Vodafone Group Plc Annual Report for the year ended 31 March 2012

Creating a more valuable Vodafone

We are creating a more valuable Vodafone
Our strategy is focused on four areas of growth potential and founded on strong capital and cost discipline. This is delivering results: we have outperformed our key competitors in most major markets, and returned over £10 billion to shareholders in the last 12 months.

£46.4bn £11.5bn
Group revenue increased 1.2% to £46.4 billion with a strong demand for data services and further voice penetration in emerging markets.

Adjusted operating profit was £11.5 billion, slightly down on last year (up 2.5%* on an organic basis) supported by a good performance from our US associate, Verizon Wireless.

£6.1bn

Free cash flow of £6.1 billion, decreased due to the sale of our interests in China and France and a lower working capital benefit.

9.52p

Total ordinary dividends per share of 9.52 pence, up 7.0% in line with our dividend per share growth target. We also paid a special dividend of 4.0 pence per share and our £6.8 billion share buyback programme is almost complete.

£6.4bn

Capital expenditure increased by 2.3%, as we continued to maintain our high level of investment to support our network strategy.

14.91p

Adjusted earnings per share of 14.91 pence, down 11.0% on last year, resulting from the loss of income following the sale of several businesses and higher financing costs.

Vodafone Group Plc Annual Report 2012

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Business review

In this year’s report

Business review#
02 Overview 02 Who we are 04 What we do and how we do it 06 Where we do it 08 Where we are heading 10 How we’re doing Chairman’s statement Chief Executive’s review Industry trends How we do business Strategy 22 26 28

Performance#
40 50 51 54 Operating results Guidance Principal risk factors and uncertainties Financial position and resources

Performance

12 14 18 20 22

Governance#
60 63 74 Board of directors and Group management Corporate governance Directors’ remuneration Governance

32 34 36 38 39

30 Core strengths Our people Sustainable business Mobile for Good Risk overview

Mobile data Emerging markets Enterprise and total communications New services

Financials
88 89 90 91 93 94 142 143 Contents Directors’ statement of responsibility# Audit report on internal controls Critical accounting estimates Audit report on the consolidated financial statements Consolidated financial statements Audit report on the Company financial statements Company financial statements

Financials

Additional information
149 157 158 162 165 168 170 172 Shareholder information# History and development# Regulation# Non-GAAP information# Form 20-F cross reference guide Forward-looking statements Definition of terms Selected financial data

Additional information

As you’d expect from such a customer-focused business, we’ve created an online reporting suite which works for your specific needs:

vodafone.com/ar2012 e
The terms “Vodafone”, the “Group”, “we”, “our” and “us” refer to the Company and, as applicable, its subsidiaries and/or interests in joint ventures and associates. Unless otherwise stated references: to “year” or “2012” mean the financial year ended 31 March 2012; to “2011” or “previous year” mean the financial year ended 31 March 2011; to the “third quarter”, “previous quarter” or “Q3” are to the quarter ended 31 December 2011; and to the “fourth quarter” or “Q4” are to the quarter ended 31 March 2012. All amounts marked with an “*” represent organic growth as defined on page 171. Definitions of terms used throughout the report can be found on page 170. Further information on non-GAAP measures used in the report can be found on page 162. This report is dated 22 May 2012.

# These sections make up the directors’ report.

Vodafone Group Plc Annual Report 2012

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Who we are
We are a global communications business giving people the power to connect with each other – and to learn, work, play, be entertained and broaden their horizons – wherever and however they choose. The numbers speak for themselves. At the last count, over 404 million customers use our services in more than 30 countries around the globe. They choose Vodafone because we stand for great coverage, a reliable connection and good value – as well as a passion for improving the customer experience.
View our year in conversation online:

vodafone.com/ar2012

Business review Performance Governance Financials

Additional information

Vodafone Group Plc Annual Report 2012

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Vodafone Group Plc Annual Report 2012

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What we do and how we do it
We want to be admired for empowering people – making their lives simpler, easier and a good deal richer and more rewarding. These are the four pillars of the Vodafone Way which forms the foundation of our culture: Customer obsessed
We are passionate about exceeding customer expectations, understanding their needs and earning their increasing loyalty.

Innovation hungry

We promote a climate that fosters innovation and calculated risk taking to develop new services and ways of working.

Ambitious and competitive

We bring energy and passion to our work, setting ourselves high standards. We measure our success compared to our competitors not just to our plans.

One company, local roots

We operate as one company across diverse teams and markets to achieve the best outcome for our customers. We have an international brand and values, but are part of the local community.
View our year in conversation online:

vodafone.com/ar2012

Business review Performance Governance Financials

Additional information

Vodafone Group Plc Annual Report 2012

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Vodafone Group Plc Annual Report 2012

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Where we do it
We are one of the world’s largest mobile companies. We operate in over 30 countries and we partner with other network operators across over 40 more – extending our reach beyond our equity interests.
Global footprint
Equity interests
Europe Albania Czech Republic Germany Greece AMAP Australia Egypt Fiji Ghana Hungary Ireland Italy Malta Netherlands India Safaricom1 New Zealand Qatar Vodacom2 Portugal Romania Spain Turkey United Kingdom Non-Controlled Interests Verizon Wireless1

Revenue3
NonControlled Interests and Common 4 Functions: £0.4bn Europe: £32.2bn Africa, Middle East and Asia Pacific (‘AMAP’): £13.9bn

Adjusted operating profit3
Europe: £5.3bn Africa, Middle East and Asia Pacific: £1.5bn

£46.4bn

£11.5bn

NonControlled Interests and Common Functions: £4.8bn

Notes: 1 Associates. 2 Includes South Africa, Tanzania, Mozambique, Lesotho and the Democratic Republic of Congo. 3 The sum of these amounts do not equal Group totals due to inter-company eliminations and roundings. 4 Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs.

4 1

7

5

2

6

3

n Equity interests n Partner markets

Vodafone Group Plc Annual Report 2012

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Business review Performance

1

36m

Germany mobile customers

2

30m

Italy

3

1

mobile customers

57m

Vodacom mobile customers

4

19m

UK

Governance

mobile customers

Our largest market by revenue
We are the leading mobile operator in Germany, with a revenue market share of 35%. In 2010 we became the first operator in Germany to launch super fast 4G mobile data services with peak data download speeds of up to 50 Mbps. Germany is our largest market for fixed broadband customers with 3.4 million users.
5

We are the largest mobile operator in Italy
We acquired operations in Italy in 2000. In 2011 we became the largest mobile operator and now have a 37% revenue market share. While the economic recession led to a fall in revenue during the year, our flexible cost structure, due to low handset subsidies, has ensured that overall profitability remains high.

Growing strongly in Africa
We own 65% of Vodacom which covers five countries in Southern Africa – including South Africa which is the largest business, accounting for about 85% of revenue, Tanzania, Lesotho, Mozambique and the Democratic Republic of Congo. In South Africa we are the market leader and continue to deliver strong revenue growth due to the rapid take up of mobile data services.
7

Our first market
We made the first UK mobile phone call in 1985 and we were the first UK mobile network operator to launch commercial 3G services in 2001. Our business has expanded rapidly and today we account for 26% of the UK market (measured by revenue) and have a market leading 37% share of the mobile enterprise market.

Financials

18m

Spain

6

mobile customers

150m

India

mobile customers

93m

Verizon Wireless
1 mobile customers

Additional information

Challenging market conditions
The economic recession is extremely harsh in Spain, with unemployment at 24% leading to significant declines in organic revenue as customers cut back on spending. We remain confident of Spain’s longer term prospects and therefore we recently invested around £500 million in new spectrum which will be used to rollout 4G services.

Our largest market by customers
We acquired a controlling stake in India in 2007. Since then we have grown the customer base from 28 million to over 150 million and increased our revenue market share from 16% to 21%. Through our investments in 3G technology and low cost handsets we are bringing mobile internet services to this fast growing market.

A leading US operator
We own 45% of Verizon Wireless, the largest mobile operator in the United States measured by revenue. During last year Verizon Wireless achieved 7.3%* service revenue growth driven by good customer growth and the strong take-up of mobile data services. Its leading 4G network now covers two-thirds of the US population.

Note: 1 Represents 100%. The Group’s share based on its equity interests are 23 million in Italy and 42 million in Verizon Wireless.

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Where we are heading
In November 2010 we set out a new strategy to develop from a strong Controlled and jointly Vodafone into a more valuable Vodafone. controlled operations The strategy is driven by a focus on four Sustained cash flow Shareholder returns key areas of growth potential: Reinvestment Data services
Growth drivers
Data services Emerging markets Enterprise and total communications New services

Customer appetite for the mobile internet and related services will be the single biggest driver of our business going forward.
Find out how we are seizing the opportunity Pages 22 to 25

Core strengths
Capital discipline Cost efficiency
Read more Pages 32 and 33

Emerging markets

Our businesses in Africa and India are growing strongly as mobile communications are having a transformational impact on people’s lives.
Read more about our strategy for emerging markets Pages 26 and 27

Non-controlled operations

Enterprise and total communications

Businesses account for a large part of our activity and growth in this sector will be driven by employees becoming more mobile, devices more secure and the convergence of fixed and wireless communications.
Learn more about why we are well placed to succeed Pages 28 and 29

Shareholder returns Reinvestment Liquidity and cash flow
Read more Pages 55 and 56

New services

Machine-to-machine, mobile commerce services and operator billing, among many others, offer exciting new avenues for growth.
More about how new services are set to enhance customer experience Pages 30 and 31

View our year in conversation online:

vodafone.com/ar2012

Business review Performance Governance Financials

Additional information

Vodafone Group Plc Annual Report 2012

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Vodafone Group Plc Annual Report 2012

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How we’re doing
We track our performance against 12 key financial, operational and commercial metrics which we judged to be the best indicators of how we’re doing.
Organic service revenue growth
Growth in the top line demonstrates our ability to grow our customer base and stabilise or increase ARPU. It also helps to maintain margins.
Target: 1 –4% per year to March 2014. 2010 –1.6% 2011 2012 1.5% 2.1%

EBITDA margin
Trends in our EBITDA margins demonstrate whether our revenue growth is generating a good return on our investment in customer acquisition, and whether we can offset underlying cost pressures in our business with cost efficiencies elsewhere.
Target: EBITDA margin to stabilise by March 2014. 2010 2011 2012 33.1% 32.0% 31.2% on-track

Adjusted operating profit (‘AOP’)
Because of the significant contribution made to our overall profitability by our US associate, Verizon Wireless, AOP is a better determinant of overall profitability than EBITDA.
Target: £11.0 – £11.8 billion in 2012 financial year. 2010 2011 2012 £11.5bn £11.8bn £11.5bn

achieved

achieved

% of European network with 3G (14.4 Mbps or better)
Faster, more reliable networks with wider coverage stimulate data usage and create a clear point of difference over other operators.
Target: 99% by March 2015.

Relative market share performance
We track our relative performance by measuring the change in our mobile market share against our competitors.
Target: Gain or hold mobile service revenue market share in most of our main markets against our principal competitor.

Returns to shareholders
Consistent and balanced returns to shareholders demonstrate our commitment to capital discipline.
Target: Dividend per share growth of at least 7% per year to March 2013 (excluding special dividends). 2010 2011 2012 +6.9% +7.1% +7.0%

82% of European 3G network at least 14.4 Mbps, up from 66% in 2011

5/7 on-track We gained mobile service revenue market share in 5 out of 7 of our main markets.

achieved

achieved

Vodafone Group Plc Annual Report 2012

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Business review Performance Governance

Free cash flow
Our regular dividend is paid out of free cash flow, so maintaining a high level of cash generation (even after significant continued investment in capex) is key to delivering our dividend growth target.
Target: £5.5 – £6.5 billion per year to March 2014. 2010 2011 2012 £7.2bn £7.0bn £6.1bn

% of consumer contract revenue from integrated tariffs
Our strategic push towards integrated tariffs allows us both to defend our revenue base from voice/SMS substitution, and to monetise future data demand growth.
Target: To significantly increase each year. of European contract revenue from integrated tariffs at March 2012, up from 27% in 2011

Smartphone penetration
Smartphones are the key to giving our customers access to the mobile internet; the more our customers have them, the bigger our data opportunity becomes.
Target: To significantly increase each year.

Financials

43%

27%

European smartphone penetration at March 2012, up from 19% in 2011

achieved

achieved

achieved

Share ownership by senior leadership team (‘SLT’)
We have recently introduced share ownership targets throughout the SLT, to more closely align operational management’s goals with those of external shareholders.
Target: 14 million shares.

Employee engagement
The employee engagement score measures employees level of engagement, a combination of pride, loyalty and motivation.
Target: Maintain top quartile.

% of women in the senior leadership team
This is one measure of the diversity in our business which brings us a more balanced range of skills and management styles.
Target: To improve each year.

Additional information

18m

Shares owned by SLT; equivalent to 128% of goal. achieved

77

19% achieved of the SLT are women up from 17% in 2011 achieved

up from 75 in 2011

12 Chairman’s statement
Vodafone Group Plc Annual Report 2012

A world of opportunity
Gerard Kleisterlee succeeded Sir John Bond as Chairman of Vodafone at the AGM in 2011. Previously he was CEO of Philips for ten years. Here he gives his view on his first impressions of Vodafone, the key governance issues facing the Board, his interactions with management, and the approach to management and shareholder remuneration.
Summary of key points aa Our strategy is working well to deliver superior operational performance, a high level of free cash flow and significant returns to shareholders aa We have strength in depth in the management team and a Board comprised of business leaders with a wide range of business expertise aa Strong returns to shareholders with total dividends for the year of 13.52 pence (including the 4.0 pence special dividend) and the majority of the £6.8 billion share buyback programme now complete

What have been your main impressions of Vodafone after your first year?
The Group is well positioned. It has strong franchises in most of its markets, attractive global exposure, a core product that has become a vital part of people’s lives and a number of exciting opportunities for growth. Combined with its substantial cash flow, low leverage and management strength in depth, there are plenty of reasons for optimism. However, throughout Vodafone I see what I would describe as a restless dissatisfaction: a sense that we are doing well and have significantly improved our commercial performance over recent years, but that we could do much better still. People at Vodafone are their own toughest critics but this creates a highly energetic and strongly collaborative environment aiming at constant improvement.

How is the strategic focus of the company evolving?
The last two years have seen significant proceeds realised from the sale of noncontrolled stakes and the income dividend from Verizon Wireless, which means that the external focus will now inevitably turn more to our operational execution. From our perspective, this is no more than business as usual and the Group’s strategy continues to be clear: to pursue our growth opportunities in data, enterprise and emerging markets in a disciplined and efficient way, and give shareholders a healthy return on their investment in the process. All of these elements are discussed in much more detail elsewhere in this report.

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Business review

Vodafone share price vs FTSE 100 1 April 2011 to 21 May 2012
200 160 120 Jun 11 Aug 11 Oct 11 Dec 11 Feb 11 Apr 12
FSTE 100 index Vodafone (share price in pence) For legal reasons it should be noted that past performance cannot be relied on as a guide to future performance.

Cash returns to shareholders
7000 2009 5500 4000 2010 2011 2012
Ordinary dividends paid Share buyback Special dividends paid

£bn

4.0 1.0 4.1 4.5 4.6 2.1 3.6 2.0

How is the Board currently functioning?
The Board’s primary focus is to support and advise the executive management on the delivery of the Group’s strategy within a clear and transparent governance framework, and I believe we are currently fulfilling that role. Our annual survey on Board effectiveness has prompted some minor modifications but no major overhaul. With respect to expertise, my predecessor made excellent progress in assembling a broad diversity of talents and outlooks. The Board currently comprises business leaders from sectors as wide-ranging as financial services, retail, venture capital, accountancy, technology and regulated industries, as well as far-reaching geographical knowledge. I would be keen to build our experience of internet-based business models, as well as a detailed knowledge of Asian markets. We also aim to bring further gender balance over the coming years as we reach our goal of 25% of Board members being women by 2015.

How do you approach shareholder remuneration?
Our shareholder remuneration strategy is focused on total shareholder return, through a combination of growing the value of the Company by investing in opportunities that earn a return in excess of our cost of capital, and a consistent dividend policy. Our dividend per share growth target, put in place two years ago, sets out to give shareholders a growing dividend stream comfortably covered by expected annual free cash flow. We are also nearing the end of a £6.8 billion share buyback programme and this year paid an additional special dividend of 4.0 pence per share out of the proceeds of our income dividend from Verizon Wireless. Taking ordinary dividends, this year’s special dividend and the buyback programme together, total cash returns to shareholders have been equivalent to approximately 30% of our market capitalisation over the last four years. Furthermore, in the period from 1 April 2011 to 21 May 2012, our share price has outperformed the MSCI European Telecoms index by 19.6% and the FTSE 100 by 3.7%.

How is Vodafone addressing its broader social responsibilities?
Mobile telecommunications have played a significant role in the development of emerging market economies, not only through the investment in infrastructure but also through allowing people to connect with each other cheaply and easily for the first time. Vodafone and Vodacom have clearly played their part in this, particularly in India and southern Africa. We are also taking a step further, introducing mobile financial services platforms across many of our markets, and developing mobile health initiatives. These, of course, stand to benefit our business through enhanced customer loyalty, but they also bring wider social benefits to the countries in which they are deployed. Finally, we can also use the resourcefulness and dynamism of our employees to help raise funds to target specific medical issues that compromise thousands of lives in emerging markets. This year we launched our Moyo challenge, to raise £7 million through our employees for the Vodafone Foundation partner Comprehensive Community Based Rehabilitation (‘CCBRT’) to eradicate obstetric fistula (a maternal health condition) in Tanzania, which has affected 24,000 women since 2000. We are well on our way to reaching our target by June this coming year, aided by the generosity of our employees, suppliers and partners.

Performance Governance Financials

And what about management remuneration?
The executive management team should be paid well to the extent that they create value for shareholders. Our incentive schemes have a bias towards long-term, share-based plans, which incentivise our leaders to prioritise multi-year investment decisions and align their interests closely with those of institutional shareholders. We have deepened this alignment this year by introducing shareholding requirements throughout the senior leadership team.

“Our share price has outperformed the MSCI European Telecoms index by 19.6% and the FTSE 100 by 3.7%”

Additional information

Gerard Kleisterlee Chairman

Explore in more detail
More on Governance Pages 63 to 73 More on Risk management Page 39 More on Director’s remuneration Page 74 to 87 More on Mobile for Good Page 38

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14 Chief Executive’s review
Vodafone Group Plc Annual Report 2012

Financial review of the year
Our overall financial performance this year has been steady. Our major emerging markets operations have had a very strong year. In addition, Verizon Wireless (‘VZW’), our 45% owned associate in the United States, combined continued good revenue growth with substantial cash flow. On the other hand, the tough macroeconomic and regulatory environment in much of Europe has made revenue growth in that region increasingly challenging. However, on a relative basis, we have held or gained share in most of our major markets, continuing last year’s trend. The quality of our network continues to improve, with high speed data now available across a growing proportion of our voice network in our European markets, and low frequency spectrum for 4G/LTE services now secured in Italy and Spain. Cash flow generation and shareholder remuneration, even after sustained network investment, continue to be significant. Group revenue for the year was up 1.2% to £46.4 billion, with Group organic service revenue up 1.5%* and data revenue up 22.2%*. Group EBITDA margin fell 0.8 percentage points, as a result of continuing high levels of commercial costs associated with the migration to smartphones, and the difficult trading environment in Spain in particular. Group EBITDA was £14.5 billion, down 1.3% year-on-year, but flat organically before restructuring costs.

Continued strategic progress
“Our focus on the key growth areas of data services, emerging markets and enterprise is positioning us well in a difficult operating environment.”
Summary of where we are now… aa Our commercial performance continues to be strong, enabling us to gain or hold market share in most of our major markets aa Group revenue increased by 1.2% to £46.4 billion driven by strong performance in data services and continued penetration of mobile services in emerging markets aa We continue to generate a strong level of free cash flow of £6.1 billion, while increasing our capital expenditure to £6.4 billion in order to maintain our leading network quality

View our year in conversation online: vodafone.com/ar2012/conversation

Vodafone Group Plc Annual Report 2012

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Business review AMAP Organic service revenue growth in AMAP was 8.0%*. Our two major businesses, India and Vodacom, reported growth of 19.5%* and 7.1%* respectively. In India, pricing showed clear signs of stabilisation after a prolonged price war. In South Africa, growth continued to be strong, despite significant price cuts on data tariffs. In Australia, revenue declined sharply as our network perception continued to suffer after service issues experienced more than a year ago. Organic EBITDA was up 7.8%* with EBITDA margin down 0.1* percentage points. EBITDA margins in our two biggest AMAP businesses, Vodacom and India, increased, but this positive impact was offset by a significant decline in the EBITDA margin in Australia. Verizon Wireless Our share of the net income of VZW represented 42.2% of our Group adjusted operating profit. VZW enjoyed another very strong year, with organic service revenue up 7.3%* and EBITDA up 7.9%*. Our share of profits from VZW amounted to £4.9 billion, up 9.3%* year-on-year. In December 2011 VZW announced the proposed acquisition of 122 Advanced Wireless Services spectrum licenses, covering a population of 259 million, from SpectrumCo for US$3.6 billion (£2.3 billion). For a detailed analysis of our financial performance for the year, please turn to page 40.

Service revenue growth 2012*

%

Group Data Emerging markets Enterprise

+1.5 +22.2 +13.2 +2.2

Adjusted earnings per share was 14.91 pence, down 11.0% on last year. The decline was driven by the loss of our share of SFR and Polkomtel profits, the loss of income from our interests in China Mobile Limited and SoftBank, and higher finance charges as the result of our decision to take advantage of low prevailing interest rates to fix a higher proportion of our debt. The Board is recommending a final dividend per share of 6.47 pence, to give total ordinary dividends per share of 9.52 pence, up 7.0% year-on-year. During the year we also paid a special dividend of 4.0 pence per share, paid out of the income dividend we received from VZW. Total dividends per share were therefore up 51.9%. Europe Organic service revenue in Europe was down 1.1%* year-on-year. Excluding the impact of regulated cuts to mobile termination rates (‘MTRs’), service revenue grew by 1.4%*. As in the prior year, we saw a broad divide between the more stable major markets of northern Europe, with Germany, the UK and the Netherlands all growing; and the much weaker markets of southern Europe, with Italy and Spain suffering from strong competition and a very poor macroeconomic environment. Data revenue growth was strong at 20.2%*, with smartphone penetration on contract customers of 44.9%, up 11.5 percentage points during the year. We have continued our major commercial push towards integrated voice, SMS and data tariffs, so that in the final quarter, 43.2% of consumer contract service revenue in our major European markets came from customers on integrated tariffs. Organic EBITDA was down 4.5%*, and the EBITDA margin fell 1.5* percentage points. The decline in EBITDA margin was almost entirely driven by margin erosion in Spain, where we put through significant price cuts during the year. Elsewhere, we benefited from increased cost efficiency.

Performance

Group adjusted operating profit was £11.5 billion, down 2.4% year-on-year but at the top of our guidance range of £11.0 billion – £11.8 billion based on guidance exchange rates. The decline in adjusted operating profit was due to the sale of our interest in SFR at the start of the year; on an organic basis, adjusted operating profit was up 2.5%*, as a result of the good performance at VZW. We recognised £3.5 billion of net gains on the disposals of our interests in SFR and Polkomtel, and we recorded impairment charges of £4.0 billion relating to our businesses in Italy, Spain, Portugal and Greece primarily driven by lower projected cash flows within business plans and an increase in discount rates, resulting from adverse changes in the economic environment. Free cash flow was £6.1 billion and within our guidance range of £6.0 billion – £6.5 billion for the year. The year-on-year decline reflected the loss of dividends from China Mobile Limited, the reduction in dividends from SFR, and the conclusion of our prior year working capital programme. Capex was up 2.3% at £6.4 billion, as we continued to maintain our significant level of investment to support our network strategy. In addition to our reported free cash flow we received an income dividend of US$4.5 billion (£2.9 billion) from VZW.

Governance Financials Additional information

Service revenue by type 2012
Other: 5%

Fixed: 8%

Messaging: 12% Data: 15% Voice: 60%

16 Chief Executive’s review (continued)
Vodafone Group Plc Annual Report 2012

“We have continued to stimulate data adoption by encouraging customers to upgrade to smartphones, and offering a broad portfolio of these handsets across a range of price points.”

Our strategic priorities: aa Mobile data aa Emerging markets aa Enterprise and total communications aa New services

Priorities
All the elements of our Group strategy are covered in detail elsewhere in the annual report. In this section, therefore, I think it is more useful to give you some deeper insight into what I see as the key priorities for the business over the year ahead, and where Vodafone’s leadership team will be focusing their energies. Some of these priorities are, indeed, specific constituents of our strategy; others reflect our ability to influence the markets in which we operate or the resources we have at our disposal to execute our strategy. Data After many years of investment and technological development, the customer experience of mobile data services in developed markets has now generally reached very good levels, with for example, high quality streamed video now widely available. However, operators in Europe have three significant challenges when it comes to data services: pricing, commercial costs and customer usage. Our progress on pricing is inconsistent. In the best markets we are successfully generating incremental ARPU of €10 a month as we migrate customers to smartphones and data packages. However, in others the uplift is more marginal, often driven by the level of competition in the market. Our goal over the next 12 months is to achieve a more consistent revenue return from data – through faster, more reliable networks, significantly enhanced customer service, and a range of new and differentiated services accessible through the handset. Unfortunately, almost all of the incremental ARPU we are generating ends up being invested in commercial costs. The smartphone market is still skewed to the high end, which has driven significant increases in average customers acquisition and retention costs over recent years. Looking ahead, we see scope for more competition in the handset market as new vendors seek to enter the market and more established players look to grow in the mid-tier. This should drive down our customer investment costs.

The pressure on our top line, particularly in Europe, is intense and we need to protect profitability through better cost discipline. Commercial costs are the biggest single cost in our business and we will not successfully stabilise margins unless we manage these acquisition and retention costs more rigorously. Finally, we need to find a way to stimulate customer consumption of data. Average data usage on a smartphone in Europe is around a third of that in the US and less than a fifth of that in some parts of Asia. We have to work more effectively at showing customers they can use data more freely while still controlling their spend, and also helping them understand what they can actually use data services for. The ongoing upgrade to our European network, creating a platform which offers high speed data services everywhere we provide a voice connection, will in itself breed additional demand. Regulation The telecoms industry continues to experience intense regulation on mobile termination rates (‘MTRs’), and voice and data roaming. In addition, auctions of new spectrum are often structured to favour new entrants at low prices. The consequence of these actions is to suppress investment in next generation mobile and fixed networks, and thus to limit our ability to provide high speed data across a broad footprint. This universal access to high speed connectivity is a key goal of regulators across Europe, and will not be achieved if the current onerous level of regulation continues. I see it as a major priority to continue to work with my industry peers and local and EU regulators to find a fairer balance which protects customers while encouraging investment and competition. I have been very vocal in my objection to this ongoing regulation, much of which has not produced the results intended by regulators. For example, reductions in mobile termination rates since 2009 have not meant that prices fall faster for mobile consumers and have not encouraged fixed line customers to make more calls to mobiles. If anything, the opposite has happened. I believe regulators should avoid auto pilot regulation that does not check whether regulation has achieved its purpose.’

Customer experience
Our retail stores around the world are being reconfigured to ensure customers leave the store with their smartphone ready to use with technical experts available to resolve customers’ questions and device problems. By May 2012 4,400 of our stores provided these services and during this year we will further expand the roll out.
More detail Page 25

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Talent and diversity We continue to have high standards for talent and to strengthen our senior leadership population. Last year we promoted 20 internal talents to the senior team, of which 30% were female, and we hired 15 external candidates of which 20% were female. We continue to rotate top talents during their Vodafone careers. This not only stimulates the cross-pollination of ideas and best practices between markets, it also develops the cultural sensitivities that will be key in our future senior management. As with many large companies, we have a disproportionate representation of men in our middle and senior management. I strongly believe that women have a range of skills and insights that are often different from, but complementary to, those of men, and management teams that do not reflect a better balance are the worse for it. Currently 19% of our senior leadership team is female, up from 17% in the prior year. We have set a target of increasing the percentage year-on-year. Organisational change Big organisations inevitably have a tendency towards bureaucracy, complexity and caution. Often the right option does not get pursued because of fear of failure or a desire not to “rock the boat”, or the time between decision and execution is too long and the opportunity has passed. Over the last three years, we have embarked on a cultural change programme called The Vodafone Way which is designed to engender a cultural shift in how we do business, both internally and externally. The key building blocks of The Vodafone Way are speed, simplicity and trust. I believe we are already beginning to see the benefits of this in more personal accountability and better decisionmaking, but we need to drive this throughout the Group and our leaders must be responsible for exhibiting the right behaviours. There is more on this on pages 34 and 35.

Prospects for the 2013 financial year
Vodafone is well positioned for the coming year. We have continued to gain revenue share in many of our markets, as we lead the migration to smartphones and the adoption of data services by the mass market. Our exposure to the enterprise segment and our emerging market assets will continue to be strategic drivers of our performance and, with VZW set for another strong year, our overall geographical exposure is a positive differentiator. We have a strong balance sheet and will continue our major focus on shareholder remuneration, while reinvesting substantially in our network to enhance the customer experience. Nevertheless, the environment in Europe is set to remain very difficult. Weak consumer demand from poor macroeconomic conditions, a harsh regulatory backdrop and ongoing competition create material barriers to growth. MTRs alone will have a negative impact, similar in percentage terms to the 2012 financial year, on service revenue growth in the 2013 financial year. On an underlying basis, excluding foreign exchange rate movements, we expect growth in adjusted operating profit, and stability in free cash flow, compared with the 2012 financial year. Adjusted operating profit is expected to be in the range of £11.1 billion to £11.9 billion. We anticipate free cash flow for the coming year of £5.3 billion to £5.8 billion. The loss of dividends from SFR following the sale of our 44% stake, as well as a weaker euro year-onyear, are the main differences from the 2012 financial year. We expect capital expenditure to remain broadly steady on a constant currency basis. We expect the Group EBITDA margin decline to continue its improving trend, supported by continued strong growth and operating leverage in our AMAP region, and improving control of commercial costs in Europe. We remain committed to continuing to deliver a good return to our shareholders through the achievement of our targets for free cash flow and dividend growth; our focused investment in profitable growth areas; and our ongoing capital discipline.

Business review Performance

Employee talent and diversity
Our goal is to achieve a broad employee base in terms of gender and nationality, and specifically target increased representation of women and emerging market talent at senior management level.
More detail Page 34

Governance Financials Additional information

Summary of the year aa Our focus on the key growth areas of data, emerging markets and enterprise is positioning us well in a difficult operating environment. aa Our commercial performance and our ability to leverage scale continue to be strong, enabling us to gain or hold market share in many of our key markets. aa Our robust cash generation and the income dividend received from Verizon Wireless have enabled us to translate this operational success into good returns for shareholders. aa Our goal over the next three years is to continue to strengthen our data networks and to enrich customers’ experience.

.

Vittorio Colao Chief Executive

Vodafone Group Plc Annual Report 2012

18

Industry trends

Where the industry is now
The mobile industry is a large and important sector with six billion global users. Customer growth over the last five years has been rapid, driven by the benefits of mobility, falling prices and rising penetration in emerging markets. However, pressures on revenue growth from competition and regulation are significant and are likely to remain. aa 86% of the world’s population use a mobile phone aa Competition is intense with typically at least four mobile operators in each country and numerous additional alternative communications providers aa Regulators continue to impose policies to lower the cost of access to mobile networks

Scale
The mobile industry is one of the largest communication sectors in the world with over six billion users across the globe. In contrast there are only 1.2 billion people with fixed line phones. The mobile industry generates around US$960 billion of annual service revenue, 80% of which comes from people making standard voice calls and sending texts. Over the last ten years the share of telephone calls via mobile has increased from 20% to 74%, reflecting the benefits of mobility. In 20111, 4.3 trillion text messages were sent (about 136,500 every second).

Competition
The telecommunications industry is highly competitive, with typically at least four national mobile network operators, such as Vodafone, and one national fixed line operator in each country. In addition, there can be numerous companies that rent capacity from mobile operators and sell their own mobile services to customers. In some countries there can also be several independent distribution companies that compete with the mobile network operators’ own stores. Advances in technology are bringing in newer suppliers, such as internet based companies and software providers offering converged services such as voice over internet protocol (‘VoIP’). Against this background, consumers have a wide choice of providers.

Mobile phone users by market 2011 Industry data calendar year
Emerging markets China 20% Developed markets Europe 18% US 7% India 18% Other 4%

Other Asia 14%

Other 19% %

Growth
The demand for mobile services continues to grow. In the last five years the number of users has increased by an average of 17% each year driven by rising living standards, population growth and cheaper mobile services and handsets. In 20111 86% of the world’s population has a mobile phone, whereas ten years ago this was only 16%. Most of the new demand for mobile services is from emerging markets such as India and Africa. In India for example, the number of phone users increased by over 140 million in just one year, 20111, which is more than twice the size of the UK population. Emerging markets are growing quickly, and account for over 70% of the world’s mobile users. The rest live in developed markets such as Europe and the United States, where demand is growing more slowly as most people already have a device – in Europe for example there is already an average of 1.3 SIM cards per person.
Note: 1 Refers to calendar year.

Mobile penetration 2011 Industry data calendar year
Europe US Turkey India China 74 74 91 106

130

Regulation
The mobile industry is very heavily regulated by both national, European and other regional and international authorities. Regulators continue to impose policies to lower the cost of access to mobile networks through setting lower mobile termination rates (the fees mobile companies charge for calls received from other companies’ networks) and to limit the amount that operators can charge for mobile roaming services. These two areas represent 12% of service revenue for Vodafone. In an environment of intense competition and significant global regulatory pressures, industry voice prices have tended to reduce over time – and in 20111 fell 14%. However, with more mobile phone users and some customers using their devices ever more frequently, global industry revenue remains on a positive trend and expanded 5% in 20111.

Outgoing voice prices per minute (year-on-year change) Vodafone data
2010 2011 2012 –16 –21

%

–22

The industry data on pages 18 and 19 is sourced from Strategy Analytics, IDC and Merrill Lynch Wireless Matrix.

Vodafone Group Plc Annual Report 2012

19

Where the industry is heading
The pace of change in the mobile industry is significant with growing sources of revenue from data services such as internet usage; new users from emerging markets; rising take-up of smartphones and tablets; and major advancements in network technology to deliver faster and better services. aa Data services and emerging markets represent the largest opportunity as traditional voice and text services in developed countries reach maturity aa The shift towards smartphones and away from feature phones continues with smartphones representing nearly 40% of devices shipped in the last year aa Significant technological improvements have led to faster data networks and product innovation to improve the customer experience

Business review Performance

Growing revenue streams
The share of industry mobile revenue from traditional voice and messaging services in developed markets is declining due to relative market maturity, ongoing competitive and regulatory pressures leading to lower prices for mobile calls, and a slow pace of economic growth. In contrast the demand for data services, such as internet on the mobile, is growing rapidly. In 20061 data services accounted for 6% of industry mobile service revenue, in 20111 it reached 20%, and it is expected to rise further over the medium term. Demand is being driven by a combination of higher smartphone penetration, significant enhancements to network data speed and coverage, and an increased range of mobile applications. Smartphones now represent 39% of all handset sales compared to 8% in 20061. Emerging markets, such as India and Africa, represent the regions with the most potential for future revenue growth driven by strong economic growth and low mobile penetration. For example, only 74% of India’s 1.2 billion population have a mobile phone implying good potential future market growth. According to external estimates by 20151 there will be 1.5 billion new mobile users, and the vast majority will be from emerging markets.

Technological innovation
Today’s mobile networks in Europe are typically a combination of 2G networks for traditional voice, text and basic data services, and 3G networks for high speed mobile internet access and application downloads. 3G maximum data downlink speeds are already up to 43 Mbps (with typical user speeds of up to 6 Mbps). 4G, or long-term evolution (‘LTE’), the next stage of mobile network development, is already in place in some countries – providing maximum user speeds of up to 150 Mbps (typical user speeds up to 12 Mbps). Going forward, further network upgrades are expected to significantly enhance the user experience through a combination of both faster networks and wider high speed network coverage. Innovation in services is also critical to enhance customer experience. Vodafone, together with a number of other leading operators, has developed the next wave in personal mobile communications known as rich communication services which will enable data services such as instant messaging or chat, live video sharing and file transfer across any device and on any network, in much the same way as voice and SMS. Vodafone is also developing a range of new services to generate additional revenue and enhance the customer experience such as mobile commerce, machine-to-machine and operator billing, which are discussed in more detail on pages 30 and 31.

Service revenue growth 2012* Vodafone data
Voice Messaging Data Fixed +5.4 –4.0 +4.4

%

Governance
+22.2

Smartphone share of handset shipments Industry data calendar year
2006 2010 2011 8 21

%

Financials

39 %

Service revenue from key areas Vodafone data
2010 2011 2012 23 27 29 28 30 33

49 43 38

Emerging markets Mature market data, fixed and other Mature market mobile voice

Maximum mobile data downlink speeds Industry data calendar year
2007 2008 2009 2010 2011 7.2 (3G) 14.4 (3G) 28.8 (3G) 43.4 (3G)

Mbps

Additional information

150 (4G) 150 (4G)

20 How we do business
Vodafone Group Plc Annual Report 2012

1. Assets
Networks We aim to have the best mobile network in each of our markets. This means giving our customers far-reaching coverage, a very reliable connection, and increasing speeds and data capacity. We believe that over time, offering a superior network experience will enable us to secure a premium positioning in most of our markets.

A simple business model
We buy licences that give us rights to spectrum bands and we build networks over which we provide calls, SMS and mobile internet services to customers. Customers pay for the services and we use the cash flow generated to reinvest in the business and provide a good return to our shareholders. Our reinvestment in the business allows us to make continuous improvements to our network, strengthen our brand, and develop our stores and websites to attract new customers and retain existing ones.

Our network investment is enhanced by our ongoing acquisition of mobile spectrum as it becomes available. For more information on our network build-out, see page 24. Distribution We operate around 14,000 stores across the Group, and have extensive networks of exclusive distribution partners and third party retailers. We will develop our distribution further to stay close to our customers, making it easy for them to join us from our competitors, upgrade their existing contract or just seek help with the services we offer. In addition, the internet is becoming an increasingly important part of our sales and service mix, and we have significantly upgraded our online shop and online service capabilities over the last three years. Supplier relationships We work closely with our suppliers to build robust networks, develop innovative services and offer the widest range of the latest devices. In many cases these are partnerships, where we will approach a supplier with an idea or a problem that needs solving, and then work together to bring a solution to market. From the customer perspective, the global reach and scale of Vodafone means that we will often be the destination for exclusive or first-to-market products.

Networks

Distribution

Supplier relationships

1. Assets

2. Customers

People

Brand

Vodafone Group Plc Annual Report 2012

21

People We place significant emphasis on the calibre of the people we recruit, how we develop them and the importance of our interface with our customers. We are working hard to build a more diverse workforce that is more representative of our customer base. We also believe it is important for our people to be the biggest champions of our own products and services, so that we all become natural Vodafone advocates. See pages 34 and 35 for more information on our people. Brand Vodafone is ranked as the number nine brand globally with an attributed worth of US$30 billion (source: Brand Finance), and the most valuable telecoms brand in the world. The strength of the brand raises the profile of our distribution channels and is a major driver of purchasing decisions for consumers and enterprise customers alike. During 2012 we continued our title partnership with the Vodafone McLaren Mercedes Formula One Team to give ongoing global exposure for our brand.

Business review

3. Revenue
We generate our service revenue through the supply of calls, text messaging, data and other services over our networks. Consumers pay for these services either via contracts (typically up to two years in length) or through buying their airtime in advance (prepaid or pay as you go). Enterprise customers often have longer contracts. These revenue models give us excellent visibility of our business. In addition, we are not reliant on single large contracts, with the top ten biggest corporate accounts representing less than 1% of annual revenue. Secondly, the majority of our services are sold in advance – reducing credit risk and generating an attractive working capital profile. Finally, our services have become such a part of our customers’ everyday lives that they have become non-discretionary in nature.

5. Shareholder remuneration
The cash generated from operations allows us to sustain a generous shareholder returns programme while also investing in the future prosperity of the business. Our annual regular dividend per share, which we have targeted to grow by at least 7% to March 2013, is comfortably covered by our free cash flow guidance. In addition, we have paid out a special dividend from the income dividend from Verizon Wireless, and are close to completing a £6.8 billion buyback programme financed through recent asset disposals. We have returned over 30% of our market capitalisation to shareholders over the last four years.

Performance

2. Customers
With 404 million customers globally, Vodafone is one of the biggest mobile operators in the world. Mobile communications are now a way of life, connecting people, stimulating commerce, offering entertainment and providing security. Our customers also include many of the world’s biggest companies: over 23% of our Group service revenue comes from the enterprise segment (see pages 28 and 29 for further details). What all our customers have in common is the expectation of a great experience in what has become an essential service.

Governance

6. Reinvestment into the business
We have maintained a high and consistent level of capex in recent years, to support wider coverage, higher speeds and deeper capacity in our networks. Through our IT investment we are enhancing our customer relationship capability and providing new customer billing services. In addition, we have continued to invest in our stores, our internet and social media presence and spectrum licences to support future services and growth. We have successfully balanced the ongoing capital requirements of the business with attractive shareholder remuneration.

4. Cash flow
Our track record of converting revenue into cash flow is strong. Firstly, we run highly efficient networks where we seek to minimise costs, thus supporting a strong gross margin. Secondly, our market share position in many markets is strong and growing, with this in-market scale being a key driver of cost efficiencies and EBITDA margin.

Financials

5. Shareholder remuneration
Additional information

3. Revenue

4. Cash flow 6. Reinvestment into the business

Vodafone Group Plc Annual Report 2012

22

Strategy

Mobile data services
Our goal is to become the provider of choice for customers wanting to use data services. The opportunity is huge as we believe that over time all customers will want to use data internet services on their mobile devices.
The mobile industry started less than 30 years ago with a single service – making and receiving calls. Today our customers enjoy a range of services including simple voice calls, text and picture messaging, and data services such as mobile internet browsing, social networking sites, downloading applications (‘apps’) and sending emails via smartphones. Market context: According to industry analysts, data is expected to be the fastest growing segment of the mobile industry. It is estimated that between the 2011 and 2016 calendar years worldwide mobile data revenue is set to grow by US$142 billion, compared to a US$27 billion decline in voice revenue over the same period.1 Goals: We aim to have the best mobile network in all of the markets in which we operate, supported by leading IT systems. This means giving our customers far-reaching coverage, a very reliable connection and increasing speeds and data capacity. Strengths: We have more than 238,000 base station sites transmitting wireless signals – making us one of the largest mobile operators in the world. Actions: We are investing around £6 billion a year to deliver a high quality mobile data experience for our customers. Progress: In 2012 nearly one trillion minutes of calls were carried and more than 216 petabytes of data were sent across our networks – in other words enough data for 2.8 trillion emails.

Focusing on growth in:

The demand for mobile data services is growing rapidly
Data is already our fastest growing segment, with data revenue up by 22.2%* over the financial year, compared to a 4.4%* rise for messaging revenue and a 4.0%* fall for voice revenue. This demand is being driven by three key factors – a widening range of powerful and attractive smartphones and tablets, significant improvements in mobile network quality and capability, and an increased choice of user friendly and useful applications for business and social use. Data revenue growth*
%

We are growing data revenue through enhancing technology and improving the customer experience
We are continuing to refocus our business on data to capture the significant expected growth in customer demand for data services. We aim to deliver a market-leading network experience to our customers. To compare our performance against our major competitors we conduct regular benchmark tests using reputable third parties. The latest results show that we have leading data service performance in 13 out of 18 markets with data downlink speeds on average around 6% better than our next best competitor. Typical user data speeds 2012
Mbps

2010 2011 2012

+19.3 +26.4 +22.2

We have already seen significant growth in the number of customers using smartphones, with 27% of customers in Europe using these devices today, compared to 19% last year, and this is expected to grow rapidly in the next few years. Data users
Millions

Downlink

5.6 5.3

Uplink 1.4
Vodafone Next best competitor

1.8

More on how we’re driving data through technology and customer experience Pages 24 and 25

2010 2011 2012

52 81 108

34%

of our customers use data.
Note: 1 Sourced from Strategy Analytics.

Vodafone Group Plc Annual Report 2012

23

Business review Performance Governance

Enhancing the UK network
Over the last 18 months we have been upgrading our network in the UK, and particularly London, to cope with the expected extra demand from the 2012 summer Olympic Games and to deliver a much enhanced smartphone data experience. We have reconfigured our 3G network to run on 900 MHz frequency spectrum instead of 2100 MHz, which enables the radio signal to travel longer distances and provides better indoor coverage. We’ve also increased the number of base station sites in the UK over the last year by around 1,300, bringing the total to more than 14,600 nationally, which will boost capacity by around a third. Customers will see major benefits with improved coverage and accessibility to the network together with faster data speeds.

Financials Additional information

In order to deliver on the growth opportunity in mobile data we are focused on improving the user data experience through two key areas – technology and customer experience. You can read about these in more detail on the following pages…

24 Strategy (continued)
Vodafone Group Plc Annual Report 2012

Mobile data:

Technology
We want to have the best data network and IT systems to provide the platform for our products and services. At the same time we will continue to carefully manage our cost base to deliver profitable data services. aa We want to provide the best data network in terms of coverage, speed and capability. aa At the same time we will continue to carefully manage our cost base to deliver profitable data services. aa Our goal is to provide robust IT systems to provide the platforms and tools for managing customer relationships for our products and services.

Our goal is to provide the best data network aa Today 99% of the population in our European markets can make a call across our network. We want the same level of reach for data users so that customers can use data almost everywhere they want, whether at work in big cities, relaxing in the countryside or on holiday by the beach. We already have a strong data network as a result of significant investment in 3G technology, with over 89% 3G data population coverage. We aim to increase coverage further to enhance the number of locations where customers can use data services. aa We are building faster and more reliable data networks that either meet or exceed the capabilities of leading smartphones for headline data downlink speeds. At present some 82% of our 3G footprint in Europe is capable of maximum data speeds of 14.4 Mbps or better and by 2015 this is expected to be nearly 100%. We will continue to upgrade our capability of both 21.6 Mbps and 43.2 Mbps in anticipation of the latest generation of smartphones and tablets. aa To support high speed data capability being introduced across our network we continue to upgrade our backhaul and backbone transmission capabilities, which connect our base stations to the latest technology. High capacity backhaul using ethernet, microwave and optical fibre transmission equipment is now in about 41% of our sites in Europe compared to 20% a year ago.

We continue to manage our cost base carefully aa The increase in demand for data has meant that data traffic has more than doubled in the last two years and as a result, data now accounts for 67% of the total traffic on our network. Despite the significant cost pressures that this adds, we have managed to keep our technology operating costs, broadly stable over the same period by investing in cost efficient equipment. For example over 70% of the new radio sites deployed across the Group during the year were shared with other mobile operators which reduces the cost of renting or building new sites. We are also deploying more single radio access network (‘RAN’) base station sites which comprise 2G, 3G and 4G technology in one single unit as opposed to three different, and hence more expensive units. Single RAN units are now present in 24% of our sites and deliver energy operating cost savings of up to 40% compared to traditional RAN units.

89% of the European population where we operate is covered by our 3G network.

£304m invested in research and development during the year to ensure we continue to develop innovative services.

Our goal is to maintain robust IT systems to provide the platform for enhancing the ways we manage our customer relationships aa We are developing a number of tools to improve the ways we interact with customers. We are investing to create a “single view” of our customers across the Group which links together all customer activity and information on our various sales channels – online, retail and contact centres. So, for example, if a customer calls a contact centre or participates in web chat online this information would be available to our in-store staff. aa We are also investing in new ways of billing customers to make tracking spend easier, including one bill for voice, data and fixed services.

Long-term evolution (‘LTE’) technology
While 3G provides a mobile data user experience comparable to traditional fixed broadband services based on copper technology, the development of 4G services, sometimes called long-term evolution (‘LTE’) technology, will significantly enhance the user experience providing user speeds of up to 12 Mbps, compared to up to 6 Mbps on 3G. In Germany, our first market to launch LTE, we have already deployed the capability on 12% of our radio sites, and as a result we can provide market leading coverage to 14 million German households, one-third of the total.

Data volume

Petabytes

2010 2011 2012

95 161 216 %

Network population coverage in Germany 2012
2G 3G 4G 351 91

99

Note: 1 Household coverage.

Vodafone Group Plc Annual Report 2012

25

Mobile data:

Customer experience
We aim to differentiate from our competitors by smart and continued investments in technology, capabilities and distribution, providing both a great customer experience and competitive value to our customers. aa We want our customers to enjoy the experience when they interact with us, through providing the best retail stores, the easiest online experience and most accessible expert advice when needed. aa Our goal is to offer customers the most attractive and innovative range of mobile devices, from smartphones to tablets, USB sticks and connected devices. aa We aim to provide services that help our customers access their digital life in an easier and safer way and to build customers’ trust .

We want our customers to enjoy the experience when they interact with us aa Our traditional voice and text messaging services are relatively simple to use and understand, however mobile data can be more difficult to understand – for example setting up your smartphone, email account or accessing internet applications. We are taking a number of steps to improve our service to make it easier for our customers. Our retail stores around the world are being reconfigured to offer customers a better experience with services which ensure customers leave the store with their smartphone fully running, and technical support experts to resolve customers’ questions or problems with their devices. By May 2012 4,400 of our stores provided these services and during this year we will further expand the roll out. aa We are also using more online capabilities so that 57% of our customers in Europe now receive an electronic bill which saves us money and also helps the environment. We have extended the online self-care service from PC to smartphones and tablets in 17 of our markets and now have eight million customers who can view their billing information, their usage and information about their price plan, across any of their connected devices. aa We are evolving our contact centre strategy to encourage the use of social media which is simple and attractive to use for some customers. Last year we received 64 million contacts through our social media contact centres such as Vodafone Facebook, YouTube and customer forum.

We aim to provide services that help our customers access their digital life in an easier and safer way and to build customers’ trust aa We have established a range of integrated voice, SMS and data plans. Within these plans, customers are able to use whatever services they wish – from simple calls and text messaging to all the applications that the internet provides. 27% of our customers in Europe are already on these plans, up from 13% last year. aa In order to keep customers’ information safe and secure, Vodafone has launched a range of services designed to support data usage on smart devices and build longer term relationships with customers. Key examples are Vodafone Cloud, Vodafone Contacts, Vodafone Protect and Vodafone Guardian. Vodafone Cloud automatically uploads or saves customers’ photos and videos to the cloud which can then be retrieved from any device. Vodafone Contacts, another cloud based solution, backs up customers’ phone contacts, so all their numbers are always safe. Vodafone Protect enables us to locate lost or stolen phones and laptops, and wipes the content to keep them secure. Vodafone Guardian is a service to help protect children with smartphones against unwanted communication, promoting responsible use of mobile technology, and helping parents control how their children’s smartphones are used.

Business review Performance Governance

14,000
We are among the world’s largest retailers with around 14,000 retail stores.

1st
Our brand is rated as the most valuable telecoms brand in the world.

Financials

Our goal is to offer our customers the most attractive and innovative range of mobile devices aa Our strategy is to leverage our devices portfolio to both differentiate as well as drive data usage in the market. 27% of our customers in Europe use a smartphone, compared to 19% a year ago. Among consumer contract customers that pay a regular fee the figure is even higher at 47%. We continuously work with our strategic partners to have the most attractive smartphone portfolio, including both high-end devices and prepaid handsets such as the value-focused Vodafone 858 Smart.

Share of European customers with a smartphone
2010 2011 2012 10 19

%

Additional information

Vodafone 858 Smart
The Vodafone 858 Smart is our Vodafone branded Android smartphone positioned to accelerate mobile data mass market adoption, with a retail price of around £55 in the UK. We are giving access to the mobile internet with a high quality experience to the mass market, and have sold around one million units since its launch in June 2011.

27

Share of European consumer contract % customers on integrated price plans1
2011 2012 13 27

Note: 1 Integrated tariffs were introduced to our markets during the 2011 financial year.

26 Strategy (continued)
Vodafone Group Plc Annual Report 2012

Emerging markets
Emerging markets such as India and Africa represent a significant opportunity for growth. Last year the Indian mobile market added 140 million customers – over two times the size of the UK population.
Emerging markets represent around 29% of our service revenue and the share is likely to grow over the medium to longer term driven by continued strong economic growth and the increase in mobile penetration towards mature market levels. Market context: Almost all of the 1.5 billion new mobile phone users over the next four years are expected to come from emerging markets.1 Goals: We are steadily increasing our exposure to emerging markets given the stronger growth prospects that they offer relative to developed markets. Strengths: We operate mobile networks in a number of emerging markets including India, Vodacom, Egypt, Turkey, Ghana, Qatar and Fiji – in which we hold either a number one or two revenue market share position. Actions: Our high quality networks combined with low cost devices and innovative services such as mobile payments and mobile health solutions help to support economic development in underdeveloped communities (see below and “Sustainable business” on page 36 for more information). Progress: Emerging markets represent our fastest growing geographies, delivering service revenue growth of 13.2%*, compared to a fall of 1.1%*, for our Europe region.

Focusing on growth in:

The attraction of emerging markets
Over 70% of the world’s six billion mobile phone users are in emerging markets, where incomes are generally lower than mature markets such as Europe. Emerging markets tend to have stronger growth prospects than mature markets, as a smaller share of the population in these countries have mobile phones and the pace of economic and population growth tends to be higher. During the year mobile service revenue growth in our emerging markets increased by 13.2%*, including 19.5%* in India and 25.1%* in Turkey. This was driven by continued strong economic growth and rising mobile penetration. In contrast revenue growth in Europe declined 1.1%*. Emerging market service revenue growth*
2010 2011 2012 +7.9 +11.8 +13.2 %

Our money transfer service, M-Pesa, supports economic development in emerging markets
Mobile services are a key driver of economic development in emerging markets. According to a World Bank study, a 10% increase in mobile penetration can add 1.2% to annual economic growth in an emerging economy. Our Vodafone money transfer service, M-Pesa, is also contributing to economic growth in countries that lack banking services. It enables millions of people who have a mobile phone, but with limited or no access to a bank account, to send and receive money, top-up airtime and make bill payments. We now have just over 14 million active M-Pesa customers, who transfer up to £600 million per month. The service is established in Kenya, Tanzania, South Africa, Afghanistan, Qatar and Fiji. During the financial year, we launched M-Pesa on a trial basis in Rajasthan, India, in preparation for a full launch later this year across the country.

The data opportunity in emerging markets
Mobile data is increasingly popular in emerging markets given the lack of alternative fixed line infrastructure. For many people in emerging markets their first internet experience has been on a mobile device and we expect this to be the case going forward. The demand for data is expected to grow strongly as only around 29% of our customers in these markets currently use data services, compared to about 42% in Europe. At 31 March 2012 over half of our mobile data users were from emerging markets.

29%

of our service revenue is from emerging markets.

£600m
Note: 1 Sourced from IDC.

transferred person to person over our M-Pesa platform per month.

Vodafone Group Plc Annual Report 2012

27

Business review Performance Governance

Our contribution to mHealth solutions
Mobile technologies offer significant opportunities to improve the accessibility and effectiveness of health services. In Tanzania our SMS for Life project uses SMS to track and manage the supply of malaria drugs so patients do not have to go without. During a six month pilot, the number of clinics without supplies reduced from 26% to almost zero. The SMS for Life project has since expanded to cover all 5,000 health facilities across Tanzania.

Financials

Managing scale in India
India is our largest market measured by customers with over 150 million phone users. We added 16 million customers last year, which is equivalent to two times the population of London. Every month we handle 43 million calls to our call centres and have the capability to deal with a diverse customer base given the 22 languages and 100 dialects in the country. With our broad distribution reach, customers can top up at over 1.4 million recharge outlets.

Additional information

28 Strategy (continued)
Vodafone Group Plc Annual Report 2012

Enterprise and total communications
Continued globalisation of marketplaces and the growth of small businesses looking for more productive ways of communicating has created growth opportunities for Vodafone in all enterprise segments from micro-businesses to multinationals.
Our enterprise customers range from small-office-home-office (‘SoHo’) businesses and small-to medium-sized enterprises (‘SME’), through to large domestic and multi-national corporates (‘MNC’). Across the Group we have over 30 million mobile enterprise customers accounting for around 8% of all customers and around 23% of service revenue. Market context: Enterprises spend €86 billion in total in areas where Vodafone provides its services: mobile voice, messaging and data.1 Goals: We want to confidently connect businesses using our expertise in converged services, delivering unmatched customer experience and real value for money. We aim to continue to gain market share and exploit opportunities across our geographic footprint. Strengths: Our geographic footprint in Europe allows us to enhance efficiency and realise scale benefits, allowing us to offer customers both fixed and mobile converged solutions. Actions: Our Vodafone One Net proposition offers customers one number which can be answered on their desk phone or mobile phone and is the foundation of our unified communications strategy. Progress: 40% of our enterprise customers now have a smartphone or tablet across Europe, pushing enterprise data revenue growth of 18.2%*.

Focusing on growth in:

Leading in enterprise
The core criteria our enterprise customers use when choosing a communications service provider are speed, simplicity, flexibility, cost and security. We are well placed to offer enterprise customers all of these through our mobile and fixed converged services, applications and secure solutions.

Total communications
Enterprise customers are embracing flexible and remote working to improve business efficiency. Vodafone’s fixed and mobile converged solutions and reliable mobile data services are increasingly vital to our customers’ business operations. Vodafone One Net offers customers a single telephone number which rings on both their fixed desk-phone and mobile handset. One Net users have complete control over where and when they take their calls. Businesses have the flexibility to change the number of users depending on their needs. As a result we help improve business efficiency, flexibility and cost control. Vodafone One Net users generate higher revenue and lower churn than mobile-only customers. Consistent with our Group strategy of continuing to develop services in Europe and enhance our efficiency and realise scale benefits, in April 2012 we announced a recommended cash offer for Cable & Wireless Worldwide plc, a leading UK fixed line business. If our offer is successful our combined business will create a leading integrated fixed and mobile operator in the UK, opening up attractive opportunities in the unified communications space.

Vodafone Global Enterprise
Vodafone Global Enterprise serves the needs of Vodafone’s largest multi-national corporate (‘MNC’) customers. MNCs demand a consistent multi-country offer from Vodafone across our global footprint. Vodafone Global Enterprise simplifies operations for these customers by providing them with a single account and service team, a single contract, single pricing structures and a single portfolio of products and services. Vodafone Global Enterprise has created a market leading portfolio of Managed Mobility Services providing capabilities such as mobile email or device security as a chargeable managed service in addition to providing the underlying connectivity and devices. By providing a broader range of services Vodafone Global Enterprise extends its core value proposition of integrating, managing and simplifying global communications services for MNC customers. During the financial year Vodafone Global Enterprise achieved revenue of £1.3 billion, with growth of 11%* across the Group, 12%* in Europe and 8%* growth in our AMAP region.

Enterprise mobile data
Vodafone’s device management solutions help customers manage the rapidly increasing number of mobile devices, such as smartphones and tablets, used in their business. Our reliable and secure data networks allow our customers to make full use of the mobile internet for business. Enterprise data revenue grew 18.2%* this year driven by smartphone penetration of 40%, as the use of the internet on smartphones has increased.

Note: 1 Sourced from IDC, MZA and Vodafone estimates.

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Business review Performance

Enterprise share of service revenue

%

2010 2011 2012

22.8 22.9 23.1

Governance

Enterprise customers

Millions

2010 2011 2012

26.0 28.1 30.3 Millions

Vodafone One Net users

2010 2011 2012

0.8 1.4 2.0

Financials

Total communications
In November 2011, Vodafone Global Enterprise acquired Bluefish to become the consultative heart of our unified communications offering to multinational corporations. As enterprise customers demand more complex end-to-end solutions, Bluefish brings Vodafone the experience and expertise to be innovative and deliver complex projects through sophisticated use of technology and brings more value to our customers.

Additional information

30 Strategy (continued)
Vodafone Group Plc Annual Report 2012

New services
We are supplementing our core communications services of voice, data and texts with a range of new services to generate additional revenue and enhance the customer experience. These new services comprise three key areas – mobile commerce services, machineto-machine (‘M2M’) services and operator billing.
People are using data more and more in their everyday lives driven by fast, reliable mobile data networks and continual improvements in devices such as handsets and tablets. We are also seeing increased interest from customers in new data-based services like mobile payments via handsets and mobile data devices for homes and cars. Market context: New services account for a small portion of our revenues today but the potential market opportunity is significant. Goals: We want to expand our presence in attractive new growth segments to capture the incremental opportunity and enhance customer service through the provision of new and useful services that add value to our customers’ lives. Strengths: Our global network reach, leading brand and strong service platforms make us well placed to become the partner of choice and capture the revenue growth opportunity. Actions: We are developing new services in partnership with leading companies from all relevant industries, including financial institutions, retailers, software producers and handset manufacturers. Progress: During the year we saw strong growth in the take up of new services, adding 3.2 million active M-Pesa customers and 2.5 million new M2M connections.

Focusing on growth in:

Mobile commerce services
Mobile financial services are today at the core of our mobile commerce services and M-Pesa is our main service, a mobile payment service that enables millions of people to transfer money electronically even when they have no access to a bank (see page 26 for more details). We are also developing a global mobile wallet service whereby customers with suitably equipped smartphones can use them to pay for goods and services. Earlier this year we announced a worldwide partnership with Visa to enable customers to simply wave their phone in front of a payment terminal to make simple everyday purchases such as train tickets, newspapers or their morning coffee. M-Pesa active customers
Millions

An increasing number of global businesses are incorporating M2M communications into their core operations, leading to greater productivity, enhanced customer service, lower energy use and decreased carbon dioxide emissions. Machine-to-machine connections
2010 2011 2012 3.7 5.3 7.8 Millions

Operator billing
Across the globe around 28 billion apps are downloaded every year; most are free but an increasing number are paid for. To build on this opportunity we are partnering with leading companies such as Google and Facebook to enhance their service with a simple solution that allows our customers to pay for apps and games directly and simply on their Vodafone monthly phone bill. We were the first operator to launch the service in Europe for the Android market and the service today also works on BlackBerry and Nokia. Early results have shown that around 80% of apps bought through BlackBerry App World are paid for via operator billing. These recently launched services provide a great customer experience and we had over 130,000 active users at the end of the financial year. Apps paid through Vodafone operator billing2
2011 205 2012 1,563 Thousands

2010 2011 2012

7.2 11.2 14.4

Machine-to-machine
M2M connections allow machines to communicate with one another via built-in mobile SIM cards. It is our vision to transform lives and businesses by providing the most innovative M2M products and services for our customers. Smart metering, automotive and logistics are currently the key growth sectors with the potential market increasing from €3 billion in 20113 to €6 billion by 20151 3. We are now serving around 7.8 million M2M connections globally, up from 5.3 million last year.

Notes: 1 Consensus of leading M2M market analysts for global M2M connectivity (excludes hardware, software, applications and system integration services). 2 Data for 2010 is unavailable as the service was launched in 2011. 3 Refers to calendar year.

Vodafone Group Plc Annual Report 2012

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Business review Performance

The machine-to-machine market (SIM to SIM communication without human intervention) is expected to grow from €3 billion in 20113 to €6 billion by 20153.

+€3bn

Governance Financials

BMW uses Vodafone’s machine-to-machine SIMs
In March we announced that Vodafone’s new SIM chip, which is based on machine-to-machine technology and allows different devices to communicate with each other, has been selected by BMW. Starting later in 2012, new BMW vehicles will be fitted with specially adapted Vodafone SIM chips which will provide drivers with access to innovative in-car services such as the BMW online service, a 24/7 personal concierge service for drivers and emergency call functions. The Vodafone SIM chip has a lifespan of more than ten years and can withstand temperatures from minus 40 to plus 85 degrees centigrade.

Additional information

Vodafone Group Plc Annual Report 2012

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Core strengths

Maintaining our leading market position
Vodafone is a high performing company with a leading market position. We are either the number one or number two mobile operator, when measured by revenue market share, in 14 out of 18 countries we operate in. We have outperformed our competitors by increasing market share in most of our key markets over the last year.
Our business is highly cash generative and in the last four years we have returned over 30% of our market capitalisation to shareholders in the form of dividends and share buybacks, while still investing around £6 billion a year in our networks and infrastructure. Mobile service revenue market share in key markets March 2012 60%
Vodacom1 Germany Italy

Our leading performance is based on three core strengths:

Our global scale advantage and close attention to cost efficiency

35%

37% 31% 26%
UK Spain

The successful implementation of our strategy to generate liquidity or free cash flow from non-controlled interests

21%

The application of rigorous capital discipline to investment decisions

Notes: 1 Market share information relates to total revenue for South Africa which is Vodacom’s largest business. 2 India: December 2011.

India2

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Business review

Deliver value and efficiency from scale
Vodafone is one of the world’s largest mobile companies. Our networks support 404 million customers and carry nearly one trillion minutes of calls and 324 billion texts each year. Our scale enables us to secure considerable unit cost savings in various ways including purchasing, standardisation of processes, off-shoring activities to lower cost locations, outsourcing non-core activities to third parties and sharing common resources with other operators.

Generate liquidity or free cash flow from non-controlled interests
In 2010 we identified six non-controlled assets in which Vodafone was the minority partner, that would either be sold or from which we extract additional cash flow in order to fund profitable investment or enhance shareholder returns. Since 2010 we have made considerable progress in this strategy by raising a total of £17.7 billion from the sale of assets and additional dividends.

Apply rigorous capital discipline to investment decisions
We are focused on enhancing returns to our shareholders and are therefore careful how we invest shareholders’ money. We apply rigorous commercial analysis and set demanding investment criteria to ensure that any investment, whether in existing businesses or acquisitions, will enhance value for shareholders. We remain committed to our target credit rating of low single A for long-term debt as this provides us with a low cost of debt and good access to liquidity.

Performance

Purchasing We use the Vodafone Procurement Company, the central Group procurement function based in Luxembourg to leverage our scale and to achieve better prices and more value. Standardisation We have developed one integrated data centre cloud across Europe and Africa and are well underway to extending it to Asia this year which enables us to operate highly resilient services and to be faster to market with our new services. Off-shoring We use shared service centres in Hungary, India and Egypt to provide financial, administrative, IT, customer operations and human resource services for our operations in over 30 countries which helps us to standardise and optimise the way we run our businesses. Outsourcing We have outsourced day-to-day network maintenance in ten countries enabling significant scale economies for the chosen supplier which are passed on to us in the form of lower costs. Sharing Over 70% of the new radio base station sites deployed this year were built as shared sites with other operators to reduce costs.

Businesses we have recently sold In September 2010 we sold our 3.2% stake in China Mobile Limited for £4.3 billion. In November 2010 we agreed to sell our remaining interest in SoftBank of Japan for £2.9 billion and the transaction was completed in April 2012. In June 2011 we sold our 44% holding in SFR of France for £6.8 billion. In November 2011 we sold our 24.4% share of Polkomtel in Poland for £0.8 billion. Dividends received from our non-controlled assets In January 2012 we received a £2.9 billion income dividend from our 45% interest in Verizon Wireless in the US. £2.0 billion of this was paid to Vodafone shareholders in the form of a special dividend. This was the first income dividend received since 2005. Remaining non-controlled interests We retain an indirect 4.4% interest in Bharti in India. The proceeds raised from non-controlled interests are being used to fund the current £6.8 billion share buyback programme, of which £5.7 billion was completed at 31 March 2012.

Discipline of regular business reviews We regularly review the cash needs of each of our existing businesses across the globe, taking into account their performance and competitive position. We make capital investments, such as for new equipment or spectrum, in our businesses to improve their performance and drive organic growth. Returns to shareholders We thoroughly review the best ways to provide returns to our shareholders. We have a target of increasing dividends per share by at least 7% a year until the financial year ending 31 March 2013. When we have surplus funds we consider additional returns to shareholders through special dividends or share buyback programmes. Selective acquisitions When managing capital we also consider whether to strengthen the Group by acquiring other companies to increase our operations in a particular market. All potential acquisitions are judged on strict financial and commercial criteria, especially whether they would provide meaningful scale in a particular segment, the cost of the acquisition and the ability to enhance the Group’s free cash flow.

Governance Financials Additional information

£0.9bn

In the last two years we have taken out some £0.9 billion from the cost base which has been used in part to offset inflationary pressures or cope with the volume of extra traffic on our networks. The net saving has been around £0.3 billion, which has been partly used to invest in commercial activities.

Dividends and sale proceeds from non-controlled interests
2010 2011 2012 0.5 0.5 3.0 5.7

£bn

Returns to shareholders 2012

£bn

Ordinary dividends paid Share buyback 7.6 Special dividend paid 2.0 3.6

4.6

Income dividend from non-controlled interests Cash received from the sale of non-controlled interests

Vodafone Group Plc Annual Report 2012

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Our people

The Vodafone Way
The Vodafone Way is about a consistent way of working, with speed, simplicity and trust. The aim is to be an admired organisation which delivers through being customer obsessed, innovation hungry, ambitious and competitive, and one company with local roots.
Our people are integral to building and sustaining our success. Market context: We are a global company, with operations in over 30 countries and with around 29% of our service revenue from emerging markets. In order to meet our customers’ different needs we aim to build a diverse workforce that reflects the various societies in which we operate. Goals: We strive for a broad employee base in terms of gender and nationality, and specifically target increased representation of women and emerging market talent at senior management level. Strengths: With around 86,400 employees we have a wealth of talent to draw from to drive our business forward. Actions: We invest nearly £60 million annually in training. Progress: According to our latest staff survey our employees’ level of engagement, a combination of pride, loyalty and motivation, is in line with other high performing global organisations.

Organisation effectiveness and change
We employed around 86,400 people worldwide during the year. Efficiency gains and related headcount reductions in Europe were partly offset by selective insourcing of customer call centres to improve customer experience, by our acquisition of Bel Company in the Netherlands to strengthen our retail and distribution and due to growth in emerging markets. We are also continuing to move some transactional and back office activities to our shared services centres in Hungary, Egypt and India.

Employment policies and employee relations
Our employment policies are developed to reflect local legal, cultural and employment requirements. We aim to be recognised as an employer of choice and therefore seek to maintain high standards and good employee relations wherever we operate. Our goal is to create a working culture that is inclusive for all. We believe that having a diverse workforce helps to meet the different needs of our customers across the globe. An inclusive culture and environment is one which respects, values, celebrates and makes the most of the individual differences we each bring to Vodafone, to the benefit of our customers, employees, shareholders, business partners and the wider communities in which we operate. We do not condone unfair treatment of any kind and offer equal opportunities in all aspects of employment and advancement regardless of race, nationality, gender, age, marital status, sexual orientation, disability, religious or political beliefs. This also applies to agency workers, the self-employed and contract workers who work for us. In our latest people survey, 88% of employees agreed that Vodafone treats people fairly, regardless of their gender, background, age or beliefs.

The main emphasis of our global diversity strategy has been on gender diversity and to increase the number of women in top senior management positions which has risen to 19.4% from 16.5% last year. We are committed to increasing the representation of women at all levels and to increase the representation of emerging markets talents in our group function and senior leadership population. During the year we deepened our commitment to diversity through, for example, running diversity and inclusion training workshops for our middle and senior managers and helping our markets to better embed female consumer preferences in our products and services through the MWomen programme.

Health, safety and wellbeing
In 2011 we introduced our new safety plan to significantly reduce fatalities and create an injury free workplace. As a result we’ve seen a reduction in fatalities to zero in some of our countries (Turkey, the Democratic Republic of Congo and Mozambique). Sadly however, 211 people died in the course of Vodafone doing business around the world. Vehicle related incidents remain our number one cause of fatalities and we’re addressing this through several interventions in local markets. In Ghana, for example, we set up a programme that uses vehicle simulators to assess driver competence, and a weekly analysis of driving activities through a GPS tracking system to improve driver safety. Living The Vodafone Way
We want everyone to live The Vodafone Way as a customer obsessed ambassador for Vodafone so we’ve created a global online portal where all employees can learn about our products, get close to our customers and answer the question “Why Vodafone?” by understanding our strategy, priorities and differentiators.

77

Employee engagement score, up from 75 in 2011

86,400
Average employees

Note: 1 While there were 21 fatalities involving contractors and employees, overall fatalities have reduced due to a decrease in fatal incidents involving members of the public.

Vodafone Group Plc Annual Report 2012

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Culture, communications and engagement
Our culture is based on The Vodafone Way which is about a consistent way of working, with speed simplicity and trust. All of our senior leadership team (227 people) attended a CEO led culture change programme in the 2011 financial year and are now returning for a practical hands-on reinforcement of the leadership skills and habits we believe we need to equip our leaders and teams with in order to make The Vodafone Way an everyday reality. Our Group functions and local markets have rolled out a similar programme for all their managers. Regular, consistent and open communication is fundamental to high levels of employee engagement. This year we launched Vodafone Circle, an online social network and collaboration tool for all our employees making it easier to connect and share expertise on a company wide basis. Our people have access to information about our business through a global intranet, with local translations and content where appropriate. The Chief Executive communicates directly with all employees through regular team meetings, email, video and webchat, and this is reinforced by local chief executive communications in all of our markets. Relevant performance and change issues are also discussed with our employees through team meetings, round table discussions or through elected representative bodies in some of the European countries.

Business review

We continue to develop and strengthen Academies to build expertise in our core functional areas of technology, marketing, finance, human resources and supply chain. We have invested in a new learning management system which will be rolled out to all markets over the next 18 months, enabling more training to be delivered online and on demand. Leadership development is an important priority for us. For the past five years we have been developing our next generation of leaders through Inspire, an 18 month programme for high potential managers. This year, 82 high potential managers from over 30 countries joined the programme, attending leadership development workshops, leading business challenges, and receiving coaching sessions and mentoring from senior leaders.

Employees by location 2012
Italy: 7% Germany: 14%

Spain: 5% UK: 9% India: 13%

Other: 43%

Vodacom: 9%

Number of employees1 Performance

2010 2011 2012

84,990 83,862 86,373

Performance, reward and recognition
We reward employees based on their performance, potential and contribution to the success of the business. We benchmark roles regularly on a total compensation basis to support our aim to provide competitive and fair rates of pay and benefits in every country where we operate. We also offer competitive retirement and other benefit provisions which vary depending on conditions and practices in local markets. Global short-term incentive plans are offered to a large percentage of employees and global long-term incentive plans are offered to our senior managers. Individual and company performance measures are attached to these plans which give employees the opportunity to achieve upside for exceptional performance as well as ensuring that as a business we do not reward failure. An ownership mentality is a cornerstone of our reward strategy and senior executives are expected to build up and maintain a significant holding in Vodafone shares within a few years of joining the company. In addition, all UK employees are able to build up an ownership in shares through our Sharesave scheme and Share Incentive Plan.

Nationalities in top senior management roles
2010 2011 2012 25 26 29

Governance

Women in top senior management roles
2010 2011 2012 14.5 16.5

%

19.4 %

Employee turnover rates2

Talent and capability development
During the year our employees continued to perform at a high level and we strengthened our senior leadership team with 53% of the vacancies being filled by internal talent. Our global graduate and recruitment programme, Discover, continued to grow with over 400 recruits this year. In addition, we partnered with nine leading MBA schools in Europe, the US, Africa and India to recruit 15 MBA graduates for key management roles. We continued to encourage international assignments in our talent pipeline and introduced the Columbus programme designed for graduate recruits to gain international experience two years after joining Vodafone. We are committed to helping our people perform at their best and achieve their full potential through ongoing training and development. People review and agree development objectives during their annual performance dialogue with their manager. During the year we invested around £60 million in training programmes. 75% of our people agreed that they had opportunities to learn the skills that they need to do their job well based on the 2011 people survey.

2010 2011 2012

13

Financials

15 15

Notes: 1 Represents the average number of employees in our controlled and jointly controlled markets during the year. 2 Based on our controlled markets and our joint venture in Italy.

Employee engagement
In October 2011 we carried out our seventh annual global people survey. The survey measures employees’ level of engagement, a combination of pride, loyalty and motivation and 90% of those surveyed responded. We increased our overall employee engagement score by 2 points to 77 and remain in line with other high performing global organisations.

Additional information

36 Sustainable business
Vodafone Group Plc Annual Report 2012

Enabling sustainable living for all
Our products and services make a real difference to people’s lives around the world. This year we developed and launched a new vision that builds on our longstanding commitment to sustainability which will help more people to improve their lives.
Our vision
The Executive Committee has overall ownership of the sustainability strategy, and the Board receives annual progress updates. Local markets develop their own strategies that address the primary opportunities and risks in their countries whilst supporting the Group’s overall vision. Throughout the year, we have kept abreast of the material issues through contact with customers, investors, employees, suppliers and governments. The Vodafone Sustainability Expert Advisory Panel met twice during the year and gave insight about our revised strategy. Connected agriculture By 2050 the world will need to produce 70% more food to satisfy a global population of nine billion1. We can help farmers meet this challenge by using mobile technology to improve productivity and increase efficiency throughout the agricultural value chain. Our Connected Agriculture research report, published in 2011 with Accenture, found that mobile technology could boost farmers’ productivity enough to increase agricultural income by US$138 billion by 2020 across our markets, primarily in India, Africa and the Middle East.2 We are piloting services with some of our corporate customers to improve information sharing across their supply chains. For consumers we have established information services for farmers in several local markets which are paid for through special tariffs. More than 600,000 farmers in Turkey now subscribe to Vodafone Farmers’ Club. They receive SMS alerts with weather forecasts, crop prices and other information tailored to their local area. We estimate this has increased Turkish farmers’ productivity by €100 million. mHealth The projected growth in the number of people over 55 years old will lead to an increase in public expenditure on healthcare especially for the treatment of chronic illness. In the European Union, spend on healthcare is projected to jump from 8% of GDP in 2000 to 14% by 20303. Vodafone mHealth Solutions is focused on delivering services that cover remote care services, access to medicine and clinical research, such as our collaboration with Boston Scientific Corporation to develop remote mobile health monitoring products. Further information is contained in “Emerging markets” on page 26.

Our vision is to unleash the power of Vodafone to transform societies and enable sustainable living for all. Market context: Many of the challenges faced in today’s world demand a change in thinking and behaviour. In various different markets, our customers face pressure from food shortages, ageing populations and economic crises. Goals: We have a unique opportunity through our services to transform societies and enable sustainable living for all. Strengths: We have strong foundations and our technology is becoming ubiquitous, giving access to digital communications, and the services that we have developed, to people in many parts of the world. Actions: This year we developed and launched a new vision that builds on our longstanding commitment to sustainability which will help more people to improve their lives. Progress: Our Connected Agriculture research report, published in 2011, specifically identifies the opportunities for mobile to address challenges in world food supplies. Our 7.8 million machine-to-machine connections can lead to a dramatic reduction in carbon emissions, whilst improving business efficiency.

Delivering transformational services
We aim to deliver products and services which can transform people’s lives and contribute to more sustainable living. M-Pesa 60% of the world’s population do not have access to basic financial services such as a bank account or insurance. In addition to the challenges this presents for employment and education, efficient remittances to rural relatives rely on secure money transfer. The M-Pesa mobile money transfer platform and mobile contactless payments are the result of our focus on the development and deployment of innovative financial services. Further information is contained in “Emerging markets” on page 26.

Notes: 1 UN Food and Agriculture Organization, How to feed the world, 2009. 2 Vodafone and Accenture, Connected Agriculture: The role of mobile in driving efficiency and sustainability in the food and agriculture supply chain, 2011. 3 According to World Bank figures. 4 Sourced from IDC.

Vodafone Group Plc Annual Report 2012

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600,000 7.8m

Responsible and ethical wherever we do business
To transform societies, we need our stakeholders’ trust and co-operation. To earn that trust we must manage the issues that matter to them and behave ethically in everything we do. Operating responsibly In 2012 we signed up to industry principles of the ICT Coalition for a Safer Internet for the development of products and services which help keep children safe online. In 2011 we joined with seven other telecom operators to collaborate in auditing the working conditions of our common suppliers, as well as requiring all our suppliers to sign up to our Code of Ethical Purchasing. Environment We have launched an eco-rating for mobile phones in the Netherlands, as part of our commitment to raising standards across our range of devices, and providing information to customers. We co-chair the Global e-Sustainability Initiative (‘GeSI’) working group to develop long-term solutions for the management of electronic waste within the ICT industry, particularly in emerging markets. We have modernised our network by installing new, more efficient single Radio Access Network (‘RAN’) technology that operates 2G, 3G and LTE networks. Single RAN units are now present in 24% of our base station sites, saving up to 40% energy compared to traditional RAN units. Based on better and more complete data this year our energy use increased by 8.2%, with greater consumption by our network being partially offset by network modernisation and energy efficiencies. This has impacted our CO2 emissions which have risen by 12.1%. In addition, there have been changes to the conversion factors used to calculate CO2 from electricity particularly in Germany, Spain and Italy. This year we sourced 18% of our electricity from renewable sources. This was primarily from purchasing green tariff energy from the grid in mature markets. In 2012 we opened the Vodafone Site Solution Innovation Centre in South Africa, a joint venture with Vodacom, to develop and field test innovations such as solar foil and hybrid power solutions. Examples of innovations at the Centre include a next-generation hybrid generator, known as a ‘power cube’, that improves efficiency by 40% and significantly lowers installation and operating costs.

Business review

Energy use 20121

GWh

Subscribers to Vodafone Farmers Club Turkey. Part of the Connected Agriculture programme.

Retail 83 Office 425

4,454

Machine-to-machine connections can lead to a dramatic reduction in carbon emissions, whilst improving business efficiency.

Network 3,946

Carbon�dioxide emissions1

Millions of tonnes

Performance

2010 2011 2012

1.21 1.96 2.20

Climate Climate change represents one of the biggest global challenges and remains a key concern of our business and stakeholders. Our machine-to-machine (‘M2M’) services enable reductions in carbon emissions from logistics, manufacturing processes and office energy use, whilst improving business efficiency and increasing quality of services. In our African operations we are investigating Community Power, which uses excess electricity from our solar-powered mast sites in off-grid rural areas to power community facilities. We envisage Community Power will support local economic and social development by bringing green energy to rural communities. Smart working It is forecast that remote mobile workers will number 1.3 billion by 20154. Creating better ways of working can deliver efficiency and productivity benefits, but there are also sustainability and life enhancing benefits to smart working. A study which was carried out across Vodafone’s operations in the UK was completed in 2011. The study, which compared figures from financial year 2011 with those of 2007, showed: aa 45% decline in carbon emissions from travel; aa 37% drop in CO2-equivalent emissions from building energy use within five years; aa a saving of 24,000 tonnes of CO2-equivalent emissions every year (this is equal to the average annual CO2 emissions associated with the energy use of 4,000 UK households).

Note: 1 The charts above on energy use and carbon emissions are 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 2012 data includes India, Ghana, Qatar and South Africa but excludes all other Vodacom markets. Our joint venture in Italy is included in all years.

Governance

Vodafone sustainability report
Our 12th annual sustainability report, which is assured by Ernst & Young LLP using the International Standard on Assurance Engagements (‘ISAE 3000’) to check adherence to the AA1000 AccountAbility Principles Standard (‘AA1000APS’), is available at www.vodafone.com/sustainability. 16 local markets publish their own sustainability reports.

Financials Additional information

Smart metering
In New Zealand, ASB Bank used smart meters to monitor and modify its energy use, leading to carbon savings of 2,200 tonnes CO2-equivalent (27%) and cumulative cost savings of £1.6 million in the first three years of use.

38 Mobile for Good: the work of the Vodafone Foundations
Vodafone Group Plc Annual Report 2012

Mobilising the community
At the heart of our Foundations is the belief that mobile communications technologies can address some of the world’s most pressing humanitarian challenges and our responsibility is to utilise our innovative mobile technology in mobilising social change and improving peoples lives.

2011 was the twentieth anniversary of the establishment of the first Vodafone Foundation, a programme which has developed into a unique network of 28 Vodafone Foundations across the markets in which Vodafone operates. Total donations for the year were £52.1 million which included £6.8 million towards Vodafone Foundations’ operating costs. Foundation activity now centres on a Mobile for Good strategy – combining a privileged access to Vodafone networks, technology, customers and employees with its charitable giving, to empower people with the necessary tools to make a difference in the world.

£7 million will help CCBRT expand and refurbish existing facilities, launch an extensive awareness and education programme, and build a brand new dedicated maternity hospital in Dar es Salaam. This campaign will help to change the lives of 31,000 women in Tanzania by 2016. Vodafone Egypt Foundation developed and launched a mobile application for its adult literacy campaign. The application aids learning through utilising a talk back function and picture association. Over 12,000 volunteers are engaged to recruit participants, build schools and teach. Since the campaign launched in February 2011, 3,000 literacy classes have been held and 50,000 adults have enrolled in the programme. Vodafone Italy Foundation launched Ricarica Insieme (Top Up Together) a €20 top up card which provides €19 credit with the remaining €1 being donated to charity. For every €1 donated through Ricarica Insieme, the Vodafone Italy Foundation donates an additional €1. In the first 17 weeks Ricarica Insieme raised €916,000, which combined with the Foundation matched pledge, totals more than €1.8 million for charity. For more information please go to www.vodafonefoundation.org/m4gplayer

Mobile for Good
In September 2011, Vodafone pledged to raise over £7 million to support Comprehensive Community Based Rehabilitation in Tanzania (‘CCBRT’). Obstetric fistula leaves women incontinent following childbirth and is believed to have affected up to 24,000 women in Tanzania since the millennium. Using Vodafone M-Pesa, the CCBRT hospital sends travel funds across the country to enable some of the poorest and most marginalised women to get to hospital for life changing surgery.

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Risk overview

Identifying and managing our risks
We have a clear framework for identifying and managing risk, both at an operational and strategic level. Our risk identification and mitigation processes have been designed to be responsive to the ever changing environments in which we operate.
Managing risk Board
Review and confirmation
Review and confirmation by the Board

Business review Performance

The Group’s key risks are outlined below.
More detail on our key risks and the steps we take to mitigate their potential impact Pages 51 to 53

Governance

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

Audit and Risk Committee

Process
Risks and mitigation validated with the Executive Committee and presented to Audit and Risk Committee for review

2. We could suffer loss of consumer confidence and/or legal action due to a failure to protect our customer information. 3. Our business could be adversely affected by a failure or significant interruption to telecommunications networks. 4. Technological advances in handsets and use of alternative communication services may result in less demand for our traditional service offerings. 5. Increased competition may reduce our market share and profitability. Financials

Executive Committee

Ongoing review and control
There is ongoing review of the risks and controls in place to mitigate these risks by the Audit and Risk Committee

Group Risk Co-ordinator

Review and assessment
Group risk co-ordinator, who is the Internal Audit Director, consolidates the operating companies’ and Group risks to create the Group’s key risks

6. Our business may be impaired by actual or perceived health risks associated with the transmission of radio waves from mobile telephones, transmitters and associated equipment. 7. One or more countries may exit the eurozone. Additional information 8. We may be unable to obtain additional/ renew sufficient spectrum with an adequate return. 9. We may not satisfactorily resolve major tax disputes. 10. A malicious attack on our network may be successful and disrupt our services or compromise our data. 11. Changes in assumptions underlying the carrying value of certain Group assets could result in impairment.

Senior management of Group functions
Identify
Senior management identify the key risks and develop mitigation actions

Senior management of operating companies
Identify
Local management create a register of their top ten risks and mitigation actions

Vodafone Group Plc Annual Report 2012

40

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

2012 financial year compared to the 2011 financial year Group1
Europe £m Africa, Middle East and Asia Pacific £m Non-Controlled Interests and Common Functions2 £m Eliminations £m 2012 £m 2011 £m % change £ Organic

Revenue Service revenue EBITDA Adjusted operating profit Adjustments for: Impairment loss Other income/(expense)3 Operating profit Non-operating (expense)/income4 Net (financing costs)/investment income Profit before taxation Income tax expense Profit for the financial year

32,181 29,914 10,445 5,260

13,868 12,751 4,115 1,472

423 272 (85) 4,800

(55) (52) – –

46,417 42,885 14,475 11,532 (4,050) 3,705 11,187 (162) (1,476) 9,549 (2,546) 7,003

45,884 42,738 14,670 11,818 (6,150) (72) 5,596 3,022 880 9,498 (1,628) 7,870

1.2 0.3 (1.3) (2.4)

2.2 1.5 (0.6) 2.5

Notes: 1 Current year results reflect average foreign exchange rates of £1:€1.16 and £1:US$1.60. 2 Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs. 3 Other income/(expense) for the year ended 31 March 2012 includes a £3,419 million gain on disposal of the Group’s 44% interest in SFR and a £296 million gain on disposal of the Group’s 24.4% interest in Polkomtel. The year ended 31 March 2011 included £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement. 4 Non-operating (expense)/income for the year ended 31 March 2011 included £3,019 million profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited.

Revenue Group revenue was up 1.2% to £46.4 billion, with service revenue of £42.9 billion, an increase of 1.5%* on an organic basis. Our overall performance reflects continued strong demand for data services and further voice penetration growth in emerging markets, offset by regulatory changes, ongoing competitive pressures and challenging macroeconomic conditions in a number of our mature markets. As a result of the leap year, service revenue growth of 2.3%* in Q4 benefited from the additional day by around 1 percentage point. AMAP service revenue was up by 8.0%*, with a strong performance in India, Qatar, Ghana and Vodacom and a return to growth in Egypt offset by a decline in Australia. In Europe, service revenue was down by 1.1%* reflecting challenging macroeconomic conditions in Southern Europe partially offset by growth in Germany, the UK, the Netherlands and Turkey. EBITDA and profit Group EBITDA was down 1.3% to £14.5 billion, as revenue growth was offset by higher customer investment due to increased smartphone penetration. Adjusted operating profit was down 2.4% to £11.5 billion, driven by a reduction in our share of profits from associates following the disposal of our 44% interest in SFR in June 2011. Our share of profits of Verizon Wireless grew by 9.3%* to £4.9 billion. Operating profit increased by 100% to £11.2 billion, primarily due to the gain on disposal of the Group’s 44% interest in SFR and 24.4% interest in Polkomtel, and lower impairment losses compared to the prior year. An impairment loss of £4.0 billion was recorded in relation to Italy, Spain, Portugal and Greece, primarily driven by lower projected cash flows within business plans and an increase in discount rates, resulting from adverse changes in the economic environment.

Net (financing costs)/investment income
2012 £m 2011 £m

Investment income Financing costs Net (financing costs)/investment income Analysed as: Net financing costs before income from investments Potential interest credit/(charges) arising on settlement of outstanding tax issues1 Income from investments Foreign exchange2 Equity put rights and similar arrangements3 Interest related to the settlement of tax cases Disposal of SoftBank Mobile Corp. Limited financial instruments

456 (1,932) (1,476)

1,309 (429) 880

(1,642) 9 19 138 – – – (1,476)

(852) (46) 83 256 95 872 472 880

Notes: 1 Excluding interest credits related to a tax case settlement. 2 Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange rate differences on financial instruments received as consideration on the disposal of Vodafone Japan to SoftBank in April 2006. 3 The year ended 31 March 2011 included foreign exchange rate movements, accretion expense and fair value charges.

Net financing costs before income from investments increased from £852 million to £1,642 million, primarily due to the decision to increase the fixed rate debt mix, which is expected to result in lower interest in future periods, and the subsequent recognition of mark-to-market losses. Income from investments decreased by £64 million as a result of the disposal of the Group’s 3.2% interest in China Mobile Limited and the Group’s interests in SoftBank Mobile Corp. Limited during the 2011 financial year.

Vodafone Group Plc Annual Report 2012

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Taxation
2012 £m 2011 £m

Income tax expense Tax on adjustments to derive adjusted profit before tax Tax benefit related to settlement of tax cases Adjusted income tax expense Share of associates’ tax Adjusted income tax expense for purposes of calculating adjusted tax rate Profit before tax Adjustments to derive adjusted profit before tax1 Adjusted profit before tax Add: Share of associates’ tax and non-controlling interest Adjusted profit before tax for the purpose of calculating adjusted effective tax rate Adjusted effective tax rate
Note: 1 See “Earnings per share”.

2,546 (242) – 2,304 302 2,606 9,549 369 9,918 382 10,300 25.3%

1,628 (232) 929 2,325 519 2,844 9,498 1,505 11,003 604 11,607 24.5%

Earnings per share Adjusted earnings per share was 14.91 pence, a decline of 11.0% year-on-year, reflecting the loss of our 44% interest in SFR and Polkomtel’s profits, the loss of interest income from investment disposals and mark-to-market items charged through finance costs, partially offset by a reduction in shares arising from the Group’s share buyback programme. Basic earnings per share was 13.74 pence (2011: 15.20 pence), reflecting the profit on disposal of our 44% interest in SFR and 24.4% interest in Polkomtel and lower impairment charges compared to the prior financial year, all of which are excluded from adjusted earnings per share.
2012 £m 2011 £m

Business review

Profit attributable to equity shareholders Pre-tax adjustments: Impairment loss1 Other income and expense1 2 Non-operating income and expense1 3 Investment income and financing costs4 Taxation1 Non-controlling interests Adjusted profit attributable to equity shareholders Weighted average number of shares outstanding Basic Diluted

6,957 4,050 (3,705) 162 (138) 369 242 (18) 7,550
Million

7,968 Performance 6,150 72 (3,022) (1,695) 1,505 (697) – 8,776
Million

The adjusted effective tax rate for the year ended 31 March 2012 was 25.3%. This is in line with our mid 20s adjusted effective tax rate guidance range. The Group’s share of associates’ tax declined due to the absence of the tax related to SFR following the disposal of our 44% interest in June 2011. Income tax expense has increased in the year ended 31 March 2012 largely due to the favourable impact of a tax settlement in the 2011 financial year.

Governance

50,644 50,958

52,408 52,748

Notes: 1 Taxation for the 2012 financial year includes a £206 million charge in respect of the disposal of the Group’s 24.4% interest in Polkomtel. The 2011 financial year included £929 million credit in respect of a tax settlement and a £208 million charge in respect of the disposal of the Group’s 3.2% interest in China Mobile Limited. The impairment charges of £4,050 million and £6,150 million in the 2012 and 2011 financial years respectively do not result in any tax consequences. The disposal of our 44% interest in SFR did not give rise to a tax charge. 2 Other income and expense for the 2012 financial year includes a £3,419 million gain on disposal of the Group’s 44% interest in SFR and a £296 million gain on disposal of the Group’s 24.4% interest in Polkomtel. The 2011 financial year includes £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement. 3 Non-operating income and expense for the 2011 financial year includes £3,019 million profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited. 4 See notes 2 and 3 in “Net (financing costs)/investment income” on page 40.

Financials

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

Year ended 31 March 2012 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin Year ended 31 March 2011 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin

8,233 7,669 2,965 1,491 36.0% 7,900 7,471 2,952 1,548 37.4%

5,658 5,329 2,514 1,735 44.4% 5,722 5,432 2,643 1,903 46.2%

4,763 4,357 1,193 566 25.0% 5,133 4,735 1,562 915 30.4%

5,397 4,996 1,294 402 24.0% 5,271 4,931 1,233 348 23.4%

8,352 7,780 2,479 1,066 29.7% 8,253 7,787 2,433 1,012 29.5%

(222) (217) – –

32,181 29,914 10,445 5,260 32.5% 32,015 30,097 10,823 5,726 33.8%

0.5 (0.6) (3.5) (8.1)

(0.1) (1.1) (4.5) (9.6)

(264) (259) – – –

(2.5) (3.4) (7.1) (9.8)

0.6 (0.4) (3.7) (6.1)

Additional information

42 Operating results (continued)
Vodafone Group Plc Annual Report 2012

Revenue increased by 0.5% including a 0.5 percentage point impact from favourable foreign exchange rate movements. On an organic basis service revenue declined by 1.1%* primarily due to the impact of MTR cuts, competitive pricing pressures and continued economic weakness, partially offset by growth in data revenue. Growth in the UK, Germany, the Netherlands and Turkey was offset by declines in most other markets, in particular, Italy, Spain and Greece. EBITDA declined by 3.5% including a 1.1 percentage point favourable impact from foreign exchange rate movements. On an organic basis EBITDA decreased by 4.5%*, resulting from higher customer investment due to the increased penetration of smartphones, and a reduction in service revenue in most markets, partially offset by direct cost efficiencies.
Organic change % Other activity1 pps Foreign exchange pps Reported change %

Italy Service revenue declined by 3.4%* as a result of weak economic conditions, intense competition and the impact of an MTR cut effective from 1 July 2011. Strong data revenue growth of 16.8%* was driven by mobile internet which benefited from a higher penetration of smartphones and an increase in those sold with a data bundle. From Q3, all new consumer contract customers are now on an integrated tariff. Enterprise revenue grew by 5.1%* with a strong contribution from Vodafone One Net, a converged fixed and mobile solution, and growth in the customer base. Fixed line growth benefited from strong customer additions although slowed in Q4 due to intense competition. EBITDA decreased by 6.4%*, and EBITDA margin fell by 1.9* percentage points resulting from the decline in service revenue partially offset by operating cost efficiencies such as site sharing agreements and outsourcing of network maintenance to Ericsson. Spain Service revenue declined by 9.4%* impacted by intense competition, continuing economic weakness and high unemployment during the year, which have driven customers to reduce or optimise their spend on tariffs. Data revenue increased by 18.4%* benefiting from the penetration of integrated voice, SMS and data tariffs initially launched in October 2010. Improvements were seen in fixed line revenue which increased by 7.3%* resulting from a competitive proposition leading to good customer additions. Mobile customer net additions were strong as a result of our more competitive tariffs and a focus on improving the retention of higher-value customers. EBITDA declined by 24.9%*, with a 5.5* percentage point fall in EBITDA margin, primarily due to lower revenue with sustained investment in acquisition and retention costs. This was partially offset by operating cost efficiencies. UK Service revenue increased by 1.6%* driven by an increase in data and consumer contract revenue supported by the success of integrated offerings. This was partially offset by the impact of an MTR cut effective from 1 April 2011 and lower consumer confidence leading to reduced out-of-bundle usage. Data revenue grew by 14.5%* due to higher penetration of smartphones and an increase in those sold with a data bundle. EBITDA increased by 5.0%* and EBITDA margin improved by 0.6* percentage points, due to a number of cost saving initiatives, including acquisition and retention efficiencies. Other Europe Service revenue increased by 1.7%* as growth in Albania, Malta, the Netherlands and Turkey more than offset a decline in the rest of the region, particularly in Greece, Portugal and Ireland, which continued to be impacted by the challenging macroeconomic environment and competitive factors. Service revenue in Turkey grew by 25.1%* driven by strong growth in consumer contract and data revenue resulting from an expanding contract customer base and the launch of innovative propositions. In the Netherlands service revenue increased by 2.1%*, driven by an increase in the customer base, partially offset by MTR cuts, price competition and customers optimising tariffs. EBITDA grew by 1.7%*, with strong growth in Turkey, driven by a combination of service revenue growth and cost efficiencies, partially offset by declines in the majority of the other markets.

Revenue – Europe Service revenue Germany Italy Spain UK Other Europe Europe EBITDA Germany Italy Spain UK Other Europe Europe Adjusted operating profit Germany Italy Spain UK Other Europe Europe

(0.1) 1.2 (3.4) (9.4) 1.6 1.7 (1.1) (1.1) (6.4) (24.9) 5.0 1.7 (4.5) (5.3) (10.4) (39.2) 15.7 3.0 (9.6)

0.1 (0.1) – (0.1) (0.3) (0.2) – – – (0.2) (0.1) (0.1) (0.1) 0.1 – (0.3) (0.2) (0.6) (0.2)

0.5 1.6 1.5 1.5 – (1.6) 0.5 1.5 1.5 1.5 – 0.3 1.1 1.5 1.6 1.4 – 2.9 1.7

0.5 2.7 (1.9) (8.0) 1.3 (0.1) (0.6) 0.4 (4.9) (23.6) 4.9 1.9 (3.5) (3.7) (8.8) (38.1) 15.5 5.3 (8.1)

Note: 1 “Other activity” includes the impact of M&A activity and the revision to intra-group roaming charges from 1 October 2012. Refer to “Organic growth” on page 171 for further detail.

Germany Service revenue increased by 1.2%* as strong growth in data and enterprise revenue more than offset the impact of an MTR cut effective from 1 December 2010 and increasing competitive pressures. Data revenue grew by 21.3%* driven by a higher penetration of smartphones, an increase in those sold with a data bundle and the launch of prepaid integrated tariffs. Enterprise revenue grew by 5.6%* driven by significant customer wins and the success of converged service offerings. A number of innovative products were launched during the second half of the 2012 financial year, including OfficeNet, a cloud based solution. The roll out of LTE has continued, following the launch of services in the prior financial year. Nearly 2,700 base stations had been upgraded to LTE at 31 March 2012, providing approximately 35% household coverage. EBITDA declined by 1.1%* as the higher revenue was offset by restructuring costs and regulation changes.

Vodafone Group Plc Annual Report 2012

43

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

Business review

Year ended 31 March 2012 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin Year ended 31 March 2011 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin

4,265 4,215 1,122 60 26.3% 3,855 3,804 985 15 25.6%

5,638 4,908 1,930 1,084 34.2% 5,479 4,839 1,844 827 33.7%

3,965 3,628 1,063 328 26.8% 3,971 3,650 1,170 430 29.5%

– – – –

13,868 12,751 4,115 1,472 29.7% 13,304 12,292 3,999 1,272 30.1%

4.2 3.7 2.9 15.7

8.4 8.0 7.8 22.4

(1) (1) – –

20.0 20.0 20.7 55.5

9.5 9.5 7.5 8.6

Performance

Revenue grew by 4.2% after a 4.2 percentage point adverse impact from foreign exchange rate movements. On an organic basis service revenue grew by 8.0%* driven by customer and data growth, partially offset by the impact of MTR reductions. Growth was driven by strong performances in India, Vodacom, Ghana and Qatar and a return to growth in Egypt, offset by service revenue declines in Australia and New Zealand. EBITDA grew by 2.9% after a 4.8 percentage point adverse impact from foreign exchange rate movements. On an organic basis, EBITDA grew by 7.8%* driven primarily by strong growth in India and Vodacom and improved contributions from Ghana and Qatar, offset in part by declines in Egypt and Australia.
Organic change % Other activity1 pps Foreign exchange pps Reported change %

India Service revenue grew by 19.5%,* driven by an 11.8% increase in the customer base, strong growth in incoming and outgoing voice minutes and 51.3%* growth in data revenue. 3G services were available to Vodafone customers in 860 towns and cities across 20 circles at 31 March 2012. Growth also benefited from mobile operators starting to charge for SMS termination during the second quarter of the 2012 financial year. At 31 March 2012 the customer base had increased to 150.5 million, with data customers totalling 35.4 million, a year-on-year increase of 81.5%. This was driven by an increase in data enabled handsets and the impact of successful marketing campaigns. Whilst the market remains highly competitive, the effective rate per minute remained broadly stable during the year, with promotional offers offsetting headline price increases. EBITDA grew by 22.9%* driven by the increase in revenue and economies of scale, partially offset by higher customer acquisition costs and increased interconnection costs. Full year EBITDA margin increased 0.8* percentage points to 26.3%, driven by cost efficiencies and scale benefits.

Governance

Revenue – Africa, Middle East and Asia Pacific Service revenue India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific EBITDA India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Adjusted operating profit India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific

8.4 19.5 7.1 (1.8) 8.0 22.9 11.3 (9.1) 7.8 389.3 41.1 (22.4) 22.4

– (0.1) – (0.1) – (0.2) – (0.1) (0.1) (40.6) – (0.2) (0.3)

(4.2) (8.6) (5.7) 1.3 (4.3) (8.8) (6.6) 0.1 (4.8) (48.7) (10.0) (1.1) (6.4)

4.2 10.8 1.4 (0.6) 3.7 13.9 4.7 (9.1) 2.9 300.0 31.1 (23.7) 15.7

Financials

Vodacom Service revenue grew by 7.1%,* driven by service revenue growth in South Africa of 4.4%*, where strong net customer additions and growth in data revenue was partially offset by the impact of MTR cuts (effective 1 March 2011 and 1 March 2012). Despite competitive pricing pressures, data revenue in South Africa grew by 24.3%,* driven by higher smartphone penetration and data bundles leading to a 35.4% increase in active data customers to 12.2 million at 31 March 2012. Vodacom’s mobile operations outside South Africa delivered strong service revenue growth of 31.9%*2, driven by customer net additions and the simplification of tariff structures in Mozambique and Tanzania. M-Pesa, our mobile phone based money transfer service, continues to perform well in Tanzania with over 3.1 million active users.

Additional information

EBITDA increased by 11.3%* driven by robust service revenue growth and continued focus on operating cost efficiencies.
Notes: 1 “Other activity” includes the impact of M&A activity and the revision to intra-group roaming charges from 1 October 2012. Refer to “Organic growth” on page 171 for further detail. 2 Excludes Gateway and Vodacom Business Africa.

44 Operating results (continued)
Vodafone Group Plc Annual Report 2012

Other Africa, Middle East and Asia Pacific Organic service revenue, which now includes Australia, declined by 1.8%* with both New Zealand and Australia being impacted by MTR cuts effective from 6 May 2011 and 1 January 2012, respectively. In Australia, despite improvements in network and customer operations performance, service revenue declined by 8.8%* driven by the competitive market and weakness in brand perception following the network and customer service issues experienced from late 2010 to early 2011 and further accelerated by MTR cuts. On 22 March 2012, Vodafone Hutchison Australia appointed Bill Morrow as its new CEO. In Egypt service revenue was suppressed by the challenging economic and political environment, however, organic growth of 1.4%* was achieved as a result of an increased customer base and strong data usage. In Qatar an increase in the customer base delivered service revenue growth of 27.1%*, despite a competitive pricing environment. Service revenue in Ghana grew by 29.2%* through strong gains in customer market share. EBITDA margin declined 2.2* percentage points, driven by the service revenue decline in Australia and the challenging economic and competitive environment in Egypt, partially offset by growth in Qatar and Ghana. Safaricom, Vodafone’s associate in Kenya, grew service revenue by 13.6%*, driven by increases in customer base, voice usage and M-Pesa activity. EBITDA margin improved in the second half of the 2012 financial year through a tariff increase in October, operating cost efficiencies and a strengthening of the local currency to take the margin for the 2012 financial year to 35.0%.

Non-Controlled Interests
Verizon Wireless1 2 3
2012 £m 2011 £m % change £ Organic

Service revenue Revenue EBITDA Interest Tax2 Group’s share of result in Verizon Wireless

18,039 20,187 7.689 (212) (287) 4,867

17,238 18,711 7,313 (261) (235) 4,569

4.6 7.9 5.1 (18.8) 22.1 6.5

7.3 10.6 7.9

9.3

In the United States Verizon Wireless reported 4.6 million net mobile customer additions bringing its closing mobile customer base to 93.0 million, up 5.2%. Service revenue growth of 7.3%* continues to be driven by the expanding customer base and robust growth in data ARPU driven by increased penetration of smartphones. EBITDA margin remained strong despite the competitive challenges and macroeconomic environment. Efficiencies in operating expenses and customer acquisition costs resulting from lower volumes have been partly offset by a higher level of customer retention costs reflecting the increased demand for smartphones. Verizon Wireless’ net debt at 31 March 2012 totalled US$6.4 billion4 (31 March 2011: net debt US$9.8 billion4), after paying a dividend to its shareholders of US$10 billion on 31 January 2012.
Notes: 1 All amounts represent the Group’s share based on its 45% equity interest, unless otherwise stated. 2 The Group’s share of the tax attributable to Verizon Wireless relates only to the corporate entities held by the Verizon Wireless partnership and certain state taxes which are levied on the partnership. The tax attributable to the Group’s share of the partnership’s pre-tax profit is included within the Group tax charge. 3 Organic growth rates include the impact of a non-cash revenue adjustment which was recorded to defer previously recognised data revenue that will be earned and recognised in future periods. Excluding this the equivalent organic growth rates for service revenue, revenue, EBITDA and the Group’s share of result in Verizon Wireless would have been 6.8%*, 10.1%*, 6.7%* and 7.5%* respectively. 4 Net debt excludes pending credit card receipts. Comparatives are presented on a comparable basis.

Vodafone Group Plc Annual Report 2012

45

2011 financial year compared to the 2010 financial year Group1
Europe £m Africa, Middle East and Asia Pacific £m Non-Controlled Interests and Common Functions2 £m Eliminations £m 2011 £m 2010 £m % change £ Organic3

Business review

Revenue Service revenue EBITDA Adjusted operating profit Adjustments for: Impairment losses Other (income)/expense4 Operating profit Non-operating income/(expense)5 Net investment income/(financing costs) Profit before taxation Income tax expense Profit for the financial year

32,015 30,097 10,823 5,726

13,304 12,292 3,999 1,272

659 412 (152) 4,820

(94) (63) – –

45,884 42,738 14,670 11,818 (6,150) (72) 5,596 3,022 880 9,498 (1,628) 7,870

44,472 41,719 14,735 11,466 (2,100) 114 9,480 (10) (796) 8,674 (56) 8,618

3.2 2.4 (0.4) 3.1

2.8 2.1 (0.7) 1.8

Performance Governance

Notes: 1 2011 results reflect average exchange rates of £1:€1.18 and £1:US$1.56. 2 Common Functions primarily represent the results of the partner markets and the net result of unallocated central Group costs. 3 Organic growth includes Vodacom at the 2011 level of ownership but excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009. 4 Other income and expense for the year ended 31 March 2011 included £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item “Share of results in associates” in the consolidated income statement. 5 Non-operating income and expense for the year ended 31 March 2011 includes £3,019 million profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited.

Revenue Group revenue increased by 3.2% to £45,884 million and Group service revenue increased by 2.4% to £42,738 million. On an organic basis Group service revenue increased by 2.1%*, with a 0.8 percentage point improvement between the first and second half of the 2011 financial year as both Europe and AMAP delivered improved organic service revenue trends. In Europe service revenue fell by 0.4%* with a decline of 0.3%* in the second half of the 2011 financial year. Both the UK and Germany performed well delivering full year service revenue growth of 4.7%* and 0.8%* respectively. Spain continued to experience economic pressures which intensified competition leading to a 6.9%* decline in service revenue. Service revenue also declined by 2.1%* in Italy driven by a challenging economic and competitive environment combined with the impact of MTR cuts. Our improved commercial offers in Turkey delivered service revenue growth of 28.9%*, despite a 52% cut in MTRs which was effective from 1 April 2010. Challenging economic and competitive conditions continued in our other central European businesses where service revenue growth was also impacted by MTR cuts. European enterprise revenue increased by 0.5%* with improved roaming activity and important customer wins. In AMAP service revenue grew by 9.5%*. Vodacom continued to perform well, with strong data revenue growth from mobile broadband offsetting weaker voice revenue which was impacted by two MTR cuts during the year. In India service revenue increased by 16.2%*, driven by an increase in the mobile customer base and a more stable pricing environment towards the end of the 2011 financial year. In Qatar the customer base reached 757,000 by 31 March 2011, with 45% of the population actively using Vodafone services less than two years after launch. On an organic basis, service revenue in Egypt declined by 0.8%* where performance was impacted by the socio-political unrest during the fourth quarter of the 2011 financial year.

EBITDA and profit EBITDA decreased by 0.4% to £14,670 million with a 1.1 percentage point decline in both the reported and organic EBITDA margin. In Europe EBITDA decreased by 3.7%*, with a decline in EBITDA margin of 1.7 percentage points, primarily driven by a reduction in service revenue in most markets and higher investment in acquisition and retention costs, partially offset by operating cost efficiencies. In AMAP EBITDA increased by 7.5%*, driven primarily by growth in India, together with improvements in Vodacom, Ghana, New Zealand and Qatar, partially offset by a slight decline in Egypt. The EBITDA margin fell 0.6* percentage points, the two main factors behind the decline being higher recurring licence fee costs in India and the change in regional mix from the strong growth in India. Adjusted operating profit grew by 3.1% as a result of an increase in the Group’s share of results of Verizon Wireless partially offset by the decline in Group EBITDA. The Group’s share of results in Verizon Wireless, the Group’s associate in the United States, increased by 8.5%* primarily due to the expanding customer base, robust data revenue, efficiencies in operating expenses and lower acquisition costs partially offset by higher customer retention costs reflecting the increased demand for smartphones in the United States. The Group recorded other net income of £5,342 million, primarily in relation to a £2.8 billion net gain on the sale of the Group’s interest in China Mobile Limited, £1.8 billion on the settlement of a tax case and £0.5 billion from the disposal of investment in SoftBank Mobile Corp. Limited. Operating profit decreased by 41.0% primarily due to higher impairment losses compared to the prior year. Impairment losses totalling £6,150 million were recorded relating to our businesses in Spain (£2,950 million), Italy (£1,050 million), Ireland (£1,000 million), Greece (£800 million) and Portugal (£350 million) primarily resulting from increased discount rates as a result of increases in government bond rates together with lower cash flows within business plans, reflecting weaker country-level macroeconomic environments. The impairment loss in the 2010 financial year was £2,100 million. Profit for the year decreased by 8.7%.

Financials Additional information

46 Operating results (continued)
Vodafone Group Plc Annual Report 2012

Net investment income/(financing costs)
2011 £m 2010 £m

Investment income Financing costs Net investment income/(financing costs) Analysed as: Net financing costs before income from investments Potential interest charges arising on settlement of outstanding tax issues1 Income from investments Foreign exchange2 Equity put rights and similar arrangements3 Interest related to the settlement of tax cases4 Disposal of SoftBank Mobile Corp. Limited financial instruments

1,309 (429) 880

716 (1,512) (796)

The adjusted effective tax rate for the year ended 31 March 2011 was 24.5%. This is in line with the adjusted effective tax rate for the year ended 31 March 2010 of 24.0%. Tax on adjustments to derive adjusted profit before tax includes tax payable on the gain on the disposal of the Group’s 3.2% interest in China Mobile Limited. Income tax expense includes a credit of £929 million arising as a result of the settlement of a tax case in July 2010. Earnings per share Adjusted earnings per share increased by 4.0% to 16.75 pence for the year ended 31 March 2011 due to growth in adjusted earnings and a reduction in shares arising from the Group’s share buyback programme. Basic earnings per share decreased to 15.2 pence primarily due to the £6,150 million of impairment charges partially offset by a gain on disposal of the Group’s 3.2% interest in China Mobile Limited and the settlement of a tax case.
2011 £m 2010 £m

(852) (46) 83 256 95 872 472 880

(1,024) (23) 145 (1) (94) 201 – (796)

Profit attributable to equity shareholders Pre-tax adjustments: Impairment loss1 Other income and expense2 Non-operating income and expense3 Investment income and financing costs4 Taxation1 Adjusted profit attributable to equity shareholders Weighted average number of shares outstanding Basic Diluted

7,968 6,150 72 (3,022) (1,695) 1,505 (697) 8,776
Million

8,645 2,100 (114) 10 (106) 1,890 (2,064) 8,471
Million

Notes: 1 Excluding interest credits related to a tax case settlement. 2 Comprises foreign exchange rate differences reflected in the income statement in relation to certain intercompany balances and the foreign exchange rate differences on financial instruments received as consideration on the disposal of Vodafone Japan to SoftBank in April 2006. 3 Includes foreign exchange rate movements, accretion expense and fair value charges. 4 The £872 million in the year ended 31 March 2011 relates to the settlement of a tax case and the £201 million in the year ended 31 March 2010 relates to the settlement of the German tax loss claim.

Net financing costs before income from investments decreased from £1,024 million to £852 million primarily due to a reduction in net debt, partially offset by an increase in average interest rates for debt denominated in US dollars. In addition, £138 million of interest was capitalised compared to £1 million in the prior year. At 31 March 2011 the provision for potential interest charges arising on settlement of outstanding tax issues was £398 million (31 March 2010: £1,312 million), with the reduction primarily reflecting the settlement of a tax case. Taxation
2011 £m 2010 £m

52,408 52,748

52,595 52,849

Income tax expense Tax on adjustments to derive adjusted profit before tax Tax benefit related to settlement of tax cases1 Adjusted income tax expense Share of associates’ tax Adjusted income tax expense for purposes of calculating adjusted tax rate Profit before tax Adjustments to derive adjusted profit before tax2 Adjusted profit before tax Add: Share of associates’ tax and non-controlling interest Adjusted profit before tax for the purpose of calculating adjusted effective tax rate Adjusted effective tax rate

1,628 (232) 929 2,325 519 2,844 9,498 1,505 11,003 604 11,607 24.5%

56 (39) 2,103 2,120 572 2,692 8,674 1,890 10,564 652 11,216 24.0%

Notes: 1 Taxation for the 2011 financial year included £929 million credit in respect of a tax settlement and a £208 million charge in respect of the disposal of the Group’s interest in China Mobile Limited. The 2010 financial year included £2,103 million arising from the German tax authorities’ decision that €15 billion of losses booked by a German subsidiary in 2001 were tax deductible. The impairment charges of £6,150 million and £2,100 million in the 2011 and 2010 financial years respectively did not result in any tax consequences. 2 The year ended 31 March 2011 includes £56 million representing the net loss on disposal of certain Alltel investments by Verizon Wireless. This is included within the line item ‘Share of results in associates’ in the consolidated income statement. 3 The year ended 31 March 2011 includes £3,019 million representing the profit arising on the sale of the Group’s 3.2% interest in China Mobile Limited. 4 See notes 2, 3, and 4 in “Net investment income/(financing costs)”.

Notes: 1 The £929 million in the year ended 31 March 2011 relates to the settlement of a tax case and the £2,103 million in the year ended 31 March 2010 relates to the settlement of the German tax loss claim. 2 See “Earnings per share”.

Vodafone Group Plc Annual Report 2012

47

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

Business review

Year ended 31 March 2011 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin Year ended 31 March 2010 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin

7,900 7,471 2,952 1,548 37.4% 8,008 7,722 3,122 1,695 39.0%

5,722 5,432 2,643 1,903 46.2% 6,027 5,780 2,843 2,107 47.2%

5,133 4,735 1,562 915 30.4% 5,713 5,298 1,956 1,310 34.2%

5,271 4,931 1,233 348 23.4% 5,025 4,711 1,141 155 22.7%

8,253 7,787 2,433 1,012 29.5% 8,357 7,943 2,582 1,084 30.9%

(264) (259) – –

32,015 30,097 10,823 5,726 33.8% 32,833 31,159 11,644 6,351 35.5%

(2.5) (3.4) (7.1) (9.8)

0.6 (0.4) (3.7) (6.1)

(297) (295) – –

Performance

Revenue declined by 2.5% reflecting a 3.2 percentage point impact from unfavourable foreign exchange rate movements. On an organic basis service revenue declined by 0.4%* reflecting reductions in most markets offset by growth in Germany, the UK, the Netherlands and Turkey. The decline was primarily driven by lower voice revenue resulting from continued market and regulatory pressure on pricing and the challenging economic climate, partially offset by growth in data and fixed line revenue. EBITDA decreased by 7.1% including a 3.5 percentage point impact from unfavourable exchange rate movements. On an organic basis EBITDA decreased by 3.7%*, with a 1.7 percentage point decline in EBITDA margin resulting from a reduction in service revenue in most markets and higher customer investment, partially offset by operating cost savings.
Organic change % M&A activity pps Foreign exchange pps Reported change %

financial year despite an MTR cut effective from 1 December 2010. Enterprise revenue grew by 3.6%* driven by strong customer and data revenue growth. EBITDA declined by 1.5%*, with a 1.6 percentage point reduction in the EBITDA margin. This decline was driven by increased customer acquisition and retention, contributed to by the launch of the iPhone in the third quarter, partially offset by operating cost efficiencies. During the 2011 financial year we acquired LTE spectrum in Germany and launched LTE services towards the end of the year, initially targeting rural areas underserved by fixed broadband. Italy Service revenue declined by 2.1%* primarily driven by the challenging economic and competitive environment, the impact of MTR cuts and customer tariff optimisation. The average contract customer base grew by 12.6% enabling the partial offset of these pressures. Data revenue growth remained strong at 21.5%* driven by the high level of customers migrating to smartphones and taking advantage of data plans. There was continued investment to improve quality and coverage of the network. Fixed line revenue continued to grow with the broadband customer base reaching 1.7 million at 31 March 2011 on a 100% basis. EBITDA decreased by 3.1%*, with a fall in the EBITDA margin of 1.0 percentage point, as a result of the decline in service revenue and higher investment in acquisition and retention costs partially offset by a reduction in operating expenses. Spain Service revenue declined by 6.9%* impacted by continued intense competition, general economic weakness and the penetration of lower priced tariffs into the customer base. New integrated plans were introduced in the third quarter in response to the demand for combined voice and data tariffs driven by the increase in smartphones. Data revenue grew by 14.8%* driven by mobile broadband and mobile internet. One-off items contributed to a 1.8* percentage point improvement to service revenue growth for the fourth quarter of the 2011 financial year. EBITDA declined 16.8%*, with a 3.8 percentage point fall in the EBITDA margin, due to lower service revenue and proportionately higher acquisition and retention costs, partially offset by a reduction in operating expenses. UK Service revenue increased by 4.7%* driven by data revenue growth due to increasing penetration of smartphones and mobile internet bundles and strong net contract customer additions, which more than offset continued competitive pressures and weaker prepaid revenue. The MTR cuts announced in March 2011 were expected to have a significant negative impact on revenue growth during the 2012 financial year.

Governance

Revenue – Europe Service revenue Germany Italy Spain UK Other Europe Europe EBITDA Germany Italy Spain UK Other Europe Europe Adjusted operating profit Germany Italy Spain UK Other Europe Europe

0.6 0.8 (2.1) (6.9) 4.7 0.5 (0.4) (1.5) (3.1) (16.8) 8.0 (2.4) (3.7) (4.9) (5.9) (27.3) 125.1 (2.0) (6.1)

0.1 – – – – 0.5 0.1 – – – – 0.2 0.1 – – – – 0.3 0.1

(3.2) (4.1) (3.9) (3.7) – (3.0) (3.1) (3.9) (3.9) (3.3) – (3.6) (3.5) (3.8) (3.8) (2.9) – (4.9) (3.8)

(2.5) (3.3) (6.0) (10.6) 4.7 (2.0) (3.4) (5.4) (7.0) (20.1) 8.0 (5.8) (7.1) (8.7) (9.7) (30.2) 125.1 (6.6) (9.8)

Financials Additional information

Germany Service revenue increased by 0.8%* driven by strong data and messaging revenue growth. Data revenue grew by 27.9%* as a result of increased penetration of smartphones and Superflat Internet tariffs. Mobile revenue remained stable in the fourth quarter of the 2011

48 Operating results (continued)
Vodafone Group Plc Annual Report 2012

EBITDA increased by 8.0%* with the EBITDA margin increasing by 0.7 percentage points, reflecting higher service revenue partially offset by higher customer acquisition and retention costs. Other Europe Service revenue increased by 0.5%* with growth in Turkey and the Netherlands being partially offset by declines in other markets due to the challenging economic environment and intense competitive factors. In Turkey service revenue grew by 28.9%* driven by strong

growth in both data and voice revenue, despite a 52% cut in MTRs effective from 1 April 2010. In Greece service revenue declined by 19.4%* with intense competition driving a reduction in prepaid revenue and economic factors leading to customer tariff optimisation. EBITDA declined by 2.4%*, with declines in all markets except Turkey and the Netherlands, due primarily to lower service revenue and higher acquisition and retention costs partially offset by operating cost efficiencies.

Africa, Middle East and Asia Pacific
India £m Vodacom £m Other £m Eliminations £m Africa, Middle East and Asia Pacific £m % change £m Organic1

Year ended 31 March 2011 Revenue Service revenue EBITDA Adjusted operating profit EBITDA margin Year ended 31 March 2010 Revenue Service revenue EBITDA Adjusted operating (loss)/profit EBITDA margin

3,855 3,804 985 15 25.6% 3,114 3,069 807 (37) 25.9%

5,479 4,839 1,844 827 33.7% 4,450 3,954 1,528 520 34.3%

3,971 3,650 1,170 430 29.5% 3,526 3,224 977 335 27.7%

(1) (1) – –

13,304 12,292 3,999 1,272 30.1% 11,089 10,246 3,312 818 29.9%

20.0 20.0 20.7 55.5

9.5 9.5 7.5 8.6

(1) (1) – –

Note: 1 Organic growth includes Vodacom at the 2011 level of ownership and excludes Australia following the merger with Hutchison 3G Australia on 9 June 2009.

Revenue grew by 20.0% with an 8.5 percentage point benefit from foreign exchange rate movements and the full year impact of the consolidation of Vodacom results from 18 May 2009 partially offset by the impact of the creation of the Vodafone Hutchison Australia (‘VHA’) joint venture on 9 June 2009. On an organic basis service revenue grew by 9.5%* despite the impact of MTR reductions and difficult economic environments. The growth was driven by a strong performance in India and continued growth from Vodacom and the rest of the region, other than Egypt where performance was impacted by the socio-political unrest during the fourth quarter of the 2011 financial year. EBITDA grew by 20.8% with foreign exchange rate movements contributing 8.0 percentage points of growth. On an organic basis EBITDA grew by 7.5%* driven primarily by growth in India, together with improvements in Vodacom, Ghana, Qatar and New Zealand, partially offset by a decline in Egypt following pricing pressure and socio-political unrest.

Organic change %

M&A activity pps

Foreign exchange pps

Reported change %

Revenue – Africa, Middle East and Asia Pacific Service revenue India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific EBITDA India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Adjusted operating profit India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific

9.5 16.2 5.8 7.2 9.5 15.1 4.9 5.1 7.5 134.0 5.7 2.2 8.6

2.0 – 6.7 (0.9) 2.2 – 4.9 10.6 5.3 – 38.2 29.2 39.9

8.5 7.7 9.9 6.9 8.3 7.0 10.9 4.1 8.0 6.5 15.1 (3.0) 7.0

20.0 23.9 22.4 13.2 20.0 22.1 20.7 19.8 20.8 140.5 59.0 28.4 55.5

Vodafone Group Plc Annual Report 2012

49

India Service revenue grew by 16.2%* including a 1.7* percentage point benefit from Indus Towers, the Group’s network sharing joint venture. Growth was driven by a 39.0% increase in the average mobile customer base and stable usage per customer trends, partially offset by a fall in the effective rate per minute due to an increase in the penetration of lower priced tariffs into the customer base and strong competition in the market. February 2011 saw the launch of commercial 3G services following the purchase of 3G spectrum in May 2010 and subsequent network build. By 31 March 2011 1.5 million customers had activated their 3G access. EBITDA grew by 15.1%* driven by the increase in the customer base and economies of scale which absorbed pricing and cost pressures. Vodacom Service revenue grew by 5.8%* driven by South Africa where growth in data revenue of 35.9%* 1 offset a decline in voice revenue caused by MTR cuts effective from 1 March 2010 and 1 March 2011. increase in data usage due to strong growth in mobile connect cards and smartphones. In addition, successful commercial activity, particularly in off-peak periods, drove higher voice usage during the 2011 financial year which partially offset the impact of MTR cuts. Net customer additions returned to pre-registration levels for the first time in the third quarter of the 2011 financial year, with the trend continuing during the fourth quarter of the 2011 financial year with net additions of 1.2 million. In Vodacom’s operations outside South Africa service revenue growth continued with strong performances from Tanzania and Mozambique. Trading conditions remain challenging in the Democratic Republic of Congo and the Gateway operations. EBITDA grew by 4.9%* driven by the increase in service revenue, strong handset sales and lower interconnection costs, partially offset by higher operating expenses. On 1 April 2011 Vodacom refreshed its branding to more closely align with that of the Group. Other Africa, Middle East and Asia Pacific Service revenue grew by 7.2%* with growth across all markets except Egypt. In Qatar the customer base reached 757,000 by 31 March 2011, with 45% of the population actively using Vodafone services. The decline in Egypt service revenue was driven by a combination of MTR reductions, competitive pressure on pricing and socio-political unrest during the fourth quarter of the 2011 financial year, offset in part by strong customer and data revenue growth during the year. In Ghana service revenue growth of 21.0%* was supported by competitive tariffs and improved brand awareness. VHA integration remained on track and a number of important initiatives were completed during the 2011 financial year to begin realising the benefits of the merger. Contact centre operations were consolidated into two major centres in Hobart and Mumbai India, substantial progress was made in the consolidation of the retail footprint, and a major refit of retail stores was underway. VHA appointed new suppliers for network managed services, core, transmission and IT managed services. EBITDA increased by 5.1%* driven by growth in Ghana, New Zealand and Qatar partially offset by a decline in Egypt resulting primarily from the lower effective price per minute but also impacted by the socio-political unrest during the fourth quarter of the 2011 financial year.
Note: 1 Data revenue in South Africa grew by 41.8%*. Excluding the impact of reclassifications between messaging and data revenue during the year, data revenue grew by 35.9%*.

Non-Controlled Interests
Verizon Wireless2 3 4
2011 £m 2010 £m % change £ Organic

Business review

Service revenue Revenue EBITDA Interest Tax3 Group’s share of result in Verizon Wireless

17,238 18,711 7,313 (261) (235) 4,569

15,898 17,222 6,689 (298) (205) 4,112

8.4 8.6 9.3 (12.4) 14.6 11.1

5.8 6.0 6.7

8.5 Performance

In the United States Verizon Wireless reported 2.6 million net mobile customer additions bringing its mobile customer base to 88.4 million at 31 March 2011, a 3.1% increase. Customer growth improved in the fourth quarter of the 2011 financial year following the launch of the iPhone 4 on the Verizon Wireless network in February 2011. Service revenue growth of 5.8%* was driven by the expanding customer base and robust data revenue primarily derived from growth in the penetration of smartphones. The EBITDA margin remained strong despite the competitive challenges and economic environment. Efficiencies in operating expenses and lower customer acquisition costs resulting from lower volumes were partly offset by a higher level of customer retention costs reflecting the increased demand for smartphones. As part of the regulatory approval for the Alltel acquisition, Verizon Wireless was required to divest overlapping properties in 105 markets. On 26 April 2010 Verizon Wireless completed the sale of network and licence assets in 26 markets, encompassing 0.9 million customers, to Atlantic Tele-Network for US$0.2 billion. On 22 June 2010 Verizon Wireless completed the sale of network assets and mobile licences in the remaining 79 markets to AT&T Mobility for US$2.4 billion. As a result the Verizon Wireless customer base reduced by approximately 2.1 million net customers on a 100% basis, partially offset by certain adjustments in relation to the Alltel acquisition. On 23 August 2010 Verizon Wireless acquired a spectrum licence, network assets and related customers in southwest Mississippi and in Louisiana, formerly owned by Centennial Communications Corporation, from AT&T Inc. for cash consideration of US$0.2 billion. This acquisition was made to enhance Verizon Wireless’ network coverage in these two locations. Verizon Wireless’ net debt at 31 March 2011 totalled US$9.8 billion5 (31 March 2010: US$22.6 billion5).
Notes: 2 All amounts represent the Group’s share based on its 45% equity interest, unless otherwise stated. 3 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. 4 Organic growth rates include the impact of a non-cash revenue adjustment which was recorded by Verizon Wireless to defer previously recognised data revenue that will be earned and recognised in future periods. Excluding this the equivalent organic growth rates for service revenue, revenue, EBITDA and the Group’s share of result in Verizon Wireless would have been 6.4%*, 6.6%*, 8.2%* and 10.8%* respectively. 5 Net debt excludes pending credit card receipts. Comparatives are presented on a comparable basis.

In South Africa data revenue growth was driven by a 48.9%*

Governance Financials Additional information

Vodafone Group Plc Annual Report 2012

50
Assumptions
Guidance for the 2013 financial year and the medium term is based on our current assessment of the global macroeconomic outlook and assumes foreign exchange rates of £1:€1.23 and £1:US$1.62. It excludes the impact of licence and spectrum purchases, income dividends from Verizon Wireless, material one-off tax-related payments, restructuring costs and any fundamental structural change to the eurozone. It also assumes no material change to the current structure of the Group. With respect to the 7% per annum dividend per share growth target, as the Group’s free cash flow is predominantly generated by companies operating within the eurozone, we have assumed that the euro to sterling exchange rate remains within 5% of the above guidance foreign exchange rate. Actual foreign exchange rates may vary from the foreign exchange rate assumptions used. A 1% change in the euro to sterling exchange rate would impact adjusted operating profit by £40 million and free cash flow by approximately £30 million and a 1% change in the dollar to sterling exchange rate would impact adjusted operating profit by approximately £50 million.

Guidance
Performance against 2012 financial year guidance
Based on guidance foreign exchange rates, our adjusted operating profit for the 2012 financial year was £11.8 billion, at the top end of the £11.0 billion to £11.8 billion range set in May 2011. On the same basis, our free cash flow was £6.2 billion, in the middle of the £6.0 billion to £6.5 billion range.

2013 financial year guidance
Adjusted operating profit £bn Free cash flow £bn

2012 reported performance SFR/Polkomtel contribution and restructuring cost Foreign exchange1 2012 financial rebased reported 2013 financial year guidance

11.5 – (0.4) 11.1 11.1 – 11.9

6.1 (0.2) (0.3) 5.6 5.3 – 5.8

Note: 1 Impact of rebasing the 2012 reported performance using the 2013 financial year guidance foreign exchange rates of £1:€1.23 and £1:$US1.62.

Guidance for the 2013 financial year is based on our current assessment of the global macroeconomic outlook and assumes foreign exchange rates of £1:€1.23 and £1: US$1.62. In addition, we will no longer receive a dividend from SFR after the sale of our stake during the 2012 financial year. We have restated the 2012 financial year adjusted operating profit and free cash flow for both these changes in the table above. Therefore, on an underlying basis, we expect growth in adjusted operating profit, and stability in free cash flow, compared with the 2012 financial year. Adjusted operating profit is expected to be in the range of £11.1 billion to £11.9 billion and free cash flow in the range of £5.3 billion to £5.8 billion, excluding any income dividends received from Verizon Wireless. We expect the Group EBITDA margin decline to continue its improving trend, supported by continued strong growth and operating leverage in our AMAP region, and improving control of commercial costs in Europe. We expect capital expenditure to remain broadly steady on a constant currency basis. In November 2010 we gave annual guidance ranges for organic service revenue growth and free cash flow which were based on the prevailing macroeconomic environment, regulatory framework and foreign exchange rates. Given larger MTR reductions than previously envisaged, we now expect organic service revenue growth in the 2013 financial year to be slightly below our previous medium term guidance range. We will provide an update on revenue prospects for the 2014 financial year when we publish our results for the year ending 31 March 2013. We expect the Group EBITDA margin to stabilise by March 2014. Our medium term free cash flow guidance is £5.5 billion to £6.5 billion per annum to March 2014. This was based on the prevailing foreign exchange rates in November 2010, including an exchange rate of £1: €1.15. Based on the £1: €1.23 foreign exchange rate used for the 2013 financial guidance, the equivalent range is £5.2 billion to £6.2 billion. This cash generation underpins the three year 7% per annum dividend per share growth target issued in May 2010. We continue to expect that total ordinary dividends per share will be no less than 10.18 pence for the 2013 financial year.

Vodafone Group Plc Annual Report 2012

51

Principal risk factors and uncertainties
1. Regulatory decisions and changes in the regulatory environment could adversely affect our business. Risk: We have ventures in both emerging and mature markets, spanning a broad geographical area including Europe, Africa, Middle East, Asia Pacific and the United States. We need to comply with an extensive range of requirements that regulate and supervise the licensing, construction and operation of our telecommunications networks and services. Pressure on political and regulatory institutions both to deliver direct consumer benefit and protect consumers interests, particularly in recessionary periods, can lead to adverse impacts on our business. Financial pressures on smaller competitors can drive them to call for regulators to protect them. Increased financial pressures on governments may lead them to target foreign investors for further taxes or licence fees. Mitigation: We monitor political developments in our existing and potential markets closely, identifying risks in our current and proposed commercial propositions. Regular reports are made to our Executive Committee on current political and regulatory risks. These risks are considered in our business planning process, including the importance of competitive commercial pricing and appropriate product strategies. Authoritative and timely intervention is made at both national and international level in respect of legislative, fiscal and regulatory proposals which we feel are not in the interests of the Group. We have regular dialogue with trade groups that represent network operators and other industry bodies to understand underlying political pressures. 2. We could suffer loss of consumer confidence and/or legal action due to a failure to protect our customer information. Risk: Mobile networks carry and store large volumes of confidential personal and business voice traffic and data. We host increasing quantities and types of customer data in both enterprise and consumer segments. We need to ensure our service environments are sufficiently secure to protect us from loss or corruption of customer information. Failure to adequately protect customer information could have a material adverse effect on our reputation and may lead to legal action against the Group. Mitigation: Both the hardware and software applications which hold or transmit confidential personal and business voice and data traffic include security features. Security related reviews are conducted according to our policies and security standards. Security governance and compliance is managed and monitored through software tools that are deployed to all local markets and selected partner markets. Our data centres are managed to international information security standards. Third party data security reviews are conducted jointly with our technology security and corporate security functions. 3. Our business could be adversely affected by a failure or significant interruption to telecommunications networks. Risk: We are dependent on the continued operation of telecommunications networks. As the importance of mobile communication in everyday life, as well as during times of crisis, increases, organisations and individuals look to us to maintain service. Major failures in the network may result in service being interrupted resulting in serious damage to our reputation and consequential customer and revenue loss. Mitigation: Specific back-up and resilience requirements are built into our networks. We monitor our ability to replace strategic equipment quickly in event of failure, and for high risk components, we maintain dedicated back-up equipment ready for use. Dedicated access network equipment is installed on trucks ready to be moved on site if required. Network contingency plans are linked with our overall business continuity and crisis management plans. A crisis management team and escalation processes are in place both nationally and internationally, and crisis simulations are conducted annually. 4. Technological advances in handsets and use of alternative communication services may result in less demand for our traditional service offerings. Risk: Strategic handset and technology suppliers are developing mobile content and services. Advancements in smartphone branding and technology places more focus on devices rather than the underlying services provided by mobile operators. The development of applications which make use of the internet as a substitute for some of our more traditional services, such as messaging and voice, could erode revenue. Reduced demand for our core services of voice, messaging and data and the development of services by handset suppliers could significantly impact our future profitability. Mitigation: We have developed strategies which strengthen our relationships with customers, including the development of our own branded products, offering a broad selection of handsets and devices from a variety of manufacturers and providing our own alternatives to our more traditional services. We have accelerated the introduction of integrated voice, messaging and data tariffs to minimise customers reducing their out-of-bundle usage through substitution. 5. Increased competition may reduce our market share and profitability. Risk: We face intensifying competition; in particular competing with established competitors in mature markets and competing with new entrants in emerging markets, where all operators are looking to secure a share of the potential customer base. 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 average revenue per customer, as customers may choose to receive telecommunications services or other competing services from alternate providers. Competition can also lead to an increase in customer acquisition and retention costs. The focus of competition in many of our markets has shifted from acquiring new customers to retaining existing customers, as the market for mobile telecommunications has become increasingly mature. Mitigation: We will continue to promote our differentiated propositions by focusing on our points of strength such as network quality, capacity and coverage, quality of customer service and the value of our products and services. We are enhancing distribution channels to get closer to customers and using targeted promotions where appropriate to attract and retain specific customers. We closely monitor and model competitor behaviour, network builds and product offerings to understand future intentions to be able to react in a timely manner. 6. Our business may be impaired by actual or perceived health risks associated with the transmission of radio waves from mobile telephones, transmitters and associated equipment. Risk: Concerns have been expressed that the electromagnetic signals emitted by mobile telephone handsets and base stations may pose health risks. We are not aware that such health risks have been substantiated, however, in the event of a major scientific finding supporting this view this might result in prohibitive legislation being introduced by governments (or the European Union), a major reduction in mobile phone usage (especially by children), a requirement to move base station sites, significant difficulty renewing or acquiring site leases and/or major litigation. An inadequate response to electromagnetic fields (‘EMF’) issues may result in loss of confidence in the industry and Vodafone. Mitigation: We have a global health and safety policy that includes standards for radio frequency fields that are mandated in all our operating companies. We have a Group EMF board that manages potential risks through cross sector initiatives and who oversee a coordinated global programme to address and reduce public concern. We have close engagement with EU institutions, in coordination with an international policy team in Brussels, to ensure early warning and advocacy related to possible precautionary legislation. We are engaged with relevant bodies to ensure that the scientific research agenda set by the World Health Organization is fully funded and executed as fast as reasonably possible. Business review Performance Governance Financials Additional information

52 Principal risk factors and uncertainties (continued)
Vodafone Group Plc Annual Report 2012

7. One or more countries may exit the eurozone. Risk: In light of recent economic conditions in Europe, there is a possibility of one or more countries exiting the eurozone, causing currency devaluation in those countries and possibly leading to a reduction in our revenue and impairment of our financial and non-financial assets. This may also lead to adverse economic impacts elsewhere. Mitigation: We are closely monitoring the eurozone situation. Executive Committee briefings have been provided with specific actions identified to reduce the impact of the risk. We have developed a detailed business continuity plan in the event of a country leaving the eurozone, which could lead to a banking system freeze and a need to transition to a “cash based” operating system for a number of months. Given the significance of the Group’s operations in Europe it was felt appropriate to outline in more detail the risks, and the action taken to reduce these risks, in the annual report, as set out on page 53. 8. We may be unable to obtain additional/renew sufficient spectrum with an adequate return. Risk: The spectrum we use for the delivery of our services is regulated in each of our markets. The regulators supervise the allocation of frequency spectrum and 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, including the implementation of unsustainable cost and revenue models, could adversely affect our future operations in these geographic areas. Our mobile data strategy and roll out of 4G/LTE services is dependent upon us being able to renew and obtain additional spectrum licences. Mitigation: Local executives and regulatory staff manage negotiations with local regulators on renewal of spectrum licences. In the event of a failure to renew, we could migrate traffic onto other frequencies. To date, all licences have been renewed but it is possible that political or competitor influences may create significant complications or uncertainty in some markets. 9. We may not satisfactorily resolve major tax disputes. Risk: We operate in many jurisdictions around the world and from time to time have disputes on the amount of tax due. In particular, in spite of a recent positive India Supreme Court decision relating to an ongoing tax case in India, as set out on pages 138 and 139, the Indian government is proposing retroactive tax legislation which would in effect overturn the court’s decision. Such or similar types of action in other jurisdictions may expose us to significant additional tax liabilities which would affect the results of the business. Mitigation: We maintain constructive but robust engagement with the tax authorities and relevant government representatives, as well as active engagement with a wide range of international companies and business organisations with similar issues. Where appropriate we engage advisors and legal counsel to obtain opinions on tax legislation and principles.

10. A malicious attack on our network may be successful and disrupt our services or compromise our data. Risk: There is a risk that an attack by a malicious individual or group could be successful on our networks. This could lead to a loss of confidential customer data or availability of critical systems. Our network is also susceptible to interruption due to a physical attack and theft of our network components as the value and market for network components increases (for example copper, batteries, generators and fuel). Mitigation: Our critical infrastructure has been designed to prevent unauthorised access and reduce the likelihood and impact of a successful attack. Business continuity and disaster recovery plans are in place to cover residual risk that cannot be mitigated. We also manage the risk using our global security operations centre that provides 24/7 monitoring of our network in many countries. 11. Changes in assumptions underlying the carrying value of certain Group assets could result in impairment. Risk: Due to the substantial carrying value of goodwill under International Financial Reporting Standards (‘IFRS’), revisions to the assumptions used in assessing its recoverability, including discount rates, estimated future cash flows or anticipated changes in operations, could lead to the impairment 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 dividend distributions to our shareholders or repurchase our shares. Mitigation: We review the carrying value of the Group’s goodwill at least annually, or more frequently where the circumstances require, to assess whether carrying values can be supported by the net present value of future cash flows derived from such assets. This review considers the continued appropriateness of the assumptions used in assessing for impairment, including an assessment of discount rates and long-term growth rates, future technological developments, and the timing and quantum of future capital expenditure. Other factors which may affect revenue and profitability (for example intensifying competition, pricing pressures, regulatory changes and the timing for introducing new products or services) are also considered. 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. Further details are provided in “Critical accounting estimates” on page 91.

Vodafone Group Plc Annual Report 2012

53

Eurozone risk
Country and currency risk Recent conditions in the eurozone have resulted in a higher risk of disruption and business risk from high currency volatility and/or the potential of an exit of one or more countries from the euro. As part of our response to these conditions we have reviewed our existing processes and policies, and in places, evolved them with the aim of both minimising the Group’s economic exposure and to preserve our ability to operate in a range of potential conditions that may exist in the event of one or more of these future events. Our ability to manage these risks needs to take appropriate account of our needs to deliver a high quality service to our customers, meet licence obligations and the significant capital investments we may have made and may need to continue to make in the markets most impacted. Currency related risks While our share price is denominated in sterling, the majority of our financial results are generated in other currencies. As a result the Group’s operating profit is sensitive to either a relative strengthening or weakening of the major currencies in which it transacts. The “Operating results” section of the annual report on pages 40 to 49 sets out a discussion and analysis of the relative contributions of the Group’s Europe and AMAP regions and the major geographical markets in each, to the Group’s service revenue and EBITDA performance. Our markets in Italy, Ireland, Greece, Portugal and Spain have been most directly impacted by the current market conditions and in order of contribution, represent 17% (Italy), 8% (Spain), 3% (Portugal) and 3% (Ireland and Greece combined) of the Group’s EBITDA. An average 3% decline in the sterling equivalent of these combined geographical markets due to currency revaluation would reduce Group EBITDA by £0.1 billion. The Group’s foreign currency earnings are diversified through its 45% equity interest in Verizon Wireless, which operates in the United States and generates its earnings in US dollars. Verizon Wireless, which is equity accounted, contributed 42% of the Group’s adjusted operating profit for the year ended 31 March 2012. The Group employs a number of mechanisms to manage elements of exchange rate risk at a transaction, translation and economic level. At the transaction level our policies require foreign exchange risks on transactions denominated in other currencies above certain de minimis levels to be hedged. Further, since the Company’s sterling share price represents the value of its future multi-currency cash flows, principally in euro, US dollars and sterling, we aim to align the currency of our debt and interest charges in proportion to our expected future principal multi-currency cash flows, thereby providing an economic hedge in terms of reduced volatility in the sterling equivalent value of the Group and a partial hedge against income statement translation exposure, as interest costs will be denominated in foreign currencies. In the event of a country’s exit from the eurozone, this may necessitate changes in one or more of our entities’ functional currency and potentially higher volatility of those entities’ trading results when translated into sterling, potentially adding further currency risk. A summary of this sensitivity of our operating results and our foreign exchange risk management policies is set out within “Financial risk management – Market risk – Foreign exchange management” within note 21 to the consolidated financial statements. Operational planning We have worked to develop operational plans to use as a basis for continuity planning across the Group in the event of significant exchange rate volatility and/or the withdrawal of one, or a small number of countries, from the euro. We have categorised “at risk” countries into three categories based on risk profile and identified three broad areas of operational risks for the Group where work has been focused, being:

Financial/investment risk: Our activities are focused on counterparty risk management and in particular the protection and availability of cash deposits and investments. Exposures in relation to liquid Group investments have been reviewed and actions have been taken to reduce counterparty limits with certain financial institutions and to convert a significant proportion of euro denominated holdings and deposits into sterling and US dollar investments. Existing Group policy requires cash sweep arrangements, to ensure no operating company has more than €5 million on deposit on any one day. Further, the Group has had in place for a number of years collateral support agreements with a significant number of its counterparties to pass collateral to the Group under certain circumstances. The Group has a net £980 million of collateral assets in its statement of financial position at 31 March 2012. Further information is provided within “Financial risk management – Credit risk” within note 21 to the consolidated financial statements. Trading risks: We have investigated the structure of existing procurement contracts and we have started the process of amending certain contractual clauses to place the Group in a better position in the event of the exit of a country from the eurozone. Business continuity risks: We have identified a number of key business continuity priorities which are focused on planning to allow migration to a more cash-based business model in the event banking systems are frozen, developing dual currency capability in contract customer billing systems or ensuring the ability to move these contract customers to prepaid methods of billing, and the consequential impacts to tariff structures. We have also put in place contingency plans with key suppliers that would assist us to continue to support our network infrastructure, retail operations and employees. The Group continues to maintain appropriate levels of cash and short-term investments in many currencies and, with a carefully controlled group of counterparties, to minimise the risks to the ongoing access to that liquidity and therefore to the ability of the Group to settle debts as they become due. Further information is provided within “Financial risk management – Liquidity risk” within note 21 to the consolidated financial statements. Risk of change in carrying amount of assets and liabilities The main potential short-term financial statement impact of the current economic uncertainties is the potential impairment of non-financial and financial assets. The Group has significant amounts of goodwill, other intangible assets and plant, property and equipment allocated to, or held by, companies operating in the eurozone. We have performed impairment testing for each country in Europe as at 31 March 2012 and identified aggregate impairment charges of £4.0 billion in relation to Vodafone Italy, Spain, Greece and Portugal. Further detail on this exercise together with the sensitivity of the results of this assessment to reasonably possible adverse assumptions is set out in note 10 to the consolidated financial statements. Our operating companies in Italy, Ireland, Greece, Portugal and Spain have billed and unbilled trade receivables totalling £2.0 billion. IFRS contains specific requirements for impairment assessments of financial assets. We have a range of credit exposures and provisions for doubtful debts that are generally made by reference to consistently applied methodologies overlaid with judgements determined on a case-bycase basis reflecting the specific facts and circumstances of the receivable. Detailed disclosures made in relation to provisions against loans and receivables as well as disclosures about any loans and receivables that are past due at the end of the period, concentrations of risk and credit risk more generally as set out in “Financial risk management – Credit risk” within note 21 to the consolidated financial statements.

Business review Performance Governance Financials Additional information

54 Financial position and resources
Vodafone Group Plc Annual Report 2012

Consolidated statement of financial position
2012 £m 2011 £m

Non-current assets Intangible assets Property, plant and equipment Investments in associates Other non-current assets Current assets Total assets Total equity shareholders’ funds Total non-controlling interests Total equity Liabilities Borrowings Long-term Short-term Taxation liabilities Deferred tax liabilities Current taxation liabilities Other non-current liabilities Other current liabilities Total liabilities Total equity and liabilities

59,514 18,655 35,108 6,274 119,551 20,025 139,576 76,935 1,267 78,202

68,558 20,181 38,105 7,373 134,217 17,003 151,220 87,555 6 87,561

than offset by equity dividends of £6.7 billion, other comprehensive loss of £4.7 billion, share buyback of £4.7 billion and £1.9 billion in relation to the acquisition of non-controlling interests, primarily in India. Total non-controlling interests have increased by £1.3 billion primarily as a result of the exercise of put options over non-controlling interests during the year. Borrowings Long-term borrowings and short-term borrowings decreased to £34.6 billion at 31 March 2012 from £38.3 billion at 31 March 2011 mainly as a result of foreign exchange rate movements, bond repayments during the year and settlement of certain put options held by the Essar Group. Taxation liabilities Current tax liabilities decreased to £2.1 billion at 31 March 2012 from £2.3 billion at 31 March 2011 mainly as a result of the resolution and payment of longstanding tax disputes. Other current liabilities Other current liabilities increased to £15.9 billion at 31 March 2012 from £15.3 billion at 31 March 2011. Trade payables at 31 March 2012 were equivalent to 43 days (2011: 37 days) outstanding, calculated by reference to the amount owed to suppliers as a proportion of the amounts invoiced by suppliers during the year. It is our policy to agree terms of transactions, including payment terms, with suppliers and it is our normal practice that payment is made accordingly.

28,362 6,258 6,597 2,148 2,140 15,869 61,374 139,576

28,375 9,906 6,486 2,262 1,373 15,257 63,659 151,220

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 Contractual obligations1 Total 5 years

Assets Intangible assets At 31 March 2012 our intangible assets were £59.5 billion (2011: £68.6 billion) with goodwill comprising the largest element at £38.4 billion (2011: £45.2 billion). The decrease primarily resulted from impairment losses of £3.9 billion, amortisation of £3.5 billion and unfavourable foreign exchange rate movements of £4.2 billion partially offset by £2.9 billion of additions. Refer to note 10 to the consolidated financial statements for further information on the impairment charge. Property, plant and equipment Property, plant and equipment decreased to £18.7 billion at 31 March 2012 from £20.2 billion at 31 March 2011 predominantly as a result of £4.4 billion of depreciation charges and unfavourable foreign exchange rate movements of £1.3 billion partially offset by £4.7 billion of additions. Investments in associates Investments in associates decreased to £35.1 billion at 31 March 2012 from £38.1 billion at 31 March 2011 primarily due to a reduction of £4.0 billion in relation to the sale of our 44% interest in SFR and £4.0 billion of dividends received partially offset by our share of the results of associates, after deductions of interest, tax and non-controlling interest, which contributed £5.0 billion, mainly arising from our investment in Verizon Wireless. Other non-current assets Other non-current assets decreased to £6.3 billion at 31 March 2012 (2011: £7.4 billion) mainly due to other investments which totalled £0.8 billion at 31 March 2012 compared to £1.4 billion at 31 March 2011. Current assets Current assets increased to £20.0 billion at 31 March 2012 from £17.0 billion at 31 March 2011 due to an increase in cash and short-term investments resulting from the element of the proceeds from the disposal of our 44% interest in SFR not yet utilised for the share buyback programme, and an increase in other receivables due to the second tranche of the proceeds from the sale of our interest in SoftBank Mobile Corp. Limited which was received in April 2012. Total equity and liabilities Total equity Total equity decreased to £78.2 billion at 31 March 2012 from £87.6 billion at 31 March 2011. The profit for the year of £7.0 billion was more

Borrowings2 Operating lease commitments3 Capital commitments3 4 Purchase commitments Total

42,079 6,141 2,018

6,266 1,110 1,798

11,419 1,633 195

10,400 1,152 25

13,994 2,246 –

5,138 3,237 1,081 446 374 55,376 12,411 14,328 12,023 16,614

Notes: 1 The above table of contractual obligations includes commitments in respect of options over interests in Group businesses held by non-controlling shareholders (see “Option agreements and similar arrangements”) and obligations to pay dividends to non-controlling shareholders (see “Dividends from associates and to non-controlling shareholders”). The table excludes current and deferred tax liabilities and obligations under post employment benefit schemes, details of which are provided in notes 6 and 23 to the consolidated financial statements respectively. The table also excludes the contractual obligations of associates. 2 See note 22 to the consolidated financial statements. 3 See note 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 2012 financial year, proposed, in respect of each financial year.
Pence per ordinary share Year ended 31 March Interim Final Total

2008 2009 2010 2011 2012

2.49 2.57 2.66 2.85 7.051

5.02 5.20 5.65 6.05 6.472

7.51 7.77 8.31 8.90 13.52

Notes: 1 Includes the 4.0 pence special dividend paid in February 2012. 2 The final dividend for the year ended 31 March 2012 was proposed on 22 May 2012 and is payable on 1 August 2012 to holders on record as of 8 June 2012. 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.

Vodafone Group Plc Annual Report 2012

55

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 2011 the directors announced an interim dividend of 3.05 pence per share representing a 7.0% increase over last year’s interim dividend. In addition a special, second interim, dividend of 4.0 pence per share was paid in February 2012 following the receipt of a US$4.5 billion (£2.9 billion) income dividend from Verizon Wireless. The directors are proposing a final dividend of 6.47 pence per share. Total dividends, excluding special dividends, for the year increased by 7.0% to 9.52 pence per share. In May 2010 the directors issued a dividend per share growth target, excluding special dividends, of at least 7% per annum for each of the financial years in the period ending 31 March 2013, assuming no material adverse foreign exchange rate movements. We expect that total ordinary dividends per share will therefore be no less than 10.18 pence for the 2013 financial year. See page 50 for the assumptions underlying this expectation.

Dividends received from associates and investments1 decreased by £0.3 billion due to the loss of dividends resulting from the disposal of the Group’s interest in SFR and China Mobile Limited. Net interest payments were stable at £1.3 billion.
2012 £m 2011 £m %

Business review

Liquidity and capital resources
The major sources of Group liquidity for the 2012 and 2011 financial years were cash generated from operations, dividends from associates, disposal of investments and borrowings through short-term and long-term issuances in the capital markets. We do not use nonconsolidated 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 51 to 53. 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, Qatar 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 fund shareholder returns. Cash flows Cash generated by operations decreased by 3.7% to £14.8 billion primarily driven by working capital movements and lower EBITDA. Free cash flow decreased by 13.4% to £6.1 billion primarily due to increased cash capital expenditure, working capital movements and lower dividends from associates1, offset by lower payments for taxation. Cash capital expenditure increased by £0.8 billion, driven by a reduction in working capital creditors and increased investment, particularly in Vodacom and Germany. Payments for taxation decreased by 24.2% to £2.0 billion primarily due to accelerated tax depreciation in the United States and the timing of tax payments in Italy.

EBITDA 14,475 14,670 Working capital 206 566 Other 143 156 Cash generated by operations 14,824 15,392 Cash capital expenditure2 (6,423) (5,658) Capital expenditure (6,365) (6,219) Working capital movement in respect of capital expenditure (58) 561 Disposal of property, plant and equipment 117 51 Operating free cash flow 8,518 9,785 Taxation (1,969) (2,597) Dividends received from associates and investments1 1,171 1,509 Dividends paid to non-controlling shareholders in subsidiaries (304) (320) Interest received and paid (1,311) (1,328) Free cash flow 6,105 7,049 Tax settlement3 (100) (800) Licence and spectrum payments (1,429) (2,982) Acquisitions and disposals4 4,872 (183) Equity dividends paid (6,643) (4,468) Purchase of treasury shares (3,583) (2,087) Foreign exchange 1,283 709 Income dividend from Verizon Wireless 2,855 – Disposal of the Group’s 3.2% interest in China Mobile Limited – 4,269 Disposal of the Group’s SoftBank Mobile Corp. Limited interests – 1,409 Other5 2,073 542 Net debt decrease 5,433 3,458 Opening net debt (29,858) (33,316) Closing net debt (24,425) (29,858)

(1.3)

(3.7)

Performance Governance Financials Additional information

(12.9)

(13.4)

(18.2)

Notes: 1 Dividends received from associates and investments for the year ended 31 March 2012 includes £965 million (2011: £1,024 million) tax distribution from our 45% interest in Verizon Wireless and a final dividend of £178 million (2011: £383 million) from SFR prior to the completion of the disposal of our 44% interest. It does not include the £2,855 million income dividend from Verizon Wireless received in January 2012. 2 Cash capital expenditure comprises the purchase of property, plant and equipment and intangible assets, other than licence and spectrum payments, during the year. 3 Related to a tax settlement in the year ended 31 March 2011. 4 Acquisitions and disposals for the year ended 31 March 2012 primarily includes £6,805 million proceeds from the sale of the Group’s 44% interest in SFR, £784 million proceeds from the sale of the Group’s 24.4% interest in Polkomtel and £2,592 million payment in relation to the purchase of non-controlling interests in Vodafone India Limited. 5 Other for the year ended 31 March 2012 primarily includes £2,301 million movement in the written put options in relation to India and the return of a court deposit made in respect of the India tax case (£310 million). Other for the year ended 31 March 2011 primarily includes £356 million in relation to a court deposit made in respect of the India tax case.

56 Financial position and resources (continued)
Vodafone Group Plc Annual Report 2012

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. 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. During the year we received distributions totalling £3.8 billion from Verizon Wireless, which included a one-off US$4.5 billion (£2.9 billion) income dividend received in January 2012 and a tax distribution amount of £965 million (2011: £1,024 million) which is included in dividends received from associates and investments as shown on page 55. Until April 2005 Verizon Wireless’ distributions were determined by the terms of the partnership agreement distribution policy and comprised income distributions and tax distributions. Since April 2005 only tax distributions have been issued, with the exception of the one-off income dividend received in January 2012. Following the announcement of Verizon Wireless’ acquisition of Alltel, certain additional tax distributions were agreed in addition to the tax distributions required by the partnership agreement. Current projections forecast that tax distributions will cover the United States tax liabilities arising from our partnership interest in Verizon Wireless. Under the terms of the partnership agreement the Verizon Wireless board has no obligation to effect additional distributions above the level of the tax distributions. However, the Verizon Wireless board has agreed that it will review distributions from Verizon Wireless on a regular basis. When considering whether distributions will be made each year, the Verizon Wireless board will take into account its debt position, the relationship between debt levels and maturities, and overall market conditions in the context of the five year business plan. In June 2011 we sold our entire 44% interest in SFR and received a final dividend from SFR of €200 million (£178 million) (2011: dividend received of £373 million). Future cash flows will be reduced by the loss of dividends from SFR. Verizon Communications Inc. has an indirect 23.1% shareholding in Vodafone Italy and under the shareholders’ agreement the shareholders have agreed to take steps to cause Vodafone Italy to pay dividends at least annually, provided that such dividends will not impair the financial condition or prospects of Vodafone Italy including, without limitation, its credit standing. During the 2012 financial year Vodafone Italy paid dividends net of withholding tax totalling €289 million (2011: €325 million) to Verizon Communications Inc. Acquisitions and disposals We received a net £4,872 million (2011: invested £183 million), net of cash and cash equivalents disposed and acquired, from acquisition and disposal activities during the year. On 16 June 2011 we sold our entire 44% interest in SFR to Vivendi for a cash consideration of €7.75 billion (£6.8 billion) before tax and transaction costs and received a final dividend from SFR of €200 million (£178 million). Vodafone and SFR also entered into a partner market agreement which will maintain their commercial cooperation. On 1 July 2011 we acquired an additional 22% stake in Vodafone India Limited (‘VIL’) from the Essar Group for a cash consideration of US$4.2 billion (£2.6 billion) including withholding tax. On 9 November 2011 we sold our entire 24.4% interest in Polkomtel in Poland for cash consideration of approximately €918 million (£784 million) before tax and transaction costs. On 23 April 2012 we announced a recommended cash offer to acquire the entire issued ordinary share capital of Cable & Wireless Worldwide plc, at a value of approximately £1,045 million. For further details refer to note 33 to the consolidated financial statements.

Treasury shares The Companies Act 2006 permits companies to purchase their own shares out of distributable reserves and to hold shares in treasury. While held in treasury, no voting rights or pre-emption rights accrue and no dividends are paid in respect of treasury shares. Treasury shares may be sold for cash, transferred (in certain circumstances) for the purposes of an employee share scheme or cancelled. If treasury shares are sold, such sales are deemed to be a new issue of shares and will accordingly count towards the 5% of share capital which the Company is permitted to issue on a non pre-emptive basis in any one year as approved by its shareholders at the AGM. The proceeds of any sale of treasury shares up to the amount of the original purchase price, calculated on a weighted average price method, is attributed to distributable profits which would not occur in the case of the sale of non-treasury shares. Any excess above the original purchase price must be transferred to the share premium account. Following the disposal of our 3.2% interest in China Mobile Limited on 10 September 2010, we initiated a £2.8 billion share buyback programme under the authority granted by our shareholders at the 2010 AGM which was completed in June 2011. Under this programme the Group purchased a total of 1,631,662,645 shares at an average price per share, including transaction costs, of 171.60 pence. Following the disposal of our entire 44% interest in SFR to Vivendi on 16 June 2011, we initiated a £4.0 billion share buyback programme. The Group placed irrevocable purchase instructions with a number of banks to enable the banks to buy back shares on our behalf when we may otherwise have been prohibited from buying in the market. Details of the shares purchased to date, including those purchased under irrevocable instructions, are shown below:
Average price Total number of Maximum paid per shares value of shares share purchased that may yet be inclusive of purchased under share Number of shares transaction under the repurchase purchased1 costs programme2 programme3 ’000 ’000 £m Pence

Date of share purchase

June 2011 July 2011 August 2011 September 2011 October 2011 November 2011 December 2011 January 2012 February 2012 March 2012 April 2012 May 2012 Total

95,908 178,643 196,798 199,672 173,100 201,279 125,000 158,400 181,200 197,700 149,800 117,000 1,974,5004

164.15 163.77 165.14 162.77 172.69 174.42 175.60 177.22 174.42 171.37 172.63 170.86 170.35

95,908 274,551 471,349 671,021 844,121 1,045,400 1,170,400 1,328,800 1,510,000 1,707,700 1,857,500 1,974,500 1,974,500

3,843 3,550 3,225 2,900 2,601 2,250 2,030 1,750 1,434 1,095 836 636 636

Notes: 1 The nominal value of shares purchased is 113⁄7 US cents each. 2 No shares were purchased outside the publicly announced share buyback programme. 3 In accordance with shareholder authority granted at the 2011 AGM. 4 The total number of shares purchased represents 4.0% of our issued share capital at 21 May 2012.

The aggregate amount of consideration paid by the Company for the shares at 21 May 2012 was £3,364 million.

Vodafone Group Plc Annual Report 2012

57

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

Net debt represented 28.6% of our market capitalisation at 31 March 2012 compared to 32.8% at 31 March 2011. Average net debt at month end accounting dates over the 12 month period ended 31 March 2012 was £25.6 billion and ranged between £22.3 billion and £29.6 billion during the year. The cash received from collateral support agreements mainly reflects the value of our interest rate swap portfolio which is substantially net present value positive. See note 21 to the consolidated financial statements for further details on these agreements. Commercial paper programmes We currently have US and euro commercial paper programmes of US$15 billion and £5 billion respectively which are available to be used to meet short-term liquidity requirements. At 31 March 2012 amounts external to the Group of €1,226 million (£1,022 million) and US$309 million (£193 million) were drawn under the euro commercial paper programme and US$1,689 million (£1,056 million) was drawn down under the US commercial paper programme, with such funds being provided by counterparties external to the Group. At 31 March 2011 €1,490 million (£1,317 million) was drawn under the euro commercial paper programme and US$551 million (£343 million) was drawn under the US commercial paper programme. The commercial paper facilities were supported by US$4.2 billion (£2.7 billion) and €4.2 billion (£3.5 billion) of syndicated committed bank facilities (see “Committed facilities”). 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 2012 the total amounts in issue under these programmes split by currency were US$13.3 billion, £2.5 billion, €8.9 billion and £0.2 billion sterling equivalent of other currencies. In the year ended 31 March 2012 bonds with a nominal value equivalent of £0.7 billion at the relevant 31 March 2012 foreign exchange rates were issued under the US shelf and the euro medium-term note programme. The bonds issued during the year were:
Date of bond issue Maturity of bond Nominal amount Million Sterling equivalent Million

Business review

1 April 2011 Reissue of shares Purchase of shares Cancelled shares 31 March 2012

5,234 (166) 2,101 (3,000) 4,169

8,171 (277) 4,671 (4,724) 7,841

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, cash receipts from investment disposals, issuances of short-term and long-term debt, and non-recourse borrowing assumed in respect of the emerging market businesses. It has not been necessary for us to draw down on our syndicated committed bank facilities during the year. Net debt Our consolidated net debt position at 31 March was as follows:
2012 £m 2011 £m

Performance

Cash and cash equivalents Short-term borrowings: Bonds Commercial paper1 Put options over non-controlling interests Bank loans Other short-term borrowings2 Long-term borrowings: Put options over non-controlling interests Bonds, loans and other long-term borrowings Other financial instruments3 Net debt

7,138 (1,289) (2,272) – (1,635) (1,062) (6,258)

6,252 (2,470) (1,660) (3,113) (2,070) (593) (9,906)

Governance

(840) (78) (27,522) (28,297) (28,362) (28,375) 3,057 2,171 (24,425) (29,858)

22 August 2011 22 August 2012 20 March 2012 20 March 2017

US$100 US$1,000

65 625

Financials

Notes: 1 At 31 March 2012 US$1,689 million was drawn under the US commercial paper programme, and €1,226 million and US$309 million were drawn under the euro commercial paper programme. 2 At 31 March 2012 the amount includes £980 million (2011: £531 million) in relation to cash received under collateral support agreements. 3 Comprises i) mark-to-market adjustments on derivative financial instruments which are included as a component of trade and other receivables (2012: £2,959 million; 2011: £2,045 million) and trade and other payables (2012: £889 million; 2011: £548 million) and ii) short-term investments primarily in index linked government bonds included as a component of other investments (2012: £987 million; 2011: £674 million).

On 11 July 2011 we also raised US$850 million (£543 million) through a US private placement with a maturity of 11 July 2016. At 31 March 2012 we had bonds outstanding with a nominal value of £18,333 million (2011: £20,987 million).

At 31 March 2012 we had £7,138 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 investment at 31 March 2012 were money market funds, UK index linked government bonds and bank deposits. Net debt decreased by £5.4 billion to £24.4 billion primarily due to cash generated by operations, the proceeds from the sale of the Group’s 44% interest in SFR and 24.4% interest in Polkomtel, and the £2.9 billion income dividend from Verizon Wireless, partially offset by share buybacks and dividend payments to equity holders. Additional information

58 Financial position and resources (continued)
Vodafone Group Plc Annual Report 2012

Committed facilities The following table summarises the committed bank facilities available to us at 31 March 2012.
Committed bank facilities Amounts drawn

1 July 2010 €4.2 billion syndicated No drawings have been made against this revolving credit facility, facility. The facility supports our commercial paper programmes and may be used for maturing 1 July 2015 general corporate purposes including acquisitions. 9 March 2011 No drawings have been made against this US$4.2 billion facility. The facility supports our commercial syndicated revolving credit facility, maturing paper programmes and may be used for 9 March 2016, US$4.1 general corporate purposes including acquisitions. billion of this facility has been extended by one year, maturing 9 March 2017 16 November 2006 This facility was drawn down in full on €0.4 billion loan 14 February 2007. facility, maturing 14 February 2014 28 July 2008 This facility was drawn down in full on €0.4 billion loan 12 August 2008. facility, maturing 12 August 2015 15 September 2009 This facility was drawn down in full on 30 July €0.4 billion loan 2010. facility, maturing 30 July 2017 29 September 2009 This facility is fully drawn down and is US$0.7 billion amortising. export credit agency loan facility, final maturity date 19 September 2018 8 December 2011 This facility is undrawn and has an availability €0.4 billion loan period of 18 months. The facility is available for facility, maturing financing a project to increase the service on the seven year availability of the UMTS (3G) mobile network anniversary of the in Italy. first drawing 20 December 2011 This facility is undrawn and has an availability €0.3 billion loan period of nine months. The facility is available facility, maturing for financing a project to upgrade and expand on the seven year the mobile telecommunications networks in anniversary of the Turkey and Romania. first drawing Under the terms and conditions of the €4.2 billion and US$4.2 billion syndicated committed bank facilities lenders have the right, but not the obligation, to cancel their commitments and have outstanding advances repaid no sooner than 30 days after notification of a change of control. This is in addition to the rights of lenders to cancel their commitment if we commit an event of default; however, it should be noted that a material adverse change clause does not apply. The facility agreements provide for certain structural changes that do not affect the obligations to be specifically excluded from the definition of a change of control. The terms and conditions of the €0.4 billion loan facility maturing on 14 February 2014 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Turkish operating company spend less than the equivalent of €0.8 billion on capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 50% of the capital expenditure.

The terms and conditions of the €0.4 billion loan facility maturing 12 August 2015 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Italian operating company spend less than the equivalent of €1.5 billion on capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 18% of the capital expenditure. The loan facility agreed on 15 September 2009 provides €0.4 billion of seven year term finance for the Group’s virtual digital subscriber line (‘VDSL’) project in Germany. The terms and conditions are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that should the Group’s German operating company spend less than the equivalent of €0.8 billion on VDSL related capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 50% of the VDSL capital expenditure. The Group entered into an export credit agency loan agreement on 29 September 2009 for US$0.7 billion. The terms and conditions of the facility are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that the Company was 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 the drawn balance commenced on 30 June 2010 with a final maturity date of 19 September 2018. The terms and conditions of the €0.4 billion loan facility agreed on 8 December 2011 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Italian operating company spend less than the equivalent of €1.3 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 €0.3 billion loan facility agreed on 20 December 2011 are similar to those of the €4.2 billion and US$4.2 billion syndicated committed bank facilities with the addition that, should our Turkish and Romanian operating companies spend less than the equivalent of €1.3 billion on capital expenditure, we will be required to repay the drawn amount of the facility that exceeds 50% of the capital expenditure. 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 2012 Vodafone India had facilities of INR 396 billion (£4.9 billion) of which INR 340 billion (£4.2 billion) is drawn. Vodafone Egypt has partly drawn EGP 1.2 billion (£126 million) from a syndicated bank facility of EGP 4.0 billion (£414 million) that matures in March 2014. Vodacom had fully drawn facilities of ZAR 11.2 billion (£912 million), US$94 million (£59 million) and TZS 115 billion (£45 million). Vodafone Americas has a US$1.4 billion (£875 million) US private placement with a maturity of 17 August 2015 as well as a US$850 million (£532 million) US private placement with a maturity of 11 July 2016. Ghana had a facility of US$240 million (£150 million) of which US$203 million (£127 million) was drawn with a final maturity of 15 March 2018. In aggregate we have committed facilities of approximately £17,304 million, of which £7,865 million was undrawn and £9,439 million was drawn at 31 March 2012. 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 2012 are included in note 22 to the consolidated financial statements.

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Financial assets and liabilities
Analysis 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.

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.

Business review

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. In respect of our interest in Vodafone India Limited (‘VIL’), Piramal Healthcare (‘Piramal’) acquired approximately 11% shareholding in VIL from Essar during the 2012 financial year. The agreements contemplate various exit mechanisms for Piramal including participating in an initial public offering by VIL or, if such initial public offering has not completed by 18 August 2013 or 8 February 2014 respectively or Piramal chooses not to participate in such initial public offering, Piramal selling its shareholding to the Vodafone Group in two tranches of 5.485% for an aggregate price of between approximately INR 70 billion (£0.8 billion) and INR 83 billion (£1.0 billion).

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.

Performance Governance Financials Additional information

60 Board of directors and Group management
Vodafone Group Plc Annual Report 2012

Directors and senior management
Our business is managed by our Board of directors (‘the Board’). Biographical details of the directors and senior management as at 22 May 2012 are as follows (with further information available at www.vodafone.com/investor): Chairman
Age: 65 Skills and experience: Gerard has a proven track record as an international business leader with deep knowledge of the consumer electronics, healthcare and lifestyle sectors; a wealth of experience of operating in developed and emerging markets; and technology industry familiarity. Career history: President/Chief Executive Officer and Chairman of the Board of Management of Koninklijke Philips Electronics N.V. from 2001 to 2011 following a career with Philips spanning over 30 years.

Gerard Kleisterlee
Time on Board: 1 year 2 months Additional appointments: Member of Daimler AG Supervisory Board; non-executive director and member of the Audit Committee of Royal Dutch Shell; Board of Directors of Dell. Committees: Nominations and Governance (Chairman)

Chief Executive
Age: 50

Vittorio Colao
Time on Board: 5 years 7 months Additional appointments: Member of the International Advisory Board of Bocconi University, Italy; member of the Advisory Board of McKinsey & Company; member of the Advisory Council of Oxford Martin School. Skills and experience: With demonstrated international business leadership skills, Vittorio has deep telecoms experience having worked in the sector for 20 years. Career history: McKinsey & Company (1986 – 1996); Omnitel Pronto Italia S.p.A. (which became Vodafone Italy) (1996 – 2004); Regional Chief Executive Officer, Southern Europe for Vodafone Group Plc (role later expanded to include Middle East and Africa regions); Chief Executive RCS MediaGroup (2004 – 2006).

Chief Financial Officer

Andy Halford
Age: 53

Chief Executive Officer, Europe region

Michel Combes
Time on Board: 6 years 10 months Additional appointments: Member of the Board of Representatives of the Verizon Wireless partnership in the US; Chairman of the Hundred Group of Finance Directors in the UK. Age: 50

Time on Board: 2 years 11 months member of the France Telecom Group Strategic Committee; Chairman and Chief Executive Officer of TDF Group. Additional appointments: Chairman of the Supervisory Board of Assystem SA in France; non-executive director on the boards of ISS Equity A/S, ISS Holding A/S and ISS A/S. Michel will retire from the Board at the conclusion of the Company’s AGM on 24 July 2012.

Skills and experience: A leading member of the finance profession, Andy has extensive experience as a finance director of UK, US and multinational companies. Career history: Group Finance Director at East Midlands Electricity Plc (1993 – 1998); Financial Director, Vodafone Limited (the UK operating company) (1999 – 2001); Financial Director for Vodafone’s Northern Europe, Middle East and Africa region (2001 – 2002); Chief Financial Officer of the Verizon Wireless partnership (2002 – 2005); Fellow of the Institute of Chartered Accountants in England and Wales.

Skills and experience: Michel is well-regarded for his breadth of experience across both fixed line and mobile operations, with over 25 years experience in the field of telecommunications. Career history: France Telecom, External Networks Division, later Industrial and International Affairs Division; technical advisor to the French Minister of Transport; Chairman and Chief Executive Officer of GlobeCast; Executive Vice President of Nouvelles Frontieres Group; Chief Executive Officer of Assystem-Brime; Senior Vice President of Group Finance and Chief Financial Officer, France Telecom; Senior Executive Vice President, in charge of NExT Finance Balance & Value Creation;

Chief Technology Officer

Stephen Pusey
Age: 50

Deputy Chairman and Senior Independent Director

Sir John Buchanan
Time on Board: 2 years 11 months Career history: Executive Vice President and President, Nortel Networks Corporation’s EMEA region; British Telecom. Age: 68

Time on Board: 9 years 1 month Additional appointments: Chairman of Smith & Nephew plc; Senior Independent Director of BHP Billiton Plc; Chairman of ARM Holdings plc; Chairman of the International Chamber of Commerce (UK); Chairman of the Trustees for UK Christchurch Earthquake Appeal. Committees: Nominations and Governance Audit and Risk Sir John will retire from the Board at the conclusion of the Company’s AGM on 24 July 2012.

Skills and experience: Stephen has a wealth of international experience across both the wireline and wireless industries and in business applications and solutions.

Skills and experience: Sir John has many years of experience and a track record of success gained during a wide-ranging career at BP p.l.c. spanning over 30 years. His financial and management skills in multinational business provide further strength to the Board. Career history: Board of Directors and Chief Executive Officer of BP p.l.c. (1996 – 2002); member of the United Kingdom Accounting Standards Board; non-executive director of The Boots Company Plc (1997 – 2003); nonexecutive director of AstraZeneca PLC (2002 – 2010).

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Business review

Non-executive director

Renee James
Age: 47

Non-executive director

Alan Jebson
Time on Board: 1 year 5 months Additional appointments: Senior vice president and general manager of the Software and Services Group for Intel Corporation; Chairman of the software subsidiaries of Intel Corporation, Havok Inc., Wind River Systems Inc. and McAfee, Inc.; independent director on the Board of Directors of VMware Inc and a member of its Audit Committee. Renee will join the Remuneration Committee on conclusion of the AGM on 24 July 2012. Age: 62

Time on Board: 5 years 6 months Additional appointments: Non-executive director of Experian plc. Committees: Audit and Risk

Skills and experience: Renee has deep knowledge of the high-tech sector and wide ranging experience of international management. Career history: Joined Intel Corporation in 1988 with the acquisition of Bell Technologies; currently senior vice president and general manager of Intel Corporation’s Software and Services Group; previous roles within Intel: vice president for Developer Programs, Chief Operating Officer of Intel Online Services – Intel’s datacenter business.

Skills and experience: Alan’s experience as a senior leader in an international business, his knowledge of international information technology systems and his financial services background are great assets to the Board. Career history: HSBC Holdings plc: Head of IT Audit (1978 – 1984); Senior Manager Planning and Operations, Saudi British Bank (1984 – 1987); HSBC Holdings plc: Group Chief Operating Officer, Group Chief Information Officer; non-executive director of MacDonald, Dettwiler and Associates (Canada).

Performance

Non-executive director

Samuel Jonah
Age: 62

Non-executive director

Nick Land
Time on Board: 2 years 2 months the Companion of the Order of the Star, in 2006. Recipient of Lifetime Award in June 2010 by the Commonwealth Business Council and African Business Magazine. Additional appointments: Executive Chairman of Jonah Capital (Pty) Limited; serves on the boards of various public and private companies including The Standard Bank of South Africa Limited. Committees: Remuneration Age: 64

Governance

Time on Board: 5 years 6 months Chairman of the Board of Trustees of Farnham Castle; member of the Finance and Audit Committees of The National Gallery; Chairman of the Board of Trustees of the Vodafone Foundation. Committees: Audit and Risk (Chairman)

Skills and experience: Sam brings widespread experience of business in Africa, particularly South Africa and Ghana where we have interests. Career history: Chief Executive Officer of Ashanti Goldfields Co Ltd (1986 – 2002); Executive President of AngloGold Ashanti Ltd (2002 – 2005); director of Lonmin Plc. (1992 – 2004); member of the Advisory Council of the President of the African Development Bank; advisor to the former Presidents of Ghana, South Africa, Nigeria and Namibia. Currently advises the Presidents of Togo and Nigeria. Honorary Knighthood awarded in 2003; awarded Ghana’s highest national award,

Skills and experience: Nick’s financial expertise and experience of dealing with major corporations in many parts of the world is invaluable to the Board. Career history: Chairman of Ernst & Young and Managing Partner of the North European, Middle East, India and Africa region. Retired from Ernst & Young in 2006 after a career spanning 36 years. Additional appointments: Non-executive director of Alliance Boots GmbH, BBA Aviation plc, Ashmore Group plc and the Financial Reporting Council; advisor to the Board of SNR Denton UK LLP; member of the Advisory Board of Alsbridge plc;

Financials

Non-executive director

Anne Lauvergeon
Age: 52

Non-executive director

Luc Vandevelde
Time on Board: 6 years 7 months Additional appointments: Non-executive director of Total S.A. and GDF SUEZ; member of the Advisory Board of the Global Business Coalition on HIV/AIDS. Committees: Audit and Risk Age: 61

Time on Board: 8 years 9 months Additional appointments: Director of Societe Generale; Founder and Managing Director of Change Capital Partners LLP.

Skills and experience: Anne’s wealth of international business knowledge gained while Chief Executive of an international energy company means she brings valuable insights to the Board. Career history: Chief Executive Officer of AREVA group; Adviser for Economic International Affairs at the French Presidency and Deputy Chief of its Staff; Partner of Lazard Frères & Cie; Senior Executive Vice President of Alcatel.

Skills and experience: Luc has many years of experience and a track record of success in retailing and consumer goods. He has a deserved reputation as an international businessman of considerable standing. His financial, management and marketing skills in international business are of great value to the Board. Career history: Kraft General Foods (1971 – 1995); Chief Executive Officer of Promodès/ Carrefour (1995 – 2000); Chairman of Marks and Spencer Group plc (2000 – 2004); Chairman of the Supervisory Board of Carrefour S.A. (2005 – 2007).

Additional information

Committees: Nominations and Governance Remuneration (Chairman) Luc will become Senior Independent Director on conclusion of the AGM on 24 July 2012.

62 Board of directors and Group management (continued)
Vodafone Group Plc Annual Report 2012

Non-executive director
Age: 67

Anthony Watson cbe
Time on Board: 6 years 1 month Additional appointments: Senior Independent Director of Hammerson plc and Witan Investment Trust; non-executive director of Lloyds Banking Group plc; member of the Board of the Shareholder Executive. Committees: Nominations and Governance Remuneration Tony will step down from the Remuneration Committee and join the Audit and Risk Committee on conclusion of the AGM on 24 July 2012. Skills and experience: Tony’s depth of experience in the City and in investment and asset management are invaluable to the Board. Career history: Hermes Pensions Management Ltd: Chief Investment Officer, later Chief Executive. Managing Director of AMP Asset Management plc; Chief International Investment Officer, Citicorp Investment Management; Chairman of the Strategic Investment Board in Northern Ireland; member of the Advisory Board of Norges Bank Investment Management; Chairman of Marks & Spencer Pension Trust and the Asian Infrastructure Fund; member of the Financial Reporting Council. In January 2009, Tony was awarded a CBE for his services to the economic redevelopment of Northern Ireland.

Non-executive director

Philip Yea
Age: 57

Time on Board: 6 years 9 months Additional appointments: Advisor to HRH The Duke of York; member of the Advisory Board to PricewaterhouseCoopers in the UK; member of the Advisory Board of Bridges Ventures LLP; Chairman of the Trustees of the British Heart Foundation; independent director and trustee on the Board of The Francis Crick Institute; Chairman of The Rose Partnership, Executive Search. Committees: Remuneration Philip will join the Nominations and Governance Committee on conclusion of the AGM on 24 July 2012.

Skills and experience: Philip brings to the Board his considerable experience as a leader of public and private businesses (as Chief Financial Officer, Chief Executive Officer and as Chairman) and, as a private equity investor, deploying his financial and strategic skills. He also has experience of business and financial turnarounds. Career history: Finance Director of Guinness PLC, becoming Finance Director of Diageo plc upon the merger of Guinness and Grand Metropolitan Public Limited Company in 1997 (1993 – 1999); Managing Director at Investcorp (1999 – 2004); Chief Executive at 3i Group plc (2005 – 2009); non-executive directorships of HBOS plc and Manchester United plc.

Executive Committee Chaired by Vittorio Colao, this committee focuses on our strategy, financial structure and planning, financial and competitive performance, succession planning, organisational development and Group-wide policies. The Executive Committee membership comprises the executive directors, details of whom are shown on page 60, 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. Group Strategy and Business Development Director

Warren Finegold
Age: 55

Group External Affairs Director

Matthew Kirk
Age: 51

Time on Executive Committee: 6 years 2 months Career history: Executive in the Corporate Finance department of Hill Samuel & Co. Limited (1981 – 1985); Executive Director Goldman Sachs International (1985 – 1995) holding positions in New York and London; Managing Director of UBS Investment Bank and most recently head of its Technology team in Europe (1995 – 2006).

Years on Executive Committee: 3 years 3 months Career history: Group Director of External Relationships, Vodafone Group Plc; member of the British Diplomatic Service for more than 20 years; British Ambassador to Finland (2002 – 2006).

Group Chief Commercial Officer

Morten Lundal
Age: 47

Group General Counsel and Company Secretary

Rosemary Martin
Age: 52

Time on Executive Committee: 3 years 7 months Career history: Chief Executive Officer at Vodafone for the Africa and Central Europe region; various senior positions with Nordic mobile operator, Telenor (1997 – 2004), including Chief Executive Officer for the Internet Division and Telenor Business Solutions, as well as the position of Executive Vice President for Corporate Strategy; Chief Executive Officer of Telenor’s Malaysian subsidiary, DiGi Telecommunication (2004 – 2008).

Time on Executive Committee: 2 years 3 months Career history: Chief Executive Officer of the Practical Law Group (2008); Reuters Group Plc in various company secretarial and legal roles, with the last five years as Group General Counsel and Company Secretary (1997 – 2008); partner with Mayer, Brown, Rowe & Maw (1990 – 1997).

Chief Executive Officer: Africa, Middle East and Asia Pacific region

Nick Read
Age: 47

Group Human Resources Director

Ronald Schellekens
Age: 48

Time on Executive Committee: 3 years 7 months Career history: Various senior roles in Vodafone Limited (the UK operating company), including Chief Financial Officer, Chief Commercial Officer and Chief Executive Officer (2002 – 2008); senior global finance positions with United Business Media plc (1998 – 2002) and Federal Express Worldwide Inc. (1995 – 1998).

Time on Executive Committee: 3 years 5 months Career history: Executive Vice President Human Resources for Royal Dutch Shell Plc’s global downstream business (2003 – 2008), various international senior human resources roles at PepsiCo (1994 – 2003); human resources roles at AT&T Network Systems in the Netherlands and Poland.

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Corporate governance
Chairman’s overview Business review

“Strong governance ensures Vodafone conducts its business responsibly, safeguarding our assets while promoting business growth.”

Dear Shareholder

Sound corporate governance is critical to our business integrity and to maintaining investors’ trust in us. Responsibility for good governance lies with your Board and the directors and I spend quality time at Board and committee meetings and in our discussions with executives to ensure there is a strong and effective governance system in place throughout the Group. Performance In this section we describe the way corporate governance works in Vodafone. It is embedded both in the way we organise our business, with local boards and audit committees having responsibility for our operations in local markets, overseen by regional governance teams for Europe and for the Africa, Middle East and Asia Pacific region, as well as in the way we expect our people to behave, with every employee required to comply with our Code of Conduct and encouraged to work in the Vodafone Way (see page 34 for more information). We strive to continuously improve the effectiveness of our Board, our Board committees and our Executive Committee and we undertake annual reviews to assess our performance. The review for the 2012 financial year is described on page 67. The Nominations and Governance Committee monitors developments in corporate governance to ensure we remain aligned with best practice. In view of the increased focus on diversity in the boardroom, I would like to take this opportunity to set out our approach to this topic. Joining me on your Board are four executive directors and nine non-executive directors representing seven different nationalities reflecting the international nature of our business. Your Board acknowledges the importance of diversity, including gender, to the effective functioning of the Board and commits to supporting diversity in the boardroom. It is our aspiration to have a minimum of 25% female representation on your Board by 2015. We also value diversity of business skills and experience because directors with diverse skills sets, capabilities and experience gained from different geographic and cultural backgrounds enhance your Board by bringing a wide range of perspectives to the business. More information can be found about our boardroom diversity policy under the report of the Nominations and Governance Committee on page 68. Looking ahead, we will strive to maintain our high standard of corporate governance as it is central to our continuing success. We will continue to balance the use of our time in Board meetings between discussion of strategy, review of financial and operational performance, oversight of risk management and internal controls, ensuring the safeguarding our assets, and keeping Board and executive succession plans refreshed.

Governance

Gerard Kleisterlee Chairman 22 May 2012

Financials

Compliance with the UK Corporate Governance Code
Throughout the year ended 31 March 2012 and to the date of this document, we complied with the provisions and applied the Main Principles of the UK Corporate Governance Code (the ‘Code’). The Code can be found on the FRC website (www.frc.org.uk). We describe how we have applied those Principles in this annual report, notably, in the following section together with the “Directors’ remuneration” section on pages 74 to 87. The Financial Reporting Council has announced that a revised version of the Code incorporating changes regarding boardroom diversity will be published in 2012, to take effect for financial years beginning on or after 1 October 2012. We are voluntarily reporting on these changes in this annual report (see “Performance evaluation” on page 67 and “Nominations and Governance Committee” on page 68).

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 149 to 156. Additional information

64 Corporate governance (continued)
Vodafone Group Plc Annual Report 2012

Our governance
Chairman Key objectives: the leadership, operation and governance of the Board, ensuring effectiveness, and setting the agenda for the Board

The Board of Vodafone Group Plc Key objectives: responsible for the overall conduct of the Group’s business and setting the Group’s strategy Nominations and Governance Committee Key objectives: to ensure the Board comprises individuals with the requisite skills, knowledge and experience to ensure that it is effective in discharging its responsibilities
More detail: Page 68

Audit and Risk Committee Key objectives: to provide effective financial governance over the appropriateness of the Group’s financial results, the performance of the internal audit function the external auditor, and the management of the Group’s systems of internal control, business risks and related compliance activities
More detail: Page 69

Remuneration Committee Key objectives: responsibility to the Board for the assessment and recommendation of policy on executive remuneration and packages for the individual executive directors
More detail: Page 71

Chief Executive Key objectives: responsible for the management of the business and implementation of Board strategy and policy

Executive Committee Key objectives: to focus on the Group’s strategy, financial structure and planning, financial and competitive performance, succession planning, organisational development and Group-wide policies; to review the Group’s financial and competitive performance

Operating Committee Key objectives: responsible for operational decisions, such as for key marketing and technology initiatives

The role of the Board is outlined in greater detail below. The Executive and Operating Committees sit below the Board for the management of the business. The executive directors, together with certain Group functional heads and regional chief executives, meet 11 times a year as the Executive Committee under the chairmanship of the Chief Executive. The Executive Committee is responsible for our competitive and financial performance, reviewing strategy and new business opportunities including major acquisitions and disposals, the management of our capital structure and funding, and key organisational and policy decisions. The members of the Executive Committee and their biographical details are set out on pages 60 to 62 (or at www.vodafone.com/investor). In April every year a Group level strategy review is conducted with the members of the Executive Committee along with the chief executives of the major operating companies. This review identifies key strategic issues for further investigation, following which the Group strategy is updated for presentation to the Board in September. Individual operating companies review and update their strategies and present to their respective regional chief executives in the autumn. The agreed strategy is used as a basis for the development of the upcoming budget and three year operating plans. Final reviews of the operating company strategies, budgets and three year plans are held in March. The Policy and Compliance Committee is a sub-committee of the Executive Committee, appointed to assist the Executive Committee fulfil its accountabilities with regard to policy compliance. Each Group policy is owned by a member of the Executive Committee so that there is clear accountability and authority for ensuring the associated business risk is adequately managed. Local market chief executives and the senior leadership team member responsible for each Group function have primary accountability for ensuring compliance with all Group policies by all our markets and entities. Our Group Compliance team and policy champions support the policy owners and local markets in implementing policies and monitoring compliance. The Vodafone Code of Conduct, applicable to all employees and those who work for or on behalf of Vodafone, is a unified policy document that sets out the standards of behaviour expected in relation to areas such as insider dealing, bribery and raising concerns through the whistle blowing process (known internally as “Speak Up”).

The Disclosure Committee, appointed by the Chief Executive and Chief Financial Officer to ensure the accuracy of external reporting, reviews and approves controls and procedures concerning the public disclosure of financial and related information. The role of the Board The Board is responsible for the overall conduct of the Group’s business and has powers and duties pursuant to the relevant laws of England and Wales and our articles of association. The Board: aa is responsible for setting the Group strategy and for the management, direction and performance of our businesses; aa is accountable to shareholders for the proper conduct of the business; aa is responsible for the long-term success of the Company, having regard for the interests of all stakeholders; and aa is responsible for ensuring the effectiveness of and reporting on our system of corporate governance. The Board has a formal schedule of matters reserved for its decision and these include: aa Group strategy and long-term plans; aa major capital projects, acquisitions or divestments; aa annual budget and operating plan; aa Group financial structure, including tax and treasury; aa annual and half-year financial results and shareholder communications; and aa system of internal control and risk management. The schedule is reviewed annually. It was last formally reviewed in March 2012 at which time it was determined that no amendments were required. Other specific responsibilities are delegated to Board committees, details of which are given on pages 68 to 71.

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Key roles and responsibilities The Chairman

Business review

Gerard Kleisterlee
The role of the Chairman is set out in writing and agreed by the Board. He is responsible for: aa the effective operation, leadership and governance of the Board; aa ensuring effectiveness of the Board; aa setting the agenda, style and tone of Board discussions; and aa ensuring the directors receive accurate, timely and clear information. The Deputy Chairman and Senior Independent Director

The Chief Executive

Vittorio Colao

The role of the Chief Executive is set out in writing and agreed by the Board. He is responsible for: aa management of the Group’s business; aa implementation of the Company’s strategy and policies; and aa maintaining a close working relationship with the Chairman.

Sir John Buchanan

The Company Secretary

Performance

Rosemary Martin

The Senior Independent Director is responsible for: aa acting as a sounding board for the Chairman; aa serving as an intermediary for the other directors; aa being available to shareholders if they have concerns which they have not been able to resolve through the normal channels of the Chairman, Chief Executive or other executive directors or for which such contact is inappropriate; and aa 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.

The Company Secretary acts as Secretary to the Board. In addition, she: aa assists the Chairman in ensuring that all directors have full and timely access to all relevant information; aa assists the Chairman by organising induction and training programmes; aa is responsible for ensuring that the correct Board procedures are followed and advises the Board on corporate governance matters; and aa administers the procedure under which directors can, where appropriate, obtain independent professional advice at the Company’s expense.

Governance

Biographical details of the Chairman, Chief Executive, Senior Independent Director and Company Secretary can be found on pages 60 to 62 or at www.vodafone.com/board. The appointment or removal of the Company Secretary is a matter for the Board as a whole.

How the Board operates
Board balance and independence Our Board consists of 14 directors, all of whom served throughout the year. At 31 March 2012, in addition to the Chairman, Gerard Kleisterlee, there were four executive directors and nine non-executive directors. Sir John Bond was a member of the Board until his retirement at the AGM on 26 July 2011. Balance of non-executive and executive directors
Chairman: 7% Executive directors: 29% Non-executive directors: 64%

We consider all of our non-executive directors to be 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 all the directors are reported to the Board. 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 is 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. No conflicts of interest have been identified during the financial year. Copies of the service contracts of the directors and terms and conditions of appointment of all non-executive directors are available for inspection at our registered office. Board meetings The Board meets at least seven times a year. Certain matters are considered at all Board meetings including the Chief Executive’s business report; the latest available management accounts/Chief Financial Officer’s report; business updates; an operations update (covering commercial, technology and operations matters); an investor relations report and, where applicable, reports from the Nominations and Governance Committee, Audit and Risk Committee, and Remuneration Committee. In addition to standing agenda items, there may be discussions on “deep-dive” topics. During the year “deep-dive” presentations have included commercial strategy, technology strategy, spectrum auctions, talent and succession, our enterprise business and our partner markets business.

Financials

The executive and non-executive directors are equal members of the Board and have collective responsibility for the Company’s direction. In particular, non-executive directors are responsible for: aa bringing a wide range of skills and experience, including independent judgement on issues of strategy, performance, and risk management; aa constructively challenging the strategy proposed by the Chief Executive and executive directors; aa scrutinising and challenging performance across the Group’s business; aa assessing risk and the integrity of the financial information and controls; and aa determining the Company’s broad policy for executive remuneration, and the remuneration packages for the executive directors and the Chairman.

Additional information

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Directors unable to attend a Board meeting because of another engagement are provided with the briefing materials and can discuss issues arising in the meeting with the Chairman or the Chief Executive. In addition to scheduled Board meetings, there are a number of other meetings to deal with specific matters. Attendance at scheduled meetings of the Board and its committees in the 2012 financial year
Nominations and Governance Board Committee Audit and Risk Remuneration Committee Committee

Board activities in the 2012 financial year Board activities are structured to assist the Board in achieving its goal to support and advise executive management on the delivery of the Group’s strategy within a transparent governance framework. The diagram below shows the key areas of focus for the Board which appear as items on the Board’s agenda at relevant times throughout the financial year. Concentrated discussion of these items assists the Board in making the right decisions based on the long-term opportunities for the business and its stakeholders. Key areas of focus for the Board
Business strategy Discussion of main strategic issues (commercial, technological, geographic, structural) Strategy away day

Director

Gerard Kleisterlee (Chairman)1 Sir John Bond2 Sir John Buchanan Vittorio Colao Michel Combes Andy Halford Renee James Alan Jebson Samuel Jonah Nick Land3 Anne Lauvergeon Stephen Pusey Luc Vandevelde4 Anthony Watson Philip Yea

7/7 2/2 6/7 7/7 7/7 7/7 7/7 7/7 7/7 7/7 7/7 6/7 7/7 7/7 6/7

3/3 – 2/3 – – – – – – – – – 3/3 3/3 –

– – 3/4 – – – – 4/4 – 4/4 4/4 – – – –

– – – – – – – – 5/5 – – – 5/5 5/5 5/5

Business risks Review of evaluation processes and controls for strategic and operational risks Monitoring and review of effectiveness

Diversity and talent Boardroom diversity policy Succession planning Business performance Board performance Commercial performance in local markets Net promoter score Business awareness Chief Executive’s business report Business development reports Operations updates Board committee reports

Notes: 1 Appointed as a director of the Board 1 April 2011 and became Chairman of the Board and Chairman of the Nominations and Governance Committee at the conclusion of the Company’s AGM on 26 July 2011. 2 Chairman of the Board and Chairman of the Nominations and Governance Committee until he retired on 26 July 2011. 3 Chairman and financial expert of the Audit and Risk Committee. 4 Chairman of the Remuneration Committee.

Being responsible Health and Safety Compliance

Areas of focus

Shareholder focus Returns to shareholders Review of investment thesis Shareholder engagement

Sustainability Delivering transformational products and services Being responsible and ethical wherever we do business Vodafone Foundation

Financials Financial results Long range plan/ forecasts Management accounts/ Chief Financial Officer’s report

Gaining valuable industry insight
In January, the Board held its meeting at Xone, Vodafone’s Innovation Centre in California. Whilst there, the Board had the opportunity to meet with senior representatives of a number of leading technology companies including Facebook, Google, Intel, Oracle, Microsoft, Nokia, Qualcomm and Samsung. These meetings provided the Board with valuable insight into views on our industry and its likely developments.

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Board effectiveness
Board composition The Board has due regard for the benefits of diversity in its membership on the Board, including gender, and strives to maintain the right balance. Our Board comprises individuals with deep knowledge and experience in core and diverse business sectors within local, international and global markets. Information and professional development Keeping up-to-date with key business developments is essential for the directors to maintain and enhance their effectiveness. From time to time the Board receives presentations from executives in our business on matters of significance. Financial plans, including budgets and forecasts, are regularly discussed at Board meetings. The directors also have the opportunity to learn the views of major investors at planned events throughout the financial year (see “Shareholder engagement” on page 71). Our directors periodically visit different parts of the Group. The visit to Vodafone’s Innovation Centre in California (see page 66) in January presented an important opportunity for the non-executive directors to learn more about industry trends. In addition, the non-executive directors are provided with briefings and information to assist them in performing their duties. Throughout their period in office, directors are regularly updated on the Group’s businesses and the regulatory and industry specific environments in which we operate. Updates are by way of written briefings and meetings with senior executives and, where appropriate, external sources. The Chairman is responsible for ensuring that induction and training programmes are provided and the Company Secretary organises the programmes. As part of the performance evaluation, Gerard Kleisterlee has meetings with each Board director (see “Performance evaluation” below) during which directors are given the opportunity to discuss training and development needs. 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. Director induction programme On appointment, directors undergo a personalised induction programme covering amongst other things: aa the business of the Group; aa their legal and regulatory responsibilities as directors; aa briefings and presentations from relevant executives; and aa opportunities to visit business operations. If appropriate the induction will also include: aa briefings on the scope of the internal audit function and the role of the Audit and Risk Committee; and aa meetings with the external auditor and other areas deemed appropriate considering the director’s area of responsibility. During the year, the induction programmes of Gerard Kleisterlee and Renee James have followed structured timetables enabling them to meet key personnel within the Group including the executive and non-executive directors, the chief executives of local markets (visiting local markets where possible) and partner markets, key external advisors and key suppliers. 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 (see www.vodafone.com/governance). Every three years the performance evaluation is conducted by an external advisor. The last external evaluation took place in respect of the 2010 financial year.

This year, Board members were asked to consider and comment on the performance of the Board as a whole as well as to reconsider the report of the Board’s self-assessment in the 2011 financial year. The Chairman led the assessment of the directors. He held one-to-one interviews with each director and these discussions were facilitated by the directors being asked to consider a number of questions in advance. Amongst other things, directors were asked for their views on company strategy; key challenges for the business; the mix of skills, experience, independence, knowledge and diversity on the Board (including gender); effectiveness of the Board’s engagement with shareholders; and how well the Board operates. The output of the interviews were discussed with the Board at the March Board meeting following a review by the Nominations and Governance Committee. Each Board committee undertook a detailed self-assessment questionnaire and the respective chairman reported feedback to the Board at the Board meeting in March. The Senior Independent Director led the review of the performance of the Chairman. The Board 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 evaluations found the Board committees were working well. As a result of recommendations made in this year’s Board performance evaluation, each Board meeting is now preceded by a meeting of the Chairman and non-executive directors; more time is being given during Board meetings to discuss organic growth opportunities; and more opportunities are being given to directors to visit local markets and various Group businesses. The Board will continue to review its procedures, its effectiveness and development in the financial year ahead. Annually, the Nominations and Governance Committee reviews performance of the Executive Committee and reports the output to the Board. Re-election of directors With the exception of Sir John Buchanan and Michel Combes who are retiring from the Board, all the directors submit themselves for re-election at the AGM to be held on 24 July 2012. 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 2012 continue to be effective and that the Company should support their re-election. 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 which is managed by the Company Secretary. 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.

Business review Performance Governance Financials Additional information

Board committees
The Board has a Nominations and Governance Committee, an Audit and Risk Committee and a Remuneration Committee, each of which has formal terms of reference approved by the Board which can be found on our website at www.vodafone.com/governance or obtained from the Company Secretary. Further biographical details of the members of each of the committees can be found on pages 60 to 62 or at www.vodafone.com/board. 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.

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Nominations and Governance Committee
“The Nominations and Governance Committee continues its work of ensuring the Board composition is right and that our governance is effective.”

In March the Committee reviewed the output from the evaluations of the Board and committees’ performance in the 2011 financial year (see “Performance evaluation” on page 67 for further information). A boardroom diversity policy was introduced during the financial year. The Board acknowledges that diversity extends beyond the boardroom and supports management in their efforts to build a diverse organisation throughout the Group. It endorses the Company’s policy to attract and develop a highly qualified and diverse workforce; to ensure that all selection decisions are based on merit and that all recruitment activities are fair and non-discriminatory. The policy acknowledges the importance of diversity, including gender, to the effective functioning of the Board and focuses on our aspiration to have a minimum of 25% female representation on the Board by 2015. Subject to securing suitable candidates, when recruiting additional directors and/or filling vacancies which arise when directors do not seek re-election, we will seek to appoint new directors who fit the skills criteria and gender balance that is in line with the Board’s aspiration. We continue to focus on encouraging diversity of business skills and experience, recognising directors with diverse skills sets, capabilities and experience gained from different geographic and cultural backgrounds enhance the Board. (Further information, including the proportions of women in senior management, is shown in “Our people” on pages 34 to 35, and within the organisation overall, is contained in our 2012 sustainability report at www.vodafone.com/sustainability). This year, when reviewing the re-election of directors at the AGM in July, the Committee took account of the fact that Luc Vandevelde will have served nine years as of 31 August 2012. The Code suggests that length of tenure is a factor to consider when determining the independence of non-executive directors. The Board has considered the matter carefully and considers that Luc Vandevelde remains independent. His length of service and resulting high degree of knowledge and understanding of the Company, are of great benefit to shareholders and add significantly to the strength of the Board. In the year ahead the Committee will continue to assess what enhancements should be made to the Board’s and committees’ composition and will continue to monitor developments in corporate governance to ensure the Company remains at the forefront of good governance practices.

Chairman: Gerard Kleisterlee (Company Chairman) Members: Sir John Buchanan (Deputy Chairman and Senior Independent Director) Luc Vandevelde (Independent non-executive director) Anthony Watson (Independent non-executive director) Key objective: to ensure the Board comprises individuals with the requisite skills, knowledge and experience to ensure that it is effective in discharging its responsibilities. Responsibilities: aa leads the process for identifying and making recommendations to the Board regarding candidates for appointment as directors, giving full consideration to succession planning and the leadership needs of the Group; aa makes recommendations to the Board on the composition of the Nominations and Governance Committee and the composition and chairmanship of the Audit and Risk, and Remuneration Committees; aa regularly reviews and makes recommendations in relation to the structure, size and composition of the Board including the diversity and balance of skills, knowledge and experience and the independence of the non-executive directors; aa oversees the performance evaluation of the Board, its committees and individual directors (see page 67); aa reviews the tenure of each of the non-executive directors; and aa is responsible for the oversight of all matters relating to corporate governance, bringing any issues to the attention of the Board. Membership The Committee which I chair comprises a majority of independent, non-executive directors. Effective from the conclusion of the AGM on 24 July 2012, Sir John Buchanan will retire and Philip Yea will join the Committee. No one other than a member of the Committee is entitled to be present at its meetings; however, other non-executive directors, the Chief Executive and external advisors may be invited to attend. In the event of matters arising concerning my membership of the Board, I would absent myself from the meeting as required and the Board’s Senior Independent Director would take the chair. Main activities of the Committee during the year During the year the Committee met three times. The Committee leads the process for appointments to the Board. There is a formal, rigorous and transparent procedure for the appointment of new directors to the Board. Candidates are identified and selected on merit against objective criteria and with due regard to the benefits of diversity on the Board, including gender. In July a review of executive succession plans was undertaken. In addition, the Committee received a commentary from the Chief Executive concerning the performance of the senior executives.

Gerard Kleisterlee On behalf of the Nominations and Governance Committee 22 May 2012

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Audit and Risk Committee
“Having broadened our scope during the year, the Committee will focus on risk management in addition to its existing role in relation to the integrity of the Group’s financial reporting, the external audit process and the appropriateness of the Group’s system of internal controls. It will continue to evolve its activities in light of guidance from regulators and market conditions.” Chairman and financial expert: Nick Land (Independent non-executive director) Members: Sir John Buchanan (Deputy Chairman and Senior Independent Director) Alan Jebson (Independent non-executive director) Anne Lauvergeon (Independent non-executive director) Key objective: to provide effective financial governance over the appropriateness of the Group’s financial results, the performance of both the internal audit function and the external auditor, and the management of the Group’s systems of internal control, business risks and related compliance activities. Responsibilities: aa reviewing our financial results announcements and financial statements; aa monitoring compliance with relevant statutory and listing requirements; aa reporting to the Board on the quality and acceptability of our accounting policies and practices including critical accounting policies and practices; aa overseeing the relationship with the external auditor; aa reviewing correspondence from regulators regarding our financial reporting; aa reviewing the scope, extent and effectiveness of the activity of the Group internal audit department; aa playing an active role in monitoring our compliance efforts in respect of section 404 of the Sarbanes-Oxley Act; aa consider and make recommendations to the Board on the nature and extent of the significant risks the Group is willing to take in achieving its strategic objectives; aa overseeing the Group’s compliance processes; and aa performing in-depth review of specific areas of financial reporting, risk and internal controls, as determined by the Committee. Membership The Committee comprises independent non-executive directors under my chairmanship and meets at least four times during the year. The Committee members have been selected to provide the wide range of financial and commercial expertise necessary to fulfil the Committee’s duties. The Board considers that I have recent and relevant financial experience, as required by the Code, and has designated me as its financial expert on the Committee for the purposes of the US SarbanesOxley Act. With effect from the close of the AGM in July, Sir John Buchanan will retire and Anthony Watson will join the Committee.

Meetings are attended by the independent non-executive directors and, by invitation, the Chief Executive, the Chief Financial Officer, the Group Financial Controller, the Group Financial Reporting Director and the Group Audit Director. The Group Compliance Director and other relevant people from the business are also invited to attend certain meetings in order to provide insight and enhance the Committee’s awareness of key issues and developments. I also invite our external auditor, Deloitte LLP, to each meeting. The Committee regularly meets separately with Deloitte LLP, the Chief Financial Officer and the Group Audit Director without other management being present. Main activities of the Committee during the year The Committee assists the Board in carrying out its responsibilities in relation to financial reporting requirements, risk management and the assessment of internal controls. It also reviews the effectiveness of the Company’s internal audit function and manages the Company’s relationship with the external auditor. Following agreement with the Board in July 2011, the scope of the Committee’s work was broadened and it is now responsible for considering and making recommendations to the Board on the nature and extent of the significant risks the Group is willing to take in achieving its strategic objectives. Its role in relation to the review of risk management processes has also been extended. Here the Committee aims to focus both on monitoring the Company’s approach to the management of existing risks together with emerging risks that arise by virtue of the dynamic markets in which the company operates. In addition, the Committee’s activities in the year have placed additional focus on the Group’s processes for monitoring and sustaining compliance with the laws and regulations applicable to the Group as well as its own internal policies. As a result of the above, the Committee’s terms of reference have been updated and can be found on our website www.vodafone.com/governance. At its four meetings during the year, the Committee focused on: Financial reporting The primary role of the Committee in relation to financial reporting is the review with both management and the external auditor of the appropriateness of the half-year and annual financial statements concentrating on, amongst other matters: aa the quality and acceptability of accounting policies and practices; aa the clarity of the disclosures and compliance with financial reporting standards and relevant financial and governance reporting requirements; aa material areas in which significant judgements have been applied or there has been discussion with the external auditor; and aa any correspondence from regulators in relation to our financial reporting. To aid our review, the Committee considered reports from the Group Financial Controller and the Group Financial Reporting Director and also reports from the external auditor on the outcomes of their half-year review and annual audit. As a Committee we support Deloitte LLP in displaying the necessary professional scepticism their role requires. The primary areas of judgement considered by the Committee in relation to the 2012 accounts were: aa the assumptions underlying impairment testing of the Group’s goodwill and intangible assets, particularly in relation to the Group’s interests in southern Europe; aa in relation to taxation, both the provisioning for potential current tax liabilities and the appropriateness of deferred tax asset recognition in relation to accumulated tax losses; and aa the level of provisioning appropriate for contingent and other liabilities in a number of our markets.

Business review Performance Governance Financials Additional information

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Internal control and risk management During the year we 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. The agenda was driven primarily by the Group’s assessment of its principal risks and uncertainties, as set out on pages 51 to 53. The Committee also received regular updates from the Group’s Compliance Director on compliance related activities where throughout the year the Group has continued to expand its work to formalise a more centralised approach to the co-ordination of these activities. Further we 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. Oversight of the Group’s compliance activities in relation to section 404 of the Sarbanes-Oxley Act also fell within the Committee’s remit. The Committee conducted a number of in-depth reviews in the year covering the control environments and risk management processes in a number of our markets, the appropriateness of the Group’s whistle blowing procedures, ensuring arrangements are in place for the independent investigation and follow up of such matters, corporate security and two sessions on information security. In light of recent economic conditions in the eurozone the Committee also undertook a detailed review of the country and currency risks facing the business and the plans in place to mitigate the Group’s exposures. We have summarised the main elements of this review on page 53 in view of the significance of the Group’s operations in Europe. We view these reviews as being critical to the role of the Committee as they allow us to meet key business leaders responsible for these areas and provide independent challenge to their activities. Internal audit A substantial agenda item at each Committee meeting is the monitoring and reviewing of the scope, extent and effectiveness of the activity of the Group Internal Audit department. Reports from the Group Audit Director usually include updates on audit activities, progress of the Group audit plan, the results of any unsatisfactory audits and the action plans to address these areas, and resource requirements of the internal audit department. Further we receive summaries of investigations into known or suspected fraudulent activities by both third parties and employees. We hold private discussions with the Group Audit Director as necessary throughout the year and I also meet with the Group Audit Director outside the formal committee process. External audit The effectiveness of the external audit process is dependent on appropriate audit risk identification and at the start of the audit cycle we receive from Deloitte LLP a detailed audit plan, identifying their assessment of these key risks. For 2012 the primary risks identified were in relation to goodwill impairment, provisioning for current tax liabilities and deferred tax asset recognition due to the inherent management judgement required in these areas. These risks are tracked through the year whenever we receive reporting from Deloitte LLP. We hold private meetings with the external auditor at each Committee meeting to provide additional opportunity for open dialogue and feedback from the Committee and the auditor without management being present. Matters typically discussed include the auditor’s assessment of business risks and management activity thereon, the transparency and openness of interactions with management, confirmation that there has been no restriction in scope placed on them by management, independence of their audit and how they have exercised professional scepticism. I also meet with the external audit partner outside the formal committee process throughout the year. Appointment and independence The Committee considers the reappointment of the external auditor, including the rotation of the audit partner, each year and also assesses their independence on an ongoing basis. The external auditor is required to rotate the audit partner responsible for the Group audit every five years. The current lead audit partner has been in place for three years.

Deloitte LLP have been the Company’s external auditor since its stock market listing in 1988; as part of the Committee’s review of the objectivity and effectiveness of the audit process an assessment was undertaken in 2011 as to whether the Group should consider putting the audit engagement out to tender. This process included the re-proposal by Deloitte LLP of their audit approach. After extensive discussion, the Committee felt a tender was not necessary at present and provided the Board with its recommendation to the shareholders on the reappointment of Deloitte LLP as external auditor for the year ended 31 March 2012. This position will be kept under annual review. In accordance with section 489 of the Companies Act 2006, a resolution proposing the reappointment of Deloitte LLP as our auditor will be put to the shareholders at the 2012 AGM. There are no contractual obligations restricting the Committee’s choice of external auditor and we do not indemnify our external auditor. In its assessment of the independence of the auditor and in accordance with the US Public Company Accounting Oversight Board’s standard on independence, the Committee receives 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. During the year Deloitte LLP and member firms of Deloitte Touche Tohmatsu Limited charged the Group £8 million (2011: £9 million, 2010: £9 million) for audit and audit related services. The Committee approved the fees for audit services for 2012 after a review of the level and nature of work to be performed and after being satisfied by Deloitte LLP that the fees were appropriate for the scope of the work required. Non-audit services As a further safeguard to help avoid the objectivity and independence of the external auditor becoming compromised, the Committee has a formal policy governing the engagement of the external auditor to provide non-audit services. This policy precludes Deloitte LLP from providing certain services such as valuation work or the provision of accounting services. This policy was extended in December 2011 and now sets the presumption that Deloitte LLP should only be engaged for non-audit services where there is no legal or practical alternative supplier. For certain specific permitted services the Committee has pre-approved that Deloitte LLP can be engaged by management, subject to the policies set out above, and subject to specified fee limits for individual engagements and fee limits for each type of specific service. For all other services, or those permitted services that exceed the specified fee limits, I as Chairman, or in my absence another member, can pre-approve permitted services. During the year Deloitte LLP and member firms of Deloitte Touche Tohmatsu Limited charged the Group £1 million (2011: £1 million, 2010: £1 million) for non-audit assignments. An analysis of the fees paid to Deloitte LLP, for both audit and non audit services, can be found in note 4 to the consolidated financial statements. Non-audit services performed during the year by Deloitte LLP were primarily in relation to non-audit related compliance matters, corporate finance activities and debt issuance. Committee evaluation The Committee conducts a formal review of its effectiveness annually and concluded that its performance was effective. A number of changes have been agreed to be implemented for the forthcoming year. Details of the Board and Committee evaluation process can be found under “Performance evaluation” on page 67.

Nick Land On behalf of the Audit and Risk Committee 22 May 2012

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Remuneration Committee
“Our remuneration policies and executive pay packages are designed to be competitive and drive behaviour in order to achieve long-term strategic goals. When making decisions we are mindful of the wider economic conditions and shareholder feedback.” Chairman: Luc Vandevelde (Independent non-executive director) Members: Samuel Jonah (Independent non-executive director) Anthony Watson (Independent non-executive director) Philip Yea (Independent non-executive director) Key objective: responsibility to the Board for the assessment and recommendation of policy on executive remuneration and packages for the individual executive directors. Responsibilities: aa determining, on behalf of the Board, the policy on the remuneration of the Chairman, the executive directors and the senior management team; aa determining the total remuneration packages for these individuals including any compensation on termination of office; aa operating within recognised principles of good governance; and aa preparing an annual report on directors’ remuneration. Membership The members of the Committee are independent non-executive directors. Following the AGM in July, Renee James will join and Anthony Watson will step down from the Committee. The Chairman and Chief Executive may attend the Committee’s meetings by invitation but they do not attend when their individual remuneration is discussed. No director is involved in deciding his or her own remuneration. Main activities of the Committee during the year The Committee met five times during the year. A detailed report to shareholders from the Committee on behalf of the Board in which, amongst other things, I have included a description of the Committee’s activities during the year, is contained in “Directors’ remuneration” on pages 74 to 87.

Shareholder engagement
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. Investor relations programme The programme includes: aa formal presentations of full year and half-year results, and interim management statements; aa briefing meetings with major institutional shareholders in the UK, the US and in Continental Europe after the half-year results and preliminary announcement;

Business review Performance

aa regular meetings between institutional investors and analysts, and the Chief Executive and Chief Financial Officer to discuss business performance; aa meetings between major shareholders and the Chairman on an ongoing basis; aa hosting investors and analysts sessions at which senior management from relevant operating companies are present; aa attendance by senior executives across the business at relevant meetings and conferences throughout the year; aa analysing and approaching new geographies to actively market the business to new investors; aa responding to enquiries from shareholders and analysts through our Investor Relations team; and aa www.vodafone.com/investor which is a section dedicated to shareholders on our website. Overall responsibility for ensuring that there is effective communication with investors, and that the Board understands the views of major shareholders on matters such as governance and strategy, rests with the Chairman who makes himself available to meet shareholders for this purpose. The Senior Independent Director and other members of the Board are also available to meet major investors on request. The principal communication with private investors is via the website, annual report and through the AGM, an occasion which is attended by all of our directors and at which all shareholders present are given the opportunity to question the Chairman, the Chairmen of the Committees and the rest of the Board. After the AGM shareholders can meet informally with directors. A summary presentation of results is 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 the Regulatory News Service. Financial and other information is made available on our website (www.vodafone.com/ investor) which is regularly updated. A summary of our share and control structures is set out in “Shareholder information” on pages 149 to 156.

Governance Financials

Luc Vandevelde On behalf of the Remuneration Committee 22 May 2012

Additional information

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Political donations
No political donations under the Companies Act 2006 have been made during the year. It is our Group policy not to make political donations or incur political expenditure as those expressions are normally understood.

In addition, the Board reviews any reports from the external auditor presented to the Audit and Risk Committee and management in relation to internal financial controls. Any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. Management is required to apply judgement in evaluating the risks we face in achieving our objectives, in determining the risks that are considered acceptable to bear, in assessing the likelihood of the risks concerned materialising, in identifying our ability to reduce the incidence and impact on the business of risks that do materialise, and in ensuring that the costs of operating particular controls are proportionate to the benefit. Review of effectiveness The Board and the Audit and Risk Committee have reviewed the effectiveness of the internal control system including financial, operational and compliance controls, and risk management in accordance with the Code for the period from 1 April 2011 to 22 May 2012 (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 SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. The directors, the Chief Executive and the Chief Financial Officer have evaluated the effectiveness of the disclosure controls and procedures and, based on that evaluation, have concluded that the disclosure controls and procedures are effective at the end of the period covered by this document. Going concern The going concern statement required by the Listing Rules and the Code is set out in the “Directors’ statement of responsibility” on page 89. Risk management An overview of the Group’s framework for identifying and managing risk, both at an operational and strategic level, is set out on page 39. Annual report The directors are responsible for preparing the annual report.

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 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 89 for management’s report on internal control over financial reporting. Monitoring and review activities There are clear processes for monitoring the system of internal control and reporting any significant control failings or weaknesses together with details of corrective action. These include: aa 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 and Risk Committee, and the Board; aa ongoing review of the appropriateness of disclosures undertaken by the Group’s Disclosure Committee, on behalf of the Chief Executive and the Chief Financial Officer, and an annual report from the Group’s Disclosure Committee to the Chief Executive and the Chief Financial Officer regarding the effectiveness of the Group’s disclosure controls and procedures; and aa periodic examination of business processes on a risk basis including reports on controls, throughout the Group, undertaken by the Group Internal Audit department which reports directly to the Audit and Risk Committee.

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US listing requirements
As Vodafone’s American depositary shares are listed on the NASDAQ Stock Market LLC (‘NASDAQ’), we are required to disclose a summary of any material differences between the corporate governance practices we follow and those of US companies listed on NASDAQ. The corporate governance practices of the Company are primarily based on UK requirements but substantially conform to those required of US companies listed on NASDAQ. The material differences are as follows: Independence aa Different tests of independence for Board members are applied under the Code and the NASDAQ rules. aa The Board is not required to, and has not explicitly taken into consideration, NASDAQ’s detailed definitions of independence as set out in the NASDAQ rules. aa In accordance with the Code, the Board has carried out an assessment based on the requirements of the Code and has determined in its judgement that all of the non-executive directors (who make up the majority of the Board) are independent within those requirements. Committees aa The 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. aa Our Nominations and Governance Committee is chaired by the Chairman of the Board and its other members are independent non-executive directors. Our Remuneration Committee is composed entirely of independent non-executive directors. aa The Audit and Risk Committee is composed entirely of non-executive directors, each of whom the Board has determined to be independent, as set out above, and who also meet the requirements of the Exchange Act. aa We have terms of reference for our Nominations and Governance, Audit and Risk and Remuneration Committees, which comply with the requirements of the Code and are available on our website (www. vodafone.com/governance). These terms of reference are generally responsive to the relevant NASDAQ rules but may not address all aspects of these rules.

Code of conduct Under the NASDAQ rules, US companies must adopt a code of conduct applicable to all directors, officers and employees that complies with the definition of a “code of ethics” set out in section 406 of the Sarbanes-Oxley Act. We have adopted a Code of Ethics that complies with section 406 which is applicable only to the senior financial and principal executive officers, and which is available on our website (www.vodafone.com/governance). We have also adopted a separate Code of Conduct which applies to all employees. Quorum The quorum required for shareholder meetings, in accordance with our articles of association, is two shareholders regardless of the level of their aggregate share ownership, while US companies listed on NASDAQ are required to have a minimum quorum of 33.33% of the shareholders of ordinary shares for shareholder meetings in accordance with the NASDAQ rules. Related party transactions aa In lieu of obtaining an independent review of related party transactions for conflicts of interests in accordance with the NASDAQ rules, we seek shareholder approval for related party transactions that meet certain financial thresholds or where transactions have unusual features in accordance with the Listing Rules issued by the FSA in the UK (the ‘Listing Rules’), the Companies Act 2006 and our articles of association. aa Further, we use the definition of a “transaction with a related party” as set out in the Listing Rules, which differs in certain respects from the definition of “related party transaction” in the NASDAQ rules. Shareholder approval aa We comply with the Listing Rules and the NASDAQ rules, when determining whether shareholder approval is required for proposed transactions. aa Under the NASDAQ rules, whether shareholder approval is required for transactions depends on, among other things, the percentage of shares to be issued or sold in connection with a transaction. Under the Listing Rules, 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.

Business review Performance Governance Financials Additional information

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Letter from the Remuneration Committee
Dear shareholder The subject of executive reward has been, and continues to be, an issue of concern both to shareholders and the wider public. In September the department of Business Skills and Innovation (‘BIS’) issued two consultative papers on the subject and although Vodafone shareholders seem satisfied with the present remuneration report, we have incorporated a number of amendments to it to respond to some legitimate concerns. Specifically we have divided the report into the following discrete sections to make it clearer and easier to understand: aa Page 75. The composition and activities of the Remuneration Committee. aa Pages 76 to 77. A summary of remuneration for the 2012 financial year including a table that shows a single figure for total remuneration paid during the year along with a detailed justification of any incentive payments. aa Pages 77 to 81. A forward-looking statement setting out our reward philosophy, details of our current reward packages and a table that sets out the value of these packages under different performance scenarios. aa Pages 82 to 87. All other disclosures currently required by statute or best practice guidelines. Summary of key decisions on remuneration Our remuneration policies and executive pay packages are designed to be competitive and drive behaviour in order to achieve long-term strategic goals such as the £20.9 billion in adjusted free cash flow produced over the last three year period and rewarded under our long-term plan. When making decisions we are mindful of the wider economic conditions and shareholder feedback as well as the need to adapt to our market and competitive environment. The Remuneration Committee receives regular updates on corporate governance as well as pay increase budgets and incentive plan payouts in our local markets. We also consider the total amount spent on executive pay (as detailed on page 76) in relation to the dividends and profit for the financial year. As can be seen from the enclosed chart for 2012, in both cases executive pay at Vodafone was very small in comparison. Total cost of executive pay in relation to dividends and adjusted profit attributable to equity shareholders
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Dividends Profit Executive pay £m

The key decisions and rationale made during the year are described in more detail on the following pages but in summary were: aa Awarding no pay increases for the executive directors in the coming year; aa Continuing our practice of setting stretching performance targets thus ensuring pay is firmly linked to performance; aa Approving an annual bonus payment for the year of 93.4% of target; aa Approving the vesting of the 2008 share award (that vested in July 2011) at 30.6% of maximum; aa Reducing the value of the maximum possible payments on future long-term incentive awards from four times the target value to three times the target value; and aa Further strengthening the share ownership culture. As at 31 March the Executive Committee collectively owned shares with a value of £22 million. Vittorio Colao personally held shares with a value of just under six times his salary and, by committing to hold the shares that vest in July 2012, this will be further increased to over ten times. Consultation with shareholders As in previous years the Remuneration Committee has had dialogue with its shareholders – the largest shareholders are invited to meet with me in person or by video conference and all letters or emails from other shareholders are always replied to. The Remuneration Committee continues to take an active interest in investors’ views and were delighted that last year the remuneration report received a 96.12% vote in favour. We sincerely hope to receive your continued support at the AGM on 24 July 2012.

Luc Vandevelde Chairman of the Remuneration Committee 22 May 2012

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Remuneration Committee
In this section we give details of the composition and activities of the Remuneration Committee. The Remuneration Committee is comprised to exercise independent judgement and consists only of the following independent nonexecutive directors: Chairman Committee members Luc Vandevelde Renee James (from 24 July 2012) Samuel Jonah Anthony Watson (until 24 July 2012) Philip Yea

Meetings The Remuneration Committee had five meetings during the year. The principal agenda items were as follows: aa a review of the total compensation packages of the executive directors and the most senior management of the company; aa approval of the 2012 Global Short-Term Incentive bonus (‘GSTIP’) framework and targets; aa approval of the GSTIP payout for the 2011 performance period; aa a review of the design of the Global Long-Term Incentive plan (‘GLTI’) as well as setting the framework and target levels for the 2012 grant; aa approval of the July 2008 GLTI vesting levels;

Business review

The Remuneration Committee regularly consults with the Chief Executive and the Group HR Director on various matters relating to the appropriateness of awards for executive directors and senior executives, though they are not present when their own compensation is discussed. In addition, the Group Reward and Policy Director provides a perspective on information provided to the Committee, and requests information and analyses from external advisors as required. The Deputy Group Company Secretary advises the Committee on corporate governance guidelines and acts as secretary to the Committee. External advisors PricewaterhouseCoopers LLP (‘pwc’) pwc were appointed by the Remuneration Committee in 2007. During the year they provided advice on market practice, governance, performance analysis and plan design. pwc also provide a range of services to Vodafone globally including international mobility, tax, technology, finance, operations and compliance. As noted in his biographical details on page 62 of this annual report, Philip Yea sits on an advisory board for pwc. In light of their role as advisor to the Remuneration Committee on remuneration matters, the Committee continue to consider this position and have determined that there is no conflict or potential conflict arising. Towers Watson Towers Watson were appointed by the Remuneration Committee in 2007. During the year they provided the Committee with market data on executive rewards. They also provide pensions and benefit administration, and reward consultancy services to the company.

Performance

aa approval of the granting of share awards to other levels of management; aa a review of the directors’ remuneration report; aa a review of the share ownership targets within the company; aa a review of the UK corporate governance environment, the implications for Vodafone and our response to Government consultations on executive remuneration; aa a risk assessment of the design of incentive plans; and aa a review of the Chairman’s fees. On an annual basis, the Committee’s effectiveness is reviewed as part of the evaluation of the Board.

Governance Financials Additional information

76 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Summary of remuneration for the 2012 financial year
In this section we summarise the pay packages awarded to our executive directors for performance in the 2012 financial year versus 2011. Specifically we have provided a table that shows all remuneration that was received by the individual during the year. In response to the debate on simplifying remuneration disclosure we have included a single total remuneration value for the year. Although there are some technical difficulties in arriving at a single value, particularly concerning the timing and valuation of awards which may not be aligned with the financial year end, we have attempted to provide the data in a logical format along with accompanying explanatory notes. Specifically we have included the value of the short-term incentive (‘GSTIP’) that was earned during the year but paid out in the following year and the value of long-term incentive (‘GLTI’) that vested and paid out during the year. For completeness the GLTI that vests in the following year has also been included in a separate table below although in the case of the award vesting in June 2012, the value can only be estimated at this stage. Total remuneration for the 2012 financial year
2012 £’000 Vittorio Colao 2011 £’000 2012 £’000 Andy Halford 2011 £’000 2012 £’000 Michel Combes 2011 £’000 2012 £’000 Stephen Pusey 2011 £’000

Salary/fees GSTIP GLTI vesting during the year 1 Cash in lieu of GLTI dividends2 Cash in lieu of pension Benefits /other 3 Total

1,099 1,037 3,745 545 330 24 6,780

1,043 1,323 590 92 313 55 3,416

700 654 2,289 333 210 30 4,216

694 869 451 70 208 27 2,319

785 728 1,776 326 236 25 3,876

763 745 – – 229 22 1,759

569 537 758 110 171 21 2,166

538 683 186 29 161 31 1,628

Notes: 1 The value shown in the 2012 column is for the award which vested on 29 July 2011 and is valued using the closing share price on that day of 171.7 pence; the value shown in the 2011 column is for the award which vested on 24 July 2010 using the closing share price on the first trading day after the award vested (26 July 2010) of 151.5 pence. Michel Combes’ award did not vest until 12 February 2012 and is valued using the closing share price on that day of 174.5 pence. 2 Under the GLTI rules, participants receive a cash award equivalent to any dividends that would have been paid on the matching shares during the performance period. 3 Includes amounts in respect of cost of living allowance, private healthcare and car allowance.

GLTI awards with a performance period ending on the 31 March of the year under review but that do not vest until the following financial year 1:
2012 Vittorio Colao 2011 2012 Andy Halford 2011 2012 Michel Combes 2011 2012 Stephen Pusey 2011

GLTI base shares GLTI matching shares Total value of GLTI awards £’000

4,564,995 1,817,866 10,991

1,262,735 918,353 3,745

2,524,934 1,676,756 7,235

698,428 634,935 2,289

2,771,771 533,854 5,692

792,473 225,497 1,776

1,872,818 510,879 4,105

288,292 153,258 758

Note: 1 The awards summarised in this table represent those that vested after the close of the financial year, but are based on the three-year performance period ended at 31 March 2012 for the awards shown in the 2012 column, and 31 March 2011 for the awards shown in the 2011 column. The awards listed under 2012 will not vest until 30 June 2012. We valued the award using a closing share price on 31 March 2012 of 172.2 pence, however, the final award value will not be certain until the award vests.

In light of the high value of the award that will vest in June, Vittorio Colao has committed to hold 100% of the shares that vest (net of those sold to cover tax) for an additional two years. Similarly the other executive directors have all agreed to hold 50% (net of those sold to cover tax) for the same period. Below we summarise our performance over the financial year, and three-year performance period ended 31 March 2012, which resulted in the remuneration disclosed in the above tables. Details of the GSTIP payout In the table below we describe our achievement against each of the performance measures in our annual bonus plan (‘GSTIP’) and the resulting total incentive payout level for the year ended 31 March 2012 of 93.4%. Vittorio Colao, Andy Halford and Stephen Pusey were measured purely on Group performance whilst Michel Combes was measured on a combination of Group and Europe region performance. The corresponding total incentive payout for Michel Combes was 92.1%. Details of how this works can be found on page 79.
Payout at target performance 100% Payout at maximum performance 200%

Performance measure

Actual payout Commentary

Service revenue EBITDA Adjusted free cash flow Competitive performance assessment Total incentive payout level

25% 25% 20% 30% 100%

50% 50% 40% 60% 200%

25.8% 24.8% 8.5% 34.3% 93.4%

Organic service revenue up 1.5% in the year. In-line with market guidance for the year. Within the range of market guidance. Outperformance of key competitors in most markets. Ranked first or second for net promoter score in over 70% of our markets.

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Details of the GLTI vesting in July 2011 Adjusted free cash flow for the three-year period ended on 31 March 2011 was £16.9 billion which compares with a target of £17.5 billion and a maximum of £19.5 billion. The graph below shows that our TSR performance against our peer group for the same period resulted in an outperformance of the median by 3.9% a year. Using our combined payout matrix, this performance resulted in a payout of 30.6% of the maximum. These shares vested on 29 July 2011. 2008 GLTI award: TSR performance (growth in the value of a hypothetical $100 holding over the performance period)
110 100 90 80 70 60 50 03/08
Vodafone Group

Details of the GLTI vesting in June 2012 Adjusted free cash flow for the three-year period ended on 31 March 2012 was £20.9 billion which compares with a target of £18.0 billion and a maximum of £20.5 billion The graph below shows that our TSR performance against our peer group for the same period resulted in an outperformance of the median by 18.5% a year. Using our combined payout matrix, this performance will result in a payout of 100% of the maximum. These shares will vest on 30 June 2012. 2009 GLTI award: TSR performance (growth in the value of a hypothetical $100 holding over the performance period)

Business review

109 100 93 88 84 72 63 56 09/08 03/09 85 73 63 78 72 76 74 95 94 94 83

200 180 160 140 120 100 80 100 03/09
Vodafone Group

167 151 134 114 111 110 09/09 128 125 03/10 134 128 114 09/10 03/11 129

171 161 133

181

Performance

142 110

09/09

03/10

09/10

03/11

09/11

03/12

Median of peer group

Outperformance of median of 9% p.a.

Median of peer group

Outperformance of median of 9% p.a.

In both cases the adjusted free cash flow performance is approved by the Remuneration Committee. The performance assessment in respect of the TSR outperformance of a peer group median is undertaken by pwc. Details of how the plan works can be found on page 79.

Summary of remuneration and performance for the 2013 financial year
In this forward-looking section we describe our reward principles along with a description of the elements of the reward package and an indication of the potential future value of this package for each of the executive directors. Principles of reward The principles of reward, as well as the individual elements of the reward package, are reviewed each year to ensure that they continue to support our Company strategy. These principles are set out below. Competitive reward assessed on a total compensation basis Vodafone wishes to provide a level of remuneration which attracts, retains and motivates executive directors of the highest calibre. Within the package there needs to be the opportunity for executive directors to achieve significant upside for truly exceptional performance. The package provided to the executive directors is reviewed annually on a total compensation basis i.e. single elements of the package are not reviewed in isolation. When the package is reviewed it is done so in the context of individual and Company performance, internal relativities, criticality of the individual to the business, experience, and the scarcity or otherwise of talent with the relevant skill set. The principal external comparator group (which is used for reference purposes only) is made up of companies of similar size and complexity to Vodafone, and is principally representative of the European top 25 companies and a few other select companies relevant to the sector. The comparator group excludes any financial services companies. When undertaking the benchmarking process the Remuneration Committee makes assumptions that individuals will invest their own money into the long-term incentive plan. This means that individuals will need to make a significant investment in order to achieve the maximum payout. Pay for performance A high proportion of total reward will be awarded through short-term and long-term performance related remuneration. This is demonstrated in the charts below where we see that at target payout over 70% of the package is delivered in the form of variable pay, which rises to over 86% if maximum payout is achieved. Fixed pay comprises base salary and pension contributions, while variable pay comprises the annual bonus and the long-term incentive opportunity assuming maximum co-investment and no movement in current share price.
 Fixed (Base salary + Pension)  Variable (Bonus + LTI)

Governance Financials

Fixed Chief Executive Target Maximum Other Executive Directors Target Maximum 27.8% 12.5% 29.5% 13.5%

Variable 72.2% 87.5% 70.5% 86.5 %

Additional information

78 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Equally important as the package design is the setting of the performance targets. The Remuneration Committee consistently set stretching targets which can be seen from the following table of historic payments under both the short- and long-term plans, and ensures that maximum or near maximum payouts are only delivered for exceptional performance.
Year GSTIP % of max GLTI % of max

Incentive targets linked to business strategy When designing our incentives, performance measures are chosen that support our strategic objectives as shown below:
Strategic objectives Supported by

2009 2010 2011 2012

49% 64% 62% 47%

0% 25% 31% 100%

Alignment to shareholder interests Share ownership is a key cornerstone of our reward policy and is designed to help maintain commitment over the long-term, and to ensure that the interests of our senior management team are aligned with those of shareholders. Executives are expected to build and maintain a significant shareholding in Vodafone shares as follows: aa Chief Executive – four times base salary; aa other executive directors – three times base salary; aa other Executive Committee members – two times base salary; and aa senior leadership team members (227 members) – one times base salary. In all cases executives have been given five years to achieve these goals. Current levels of ownership, and the date by which the goal should be achieved, are as shown below. These values do not include the value of the shares that will vest in June but which the directors have committed to hold for the next two years.
Goal as a % of salary Current % of salary held1 % of goal achieved Value of shareholding (£m)1 Date for goal to be achieved

Aiming to deliver organic service revenue growth of 1 – 4% a year until the year ended 31 March 2014, focusing on key areas of growth potential: mobile data, emerging markets, enterprise, total communications and new services. Delivering value and efficiency from scale – continuing to drive benefit from the Group’s scale advantage and maintain our focus on cost. Generate liquidity or free cash flow from non-controlled interests – aim to seek to maximise the value of non-controlled interests through generating liquidity or increasing free cash flow in order to fund profitable investments and enhance shareholders returns. Apply rigorous capital discipline to investment decisions – continuing to apply capital discipline to our investment decisions through rigorous commercial analysis and demanding investment criteria to ensure any investment in existing businesses or acquisitions will enhance value for shareholders.

Revenue and relative performance targets in the GSTIP.

EBITDA, adjusted free cash flow and relative performance targets in the GSTIP. The use of TSR as a performance measure in GLTI as well as the value of the underlying shares.

Adjusted free cash flow targets in both the GSTIP and GLTI as well as the TSR target in the GLTI.

Vittorio Colao Andy Halford Michel Combes Stephen Pusey

400% 300% 300% 300%

581% 653% 301% 263%

145% 218% 100% 88%

6.5 4.6 2.4 1.5

July 2012 July 2010 June 2014 June 2014

Note: 1 Based on a share price at 31 March 2012 of 172.2 pence and includes the post tax value of any unexercised options.

Collectively the Executive Committee including the executive directors own 13 million Vodafone shares, with a value of £22 million at 31 March 2012.

Assessment of risk Vodafone seeks to provide a structure of rewards that encourages acceptable risk taking and high performance through optimal pay mix, performance metrics and calibration, and timing. With that said, it is prudent practice to ensure that our reward programmes achieve this and do not encourage excessive or inappropriate risk taking. On a regular basis, the Remuneration Committee has considered the risk involved in the incentive schemes and is satisfied that the following design elements and governance procedures mitigate the principal risks: aa the heavy weighting on long-term incentives with overlapping performance periods which reward sustained performance; aa the proportionately higher incentive opportunity paid in shares rather than in cash; aa the need for a significant annual investment in company shares in order to fully participate in the long-term arrangements; aa the considerable weighting on non-financial measures in the short-term plan which provides an external perspective on our performance by focusing on customer satisfaction and performance relative to our competitors; aa the fact that executives do not participate in sales commission or uncapped incentive schemes; and aa the fact that the Committee has the ability to exercise discretion in determining the outcome of awards paid out or vesting. The Remuneration Committee will continue to consider the risks involved in the incentive plans on an ongoing basis.

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The remuneration package The table below summarises the main components of the reward package for executive directors.
Objective and practice Performance period Award size and performance conditions

Business review

Base salary

aa To attract and retain the best talent. aa Base salaries are reviewed annually and set on 1 July.

n/a

aa Salaries are reviewed against: aa level of skill, experience and scope of responsibilities of individual and business performance, economic climate and market conditions; and aa European peer group of comparably sized companies and other telecom businesses. aa Executive directors may choose to participate in the defined contribution pension scheme or to receive a cash allowance in lieu of pension. The cash payment or pension contribution is equal to 30% of annual gross salary. From 6 April 2011 contributions into the defined contribution pension scheme were restricted to £50,000 per annum. Any residual of the 30% pension benefit is delivered as a cash allowance. aa Company car or cash allowance worth £19,200 per annum. aa Private medical insurance. aa Chauffeur services, where appropriate, to assist with their role. aa Performance over the financial year is measured against stretching financial and non-financial performance targets set at the start of the financial year. aa Summary of the plan: aa service revenue (25%); aa EBITDA (25%); aa adjusted free cash flow (20%); and aa competitive performance assessment (30%). aa Bonuses can range from 0 – 200% of base salary, with 100% paid for on-target performance. Maximum is only paid out for exceptional performance. aa Performance over three financial years is measured against stretching targets set at the beginning of the performance period. aa Vesting is determined based on a matrix of two measures: aa adjusted free cash flow as our operational performance measure; and aa relative TSR as our external performance measure. aa Awards vest to the extent performance conditions are satisfied, three years from grant. An additional cash payment in lieu of dividends is also paid at vesting. aa The Chief Executive’s base award will have a target face value of 137.5% of base salary. The base award for the other executive directors will have a target face value of 110% of base salary. aa Minimum vesting is zero times and maximum vesting is three times the base award level. aa GLTI matching awards are subject to the same performance conditions as the main GLTI award and also receive an additional cash payment in lieu of dividends. aa Executive directors can co-invest up to their annual gross salary. aa Matching awards will be granted on a one-for-one basis at target performance. aa Minimum vesting is zero times and maximum vesting is three times the target award level.

Benefits

aa To aid retention and remain competitive within the market place.

n/a

Performance

Global Short-Term aa To motivate employees and incentivise delivery of performance over the Incentive Plan one-year operating cycle. (‘GSTIP’) aa Bonus levels and the appropriateness of measures and weightings are reviewed annually to ensure they continue to support our strategy. aa The annual bonus is paid in cash in June each year for performance over the previous financial year.

1 year

Governance

Global Long-Term aa To motivate and incentivise delivery of sustained performance over the Incentive Plan long-term. (‘GLTI’) base awards aa Award levels and the framework for determining vesting are reviewed annually to ensure they continue to support our strategy. aa Long-term incentive base awards consist of performance shares which are granted each year in June/July and vest three years later based on Group operational and external performance.

3 years

Financials

3 years Global Long-Term aa To support and encourage greater shareholder alignment through a high Incentive Plan level of personal financial commitment. (‘GLTI’) coinvestment aa Individuals may purchase Vodafone matching awards shares and hold them in trust for three years in order to receive additional performance shares in the form of a GLTI matching award. aa GLTI matching awards are granted each year in June/July in line with the investment made and vest three years later based on Group operational and external performance.

Additional information

80 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Base pay The Remuneration Committee considers the remuneration increases for the different groups of employees across all of our local markets and other relevant factors when assessing the pay of the executive directors. During its regular review of total compensation in March 2012, the Remuneration Committee decided not to award salary increases to the executive directors. Base salary levels will therefore remain unchanged from 1 July 2011.
Base pay £’000

Vittorio Colao Andy Halford Michel Combes Stephen Pusey

.

1,110 700 790 575

The target adjusted free cash flow level is set by reference to the Company’s three year plan and market expectations. The Remuneration Committee considers the targets to be critical to the Company’s long-term success and its ability to maximise shareholder value, and to be in line with the strategic goals of the Company. The Remuneration Committee also considers these targets to be sufficiently demanding with significant stretch where only outstanding performance will be rewarded with a maximum payout. It is worth noting that the targets for the award granted in the 2013 year are lower than those set for the 2012 financial year to reflect differing exchange rates, and the loss of dividend streams from the sale of SFR and China Mobile Limited. TSR outperformance 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 outperformance 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 2013, 2012, 2011 and 2010 financial years is: aa BT Group; aa Deutsche Telekom; aa France Telecom; aa Telecom Italia; aa Telefonica; and aa Emerging market composite (consists of the average TSR performance of Bharti, MTN and Turkcell). For awards made in the 2013, 2012, 2011 and 2010 financial years the relative TSR position will determine the performance multiplier. This will be applied to the adjusted free cash flow vesting percentage. There will be no multiplier until TSR performance exceeds median. Above median, the following table will apply (with linear interpolation between points):
Outperformance of peer group median Multiplier

It should be noted that the average increase for Group employees based in the UK was 2.5% to 3.0%. GSTIP The Remuneration Committee has reviewed the GSTIP and decided that no design changes were necessary for the coming year. GLTI As mentioned earlier, given concerns about the public acceptability of highly leveraged pay packages and their influence on risk taking behaviour, the Committee reduced the maximum leverage on the share awards to Executive Committee members from four times target to a maximum of three times target. Otherwise, the structure of both the base award and matching award, which will be granted in the 2013 financial year, will remain broadly unchanged from the awards granted in the 2012 financial year. The extent to which awards vest will continue to depend on two performance conditions: aa underlying operational performance as measured by adjusted free cash flow; and aa relative TSR against a peer group median. 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 free cash flow excluding: aa Verizon Wireless income dividends; aa the impact of any mergers, acquisitions and disposals; aa certain material one-off tax settlements; and aa foreign exchange rate movements over the performance period. The cumulative adjusted free cash flow target and range for awards in the 2013, 2012, 2011 and 2010 financial years are shown in the table below:
Vesting percentage 2013 2013 £bn Vesting percentage 2010-2012 2012 £bn 2011 £bn 2010 £bn

Median 65th percentile 80th percentile (upper quintile)

0.0% p.a. 4.5% p.a. 9.0% p.a.

No increase 1.5 times 2.0 times

Combined vesting matrix The combination of the two performance measures for the award granted in the 2013 financial year gives a combined vesting matrix as follows:
TSR performance Adjusted free cash flow measure Up to median 65th 80th

Threshold 50% 75% 100% Target 100% 150% 200% Maximum 150% 225% 300% The combined vesting percentages are applied to the target number of shares granted.

Performance

Threshold Target Maximum

50% 100% 150%

15.4 17.9 20.4

50% 100% 200%

16.70 19.20 21.70

18.00 20.50 23.00

15.50 18.00 20.50

Vodafone Group Plc Annual Report 2012

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Estimates of total future potential remuneration from 2013 pay packages The tables below provide estimates of the potential future remuneration for each of the executive directors based on the remuneration opportunity granted in the 2013 financial year. Potential outcomes based on different performance scenarios are provided for each executive director. Vittorio Colao, Chief Executive
£’000 12,000 10,000 8,000 6,000 4,000 2,000 0 Minimum Target Maximum
 Salary and benefits  GSTIP  GLTI base award

Business review

Andy Halford, Chief Financial Officer
GLTI matching award £’000 12,000 10,000 8,000 6,000 4,000 2,000 0 Minimum Target Maximum
 Salary and benefits  GSTIP  GLTI base award

GLTI matching award

Performance

Michel Combes, Regional CEO Europe
£’000 12,000 10,000 8,000 6,000 4,000 2,000 0 Minimum Target Maximum
 Salary and benefits  GSTIP  GLTI base award

Stephen Pusey, Chief Technology Officer
GLTI matching award £’000 12,000 10,000 8,000 6,000 4,000 2,000 0 Minimum Target Maximum
 Salary and benefits  GSTIP  GLTI base award

GLTI matching award

Governance

The assumptions underlying each scenario are described below. All scenarios aa Other benefits reflect those which were paid in the year to 31 March 2012, plus pension. aa Each executive is assumed to co-invest the maximum allowed under the GLTI, 100% of salary, and the GLTI matching award reflects this. aa The amounts shown for the GSTIP and GLTI are based on the salary disclosed on page 80. The actual amounts for the GLTI will be based on the share price on the date the award vests in 2015. They do not include an estimate of dividend equivalents which accumulate on the vested shares and are paid in cash to the executive after the award vests. Below threshold aa No pay for performance is payable. Target aa The target award opportunity for the GSTIP is 100% of base salary. aa The target levels of performance for the GLTI are discussed in detail on page 80. We assumed that TSR performance was at median. Maximum aa Two times the target award opportunity is payable under the GSTIP. aa The maximum levels of performance for the GLTI are discussed in detail on page 80. We assumed that TSR performance was at or above the 80th percentile.

Financials Additional information

82 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Other considerations
In this section we include all other disclosures that are currently required by statute or good practice guidelines. Cascade to senior management The principles of the reward policy for executive directors are cascaded, where appropriate, to the other members of the Executive Committee as set out below.
Cascade of policy to Executive Committee – 2012 financial year

All-employee share plans The executive directors are also eligible to participate in the all-employee plans.
Summary of plans

Total remuneration and base salary Methodology consistent with the executive directors. Annual bonus The annual bonus is based on the same measures. For some individuals these are measured within a region rather than across the whole Group. 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. Service contracts of executive directors The Remuneration Committee has determined that after an initial term of up to two years’ duration executive directors’ contracts should thereafter have rolling terms and be terminable on no more than 12 months notice. The table below summarises the key elements of their service contract:
Provision Detailed items

Sharesave The Vodafone Group 2008 Sharesave Plan is an HM Revenue & Customs (‘HMRC’) approved scheme open to all staff permanently employed by a Vodafone Company in the UK as of the eligibility date. Options under the plan are granted at up to a 20% discount to market value. Executive directors’ participation is included in the option table on page 85. Share Incentive Plan The Vodafone Share Incentive Plan is an HMRC approved plan open to all staff permanently employed by a Vodafone Company in the UK. Participants may contribute up to a maximum of £125 per month (or 5% of salary if less) which the trustee of the plan uses to buy shares on their behalf. An equivalent number of shares are purchased with contributions from the employing company. UK-based executive directors are eligible to participate. Dilution All awards are made under plans that incorporate dilution limits as set out in the guidelines for share incentive schemes published by the Association of British Insurers. The current estimated dilution from subsisting executive awards is approximately 3.1% of the Company’s share capital at 31 March 2012 (3.1% at 31 March 2011), whilst from all employee share awards it is approximately 0.3% (0.3% at 31 March 2011). This gives a total dilution of 3.4% (3.4% at 31 March 2011). Funding A mixture of newly issued shares, treasury shares and shares purchased in the market by the employee benefit trust are used to satisfy share-based awards. This policy is kept under review. TSR performance The following chart is included in order to be compliant with the requirements of the large and medium sized companies and Groups (Accounts and Reports) Regulations 2008. Data was provided by FTSE and DataStream and shows performance of the Company relative to the FTSE 100 index over a five year period, of which we were a constituent throughout the year. It should be noted that the payout from the long-term incentive plan is based on the TSR performance shown in the graph on page 77 and not on the graph below. Five year historical TSR performance growth in the value of a hypothetical £100 holding over five years
175 150 125 100 75 50 03/07
Vodafone

Notice period Retirement date Termination payment

12 months Normal retirement date Up to 12 months salary Bonus paid up to termination day Entitlements under incentive plans and benefits that are consistent with the terms of such plans Remuneration Salary, pension and benefits Company car or cash allowance Participation in the GSTIP, GLTI and the employee share schemes Non-competition During employment and for 12 months thereafter
Date of service agreement

Vittorio Colao Andy Halford Michel Combes Stephen Pusey

27 May 2008 20 May 2005 1 June 2009 1 June 2009

Additionally, all of the Company’s share plans contain provisions relating to a change of control. Outstanding awards and options would normally vest and become exercisable on a change of control to the extent that any performance condition has been satisfied. The Remuneration Committee may also decide that the extent to which an award will vest will be further reduced pro-rata to reflect the acceleration of vesting. Fees retained for external non-executive directorships Executive directors may hold positions in other companies as nonexecutive directors. Michel Combes was the only executive director with such positions held at Assystem SA and ISS Group, and in accordance with Group policy he retained fees for the year of €24,545 from Assystem SA and DKK 407,292 from ISS Group (£66,112 in total).

162 132 100 116 94 100 67 03/08
FSTE 100

170

101

109

110

03/09

03/10

03/11

03/12

FTSE 100 comparison based on spot values

Vodafone Group Plc Annual Report 2012

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Audited information for executive directors
Remuneration for the year ended 31 March 2012 This table1 shows the remuneration of the executive directors during the year in the currently prescribed format. The table on page 76 includes a value for GLTI payments. All other numbers are identical.
2012 £’000 Vittorio Colao 2011 £’000 2012 £’000 Andy Halford 2011 £’000 2012 £’000 Michel Combes 2011 £’000 2012 £’000 Stephen Pusey 2011 £’000

Business review

Salary/fees GSTIP 2 Cash in lieu of GLTI dividends Cash in lieu of pension Benefits /other 3 Total

1,099 1,037 545 330 24 3,035

1,043 1,323 92 313 55 2,826

700 654 333 210 30 1,927

694 869 70 208 27 1,868

785 728 326 236 25 2,100

763 745 – 229 22 1,759

569 537 110 171 21 1,408

538 683 29 161 31 1,442

Performance

Notes: 1 The information in this table is audited. 2 Payments are made in June following the end of the financial year. 3 Includes amounts in respect of cost of living allowance, private healthcare and car allowance.

The aggregate remuneration we paid to our Executive Committee (other than our executive directors) for services for the year ended 31 March 2012 is set out below.
2012 £’000 2011 £’000

Salaries/fees GSTIP1 Cash in lieu of GLTI dividends Cash in lieu of pension Benefits/other Total

2,822 2,758 490 747 169 6,986

3,151 4,081 89 456 799 8,576

Governance

Note: 1 Comprises the incentive scheme information for the Executive Committee members on an equivalent basis to that disclosed for executive directors at the beginning of the report. Details of share incentives awarded to directors and other members of the Executive Committee are included in footnotes to “Directors’ interests in the shares of the Company – Long-term incentives” on page 84.

Pensions Vittorio Colao, Andy Halford, Michel Combes and Stephen Pusey take a cash allowance of 30% of base salary in lieu of pension contributions. The Executive Committee, including the executive directors, are provided benefits in the event of death in service. They also have an entitlement under a long-term disability plan from which two-thirds of base salary, up to a maximum benefit determined by the insurer, would be provided until normal retirement date. Pension benefits earned by the director in the year ended 31 March 2012 were:
Change in transfer value over year less member contributions £’000 Change in accrued benefit in excess of inflation3 £’000 Transfer value of change in accrued benefit net of member contributions £’000 Employer allocation/ contribution to defined contribution plans £’000

Financials

Total accrued benefit at 31 March 20121 £’000

Change in accrued benefit over the year1 £’000

Transfer value at 31 March 20112 £’000

Transfer value at 31 March 20122 £’000

Andy Halford

18.7

0.9

701.2

846.9

145.7

(0.1)

(4.8)

–

Notes: 1 Andy Halford took the opportunity to take early retirement from the pension scheme due to the closure of the scheme on 31 March 2010 (aged 51 years). In accordance with the scheme rules, his accrued pension at this date was reduced with an early retirement factor for four years to reflect the fact that his pension is being paid before age 55 and is therefore expected to be paid out for a longer period of time. In addition, Andy Halford exchanged part of his early retirement pension at 31 March 2010 for a tax-free cash lump sum of £118,660. The pension in payment at 31 March 2010 was £17,800 per year, and this increased on 1 April 2011 by 5%, in line with the scheme rules, to £18,700 per year and remained so at 31 March 2012, as shown above. No member contributions are payable as Andy Halford is in receipt of his pension. 2 The transfer value at 31 March 2012 has been calculated on the basis and methodology set by the trustees after taking actuarial advice, as set out in the papers entitled “Calculation of cash equivalent transfer values” dated January 2011 and “Sex-specific actuarial factor” dated March 2011. No director elected to pay additional voluntary contributions. The transfer value disclosed above does not represent a sum paid or payable to the individual director. Instead it represents a potential liability of the pension scheme. 3 Inflation has been taken as the increase in the retail price index over the year to 30 September 2011.

In respect of the Executive Committee, the Group has made aggregate contributions of £100,000 (2011: £508,600) into defined contribution pension schemes.

Additional information

84 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Directors’ interests in the shares of the Company – long-term incentives Performance shares GLTI conditional share awards granted to executive directors for the relevant financial years are shown below. It is important to note that the figures shown in the first two columns represent the maximum amount which could vest at the end of the relevant three year performance period. In order to participate in these plans, executives have had to invest personal shares with a combined value of: £3,342,473 (Vittorio Colao); £2,035,516 (Andy Halford); £1,118,582 (Michel Combes); and £762,856 (Stephen Pusey). The total value is calculated using the closing mid-market share price on 31 March 2012 of 172.2 pence.
Total interest in performance shares at 1 April 2011 or date of appointment Number of shares Shares conditionally awarded during the 2012 financial year1 Number of shares Shares forfeited during the 2012 financial year2 Number of shares Shares vested during the 2012 financial year2 Number of shares Total interest in performance shares at 31 March 2012 Number of shares Market price at date awards granted Pence

Total value £’000

Vesting date

Vittorio Colao 2008 – Base award 2008 – Match award 2009 – Base award 2009 – Match award 2010 – Base award 2010 – Match award 2011 – Base award 2011 – Match award Total Andy Halford 2008 – Base award 2008 – Match award 2009 – Base award 2009 – Match award 2010 – Base award 2010 – Match award 2011 – Base award 2011 – Match award Total Michel Combes 2008 – Base award 2008 – Match award 2009 – Base award 2009 – Match award 2010 – Base award 2010 – Match award 2011 – Base award 2011 – Match award Total Stephen Pusey 2008 – Base award 2008 – Match award 2009 – Base award 2009 – Match award 2010 – Base award 2010 – Match award 2011 – Base award 2011 – Match award Total

4,126,587 3,001,154 4,564,995 1,817,866 4,097,873 2,980,271 – – 20,588,746 2,282,447 2,074,952 2,524,934 1,676,756 2,154,750 1,958,863 – – 12,672,702 2,589,782 736,919 2,771,771 533,854 2,370,225 1,144,116 – – 10,146,667 942,132 500,844 1,872,818 510,879 1,693,018 571,097 – – 6,090,788

– – – – – – 3,740,808 2,720,588 6,461,396 – – – – – – 1,887,254 756,036 2,643,290 – – – – – – 2,129,901 876,531 3,006,432 – – – – – – 1,550,245 612,745 2,162,990

(2,863,852) (2,082,801) – – – – – – (4,946,653) (1,584,019) (1,440,017) – – – – – – (3,024,036) (1,797,309) (511,422) – – – – – – (2,308,731) (653,840) (347,586) – – – – – – (1,001,426)

(1,262,735) – (918,353) – – 4,564,995 – 1,817,866 – 4,097,873 – 2,980,271 – 3,740,808 – 2,720,588 (2,181,088) 19,922,401 (698,428) – (634,935) – – 2,524,934 – 1,676,756 – 2,154,750 – 1,958,863 – 1,887,254 – 756,036 (1,333,363) 10,958,593 (792,473) (225,497) – – – – – (1,017,970) (288,292) (153,258) – – – – – – (441,550) – – 2,771,771 533,854 2,370,225 1,144,116 2,129,901 876,531 9,826,398 – – 1,872,818 510,879 1,693,018 571,097 1,550,245 612,745 6,810,802

– – 7,861 3,130 7,057 5,132 6,442 4,685 34,307 – – 4,348 2,887 3,710 3,373 3,250 1,302 18,870 – – 4,773 919 4,082 1,970 3,668 1,509 16,921 – – 3,225 880 2,915 983 2,670 1,055 11,728

129.95 129.95 117.47 117.47 142.94 142.94 163.20 163.20

Jul 2011 Jul 2011 Jun 2012 Jun 2012 Jun 2013 Jun 2013 Jun 2014 Jun 2014

129.95 129.95 117.47 117.47 142.94 142.94 163.20 163.20

Jul 2011 Jul 2011 Jun 2012 Jun 2012 Jun 2013 Jun 2013 Jun 2014 Jun 2014

129.95 129.95 117.47 117.47 142.94 142.94 163.20 163.20

Feb 2012 Feb 2012 Jun 2012 Jun 2012 Jun 2013 Jun 2013 Jun 2014 Jun 2014

129.95 129.95 117.47 117.47 142.94 142.94 163.20 163.20

Jul 2011 Jul 2011 Jun 2012 Jun 2012 Jun 2013 Jun 2013 Jun 2014 Jun 2014

Notes: 1 The awards were granted during the year under the Vodafone GIP using the closing share price on the day before the grant which was 163.2 pence. These awards have a performance period running from 1 April 2011 to 31 March 2014. The performance conditions are a matrix of adjusted free cash flow performance and relative TSR. The vesting date will be in June 2014. 2 Shares granted on 29 July 2008 vested on 29 July 2011. The performance conditions on these awards were a matrix of adjusted free cash flow performance and relative TSR, and the resulting vesting was 30.6% of maximum. The share price on the vesting date was 171.7 pence.

The aggregate number of shares conditionally awarded during the year to the Executive Committee, other than the executive directors, was 10,865,023 shares. The performance and vesting conditions on the shares awarded in the year are based on a matrix of adjusted free cash flow performance and relative TSR.

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85

Share options No share options have been granted to directors during the year. The following information summarises the executive directors’ options under the Vodafone Group 2008 Sharesave Plan (‘SAYE’), the Vodafone Group Plc 1999 Long-Term Stock Incentive Plan (‘LTSIP’) and the Vodafone Global Incentive Plan (‘GIP’). HMRC approved awards may be made under all of the schemes mentioned. No other directors have options under any of these schemes. Options under the Vodafone Group 2008 Sharesave Plan were 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.
At 1 April 2011 or date of appointment Grant date Number of shares Options granted during the 2012 financial year Number of shares Options exercised during the 2012 financial year Number of shares Options lapsed during the 2012 financial year Number of shares

Business review

Options held at 31 March 2012 Number of shares

Option price Pence
1

Date from which exercisable

Market price on exercise Expiry date Pence

Vittorio Colao GIP GIP2 SAYE Total Andy Halford LTSIP LTSIP GIP2 SAYE Total Michel Combes SAYE Total Stephen Pusey GIP GIP2 SAYE Total

Performance

Nov 2006 3,472,975 Jul 2007 3,003,575 Jul 2009 16,568 6,493,118

– – – –

– – – –

– – – –

3,472,975 3,003,575 16,568 6,493,118

135.50 Nov 2009 Nov 2016 167.80 Jul 2010 Jul 2017 93.85 Sep 2014 Feb 2015

– – –

Jul 2001 152,400 Jul 2005 1,291,326 Jul 2007 2,295,589 Jul 2009 9,669 3,748,984

– – – – –

(152,400) – – – (152,400)

– – – –

1,291,326 2,295,589 9,669 3,596,584

151.56 Jul 2004 Jul 2011 145.25 Jul 2008 Jul 2015 167.80 Jul 2010 Jul 2017 93.85 Sep 2012 Feb 2013

163.3 – – –

Governance

Jul 2009

9,669 9,669

– –

– –

– –

9,669 9,669

93.85 Sep 2012 Feb 2013

–

Sep 2006 1,034,259 Jul 2007 947,556 Jul 2009 9,669 1,991,484

– – – –

– – – –

– – – –

1,034,259 947,556 9,669 1,991,484

113.75 Sep 2009 Aug 2016 167.80 Jul 2010 Jul 2017 93.85 Sep 2012 Feb 2013

– – –

Notes: 1 The closing mid-market share price on 31 March 2012 was 172.2 pence. The highest mid-market share price during the year was 183.9 pence and the lowest price was 154.0 pence. 2 The performance condition on these options is a three year cumulative growth in adjusted earnings per share. The options vested at 100% on 24 July 2010.

Non-executive directors’ remuneration
The remuneration of non-executive directors is reviewed annually by the Chairman following consultation with the Remuneration Committee Chairman. Our policy is to pay competitively for the role including consideration of the time commitment required. In this regard, the fees are benchmarked against a comparator group of the FTSE 15 companies. Following the 2012 review there will be no increases to the fees of non-executive directors.
Position/role Fee payable (£’000) From 1 April 2012

Financials

Chairman Deputy Chairman Non-executive director Chairmanship of Audit and Risk Committee Chairmanship of Remuneration Committee
Note: 1 The Chairman’s fee also includes the fee for the Chairmanship of the Nominations and Governance Committee.

1

600 175 115 25 25 Additional information

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 2012 financial year are included in the table on page 86. 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.

86 Directors’ remuneration (continued)
Vodafone Group Plc Annual Report 2012

Chairman and non-executive director service contracts Gerard Kleisterlee became Chairman on the 26 July 2011, succeeding Sir John Bond who stepped down following the AGM. 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. For further information refer to “Nomination and Governance Committee” on page 68. The terms and conditions of appointment of non-executive directors are available for inspection at the Company’s registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).
Date of letter of appointment Date of election/re-election

John Buchanan Renee James Alan Jebson Samuel Jonah Gerard Kleisterlee Nick Land Anne Lauvergeon Luc Vandevelde Anthony Watson Philip Yea

28 April 2003 1 January 2011 7 November 2006 9 March 2009 1 April 2011 7 November 2006 20 September 2005 24 June 2003 6 February 2006 14 July 2005

AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012 AGM 2012

Audited information for non-executive directors serving during the year ended 31 March 2012
Salary/fees 2012 £’000 2011 £’000 2012 £’000 Benefits 2011 £’000 2012 £’000 Total 2011 £’000

Chairman Sir John Bond (retired 26 July 2011) Gerard Kleisterlee Deputy Chairman John Buchanan Non-executive directors Renee James1 Alan Jebson1 Samuel Jonah1 Nick Land Anne Lauvergeon Luc Vandevelde Anthony Watson Philip Yea Former non-executive directors Simon Murray (retired 26 July 2010) Total
Note: 1 Salary/fees include travel allowances.

200 438 175 139 145 139 140 115 140 115 115 – 1,861

600 – 162 35 151 151 140 115 135 115 115 38 1,757

1 – – – – – – – – – – – 1

3 – – – – – – – – – – – 3

201 438 175 139 145 139 140 115 140 115 115 – 1,862

603 – 162 35 151 151 140 115 135 115 115 38 1,760

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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:
21 May 2012 31 March 2012 1 April 2011 or date of appointment

Business review

John Buchanan Vittorio Colao Andy Halford Michel Combes Stephen Pusey Renee James Alan Jebson Samuel Jonah Gerard Kleisterlee1 Nick Land Anne Lauvergeon Luc Vandevelde Anthony Watson Philip Yea

239,361 3,354,896 2,527,943 1,379,398 698,264 50,000 82,340 55,350 100,000 35,000 28,936 90,478 115,000 61,249

239,361 3,354,896 2,527,649 1,379,104 698,264 50,000 82,340 55,350 100,000 35,000 28,936 90,478 115,000 61,249

222,223 2,307,663 2,335,622 670,297 544,733 50,000 82,340 55,350 – 35,000 28,936 89,030 115,000 61,249

Performance

Note: 1 Non-executive directors appointed to the Board during the financial year are as follows: Gerard Kleisterlee 1 April 2011.

At 31 March 2012 and during the period from 1 April 2012 to 21 May 2012, 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 2012, members of the Group’s Executive Committee at 31 March 2012 had an aggregate beneficial interest in 4,274,128 ordinary shares of the Company. At 21 May 2012 the directors had an aggregate beneficial interest in 8,818,215 ordinary shares of the Company and the Executive Committee members had an aggregate beneficial interest in 4,274,716 ordinary shares of the Company. None of the directors or the Executive Committee members had an individual beneficial interest amounting to greater than 1% of the Company’s ordinary shares. Interests in share options of the Company At 21 May 2012 there had been no change to the directors’ interests in share options from 31 March 2012 (see page 85). Other than those individuals included in the table above, at 21 May 2012 members of the Group’s Executive Committee held options for 2,592,271 ordinary shares at prices ranging from 115.3 pence to 167.8 pence per ordinary share, with a weighted average exercise price of 162.2 pence per ordinary share exercisable at dates ranging from July 2008 to July 2017. John Buchanan, Renee James, Alan Jebson, Samuel Jonah, Gerard Kleisterlee, Nick Land, Anne Lauvergeon, Luc Vandevelde, Anthony Watson and Philip Yea held no options at 21 May 2012. 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.

Governance Financials

Luc Vandevelde On behalf of the Board 22 May 2012

Additional information

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88

Contents

89 90 91 93 94

98

Directors’ statement of responsibility Audit report on internal controls Critical accounting estimates Audit report on the consolidated financial statements Consolidated financial statements 94 Consolidated income statement 94 Consolidated statement of comprehensive income 95 Consolidated statement of financial position 96 Consolidated statement of changes in equity 97 Consolidated statement of cash flows Notes to the consolidated financial statements: 1. Basis of preparation 98 2. Significant accounting policies 98 106 3. Segment analysis 108 4. Operating profit 109 5. Investment income and financing costs 109 6. Taxation 112 7. Equity dividends 112 8. Earnings per share 113 9. Intangible assets 114 10. Impairment 117 11. Property, plant and equipment 118 12. Principal subsidiaries 119 13. Investments in joint ventures 120 14. Investments in associates 120 15. Other investments 121 16. Inventory 121 17. Trade and other receivables 122 18. Cash and cash equivalents 122 19. Called up share capital 122 20. Share-based payments 124 21. Capital and financial risk management 128 22. Borrowings 133 23. Post employment benefits 135 24. Provisions 136 25. Trade and other payables 136 26. Disposals 137 27. Reconciliation of net cash flow from operating activities 137 28. Commitments 138 29. Contingent liabilities 139 30. Directors and key management compensation 140 31. Related party transactions 141 32. Employees 141 33. Subsequent events

142 Audit report on the Company financial statements 143 Company financial statements of Vodafone Group Plc 144 Notes to the Company financial statements: 144 1. Basis of preparation 144 2. Significant accounting policies 145 3. Fixed assets 146 4. Debtors 146 5. Other investments 146 6. Creditors 146 7. Share capital 147 8. Share-based payments 147 9. Reserves and reconciliation of movements in equity shareholders’ funds 148 10. Equity dividends 148 11. Contingent liabilities

Vodafone Group Plc Annual Report 2012

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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: aa select suitable accounting policies and apply them consistently; aa make judgements and estimates that are reasonable and prudent; aa state whether the consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as issued by the IASB, in accordance with IFRS as adopted for use in the EU and Article 4 of the EU IAS Regulations; aa state for the Company financial statements whether applicable UK accounting standards have been followed; and aa 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.

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 Group’s internal control over financial reporting includes policies and procedures that: aa pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; aa are designed to provide reasonable assurance that transactions are recorded as necessary to permit the preparation of financial statements in accordance with IFRS, as adopted by the EU and IFRS as issued by the IASB, and that receipts and expenditures are being made only in accordance with authorisation of management and the directors of the Company; and aa provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the Group’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 2012 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 2012. Management has excluded from its assessment the internal control over financial reporting of entities which are accounted for under the equity method, including Verizon Wireless, because the Group does not have the ability to dictate or modify the controls at these entities and does not have the ability to assess, in practice, the controls at these entities. Accordingly, the internal controls of these entities, which contributed a net profit of £4,963 million (2011: £5,059 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 Group’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 Group’s internal control over financial reporting at 31 March 2012 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 control over financial reporting is on page 90. By Order of the Board

Business review Performance Governance

Directors’ responsibility statement
The Board confirms to the best of its knowledge: aa 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 aa the directors’ report includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that it faces. Neither the Company nor the directors accept any liability to any person in relation to the annual report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.

Financials

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

Additional 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 55 to 59 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.

Rosemary Martin Company Secretary 22 May 2012

90 Audit report on internal controls
Vodafone Group Plc Annual Report 2012

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 2012 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 has excluded from its assessment the internal control over financial reporting of those entities that are accounted for under the equity method, including Verizon Wireless, because the Group does not have the ability to dictate or modify controls at these entities and does not have the ability to assess, in practice, the controls at these entities. Accordingly, the internal control over financial reporting of these entities, which contributed a net profit of £4,963 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 2012, 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 2012, 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 22 May 2012 expressed an unqualified opinion on those financial statements.

Deloitte LLP London United Kingdom 22 May 2012 Please refer to our Form 20-F to be filed with the Securities and Exchange Commission on 1 June 2012 for the audit opinion over the consolidated financial statements of the Group as of 31 March 2012 and 2011 and for each of the three years in the period ended 31 March 2012 issued in accordance with the standards of the Public Company Accounting Oversight Board (United States).

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91

Critical accounting estimates
The Group prepares its consolidated financial statements in accordance with IFRS as issued by the IASB and IFRS as adopted by the EU, the application of which often requires judgements to be made by management when formulating the Group’s financial position and results. Under IFRS, the directors are required to adopt those accounting policies most appropriate to the Group’s circumstances for the purpose of presenting fairly the Group’s financial position, financial performance and cash flows. In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate. Management considers the accounting estimates and assumptions discussed below to be its critical accounting estimates and, accordingly, provides an explanation of each below. The discussion below should also be read in conjunction with the Group’s disclosure of significant IFRS accounting policies which is provided in note 2 to the consolidated financial statements, “Significant accounting policies”. Management has discussed its critical accounting estimates and associated disclosures with the Company’s Audit and Risk Committee. 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. Business review

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.

Performance

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: aa growth in EBITDA, calculated as adjusted operating profit before depreciation and amortisation; aa timing and quantum of future capital expenditure; aa long-term growth rates; and aa 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 may not be 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: aa the nominal GDP rates for the country of operation; and aa the long-term compound annual growth rate in 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: aa the nominal GDP rates for the country of operation; and aa the compound annual growth rate in EBITDA in years nine to ten of the management plan.

Governance

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 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. 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. To determine the future taxable profits, reference is made to the latest available profit forecasts. Where the temporary differences are related to losses, relevant tax law is considered to determine the availability of the losses to offset against the future taxable profits. Significant items on which the Group has exercised accounting judgement include recognition of a deferred tax asset in respect of losses in Germany (see note 6 of the consolidated financial statements) and the recognition of a deferred tax asset in respect of losses in Luxembourg (see note 6 to the consolidated financial statements). The amounts recognised in the consolidated financial statements in respect of each matter are derived from the Group’s best estimation and judgement as described above.

Financials Additional information

92 Critical accounting estimates (continued)
Vodafone Group Plc Annual Report 2012

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.

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 term 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.

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.

Property, plant and equipment
Property, plant and equipment also represent a significant proportion of the asset base of the Group being 13.4% (2011: 13.3%) 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.

Finite lived intangible assets
Other intangible assets include the Group’s aggregate amounts spent on the acquisition of licences and spectrum, computer software, customer bases, brands and development costs. These assets arise from both separate purchases and from acquisition as part of business combinations. On the acquisition of mobile network operators the identifiable intangible assets may include licences, customer bases and brands. The fair value of these assets is determined by discounting estimated future net cash flows generated by the asset where no active market for the assets exists. 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 2012 intangible assets, excluding goodwill, amounted to £21,164 million (2011: £23,322 million) and represented 15.2% (2011: 15.4%) of the Group’s total assets. Estimation of useful life The useful life used to amortise intangible assets relates to the expected future performance of the assets acquired and management’s judgement of the period over which economic benefit will be derived from the asset. The basis for determining the useful life for the most significant categories of intangible assets is as follows:

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.

Vodafone Group Plc Annual Report 2012

93

Audit report on the consolidated financial statements
Independent auditor’s report to the members of Vodafone Group Plc
We have audited the consolidated financial statements of Vodafone Group Plc for the year ended 31 March 2012 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity, the consolidated statement of cash flows, and the related notes 1 to 33. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union. 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 auditor As explained more fully in the directors’ statement of responsibilities, the directors are responsible for the preparation of the consolidated financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the consolidated financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’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 Group’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. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion the consolidated financial statements: aa give a true and fair view of the state of the Group’s affairs as at 31 March 2012 and of its profit for the year then ended; aa have been properly prepared in accordance with IFRSs as adopted by the European Union; and aa have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation. Additional information Separate opinion in relation to IFRSs as issued by the IASB As explained in note 1 to the consolidated financial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (‘IASB’). In our opinion the consolidated financial statements comply with IFRSs as issued by the IASB. Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the directors’ report for the financial year for which the consolidated financial statements are prepared is consistent with the Group financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: aa certain disclosures of directors’ remuneration specified by law are not made; or aa we have not received all the information and explanations we require for our audit. Performance Under the listing rules we are required to review: aa the directors’ statement contained within the directors’ report in relation to going concern; aa the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and aa certain elements of the report to shareholders by the Board on directors’ remuneration. Other matter We have reported separately on the parent company financial statements of Vodafone Group Plc for the year ended 31 March 2012 and on the information in the directors’ remuneration report that is described as having been audited. Business review Governance

Panos Kakoullis FCA (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London United Kingdom 22 May 2012

Financials

94 Consolidated income statement
Vodafone Group Plc Annual Report 2012

for the years ended 31 March

2012 Note £m

2011 £m

2010 £m

Revenue Cost of sales Gross profit Selling and distribution expenses Administrative expenses Share of result in associates Impairment losses Other income and expense Operating profit Non-operating income and expense Investment income Financing costs Profit before taxation Income tax expense Profit for the financial year Attributable to: – Equity shareholders – Non-controlling interests Basic earnings per share Diluted earnings per share

3

14 10 26 4 15 5 5 6

46,417 (31,546) 14,871 (3,227) (5,075) 4,963 (4,050) 3,705 11,187 (162) 456 (1,932) 9,549 (2,546) 7,003 6,957 46 7,003

45,884 (30,814) 15,070 (3,067) (5,300) 5,059 (6,150) (16) 5,596 3,022 1,309 (429) 9,498 (1,628) 7,870 7,968 (98) 7,870 15.20p 15.11p

44,472 (29,439) 15,033 (2,981) (5,328) 4,742 (2,100) 114 9,480 (10) 716 (1,512) 8,674 (56) 8,618 8,645 (27) 8,618 16.44p 16.36p

8 8

13.74p 13.65p

Consolidated statement of comprehensive income for the years ended 31 March
2012 £m 2011 £m 2010 £m

(Losses)/gains on revaluation of available-for-sale investments, net of tax Foreign exchange translation differences, net of tax Net actuarial (losses)/gains on defined benefit pension schemes, net of tax Revaluation gain Foreign exchange gains transferred to the income statement Fair value (gains)/losses transferred to the income statement Other, net of tax Other comprehensive loss Profit for the financial year Total comprehensive income for the year Attributable to: – Equity shareholders – Non-controlling interests The accompanying notes are an integral part of these consolidated financial statements.

(17) (3,673) (272) – (681) – (10) (4,653) 7,003 2,350 2,383 (33) 2,350

310 (2,132) 136 – (630) (2,192) 19 (4,489) 7,870 3,381 3,567 (186) 3,381

206 (1,021) (104) 860 (84) 3 67 (73) 8,618 8,545 8,312 233 8,545

Vodafone Group Plc Annual Report 2012

95

Consolidated statement of financial position at 31 March Business review
2012 Note £m 2011 £m

Non-current assets Goodwill Other intangible assets Property, plant and equipment Investments in associates Other investments Deferred tax assets Post employment benefits Trade and other receivables Current assets Inventory Taxation recoverable Trade and other receivables Other investments Cash and cash equivalents Total assets Equity Called up share capital Additional paid-in capital Treasury shares Retained losses Accumulated other comprehensive income Total equity shareholders’ funds Non-controlling interests Put options over non-controlling interests Total non-controlling interests Total equity Non-current liabilities Long-term borrowings Taxation liabilities Deferred tax liabilities Post employment benefits Provisions Trade and other payables Current liabilities Short-term borrowings Taxation liabilities Provisions Trade and other payables Total equity and liabilities

9 9 11 14 15 6 23 17

38,350 21,164 18,655 35,108 791 1,970 31 3,482 119,551 486 334 10,744 1,323 7,138 20,025 139,576 3,866 154,123 (7,841) (84,184) 10,971 76,935 2,090 (823) 1,267 78,202

45,236 23,322 20,181 38,105 1,381 2,018 97 3,877 134,217 537 281 9,259 674 6,252 17,003 151,220 4,082 153,760 (8,171) (77,661) 15,545 87,555 2,880 (2,874) 6 87,561 28,375 350 6,486 87 482 804 36,584 9,906 1,912 559 14,698 27,075 151,220

Performance

16 17 15 18

19

Governance

22 6 23 24 25

28,362 250 6,597 337 479 1,324 37,349 6,258 1,898 633 15,236 24,025 139,576

Financials

22 24 25

The consolidated financial statements were approved by the Board of directors and authorised for issue on 22 May 2012 and were signed on its behalf by:

Additional information

Vittorio Colao Chief Executive

Andy Halford Chief Financial Officer

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

96 Consolidated statement of changes in equity
Vodafone Group Plc Annual Report 2012

for the years ended 31 March

Equity Additional Share capital £m paid-in capital1 £m Treasury shares £m Retained losses £m Currency reserve £m Pensions reserve £m Other comprehensive income Investment Revaluation reserve £m surplus £m Other £m shareholders’ funds £m Noncontrolling interests £m Total £m

1 April 2009 Issue or reissue of shares Share-based payment Acquisition of non-controlling interest Comprehensive income Profit/(loss) OCI – before tax OCI – taxes Transfer to the income statement Dividends Other 31 March 2010 Issue or reissue of shares Redemption or cancellation of shares Purchase of own shares Share-based payment Acquisition of non-controlling interest Comprehensive income Profit/(loss) OCI – before tax OCI – taxes Transfer to the income statement Dividends Other 31 March 2011 Issue or reissue of shares Redemption or cancellation of shares Purchase of own shares Share-based payment Acquisition of non-controlling interest Comprehensive income Profit OCI – before tax OCI – taxes Transfer to the income statement Dividends Other 31 March 2012

4,153 153,348 (8,036) (83,820) 18,451 – – 189 (119) – – 1612 – – – – – – – – – – – – – – – – – – (133) – 8,645 (1,365) 8,645 – – (1,320) – 39

(259) – – – (104) – (149) 45

2,148 – – – 209 – 377 (171)

180 – – – 860 – 860 – – – – 1,040 – – – – – – – – –

(3) 86,162 – 70 – 161 – 67 – 79 (12) (133) 8,312 8,645 (153) (99)

(1,385) 84,777 – 70 – 161 1,636 233 (27) 260 – 1,503 8,545 8,618 107 (99)

– – – – (84) – – – (4,131) – – – 37 (97) – 4,153 153,509 (7,810) (79,655) 17,086 – (71) – – – – – – – – 232 (125) (1,532) – – – – – –

– 3 – – – – (363) 2,357 – – – – – – – –

– (81) – (4,131) – (60) 64 90,381 – – – – – 14 – 14 – 107 – (2,125) 180 (120) 3,567 7,968 (1,502) (77)

– (81) (56) (4,187) 1 (59) 429 90,810 – – – – 107 – (2,125) 180

71 1,532 – (2,125) 1802 – – – – – – – – – – –

(120) – 7,968 (2,669) 7,968 – – (2,053) – 14

– – 136 (1,882) – – 190 347 (54) (37)

35 (85) (186) 3,381 (98) 7,870 (88) (1,590) – (77) – (2,822) (328) (4,796) 56 89 6 87,561 – – – – 71 – (4,671) 145

– – – – (630) – – – (4,468) – – – – 271 – 4,082 153,760 (8,171) (77,661) 14,417 – (216) – – – – – – – 2 277 (208) – – – –

– (2,192)3 – – – – – (238) – (227) 237 1,040 – – – – – (272) – (365) 93 – – – (499) – – – – – (17) – (17) – – – – 220 – – – – – – – – – – – – 1,040

– (2,822) – (4,468) – 33 78 87,555 – – – – 71 – (4,671) 145

216 4,724 (4,724) – (4,671)4 – 1452 – – – – – – – – – – – –

(1,908) – 6,957 (4,279) 6,957 – – (3,629) – 31

– (1,908) (6) 2,383 – 6,957 (14) (4,025) 8 132

1,599 (309) (33) 2,350 46 7,003 (71) (4,096) (8) 124

– – – – (681) – – – (6,654) – – – – 14 – 3,866 154,123 (7,841) (84,184) 10,138

– (681) – (681) – (6,654) (305) (6,959) – 14 – 14 72 76,935 1,267 78,202

Notes: 1 Includes share premium, capital redemption reserve and merger reserve. The merger reserve was derived from acquisitions made prior to 31 March 2004 and subsequently allocated to additional paid-in capital on adoption of IFRS. 2 Includes a £2 million tax credit (2011: £24 million, 2010: £11 million). 3 Amounts for 2011 include a £208 million tax credit. 4 Amount includes a commitment for the purchase of own shares of £1,091 million (2011: £nil).

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97

Consolidated statement of cash flows for the years ended 31 March Business review
2012 Note £m 2011 £m 2010 £m

Net cash flow from operating activities Cash flows from investing activities Purchase of interests in subsidiaries and joint ventures, net of cash acquired Other investing activities in relation to purchase of subsidiaries Purchase of interests in associates Purchase of intangible assets Purchase of property, plant and equipment Purchase of investments Disposal of interests in subsidiaries and joint ventures, net of cash disposed Disposal of interests in associates Disposal of property, plant and equipment Disposal of investments Dividends received from associates Dividends received from investments Interest received Taxation on investing activities Net cash flow from investing activities Cash flows from financing activities Issue of ordinary share capital and reissue of treasury shares Net movement in short-term borrowings Proceeds from issue of long-term borrowings Repayment of borrowings Purchase of treasury shares Equity dividends paid Dividends paid to non-controlling shareholders in subsidiaries Contributions from non-controlling shareholders in subsidiaries Other transactions with non-controlling shareholders in subsidiaries Interest paid Net cash flow from financing activities Net cash flow Cash and cash equivalents at beginning of the financial year Exchange loss on cash and cash equivalents Cash and cash equivalents at end of the financial year The accompanying notes are an integral part of these consolidated financial statements.

27

12,755 (149) 310 (5) (3,090) (4,762) (417) 832 6,799 117 66 4,023 3 322 (206) 3,843 71 1,206 1,642 (3,520) (3,583) (6,643) (304) – (2,605) (1,633) (15,369) 1,229

11,995 (46) (356) – (4,290) (4,350) (318) – – 51 4,467 1,424 85 1,659 (208) (1,882) 107 (573) 4,861 (4,064) (2,087) (4,468) (320) – (137) (1,578) (8,259) 1,854 4,363 (12) 6,205

13,064 (1,777) – – (2,134) (4,841) (522) – – 48 17 1,436 141 195 – (7,437) 70 227 4,217 (5,184) – (4,139) (56) 613 – (1,601) (5,853) (226) 4,846 (257) 4,363

Performance Governance

18 18

6,205 (346) 7,088

Financials Additional information

98 Notes to the consolidated financial statements
Vodafone Group Plc Annual Report 2012

1. Basis of preparation
The consolidated financial statements are prepared in accordance with IFRS as issued by the International Accounting Standards Board and are also prepared in accordance with IFRS adopted by the European Union (‘EU’), the Companies Act 2006 and Article 4 of the EU IAS Regulations. The consolidated financial statements are prepared on a going concern basis. 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 91 to 92. Actual results could differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Amounts in the consolidated financial statements are stated in pounds sterling. Vodafone Group Plc is registered in England (No. 1833679).

2. Significant accounting policies Accounting convention
The consolidated financial statements are prepared on a historical cost basis except for certain financial and equity instruments that have been measured at fair value.

New accounting pronouncements adopted
On 1 April 2011 the Group adopted new accounting policies to comply with: aa “Improvements to IFRS” issued in May 2010. aa Amendments to IAS 24 “State-controlled entities and the definition of a related party”. aa Amendments to IFRIC 14 “Prepayments on a minimum funding requirement”. aa IFRIC 19 “Extinguishing financial liabilities with equity instruments”. These changes have no material impact on the consolidated results, financial position or cash flows of the Group.

New accounting pronouncements not yet adopted
Phase I of IFRS 9 “Financial Instruments” was issued in November 2009 and has subsequently been updated and amended. The standard is effective for annual periods beginning on or after 1 January 2015 and has not yet been endorsed for use in the EU. The standard introduces changes to the classification and measurement of financial assets and the requirements relating to financial liabilities in relation to the presentation of changes in fair value due to credit risks and the removal of an exemption from measuring certain derivative liabilities at fair value. The Group is currently assessing the impact of the standard on its results, financial position and cash flows. The Group has not adopted the following pronouncements, which have been issued by the IASB or the IFRIC. These pronouncements have not yet been endorsed for use in the EU. 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. aa Amendments to IAS 1, “Presentation of items of other comprehensive income”, effective for annual periods beginning on or after 1 July 2012. aa Amendment to IAS 12, “Deferred tax: recovery of underlying assets”, effective for annual periods beginning on or after 1 January 2012. aa Amendments to IAS 32, “Offsetting financial assets and financial liabilities”, effective for annual periods beginning on or after 1 January 2014. aa IFRIC 20, “Stripping costs in the production phase of a surface mine”, effective for annual periods beginning on or after 1 January 2013. aa Amendment to IFRS 1, “Severe hyperinflation and removal of fixed dates for first-timer adopters”, effective for annual periods beginning on or after 1 July 2011. aa Amendment to IFRS 1, “Government loans”, effective for annual periods beginning on or after 1 January 2013. aa Amendments to IFRS 7, “Financial Instruments: Disclosure”, effective for annual periods beginning on or after 1 July 2011. aa “Improvements to IFRS 2009 – 2011 Cycle”, effective for annual periods beginning on or after 1 January 2013.

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The Group has also not adopted the following pronouncements which are effective for annual periods beginning on or after 1 January 2013 and have not yet been endorsed for use in the EU. The Group has not completed its assessment of the impact of these pronouncements on the consolidated results, financial position or cash flows of the Group. However, the Group currently expects that IFRS 11, “Joint Arrangements”, will have a material impact on the presentation of the Group’s interests in its joint ventures owing to the Group’s significant investments in joint ventures as discussed in note 13. aa IFRS 10, “Consolidated Financial Statements”, which replaces parts of IAS 27, “Consolidated and Separate Financial Statements” and all of SIC-12, “Consolidation – Special Purpose Entities”, builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The remainder of IAS 27, “Separate Financial Statements”, now contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates only when an entity prepares separate financial statements and is therefore not applicable in the Group’s consolidated financial statements. aa IFRS 11, “Joint Arrangements”, which replaces IAS 31, “Interests in Joint Ventures” and SIC-13, “Jointly Controlled Entities – Non-monetary Contributions by Venturers”, requires a single method, known as the equity method, to account for interests in jointly controlled entities which is consistent with the accounting treatment currently applied to investments in associates. The proportionate consolidation method currently applied to the Group’s interests in joint ventures is prohibited. IAS 28, “Investments in Associates and Joint Ventures”, was amended as a consequence of the issuance of IFRS 11. In addition to prescribing the accounting for investment in associates, it now sets out the requirements for the application of the equity method when accounting for joint ventures. The application of the equity method has not changed as a result of this amendment. aa IFRS 12, “Disclosure of Interest in Other Entities”, is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The standard includes disclosure requirements for entities covered under IFRS 10 and IFRS 11. aa IFRS 13, “Fair Value Measurement”, provides guidance on how fair value should be applied where its use is already required or permitted by other standards within IFRS, including a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS. aa Amendments to IAS 19, “Employee benefits”, require a revised allocation of costs for defined benefit pension schemes between the income statement and other comprehensive income and prohibit the use of the “corridor approach” to spread the recognition of actuarial gains and losses, which is not used by the Group, and require a different measurement basis for asset returns. The amendments also include a revised definition of short- and long-term benefits to employees and revised criteria for the recognition of termination benefits.

Business review Performance Governance

Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled, both unilaterally and jointly, by the Company.

Accounting for subsidiaries
A subsidiary is an entity controlled by the Company. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling shareholder’s share of changes in equity since the date of the combination. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Financials

Business combinations
Acquisitions of subsidiaries are accounted for using the acquisition method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group. Acquisition-related costs are recognised in the income statement as incurred. The acquiree’s identifiable assets and liabilities are recognised at their fair values at the acquisition date. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the Group’s previously held equity interest in the acquiree, if any, over the net amounts of identifiable assets acquired and liabilities assumed at the acquisition date. The interest of the non-controlling shareholders in the acquiree may initially be measured either at fair value or at the non-controlling shareholders’ proportion of the net fair value of the identifiable assets acquired, liabilities and contingent liabilities assumed. The choice of measurement basis is made on an acquisition-by-acquisition basis. Additional information

Acquisition of interests from non-controlling shareholders
In transactions with non-controlling parties that do not result in a change in control, the difference between the fair value of the consideration paid or received and the amount by which the non-controlling interest is adjusted is recognised in equity.

100 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 2. Significant accounting policies (continued)

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 postacquisition 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 denominated in the currency of the acquired entity and revalued to the closing rate at each reporting period date. Goodwill is not subject to amortisation but is tested for impairment. Negative goodwill arising on an acquisition is recognised directly in the income statement. On disposal of a subsidiary or a jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss recognised in the income statement on disposal. Goodwill arising before the date of transition to IFRS, on 1 April 2004, has been retained at the previous UK GAAP amounts, subject to being tested for impairment at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has not been reinstated and is not included in determining any subsequent profit or loss on disposal. Finite lived intangible assets Intangible assets with finite lives are stated at acquisition or development cost, less accumulated amortisation. The amortisation period and method is reviewed at least annually. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Licence and spectrum fees Amortisation periods for licence and spectrum fees are determined primarily by reference to the unexpired licence period, the conditions for licence renewal and whether licences are dependent on specific technologies. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives from the commencement of service of the network. Computer software Computer software comprises computer software purchased from third parties as well as the cost of internally developed software. Computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and are probable of producing future economic benefits are recognised as intangible assets. Direct costs include software development employee costs and directly attributable overheads.

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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: aa an asset is created that can be separately identified; aa it is probable that the asset created will generate future economic benefits; and aa 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 , over the estimated useful lives of intangible assets from the date they are available for use, on a straight-line basis, with the exception of customer relationships which are amortised on a sum of digits basis. The amortisation basis adopted for each class of intangible asset reflects the Group’s consumption of the economic benefit from that asset. Estimated useful lives The estimated useful lives of finite lived intangible assets are as follows: aa Licence and spectrum fees aa Computer software aa Brands aa Customer bases 3 – 25 years 3 – 5 years 1 – 10 years 2 – 7 years

Business review Performance

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. Amounts for equipment, fixtures and fittings, which includes network infrastructure assets and which together comprise an all but insignificant amount of the Group’s property, plant and equipment, 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: aa Freehold buildings aa Leasehold premises Equipment, fixtures and fittings: aa Network infrastructure aa Other 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. 3 – 25 years 3 – 10 years 25 – 50 years the term of the lease Financials Governance

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. Additional information

102 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 2. Significant accounting policies (continued)

Property, plant and equipment and finite lived intangible assets At each reporting period date, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement. Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in the income statement.

Revenue
Revenue is recognised to the extent the Group has delivered goods or rendered services under an agreement, the amount of revenue can be measured reliably and it is probable that the economic benefits associated with the transaction will flow to the Group. Revenue is measured at the fair value of the consideration received, exclusive of sales taxes and discounts. The Group principally obtains revenue from providing the following telecommunication services: access charges, airtime usage, messaging, interconnect fees, data services and information provision, connection fees and equipment sales. Products and services may be sold separately or in bundled packages. Revenue for access charges, airtime usage and messaging by contract customers is recognised as services are performed, with unbilled revenue resulting from services already provided accrued at the end of each period and unearned revenue from services to be provided in future periods deferred. Revenue from the sale of prepaid credit is deferred until such time as the customer uses the airtime, or the credit expires. Revenue from interconnect fees is recognised at the time the services are performed. Revenue from data services and information provision is recognised when the Group has performed the related service and, depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service. Customer connection revenue is recognised together with the related equipment revenue to the extent that the aggregate equipment and connection revenue does not exceed the fair value of the equipment delivered to the customer. Any customer connection revenue not recognised together with related equipment revenue is deferred and recognised over the period in which services are expected to be provided to the customer. Revenue for device sales is recognised when the device is delivered to the end customer and the sale is considered complete. For device sales made to intermediaries, revenue is recognised if the significant risks associated with the device are transferred to the intermediary and the intermediary has no general right of return. If the significant risks are not transferred, revenue recognition is deferred until sale of the device to an end customer by the intermediary or the expiry of the right of return. In revenue arrangements including more than one deliverable, the arrangements are divided into separate units of accounting. Deliverables are considered separate units of accounting if the following two conditions are met: (1) the deliverable has value to the customer on a stand-alone basis and (2) there is evidence of the fair value of the item. The arrangement consideration is allocated to each separate unit of accounting based on its relative fair value.

Commissions
Intermediaries are given cash incentives by the Group to connect new customers and upgrade existing customers. For intermediaries who do not purchase products and services from the Group, such cash incentives are accounted for as an expense. Such cash incentives to other intermediaries are also accounted for as an expense if: aa the Group receives an identifiable benefit in exchange for the cash incentive that is separable from sales transactions to that intermediary; and aa the Group can reliably estimate the fair value of that benefit. Cash incentives that do not meet these criteria are recognised as a reduction of the related revenue.

Inventory
Inventory is stated at the lower of cost and net realisable value. Cost is determined on the basis of weighted average costs and comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition.

Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments as determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised in the income statement. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.

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Foreign currencies
The consolidated financial statements are presented in sterling, which is the parent company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Transactions in foreign currencies are initially recorded at the functional currency rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into the respective functional currency of the entity at the rates prevailing on the reporting period date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the initial transaction dates. Non-monetary items measured in terms of historical cost in a foreign currency are not retranslated. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are analysed between translation differences and other changes in the carrying amount of the security. Translation differences are recognised in the income statement and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial assets, such as investments in equity securities, classified as available-for-sale are reported as part of the fair value gain or loss and are included in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of entities with a functional currency other than sterling are expressed in sterling using exchange rates prevailing at the reporting period date. Income and expense items and cash flows are translated at the average exchange rates for the period and exchange differences arising are recognised directly in equity. On disposal of a foreign entity, the cumulative amount previously recognised in equity relating to that particular foreign operation is recognised in profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated accordingly. In respect of all foreign operations, any exchange differences that have arisen before 1 April 2004, the date of transition to IFRS, are deemed to be nil and will be excluded from the determination of any subsequent profit or loss on disposal. The net foreign exchange gain recognised in the consolidated income statement for the year ended 31 March 2012 is £702 million (2011: £1,022 million, 2010: £35 million). The net gains are recorded within operating income (2012: £34 million charge, 2011: £14 million charge, 2010: £29 million credit), other income and expense and non-operating income and expense (2012: £681 million credit, 2011: £630 million credit, 2010: £84 million credit), investment and financing income (2012: £55 million credit, 2011: £405 million credit, 2010: £78 million charge) and income tax expense (2011: £1 million credit). The foreign exchange gains included within other income and expense and non-operating income and expense arise on the disposal of interests in joint ventures, associates and investments from the recycling of foreign exchange gains previously recorded in the consolidated statement of comprehensive income.

Business review Performance Governance

Research expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Post employment benefits
For defined benefit retirement plans, the difference between the fair value of the plan assets and the present value of the plan liabilities is recognised as an asset or liability on the statement of financial position. Scheme liabilities are assessed using the projected unit funding method and applying the principal actuarial assumptions at the reporting period date. Assets are valued at market value. Actuarial gains and losses are taken to the statement of comprehensive income as incurred. For this purpose, actuarial gains and losses comprise both the effects of changes in actuarial assumptions and experience adjustments arising because of differences between the previous actuarial assumptions and what has actually occurred. Other movements in the net surplus or deficit are recognised in the income statement, including the current service cost, any past service cost and the effect of any curtailment or settlements. The interest cost less the expected return on assets is also charged to the income statement. The amount charged to the income statement in respect of these plans is included within operating costs or in the Group’s share of the results of equity accounted operations as appropriate. The Group’s contributions to defined contribution pension plans are charged to the income statement as they fall due. Cumulative actuarial gains and losses at 1 April 2004, the date of transition to IFRS, have been recognised in the statement of financial position. Financials

Taxation
Income tax expense represents the sum of the current tax payable and deferred tax. Current tax payable or recoverable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because some items of income or expense are taxable or deductible in different years or may never be taxable or deductible. The Group’s liability for current tax is calculated using UK and foreign tax rates and laws that have been enacted or substantively enacted by the reporting period date. Deferred tax is the tax expected to be payable or recoverable in the future arising from temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. It is accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are not recognised to the extent they arise from the initial recognition of non-tax deductible 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. Additional information

104 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 2. Significant accounting policies (continued)

The carrying amount of deferred tax assets is reviewed at each reporting period date and adjusted to reflect changes in probability that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted by the reporting period date. Tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they either relate to income taxes levied by the same taxation authority on either the same taxable entity or on different taxable entities which intend to settle the current tax assets and liabilities on a net basis. Tax is charged or credited to the income statement, except when it relates to items charged or credited to other comprehensive income or directly to equity, in which case the tax is recognised in other comprehensive income or 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 amount due on settlement or redemption of borrowings is recognised over the term of the borrowing. Equity instruments Equity instruments issued by the Group are recorded at the proceeds received, net of direct issuance costs. Derivative financial instruments and hedge accounting The Group’s activities expose it to the financial risks of changes in foreign exchange rates and interest rates. The use of financial derivatives is governed by the Group’s policies approved by the Board of directors, which provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. Changes in values of all derivatives of a financing nature are included within investment income and financing costs in the income statement. The Group does not use derivative financial instruments for speculative purposes. Derivative financial instruments are initially measured at fair value on the contract date and are subsequently remeasured to fair value at each reporting date. The Group designates certain derivatives as: aa hedges of the change of fair value of recognised assets and liabilities (‘fair value hedges’); aa hedges of highly probable forecast transactions or hedges of foreign currencies risk of firm commitments (“cash flow hedges”); or aa 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.

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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. Cash flow hedges Cash flow hedging is used by the Group to hedge certain exposures to variability in future cash flows. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income; gains or losses relating to any ineffective portion are recognised immediately in the income statement. When the hedged item is recognised in the income statement amounts previously recognised in other comprehensive income and accumulated in equity for the hedging instrument are reclassified to the income statement and recognised in the same line. However, when the hedged forecast transaction results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously recognised in other comprehensive income and accumulated in equity are transferred from equity and included in the initial measurement of the cost of the non-financial asset or non-financial liability. When hedge accounting is discontinued any gain or loss recognised in other comprehensive income at that time remains in equity and is recognised in the income statement when the hedged transaction is ultimately recognised in the income statement. If a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity 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 noncontrolling 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.

Business review Performance Governance

Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material. Financials

Share-based payments
The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of the shares that will eventually vest and adjusted for the effect of non-market-based vesting conditions. Fair value is measured using a binomial pricing model, being a lattice-based option valuation model, which is calibrated using a Black-Scholes framework. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The Group uses historical data to estimate option exercise and employee termination within the valuation model; separate groups of employees that have similar historical exercise behaviour are considered separately for valuation purposes. The expected life of options granted is derived from the output of the option valuation model and represents the period of time that options are expected to be outstanding. Expected volatilities are based on implied volatilities as determined by a simple average of no less than three international banks, excluding the highest and lowest numbers. The risk free rates for periods within the contractual life of the option are based on the UK gilt yield curve in effect at the time of grant. Some share awards have an attached market condition, based on total shareholder return (“TSR”), which is taken into account when calculating the fair value of the share awards. The valuation for the TSR is based on Vodafone’s ranking within the same group of companies, where possible, over the past five years. The volatility of the ranking over a three year period is used to determine the probable weighted percentage number of shares that could be expected to vest and hence affect fair value. The fair value of awards of non-vested shares is equal to the closing price of the Vodafone’s shares on the date of grant, adjusted for the present value of future dividend entitlements where appropriate. Additional information

106 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

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.
Segment revenue £m Intra-region revenue £m Regional revenue £m Inter-region revenue £m Group revenue £m EBITDA1 £m

31 March 2012 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group Verizon Wireless2 31 March 2011 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group Verizon Wireless2 31 March 2010 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group Verizon Wireless2

8,233 5,658 4,763 5,397 8,352 32,403 4,265 5,638 3,965 13,868 423 46,694 20,187 7,900 5,722 5,133 5,271 8,253 32,279 3,855 5,479 3,971 13,305 659 46,243 18,711 8,008 6,027 5,713 5,025 8,357 33,130 3,114 4,450 3,526 11,090 667 44,887 17,222

(44) (28) (54) (37) (59) (222) – – – – – (222)

8,189 5,630 4,709 5,360 8,293 32,181 4,265 5,638 3,965 13,868 423 46,472

(1) (1) (3) (6) (5) (16) (6) (8) (23) (37) (2) (55)

8,188 5,629 4,706 5,354 8,288 32,165 4,259 5,630 3,942 13,831 421 46,417

2,965 2,514 1,193 1,294 2,479 10,445 1,122 1,930 1,063 4,115 (85) 14,475 7,689 2,952 2,643 1,562 1,233 2,433 10,823 985 1,844 1,170 3,999 (152) 14,670 7,313 3,122 2,843 1,956 1,141 2,582 11,644 807 1,528 977 3,312 (221) 14,735 6,689

(51) (31) (62) (50) (70) (264) (1) – – (1) – (265)

7,849 5,691 5,071 5,221 8,183 32,015 3,854 5,479 3,971 13,304 659 45,978

(2) (3) (2) (7) (3) (17) (11) (8) (27) (46) (31) (94)

7,847 5,688 5,069 5,214 8,180 31,998 3,843 5,471 3,944 13,258 628 45,884

(41) (40) (81) (47) (88) (297) (1) – – (1) – (298)

7,967 5,987 5,632 4,978 8,269 32,833 3,113 4,450 3,526 11,089 667 44,589

(8) (2) (2) (10) (5) (27) (20) (7) (30) (57) (33) (117)

7,959 5,985 5,630 4,968 8,264 32,806 3,093 4,443 3,496 11,032 634 44,472

Notes: 1 The Group’s measure of segment profit, EBITDA, excludes the Group’s share of results in associates. The Group’s share of results in associates, by segment, for the year ended 31 March 2012 is Other Europe £3 million (2011: £nil; 2010 £nil), Vodacom £nil (2011: £nil; 2010: £(2) million), Other Africa, Middle East and Asia Pacific £36 million (2011: £51 million; 2010: £56 million) and Non-Controlled Interests and Common Functions £4,924 million (2011: £5,008 million; 2010: £4,688 million). 2 Values shown for Verizon Wireless, which is an associate, are not included in the calculation of Group revenue or EBITDA.

Vodafone Group Plc Annual Report 2012

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A reconciliation of EBITDA to operating profit is shown below. For a reconciliation of operating profit to profit before taxation, see the consolidated income statement on page 94.
2012 £m 2011 £m 2010 £m

Business review

EBITDA Depreciation, amortisation and loss on disposal of fixed assets Share of results in associates Impairment losses Other income and expense Operating profit

14,475 (7,906) 4,963 (4,050) 3,705 11,187
Other expenditure Non-current assets1 £m Capital expenditure2 £m on intangible assets £m

14,670 (7,967) 5,059 (6,150) (16) 5,596

14,735 (8,011) 4,742 (2,100) 114 9,480

Depreciation and amortisation £m

Impairment loss/ (reversal) £m

Performance

31 March 2012 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group 31 March 2011 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group 31 March 2010 Germany Italy Spain UK Other Europe Europe India Vodacom Other Africa, Middle East and Asia Pacific Africa, Middle East and Asia Pacific Non-Controlled Interests and Common Functions Group
Notes: 1 Comprises goodwill, other intangible assets and property, plant and equipment. 2 Includes additions to property, plant and equipment and computer software, reported within intangible assets.

19,151 13,978 8,069 6,430 10,146 57,774 8,431 6,469 4,735 19,635 760 78,169 20,764 16,645 9,596 6,665 11,438 65,108 9,882 7,382 4,797 22,061 1,570 88,739 20,211 17,941 12,746 6,977 13,883 71,758 8,665 7,783 5,062 21,510 1,632 94,900

880 621 429 575 1,092 3,597 805 723 793 2,321 447 6,365 824 590 517 516 1,230 3,677 870 572 754 2,196 346 6,219 766 610 543 494 1,282 3,695 853 520 694 2,067 430 6,192

4 875 71 – 313 1,263 – – – – – 1,263 1,214 12 – – 59 1,285 1,851 19 2 1,872 9 3,166 18 60 – – 228 306 – – – – 19 325

1,469 783 626 880 1,389 5,147 1,066 840 771 2,677 35 7,859 1,361 732 641 874 1,406 5,014 973 1,013 793 2,779 83 7,876 1,422 732 638 963 1,467 5,222 848 1,005 683 2,536 152 7,910

– 2,450 900 – 700 4,050 – – – – – 4,050 – 1,050 2,950 – 2,150 6,150 – – – – – 6,150 – – – – (200) (200) 2,300 – – 2,300 – 2,100

Governance Financials Additional information

108 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

4. Operating profit
Operating profit has been arrived at after charging/(crediting):
2012 £m 2011 £m 2010 £m

Net foreign exchange losses/(gains) Depreciation of property, plant and equipment (note 11): Owned assets Leased assets Amortisation of intangible assets (note 9) Impairment of goodwill in subsidiaries and associates (note 10) Impairment/(reversal of impairment) of licences and spectrum (note 10) Impairment of property, plant and equipment (note 10) Research and development expenditure Staff costs (note 32) Operating lease rentals payable: Plant and machinery Other assets including fixed line rentals Loss on disposal of property, plant and equipment Own costs capitalised attributable to the construction or acquisition of property, plant and equipment

34 4,284 79 3,496 3,848 121 81 304 3,843 173 1,672 47 (374)

14 4,318 54 3,504 6,150 – – 287 3,642 127 1,761 91 (331)

(29) 4,412 44 3,454 2,300 (200) – 303 3,770 71 1,587 101 (296)

The total remuneration of the Group’s auditor, Deloitte LLP and other member firms of Deloitte Touche Tohmatsu Limited for services provided to the Group is analysed below:
2012 £m 2011 £m 2010 £m

Audit fees: Parent company Subsidiaries Audit-related assurance services1 Audit and audit-related fees Taxation advisory services Other non-audit services Total fees
Note: 1 Relates to fees for statutory and regulatory filings.

1 6 7 1 8 – 1 9

1 7 8 1 9 1 – 10

1 7 8 1 9 1 – 10

In addition to the above, the Group’s joint ventures and associates paid fees totalling £2 million (2011: £1 million, 2010: £2 million) and £5 million (2011: £5 million, 2010: £7 million) respectively to Deloitte LLP and other member firms of Deloitte Touche Tohmatsu Limited during the year. Deloitte LLP and other member firms of Deloitte Touche Tohmatsu Limited have also received amounts totalling less than £1 million in each of the last three years in respect of services provided to pension schemes and charitable foundations associated to the Group. A description of the work performed by the Audit and Risk Committee in order to safeguard auditor independence when non-audit services are provided is set out in “Corporate governance” on page 70.

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5. Investment income and financing costs
2012 £m 2011 £m 2010 £m

Business review

Investment income: Available-for-sale investments: Dividends received Loans and receivables at amortised cost Gain on settlement of loans and receivables1 Fair value through the income statement (held for trading): Derivatives – foreign exchange contracts Other2 Equity put rights and similar arrangements3 Financing costs: Items in hedge relationships: Other loans Interest rate swaps Dividends on redeemable preference shares Fair value hedging instrument Fair value of hedged item Cash flow hedges transferred from equity Other financial liabilities held at amortised cost: Bank loans and overdrafts4 Other loans2 Potential interest credit on settlement of tax issues5 Equity put rights and similar arrangements2 3 Finance leases Fair value through the income statement (held for trading): Derivatives – forward starting swaps and futures Net financing costs/(investment income)

2 168 – 121 165 – 456

83 339 472 38 263 114 1,309

145 423 – 3 92 53 716

Performance

211 (178) 56 (539) 511 – 769 785 (9) 81 1 244 1,932 1,476

746 (338) 58 (47) 40 17 629 121 (826) 19 9 1 429 (880)

888 (464) 56 228 (183) 82 591 185 (178) 94 7 206 1,512 796

Governance

Notes: 1 Gain on settlement of loans and receivables issued by SoftBank Mobile Corp. 2 Amounts for 2012 include net foreign exchange gains of £55 million (2011: £405 million gain; 2010 £78 million loss) arising from net investments in foreign operations, investments held following the disposal of Vodafone Japan to SoftBank Corp. and net foreign exchange movements on certain intercompany balances. 3 Includes amounts in relation to the Group’s arrangements with its minority partners in India. 4 The Group capitalised £25 million of interest expense in the year (2011: £138 million; 2010: £1 million). The interest rate used to determine the amount of borrowing costs eligible for capitalisation was 5.0%. 5 Amounts for 2012, 2011 and 2010 include a reduction of the provision for potential interest on tax issues.

Financials

6. Taxation Income tax expense
2012 £m 2011 £m 2010 £m

United Kingdom corporation tax (income)/expense: Current year Adjustments in respect of prior years Overseas current tax expense/(income): Current year Adjustments in respect of prior years Total current tax expense Deferred tax on origination and reversal of temporary differences: United Kingdom deferred tax Overseas deferred tax Total deferred tax expense/(income) Total income tax expense

– (4) (4) 2,440 (231) 2,209 2,205 (8) 349 341 2,546

141 (5) 136 2,152 (477) 1,675 1,811 (275) 92 (183) 1,628

40 (4) 36 2,377 (1,718) 659 695 (166) (473) (639) 56

Additional information

110 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 6. Taxation (continued)

Tax (credited)/charged directly to other comprehensive income
2012 £m 2011 £m 2010 £m

Current tax credit Deferred tax (credit)/charge Total tax (credited)/charged directly to other comprehensive income

(5) (119) (124)

(14) (117) (131)

(38) 137 99

Tax credited directly to equity
2012 £m 2011 £m 2010 £m

Current tax credit Deferred tax credit Total tax credited directly to equity

(1) (1) (2)

(5) (19) (24)

(1) (10) (11)

Factors affecting tax expense for the year
The table below explains the differences between the expected tax expense, at the UK statutory tax rate of 26% (2011 and 2010: 28%), and the Group’s total tax expense for each year. Further discussion of the current year tax expense can be found in the section titled “Operating results” on page 41.
2012 £m 2011 £m 2010 £m

Profit before tax as shown in the consolidated income statement Expected income tax expense at UK statutory tax rate Effect of taxation of associates, reported within operating profit Impairment losses with no tax effect Disposal of Group investments1 Impact of agreement of German write down losses Effect of different statutory tax rates of overseas jurisdictions Deferred tax impact of previously unrecognised temporary differences including losses2 Current tax impact of previously unrecognised temporary differences including losses Effect of unrecognised temporary differences Adjustments in respect of prior years Effect of secondary and irrecoverable taxes Effect of current year changes in statutory tax rates Deferred tax on overseas earnings Assets revalued for tax purposes Expenses not deductible for tax purposes and other items Exclude taxation of associates Income tax expense
Notes: 1 Relates to the disposal of SFR and Polkomtel. 2011 relates to the disposal of China Mobile Limited and SoftBank. 2 See note regarding deferred tax asset recognition on page 111.

9,549 2,483 78 1,053 (718) – 675 (634) – (285) (210) 159 (3) 15 – 235 (302) 2,546

9,498 2,659 145 1,722 (763) – 371 (1,247) (734) 366 (1,088) 91 29 143 121 332 (519) 1,628

8,674 2,429 160 588 – (2,103) 370 (198) (261) (260) (387) 49 35 5 – 201 (572) 56

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

1 April 2011 Exchange movements Charged to the income statement Credited directly to other comprehensive income Credited directly to equity Reclassifications Arising on acquisition and disposals 31 March 2012

(4,468) 26 (341) 119 1 10 26 (4,627)

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Deferred tax assets and liabilities, before offset of balances within countries, are as follows:
Amount (charged)/ credited in income statement £m Gross deferred tax asset £m Gross deferred tax liability £m Less amounts unrecognised £m Net recognised deferred tax (liability)/ asset £m

Business review

Accelerated tax depreciation Intangible assets Tax losses Deferred tax on overseas earnings Other short-term temporary differences 31 March 2012

(792) 178 254 (13) 32 (341)

198 620 24,742 – 3,254 28,814

(4,595) (2,061) – (1,796) (877) (9,329)

– (275) (22,515) – (1,322) (24,112)

(4,397) (1,716) 2,227 (1,796) 1,055 (4,627) Performance

Analysed in the statement of financial position, after offset of balances within countries, as:
£m

Deferred tax asset Deferred tax liability 31 March 2012
Amount (charged)/ credited in income statement £m Gross deferred tax asset £m Gross deferred tax liability £m Less amounts unrecognised £m

1,970 (6,597) (4,627)
Net recognised deferred tax (liability)/ asset £m

Accelerated tax depreciation Intangible assets Tax losses Deferred tax on overseas earnings Other short-term temporary differences 31 March 2011

(1,374) (140) 1,198 764 (265) 183

253 815 27,882 – 4,075 33,025

(3,682) (2,449) – (1,775) (395) (8,301)

– (335) (25,784) – (3,073) (29,192)

(3,429) (1,969) 2,098 (1,775) 607 (4,468)

Governance

Analysed in the statement of financial position, after offset of balances within countries, as:
£m

Deferred tax asset Deferred tax liability 31 March 2011

2,018 (6,486) (4,468) Financials

Factors affecting the tax charge in future years
Factors that may affect the Group’s future tax charge include the impact of corporate restructurings, the resolution of open issues, future planning opportunities, corporate acquisitions and disposals, the use of brought forward tax losses and changes in tax legislation and tax rates. The Group is routinely subject to audit by tax authorities in the territories in which it operates, and specifically, in India these are usually resolved through the Indian legal system. The Group considers each issue on its merits and, where appropriate, holds provisions in respect of the potential tax liability that may arise. However, the amount ultimately paid may differ materially from the amount accrued and could therefore affect the Group’s overall profitability and cash flows in future periods. At 31 March 2012 the gross amount and expiry dates of losses available for carry forward are as follows:
Expiring within 5 years £m Expiring within 6-10 years £m Unlimited £m Total £m

Losses for which a deferred tax asset is recognised Losses for which no deferred tax is recognised

68 1,838 1,906

31 670 701

8,317 82,912 91,229

8,416 85,420 93,836

Additional information

The losses arising on the write down of investments in Germany are available to use against both German federal and trade tax liabilities. Losses of £3,804 million (2011: £3,892 million) are included in the above table on which a deferred tax asset has been recognised. The Group has not recognised a deferred tax asset on £11,547 million (2011: £13,389 million) of the losses as it is uncertain that these losses will be utilised. Included above are losses amounting to £1,907 million (2011: £1,907 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 £72,696 million (2011: £82,725 million) that have arisen in overseas holding companies as a result of revaluations of those companies’ investments for local GAAP purposes. No deferred tax asset is recognised in respect of £68,653 million of these losses as it is uncertain whether these losses will be utilised. A deferred tax asset has been recognised for the remainder of these losses (see page 112).

112 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 6. Taxation (continued)

A total deferred tax asset of £1,164 million (2011: £1,143 million) has been recognised in relation to some of the losses of a fiscal unity in Luxembourg as we expect the members of this fiscal unity to generate taxable profits against which these losses will be used. £791 million (2011: £856 million) of the asset has been recognised as a result of the agreement reached with the UK tax authorities in respect of the CFC tax case in the prior year. 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 £40,515 million (2011: £41,607 million) of unremitted earnings of subsidiaries, joint ventures and associates 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
2012 £m 2011 £m 2010 £m

Declared during the financial year: Final dividend for the year ended 31 March 2011: 6.05 pence per share (2010: 5.65 pence per share, 2009: 5.20 pence per share) Interim dividend for the year ended 31 March 2012: 3.05 pence per share (2011: 2.85 pence per share, 2010: 2.66 pence per share) Second interim dividend share for the year ended 31 March 2012: 4.00 pence per share (2011: nil, 2010: nil) Proposed after the end of reporting period and not recognised as a liability: Final dividend for the year ended 31 March 2012: 6.47 pence per share (2011: 6.05 pence per share, 2010: 5.65 pence per share)

3,102 1,536 2,016 6,654

2,976 1,492 – 4,468

2,731 1,400 – 4,131

3,195

3,106

2,976

8. Earnings per share
2012 Millions 2011 Millions 2010 Millions

Weighted average number of shares for basic earnings per share Effect of dilutive potential shares: restricted shares and share options Weighted average number of shares for diluted earnings per share

50,644 314 50,958
£m

52,408 340 52,748
£m

52,595 254 52,849
£m

Earnings for basic and diluted earnings per share

6,957

7,968

8,645

Vodafone Group Plc Annual Report 2012

113

9. Intangible assets
Licences and Goodwill £m spectrum £m Computer software £m Other £m Total £m

Business review

Cost: 1 April 2010 Exchange movements Arising on acquisition Additions Disposals Other 31 March 2011 Exchange movements Arising on acquisition Additions Disposals Disposals of subsidiaries and joint ventures Other 31 March 2012 Accumulated impairment losses and amortisation: 1 April 2010 Exchange movements Amortisation charge for the year Impairment losses Disposals Other 31 March 2011 Exchange movements Amortisation charge for the year Impairment losses Disposals Disposals of subsidiaries and joint ventures Other 31 March 2012 Net book value: 31 March 2011 31 March 2012

104,996 (1,120) 24 – – – 103,900 (6,398) 87 – – (358) – 97,231 53,158 (644) – 6,150 – – 58,664 (3,601) – 3,818 – – – 58,881 45,236 38,350

27,547 (545) – 3,157 – – 30,159 (1,804) – 1,263 – (139) – 29,479 8,918 (104) 1,809 – – – 10,623 (645) 1,891 121 – (34) – 11,956 19,536 17,523

8,244 (16) 17 1,493 (424) 635 9,949 (539) 19 1,653 (653) (52) 81 10,458 5,924 (14) 1,166 – (426) 485 7,135 (371) 1,298 – (634) (23) 55 7,460 2,814 2,998

3,245 8 – 9 (1) 8 3,269 (306) 33 10 (18) (24) 32 2,996 1,774 (6) 529 – – – 2,297 (220) 307 – (16) (20) 5 2,353 972 643

144,032 (1,673) 41 4,659 (425) 643 147,277 (9,047) 139 2,926 (671) (573) 113 140,164 69,774 (768) 3,504 6,150 (426) 485 78,719 (4,837) 3,496 3,939 (650) (77) 60 80,650 68,558 59,514

Performance Governance Financials

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 £2,991 million (2011: £3,845 million) have been pledged as security against borrowings. The net book value at 31 March 2012 and expiry dates of the most significant licences are as follows:
2012 Expiry date £m 2011 £m

Germany UK India Qatar Italy

December 2020/2025 December 2021 September 2030 June 2028 December 2021/2029

4,778 3,250 1,455 1,125 1,771

5,540 3,581 1,746 1,187 1,002 Additional information

The remaining amortisation period for each of the licences in the table above corresponds to the expiry date of the respective licence.

Acquisitions
During the 2012 financial year the Group completed a number of smaller acquisitions for net cash consideration of £149 million, all of which was paid during the year. The aggregate fair values of goodwill, identifiable assets and liabilities of the acquired operations were £87 million, £98 million and £36 million, respectively. In addition, the Group completed the acquisition of certain non-controlling interests for net cash consideration of £2,605 million.

114 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

10. Impairment Impairment losses
The net impairment losses recognised in the consolidated income statement, as a separate line item within operating profit, in respect of goodwill, licences and spectrum fees, and property, plant and equipment are as follows:
Cash generating unit Reportable segment 2012 £m 20111 £m 2010 £m

Italy Spain Greece Portugal Ireland Turkey India

Italy Spain Other Europe2 Other Europe2 Other Europe2 Other Europe India

2,450 900 450 250 – – – 4,050

1,050 2,950 800 350 1,000 – – 6,150

– – – – – (200) 2,300 2,100

Notes: 1 Impairment charges for the year ended 31 March 2011 relate solely to goodwill. 2 Total impairment losses in the Other Europe segment were £700 million in the year ended 31 March 2012 (2011: £2,150 million).

Year ended 31 March 2012 The impairment losses were based on value in use calculations. The pre-tax adjusted discount rates used in the most recent value in use calculation in the year ended 31 March 2012 are as follows:
Pre-tax adjusted discount rate

Italy Spain Greece Portugal

12.1% 10.6% 22.8% 16.9%

During the year ended 31 March 2012, impairment charges in relation to the Group’s investments in Italy, Spain, Greece and Portugal of £2,450 million, £900 million, £450 million and £250 million, respectively, were reported. Of the total charge, £3,848 million relates to goodwill, and £202 million is allocated to licence intangible assets and property, plant and equipment in Greece. The impairment charges were primarily driven by increased discount rates as a result of increases in bond rates, with the exception of Spain where rates have reduced marginally compared to 31 March 2011. In addition, business valuations were negatively impacted by lower cash flows within business plans reflecting challenging economic and competitive conditions, and faster than expected regulatory rate cuts, particularly in Italy. The pre-tax risk adjusted discount rates used in the previous value in use calculations at 31 March 2011 are disclosed below. Year ended 31 March 2011 The net impairment losses were based on value in use calculations. The pre-tax adjusted discount rates used in the value in use calculation in the year ended 31 March 2011 were as follows:
Pre-tax adjusted discount rate

Italy Spain Greece Ireland Portugal

11.9% 11.5% 14.0% 14.5% 14.0%

During the year ended 31 March 2011 the goodwill in relation to the Group’s investments in Italy, Spain, Greece, Ireland and Portugal was impaired by £1,050 million, £2,950 million, £800 million, £1,000 million and £350 million, respectively. The impairment charges were primarily driven by increased discount rates as a result of increases in government bond rates. In addition, business valuations were negatively impacted by lower cash flows within business plans, reflecting weaker country-level macroeconomic environments.

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Year ended 31 March 2010 The net impairment loss was based on value in use calculations. The pre-tax adjusted discount rates used in the value in use calculation in the year ended 31 March 2010 were as follows:
Pre-tax adjusted discount rate

Business review

India Turkey

13.8% 17.6%

During the year ended 31 March 2010 the goodwill in relation to the Group’s operations in India was impaired by £2,300 million primarily due to intense price competition following the entry of a number of new operators into the market. The pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 March 2009 was 12.3%. In addition, impairment losses of £200 million, previously recognised in respect of intangible assets in relation to the Group’s operations in Turkey, were reversed. The reversal was in relation to licences and spectrum and was as a result of favourable changes in the discount rate. The cash flow projections within the business plans used for impairment testing were substantially unchanged from those used at 31 March 2009. The pre-tax risk adjusted discount rate used in the previous value in use calculation at 31 March 2009 was 19.5%.

Performance

Goodwill
The carrying value of goodwill at 31 March was as follows:
2012 £m 2011 £m

Germany Italy Spain Other

11,566 10,400 5,833 27,799 10,551 38,350

12,200 13,615 7,133 32,948 12,288 45,236 Governance

Key assumptions used in the value in use calculations
The key assumptions used in determining the value in use are:
Assumption How determined

Budgeted EBITDA

Budgeted EBITDA has been based on past experience adjusted for the following: aa voice and messaging revenue is expected to benefit from increased usage from new customers, especially in emerging markets, 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 and other regulated rates; aa non-messaging data revenue is expected to continue to grow as the penetration of 3G (plus 4G where available) enabled devices and smartphones rise along with higher data bundle attachment rates, and new products and services are introduced; and aa margins are expected to be impacted by negative factors such as 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: aa the nominal GDP rates for the country of operation; and aa the long-term compound annual growth rate in EBITDA in years six to ten estimated by management. Pre-tax risk adjusted discount rate The discount rate applied to the cash flows of each of the Group’s operations is generally based on the risk free rate for ten year bonds issued by the government in the respective market. Where government bond rates contain a material component of credit risk, high quality local corporate bond rates may be used. These rates are adjusted for a risk premium to reflect both the increased risk of investing in equities and the systematic risk of the specific Group operating company. In making this adjustment, inputs required are the equity market risk premium (that is the required increased return required over and above a risk free rate by an investor who is investing in the market as a whole) and the risk adjustment, beta, applied to reflect the risk of the specific Group operating company relative to the market as a whole. In determining the risk adjusted discount rate, management has applied an adjustment for the systematic risk to each of the Group’s operations determined using an average of the betas of comparable listed mobile telecommunications companies and, where available and appropriate, across a specific territory. Management has used a forward-looking equity market risk premium that takes into consideration both studies by independent economists, the average equity market risk premium over the past ten years and the market risk premiums typically used by investment banks in evaluating acquisition proposals.

Financials Additional information

116 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 10. Impairment (continued)

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 2012 The estimated recoverable amounts of the Group’s operations in Italy, Spain, Greece and Portugal equalled their respective carrying values and, consequently, any adverse change in key assumption would, in isolation, cause a further impairment loss to be recognised. The estimated recoverable amounts of the Group’s operations in India and Romania exceeded their carrying values by approximately £2,060 million and £66 million respectively. The table below shows the key assumptions used in the value in use calculations.
Assumptions used in value in use calculation Germany % Italy % Spain % Greece % Portugal % India % Romania %

Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA1 Budgeted capital expenditure2

8.5 1.5 2.3 8.5–11.8

12.1 1.2 (1.2) 10.1–12.3

10.6 1.6 3.9 10.3–11.7

22.8 1.0 (6.1) 9.3–12.7

16.9 2.3 0.2 12.5–14.0

15.1 6.8 15.0 11.4–14.4

11.5 3.0 0.8 12.0–14.3

Notes: 1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial five years for all 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 five years for all cash generating units of the plans used for impairment testing.

The table below shows, for India and Romania, the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.
Change required for carrying value to equal the recoverable amount India pps Romania pps

Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA1 Budgeted capital expenditure2
Notes: 1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial five years for all cash generating units of the plans used for impairment testing. 2 Budgeted capital expenditure is expressed as a percentage of revenue in the initial five years for all the cash generating units of the plans used for impairment testing.

1.1 (1.6) (3.3) 3.6

0.3 (0.4) (0.6) 1.0

The changes in the following table to assumptions used in the impairment review would, in isolation, lead to an (increase)/decrease to the aggregate impairment loss recognised in the year ended 31 March 2012:
Italy Increase by 2pps £bn Decrease by 2pps £bn Increase by 2pps £bn Spain Decrease by 2pps £bn Increase by 2pps £bn Greece Decrease by 2pps £bn Increase by 2pps £bn Portugal Decrease by 2pps £bn

Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA1 Budgeted capital expenditure2

(2.22) 2.45 1.70 (1.00)

2.45 (2.16) (1.64) 0.94

(1.42) 0.90 0.90 (1.31) 0.30 (0.28) (0.93) 0.90

(0.03) 0.04 0.04 (0.05)

0.06 (0.01) (0.01) 0.07

(0.23) 0.25 0.25 (0.18) 0.22 (0.20) (0.13) 0.14

Notes: 1 Budgeted EBITDA is expressed as the compound annual growth rates in the initial five years for all cash generating units of the plans used for impairment testing. 2 Budgeted capital expenditure is expressed as a percentage of revenue in the initial five years for all cash generating units of the plans used for impairment testing.

31 March 2011 The estimated recoverable amounts of the Group’s operations in Italy, Spain, Greece, Ireland and Portugal equalled their respective carrying values and, consequently, any adverse change in key assumptions would, in isolation, cause a further impairment loss to be recognised. The estimated recoverable amounts of the Group’s operations in Turkey, India and Ghana exceeded their carrying values by approximately £1,481 million, £977 million and £138 million, respectively. The table below shows the key assumptions used in the value in use calculations.
Assumptions used in value in use calculation Italy % Spain % Greece % Ireland % Portugal % Turkey % India % Ghana %

Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA1 Budgeted capital expenditure2

11.9 0.8 (1.0) 9.6–11.3

11.5 1.6 – 7.8–10.6

14.0 2.0 1.2 10.7–12.3

14.5 2.0 2.4 9.4–11.6

14.0 1.5 (1.2) 12.4–14.1

14.1 6.1 16.8 10.0–16.6

14.2 6.3 16.5 12.9–22.7

20.8 6.3 41.4 7.3–41.3

Notes: 1 Budgeted 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.

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The table below shows, for Turkey, India and Ghana, the amount by which each key assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.
Change required for the carrying value to equal the recoverable amount1 Turkey pps India pps Ghana pps

Business review

Pre-tax adjusted discount rate Long-term growth rate Budgeted EBITDA2 Budgeted capital expenditure3

5.6 (19.6) (4.7) 7.0

1.1 (1.0) (2.2) 2.5

6.9 n/a (8.7) 8.9

Notes: 1 The recoverable amount for Greece, which was impaired at 30 September 2010, equals the carrying value at 31 March 2011. 2 Budgeted 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 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.

Performance

11. Property, plant and equipment
Equipment, Land and buildings £m fixtures and fittings £m Total £m

Cost: 1 April 2010 Exchange movements Additions Disposals Reclassifications 31 March 2011 Exchange movements Arising on acquisition Additions Disposals Disposals of subsidiaries and joint ventures Other 31 March 2012 Accumulated depreciation and impairment: 1 April 2010 Exchange movements Charge for the year Disposals Other 31 March 2011 Exchange movements Charge for the year Impairment losses Disposals Disposals of subsidiaries and joint ventures Other 31 March 2012 Net book value: 31 March 2011 31 March 2012

1,577 (16) 122 (21) 69 1,731 (89) 2 140 (29) – (53) 1,702 633 (4) 99 (19) – 709 (33) 98 – (23) – – 751 1,022 951

46,845 (678) 4,604 (3,001) (732) 47,038 (2,933) 5 4,562 (1,458) (604) (45) 46,565 27,147 (114) 4,273 (2,942) (485) 27,879 (1,652) 4,265 81 (1,252) (400) (60) 28,861 19,159 17,704

48,422 (694) 4,726 (3,022) (663) 48,769 (3,022) 7 4,702 (1,487) (604) (98) 48,267 27,780 (118) 4,372 (2,961) (485) 28,588 (1,685) 4,363 81 (1,275) (400) (60) 29,612 20,181 18,655

Governance Financials Additional information

The net book value of land and buildings and equipment, fixtures and fittings includes £58 million and £233 million respectively (2011: £131 million and £155 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 £28 million and £2,037 million respectively (2011: £38 million and £2,375 million). Property, plant and equipment with a net book value of £893 million (2011: £972 million) has been pledged as security against borrowings.

118 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

12. Principal subsidiaries
At 31 March 2012 the Company had the following principal subsidiaries carrying on businesses which affect the profits and assets of the Group. The Group comprises a large number of subsidiaries and it is not practical to include all of them in the list below. The list therefore only includes those principal subsidiaries which affected the Group accounts. A full list of subsidiaries with significant holdings and associated undertakings (both as defined in the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008) as at 15 August 2012 will be annexed to the Company’s next annual return filed with the Registrar of Companies. No subsidiaries are excluded from the Group consolidation. 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.
Name Principal activity Country of incorporation or registration Percentage shareholdings1

Vodafone D2 GmbH Vodafone España S.A.U. Vodafone Limited Vodafone Albania Sh.A. Vodafone Czech Republic a.s. Vodafone-Panafon Hellenic Telecommunications Company S.A. Vodafone Magyarorszag Mobile Tavkozlesi Zartkoruen Mukodo Reszvenytarsasag2 Vodafone Ireland Limited Vodafone Malta Limited Vodafone Libertel B.V. Vodafone Portugal-Comunicações Pessoais, S.A.3 Vodafone Romania S.A. Vodafone Telekomunikasyon A.S. Vodafone India Limited4 Vodacom Group Limited Vodacom Congo (RDC) s.p.r.l.5 6 7 Vodacom Tanzania Limited5 7 VM, S.A.5 8 Vodacom Lesotho (Pty) Limited5 Vodacom Business Africa Group (PTY) Limited5 Vodafone Egypt Telecommunications S.A.E. Ghana Telecommunications Company Limited Vodafone New Zealand Limited Vodafone Qatar Q.S.C.7 Vodafone Group Services Limited9 Vodafone Marketing S.a.r.l. Vodafone Holding GmbH Vodafone Holdings Europe S.L.U. Vodafone Europe B.V. Vodafone International Holdings B.V. Vodafone Investments Luxembourg S.a.r.l. Vodafone Procurement Company S.a.r.l. Vodafone Roaming Services S.a.r.l. Vodafone Americas Inc.10

Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Network operator Holding company Network operator Network operator Network operator Network operator Global products and services provider Provider of partner market services Holding company Holding company Holding company Holding company Holding company Group services provider Group services provider Holding company

Germany Spain England Albania Czech Republic Greece Hungary Ireland Malta Netherlands Portugal Romania Turkey India South Africa The Democratic Republic of Congo Tanzania Mozambique Lesotho South Africa Egypt Ghana New Zealand Qatar England Luxembourg Germany Spain Netherlands Netherlands Luxembourg Luxembourg Luxembourg US

100.0 100.0 100.0 99.9 100.0 99.9 100.0 100.0 100.0 100.0 100.0 100.0 100.0 84.5 65.0 33.2 42.3 55.3 52.0 65.0 54.9 70.0 100.0 23.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Notes: 1 Effective ownership percentages of Vodafone Group Plc at 31 March 2012, rounded to nearest tenth of one percent. 2 Trades as Vodafone Hungary Mobile Telecommunications Company Limited. 3 38.6% of the issued share capital of Vodafone Portugal-Comunicações Pessoais, S.A. is directly held by Vodafone Group Plc. 4 At 31 March 2012, the Group had a 64.4% interest in Vodafone India Limited (name changed from Vodafone Essar Limited on 11 October 2011) (‘VIL’) through wholly owned subsidiaries and a further 20.1% indirectly through less than 50% owned entities giving an aggregate 84.5% interest. The Group has call options to acquire shareholdings in companies which indirectly own a further 4.5% interest in VIL. The shareholders of these companies also have put options which, if exercised, would require Vodafone to purchase the remaining shares in the respective company. If these options were exercised, which can only be done in accordance with the Indian law prevailing at the time of exercise, the Group would have a direct and indirect interest of 89.0% of VIL. 5 Shareholding is indirect through Vodacom Group Limited. The indirect shareholding is calculated using the 65.0% ownership interest in Vodacom. 6 The share capital of Vodacom Congo (RDC) s.p.r.l. consists of 1,000,000 ordinary shares and 75,470,588 preference shares. 7 The Group has rights that enable it to control the strategic and operating decisions of Vodafone Qatar Q.S.C., Vodacom Congo (RDC) s.p.r.l. and Vodacom Tanzania Limited. 8 The share capital of VM, S.A. consists of 60,000,000 ordinary shares and 547,294,533 preference shares. 9 Share capital consists of 600 ordinary shares and one deferred share, of which 100% of the shares are indirectly held by Vodafone Group Plc. 10 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 indirectly held by Vodafone Group Plc.

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13. Investments in joint ventures Principal joint ventures
At 31 March 2012 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.
Name Principal activity Country of incorporation or registration Percentage1 shareholdings

Business review

Indus Towers Limited Vodafone Hutchison Australia Pty Limited3 Vodafone Fiji Limited Vodafone Omnitel N.V.5

Network infrastructure India Network operator Australia Network operator Fiji Network operator Netherlands

35.52 50.0 49.04 76.96 Performance

Notes: 1 Effective ownership percentages of Vodafone Group Plc at 31 March 2012, rounded to the nearest tenth of one percent. 2 42% of Indus Towers Limited is held by Vodafone India Limited (‘VIL’) in which, as discussed in note 12, footnote 4, the Group had a 64.4% interest through wholly owned subsidiaries and a further 20.1% indirectly through less than 50% owned entities. 3 Vodafone Hutchison Australia Pty Limited has 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. The results of Australia are included from 9 June 2009 following its merger with Hutchison 3G Australia. The results of Polkomtel are included until its disposal on 9 November 2011.
2012 £m 2011 £m 2010 £m

Governance

Revenue Cost of sales Gross profit Selling, distribution and administrative expenses Impairment losses Other income and expense Operating profit Net financing costs Profit before tax Income tax expense Profit for the financial year

7,436 (4,483) 2,953 (1,231) (2,450) 296 (432) (141) (573) (552) (1,125)

7,849 (4,200) 3,649 (1,624) (1,050) – 975 (146) 829 (608) 221
2012 £m

7,896 (4,216) 3,680 (1,369) – (12) 2,299 (152) 2,147 (655) 1,492
2011 £m

Financials

Non-current assets Current assets Total assets Total shareholders’ funds and total equity Non-current liabilities Current liabilities Total liabilities Total equity and liabilities

15,707 911 16,618 12,574 1,721 2,323 4,044 16,618

19,043 1,908 20,951 16,389 1,887 2,675 4,562 20,951

Additional information

120 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

14. Investments in associates
At 31 March 2012 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.
Name Principal activity Country of incorporation or registration Percentage1 shareholdings

Cellco Partnership2 Safaricom Limited3 4

Network operator Network operator

US Kenya

45.0 40.0

Notes: 1 Effective ownership percentages of Vodafone Group Plc at 31 March 2012, rounded to the 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 2012 the fair value of Safaricom Limited was KES 51 billion (£386 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.
2012 £m 2011 £m 2010 £m

Share of revenue in associates Share of result in associates Share of discontinued operations in associates

20,601 4,963 –

24,213 5,059 18
2012 £m

23,288 4,742 93
2011 £m

Non-current assets Current assets Share of total assets Non-current liabilities Current liabilities Non-controlling interests Share of total liabilities and non-controlling interests Share of equity shareholders’ funds in associates

38,788 3,764 42,552 3,990 2,888 566 7,444 35,108

45,446 5,588 51,034 5,719 6,656 554 12,929 38,105

15. Other investments
Non-current other investments comprise the following, all of which are classified as available-for-sale, with the exception of public debt and bonds, and other debt and bonds, which are classified as loans and receivables, and cash held in restricted deposits:
2012 £m 2011 £m

Included within non-current assets: Listed securities: Equity securities Unlisted securities: Equity securities Public debt and bonds Other debt and bonds Cash held in restricted deposits

1 671 54 65 – 791

1 967 3 72 338 1,381

Unlisted equity securities include a 26% interest in Bharti Infotel Private Limited through which the Group has a 4.39% 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. In the year ended 31 March 2011 the Group sold its 3.2% interest in China Mobile for £4,264 million generating a £3,019 million income statement gain, including income statement recognition of foreign exchange rate gains previously recognised in equity. For public debt and bonds, other debt and bonds and cash held in restricted deposits, the carrying amount approximates fair value.

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Current other investments comprise the following, of which public debt and bonds are classified as held for trading. Other debt and bonds includes £87 million of assets held for trading (2011: £64 million):
2012 £m 2011 £m

Business review

Included within current assets: Public debt and bonds Other debt and bonds Cash held in restricted deposits

900 90 333 1,323

610 64 – 674

Current public debt and bonds include Government Bonds of £900 million (2011: £610 million) which consist of index linked gilts with less than six years to maturity held on an effective floating rate basis. For public debt and bonds, other debt and bonds and cash held in restricted deposits, the carrying amount approximates fair value. Performance

16. Inventory
2012 £m 2011 £m

Goods held for resale Inventory is reported net of allowances for obsolescence, an analysis of which is as follows:
2012 £m

486

537

2011 £m

2010 £m

1 April Exchange movements Amounts (credited)/charged to the income statement 31 March

117 (8) – 109

120 (1) (2) 117

111 5 4 120

Governance

Cost of sales includes amounts related to inventory amounting to £6,327 million (2011: £5,878 million; 2010: £5,268 million).

17. Trade and other receivables
2012 £m 2011 £m

Included within non-current assets: Trade receivables Other receivables Prepayments and accrued income Derivative financial instruments Included within current assets: Trade receivables Amounts owed by associates Other receivables Prepayments and accrued income Derivative financial instruments

120 235 326 2,801 3,482 3,885 15 2,984 3,702 158 10,744

92 1,719 137 1,929 3,877 4,185 53 1,606 3,299 116 9,259

Financials

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:
2012 £m 2011 £m 2010 £m

Additional information

1 April Exchange movements Amounts charged to administrative expenses Trade receivables written off 31 March

1,006 (64) 458 (386) 1,014

929 (30) 460 (353) 1,006

874 (27) 465 (383) 929

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

122 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 17. Trade and other receivables (continued)
2012 £m 2011 £m

Included within “Derivative financial instruments”: Fair value through the income statement (held for trading): Interest rate swaps Foreign exchange swaps Fair value hedges: Interest rate swaps

1,514 128 1,642 1,317 2,959

1,292 99 1,391 654 2,045

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.

18. Cash and cash equivalents
2012 £m 2011 £m

Cash at bank and in hand Money market funds Repurchase agreements Other Cash and cash equivalents as presented in the statement of financial position Bank overdrafts Cash and cash equivalents as presented in the statement of cash flows

2,762 3,190 600 586 7,138 (50) 7,088

896 5,015 – 341 6,252 (47) 6,205

Bank balances and money market funds comprise cash held by the Group on a short-term basis with original maturity of three months or less. The carrying amount of cash and cash equivalents approximates their fair value. Repurchase agreements have an original maturity of less than three months and the carrying value approximates the fair value.

19. Called up share capital
2012 Number £m Number 2011 £m

Ordinary shares of 113⁄ 7 US cents each allotted, issued and fully paid:1 1 April Allotted during the year Cancelled during the year 31 March

56,811,123,429 3,883,860 (3,000,000,000) 53,815,007,289

4,082 – (216) 3,866

57,809,246,732 1,876,697 (1,000,000,000) 56,811,123,429

4,153 – (71) 4,082

Note: 1 At 31 March 2012 the Group held 4,169,067,107 (2011: 5,233,597,599) treasury shares with a nominal value of £299 million (2011: £376 million). The market value of shares held was £7,179 million (2011: £9,237 million). During the year 166,003,556 (2011: 150,404,079) treasury shares were reissued under Group share option schemes.

Allotted during the year
Nominal value Number £m Net proceeds £m

Share awards and option scheme awards1
Note: 1. Shares allotted during the year were in relation to US share awards and option schemes.

3,883,860

–

7

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: aa 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 aa 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.

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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 2012. There are options outstanding under the Vodafone Group 1999 Long-Term Stock Incentive Plan and the Vodafone Global Incentive Plan. These options are normally exercisable between three and ten years from the date of grant. The vesting of some of these options is subject to satisfaction of performance conditions. Grants made to US employees are made in respect of ADSs. Vodafone Group Sharesave Plan The Vodafone Group 2008 Sharesave Plan and its predecessor, the Vodafone Group 1998 Sharesave Scheme, enable UK staff to acquire shares in the Company through monthly savings of up to £250 over a three or five year period, at the end of which they also receive a tax free bonus. The savings and bonus may then be used to purchase shares at the option price, which is set at the beginning of the invitation period and usually at a discount of 20% to the then prevailing market price of the Company’s shares.

Business review

Share plans
Vodafone Group executive plans Under the Vodafone Global Incentive Plan awards of shares are granted to directors and certain employees. The release of these shares is conditional upon continued employment and for some awards achievement of certain performance targets measured over a three year period. Vodafone Share Incentive Plan The Vodafone Share Incentive Plan enables UK staff to acquire shares in the Company through monthly purchases of up to £125 per month or 5% of salary, whichever is lower. For each share purchased by the employee, the Company provides a free matching share.

Performance

Movements in ordinary share options and ADS options outstanding
ADS options 2012 Millions 2011 Millions 2010 Millions 2012 Millions 2011 Millions Ordinary share options 2010 Millions

1 April Granted during the year Forfeited during the year Exercised during the year Expired during the year 31 March Weighted average exercise price: 1 April Granted during the year Forfeited during the year Exercised during the year Expired during the year 31 March

1 – – – – 1 $14.82 – – – – $15.20

1 – – – – 1 $15.07 – – – – $14.82

1 – – – – 1 $15.37 – – – – $15.07

171 5 (1) (55) (36) 84 £1.32 £1.31 £1.07 £1.37 £1.56 £1.18

266 4 (1) (72) (26) 171 £1.41 £1.14 £1.10 £1.33 £2.25 £1.32

334 13 (2) (47) (32) 266 £1.41 £0.94 £1.50 £1.11 £1.67 £1.41

Governance Financials

Summary of options outstanding and exercisable at 31 March 2012
Outstanding Weighted average Weighted Outstanding shares Millions average exercise price remaining contractual life Months Exercisable shares Millions Weighted average exercise price Exercisable Weighted average remaining contractual life Months

Vodafone Group savings related and Sharesave Plan: £0.01 – £1.00 £1.01 – £2.00 Vodafone Group 1999 Long-Term Stock Incentive Plan: £0.01 – £1.00 £1.01 – £2.00 Other share option plans: £1.01 – greater than £3.01 Vodafone Group 1999 Long-Term Stock Incentive Plan: $10.01 – $30.00

9 10 19 30 35 65 – 1

£0.94 £1.24 £1.09 £0.90 £1.45 £1.20 £2.72 $15.20

19 33 26 3 49 28 1 6

– – – 30 35 65 – 1

– – – £0.90 £1.45 £1.20 £1.51 $15.20

– – – 3 49 28 1 6

Additional information

124 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 20. Share-based payments (continued)

Fair value of options granted
Ordinary share options 2012 2011 2010

Expected life of option (years) Expected share price volatility Dividend yield Risk free rates Exercise price

3–5 25.4–25.6% 5.44% 1.1–1.9% £1.31

3–5 27.5–27.6% 5.82% 1.3–2.2% £1.14

3–5 32.5–33.5% 6.62% 2.5–3.0% £0.94

The fair value of options granted is estimated at the date of grant using a lattice-based option valuation model which incorporates ranges of assumptions for inputs as disclosed above.

Share awards
Movements in non-vested shares during the year ended 31 March 2012 are as follows:
Global AllShare Plan Weighted average fair value at Millions grant date Millions Other Weighted average fair value at grant date Millions Total Weighted average fair value at grant date

1 April 2011 Granted Vested Forfeited 31 March 2012

17 – (17) – –

£1.02 – £1.02 – –

370 120 (99) (39) 352

£1.00 £1.29 £1.14 £0.81 £1.08

387 120 (116) (39) 352

£1.00 £1.29 £1.12 £0.81 £1.08

Other information
The weighted average grant date fair value of options granted during the 2012 financial year was £0.30 (2011: £0.27; 2010: £0.26). The total fair value of shares vested during the year ended 31 March 2012 was £130 million (2011: £113 million; 2010: £100 million). The compensation cost included in the consolidated income statement in respect of share options and share plans was £143 million (2011: £156 million; 2010: £150 million) which is comprised entirely of equity-settled transactions. The average share price for the year ended 31 March 2012 was 169.9 pence (2011: 159.5 pence, 2010: 132 pence).

21. Capital and financial risk management Capital management
The following table summarises the capital of the Group:
2012 £m 2011 £m

Financial assets: Cash and cash equivalents Fair value through the income statement (held for trading) Derivative instruments in designated hedge relationships Financial liabilities: Fair value through the income statements (held for trading) Derivative instruments in designated hedge relationships Financial liabilities held at amortised cost Net debt Equity Capital

(7,138) (2,629) (1,317) 889 – 34,620 24,425 78,202 102,627

(6,252) (2,065) (654) 495 53 38,281 29,858 87,561 117,419

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 non-controlling shareholders 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.

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Financial risk management
The Group’s treasury function provides a centralised service to the Group for funding, foreign exchange, interest rate management and counterparty risk management. Treasury operations are conducted within a framework of policies and guidelines authorised and reviewed by the Board, most recently on 27 March 2012. A treasury policy committee comprising of the Group’s Chief Financial Officer, Group General Counsel and Company Secretary, Group Treasury 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’s accounting function, which does not report to the Group Treasury Director, provides regular update reports of treasury activity to the Board. The Group’s internal auditor reviews the internal control environment regularly. The Group uses a number of derivative instruments for currency and interest rate risk management purposes only that are transacted by specialist treasury personnel. The Group mitigates banking sector credit risk by the use of collateral support agreements. Credit risk The Group considers its exposure to credit risk at 31 March to be as follows:

Business review Performance

2012 £m

2011 £m

Bank deposits Repurchase agreements Cash held in restricted deposits Government bonds Money market fund investments Derivative financial instruments Other investments – debt and bonds Trade receivables Other receivables Other

2,762 600 333 900 3,190 2,959 160 4,005 3,219 586 18,714

896 – 338 610 5,015 2,045 75 4,277 3,325 341 16,922

Governance

The Group invests in UK index linked government bonds on the basis that they generate a swap return in excess of £ LIBOR and are amongst the most creditworthy of investments available. Money market investments are in accordance with established internal treasury policies which dictate that an investment’s long-term credit rating is no lower than mid BBB. Additionally, the Group invests in AAA unsecured money market mutual funds where the investment is limited to 7.5% of each fund. The Group has investments in repurchase agreements which are fully collateralised investments. The collateral is sovereign and supranational debt of major AAA rated 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. Detailed below is the value of the collateral held by the Group at 31 March 2012.
2012 £m 2011 £m

Sovereign Supranational

575 25 600

– – –

Financials

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 (i) reference to the long-term credit ratings assigned for that counterparty by Moody’s, Fitch Ratings and Standard & Poor’s, (ii) that counterparty’s five year credit default swap (‘CDS’) spread, and (iii) the sovereign credit rating of that counterparty’s principal operating jurisdiction. Furthermore, collateral support agreements were 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 2012:
2012 £m 2011 £m

Additional information

Cash collateral

980

531

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 2012 £1,806 million (2011: £2,233 million) of trade receivables were not yet due for payment. Total trade receivables consisted of £2,672 million (2011: £2,852 million) relating to the Europe region and £1,333 million (2011: £1,425 million) relating to the Africa, Middle East and Asia Pacific region. Accounts are monitored by management and provisions for bad and doubtful debts raised where it is deemed appropriate.

126 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 21. Capital and financial risk management (continued)

The following table presents ageing of receivables that are past due and provisions for doubtful receivables that have been established.
2012 Gross receivables £m Less provisions £m Net receivables £m Gross receivables £m Less provisions £m 2011 Net receivables £m

30 days or less Between 31 – 60 days Between 61 – 180 days Greater than 180 days

1,914 192 435 598 3,139

(390) (21) (96) (433) (940)

1,524 171 339 165 2,199

1,933 140 157 778 3,008

(372) (40) (72) (480) (964)

1,561 100 85 298 2,044

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 2012 were £458 million (2011: £460 million, 2010: £465 million) (see note 17). The Group’s investments in preferred equity and a subordinated loan received as part of the disposal of Vodafone Japan to SoftBank in the 2007 financial year were disposed of in the prior year. The Group has a receivable of £1,514 million (2011: £1,488 million) in relation to the second tranche of consideration receivable in relation to the disposal. This amount was received on 2 April 2012. 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 security takes the form of an English law pledge over UK index linked government bonds. Liquidity risk At 31 March 2012 the Group had €4.2 billion and US$4.2 billion syndicated committed undrawn bank facilities and US$15 billion and £5 billion commercial paper programmes, supported by the €4.2 billion and US$4.2 billion syndicated committed bank facilities, available to manage its liquidity. The Group uses commercial paper and bank facilities to manage short-term liquidity and manages long-term liquidity by raising funds in the capital markets. €4.2 billion of the syndicated committed facility has a maturity date of 1 July 2015. US$4.2 billion has a maturity of 9 March 2016; during the year US$4.1 billion of this facility was extended by one year, now maturing 9 March 2017. 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 25 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 2012 amounted to £7,138 million (2011: £6,252 million). Market risk Interest rate management Under the Group’s interest rate management policy, interest rates on monetary assets and liabilities denominated in euros, US dollars and sterling are maintained on a floating rate basis except for periods up to six years where interest rate fixing has to be undertaken in accordance with treasury policy. Where assets and liabilities are denominated in other currencies interest rates may also be fixed. In addition, fixing is undertaken for longer periods when interest rates are statistically low. 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 2012 there would be a reduction or increase in profit before tax by approximately £33 million (2011: increase or reduce by £30 million) including mark-tomarket revaluations of interest rate and other derivatives and the potential interest on outstanding tax issues. There would be no material impact on equity.

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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, South African rand, Indian rupee 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 2012 140% of net debt was denominated in currencies other than sterling (54% euro, 54% US dollar and 32% other) while 40% of net debt had been purchased forward in sterling in anticipation of sterling denominated shareholder returns via dividends and share buybacks. This allows euro, US dollar and other debt to be serviced in proportion to expected future cash flows and therefore provides a partial hedge against income statement translation exposure, as interest costs will be denominated in foreign currencies. Yen debt is used as a hedge against the value of yen assets as the Group has minimal yen cash flows. 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.

Business review Performance

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.
2012 £m

Euro 3% change – Operating profit1 US dollar 4% change – Operating profit1
Note: 1 Operating profit before impairment losses and other income and expense

140 195

At 31 March 2011 sensitivity of the Group’s operating profit was analysed for a strengthening of the euro by 4% and the US dollar by 13%, which represented movements of £230 million and £594 million respectively. Equity risk The Group has equity investments, primarily in Bharti Infotel Private Limited, which is subject to equity risk. See note 15 to the consolidated financial statements for further details on the carrying value of this investment.

Governance

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 2012.
Level 11 2012 £m 2011 £m 2012 £m Level 22 2011 £m 2012 £m Total 2011 £m

Financial assets: Fair value through the income statement (held for trading) Derivative financial instruments: Interest rate swaps Foreign exchange contracts Interest rate futures Financial investments available-for-sale: Listed equity securities3 Unlisted equity securities3

Financials

– – – – – 1 – 1 1

– – – – – 1 – 1 1

949 2,831 128 38 3,946 – 591 591 4,537

674 1,946 99 31 2,750 – 703 703 3,453

949 2,831 128 38 3,946 1 591 592 4,538

674 1,946 99 31 2,750 1 703 704 3,454

Financial liabilities: Derivative financial instruments: Interest rate swaps Foreign exchange contracts

Additional information

– – –

– – –

800 89 889

395 153 548

800 89 889

395 153 548

Notes: 1 Level 1 classification comprises financial instruments where fair value is determined by unadjusted quoted prices in active markets for identical assets or liabilities. 2 Level 2 classification comprises where fair value is determined from inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Fair values for unlisted equity securities are derived from observable quoted market prices for similar items. Derivative financial instrument fair values are present values determined from future cash flows discounted at rates derived from market sourced data. 3 Details of listed and unlisted equity securities are included in note 15 “Other Investments”.

128 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012

22. Borrowings Carrying value and fair value information
2012 Short-term borrowings £m Long-term borrowings £m Total £m Short-term borrowings £m Long-term borrowings £m Total £m 2011

Financial liabilities measured at amortised cost: Bank loans Bank overdrafts Redeemable preference shares Commercial paper Bonds Other liabilities1 2 Bonds in fair value hedge relationships

1,635 50 – 2,272 1,289 1,012 – 6,258

5,624 – 1,281 – 14,463 2,417 4,577 28,362

7,259 50 1,281 2,272 15,752 3,429 4,577 34,620

2,070 47 – 1,660 2,470 3,659 – 9,906

5,872 – 1,169 – 16,046 1,023 4,265 28,375

7,942 47 1,169 1,660 18,516 4,682 4,265 38,281

Notes: 1 At 31 March 2012 amount includes £980 million (2011: £531 million) in relation to collateral support agreements. 2 Amounts at 31 March 2012 includes £840 million (2011: £3,190 million) in relation to the options disclosed in note 12.

Bank loans include INR 273 billion of loans held by Vodafone India Limited (‘VIL’) and its subsidiaries (the ‘VIL Group’). The VIL 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 VIL. The terms and conditions of the security arrangements mean that should members of the VIL 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 VIL Group. Each of the eight legal entities within the VIL 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 2012 £m 2011 £m 2012 £m Fair value 2011 £m 2012 £m Carrying value 2011 £m

Financial liabilities measured at amortised cost Bonds: 1.15% US dollar 100 million bond due August 2012 3.625% euro 1,250 million bond due November 2012 6.75% Australian dollar 265 million bond due January 2013 US dollar floating rate note due June 2011 5.5% US dollar 750 million bond due June 2011 1% US dollar 100 million bond due August 2011 Euro floating rate note due January 2012 US dollar floating rate note due February 2012 5.35% US dollar 500 million bond due February 2012 Short-term borrowings

4,915 1,267 63 1,032 172 – – – – – – 6,182

7,316 2,444 – – – 171 467 45 1,144 306 311 9,760

4,977 1,288 63 1,051 174 – – – – – – 6,265

7,425 2,463 – – – 171 471 45 1,146 306 324 9,888

4,969 1,289 63 1,050 176 – – – – – – 6,258

7,436 2,470 – – – 171 478 45 1,148 306 322 9,906

Vodafone Group Plc Annual Report 2012

129

The fair value and carrying value of the Group’s long-term borrowings is as follows:
Sterling equivalent nominal value 2012 £m 2011 £m 2012 £m Fair value 2011 £m 2012 £m Carrying value 2011 £m

Business review

Financial liabilities measured at amortised cost: Bank loans Redeemable preference shares Other liabilities Bonds: 3.625% euro 1,250 million bond due November 2012 6.75% Australian dollar 265 million bond due January 2013 Czech kurona floating rate note due June 2013 Euro floating rate note due September 2013 5.0% US dollar 1,000 million bond due December 2013 6.875% euro 1,000 million bond due December 2013 Euro floating rate note due June 2014 4.15% US dollar 1,250 million bond due June 2014 4.625% sterling 350 million bond due September 2014 4.625% sterling 525 million bond due September 2014 5.125% euro 500 million bond due April 2015 5.0% US dollar 750 million bond due September 2015 3.375% US dollar 500 million bond due November 2015 6.25% euro 1,250 million bond due January 2016 2.875% US dollar 600 million bond due March 2016 5.75% US dollar 750 million bond due March 2016 4.75% euro 500 million bond due June 2016 5.625% US dollar 1,300 million bond due February 2017 1.625% US dollar 1,000 million bond due March 2017 5.375% sterling 600 million bond due December 2017 5% euro 750 million bond due June 2018 8.125% sterling 450 million bond due November 2018 4.375% US dollar 500 million bond due March 2021 7.875% US dollar 750 million bond due February 2030 6.25% US dollar 495 million bond due November 2032 6.15% US dollar 1,700 million bond due February 2037 Bonds in fair value hedge relationships: 2.15% Japanese yen 3,000 million bond due April 2015 5.375% US dollar 900 million bond due January 2015 4.625% US dollar 500 million bond due July 2018 5.45% US dollar 1,250 million bond due June 2019 4.65% euro 1,250 million bond January 2022 5.375% euro 500 million bond June 2022 5.625% sterling 250 million bond due December 2025 6.6324% euro 50 million bond due December 2028 5.9% sterling 450 million bond due November 2032 Long-term borrowings

5,336 1,032 2,325 13,184 – – 18 638 625 763 938 755 304 525 417 469 313 938 375 469 417 813 625 552 625 450 313 469 310 1,063 3,882 23 563 313 782 1,042 417 250 42 450 25,759

5,728 1,027 1,022 14,581 1,104 171 19 751 623 883 1,104 778 350 525 442 467 311 1,104 374 467 442 809 – 600 663 450 311 467 308 1,058 3,962 23 560 311 778 1,104 442 250 44 450 26,320

5,625 1,199 2,472 14,746 – – 18 641 669 834 939 808 325 562 463 528 335 1,094 393 543 469 954 624 632 726 589 348 648 377 1,227 4,541 24 628 354 920 1,203 501 294 86 531 28,583

5,872 1,054 1,023 15,578 1,125 173 19 752 676 970 1,099 826 367 551 475 506 317 1,230 371 523 463 897 – 638 697 550 307 591 332 1,123 4,199 24 616 327 850 1,115 470 258 68 471 27,726

5,624 1,281 2,417 14,463 – – 18 638 657 786 938 773 326 541 442 505 314 953 374 522 455 908 621 573 650 485 310 751 424 1,499 4,577 23 621 367 898 1,172 532 324 67 573 28,362

5,873 1,169 1,022 16,046 1,132 176 19 752 667 922 1,105 802 382 544 470 512 312 1,139 371 532 487 920 – 629 689 488 309 759 425 1,503 4,265 23 621 338 823 1,114 505 284 57 500 28,375

Performance Governance Financials Additional information

Fair values are calculated using quoted market prices or discounted cash flows with a discount rate based upon forward interest rates available to the Group at the reporting date.

130 Notes to the consolidated financial statements (continued)
Vodafone Group Plc Annual Report 2012 22. Borrowings (continued)

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 Bank loans £m preference shares £m Commercial paper £m Bonds £m Other liabilities £m Loans in fair value hedge relationships £m Total £m

Within one year In one to two years In two to three years In three to four years In four to five years In more than five years Effect of discount/financing rates 31 March 2012 Within one year In one to two years In two to three years In three to four years In four to five years In more than five years Effect of discount/financing rates 31 March 2011

684 2,983 567 1,316 1,574 1,466 8,590 (1,331) 7,259 947 1,914 2,748 529 987 2,197 9,322 (1,380) 7,942

56 56 56 56 56 1,214 1,494 (213) 1,281 52 52 52 52 52 1,240 1,500 (331) 1,169

2,283 – – – – – 2,283 (11) 2,272 1,670 – – – – – 1,670 (10) 1,660

2,000 2,828 3,197 3,536 1,541 6,780 19,882 (4,130) 15,752 3,292 2,009 2,919 3,251 3,613 7,725 22,809 (4,293) 18,516

1,044 771 – 1,235 726 69 3,845 (366) 3,479 3,766 191 60 60 901 – 4,978 (249) 4,729

199 199 762 191 169 4,465 5,985 (1,408) 4,577 203 203 203 763 195 4,752 6,319 (2,054) 4,265

6,266 6,837 4,582 6,334 4,066 13,994 42,079 (7,459) 34,620 9,930 4,369 5,982 4,655 5,748 15,914 46,598 (8,317) 38,281

The maturi