Chairman’s statement

After the macroeconomic shocks of the previous financial year and the business challenges that accompanied them, our overall operating environment did not deteriorate further during the year. Most markets saw economic growth recover, although southern Europe remained weaker.

Within this context, the Group has performed well. We achieved organic service revenue growth of 2.1%^(*), a significant change in momentum from last year’s 1.6%^(*) decline.

Our adjusted operating profit was up 3.1% at £11.8 billion, reflecting a stable performance in our controlled operations and strong growth in the contribution from Verizon Wireless, our US associate.

Data has been the key driver of growth over the last year. Our customers around the world are increasingly drawn to the experience of the mobile internet and related services. Organic data revenue growth was 26.4%^(*) achieved through combining increasingly disciplined pricing structures with a broad range of devices and a network with a deserved reputation for market-leading speed and reliability.

We have continued to make substantial investments in our infrastructure to maintain our advantage over our peers, with a total capital expenditure outlay of £6.2 billion during the year. The Group, however, remains highly cash generative, with free cash flow for the year totalling £7.0 billion.

The Board remains committed to achieving full value from the non-controlled interests within the Group. This has been an ongoing process, starting with the disposals of our interests in Belgacom and Swisscom five years ago, but inevitably pausing during the financial crisis when asset prices were depressed. During the year, we successfully disposed of our holdings in China Mobile Limited and SoftBank, generating proceeds of £7.4 billion. Just after the year end, we were pleased to announce the sale of our 44% interest in SFR, the number two mobile operator in France.

This time last year the Board put in place a target to grow total dividends per share by at least 7% per annum over the following three years, and I am pleased to announce a 7.1% increase in the final dividend for the March 2011 year, giving a total payout for the year of 8.90 pence.

In addition, from the proceeds from our portfolio rationalisation, we have committed £6.8 billion to share buyback programmes. Combined with the dividend, this takes total committed shareholder returns during the year to £15.7 billion, or 17% of our market capitalisation at 31 March 2011. Including share price appreciation, our total shareholder return for the year was 23%, compared to 8% for the FTSE 100.

During the year, the Group has been involved in two high profile tax cases in the UK and India. Our tax policy is straightforward: we pay taxes that are due in the countries where we make profits or record capital gains in line with the prevailing legislation of those jurisdictions.

I am proud to say every year that our people all around the world are absolutely committed to serving our customers and are often the difference between Vodafone and our competitors. However, this year I must highlight the extraordinary commitment and dedication shown to maintaining services to customers in two of our markets in extremis.

In Egypt, our employees risked their personal safety in a very volatile environment to keep the network up and running at a time when mobile communication was more important than ever, keeping the voice network outage to less than 24 hours.

In New Zealand, our people responded magnificently to the earthquake that devastated Christchurch in February 2011. They ensured network coverage was maintained 24 hours a day despite major power outages and structural damage, and managed unprecedented levels of demand as the mobile phone became the primary means of communication for the people of Christchurch and the rescue services. The team worked around the clock to ensure the safety of our own staff and to provide temporary stores and subsidised packages to support customers’ communications needs.

We have continued to fund the good work of the Vodafone Foundation. Through the Vodafone Foundation and our network of national affiliate foundations we support communities and societies in the countries in which we operate. In this financial year we invested a total of £50 million in foundation programmes and social causes.

Our World of Difference programme is now in 20 countries and has so far enabled 1,500 people to take paid time to work for a charitable purpose of their choice in their own community or in a developing country.

Our Mobiles for Good programme, combining our technology with our giving, saw the launch of Instant Network, a partnership with Telecoms Sans Frontieres which enables a network to be deployed from three suitcases, covering 10 sq km for usage of up to 12,000 people. Field trials are currently underway.

Across the Group we continue to promote text giving, enabling our customers to give money simply and free of charge to support charitable appeals following disasters. Using this platform we raised over NZ$1.3 million for the Red Cross to support the people of Christchurch.

During the year the Board appointed Renee James as a non-executive director. Renee is Senior Vice President and General Manager of the Software and Services Group for Intel Corporation. She joined the Board in January 2011 and it is clear that her industry knowledge and expertise will make a strong contribution to the Group through another period of rapid technological change.

The Board welcomed the publication in February of the Davies Review on Women on Boards and, in line with its recommendations, it is our aspiration to have a minimum of 25% female representation on the Board by 2015. The Financial Reporting Council is currently consulting on changes to the UK Corporate Governance Code including a recommendation that companies adopt a boardroom diversity policy; we expect to comply with any such recommendation. The Board recognises the importance of gender balance throughout the Group and continues to support our CEO, Vittorio Colao, in his efforts to build a diverse organisation. Further information can be found in the Corporate Governance section of this report.

After five years as Chairman I am retiring from the Board at the AGM in July. It has been a privilege to chair a Board of such diverse and rich experience, and to help steer the Group through the challenges of a dynamic industry and an uncertain economic environment.

As a Board, our goal has always been to make the right decisions based on the long-term opportunities for the business. As a result, we now have an established presence in a number of emerging markets that offer attractive potential for sustained growth; and our commitment to maintaining investment throughout the economic cycle means we have mobile networks that lead the industry for speed and reliability. This will be crucial as customers’ expectations grow in line with their data usage.

Furthermore, we have continually assessed the risks and opportunities of having capital deployed in some of our non-controlled interests. This is particularly true of Verizon Wireless, from which we have not received a dividend (other than tax related dividend receipts) for six years. It would arguably have been easier to sell our stake along the way, but our decision to remain invested has been strongly vindicated by its exceptional operating performance and strong cash generation, which have led to a significant increase in the value of the asset.

Our approach has led to strong returns to shareholders over the last five years. Total shareholder return since July 2006 has been 85%, compared to 22% for the FTSE 100.

I am delighted to welcome Gerard Kleisterlee as Vodafone’s new Chairman. As CEO of Philips, Gerard spent ten successful years at the helm of an international consumer technology business, and the Group is certain to make continued good progress under his stewardship. I wish him, and the Group, all the best for the future.