no one has been entered on the share register as the holder of the share, it can be renounced by the allottee to another person. This

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transfers the right to be registered as the holder of the share to another person. This process is called renunciation.

requisition a meeting A formal process which shareholders can use to call a shareholders’ meeting. Generally speaking the shareholders who want to call a meeting must hold at least 10 per cent of the issued shares.

reserve fund or reserves A fund which has been set aside in the accounts of a company. Profits which are not paid out to shareholders as dividends, or used up in some other way, are held in a reserve fund by the company. The capital redemption reserve and share premium account are also reserve funds.

revoke To withdraw, or cancel.

rights issue A way by which companies raise extra share capital. Usually the existing shareholders will be offered the chance to buy a certain number of new shares, depending on how many they already have. For example, shareholders may be offered the chance to buy one new share for every four they already have.

securities All shares, bonds and other investment instruments issued by a company which entitle the holder to a share in the profits or assets of that company, to receive a cash payment from a company or to subscribe for such a security.

securities seal A seal used to stamp the Company’s securities as evidence that the Company has issued them. The Company’s Securities Seal is like the Company’s Common Seal but with the addition of the word “securities”.

share premium account If a new share is issued by the Company for more than its nominal value (generally because the market value is more than the nominal value) then the amount above the nominal value is the premium, and the total of these premiums is held in a reserve fund (which cannot be used to pay dividends) called the share premium account.

show of hands A shareholder raises his hand to vote at a shareholders’ meeting (unless there is a poll). Each person who is entitled to vote has just one vote, however many shares he holds.

special notice This term is defined in Companies Acts. Broadly, if special notice of a resolution is required by the Companies Acts, the resolution is not valid unless the Company has been told about the intention to propose it at least 28 days before the shareholders’ meeting at which it is proposed (although in certain circumstances the meeting can be on a date less than 28 days from the date of the notice).

special resolution A decision reached by a majority of at least 75 per cent of votes cast.

special rights These are the rights of a particular class of shares, as distinct from rights which apply to all shares generally. Typical examples of special rights are where the shares rank, their rights to sharing in income and assets and voting rights.

statutory declaration A formal way of declaring something in writing. Particular words and formalities must be used — these are laid down by the Statutory Declarations Act of 1835.

stock When shares have been converted into stock the holder’s interest in the Company is expressed by reference to a sum of money divided into transferable units. For example, the interest of a shareholder with one hundred £1 shares might have been converted into £100 worth of stock transferable in units of £1 each.

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subdividing shares When shares are subdivided they are split into shares which have a smaller nominal value. For example, a £1 share might be subdivided into two 50p shares.

subject to Means that something else has priority, or prevails, or must be taken into account. When a statement is subject to another statement this means that the first statement must be read in the light of the other statement, which will prevail if there is any conflict.

subordinate Where a right or interest is subordinated to something else, it ranks behind it.

subscribe for shares To agree to take new shares in a company (usually for a cash payment).

subscribers to shares The people who first acquire the shares.

subsidiary This is a term used by the Companies Act. A company which is controlled by another company (for example because the other Company owns a majority of its shares) is called a subsidiary of that company.

subsidiary undertaking This is a term used by the Companies Acts. It is a wider definition than subsidiary. Generally speaking it is a company which is controlled by another company because the other company:

• has a majority of the votes in the company either alone, or acting with others;

• is a shareholder who can appoint or remove a majority of the directors; or

• can exercise dominant influence over the company because of anything in the Company’s Memorandum or Articles, or because of a certain kind of contract.

trustees People who hold property of any kind for the benefit of one or more other people under a kind of arrangement which the law treats as a “trust”. The people whose property is held by the trustees are called the beneficiary.

underwrite A person who agrees to buy new shares if they are not bought by other people underwrites the share offer.

unincorporated associations Associations, partnerships, societies and other bodies which the law does not treat as a separate legal person to their members.

warrant See the definition of dividend warrant.

wider-range investments The law restricts the investments which some trustees can invest in. Where this restriction applies, the trustees can invest up to three quarters of their funds in wider-range investments. These are, generally speaking, shares which are quoted on the London Stock Exchange, and which are earning dividends.

wind up The formal process to put an end to a company. When a company is wound up its assets are distributed. The assets go first to creditors, and then to shareholders. Shares which rank first in sharing in the Company’s assets will receive any funds which are left over before any shares which rank after (or behind) them.

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EX-2.3

Exhibit 2.3

CONFORMED COPY

EIGHTH SUPPLEMENTAL TRUST DEED

10 JULY 2009

VODAFONE GROUP PLC

and

THE LAW DEBENTURE TRUST CORPORATION p.l.c.

further modifying the provisions of
the Trust Deed dated 16 July 1999

relating to a
€30,000,000,000
Euro Medium Term Note Programme

For Vodafone Group Plc:

LINKLATERS LLP
One Silk Street
London EC2Y 8HQ

For The Law Debenture Trust Corporation p.l.c.:

ALLEN & OVERY LLP
One Bishops Square
London E1 6AD

THIS EIGHTH SUPPLEMENTAL TRUST DEED is made on 10 July 2009

BETWEEN:

(1)

VODAFONE GROUP Plc, a company incorporated with limited liability in England and Wales with registered number 1833679, whose registered office is Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England (the Issuer); and

(2)

THE LAW DEBENTURE TRUST CORPORATION p.l.c., a company incorporated with limited liability in England and Wales with registered number 1675231, whose registered office is at Fifth Floor, 100 Wood Street, London EC2V 7EX, England (the Trustee, which expression shall, wherever the context so admits, include such company and all other persons or companies for the time being the trustee or trustees of these presents) as trustee for the Noteholders, the Receiptholders and the Couponholders.

WHEREAS:

(A)	This Eighth Supplemental Trust Deed is supplemental to:
(i)	the Trust Deed dated 16 July 1999 (hereinafter called the Principal Trust Deed) made between the Issuer and the Trustee and relating to the €30,000,000,000 Euro Medium Term Note Programme for the issue of Notes established by the Issuer;
(ii)	the First Supplemental Trust Deed dated 4 May 2000 (the First Supplemental Trust Deed) made between the Issuer and the Trustee modifying and restating the provisions of the Principal Trust Deed;
(iii)	the Second Supplemental Trust Deed dated 31 May 2001 (the Second Supplemental Trust Deed) made between the Issuer and the Trustee further modifying and restating the provisions of the Principal Trust Deed;
(iv)	the Third Supplemental Trust Deed dated 6 June 2002 (the Third Supplemental Trust Deed) made between the Issuer and the Trustee further modifying the provisions of the Principal Trust Deed;
(v)	the Fourth Supplemental Trust Deed dated 19 July 2005 (the Fourth Supplemental Trust Deed) made between the Issuer and the Trustee further modifying and restating the provisions of the Principal Trust Deed;
(vi)	the Fifth Supplemental Trust Deed dated 19 July 2006 (the Fifth Supplemental Trust Deed) made between the Issuer and the Trustee further modifying and restating the provisions of the Principal Trust Deed;
(vii)	the Sixth Supplemental Trust Deed dated 1 August 2007 (the Sixth Supplemental Trust Deed) made between the Issuer and the Trustee further modifying the provisions of the Principal Trust Deed; and
(viii)	the Seventh Supplemental Trust Deed dated 14 July 2008 (the Seventh Supplemental Trust Deed and, together with the Principal Trust Deed, the First Supplemental Trust Deed, the Second Supplemental Trust Deed, the Third Supplemental Trust Deed, the Fourth Supplemental Trust Deed, the Fifth Supplemental Trust Deed and the Sixth Supplemental Trust Deed, the Subsisting Trust Deeds) made between the Issuer and the Trustee further modifying the provisions of the Principal Trust Deed.

1

(B)	On the date hereof the Issuer published a Prospectus relating to the Programme, which replaces the Prospectus dated 14 July 2008.
(C)	The parties have agreed to make certain modifications to the Subsisting Trust Deeds in the manner set out herein.

NOW THIS EIGHTH SUPPLEMENTAL TRUST DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED as follows:

1.	Subject as hereinafter provided and unless there is something in the subject matter or context inconsistent therewith all words and expressions defined in the Principal Trust Deed (as modified and restated as aforesaid) shall have the same meanings in this Eighth Supplemental Trust Deed.
2.	Save:

(a)	in relation to all Series of Notes the first Tranche of which was issued on or prior to the day last preceding the date of this Eighth Supplemental Trust Deed; and
(b)	for the purpose (where necessary) of construing the provisions of this Eighth Supplemental Trust Deed,

with effect on and from the date of this Eighth Supplemental Trust Deed, the Principal Trust Deed (as modified and restated as aforesaid) is further modified as follows:

(i)	by the deletion of the words “Lehman Brothers International (Europe)”, by the insertion of the words “Banca IMI S.p.a., Banco Bilbao Vizcaya, Argentaria, S.A.” immediately preceding the words “Barclays Bank PLC”, by the insertion of the words “Bayerische Hypo-Und Vereinsbank AG” immediately following the words “Barclays Bank PLC” and by the insertion of the words “Lloyds TSB Bank plc, Merrill Lynch International, Morgan Stanley & Co. International plc” immediately following the words “J.P. Morgan Securities Ltd.” in the definition of “Dealers” in Clause 1.1;
(ii)	by the insertion of the words “, and any non-contractual obligations arising out of or in connection with them,” immediately after the words “the Coupons” in Clause 26;
(iii)	by the deletion of the Terms and Conditions of the Notes set out in Schedule 1 thereto and the substitution therefor of the Terms and Conditions of the Notes set out in Schedule 1 hereto;
(iv)	by the deletion of the forms of Global Notes set out in Parts 1 and 2 of Schedule 2 thereto and the substitution therefor of the Global Notes set out in Parts 1 and 2 of Schedule 2 hereto;
(v)	by the deletion of the forms of Global Certificates set out in Parts 3 and 4 of Schedule 2 thereto and the substitution therefor of the Global Certificates set out in Parts 3 and 4 of Schedule 2 hereto; and
(vi)	by the deletion of the forms of Certificates set out in Parts 9 and 10 of Schedule 2 thereto and the substitution therefor of the Certificates set out in Parts 5 and 6 of Schedule 2 hereto.

3. For the avoidance of doubt, the Principal Trust Deed (without the modifications made hereby but, where applicable, as modified and restated as aforesaid) shall continue to have effect in relation to all Series of Notes the first Tranche of which was issued on or prior to the day last preceding the date of this Eighth Supplemental Trust Deed.

2

4.	The provisions of the Principal Trust Deed (as previously modified and restated) as further modified by this Eighth Supplemental Trust Deed shall be valid and binding obligations of the Issuer and the Trustee.
5.	The Subsisting Trust Deeds shall henceforth be read and construed as one document with this Eighth Supplemental Trust Deed.
6.	No person other than a party to this Eighth Supplemental Trust Deed shall have any right by virtue of the Contracts (Rights of Third Parties) Act 1999 to enforce any term (express or implied) of this Eighth Supplemental Trust Deed, but this is without prejudice to any right or remedy of any third party which may exist or be available apart from that Act.
7.	This Eighth Supplemental Trust Deed, and any non-contractual obligations arising out of or in connection with it, shall be governed by, and construed in accordance with, English law.
8.	A Memorandum of this Eighth Supplemental Trust Deed shall be endorsed by the Trustee on the Principal Trust Deed and by the Issuer on its duplicate thereof.
9.	This Eighth Supplemental Trust Deed may be executed in any number of counterparts, each of which, taken together, shall constitute one and the same Eighth Supplemental Trust Deed and any party may enter into this Eighth Supplemental Trust Deed by executing a counterpart.

IN WITNESS whereof this Eighth Supplemental Trust Deed has been executed by the Issuer and the Trustee as a deed and delivered on the day and year first above written.

3

SCHEDULE 1

TERMS AND CONDITIONS OF THE NOTES

The following are the Terms and Conditions of the Notes, that, subject to completion and amendment and as supplemented or varied in accordance with the provisions of the applicable Final Terms, shall be applicable to the Notes and/or Certificates in definitive form (if any) issued in exchange for the Global Note(s) and/or Global Certificates representing each Series or shall be incorporated by reference in the Deed Poll (as defined below) as the terms and conditions of the Australian Domestic Notes (as defined below). Either (i) the full text of the following Terms and Conditions together with the relevant provisions of the Final Terms or (ii) these Terms and Conditions as so completed, amended, supplemented or varied (and subject to simplification by the deletion of non-applicable provisions), shall be endorsed on such definitive Bearer Notes or on the definitive Certificates relating to Registered Notes (other than Australian Domestic Notes) or shall be incorporated by reference in the Deed Poll as the terms and conditions of the Australian Domestic Notes. Part A of the applicable Final Terms in relation to any Tranche of Notes may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with the following Terms and Conditions, replace or modify the following Terms and Conditions for the purpose of such Notes. Reference should be made to “Summary of Provisions Relating to the Notes While in Global Form” and “Summary of Certain Matters Relating to Australian Domestic Notes” for a description of the content of Final Terms which will specify which of such terms are to apply in relation to the relevant Notes. References in the following Terms and Conditions to “Notes” are to the Notes of one Series only, not to all Notes that may be issued under the Programme.

Notes (other than Australian Domestic Notes (as defined below)) issued by Vodafone Group Plc (formerly called Vodafone AirTouch Plc) (the “Issuer”) are constituted by a Trust Deed dated 16th July, 1999 (such Trust Deed as modified and/or supplemented and/or restated from time to time, the “Trust Deed”) made between the Issuer and The Law Debenture Trust Corporation p.l.c. (the “Trustee”, which expression shall include any successor as trustee).

The Notes (other than Australian Domestic Notes), the Receipts (as defined below) and the Coupons (as defined below) have the benefit of an amended and restated Agency Agreement dated 19th July, 2006 (such Agency Agreement as amended and/or supplemented and/or restated from time to time, the “Agency Agreement”) made between the Issuer, HSBC Bank plc as issuing and principal paying agent and agent bank (the “Issuing and Principal Paying Agent”, which expression shall include any successor issuing and principal paying agent), the other paying agents named therein (together with the Issuing and Principal Paying Agent, the “Paying Agents”, which expression shall include any additional or successor paying agents), HSBC Bank USA, National Association as exchange agent (the “Exchange Agent”, which expression shall include any successor exchange agent) and HSBC Bank USA, National Association as registrar (the “Registrar”, which expression shall include any successor registrar) and a transfer agent and the other transfer agents named therein (together with the Registrar, the “Transfer Agents”, which expression shall include any additional or successor transfer agent) and the Trustee.

Notes may also be issued by the Issuer in registered uncertificated (or inscribed) form which are denominated in Australian dollars and constituted by the Deed Poll as defined below (“Australian Domestic Notes”). They will be constituted by a deed poll (the “Deed Poll”) dated 19th July, 2006 executed by the Issuer in favour of the relevant Noteholders and the Trustee. The provisions of these Terms and Conditions relating to Global Notes, Certificates, Coupons and Talons do not apply to Australian Domestic Notes. In relation to any Australian Domestic Notes to be issued, the Issuer will appoint an Issuing and Principal Paying Agent and a Registrar for the Australian Domestic Notes pursuant to an agreement or agreements (any such agreement as amended and/or supplemented and/or restated from time to time, an “Australian Agency Agreement”) entered into between the Issuer, the relevant Issuing and Principal Paying Agent and/or Registrar and (unless otherwise specified in the applicable Final Terms) the Trustee. References herein to “Issuing and Principal Paying Agent” and “Registrar” shall in relation to Australian Domestic Notes, be deemed to be respectively to the Issuing and Principal Paying Agent and the Registrar so appointed and references to any Paying Agent shall be to the Issuing and Principal Paying Agent. The Issuing and Principal Paying Agent and the Registrar will be specified in the applicable Final Terms.

The Noteholders (as defined below), the holders (the “Couponholders”) of the interest coupons (the “Coupons”) relating to interest bearing Notes in bearer form and, where applicable in the case of such Notes, talons for further Coupons (the “Talons”) and the holders (the “Receiptholders”) of the receipts for the payment of instalments of principal (the “Receipts”) relating to Notes in bearer form of which the principal is payable in instalments are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Deed Poll (in the case of Australian Domestic Notes) and are deemed to have notice of those provisions applicable to them of the Agency Agreement. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons.

The Final Terms for this Note (or the relevant provisions thereof) are attached to or endorsed on this Note or, in the case of an Australian Domestic Note, incorporated in the Deed Poll. Part A of the Final Terms supplements these Terms and Conditions and may specify other terms and conditions which shall, to the extent so specified or to the extent inconsistent with these Terms and Conditions, replace or modify these Terms and Conditions for the purposes of this Note. References to the “applicable Final Terms” are to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note (or, in the case of an Australian Domestic Note, incorporated by reference in the Deed Poll).

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The Trustee acts for the benefit of the Noteholders, the Receiptholders and the Couponholders, (which expression shall, unless the context otherwise requires, include the holders of the Talons), in accordance with the provisions of the Trust Deed.

As used herein, “Tranche” means Notes which are identical in all respects (including as to listing) and “Series” means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (i) expressed to be consolidated and form a single series and (ii) identical in all respects (including as to listing) except for their respective Issue Dates, Interest Commencement Dates and/or Issue Prices.

Copies of the Trust Deed and the Agency Agreement are available for inspection during normal business hours at the registered office for the time being of the Trustee (being at 10th July, 2009 at Fifth Floor, 100 Wood Street, London EC2V 7EX, England) and at the specified office of each of the Paying Agents. Copies of the Deed Poll and the applicable Final Terms relating to Australian Domestic Notes will be available for inspection at the specified office of the Registrar following the issue of any Australian Domestic Notes. In addition, Final Terms relating to Notes which are either admitted to trading on a regulated market in the European Economic Area or offered in the European Economic Area in circumstances where a prospectus is required to be published under Directive 2003/71/EC (the “Prospectus Directive”) will be available for viewing on the website of the Regulatory News Service operated by the London Stock Exchange plc at
www.londonstockexchange.com/en-gb/pricesnews/marketnews/ or otherwise published in accordance with Article 14 of the Prospectus Directive. The Noteholders, the Receiptholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Trust Deed, the Agency Agreement (except in respect of Australian Domestic Notes) and the applicable Final Terms which are applicable to them. The statements in these Terms and Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. In the case of Australian Domestic Notes, the Noteholders will also be deemed to have notice of, and will be entitled to the benefit of, all the provisions of the Deed Poll, which will be binding on them.

Words and expressions defined in the Trust Deed and/or (except in respect of Australian Domestic Notes) the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in these Terms and Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the Trust Deed, the Trust Deed shall prevail and, in the event of inconsistency between the Agency Agreement or the Trust Deed and the applicable Final Terms, the applicable Final Terms will prevail. In the event of any inconsistency between the applicable Final Terms for a series of Australian Domestic Notes and the Deed Poll, the applicable Final Terms will prevail.

1 Form, Denomination and Title

The Notes are issued in bearer form (“Bearer Notes”, which expression includes Notes that are specified to be Exchangeable Bearer Notes), in registered form (“Registered Notes”) or in bearer form exchangeable for Registered Notes (other than Australian Domestic Notes) (“Exchangeable Bearer Notes”) in each case in the Specified Denomination(s) shown hereon. Australian Domestic Notes will only be Registered Notes.

All Registered Notes shall have the same Specified Denomination. Where Exchangeable Bearer Notes are issued, the Registered Notes for which they are exchangeable shall have the same Specified Denomination as the lowest denomination of Exchangeable Bearer Notes.

The Notes may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note, an Index Linked Interest Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms.

The Notes may be an Index Linked Redemption Note, an Instalment Note, a Dual Currency Note, a Partly Paid Note or a combination of any of the foregoing, depending on the Redemption/Payment Basis shown in the applicable Final Terms.

Bearer Notes are serially numbered and are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in these Terms and Conditions are not applicable.

Registered Notes (other than Australian Domestic Notes) are represented by registered certificates (“Certificates”) and, save as provided in Condition 2(c), each Certificate shall represent the entire holding of Registered Notes by the same holder.

Title to the Bearer Notes, Receipts and Coupons will pass by delivery. Title to the Registered Notes will pass by registration in the register that the Issuer will procure to be kept by the Registrar in accordance with the provisions of the Agency Agreement or, in the case of Australian Domestic Notes, these Terms and Conditions (the “Register”). The Issuer, any Paying Agent, the Registrar, the Transfer Agents, the Exchange Agent and the Trustee may (to the fullest extent permitted by applicable laws) deem and treat the holder (as defined below) of any Note, Receipt or Coupon as the absolute owner for all purposes (whether or not the Note, Receipt or Coupon shall be overdue and notwithstanding any notice of ownership or writing on the Note, Receipt or Coupon (or on the Certificate representing it) or any notice of previous loss or theft of the Note, Receipt or Coupon (or that of the related Certificate) or of trust or any interest therein) and shall not be required to obtain any proof thereof or as to the identity of such holder and no person shall be liable for so treating the holder.

In these Terms and Conditions, “Noteholder” means the bearer of any Bearer Note and the Receipts relating to it or the person in whose name a Registered Note is registered (as the case may be), “holder” (in relation to a Note, Receipt or Coupon) means the bearer of any Bearer Note, Receipt or Coupon or the person in whose name a Registered Note is registered (as the case may be) and capitalised terms have the meanings given to them in the applicable Final Terms, the absence of any such meaning indicating that such term is not applicable to the Notes. For the avoidance of doubt, where an Australian Domestic Note is entered into the system operated by Austraclear Limited (ABN 94 002 060 773) (“Austraclear”) for holding securities and the electronic recording

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and settling of transactions in those securities between members of that system (the “Austraclear System”), the “Noteholder” or “holder” of that note is Austraclear.

In the case of Australian Domestic Notes, the following provisions shall apply and shall prevail over the foregoing provisions of this Condition 1 in the event of any inconsistency.

Australian Domestic Notes will be debt obligations of the Issuer constituted by the Deed Poll and will take the form of entries in a register (the “Register”) to be established and maintained by the Registrar in Sydney, or such other place specified in the applicable Final Terms or agreed with the Registrar. The Issuer will arrange for the Registrar to maintain the Register so as to show at all times such details of the Noteholders and the Notes as are required to be shown on the Register by or for the effective operation of these Terms and Conditions or by law or which the Issuer and Registrar determine should be shown in the Register. Although Australian Domestic Notes will not be constituted by the Trust Deed, Australian Domestic Notes will have the benefit of certain other provisions of the Trust Deed. The Agency Agreement is not applicable to Australian Domestic Notes.

Australian Domestic Notes will not be serially numbered, unless otherwise agreed with the Registrar. Each entry in the Register constitutes a separate and individual acknowledgement to the relevant Noteholder of the indebtedness of the Issuer to the relevant Noteholder. The obligations of the Issuer in respect of each Australian Domestic Note constitute separate and independent obligations which the Noteholder and the Trustee are entitled to enforce in accordance with (and subject to) these Terms and Conditions, the Trust Deed and the Deed Poll. No certificate or other evidence of title will be issued by or on behalf of the Issuer to evidence title to an Australian Domestic Note unless the Issuer determines that certificates should be made available or it is required to do so pursuant to any applicable law or regulation.

No Australian Domestic Note will be registered in the name of more than four persons. Australian Domestic Notes registered in the name of more than one person are held by those persons as joint tenants. Australian Domestic Notes will be registered by name only, without reference to any trusteeship and an entry in the Register in relation to an Australian Domestic Note constitutes conclusive evidence that the person so entered is the absolute owner of such Note, subject to rectification for fraud or error.

Title to an Australian Domestic Note and all rights and entitlements arising by virtue of the Deed Poll or the Trust Deed in respect of that Australian Domestic Note vest absolutely in the registered owner of the Australian Domestic Note, subject to rectification of the Register for fraud or error, such that no person who has previously been registered as the owner of the Australian Domestic Note has or is entitled to assert against the Issuer or the Registrar or the registered owner of the Australian Domestic Note for the time being and from time to time any rights, benefits or entitlements in respect of the Australian Domestic Note.

2 Exchanges of Exchangeable Bearer Notes and Transfers of Registered Notes

(a) Exchange of Exchangeable Bearer Notes

Subject as provided in Condition 2(f), Exchangeable Bearer Notes may be exchanged for the same nominal amount of Registered Notes (other than Australian Domestic Notes) at the request in writing of the relevant Noteholder (in substantially the same form set out in Schedule 3 of the Agency Agreement) and upon surrender of each Exchangeable Bearer Note to be exchanged, together with all unmatured Receipts and Coupons relating to it, at the specified office of any Transfer Agent; provided, however, that where an Exchangeable Bearer Note is surrendered for exchange after the Record Date (as defined in Condition 5(c)) for any payment of interest, the Coupon in respect of that payment of interest need not be surrendered with it. Registered Notes may not be exchanged for Bearer Notes. Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination. Bearer Notes that are not Exchangeable Bearer Notes may not be exchanged for Registered Notes.

(b) Transfer of Registered Notes

This Condition 2(b) does not apply to Australian Domestic Notes.

One or more Registered Notes may be transferred upon the surrender (at the specified office of the Registrar or any Transfer Agent) of the Certificate representing such Registered Notes to be transferred, together with the form of transfer endorsed on such Certificate, (or another form of transfer substantially in the same form and containing the same representations and certifications (if any), unless otherwise agreed by the issuer), duly completed and executed and any other evidence as the Registrar or Transfer Agent may reasonably require. In the case of a transfer of part only of a holding of Registered Notes represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor.

(c) Partial Redemption in Respect of Registered Notes

This Condition 2(c) does not apply to Australian Domestic Notes.

In the case of a partial redemption of a holding of Registered Notes represented by a single Certificate, a new Certificate shall be issued to the holder in respect of the balance of the holding not redeemed. New Certificates shall only be issued against surrender of the existing Certificates to the Registrar or any Transfer Agent. In the case of a transfer of Registered Notes to a person who is already a holder of Registered Notes, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding.

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(d) Delivery of New Certificates

Each new Certificate to be issued pursuant to Conditions 2(a), (b) or (c) shall only be available for delivery within three business days of receipt of the request for exchange, form of transfer or Put Notice (as defined in Condition 6(d)) and surrender of the Certificate for exchange. Delivery of the new Certificate(s) shall be made at the specified office of the Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such request for exchange, form of transfer, Put Notice or Certificate shall have been made or, at the option of the holder making such delivery or surrender as aforesaid and as specified in the relevant request for exchange, form of transfer, Put Notice or other in writing, be mailed by uninsured post at the risk of the holder entitled to the new Certificate to such address as may be so specified, unless such holder requests otherwise and pays in advance to the relevant Transfer Agent the costs of such other method of delivery and/or such insurance as it may specify. In this Condition (d), “business day” means a day, other than a Saturday or Sunday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).

(e) Exchange or Transfer Free of Charge

Exchange and transfer of Notes and Certificates on registration, transfer and exercise of an option or partial redemption shall be effected without charge by or on behalf of the Issuer, the Registrar or the Transfer Agents, but upon payment of any tax or other governmental charges that may be imposed in relation to it (or the giving of such indemnity as the Registrar or the relevant Transfer Agent may require).

(f) Closed Periods

No Noteholder may require the transfer of a Registered Note to be registered or an Exchangeable Bearer Note to be exchanged for one or more Registered Note(s) (i) during the period of 15 days (or, in the case of an Australian Domestic Note, eight days) ending on the due date for redemption of, or payment of any Instalment Amount in respect of, that Note, (ii) during the period of 15 days prior to any date on which Notes may be called for redemption by the Issuer at its option pursuant to Condition 6(c), (iii) after any such Note has been called for redemption or (iv) during the period of seven days ending on (and including) any Record Date (or, in the case of Australian Domestic Notes, during the period of eight days ending on the due date for payment of any interest). An Exchangeable Bearer Note called for redemption may, however, be exchanged for one or more Registered Note(s) in respect of which the Certificate is simultaneously surrendered not later than the relevant Record Date.

(g) Additional Provisions Relating to Transfer of Australian Domestic Notes

Australian Domestic Notes may be transferred in whole but not in part. Australian Domestic Notes will (subject to the following provisions) be transferred by duly completed and (if applicable) stamped transfer and acceptance forms in the form specified by, and obtainable from, the Registrar or by any other manner approved by the Issuer and the Registrar. Australian Domestic Notes entered in the Austraclear System will be transferable only in accordance with the Austraclear System Regulations.

Application for the transfer of Australian Domestic Notes must be made by the lodgement of a transfer and acceptance form with the Registrar. Each transfer and acceptance form must be signed by the transferor and transferee and be accompanied by such evidence (if any) as the Registrar may require to prove the title of the transferor or the transferor’s right to transfer the Australian Domestic Notes and that the form has been properly executed by both the transferor and transferee.

The transferor of an Australian Domestic Note remains the Noteholder of that Australian Domestic Note until the name of the transferee is entered in the Register in respect of that Australian Domestic Note. Transfers will not be registered later than eight days prior to the Maturity Date of an Australian Domestic Note.

Australian Domestic Notes may only be transferred within, to or from Australia if (i) the aggregate consideration payable by the transferee at the time of transfer is at least A$500,000 (or the equivalent in another currency, in either case disregarding moneys lent by the transferor or its associates) (or, if the Australian Domestic Notes are not listed on the Australian Securities Exchange, the transferee is otherwise not a “retail client” as defined in section 761G of the Corporations Act 2001 and the offer or invitation giving rise to the transfer otherwise does not constitute an offer or invitation for which disclosure is required to be made to investors in accordance with Part 6D.2 or Part 7.9 of the Corporations Act 2001), (ii) the transfer is in compliance with all applicable laws, regulations or directives (including, without limitation, in the case of a transfer to or from Australia, the laws of the jurisdiction in which the transfer takes place), and (iii) in the case of a transfer between persons outside Australia, if a transfer and acceptance form is signed outside Australia. A transfer to an unincorporated association is not permitted.

A person becoming entitled to an Australian Domestic Note as a consequence of the death or bankruptcy of a Noteholder or of a vesting order or a person administering the estate of a Noteholder may, upon producing such evidence as to that entitlement or status as the Registrar considers sufficient, transfer the Australian Domestic Note or, if so entitled, become registered as the holder of the Australian Domestic Note.

Where the transferor executes a transfer of less than all Australian Domestic Notes registered in its name, and the specific Australian Domestic Notes to be transferred are not identified, the Registrar may register the transfer in respect of such of the Australian Domestic Notes registered in the name of the transferor as the Registrar thinks fit, provided the aggregate principal amount of the Australian Domestic Notes registered as having been transferred equals the aggregate principal amount of the Australian Domestic Notes expressed to be transferred in the transfer.

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3 Status of the Notes

The Notes and any relative Receipts and Coupons are direct, unconditional and unsecured obligations of the Issuer and rank and will rank pari passu, without any preference among themselves, with all other, present and future, outstanding unsecured and unsubordinated obligations of the Issuer (other than obligations preferred by law).

4 Interest

(a) Interest on Fixed Rate Notes

Each Fixed Rate Note bears interest from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year and on the Maturity Date if that does not fall on an Interest Payment Date.

If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified.

As used in these Terms and Conditions, “Fixed Interest Period” means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date.

Except in the case of Notes in definitive form where a Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to:

(i)	in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(ii)	in the case of Fixed Rate Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Fixed Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form comprises more than one Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

In these Terms and Conditions:

“Fixed Day Count Fraction” means, in respect of the calculation of an amount of interest in accordance with this Condition 4(a):

(i) if “Actual/Actual (ICMA)” is specified in the applicable Final Terms:

(a)

in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the “Accrual Period”) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (1) the number of days in such Determination Period and (2) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or

(b)

in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of:

(1)	the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; and
(2)	the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year assuming interest was to be payable in respect of the whole of that year; and

(ii) if “30/360” is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with 12 30-day months) divided by 360.

In these Terms and Conditions:

“Determination Period” means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and

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“sub-unit” means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, means one cent.

(b) Interest on Floating Rate Notes and Index Linked Interest Notes

(i) Interest Payment Dates

Each Floating Rate Note and Index Linked Interest Note bears interest from (and including) the Interest Commencement Date and such interest will be payable in arrear on either:

(A)	the Specified Interest Payment Date(s) (each an “Interest Payment Date”) in each year specified in the applicable Final Terms; or
(B)	if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each an “Interest Payment Date”) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date.

Such interest will be payable in respect of each Interest Period (which expression shall, in these Terms and Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date).

If a Business Day Convention is specified in the applicable Final terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is:

(1)	in any case where Specified Periods are specified in accordance with Condition 4(b)(i)(B), the Floating Rate Convention, such Interest Payment Date (i) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (B) below shall apply mutatis mutandis or (ii) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (A) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (B) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or
(2)	the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or
(3)	the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or
(4)	the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day.

In these Terms and Conditions, “Business Day” means a day which is both:

(A)

a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and any Additional Business Centre specified in the applicable Final Terms; and

(B)

either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than London and any Additional Business Centre and which if the Specified Currency is Australian dollars or New Zealand dollars shall be Sydney or Wellington, respectively) or (2) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET2) System (the “TARGET2 System”) is open.

(ii) Rate of Interest

The Rate of Interest payable from time to time in respect of Floating Rate Notes and Index Linked Interest Notes will be determined in the manner specified in the applicable Final Terms.

(A) ISDA Determination for Floating Rate Notes

Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this sub-paragraph (A), “ISDA Rate” for an Interest Period means a rate equal to the Floating Rate that would be determined by the Issuing and Principal Paying Agent under an interest rate swap transaction if the Issuing and Principal Paying Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. and amended and updated as at the Issue Date of the first Tranche of the Notes) (the “ISDA Definitions”) and under which:

(1)	the Floating Rate Option is as specified in the applicable Final Terms;
(2)	the Designated Maturity is a period specified in the applicable Final Terms; and

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(3) the relevant Reset Date is either (i) if the applicable Floating Rate Option is based on the London inter-bank offered rate (“LIBOR”) or on the Euro-zone inter-bank offered rate (“EURIBOR”) for a currency, the first day of that Interest Period or (ii) in any other case, as specified in the applicable Final Terms.

For the purposes of this sub-paragraph (A), (i) “Floating Rate”, “Calculation Agent”, “Floating Rate Option”, “Designated Maturity” and “Reset Date” have the meanings given to those terms in the ISDA Definitions, (ii) the definition of “Banking Day” in the ISDA Definitions shall be amended to insert after the words “are open for” in the second line the word “general” and (iii) “Euro-zone” means the region comprised of Member States of the European Union that adopt the single currency in accordance with the Treaty establishing the European Community, as amended by the Treaty on European Union.

(B) Screen Rate Determination for Floating Rate Notes

Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either:

(1)	the offered quotation; or
(2)	the arithmetic mean (rounded if necessary to the fifth decimal place, with 0.000005 being rounded upwards) of the offered quotations,

(expressed as a percentage rate per annum) for the Reference Rate which appears or appear, as the case may be, on the Relevant Screen Page as at 11.00 a.m. (London time, in the case of LIBOR, or Brussels time, in the case of EURIBOR) on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Issuing and Principal Paying Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Issuing and Principal Paying Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations.

The Agency Agreement contains (or, in the case of Australian Domestic Notes, the Final Terms will contain) provisions for determining the Rate of Interest in the event that the Relevant Screen Page is not available or if, in the case of (1) above, no such offered quotation appears or, in the case of (2) above, fewer than three such offered quotations appear, in each case as at the time specified in the preceding paragraph.

If the Reference Rate from time to time in respect of Floating Rate Notes is specified in the applicable Final Terms as being other than LIBOR or EURIBOR, the Rate of Interest in respect of such Notes will be determined as provided in the applicable Final Terms.

(C) Bank Bill Rate Determination for Australian Domestic Notes

Where, in relation to an issue of Australian Domestic Notes, Bank Bill Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant Bank Bill Rate plus or minus (as indicated in the applicable Final Terms) the Margin.

For the purposes of this sub-paragraph (C),

(1)	“Bank Bill Rate”, for an Interest Period, means the average mid rate for Bills having a tenor closest to the Interest Period as displayed on the “BBSW” page of the Reuters Monitor System on the first day of that Interest Period as determined by the Issuing and Principal Paying Agent.
	However, if the average mid rate is not displayed by 10.30 am on that day, or if it is displayed but the Issuing and Principal Paying Agent determines that there is an obvious error in that rate, “Bank Bill Rate” means the rate determined by the Issuing and Principal Paying Agent in good faith at approximately 10.30 am on that day, having regard, to the extent possible, to the mid rate of the rates otherwise bid and offered for bank accepted Bills of that tenor at or around that time (including any displayed on the “BBSY” page of the Reuters Monitor System); and
(2)	“Bill” has the meaning it has in the Bills of Exchange Act 1909 of Australia and a reference to the acceptance of a Bill is to be interpreted in accordance with that Act.
(iii)	Minimum Rate of Interest and/or Maximum Rate of Interest

If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest.

If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (ii) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest.

(iv) Determination of Rate of Interest and calculation of Interest Amounts

The Issuing and Principal Paying Agent, in the case of Floating Rate Notes, and the Calculation Agent, in the case of Index Linked Interest Notes, will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. In

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the case of Index Linked Interest Notes, the Calculation Agent will notify the Issuing and Principal Paying Agent of the Rate of Interest for the relevant Interest Period as soon as practicable after calculating the same.

The Issuing and Principal Paying Agent will calculate the amount of interest (the “Interest Amount”) payable on the Floating Rate Notes or Index Linked Interest Notes for the relevant Interest Period by applying the Rate of Interest to:

(i)	in the case of Floating Rate Notes or Index Linked Interest Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note (or, if they are Partly Paid Notes, the aggregate amount paid up); or
(ii)	in the case of Floating Rate Notes or Index Linked Interest Notes in definitive form, the Calculation Amount;

and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note or an Index Linked Interest Note in definitive form comprises more than one Calculation Amount, the Interest Amount payable in respect of such Note shall be the aggregate of the amounts (determined in the manner provided above) for each Calculation Amount comprising the Specified Denomination without any further rounding.

“Day Count Fraction” means, in respect of the calculation of an amount of interest for any Interest Period:

(i)	if “Actual/Actual-ISDA” or “Actual/Actual” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365);
(ii)	if “Actual/365 (Fixed)” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365;
(iii)	if “Actual/360” is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360;
(iv)	if “30/360”, “360/360” or “Bond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

	[360 X (Y2 – Y1)] + [30 X (M 2 – M1)] + (D2 – D 1)
Day Count Fraction =		360

where:

“Y₁” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y₂” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M₁” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M₂” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D₁” is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D1 will be 30; and

“D₂” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D1 is greater than 29, in which case D2 will be 30;

(v) if “30E/360” or “Eurobond Basis” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

	[360 X (Y2 – Y1)] + [30 X (M 2 – M1)] + (D2 – D 1)
Day Count Fraction =		360

where:

“Y₁” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y₂” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M₁” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M₂” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D₁” is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D1 will be 30; and

“D₂” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D2 will be 30; and

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(vi) if “30E/360 (ISDA)” is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows:

	[360 X (Y2 – Y1)] + [30 X (M2 – M1)] + (D2 – D1)
Day Count Fraction =		360

where:

“Y₁” is the year, expressed as a number, in which the first day of the Interest Period falls;

“Y₂” is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“M₁” is the calendar month, expressed as a number, in which the first day of the Interest Period falls;

“M₂” is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls;

“D₁” is the first calendar day, expressed as a number, of the Interest Period, unless (i) that day is the last day of February or (ii) such number would be 31, in which case D1 will be 30; and

“D₂” is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (i) that day is the last day of February but not the Maturity Date or (ii) such number would be 31, in which case D2 will be 30.

(v) Notification of Rate of Interest and Interest Amounts

The Issuing and Principal Paying Agent will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer, the Registrar (in the case of an Australian Domestic Note) and any stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes or Index Linked Interest Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression “London Business Day” means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for business in London (and, in the case of Australian Domestic Notes, Sydney).

(vi) Determination or Calculation by Trustee

If for any reason at any relevant time the Issuing and Principal Paying Agent or, as the case may be, the Calculation Agent defaults in its obligation to determine the Rate of Interest or the Issuing and Principal Paying Agent defaults in its obligation to calculate any Interest Amount in accordance with sub-paragraph (ii)(A), (B) or (C) above or as otherwise specified in the applicable Final Terms, as the case may be, and in each case in accordance with paragraph (iv) above, the Trustee shall determine the Rate of Interest at such rate as, in its absolute discretion (having such regard as it shall think fit to the foregoing provisions of this Condition 4, but subject always to any Minimum or Maximum Rate of Interest specified in the applicable Final Terms), it shall deem fair and reasonable in all the circumstances or, as the case may be, the Trustee shall calculate the Interest Amount(s) in such manner as it shall deem fair and reasonable in all the circumstances and each such determination or calculation shall be deemed to have been made by the Issuing and Principal Paying Agent or the Calculation Agent, as applicable.

(vii) Certificates to be final

All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4, whether by the Issuing and Principal Paying Agent or, if applicable, the Calculation Agent or the Trustee, shall (in the absence of wilful default, bad faith or manifest error) be binding on the Issuer, the Issuing and Principal Paying Agent, the Calculation Agent (if applicable), the other Paying Agents and all Noteholders, Receiptholders and Couponholders and (in the absence as aforesaid) no liability to the Issuer, the Noteholders, the Receiptholders or the Couponholders shall attach to the Issuing and Principal Paying Agent or, if applicable, the Calculation Agent or the Trustee in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions.

(c) Interest on Dual Currency Notes

In the case of Dual Currency Notes, if the rate or amount of interest falls to be determined by reference to an exchange rate, the rate or amount of interest payable shall be determined in the manner specified in the applicable Final Terms.

(d) Interest on Partly Paid Notes

In the case of Partly Paid Notes (other than Partly Paid Notes which are Zero Coupon Notes), interest will accrue as aforesaid on the paid-up nominal amount of such Notes and otherwise as specified in the applicable Final Terms.

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(e) Accrual of interest

Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof (in the case of Notes other than Australian Domestic Notes), payment of principal is improperly withheld or refused or, in the case of Australian Domestic Notes, payment on the due date is improperly withheld or not made. In such event, interest will continue to accrue as provided in the Trust Deed.

5 Payments

(a) Method of payment

Subject as provided below:

(i)

payments in a Specified Currency other than euro will be made by credit or transfer to an account in the relevant Specified Currency (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by the payee with, or, at the option of the payee, by a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency (which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney or Wellington, respectively); and

(ii)

payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque.

Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7.

(b) Presentation of Bearer Notes, Receipts and Coupons

Payments of principal in respect of Bearer Notes will (subject as provided below) be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Bearer Notes, and payments of interest in respect of Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)).

Payments of instalments of principal (if any) in respect of Bearer Notes, other than the final instalment, will (subject as provided below) be made in the manner provided in paragraph (a) above against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Receipt in accordance with the preceding paragraph. Payment of the final instalment will be made in the manner provided in paragraph (a) above only against presentation and surrender (or, in the case of part payment of any sum due, endorsement) of the relevant Note in accordance with the preceding paragraph. Each Receipt must be presented for payment of the relevant instalment together with the Bearer Note to which it appertains. Receipts presented without the Bearer Note to which they appertain do not constitute valid obligations of the Issuer. Upon the date on which any Bearer Note becomes due and repayable, unmatured Receipts (if any) relating thereto (whether or not attached) shall become void and no payment shall be made in respect thereof.

Fixed Rate Notes in bearer form (other than Dual Currency Notes or Index Linked Notes) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter.

Upon any Fixed Rate Note in bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof.

Upon the date on which any Floating Rate Note, Dual Currency Note or Index Linked Interest Note in bearer form becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof.

If the due date for redemption of any definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant definitive Bearer Note.

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(c) Payments in respect of Registered Notes

This Condition 5(c) does not apply to Australian Domestic Notes.

(i)	Payments of principal (which for purposes of this Condition 5(c) shall include final Instalment Amounts but not other Instalment Amounts) in respect of Registered Notes shall be made against presentation and surrender of the relevant Certificates at the specified office of any of the Transfer Agents or of the Registrar and in the manner provided in the paragraph (ii) below.
(ii)	Interest (which for the purpose of this Condition 5(c) shall include all Instalment Amounts other than final Instalment Amounts) on Registered Notes shall be paid to the person shown on the Register at the close of business on the fifteenth day before the due date for payment thereof (the “Record Date”). Payments of interest on each Registered Note shall be made in the relevant currency by cheque drawn on a Bank and mailed to the holder (or to the first named of joint holders) of such Note at its address appearing in the Register on the Record Date. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in the relevant currency maintained by the payee with a Bank.
(iii)	Payments of principal and interest in respect of Registered Notes registered in the name of, or in the name of a nominee for, The Depository Trust Company (“DTC”) and denominated in a Specified Currency other than U.S. dollars will be made or procured to be made by transfer by the Registrar to an account in the relevant Specified Currency of the Exchange Agent on behalf of DTC or its nominee in accordance with the following provisions. The amounts in such Specified Currency payable by the Registrar or its agent to DTC with respect to Registered Notes held by DTC or its nominee will be received from the Issuer by the Registrar who will make payments in such Specified Currency by wire transfer of same day funds to the designated bank account in such Specified Currency of those DTC participants entitled to receive the relevant payment who have made an irrevocable election to DTC, in the case of interest payments, on or prior to the third DTC Business Day after the Record Date for the relevant payment of interest and, in the case of payments of principal, at least 12 DTC Business Days prior to the relevant payment date, to receive that payment in such Specified Currency. The Registrar, after the Exchange Agent has converted amounts in such Specified Currency into U.S. dollars, will deliver such U.S. dollar amount in same day funds to DTC for payment through its settlement system to those DTC participants entitled to receive the relevant payment who did not elect to receive such payment in such Specified Currency. The Agency Agreement sets out the manner in which such conversions are to be made. For the purposes of this Condition 5(c), “DTC Business Day” means any day on which DTC is open for business.

(d) General provisions applicable to payments

The holder of a Global Note or a Global Certificate shall be the only person entitled to receive payments in respect of Notes represented by such Global Note or Global Certificate and the Issuer will be discharged by payment to, or to the order of, the holder of such Global Note or Global Certificate in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the beneficial holder of a particular nominal amount of Notes represented by such Global Note or Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or DTC, as the case may be, for his share of each payment so made by the Issuer to, or to the order of, the holder of such Global Note or Global Certificate.

Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Bearer Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if:

(i)	the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due; and
(ii)	payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and
(iii)	such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer.

(e) Payment Day

If the date for payment of any amount in respect of any Note, Receipt or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, “Payment Day” means any day which (subject to Condition 8) is:

(i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in:

(A)	relevant place of presentation (where presentation is required);
(B)	London; and
(C)	any Additional Financial Centre specified in the applicable Final Terms; and

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(ii) either (1) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency (if other than the place of presentation, London and any Additional Financial Centre and which, if the Specified Currency is Australian dollars or New Zealand dollars, shall be Sydney or Wellington, respectively) or (2) in relation to any sum payable in euro, a day on which the TARGET2 System is open.

(f) Interpretation of principal and interest

Any reference in these Terms and Conditions to principal in respect of the Notes shall be deemed to include, as applicable:

(i)	any additional amounts which may be payable with respect to principal under Condition 6 or under any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed;
(ii)	the Final Redemption Amount of the Notes;
(iii)	the Early Redemption Amount of the Notes;
(iv)	the Optional Redemption Amount(s) (if any) of the Notes;
(v)	in relation to Notes redeemable in instalments, the Instalment Amounts;
(vi)	in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6(e)); and
(vii)	any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes.

Any reference in these Terms and Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition 7 or any undertakings given in addition thereto or in substitution therefor pursuant to the Trust Deed.

(g) Payments in respect of Australian Domestic Notes

Payments of principal and interest in respect of Australian Domestic Notes will be made in Australian dollars to the persons registered in the Register on the relevant Record Date (as defined below) as the holders of such Australian Domestic Notes or (if so required by the Trustee by notice in writing following the occurrence of an Event of Default or Potential Event of Default or following receipt by the Trustee of any money which it proposes to pay under clause 9 of the Trust Deed) to the Trustee. Payments to holders in respect of each Australian Domestic Note will be made: (i) if the Australian Domestic Note is held by Austraclear and entered in the Austraclear System, by crediting on the relevant Interest Payment Date, the Maturity Date or other date on which payment is due the amount then due to the account or accounts to which payments should be made in accordance with the Austraclear System Regulations or as otherwise agreed with Austraclear; and (ii) if the Australian Domestic Note is not held by Austraclear and entered in the Austraclear System, by crediting on the Interest Payment Date, the Maturity Date or other date on which payment is due, the amount then due to an account in Australia previously notified by the Noteholder(s) of the Australian Domestic Note to the Issuer and the Registrar.

Payment of an amount due in respect of an Australian Domestic Note to the holder or otherwise in accordance with this Condition or to the Trustee discharges the obligation of the Issuer to all persons to pay that amount.

Payments will for all purposes be taken to be made when the Issuer or the Issuing and Principal Paying Agent gives irrevocable instructions for the making of the relevant payment by electronic transfer, being instructions which would be reasonably expected to result, in the ordinary course of banking business, in the funds transferred reaching the account to which the payment is to be made on the same day as the day on which the instructions are given.

If a payment cannot be made in accordance with the foregoing because appropriate account details have not been provided, the Issuer has no obligation to make the payment until the Issuing and Principal Paying Agent has received those details together with a claim for payment and evidence to its satisfaction of the entitlement of the payee. No interest or other amount will be payable in respect of the delay.

If, following the application of Condition 5(e), a payment is due to be made under an Australian Domestic Note to an account on a Payment Day on which banks are not open for general banking business in the city in which the account is located, the Noteholder is not entitled to payment of such amount until the next Payment Day on which banks in such city are open for general banking business and is not entitled to any interest or other payment in respect of any such delay.

Payments will be subject in all cases to any fiscal or other laws and regulations applicable thereto but without prejudice to the provisions of Condition 7.

In this Condition 5(g) in relation to Australian Domestic Notes, “Record Date” means, in the case of payments of principal or interest, the date which is the eighth calendar day before the due date for the relevant payment of principal or interest.

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6 Redemption and Purchase

(a) Redemption at maturity

Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date.

(b) Redemption for tax reasons

The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is neither a Floating Rate Note nor an Index Linked Interest Note) or on any Interest Payment Date (if this Note is either a Floating Rate Note or an Index Linked Interest Note), on giving not less than 30 nor more than 60 days’ notice to the Issuing and Principal Paying Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if:

(i)

on the occasion of the next payment due in respect of the Notes, the Issuer would be required to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of the Relevant Jurisdiction (as defined in Condition 7) (or any political subdivision or taxing authority thereof or therein), or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes; and

(ii)

such requirement cannot be avoided by the Issuer taking reasonable measures available to it,

provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be required to pay such additional amounts were a payment in respect of the Notes then due.

Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Trustee a certificate signed by two Directors of the Issuer stating that the requirement referred to in (i) above will apply on the occasion of the next payment due in respect of the Notes and cannot be avoided by the Issuer taking reasonable measures available to it and the Trustee shall be entitled to accept the certificate as sufficient evidence of the satisfaction of the conditions precedent set out above, in which event it shall be conclusive and binding on the Noteholders, the Receiptholders and the Couponholders. Upon the expiry of any such notice as is referred to in this paragraph, the Issuer shall be bound to redeem the Notes in accordance with the provisions of this paragraph.

Notes redeemed pursuant to this Condition 6(b) will be redeemed at their Early Redemption Amount referred to in paragraph (e) below together (if appropriate) with interest accrued to (but excluding) the date of redemption.

(c) Redemption at the option of the Issuer (Issuer Call)

If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given:

(i)	notice within the Issuer Call Period to the Noteholders in accordance with Condition 13; and
(ii)	not less than 10 days before the giving of the notice referred to in (i), notice to the Issuing and Principal Paying Agent and the Trustee;

(which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount equal to the Minimum Redemption Amount or a Higher Redemption Amount. In the case of a partial redemption of Notes, the Notes to be redeemed (“Redeemed Notes”) will be selected individually by lot, in the case of Redeemed Notes represented by definitive Notes or Australian Domestic Notes, not more than 30 days prior to the date fixed for redemption (such date of selection being hereinafter called the “Selection Date”). In the case of Redeemed Notes represented by definitive Notes or Australian Domestic Notes, a list of the serial numbers (or other identifying details in the case of Australian Domestic Notes) of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption.

(d) Redemption at the option of the Noteholders (Investor Put)

If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 13 notice within the Investor Put Period the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, in whole (but not in part), such Note on the Optional Redemption Date and at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms.

To exercise this option the holder must deposit (in the case of Bearer Notes) such Note (together with all unmatured Receipts and Coupons) with any Paying Agent or (in the case of Registered Notes (other than Australian Domestic Notes)) the Certificate representing such Note(s) with the Registrar or any Transfer Agent at its specified office, accompanied by a duly completed and signed notice of exercise (a “Put Notice” in the form (for the time being current) obtainable from any specified office of any Paying Agent, the Registrar or any Transfer Agent (as applicable) within the notice period and in which

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the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition. The provisions of this paragraph in relation to Registered Notes (other than Australian Domestic Notes) apply equally to the Australian Domestic Notes, except that it shall not be necessary to deposit a certificate in connection with the exercise of this option in respect of an Australian Domestic Note.

(e) Early Redemption Amounts

For the purpose of paragraph (b) above and Condition 9, each Note will be redeemed at the Early Redemption Amount calculated as follows:

(i)	in the case of a Note with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof;
(ii)	in the case of a Note (other than a Zero Coupon Note but including an Instalment Note and Partly Paid Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Notes are denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or
(iii)	in the case of a Zero Coupon Note, at an amount (the “Amortised Face Amount”) equal to the sum of:

(A)	the Reference Price; and
(B)	the product of the Accrual Yield (compounded annually) being applied to the Reference Price from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable.

Where such calculation is to be made for a period which is not a whole number of years, it shall be made (I) in the case of a Zero Coupon Note other than a Zero Coupon Note payable in euro, on the basis of a 360-day year consisting of 12 months of 30 days each or (II) in the case of a Zero Coupon Note payable in euro, on the basis of the actual number of days elapsed divided by 365 (or, if any of the days elapsed falls in a leap year, the sum of (x) the number of those days falling in a leap year divided by 366 and (y) the number of those days falling in a non-leap year dividend by 365) or (in either case) on such other calculation basis as may be specified in the applicable Final Terms.

(f) Instalments

Instalment Notes will be redeemed in the Instalment Amounts and on the Instalment Dates. In the case of early redemption, the Early Redemption Amount will be determined pursuant to paragraph (e) above.

(g) Partly Paid Notes

Partly Paid Notes will be redeemed, whether at maturity, early redemption or otherwise, in accordance with the provisions of this Condition 6 and the applicable Final Terms.

(h) Purchases

The Issuer or any Subsidiary (as defined in the Trust Deed) of the Issuer may at any time purchase Notes (provided that, in the case of Bearer Notes, all unmatured Receipts, Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise.

(i) Cancellation

All Notes which are (a) redeemed or (b) purchased by or on behalf of the Issuer will forthwith be cancelled (together with all Certificates or unmatured Receipts, Coupons and Talons attached thereto or surrendered therewith at the time of redemption) and accordingly may not be reissued or resold. Any Notes which are purchased by or on behalf of any of the Issuer’s Subsidiaries may, at the option of the purchaser, be held or resold or surrendered to a Paying Agent for cancellation. Cancellation of an Australian Domestic Note will be taken to have occurred upon redemption of the Note or an entry being made in the Register that the Note has been redeemed or cancelled or transferred to the Issuer.

(j) Late payment on Zero Coupon Notes

If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to paragraph (a), (b), (c) or (d) above or upon its becoming due and repayable as provided in Condition 9 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in paragraph (e)(iii) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of:

(i)	the date on which all amounts due in respect of such Zero Coupon Note have been paid; and
(ii)	five days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Issuing and Principal Paying Agent or the Trustee and notice to that effect has been given to the Noteholders in accordance with Condition 13.

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7 Taxation

All payments in respect of the Notes, Receipts and Coupons by the Issuer will be made without withholding or deduction for any present or future taxes, assessments or other governmental charges (“Taxes”) of the Issuer’s jurisdiction of incorporation (the “Relevant Jurisdiction”) (or any political subdivision or taxing authority thereof or therein), unless the withholding or deduction of the Taxes is required by law. In that event, the Issuer will pay such additional amounts as may be necessary in order that the net amount paid to each holder of any Note, Receipt or Coupon who, with respect to any such Tax is not resident in the Relevant Jurisdiction, after such withholding or deduction shall be not less than the respective amount to which such holder would have been entitled in respect of such Note, Receipt or Coupon, as the case may be, in the absence of the withholding or deduction; provided however that the Issuer shall not be required to pay any additional amounts (i) for or on account of any such Tax imposed by the United States (or any political subdivision or taxing authority thereof or therein) or (ii) for or on account of:

(a)	any Tax which would not have been imposed but for (i) the existence of any present or former connection between a holder (or between a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a power over, such holder, if such holder is an estate, trust, partnership or corporation) and the Relevant Jurisdiction or any political subdivision or territory or possession thereof or area subject to its jurisdiction, including, without limitation, such holder (or such fiduciary, settlor, beneficiary, member, shareholder or possessor) being or having been a citizen or resident thereof or being or having been present or engaged in trade or business therein or having or having had a permanent establishment therein or (ii) in the case of Notes other than Australian Domestic Notes, the presentation of such Note, Receipt or Coupon (or, in the case of Australian Domestic Notes, a claim for payment being made after that date) (x) for payment on a date more than 30 days after the Relevant Date (as defined below) or (y) in the Relevant Jurisdiction;
(b)	any estate, inheritance, gift, sale, transfer, personal property or similar tax, assessment or other governmental charge;
(c)	any Tax which is payable otherwise than by withholding from payments of (or in respect of) principal of, or any interest on, such Note, Receipt or Coupon;
(d)	any Tax that is imposed or withheld by reason of the failure by the holder or any beneficial owner of such Note, Receipt or Coupon to comply with a request of the Issuer given to the holder in accordance with Condition 13 (i) to provide information concerning the nationality, residence or identity of the holder or any beneficial owner or (ii) to make any declaration or other similar claim or satisfy any information or reporting requirements, which, in the case of (i) or (ii), is required or imposed by a statute, treaty, regulation or administrative practice of the Relevant Jurisdiction as a precondition to exemption from all or part of such Tax;
(e)	any Tax imposed on a payment to an individual which is required to be made pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive;
(f)	any Tax payable with respect to a Note, Receipt or Coupon presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note, Receipt or Coupon to another Paying Agent in a Member State of the European Union; or
(g)	any combination of items (a), (b), (c), (d), (e) and (f) above,

nor shall the Issuer be required to pay any additional amounts with respect to any payment of the principal of, or any interest on, any Note, Receipt or Coupon to any holder who is a fiduciary or partnership or other than the sole beneficial owner of such payment to the extent such payment would be required by the laws of the Relevant Jurisdiction (or any political subdivision or taxing authority thereof or therein) to be included in the income for tax purposes of a beneficiary or settlor with respect to such fiduciary or a member of such partnership or a beneficial owner which would not have been entitled to such additional amounts had it been the holder of such Note, Receipt or Coupon.

As used herein:

“Relevant Date” means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Issuing and Principal Paying Agent or the Trustee on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition 13; and

“United States” means the United States of America (including the States and the District of Columbia) and its possessions (including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).

8 Prescription

The Notes, Receipts and Coupons will become void unless presented for payment (or, in the case of Australian Domestic Notes, unless a claim for payment is made) within a period of 10 years (in the case of principal) and five years (in the case of interest) after the Relevant Date (as defined in Condition 7) therefor (subject to the provisions of Condition 5(b)).

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There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5(b) or any Talon which would be void pursuant to Condition 5(b).

9 Events of Default and Enforcement

(A) Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in nominal amount of the Notes then outstanding or if so directed by an Extraordinary Resolution of the Noteholders shall (subject in each case to being indemnified to its satisfaction), give notice to the Issuer that the Notes are, and they shall accordingly forthwith become, immediately due and repayable at their Early Redemption Amount as referred to in Condition 6(e), together (if applicable) with accrued interest as provided in the Trust Deed, in any of the following events (“Events of Default”):

(a)	if default is made in the payment of any principal or any interest due in respect of the Notes or any of them and the default continues for a period of 14 days in the case of a payment of principal or 21 days in the case of a payment of interest; or
(b)	if the Issuer fails to perform or observe any of its other obligations under these Terms and Conditions or the Trust Deed and (except in any case where the Trustee considers the failure to be incapable of remedy when no such continuation or notice as is hereinafter mentioned will be required) the failure continues for the period of 30 days (or such longer period as the Trustee may permit) next following the service by the Trustee on the Issuer of notice requiring the same to be remedied; or
(c)	if any Indebtedness for Borrowed Money of the Issuer becomes due and repayable prematurely by reason of an event of default (however described) or the Issuer fails to make any payment in respect of any Indebtedness for Borrowed Money on the due date for payment (as extended by any originally applicable grace period) or any security given by the Issuer for any Indebtedness for Borrowed Money becomes enforceable by reason of default in relation thereto and steps are taken to enforce such security or if default is made by the Issuer in making any payment due under any guarantee and/or indemnity (at the expiry of any originally applicable grace period) given by it in relation to any Indebtedness for Borrowed Money of any other person, provided that no event shall constitute an Event of Default unless the Indebtedness for Borrowed Money or other relative liability either alone or when aggregated with other Indebtedness for Borrowed Money and/or other liabilities relative to all (if any) other events which shall have occurred equals or exceeds (i) £50,000,000 (or its equivalent in any other currency) in relation to any such event falling on or before 1st August, 2014 and (ii) £150,000,000 (or its equivalent in any other currency) in relation to any such event falling after 1st August, 2014; or
(d)	if any order is made by any competent court or resolution passed for the winding up or dissolution of the Issuer, save for the purposes of a reorganisation on terms approved in writing by the Trustee; or
(e)	if the Issuer stops payment of, or is unable to, or admits inability to, pay, its debts (or any class of its debts) as they fall due, or is deemed unable to pay its debts (within the meaning of section 123(1)(e) or (2) of the Insolvency Act 1986), or is adjudicated or found bankrupt or insolvent or shall enter into any composition or other similar arrangements with its creditors under section 1 of the Insolvency Act 1986; or
(f)	if (i) an administrative or other receiver, manager, administrator or other similar official is appointed in relation to the Issuer or, as the case may be, in relation to the whole or a substantial part of the undertaking or assets of it, or an encumbrancer takes possession of the whole or a substantial part of the undertaking or assets of it, or a distress, execution, attachment, sequestration or other process is levied, enforced upon, sued out or put in force against the whole or a substantial part of the undertaking or assets of it and (ii) in any case (other than the appointment of an administrator) is not discharged, removed or paid within 45 days;

PROVIDED, in the case of any Event of Default other than those described in paragraphs (a) and (d) above, the Trustee shall have certified in writing to the Issuer that the Event of Default is, in its opinion, materially prejudicial to the interests of the Noteholders.

For the purposes of this Condition, “Indebtedness for Borrowed Money” means any present or future indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) liabilities under or in respect of any acceptance or acceptance credit or (iii) any bonds, notes, debentures, debenture stock or loan stock.

(B) Enforcement

The Trustee may at any time, at its discretion and without notice, take such proceedings against the Issuer as it may think fit to enforce the provisions of the Trust Deed, the Deed Poll, the Notes, the Receipts and the Coupons, but it shall not be bound to take any such proceedings or any other action in relation to the Trust Deed, the Deed Poll, the Notes, the Receipts or the Coupons unless (i) it shall have been so directed by an Extraordinary Resolution of the relevant Noteholders or so requested in writing by the holders of at least one-quarter in nominal amount of the relevant Notes then outstanding, and (ii) it shall have been indemnified to its satisfaction.

Save as otherwise provided herein, no Noteholder, Receiptholder or Couponholder shall be entitled to proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails so to do within a reasonable period and the failure shall be continuing.

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10 Replacement of Notes, Certificates, Receipts, Coupons and Talons

This Condition 10 does not apply to Australian Domestic Notes.

Should any Note, Certificate, Receipt, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Issuing and Principal Paying Agent (in the case of Bearer Notes, Receipts, Coupons or Talons) and of the Registrar (in the case of Certificates) upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Certificates, Receipts, Coupons or Talons must be surrendered before replacements will be issued.

11 Agents

The names of the initial Issuing and Principal Paying Agent, the other Paying Agents, the Registrar and the Transfer Agents and their initial specified offices are set out below or, in the case of Australian Domestic Notes, in the applicable Final Terms.

The Issuer is entitled, with the prior written approval of the Trustee, to vary or terminate the appointment of the Issuing and Principal Paying Agent, any other Paying Agent, the Registrar or any Transfer Agent and/or appoint additional or other Paying Agents or Transfer Agents or another Registrar and/or approve any change in the specified office through which any such agent acts, provided that:

(i)	there will at all times be an Issuing and Principal Paying Agent;
(ii)	there will at all times be a Registrar and (except in relation to Australian Domestic Notes) a Transfer Agent in relation to Registered Notes;
(iii)	so long as the Notes are listed on any stock exchange, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority;
(iv)	there will at all times be a Paying Agent with a specified office in a city approved by the Trustee outside the Relevant Jurisdiction; and
(v)	save where it may from time to time be otherwise agreed with the Trustee that it is unduly onerous or not current market practice at the relevant time to do so and save to the extent that the following requirement is not met by virtue of paragraph (iii) above and, except in the case of Australian Domestic Notes, there will at all times be a Paying Agent with a specified office in a European Union member state that is not obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive.

In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5(d).

Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 60 days’ prior notice thereof shall have been given to the Noteholders in accordance with Condition 13.

In acting under the Agency Agreement or an Australian Agency Agreement, the Issuing and Principal Paying Agent, the Paying Agents, the Registrar and the Transfer Agents act solely as agents of the Issuer and, in certain limited circumstances, of the Trustee and do not assume any obligation to, or relationship of agency or trust with, any Noteholders, Receiptholders or Couponholders (except that sums received from or on behalf of the Issuer for the payment of principal or interest on any Australian Domestic Notes may be held on trust for the benefit of the persons entitled thereto until such sums shall be paid to such persons or otherwise disposed of as may be set forth in the Australian Agency Agreement). The Agency Agreement contains, and any Australian Agency Agreement may contain, provisions permitting any entity into which any Paying Agent or Registrar or Transfer Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent, registrar or transfer agent, as the case may be.

An approval given by the Issuing and Principal Paying Agent or the Registrar for an Australian Domestic Note for any purpose under its Australian Agency Agreement does not constitute a recommendation or endorsement by such person of the Note but only indicates that it is considered by the Issuing and Principal Paying Agent or the Registrars, as the case may be, to be compatible with the performance of its obligations under the Australian Agency Agreement.

12 Exchange of Talons

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Issuing and Principal Paying Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition 8.

13 Notices

Notices to the holders of Registered Notes shall be mailed to them at their respective addresses in the Register and deemed to have been given on the fourth weekday (being a day other than a Saturday or Sunday) after the date of mailing. Alternatively, notices to holders of Australian Domestic Notes may

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be given by being published in a leading daily newspaper of general circulation in Australia. It is expected that such notices will normally be published in the Australian Financial Review. Any such notice will be deemed to have been given on the first date of such publication.

Notices to the holders of Bearer Notes will be deemed to be validly given if published in a leading English language daily newspaper of general circulation in the United Kingdom. It is expected that such publication will be made in the Financial Times. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules and regulations of any stock exchange or any other relevant authority on which the Notes are for the time being listed. Any such notice will be deemed to have been given on the date of the first publication.

Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Issuing and Principal Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Couponholders shall be deemed for all purposes to have notice of the contents of any notice given to the holders of Bearer Notes in accordance with this Condition.

14 Meeting of Noteholders, Modification, Authorisation, Waiver, Determination and Substitution

(a) Meetings

The Trust Deed contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of the provisions of these Terms and Conditions, the Notes, the Receipts, the Coupons or the Trust Deed. Such a meeting may be convened by the Issuer or by Noteholders holding not less than 10 per cent. in nominal amount of the Notes for the time being outstanding. The quorum at any such meeting for passing an Extraordinary Resolution will be one or more persons holding or representing a clear majority in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at the meeting, and on all Receiptholders and Couponholders.

(b) Modification, Authorisation, Waiver, Determination, Substitution etc.

The Trustee may agree, without the consent of the Noteholders, the Receiptholders or the Couponholders, to any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of these Terms and Conditions or any of the provisions of the Trust Deed or the Deed Poll or determine, without any such consent as aforesaid, that any Event of Default or Potential Event of Default (as defined in the Trust Deed) shall not be treated as such, which in any such case is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders or may agree, without any such consent as aforesaid, to any modification which is of a formal, minor or technical nature or to correct a manifest error.

In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation, determination or substitution), the Trustee shall have regard to the general interests of the Noteholders as a class but shall not have regard to any interests arising from circumstances particular to individual Noteholders, Receiptholders or Couponholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders, Receiptholders or Couponholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder, Receiptholder or Couponholder be entitled to claim, from the Issuer, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders, Receiptholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition to, or in substitution for, Condition 7 pursuant to the Trust Deed.

The Trustee may, without the consent of the Noteholders, Receiptholders or Couponholders, agree with the Issuer to the substitution in place of the Issuer (or of any previous substitute under this Condition) as principal debtor in respect of the Notes, the Receipts and the Coupons and under the Trust Deed and (in the case of Australian Domestic Notes) the Deed Poll of either (i) a Successor in Business (as defined in the Trust Deed) to the Issuer or (ii) a Holding Company of the Issuer or (iii) a Subsidiary of the Issuer, in each case subject to the Trustee being satisfied that the interests of the Noteholders will not be materially prejudiced thereby provided that in determining such material prejudice the Trustee shall not take into account any prejudice to the interests of the Noteholders as a result of such substituted company not being required pursuant to proviso (i) to Condition 7 to pay any additional amounts for or on account of any Taxes imposed by the United States of America or any political subdivision or taxing authority thereof or therein and certain other conditions set out in the Trust Deed being complied with.

The Trust Deed contains provisions permitting the Issuer to consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person provided that (i) in the case of a consolidation or merger (except where the Issuer is the continuing entity) such person agrees to be bound by the terms of the Notes, the Receipts, the Coupons, the Trust Deed and the Deed Poll as principal debtor in place of the Issuer; (ii) in the case of a conveyance, transfer or lease, such person guarantees the obligations of the Issuer under the Notes, the Receipts, the Coupons and the Trust Deed and (iii) certain other conditions set out in the Trust Deed are complied with.

Any such modification, waiver, authorisation, determination or substitution shall be binding on the Noteholders, the Receiptholders and the Couponholders and, unless the Trustee otherwise agrees, any such modification or substitution shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter.

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For the purposes of this Condition “Holding Company” means, in relation to a person, an entity of which that person is a Subsidiary.

N.B. The Trust Deed does not contain any provisions requiring higher quorums in any circumstances.

15 Further Issues

The Issuer shall be at liberty from time to time without the consent of the Noteholders, the Receiptholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and so that the same shall be consolidated and form a single Series with the outstanding Notes. The Trust Deed contains provisions for convening a single meeting of the Noteholders and the holders of notes of other Series in certain circumstances where the Trustee so decides.

16 Indemnification of the Trustee and its Contracting with the Issuer

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking action unless indemnified to its satisfaction.

The Trust Deed also contains provisions pursuant to which the Trustee is entitled, inter alia, (i) to enter into business transactions with the Issuer and/or any of its Subsidiaries and to act as trustee for the holders of any other securities issued or guaranteed by, or relating to, the Issuer and/or any of its Subsidiaries, (ii) to exercise and enforce its rights, comply with its obligations and perform its duties under or in relation to any such transactions or, as the case may be, any such trusteeship without regard to the interests of, or consequences for, the Noteholders, Receiptholders or Couponholders, and (iii) to retain and not be liable to account for any profit made or any other amount or benefit received thereby or in connection therewith.

17 Third Party Rights

No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Notes, but this does not affect any right or remedy of any person which exists or is available apart from that Act.

18 Governing Law

The Trust Deed, the Notes (other than Australian Domestic Notes), the Receipts and the Coupons, and any non-contractual obligations arising out of or in connection with any of them, are governed by and shall be construed in accordance with, English law. The Agency Agreement is governed by and shall be construed in accordance with English law.

The Australian Domestic Notes, the Deed Poll and (unless otherwise specified in the applicable Final Terms) each Australian Agency Agreement will be governed by, and construed in accordance with, the laws in force in New South Wales, Australia, save that the provisions of Condition 9 and Condition 14 shall be interpreted so as to have the same meaning they would have if governed by English law. In the case of Australian Domestic Notes, the Issuer has irrevocably agreed for the benefit of Noteholders that the courts of New South Wales, Australia are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Australian Domestic Notes and the Deed Poll and that accordingly any suit, action or proceedings arising out of or in connection with the Australian Domestic Notes or the Deed Poll (together referred to as “Australian Proceedings”) may be brought in such courts.

The Issuer has irrevocably waived any objection which it may have now or hereafter to the laying of the venue of any Australian Proceedings in any such court and any claim that any such Australian Proceedings have been brought in an inconvenient forum and has further irrevocably agreed that a judgment in any such Australian Proceedings brought in the courts of New South Wales shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.

For so long any Australian Domestic Notes are outstanding, the Issuer will appoint an agent to accept service of process on its behalf in New South Wales in respect of any Australian Proceedings such agent being as specified in the applicable Final Terms. In the event of such agent ceasing to act, the Issuer will immediately appoint another agent in Sydney.

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SCHEDULE 2

PART 1

FORM OF TEMPORARY GLOBAL NOTE

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]¹

VODAFONE GROUP PLC
(the Issuer)
(incorporated with limited liability in England and Wales)

TEMPORARY GLOBAL NOTE

This Note is a Temporary Global Note in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in the Schedule 1 to the Trust Deed (as defined below) as supplemented, replaced and modified by the Final Terms but, in the event of any conflict between the provisions of the Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c. as trustee for the holders of the Notes.

The Issuer, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note to or to the order of the Issuing and Principal Paying Agent or any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes.

If the Final Terms indicates that this Global Note is intended to be a New Global Note, the nominal amount of Notes represented by this Global Note shall be the aggregate amount from time to time entered in the records of both Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg and together with Euroclear, the relevant Clearing Systems). The records of the relevant Clearing Systems (which expression in this Global Note means the records that each relevant Clearing System holds for its customers which reflect the amount of such customer’s interest in the Notes) shall be conclusive evidence of the nominal amount of Notes represented by this Global Note and, for these purposes, a statement issued by a relevant Clearing System (which statement shall be made available to the bearer upon request) stating the nominal amount of Notes represented by this Global Note at any time shall be conclusive evidence of the records of the relevant Clearing System at that time.

¹ Include where the original maturity of the Notes is more than 365 days.

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If the Final Terms indicates that this Global Note is not intended to be a New Global Note, the nominal amount of the Notes represented by this Global Note shall be the amount stated in the applicable Final Terms or, if lower, the nominal amount most recently entered by or on behalf of the Issuer in the relevant column in Part II, III, or IV of Schedule One hereto or in Schedule Two hereto.

On any redemption of, or payment of an instalment or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note the Issuer shall procure that:

(a)

if the Final Terms indicates that this Global Note is intended to be a New Global Note, details of such redemption, payment or purchase and cancellation (as the case may be) shall be entered pro rata in the records of the relevant Clearing Systems, and, upon any such entry being made, the nominal amount of the Notes recorded in the records of the relevant Clearing Systems and represented by this Global Note shall be reduced by the aggregate nominal amount of the Notes so redeemed or purchased and cancelled or by the aggregate amount of such instalment so paid; or

(b)

if the Final Terms indicates that this Global Note is not intended to be a New Global Note, details of such redemption, payment or purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment or purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment or purchase and cancellation, the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment so paid.

Payments due in respect of Notes for the time being represented by this Global Note shall be made to the bearer of this Global Note and each payment so made will discharge the Issuer’s obligations in respect thereof. Any failure to make entries referred to above shall not affect such discharge.

Payments of principal and interest (if any) due prior to the Exchange Date (as defined below) will only be made to the bearer hereof to the extent that there is presented to the Agent by Clearstream, Luxembourg or Euroclear a certificate to the effect that it has received from or in respect of a person entitled to a beneficial interest in a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate of non-US beneficial ownership in the form required by it. The bearer of this Global Note will not (unless upon due presentation of this Global Note for exchange, delivery of the appropriate number of Definitive Bearer Notes (together, if applicable, with the Receipts, Coupons and Talons appertaining thereto in or substantially in the forms set out in Parts 5, 6, 7 and 8 of Schedule 2 to the Trust Deed) or, as the case may be, issue and delivery (or, as the case may be, endorsement) of the Permanent Global Note is improperly withheld or refused and such withholding or refusal is continuing at the relevant payment date) be entitled to receive any payment hereon due on or after the Exchange Date.

If this Temporary Global Note is an Exchangeable Bearer Note then, subject to Condition 2(f), this Temporary Global Note may be exchanged in whole or from time to time in part for one or more Registered Notes in accordance with the Conditions on or after the Issue Date but before its Exchange Date referred to below by its presentation to any Transfer Agent at its specified office. On or after the Exchange Date, the outstanding nominal amount of this Temporary Global Note may be exchanged for Definitive Bearer Notes and Registered Notes in accordance with the next paragraph.

On or after the date (the Exchange Date) which is the 40th day after the Issue Date, this Global Note may be exchanged (free of charge) in whole or in part for, as specified in the Final Terms, either (a) Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons (on the basis that all the appropriate details have been included on the face of such Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Final Terms has been endorsed on or attached to such Definitive Bearer Notes) or (b) either (if the Final Terms indicates that this Global Note is intended to be a New Global Note) interests recorded in the records

24

of the relevant Clearing Systems in a Permanent Global Note or (if the Final Terms indicates that this Global Note is not intended to be a New Global Note) a Permanent Global Note which, in either case, is in or substantially in the form set out in Part 2 of the Schedule 2 to the Trust Deed (together with the Final Terms attached thereto) or (if this Global Note is an Exchangeable Bearer Note) for Registered Notes upon notice being given by Euroclear and/or Clearstream, Luxembourg acting on the instructions of any holder of an interest in this Global Note and subject, in the case of Definitive Bearer Notes, to such notice period as is specified in the Final Terms.

If Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons have already been issued in exchange for all the Notes represented for the time being by the Permanent Global Note, then this Global Note may only thereafter be exchanged for Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons pursuant to the terms hereof. This Global Note may be exchanged by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for general business in London.

The Issuer shall procure that Definitive Bearer Notes or (as the case may be) the Permanent Global Note shall be issued and delivered and (in the case of the Permanent Global Note where the Final Terms indicates that this Global Note is intended to be a New Global Note) interests in the Permanent Global Note shall be recorded in the records of the relevant Clearing Systems in exchange for only that portion of this Global Note in respect of which there shall have been presented to the Principal Paying Agent by Euroclear or Clearstream, Luxembourg a certificate to the effect that it has received from or in respect of a person entitled to a beneficial interest in a particular nominal amount of the Notes represented by this Global Note (as shown by its records) a certificate of non-US beneficial ownership in the form required by it.

On an exchange of the whole of this Global Note, this Global Note shall be surrendered to or to the order of the Principal Paying Agent. The Issuer shall procure that:

(a)

if the Final Terms indicates that this Global Note is intended to be a New Global Note, on an exchange of the whole or part only of this Global Note, details of such exchange shall be entered pro rata in the records of the relevant Clearing Systems such that the nominal amount of Notes represented by this Global Note shall be reduced by the nominal amount of this Global Note so exchanged; or

(b)

if the Final Terms indicates that this Global Note is not intended to be a New Global Note, on an exchange of part only of this Global Note details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of this Global Note so exchanged. On any exchange of this Global Note for a Permanent Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two to the Permanent Global Note and the relevant space in Schedule Two thereto recording such exchange shall be signed by or on behalf of the Issuer.

Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall in all respects be entitled to the same benefits as if he were the bearer of Definitive Bearer Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Part 5, Part 6, Part 7 and Part 8 (as applicable) of the Schedule 2 to the Trust Deed.

The holder of this Global Note shall be treated at any meeting of the Noteholders as having one vote in respect of each Definitive Bearer Note for which this Global Note would be exchangeable.

In considering the interests of Noteholders while this Global Note is held on behalf of a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to this Global Note and may consider such interests as if such accountholders were the holder of this Global Note.

25

This Global Note does not confer on a third party any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Global Note, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

This Global Note, and any non-contractual obligations arising out of or in connection with it, are governed by, and shall be construed in accordance with, English law.

This Global Note shall not be valid unless authenticated by HSBC Bank plc as Issuing and Principal Paying Agent and, if the Final Terms indicates that this Global Note is intended to be held in a manner which would allow Eurosystem eligibility, effectuated by the entity appointed as common safekeeper by the relevant Clearing Systems.

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IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by a person duly authorised on its behalf.

Issued as of
VODAFONE GROUP PLC
By:
	Duly Authorised

Authenticated by
HSBC Bank plc
as Issuing and Principal Paying Agent.

By:
	Authorised Officer

²Effectuated without recourse,
warranty or liability by

as common safekeeper 

By:  

² This should only be completed where the Final Terms indicates that this Global Note is intended to be held in a manner which would allow Eurosytem eligibility.

27

Schedule One*

PART I

INTEREST PAYMENTS

				Confirmation of
	Interest Payment	Total amount of	Amount of interest	payment by or on
Date made	Date	interest payable	paid	behalf of the Issuer

* Schedule One should only be completed where the Final Terms indicates that this Global Note is not intended to be a New Global Note.

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PART II

PAYMENT OF INSTALMENT AMOUNTS

			Remaining nominal
			amount of this
	Total amount of	Amount of	Global Note	Confirmation of
	Instalment	Instalment	following such	payment by or on
Date made	Amounts payable	Amounts paid	payment *	behalf of the Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

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PART III

REDEMPTIONS

			Remaining nominal
			amount of this	Confirmation of
			Global Note	redemption by or
	Total amount of	Amount of	following such	on behalf of the
Date made	principal payable	principal paid	redemption*	Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

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PART IV

PURCHASES AND CANCELLATIONS

		Remaining nominal
		amount of this Global	Confirmation of
	Part of nominal amount	Note following such	purchase and
	of this Global Note	purchase and	cancellation by or on
Date made	purchased and cancelled	cancellation*	behalf of the Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

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Schedule Two*

EXCHANGES
FOR DEFINITIVE BEARER NOTES, REGISTERED NOTES OR PERMANENT GLOBAL NOTE

The following exchanges of a part of this Global Note for Definitive Bearer Notes or Registered Notes or a part of a Permanent Global Note have been made:

	Nominal amount of this
	Global Note exchanged
	for Definitive Bearer
	Notes, Registered Notes	Remaining nominal
	or a part of a Permanent	amount of this Global
	Global Note (stating	Note following such	Notation made by or on
Date made	which)	exchange*	behalf of the Issuer

*	Schedule Two should only be completed where the Final Terms indicates that this Global Note is not intended to be a New Global Note.
*	See most recent entry in Part II, III or IV of Schedule One or in this Schedule Two in order to determine this amount.

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ANNEX

[attach Final Terms that relate to this Global Note]

33

PART 2

FORM OF PERMANENT GLOBAL NOTE

[ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.]³

VODAFONE GROUP PLC
(the Issuer)
(incorporated with limited liability in England and Wales)

PERMANENT GLOBAL NOTE

This Note is a Permanent Global Note in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. References herein to the Conditions shall be to the Terms and Conditions of the Notes as set out in the Schedule 1 to the Trust Deed (as defined below) as supplemented, replaced and modified by the Final Terms but, in the event of any conflict between the provisions of the Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Global Note. This Global Note is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c. as trustee for the holders of the Notes.

The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the bearer hereof on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Global Note may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Global Note calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed, upon presentation and, at maturity, surrender of this Global Note at the specified office of the Issuing and Principal Paying Agent at 8 Canada Square, London EC2V 7EX, England or such other specified office as may be specified for this purpose in accordance with the Conditions or at the specified office of any of the other Paying Agents located outside the United States, its territories and possessions (except as provided in the Conditions) from time to time appointed by the Issuer in respect of the Notes.

If the Final Terms indicates that this Global Note is intended to be a New Global Note, the nominal amount of Notes represented by this Global Note shall be the aggregate amount from time to time entered in the records of both Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg and together with Euroclear, the relevant Clearing Systems). The records of the relevant Clearing Systems (which expression in this Global Note means the records that each relevant Clearing System holds for its customers which reflect the amount of such customer’s interest in the Notes) shall be conclusive evidence of the nominal amount of Notes represented by this Global Note and, for these purposes, a statement issued by a relevant Clearing System (which statement shall be made available to the bearer upon request) stating the nominal amount of Notes represented by this Global Note at any time shall be conclusive evidence of the records of the relevant Clearing System at that time.

³ Include where the original maturity of the Notes is more than 365 days.

34

If the Final Terms indicates that this Global Note is not intended to be a New Global Note, the nominal amount of the Notes represented by this Global Note shall be the amount stated in the applicable Final Terms or, if lower, the nominal amount most recently entered by or on behalf of the Issuer in the relevant column in Part II, Part III, or Part IV of Schedule One hereto or in Schedule Two hereto.

On any redemption of, or payment of an instalment or interest being made in respect of, or purchase and cancellation of, any of the Notes represented by this Global Note the Issuer shall procure that:

(a)

if the Final Terms indicates that this Global Note is intended to be a New Global Note, details of such redemption, payment or purchase and cancellation (as the case may be) shall be entered pro rata in the records of the relevant Clearing Systems and, upon any such entry being made, the nominal amount of the Notes recorded in the records of the relevant Clearing Systems and represented by this Global Note shall be reduced by the aggregate nominal amount of the Notes so redeemed or purchased and cancelled or by the aggregate amount of such instalment so paid; or

(b)

if the Final Terms indicates that this Global Note is not intended to be a New Global Note, details of such redemption, payment or purchase and cancellation (as the case may be) shall be entered by or on behalf of the Issuer in Schedule One hereto and the relevant space in Schedule One hereto recording any such redemption, payment or purchase and cancellation (as the case may be) shall be signed by or on behalf of the Issuer. Upon any such redemption, payment of an instalment or purchase and cancellation, the nominal amount of this Global Note and the Notes represented by this Global Note shall be reduced by the nominal amount of such Notes so redeemed or purchased and cancelled or the amount of such instalment so paid.

Payments due in respect of Notes for the time being represented by this Global Note shall be made to the bearer of this Global Note and each payment so made will discharge the Issuer’s obligations in respect thereof and any failure to make entries referred to above shall not affect such discharge.

If the Notes represented by this Global Note were, on issue, represented by a Temporary Global Note then on any exchange of such Temporary Global Note for this Global Note or any part hereof, the Issuer shall procure that:

(a)

if the Final Terms indicates that this Global Note is intended to be a New Global Note, details of such exchange shall be entered in the records of the relevant Clearing Systems such that the nominal amount of Notes represented by this Global Note shall be increased by the nominal amount of the Temporary Global Note so exchanged; or

(b)

if the Final Terms indicates that this Global Note is not intended to be a New Global Note, details of such exchange shall be entered by or on behalf of the Issuer in Schedule Two hereto and the relevant space in Schedule Two hereto recording such exchange shall be signed by or on behalf of the Issuer, whereupon the nominal amount of this Global Note and the Notes represented by this Global Note shall be increased by the nominal amount of the Temporary Global Note so exchanged.

This Global Note may be exchanged (free of charge) in whole, but, except as provided below, not in part, for Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons in or substantially in the forms set out in Part 5, Part 6, Part 7 and Part 8 of the Schedule 2 to the Trust Deed (on the basis that all the appropriate details have been included on the face of such Definitive Bearer Notes and (if applicable) Receipts, Coupons and/or Talons and the relevant information supplementing, replacing or modifying the Conditions appearing in the Final Terms has been endorsed on or attached to such Definitive Bearer Notes) or (if this Global Note is an Exchangeable Bearer Note) Registered Notes represented by the Certificates described in the Trust Deed:

35

(a)	if specified in the applicable Final Terms, upon not less than 60 days’ written notice being given to the Issuing and Principal Paying Agent by Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in this Global Note); or
(b)	if specified in the applicable Final Terms, only upon the occurrence of an Exchange Event; or
(c)	if this Global Note is an Exchangeable Bearer Note then, subject to Condition 2(f), by the holder hereof giving notice to the Issuing and Principal Paying Agent of its election to exchange the whole or a part of this Global Note for Registered Notes.

An Exchange Event means (unless otherwise specified in the applicable Final Terms):

(i)	an Event of Default has occurred and is continuing;
(ii)	the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no alternative clearing system satisfactory to the Trustee is available; or
(iii)	the Issuer has or will become obliged to pay additional amounts as provided for or referred to in Condition 7 which would not be required were the Bearer Notes in definitive form.

Upon the occurrence of an Exchange Event:

(A)	the Issuer will promptly give notice to Noteholders in accordance with Condition 13 of the occurrence of such Exchange Event; and
(B)	Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in this Global Note) or the Trustee may give notice to the Issuing and Principal Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (iii) above, the Issuer may also give notice to the Issuing and Principal Paying Agent requesting exchange.

This Global Note is exchangeable in part only if this Global Note is an Exchangeable Bearer Note and the part thereof submitted for exchange is to be exchanged for Registered Notes.

Any such exchange shall occur on a date specified in the notice not later than 60 days (or, in the case of an exchange for Registered Notes, 5 days) after the date of receipt of the first relevant notice by the Issuing and Principal Paying Agent.

The first notice requesting exchange in accordance with the above provisions shall give rise to the issue of Definitive Bearer Notes for the total nominal amount of Notes represented by this Global Note.

Any such exchange as aforesaid will be made upon presentation of this Global Note by the bearer hereof on any day (other than a Saturday or Sunday) on which banks are open for business in London at the office of the Issuing and Principal Paying Agent specified above.

The aggregate nominal amount of Definitive Bearer Notes or Registered Notes issued upon an exchange of this Global Note will be equal to the aggregate nominal amount of this Global Note submitted for exchange. Upon exchange in full of this Global Note, the Issuing and Principal Paying Agent shall cancel it or procure that it is cancelled.

36

Certificates issued upon exchange for Registered Notes shall not be Global Certificates unless the holder so requests and certifies to the Issuing and Principal Paying Agent that it is, or is acting as, a nominee for Clearstream, Luxembourg or Euroclear.

Until the exchange of the whole of this Global Note as aforesaid, the bearer hereof shall in all respects be entitled to the same benefits as if he were the bearer of Definitive Bearer Notes and the relative Receipts, Coupons and/or Talons (if any) in the form(s) set out in Part 5, Part 6, Part 7 and Part 8 (as applicable) of the Schedule 2 to the Trust Deed.

The holder of this Global Note shall be treated at any meeting of the Noteholders as having one vote in respect of each Definitive Bearer Note for which this Global Note would be exchangeable.

In considering the interests of Noteholders while this Global Note is held on behalf of a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to this Global Note and may consider such interests as if such accountholders were the holder of this Global Note.

This Global Note does not confer on a third party any right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Global Note, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

This Global Note, and any non-contractual obligations arising out of or in connection with it, are governed by, and shall be construed in accordance with, English law.

This Global Note shall not be valid unless authenticated by HSBC Bank plc as Issuing and Principal Paying Agent and, if the Final Terms indicates that this Global Note is intended to be held in a manner which would allow Eurosystem eligibility, effectuated by the entity appointed as common safekeeper by the relevant Clearing Systems.

37

IN WITNESS whereof the Issuer has caused this Global Note to be signed manually or in facsimile by a person duly authorised on its behalf.

Issued as of
VODAFONE GROUP PLC
By:
	Duly Authorised

Authenticated by
HSBC Bank plc
as Issuing and Principal Paying Agent.

By:
	Authorised Officer

⁴Effectuated without recourse,
warranty or liability by

as common safekeeper

By:

⁴ This should only be completed where the Final Terms indicates that this Global Note is intended to be held in a manner which would allow Eurosytem eligibility.

38

Schedule One*

PART I

INTEREST PAYMENTS

				Confirmation of
	Interest Payment	Total amount of	Amount of interest	payment by or on
Date made	Date	interest payable	paid	behalf of the Issuer

* Schedule One should only be completed where the Final Terms indicates that this Global Note is not intended to be a New Global Note.

39

PART II

PAYMENT OF INSTALMENT AMOUNTS

			Remaining nominal
			amount of this
	Total amount of	Amount of	Global Note	Confirmation of
	Instalment	Instalment	following such	payment by or on
Date made	Amounts payable	Amounts paid	payment *	behalf of the Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

40

PART III

REDEMPTION

			Remaining nominal
			amount of this	Confirmation of
			Global Note	redemption by or
	Total amount of	Amount of	following such	on behalf of the
Date made	principal payable	principal paid	redemption*	Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

41

PART IV

PURCHASES AND CANCELLATIONS

		Remaining nominal
		amount of this Global	Confirmation of
	Part of nominal amount	Note following such	purchase and
	of this Global Note	purchase and	cancellation by or on
Date made	purchased and cancelled	cancellation*	behalf of the Issuer

* See most recent entry in Part II, III or IV of Schedule Two in order to determine this amount.

42

Schedule Two*

EXCHANGES

The following exchanges of a part of this the Temporary Global Note for a part of this Global Note or a part of this Global Note for Registered Notes have been made:

	Nominal amount of
	Temporary Global Note
	exchanged for this	Increased/decreased
	Global Note or of this	nominal amount of this
	Global Note exchanged	Global Note following	Notation made by or on
Date made	for Registered Notes	such exchange*	behalf of the Issuer

*	See most recent entry in Part II, III or IV of Schedule One or in this Schedule Two in order to determine this amount.
*	Schedule Two should only be completed where the Final Terms indicates that this Global Note is not intended to be a New Global Note.

43

ANNEX

[attach the Final Terms that relate to this Global Note]

44

PART 3

FORM OF REGULATION S GLOBAL CERTIFICATE

THE NOTES REPRESENTED BY THIS REGULATION S GLOBAL CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

VODAFONE GROUP PLC
(the Issuer)
(incorporated with limited liability in England and Wales)

REGULATION S GLOBAL CERTIFICATE

Registered Holder:

Address of Registered Holder:

Nominal amount of Notes
represented by this Regulation S Global
Certificate:

This Regulation S Global Certificate is issued in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. This Regulation S Global Certificate certifies that the Registered Holder (as defined above) is registered as the holder of such nominal amount of the Notes at the date hereof.

Interpretation and Definitions

References in this Regulation S Global Certificate to the Conditions are to the Terms and Conditions of the Notes as set out in the Schedule 1 to the Trust Deed (as defined below) as supplemented, replaced and modified by the Final Terms but, in the event of any conflict between the provisions of the Conditions and the information in the Final Term; the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Regulation S Global Certificate. This Regulation S Global Certificate is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c as Trustee for the holders of the Notes.

Promise to Pay

The Issuer, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the holder of the Notes represented by this Regulation S Global Certificate on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this Regulation S Global Certificate may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this Regulation S Global Certificate calculated and payable as

45

provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed.

For the purposes of this Regulation S Global Certificate, (a) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Notes represented by this Regulation S Global Certificate, (b) this Regulation S Global Certificate is evidence of entitlement only, (c) title to the Notes represented by this Regulation S Global Certificate passes only on due registration on the Register, (d) only the holder of the Notes, (in the case of payments of interest and Instalment Amounts (other than the Final Instalment)), as at the Record Date, represented by this Regulation S Global Certificate is entitled to payments in respect of the Notes represented by this Regulation S Global Certificate, and (e) the nominal amount of Notes represented by this Regulation S Global Certificate from time to time shall be that amount shown in the Register as being registered in the name of the Registered Holder hereof at such time.

Transfer of Notes represented by Regulation S Global Certificates

If the Final Terms state that the Notes are to be represented by a Regulation S Global Certificate on issue, transfers of the holding of Notes represented by this Regulation S Global Certificate pursuant to Condition 2(b) may only be made in part:

(a)	if the Notes represented by this Regulation S Global Certificate are held on behalf of Euroclear or Clearstream, Luxembourg or any other clearing system (an Alternative Clearing System) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so and no alternative clearing system satisfactory to the Trustee is available; or
(b)	an Event of Default has occurred and is continuing; or
(c)	with the consent of the Issuer,

provided that, in the case of the first transfer of part of a holding pursuant to (a) or (b) above, the holder of the Notes represented by this Regulation S Global Certificate has given the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Notes represented by this Regulation S Global Certificate is only transferable in its entirety, the Certificate issued to the transferee upon transfer of such holding shall be a Regulation S Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be Regulation S Global Certificates unless the transferee so requests and certifies to the Registrar that it is, or is acting as a nominee for, Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System.

Interests in a Regulation S Global Certificate will be exchangeable, free of charge to the holder, for definitive Regulation S Certificates only upon the occurrence of an Exchange Event. An Exchange Event means (unless otherwise specified in the applicable Final Terms) that:

(i)	an Event of Default has occurred and is continuing; or
(ii)	the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is available; or
(iii)	the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by definitive Regulation S Certificates.

Upon the occurrence of an Exchange Event:

46

(A)	the Issuer will promptly give notice to Noteholders in accordance with Condition 13; and
(B)	Euroclear and Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Regulation S Global Certificate) may give notice to the Registrar requesting exchange and, in the event of an Exchange Event as described in (iii) above, the Issuer many also give notice to the Registrar requesting exchange.

Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.

Meetings

At any meeting of Noteholders, the holder of the Notes represented by this Regulation S Global Certificate shall be treated as having one vote in respect of each nominal amount of Notes equal to the minimum Specified Denomination of the Notes.

This Regulation S Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

This Regulation S Global Certificate, and any non-contractual obligations arising out of or in connection with it, shall be governed by and construed in accordance with English law.

IN WITNESS whereof the Issuer has caused this Regulation S Global Certificate to be signed manually or in facsimile by a person duly authorised on its behalf.

Dated as of the Issue Date.

VODAFONE GROUP PLC

By:
	Duly Authorised

Authenticated
by HSBC Bank USA, National Association as Registrar

By:
	Authorised Officer

47

Form of Transfer

     For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[l] nominal amount of the Notes represented by this Regulation S Global Certificate, and all rights under them.

Dated
Signed	Certifying Signature

(a) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this Regulation S Global Certificate or (if such signature corresponds with the name as it appears on the face of this Regulation S Global Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require.

(b) A representative of the Noteholder should state the capacity in which he signs e.g. executor.

48

ANNEX

[attach Final Terms that relate to this Global Certificate]

49

PART 4

FORM OF DTC RESTRICTED GLOBAL CERTIFICATE

THE NOTES REPRESENTED BY THIS DTC RESTRICTED GLOBAL CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) , IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THE NOTES REPRESENTED BY THIS DTC RESTRICTED CERTIFICATE.

Unless this DTC Restricted Global Certificate is presented by an authorised representative of The Depository Trust Company, a New York corporation (DTC) to the Issuer or its agent for registration of transfer, exchange or payment, and any definitive Note issued is registered in the name of Cede & Co. or such other name as is requested by an authorised representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorised representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner hereof, Cede & Co., has an interest herein.

VODAFONE GROUP PLC
(the Issuer)
(incorporated with limited liability in England and Wales)

DTC RESTRICTED GLOBAL CERTIFICATE

Registered Holder:

Address of Registered Holder:

Nominal amount of Notes
represented by this DTC Restricted Global
Certificate:

This DTC Restricted Global Certificate is issued in respect of a duly authorised issue of Notes of the Issuer (the Notes) of the Nominal Amount, Specified Currency(ies) and Specified Denomination(s) as are specified in the Final Terms applicable to the Notes (the Final Terms), a copy of which is annexed hereto. This DTC Restricted Global Certificate certifies that the Registered Holder (as defined above) is registered as the holder of such nominal amount of the Notes at the date hereof.

Interpretation and Definitions

References in this DTC Restricted Global Certificate to the Conditions are to the Terms and Conditions or the Notes as set out in the Schedule 1 to the Trust Deed (as defined below) as supplemented, replaced and

50

modified by the Final Terms but, in the event of any conflict between the provisions of the Conditions and the information in the Final Terms, the Final Terms will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this DTC Restricted Global Certificate. This DTC Restricted Global Certificate is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c as Trustee for the holders of the Notes.

Promise to Pay

The Issuer, subject as hereinafter provided and subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the holder of the Notes represented by this DTC Restricted Global Certificate on each Instalment Date (if the Notes are repayable in instalments) and on the Maturity Date and/or on such earlier date(s) as all or any of the Notes represented by this DTC Restricted Global Certificate may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable under the Conditions in respect of such Notes on each such date and to pay interest (if any) on the nominal amount of the Notes from time to time represented by this DTC Restricted Global Certificate calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed.

For the purposes of this DTC Restricted Global Certificate, (a) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Notes represented by this DTC Restricted Global Certificate, (b) this DTC Restricted Global Certificate is evidence of entitlement only, (c) title to the Notes represented by this DTC Restricted Global Certificate passes only on due registration on the Register, (d) only the holder of the Notes, (in the case of payments of interest and Instalment Amounts (other than the Final Instalment)) as at the Record Date, represented by this DTC Restricted Global Certificate is entitled to payments in respect of the Notes represented by this DTC Restricted Global Certificate, and (e) the nominal amount of Notes represented by this DTC Restricted Global Certificate from time to time shall be that amount shown in the Register as being registered in the name of the Registered Holder hereof at such time.

Transfer of Notes represented by DTC Restricted Global Certificates

If the Final Terms state that the Notes are to be represented by a DTC Restricted Global Certificate on issue, transfers of the holding of Notes represented by this DTC Restricted Global Certificate pursuant to Condition 2(b) may only be made in part:

(a)	if the Notes represented by this DTC Restricted Global Certificate are held on behalf of DTC or any other clearing system (an Alternative Clearing System) and any such clearing system is closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so and no alternative clearing system satisfactory to the Trustee is available; or
(b)	an Event of Default has occurred and is continuing; or
(c)	with the consent of the Issuer

provided that, in the case of the first transfer of part of a holding pursuant to (a) or (b) above, the holder of the Notes represented by this DTC Restricted Global Certificate has given the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such transfer. Where the holding of Notes represented by this DTC Restricted Global Certificate is only transferable in its entirety, the Certificate issued to the transferee upon transfer of such holding shall be a DTC Restricted Global Certificate. Where transfers are permitted in part, Certificates issued to transferees shall not be DTC Restricted Global Certificates unless the transferee so requests and certifies to the Registrar that it is, or is acting as a nominee for, DTC and/or an Alternative Clearing System.

51

Interests in a DTC Restricted Global Certificate will be exchangeable, free of charge to the holder, for definitive DTC Restricted Certificates only upon the occurrence of an Exchange Event. An Exchange Event means (unless otherwise specified in the applicable Final Terms) that:

(i)	an Event of Default has occurred and is continuing; or
(ii)	either DTC has notified the Issuer that it is unwilling or unable to continue to act as depositary for the Notes and no alternative clearing system is available or DTC has ceased to constitute a clearing agency registered under the Exchange Act; or
(iii)	the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by definitive DTC Restricted Certificates.

Upon the occurrence of an Exchange Event:

(A)	the Issuer will promptly give notice to Noteholders in accordance with Condition 13; and
(B)	DTC (acting on the instructions of any holder of an interest in such DTC Restricted Global Certificate) may give notice to the Registrar requesting exchange and, in the event of an Exchange Event as described in (iii) above, the Issuer many also give notice to the Registrar requesting exchange.

Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar.

Covenants

The statements set forth in the legend above are an integral part of the Notes in respect of which this DTC Restricted Global Certificate representing DTC Restricted Registered Notes is issued and by acceptance hereof each holder of such Notes agrees to be subject to and bound by the terms and provisions set forth in such legend.

Meetings

At any meeting of Noteholders, the holder of the Notes represented by this DTC Restricted Global Certificate shall be treated as having one vote in respect of each nominal amount of Notes equal to the minimum Specified Denomination of the Notes.

This DTC Restricted Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

This DTC Restricted Global Certificate, and any non-contractual obligations arising out of or in connection with it, shall be governed by and construed in accordance with English law.

IN WITNESS whereof the Issuer has caused this DTC Restricted Global Certificate to be signed manually or in facsimile by a person duly authorised on its behalf.

Dated as of the Issue Date.

VODAFONE GROUP PLC

By:
	Duly Authorised

52

Authenticated

by HSBC Bank USA, National Association as Registrar

By:
	Authorised Officer

53

Form of Transfer

For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[l] nominal amount of the Notes represented by this DTC Restricted Global Certificate, and all rights under them.

Dated
Signed	Certifying Signature

Notes:

(a)

The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this DTC Restricted Global Certificate or (if such signature corresponds with the name as it appears on the face of this DTC Restricted Global Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require.

(b)

A representative of the Noteholder should state the capacity in which he signs e.g. executor.

54

ANNEX

[attach Final Terms that relate to this Global Certificate]

55

PART 5

FORM OF REGULATION S CERTIFICATE

On the front:

THE NOTES REPRESENTED BY THIS REGULATION S GLOBAL CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.

VODAFONE GROUP PLC
(the Issuer)
(incorporated with limited liability in England and Wales)

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE

[Year of Maturity]

This Regulation S Certificate certifies that [l] (the Registered Holder) is, as at the date hereof, registered as the holder of [nominal amount] of the Notes referred to above (the Notes) of the Issuer. References herein to the Conditions shall be to the Terms and Conditions [endorsed hereon/set out in the Schedule 1 to the Trust Deed (as defined below) which shall be incorporated by reference herein and have effect as if set out herein] as supplemented, replaced and modified by the relevant information (appearing in the Final Terms (the Final Terms)) endorsed hereon but, in the event of any conflict between the provisions of the said Conditions and such information in the Final Terms, such information will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this Certificate. This Certificate is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c. as trustee for the holders of the Notes.

The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the Registered Holder hereof on [each Instalment Date and] the Maturity Date or on such earlier date as the Notes represented by this Certificate may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable on redemption of such Notes and to pay interest (if any) on the nominal amount of such Notes calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed.

For the purposes of this Regulation S Certificate, (a) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Note(s) represented by this Regulation S Certificate, (b) this Regulation S Certificate is evidence of entitlement only, (c) title to the Note(s) represented by this Regulation S Certificate passes only on due registration on the Register, and (d) only the holder of the Note(s) represented by this Regulation S Certificate is entitled to payments in respect of the Note(s) represented by this Regulation S Certificate.

This Regulation S Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

56

This Regulation S Certificate, and any non-contractual obligations arising out of or in connection with it, shall be governed by and construed in accordance with English law.

IN WITNESS whereof this Regulation S Certificate has been executed on behalf of the Issuer.

Dated as of the Issue Date.

VODAFONE GROUP PLC

By:
	Duly Authorised

Authenticated by HSBC Bank USA, National Association as Registrar.

By:
	Authorised Officer

57

On the back:

Terms and Conditions of the Notes

[Conditions to be as set out in the Schedule 1 to this Trust Deed or such other form as may be agreed between the Issuer, the Issuing and Principal Paying Agent, the Registrar, the Trustee and the relevant Dealer(s), but shall not be endorsed if not required by the relevant Stock Exchange.]

58

Final Terms

[Here to be set out the text of the relevant information supplementing, replacing or modifying the Conditions which appears in the Final Terms relating to the Notes].

59

Form of Transfer

For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[l] nominal amount of the Notes represented by this Regulation S Certificate, and all rights under them.

Dated
	Certifying Signature
Signed
Notes:

(a) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this Regulation S Certificate or (if such signature corresponds with the name as it appears on the face of this Regulation S Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require.

(b) A representative of the Noteholder should state the capacity in which he signs.

Unless the context otherwise requires capitalised terms used in this Form of Transfer have the same meaning as in the Trust Deed.

[TO BE COMPLETED BY TRANSFEREE:

[INSERT ANY REQUIRED TRANSFEREE REPRESENTATIONS, CERTIFICATIONS, ETC.]]

ISSUING AND PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR

HSBC Bank plc
8 Canada Square
London E14 5HQ

PAYING AGENT AND TRANSFER AGENT

HSBC Bank USA, National Association
452 Fifth Avenue
New York
NY 10018-2708

60

PART 6

FORM OF DTC RESTRICTED CERTIFICATE

On the front:

THE NOTES REPRESENTED BY THIS DEFINITIVE REGISTERED NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALE OF THE NOTES REPRESENTED BY THIS DEFINITIVE REGISTERED NOTE.

[FOR PURPOSES OF SECTIONS 1271 ET. SEQ. OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE HAS ORIGINAL ISSUE DISCOUNT OF [currency][amount] PER EACH [currency][amount] OF PRINCIPAL AMOUNT OF THIS NOTE; THE ISSUE PRICE OF THIS NOTE IS [currency][amount]; THE ISSUE DATE IS [date]; AND THE YIELD TO MATURITY (COMPOUNDED [semi-annually]) IS [yield].]^*.

VODAFONE GROUP PLC
(the Issuer)

(incorporated with limited liability in England and Wales)

[Specified Currency and Nominal Amount of Tranche]
NOTES DUE
[Year of Maturity]

This DTC Restricted Certificate certifies that [l] (the Registered Holder) is, as at the date hereof, registered as the holder of [nominal amount] of the Notes referred to above (the Notes) of the Issuer. References herein to the Conditions shall be to the Terms and Conditions [endorsed hereon/set out in Schedule 1 to the Trust Deed (as defined below) which shall be incorporated by reference herein and have effect as if set out herein] as supplemented, replaced and modified by the relevant information (appearing in the Final Terms (the Final Terms)) endorsed hereon but, in the event of any conflict between the provisions of the said Conditions and such information in the Final Terms, such information will prevail. Words and expressions defined in the Conditions shall bear the same meanings when used in this DTC Restricted Certificate. This DTC Restricted Certificate is issued subject to, and with the benefit of, the Conditions and a Trust Deed (such Trust Deed as modified and/or supplemented and/or restated from time to time, the Trust Deed) dated 16 July 1999 and made between the Issuer (under its then name of Vodafone AirTouch Plc) and The Law Debenture Trust Corporation p.l.c. as trustee for the holders of the Notes.

* Legend to be borne by any Definitive Certificate issued with “original issue discount” for U.S federal income tax purposes.

61

The Issuer, subject to and in accordance with the Conditions and the Trust Deed, promises to pay to the Registered Holder hereof on [each Instalment Date and] the Maturity Date or on such earlier date as the Notes represented by this DTC Restricted Certificate may become due and repayable in accordance with the Conditions and the Trust Deed, the amount payable on redemption of such Notes and to pay interest (if any) on the nominal amount of such Notes calculated and payable as provided in the Conditions and the Trust Deed together with any other sums payable under the Conditions and the Trust Deed.

The statements set forth in the legend above are an integral part of the Notes in respect of which this DTC Restricted Certificate is issued and by acceptance hereof each holder of such Notes agrees to be subject to and bound by the terms and provisions set forth in such legend.

For so long as the Notes are outstanding, the Issuer will, during the period in which the Issuer is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended, nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, provide to the holder hereof, or to any prospective purchaser hereof designated by such holder, upon request, the information required to be provided by Rule 144A(d)(4) under the U.S. Securities Act of 1933, as amended (the Securities Act).

For the purposes of this DTC Restricted Certificate, (a) the Issuer certifies that the Registered Holder is, at the date hereof, entered in the Register as the holder of the Note(s) represented by this DTC Restricted Certificate, (b) this DTC Restricted Certificate is evidence of entitlement only, (c) title to the Note(s) represented by this DTC Restricted Certificate passes only on due registration on the Register, and (d) only the holder of the Note(s) represented by this DTC Restricted Certificate is entitled to payments in respect of the Note(s) represented by this DTC Restricted Certificate.

This DTC Restricted Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.

This DTC Restricted Certificate, and any non-contractual obligations arising out of or in connection with it, shall be governed by and construed in accordance with English law.

IN WITNESS whereof this DTC Restricted Certificate has been executed on behalf of the Issuer.

Dated as of the Issue Date.

VODAFONE GROUP PLC

By:
	Duly Authorised

Authenticated by HSBC Bank USA, National Association as Registrar.

By:
	Authorised Officer

62

On the back:

Terms and Conditions of the Notes

[Conditions to be as set out in the Schedule 1 to this Trust Deed or such other form as may be agreed between the Issuer, the Issuing and Principal Paying Agent, the Registrar, the Trustee and the relevant Dealer(s), but shall not be endorsed if not required by the relevant Stock Exchange.]

63

Final Terms

[Here to be set out the text of the relevant information supplementing, replacing or modifying the Conditions which appears in the Final Terms relating to the Notes].

64

Form of Transfer

For value received the undersigned transfers to

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[l] nominal amount of the Notes represented by this Regulation S Certificate, and all rights under them.

Dated
	Certifying Signature
Signed
Notes:

(a) The signature of the person effecting a transfer shall conform to a list of duly authorised specimen signatures supplied by the holder of the Notes represented by this DTC Restricted Certificate or (if such signature corresponds with the name as it appears on the face of this DTC Restricted Certificate) be certified by a notary public or a recognised bank or be supported by such other evidence as a Transfer Agent or the Registrar may reasonably require.

(b) A representative of the Noteholder should state the capacity in which he signs.

Unless the context otherwise requires capitalised terms used in this Form of Transfer have the same meaning as in the Trust Deed.

[TO BE COMPLETED BY TRANSFEREE:

[INSERT ANY REQUIRED TRANSFEREE REPRESENTATIONS, CERTIFICATIONS, ETC.]]

ISSUING AND PRINCIPAL PAYING AGENT, TRANSFER AGENT AND REGISTRAR

HSBC Bank plc
8 Canada Square
London E14 5HQ

PAYING AGENT AND TRANSFER AGENT
HSBC Bank USA, National Association
452 Fifth Avenue
New York
NY 10018-2708

65

SIGNATORIES

Executed as a deed by
VODAFONE GROUP PLC
acting by:
ANDREW HALFORD
Director
STEPHEN SCOTT
Director/Secretary
THE COMMON SEAL of	)
THE LAW DEBENTURE TRUST	)
CORPORATION p.l.c.	)
was affixed to this deed	)
in the presence of:	)
JULIAN MASON-JEBB
KATY LEGROS

66

10 July 2009

VODAFONE GROUP PLC

and

THE LAW DEBENTURE TRUST
CORPORATION p.l.c.

further modifying the provisions of
the Trust Deed dated 16 July 1999

relating to a
€30,000,000,000
Euro Medium Term Note Programme

For Vodafone Group Plc:

LINKLATERS LLP
One Silk Street
London EC2Y 8HQ

For The Law Debenture Trust
Corporation p.l.c.:

ALLEN & OVERY LLP
One Bishops Square
London E1 6AD

EIGHTH
SUPPLEMENTAL
TRUST DEED

EX-4.25

Exhibit 4.25

Stephen Scott Group General Counsel and Company Secretary
27 July 2005

Mr Andy Halford	Our Ref:	SRS/je/3713
The Oxdrove House	Direct line:	+44 1635 673915
Burghclere	Direct fax:	+44 1635 580761
Berkshire
RG20 9HJ

Dear Andy

INDEMNIFICATION OF DIRECTORS

Until April of this year, the Company was only able to indemnify a Director for liability incurred in his or her capacity as Director once judgment was given in favour of the Director or the Director was acquitted. The Companies (Audit, Investigations and Community Enterprise) Act 2004 came into force in April 2005 and expands the circumstances under which a Director can be indemnified.

At the AGM of the Company held on 26 July 2005, the shareholders approved amendments to the Memorandum and Articles of Association of the Company to enable the Company to indemnify its Directors in accordance with the new legislation.

As a result, and with immediate effect, the Board has instructed me to advise you that the Company has granted and hereby confirms the grant of the following indemnity to you in relation to liability incurred in your capacity as Director:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt and in accordance with the new legislation, the indemnity granted does not cover:

(i)	Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced;
(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced:

Vodafone Group Plc
Company Secretary’s & Legal Department
Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
Telephone: +44 1635 33251, Facsimile: +44 1635 580857

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and
(v)	Liability incurred in connection with any application under Section 144(3) or (4) of the Companies Act 1985 (acquisition of shares by innocent nominee) or section 727 of the Companies Act 1985 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

The indemnity is provided for all claims arising from today’s date, even if the action giving rise to the claim occurred before the Company had the authority to grant an indemnity in accordance with the new legislation. Prior to today’s date, your right to indemnification is as set out in your Service Agreement and the Articles of Association of the Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter let me know. If not, please counter-sign the enclosed copy of this letter and return it to me at your earliest convenience.

Yours sincerely

I accept the terms of this letter

/s/ [ILLEGIBLE] Date 27 July 2005

2

APPENDIX

Section 144(3) and (4) Companies Act 1985

Section 144 CA 1985 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity granted by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 727 Companies Act 1985

The Court has power under s.727 CA 1985 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted under the new legislation to indemnify the Director.

3

EX-4.26

Exhibit 4.26

19 May 2009

Michel Combes
Chief Executive, Europe Region
Vodafone Group Plc
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN

Dear Michel

INDEMNIFICATION OF DIRECTORS

In April 2005, the Companies (Audit Investigations and Community Enterprise) Act 2004 came into force which expanded the circumstances under which a Director can be indemnified by the Company. At the Company’s AGM in 2005, the Shareholders approved amendments to the Memorandum and Articles of Association to enable the Company to indemnify its Directors in accordance with the legislation. Further amendments to the Articles of Association were approved at the Company’s AGM in 2008 to provide the Company with the ability to provide indemnification to the extent permitted by the Companies Act 2006.

As a result, you will have the benefit of the following indemnity in relation to liability incurred in your capacity as a Director of the Company. This indemnity is as wide as English law currently permits:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt, the indemnity granted does not cover:

(i) Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced:

Vodafone Group Plc
Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
T +44 1635 33251 F +44 1635 676746

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced;
(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and
(v)	Liability incurred in connection with any application under Section 661(3) or (4) of the Companies Act 2006 (acquisition of shares by innocent nominee) or section 1157 of the Companies Act 2006 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

Furthermore, the Company may, subject to the provisions of the Companies Act 2006 and the rules made by the UK Listing Authority, provide funds to cover costs as incurred by you in defending yourself in an investigation by a regulatory authority or against an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by you in relation to the Company or an Associated Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter, please let me know. Otherwise, please counter-sign the enclosed copy of this letter and return to me at your earliest convenience.

Yours sincerely

I accept the terms of this letter.

/s/ Michel Combes

Michel Combes

Chief Executive, Europe Region

Vodafone Group Plc

Date:

Appendix

Section 661(3) and (4) Companies Act 2006

Section 661 of the Companies Act 2006 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity provided by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 1157 Companies Act 2006

The Court has power under section 1157 of the Companies Act 2006 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted to indemnify the Director.

EX-4.27

Exhibit 4.27

19 May 2009

S C Pusey
Chief Technology Officer
Vodafone Group Plc
Vodafone House
The Connection
Newbury
Berkshire
RG14 2FN

Dear Steve

INDEMNIFICATION OF DIRECTORS

In April 2005, the Companies (Audit, Investigations and Community Enterprise) Act 2004 came into force which expanded the circumstances under which a Director can be indemnified by the Company. At the Company’s AGM in 2005, the Shareholders approved amendments to the Memorandum and Articles of Association to enable the Company to indemnify its Directors in accordance with the legislation. Further amendments to the Articles of Association were approved at the Company’s AGM in 2008 to provide the Company with the ability to provide indemnification to the extent permitted by the Companies Act 2006.

As a result, you will have the benefit of the following indemnity in relation to liability incurred in your capacity as a Director of the Company. This indemnity is as wide as English law currently permits:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt, the indemnity granted does not cover:

(i)	Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced;
(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced;

Vodafone Group Plc
Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England
T +44 1635 33251 F +44 1635 676746

Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN, England. Registered in England No. 1833679

(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and
(v)	Liability incurred in connection with any application under Section 661(3) or (4) of the Companies Act 2006 (acquisition of shares by innocent nominee) or section 1157 of the Companies Act 2006 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

Furthermore, the Company may, subject to the provisions of the Companies Act 2006 and the rules made by the UK Listing Authority, provide funds to cover costs as incurred by you in defending yourself in an investigation by a regulatory authority or against an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by you in relation to the Company or an Associated Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter, please let me know. Otherwise, please counter-sign the enclosed copy of this letter and return to me at your earliest convenience.

Yours sincerely

I accept the terms of this letter.

/s/ Steve Pusey

Steve Pusey

Chief Technology Officer

Vodafone Group Plc

Date:

Appendix

Section 661(3) and (4) Companies Act 2006

Section 661 of the Companies Act 2006 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity provided by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 1157 Companies Act 2006

The Court has power under section 1157 of the Companies Act 2006 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted to indemnify the Director.

EX-4.28

Exhibit 4.28

Stephen Scott Group General Counsel and Company Secretary
17 March 2010

Mr J Buchanan
‘Fernshaw’
Rockfield Road
Oxted
Surrey RH8 0HA

Dear John

CONFIRMATION OF INDEMNIFICATION OF DIRECTORS

As your letter of appointment dates back to 2003, it has come to light that you may not have received written confirmation of the indemnity that the Company provides to you which was approved by the shareholders in 2005, as amended in 2008. By way of confirmation, please find set out below, details of the indemnity provided to you.

You will have the benefit of the following indemnity in relation to liability incurred in your capacity as a Director of the Company. This indemnity is as wide as English law currently permits:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt, the indemnity granted does not cover:

(i)	Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced;
(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced;
(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and

Vodafone Group Plc
Company Secretary’s & Legal Department	Our ref: SRS/je
One Kingdom Street, Paddington Central, London W2 6BY, England	T +44 1635 673915
T +44 (0)1635 33251 F +44 (0)1635 580857 www.vodafone.com	F +44 1635 233743
	stephen.scott@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire
RG14 2FN, England. Registered in England No. 1833679

(v) Liability incurred in connection with any application under Section 661(3) or (4) of the Companies Act 2006 (acquisition of shares by innocent nominee) or section 1157 of the Companies Act 2006 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

Furthermore, the Company may, subject to the provisions of the Companies Act 2006 and the rules made by the UK Listing Authority, provide funds to cover costs as incurred by you in defending yourself in an investigation by a regulatory authority or against an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by you in relation to the Company or an Associated Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter, please let me know. Otherwise, please counter-sign the enclosed copy of this letter and return to me at your earliest convenience.

Yours sincerely

Stephen Scott

I accept the terms of this letter.

John Buchanan

John Buchanan
Director
Vodafone Group Plc

Date: 22 March 2010

17 March 2010

2

Appendix

Section 661(3) and (4) Companies Act 2006

Section 661 of the Companies Act 2006 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity provided by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 1157 Companies Act 2006

The Court has power under section 1157 of the Companies Act 2006 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted to indemnify the Director.

17 March 2010

3

EX-4.29

Exhibit 4.29

Stephen Scott
Group General Counsel and Company Secretary

18 March 2010

Mr. P E Yea
Castor Heights
Ferry Hill
Castor
Peterborough
PE5 7BU

Dear Phil

CONFIRMATION OF INDEMNIFICATION OF DIRECTORS

You may recall that your letter of appointment made reference to the fact that at the Company’s AGM in 2005, the shareholders would be asked to approve amendments to the Memorandum and Articles of Association to enable the Company to indemnify its Directors in accordance with new legislation, and that if such approval was obtained, you would benefit from such an indemnity.

Shareholder approval was obtained and this indemnity was granted to you. By way of confirmation, please find set out below details of the indemnity provided to you.

You will have the benefit of the following indemnity in relation to liability incurred in your capacity as a Director of the Company. This indemnity is as wide as English law currently permits:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt, the indemnity granted does not cover:

(i)	Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced;
(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced;

Vodafone Group Plc
Company Secretary’s & Legal Department	Our ref: SRS/je
One Kingdom Street, Paddington Central, London W2 6BY, England	T +44 1635 673915
T +44 (0)1635 33251 F +44 (0)1635 580857 www.vodafone.com	F +44 1635 233743
	stephen.scott@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14
2FN, England. Registered in England No. 1833679

(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and
(v)	Liability incurred in connection with any application under Section 661(3) or (4) of the Companies Act 2006 (acquisition of shares by innocent nominee) or section 1157 of the Companies Act 2006 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

Furthermore, the Company may, subject to the provisions of the Companies Act 2006 and the rules made by the UK Listing Authority, provide funds to cover costs as incurred by you in defending yourself in an investigation by a regulatory authority or against an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by you in relation to the Company or an Associated Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter, please let me know. Otherwise, please counter-sign the enclosed copy of this letter and return to me at your earliest convenience.

Yours sincerely

Stephen Scott

I accept the terms of this letter.

Philip Yea

Philip Yea
Director
Vodafone Group Plc

Date: 19 March 2010

18 March 2010

2

Appendix

Section 661(3) and (4) Companies Act 2006

Section 661 of the Companies Act 2006 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity provided by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 1157 Companies Act 2006

The Court has power under section 1157 of the Companies Act 2006 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted to indemnify the Director.

18 March 2010

3

EX-4.30

Exhibit 4.30

Stephen Scott
Group General Counsel and Company Secretary

19 March 2010

Mr L E R Vandevelde
Avenue Van Bever 28B
1180 Uccle
Belgium

Dear Luc

CONFIRMATION OF INDEMNIFICATION OF DIRECTORS

As your letter of appointment dates back to 2003, it has come to light that you may not have received written confirmation of the indemnity that the Company provides to you which was approved by the shareholders in 2005, as amended in 2008. By way of confirmation, please find set out below, details of the indemnity provided to you.

You will have the benefit of the following indemnity in relation to liability incurred in your capacity as a Director of the Company. This indemnity is as wide as English law currently permits:

(i)	The Company will provide funds to cover costs as incurred by you in defending legal proceedings brought against you in your capacity as, or as a result of your being or having been, a Director of the Company including criminal proceedings and proceedings brought by the Company itself or an Associated Company;
(ii)	The Company will indemnify you in respect of any proceedings brought by third parties, including both legal and financial costs of an adverse judgment brought against you in your capacity as, or as a result of your being or having been, a Director of the Company; and
(iii)	The Company will indemnify you for liability incurred in connection with any application made to a court for relief from liability, where the court grants such relief.

For the avoidance of doubt, the indemnity granted does not cover:

(i)	Unsuccessful defence of criminal proceedings, in which instance the Company would seek reimbursement for any funds advanced;
(ii)	Unsuccessful defence of an action brought by the Company itself or an Associated Company, in which instance the Company would seek reimbursement for any funds advanced;
(iii)	Fines imposed by regulatory bodies;
(iv)	Fines imposed in criminal proceedings; and

Vodafone Group Plc
Company Secretary’s & Legal Department	Our ref: SRS/je
One Kingdom Street, Paddington Central, London W2 6BY, England	T +44 1635 673915
T +44 (0)1635 33251 F +44 (0)1635 580857 www.vodafone.com	F +44 1635 233743
	stephen.scott@vodafone.com
Registered Office: Vodafone House, The Connection, Newbury, Berkshire RG14 2FN,
England. Registered in England No. 1833679

(v) Liability incurred in connection with any application under Section 661(3) or (4) of the Companies Act 2006 (acquisition of shares by innocent nominee) or section 1157 of the Companies Act 2006 (general power to grant relief in case of honest and reasonable conduct), where the court refuses to grant you relief, and such refusal is final. (For reference, a summary of these sections is appended to this letter).

Furthermore, the Company may, subject to the provisions of the Companies Act 2006 and the rules made by the UK Listing Authority, provide funds to cover costs as incurred by you in defending yourself in an investigation by a regulatory authority or against an action proposed to be taken by a regulatory authority in connection with any alleged negligence, default, breach of duty or breach of trust by you in relation to the Company or an Associated Company.

It is a condition of the provision of this indemnity that you shall notify the Company without delay upon becoming aware of any claim or potential claim against you and that you have a duty to mitigate any loss incurred.

The Company maintains Directors and Officers insurance as additional cover for Directors which, if the insurance policy so permits, may provide funds in circumstances where the law prohibits the Company from indemnifying Directors.

If you have any queries in relation to this letter, please let me know. Otherwise, please counter-sign the enclosed copy of this letter and return to me at your earliest convenience.

Yours sincerely

Stephen Scott

I accept the terms of this letter.

Luc Vandvelde

Luc Vandevelde
Director
Vodafone Group Plc

Date: March 23^rd, 2010

19 March 2010

2

Appendix

Section 661(3) and (4) Companies Act 2006

Section 661 of the Companies Act 2006 governs the situation where there are partly paid up shares issued to a Company nominee. If the nominee is called upon to pay up but fails to do so, the Directors of the Company are jointly and severally liable with the nominee to pay such amount. Under this section however, the court is able to excuse the Director of his or her liability if it finds that the Director has acted honestly and reasonably in the circumstances and ought fairly to be excused from liability. If the Director is so excused, the indemnity provided by the Company will cover costs incurred by the Director in relation to the proceedings. If the court refuses to grant such relief, the Company will not be permitted to indemnify the Director for costs incurred.

Section 1157 Companies Act 2006

The Court has power under section 1157 of the Companies Act 2006 in any proceedings that come before it concerning negligence, default, breach of duty or breach of trust against a Director to relieve him or her from liability if having regard to all the circumstances of the case it finds that the Director has acted honestly and reasonably and ought fairly to be excused from liability. If the Director is excused, the Company will indemnify the Director for any costs incurred in relation to the proceedings but if relief is refused, the Company will not be permitted to indemnify the Director.

19 March 2010

3

EX-7

Exhibit 7

UNAUDITED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)

	2010			2009			2008			2007			2006
	£m			£m			£m			£m			£m
Financing costs per consolidated income statement		1,512			2,419			2,014			1,612			1,120
One third of rental expense		553			466			387			340			323
Fixed charges(2)		2,065			2,885			2,401			1,952			1,443
Profit/(loss) before taxation from continuing operations		8,674			4,189			9,001			(2,383	)		(14,853	)
Share of profit in associates		(4,742	)		(4,091	)		(2,876	)		(2,728	)		(2,428	)
Fixed charges		2,065			2,885			2,401			1,952			1,443
Dividends received from associates		1,436			647			873			791			835
Preference dividend requirements of a consolidated subsidiary		(86	)		(82	)		(65	)		(69	)		(74	)
Earnings		7,347			3,548			9,334			(2,437	)		(15,077	)
Ratio of earnings to fixed charges		3.6			1.2			3.9			—			—
Deficiency between fixed charges and earnings		—			—			—			(4,389	)		(16,520	)

Notes:
1.	All of the financial information presented in this exhibit is unaudited.
2.	Fixed charges include (1) interest expensed (2) amortised premiums, discounts and capitalised expenses related to indebtedness, (3) an estimate of the interest within rental expense, and (4) preference security dividend requirements of a consolidated subsidiary. These include the financings costs of subsidiaries and joint ventures.

EX-12

Exhibit 12

RULE 13a-14(a) CERTIFICATION

I, Vittorio Colao, certify that:

1.	I have reviewed this annual report on Form 20-F of Vodafone Group Plc (the “Company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

2 June 2010 Date	/s/ Vittorio Colao
	Vittorio Colao
	Chief Executive

RULE 13a-14(a) CERTIFICATION

I, Andy N. Halford, certify that:

1.	I have reviewed this annual report on Form 20-F of Vodafone Group Plc (the “Company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4.	The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the Company and have:
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)	Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and
5.	The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

2 June 2010 Date	/s/ Andy Halford
	Andy N. Halford
	Chief Financial Officer

EX-13

Exhibit 13

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended 31 March 2010 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

2 June 2010 Date	/s/ Vittorio Colao Vittorio Colao
	Chief Executive

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended 31 March 2010 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

2 June 2010 Date	/s/ Andy Halford Andy N. Halford
	Chief Financial Officer

The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration statement Nos. 333-81825 and 333-149634 on Form S-8 and Registration statement No. 333-144978 on Form F-3 of our reports dated May 18, 2010, relating to the consolidated financial statements of Vodafone Group Plc, and the effectiveness of Vodafone Group Plc’s internal control over financial reporting, appearing in this Annual Report on Form 20-F of Vodafone Group Plc for the year ended March 31, 2010.

/s/ Deloitte LLP

Deloitte LLP
Chartered Accountants and Registered Auditors
London, United Kingdom

June 1, 2010

EX-15.2

Exhibit 15.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-81825 and 333-149634 on Form S-8 and Registration Statement No. 333-144978 on Form F-3 of Vodafone Group Plc of our report dated March 12, 2010 (June 1, 2010 as to Note 14) relating to the consolidated financial statements of Cellco Partnership d/b/a Verizon Wireless appearing in this Annual Report on Form 20-F of Vodafone Group Plc for the year ended March 31, 2010.

/s/ Deloitte & Touche LLP
New York, New York
June 1, 2010

EX-15.3

Exhibit 15.3

CAPITALIZATION AND INDEBTEDNESS

The following table sets out our called up share capital, and the borrowings and indebtedness of Vodafone Group Plc, its consolidated subsidiaries and share of joint ventures, referred to as the “Group”, at March 31, 2010.

	At March 31,
	2010
	£
	(in millions)
Borrowings and Indebtedness
Short-term borrowings		11,163
Short-term derivative financial instruments *		99
Total short-term borrowings		11,262
Long-term borrowings		28,632
Long-term derivative financial instruments *		361
Total long-term borrowings		28,993
Total borrowings and indebtedness		40,255
Share Capital
Called up share capital (57,809,246,732 ordinary shares allotted, issued and fully paid)		4,153
Treasury shares held (5,146,112,159 shares)		(7,810	)
Additional paid-in capital		153,509
Retained losses		(79,655	)
Accumulated other comprehensive income		20,184
Total equity and shareholders’ funds		90,381
Total Capitalization and Indebtedness		130,636

*	Certain mark to market adjustments on financing instruments are included within derivative financial instruments, a component of trade and other payables
(1)	At March 31, 2010, all borrowings and indebtedness are unsecured, except for indebtedness in respect of Vodafone Essar of INR150.5 billion and Vodafone Holdings SA Pty Limited of ZAR4.85 billion.
(2)	At March 31, 2010, the Group had contingent indebtedness relating to outstanding guarantees, performance bonds and other contingent indebtedness items totaling £818 million.
(3)	At March 31, 2010, the Group had cash and cash equivalents of £4,423 million, investments in index linked government bonds of £388 million and trade and other receivables which comprise certain mark to market adjustments on financing instruments of £2,128 million, giving total net borrowings and indebtedness of £33,316 million.
(4)	The Group’s outstanding US and euro commercial paper, reported within short term borrowings in the above table, increased by €209 million and decreased by US$204 million between March 31, 2010 and May 18, 2010.
(5)	Other than the changes mentioned in the above footnotes and changes due to movements in foreign exchange rates, there has been no material change in the capitalization and indebtedness of the Group since March 31, 2010.