city of edinburgh council, et al. v. vodafone group,...

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

x THE CITY OF EDINBURGH COUNCIL ON BEHALF OF THE LOTHIAN PENSION FUND, On Behalf of Itself and All Others Similarly Situated,

Plaintiff,

vs.

VODAFONE GROUP PUBLIC LIMITED COMPANY, et al.,

Defendants.

: : : : : : : : : : : : : x

Civil Action No. 1:07-cv-09921-PKC

CLASS ACTION

AMENDED COMPLAINT FOR VIOLATION OF THE FEDERAL SECURITIES LAWS

Lead Plaintiff The City of Edinburgh Council on Behalf of the Lothian Pension Fund (“Lead

Plaintiff” or “Plaintiff”) makes the following allegations based upon the investigation undertaken by

its counsel, which included analysis of publicly available news articles and reports, public filings,

securities analysts’ reports and advisories about Vodafone Group Public Limited Company

(“Vodafone” or the “Company”), interviews with former Vodafone employees, press releases and

other public statements issued by the Company, and media reports about the Company. Plaintiff

believes that substantial additional evidentiary support will exist for the allegations set forth herein

after a reasonable opportunity for discovery.

SUMMARY AND OVERVIEW

1. This is a securities class action on behalf of all persons who purchased the publicly

traded securities, including common/ordinary stock and American Depositary Receipts (“ADRs”), of

Vodafone between 6/10/04 and 2/27/06 (the “Class Period”), against Vodafone and certain of its

officers and/or directors for violations of the Securities Exchange Act of 1934 (the “1934 Act”).

2. During the telecom boom at the turn of the last century, Vodafone grew into one of

the world’s largest providers of mobile, i.e., wireless, telephone services, with worldwide operations

in 28 countries, including in the United States, Germany, Italy and Japan. Vodafone’s rapid growth

occurred while Lord Ian MacLaurin of Knebworth (“MacLaurin”) and Sir Christopher Gent (“Gent”)

were its Chairman and Chief Executive Officer (“CEO”), respectively. They accomplished such

rapid growth by causing Vodafone to spend over $300 billion to make several acquisitions.

Vodafone’s largest and most notable acquisition was the acquisition of Mannesmann in Germany in

2000 for $170 billion, at that time one of the largest acquisitions in business history. At the height of

the telecom boom and Vodafone’s apparently successful growth, Vodafone’s ADRs1 on the New

York Stock Exchange (“NYSE”) reached a high of $63 per share, while its common/ordinary shares

traded elsewhere reached a high of £4.00 per share. Based on Vodafone’s 67+ billion outstanding

common/ordinary shares, this gave the Company a market capitalization of over £230 billion,

making it one of the world’s four most valuable companies.

3. However, Vodafone imploded in fiscal 2002-2003 as the telcom bubble burst. The

Company suffered huge losses and took billions in asset write-downs. For F02 (ended 3/31/02),2

Vodafone suffered a loss of almost $24 billion due in large part to massive write-downs of over $10

billion from prior over-valued acquisitions, including $7 billion due to the Mannesmann acquisition.

[THIS SPACE INTENTIONALLY LEFT BLANK]

1 Each ADR represents 10 ordinary shares.

2 Vodafone’s fiscal year ends 3/31 of each year.

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4. Vodafone’s ADRs and ordinary shares collapsed to as low as $13.10 and £.80 per

share, respectively, and billions in market capitalization were wiped out, inflicting huge losses on

Vodafone’s shareholders.3

5. This collapse in the prices of Vodafone’s publicly traded securities resulted in

consternation among its stockholders and contributed to the widespread belief that Vodafone’s

executives had made serious mistakes in attempting to grow the Company so fast through large

acquisitions. As Vodafone attempted to recover from the 2002-2003 debacle, on 7/30/03, Gent was

“pushed upstairs” and made Vodafone’s Life President and MacLaurin handpicked Arun Sarin

(“Sarin”) as the new CEO of Vodafone, charged with the responsibility of restoring stockholder

value after the collapse in Vodafone’s stock and ADR prices. This restoration of shareholder value

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was supposedly to be accomplished by capturing the economies of scale in Vodafone’s huge size and

global scale and by the successful integration of Vodafone’s past acquisitions, thus improving

Vodafone’s operations and generating increasing free cash flow, each year over the next several

years and by avoiding wasteful spending, i.e., not making any more large acquisitions of the type

that had harmed Vodafone in the past.

6. During F02, Vodafone supposedly took all the asset value write-downs necessary to

reflect the current fair value of its prior acquisitions on its balance sheet, including some $7 billion

for its German (Mannesmann) acquisition, such that the goodwill shown on Vodafone’s balance

sheet was not inflated, meaning Vodafone’s future operating earnings would not be hurt by further

huge asset (goodwill) write-downs. In connection with Vodafone’s Mannesmann write-down,

Vodafone wrote down only Mannesmann’s ground line assets – not its mobile assets – which

Vodafone insisted were fairly valued, representing to investors that no further asset impairment

write-downs were required for Mannesmann, as its future operations would enable Vodafone to fully

recover its investment in that entity. When Sarin’s efforts appeared to be leading Vodafone toward

financial recovery during F04, Vodafone’s ADR and common/ordinary share prices recovered

significantly, reaching highs of $27.88 and £1.50, respectively, by 1/04:


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7. However, in early 2004, Sarin and MacLaurin shocked Vodafone stockholders and

the investment community by causing Vodafone to attempt to acquire AT&T’s wireless assets for

$38 billion, another gigantic telecom acquisition of the type which had been harmful to Vodafone in

the past. Investors reacted very negatively to this acquisition attempt, which forced MacLaurin and

Sarin to abandon it. In reaction to this ill-fated acquisition attempt and serious problems with

Vodafone’s Japanese operation (Vodafone KK), Vodafone’s ADRs and common/ordinary shares

plunged lower:

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8. These declines, which wiped out billions of dollars of shareholder value, caused a

further growing “chorus of complaints” in the investment community against the Sarin/MacLaurin

executive team. Major financial publications ran articles criticizing Vodafone’s “dismal”

performance, some asserting that Vodafone had “misled” and “failed” the City, i.e., London’s

important financial community, had “failed” its shareholders, that “the Company’s best days are

behind it” and that matters had to be “put right” by the Company. Vodafone’s 2004 stock price

decline also significantly impaired the value of stock options held by Sarin and other members of the

Sarin/MacLaurin management team and made it unlikely that they would be able to obtain the type

of multi-million dollar bonuses from Vodafone they desired, the amount of which depended in part

on whether Vodafone achieved targeted performance indicators, including Vodafone stock price

appreciation. These factors put tremendous pressure on Sarin, the new, high-profile CEO of

Vodafone, and MacLaurin, Vodafone’s long-time Chairman, who had spearheaded Vodafone’s prior

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growth strategy and hand-picked Sarin as CEO, to show concrete operative and financial progress in

their management of Vodafone and to pacify Vodafone stockholders and boost Vodafone’s share and

ADR prices. This would not only restore value to the Vodafone executives’ stock options, but also

enable Sarin and MacLaurin and their top cohorts to hold onto their lucrative executive positions,

allowing them to pocket millions of dollars a year in pay and performance bonuses.

9. In 6/04, Vodafone was about to issue its F04 Annual Report and then report its 1stQ

F05 results. In order to try to stem the decline in Vodafone ADRs and ordinary shares and try to

push those shares up higher in price, Sarin, MacLaurin and their top cohorts commenced their

scheme and course of conduct to boost the trading prices of Vodafone’s publicly traded securities

and deceive Vodafone’s shareholders and purchasers of the publicly traded securities of Vodafone.

They did this then and thereafter, while reporting strong operating earnings and EBITDA results,4 by

repeatedly asserting that: (i) despite intensified competition, Vodafone’s important operating units –

especially its German and Italian operations – were doing very well; (ii) despite the troubled nature

of its Japanese operations, they had put in place a plan to turn that important Vodafone operation

around; (iii) Vodafone would achieve strong profit margin growth for F06 (to end March 31, 2006),

with huge cash flow improvements ($2.5 billion yearly by 2007-2008) due to the “One Vodafone”

operational plan and a reduction in Vodafone’s capital expenditures to less than 10% of Vodafone’s

mobile revenues by F08; and (iv) Vodafone faced only a “modest increase in tax payments” in the

future.

4 Until it adopted International Financial Reporting Standards (“IFRS”) beginning 4/1/05 for its F06 year, Vodafone recognized large annual goodwill amortizing charges due to prior acquisitions, resulting in large net losses. Thus, Vodafone stressed investors should focus on its reported operating profits or EBITDA, financial metrics which did not include non-cash goodwill amortization charges.

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10. During this period, defendants repeatedly extolled the success of Vodafone’s German

and Italian operations, the “One Vodafone” program (by which Vodafone’s international operations

were supposedly being integrated and streamlined), which would generate $2.5 billion in additional

yearly free cash flow by 2007-2008, and the successful introduction of its new 3-G phones and

service, especially in Japan. To make it appear that Vodafone was succeeding and thus further their

fraudulent scheme and course of conduct, the defendants caused Vodafone to report false and

misleading (and artificially manipulated and inflated) financial results for F04, throughout F05 and

for part of F06, which overstated Vodafone’s operating profits, EBITDA, assets and net worth by

several billion dollars, due to defendants’ failure to timely recognize and take the required write-

downs for the impaired value of Vodafone’s German, Italian and Japanese operations resulting, in

part, from previous acquisitions in those zones at inflated prices. This manipulated financial

reporting occurred while defendants were falsely assuring investors that Vodafone’s German and

Italian operations were succeeding and growing, despite increasingly competitive conditions and

decreases in termination fees5 imposed by regulators, and that its Japanese operations, while

troubled, were being turned around in a manner that would not require substantially increased capital

expenditures to be incurred or any asset (goodwill) impairment charge to be recognized. They also

concealed that Vodafone was going to incur additional cash tax payments of approximately $7

billion during F06-F08, which would materially impair its free operating cash flow during those

periods.

11. Throughout the Class Period, Vodafone reported strong operating financial results,

representing that its core European businesses were performing well and its troubled Japanese

5 Termination fees are charges, authorized by regulatory authorities, that one mobile carrier must pay another when a customer terminates service with one carrier and switches to another.

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operation was improving and being turned around, which would lead to strong revenue, operating

profit margin and EBITDA growth in F06 and F07 – with $7 billion in annual free cash flow. For

instance, defendants told investors:

(a) Vodafone’s overall business was “progressing” and “performing well,”

“despite a tough competitive environment,” and its business was “going well,” enjoying “robust

operational performance.” Thus, despite “intensifying competition” and “regulatory led termination

rate reductions,” Vodafone’s business was “running fully in line with expectations,” and was “on

track”; thus defendants were “excited” as Vodafone was “uniquely positioned to succeed through

[its] scale and scope.”

(b) As a result, Vodafone reported “strong” and “robust” financial results,

“showing good operational growth” and a “healthy financial position” – demonstrating its “strong

overall operational performance.” Vodafone’s “strong financial performance . . . met or exceeded

[its] stated targets,” “highlighting [Vodafone’s] operational and financial strength,” despite

“increasing” “competitive pressures.” According to Vodafone, its “superior results” and

“performance” were due to its “global scale and scope . . . showing through.” This, in turn, was due

to a new “organisational structure” announced in 10/04, which strengthened its management team

“to ensure effective and fast decision-making” and generated “more organizational efficiency.”

(c) Vodafone’s major new product/service launched during the Class Period was

called “3-G.” Vodafone said its 3-G service was “the start of a new era in mobile

communications,” and Vodafone was “‘confident’ [it] would be a success,” providing “services of

the highest quality” and “a new platform for profitable growth.” According to Vodafone, the 3-G

“launch . . . significantly improves our competitive position in Japan” as the “product is good,”

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“services are good,” “content is good” and, as a result, out in the marketplace, 3-G was “doing

well,” enabling the Company to make “significant progress” with this product/service.

(d) Europe was Vodafone’s core market – with Germany and Italy its main

businesses on the continent. Defendants assured investors they were “comfortable” with Vodafone’s

“operational progress in Europe,” where operations were “robust,” leading to confidence in a

“margin uplift.” They said “most pleasing” was that “in Europe we are outperforming our

competitors” with a “consistently strong performance across Europe” – in fact, “[y]ou can expect

from us continued out-performance versus our competition in Europe,” where Vodafone was

seeing “accelerating growth” and “market share.” Specifically, as to Italy and Germany,

defendants said “[o]ur businesses are performing well” where “margins . . . are . . . up.” Italy was

enjoying “flattish” but very high margins, with an “increasing customer base” being the “main

driver of service revenue growth.” Vodafone Italy “continue[s] to perform well in all key areas,”

i.e., “robustly,” despite an “increasing” and “very competitive” environment as its “core strategy . . .

continues to prove successful” in “growing its business.” In Italy, Vodafone had successfully

“fenced off” a major competitive threat from Hutchinson, achieving “accelerated growth” and “out-

performance,” and thus had “won our battle for growth and value” due to a “strong . . . very strong

competitive position,” which would allow Vodafone to “succeed in the Italian market . . . in the

future.” As to Germany, Vodafone saw “continued strong growth,” leaving it “well-positioned”

with impressive profitability and the “highest” EBITDA margins in Germany, “significantly ahead

of [its] other two competitors.” Thus, Germany saw “continued uplift in EBITDA margin,”

leaving it “poised for continued growth and improvement” in margins – “despite a very

competitive” environment. Vodafone’s German business was “outstanding . . . measured on any

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basis,” and was “outperforming . . . competition,” making it the “profitability leader . . . in

Germany,” where it would “continue to grow EBITDA.”

(e) In Japan, a troubled operation, the “3G launch . . . significantly improve[d]

[Vodafone’s] competitive position in Japan,” where an “ongoing transformation plan [was]

expected to improve . . . performance and competitive position.” Defendants represented that Japan

was “fundamentally a good business,” where “good progress has been achieved” and the

turnaround was “on track,” achieving “encouraging results” – thus Vodafone retained its “long

term commitment” to Japan and was “confident” that “our investment” will “prove to be very

rewarding.”

(f) The One Vodafone program was to produce £2.5 billion in “annual . . . free

cash flow” improvements by F07-F08. According to Vodafone, it “continue[d] to make strong

progress” with One Vodafone and the program was “progressing well,” leaving Vodafone “on

target to deliver £2.5 billion additional . . . free cash flow by” F08. Vodafone was also to reduce

“CapEx.,” i.e., expenditures, to “less than 10% of . . . revenue” by F07-F08, was also achieving

“significant progress” and “progress is good,” and Vodafone was “on track” to achieve the

improvements of both these programs.

(g) As a result of all these favorable factors, defendants represented that the

carrying value (goodwill) of its Germany, Italy and Japan businesses were properly and fairly

presented, secure and not impaired, and that new SEC regulations and the new IFRS would “not

affect” those carrying values which would be “carried forward” at the current balance under U.K.

and U.S. Generally Accepted Accounting Principles (“GAAP”) upon Vodafone’s switch to IFRS in

F05 and thereafter.

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(h) Defendants’ assurances regarding Vodafone’s cash flow prospects were made

despite a £9 billion deferred tax obligation carried on its balance sheet, as the “unwind” of those

liabilities was not “imminent,” but would occur “in due course” – but Vodafone could not give

“accurate timing on that” as such timing was “very difficult to predict.”

(i) As a result of these various factors, defendants forecast strong results for

Vodafone in F06-F07 – revenue growth of 6%-9% (“high single-digits”), stable to flat to 1%

margins and free cash flow of £6.5-£7 billion – emphasizing these forecasts would be achieved

despite “intensifying competition” and “regulatory intervention” with “termination rate cuts in

most markets,” which were “not a surprise” and were “baked into” Vodafone’s plans and forecasts.

12. As the MacLaurin/Sarin team bombarded the securities markets and investment

community with these positive statements, assurances and forecasts, it had the intended impact upon

the price of the publicly traded securities of Vodafone. Vodafone’s ADRs increased to a Class

Period high of $28.31 and its ordinary/common shares increased to a Class Period high of £1.54 – an

increase of over 33%. As Vodafone’s publicly traded securities traded at inflated prices – the ADRs

and ordinary shares traded as high as $28.04 and £1.50 even in mid-9/05 – Sarin and his cohorts took

advantage of the artificially inflated stock price their false and misleading statements and scheme to

defraud had created by selling off large amounts of their common/ordinary shares, pocketing at least

$29 million in illegal insider trading proceeds, while many other executives and managers of

Vodafone, who are not required to publicly report their stock transactions, exercised their now “in

the money” stock options and then sold the shares – while pocketing additional millions of dollars of

illegal insider trading proceeds. Sarin and other top Vodafone executives also pocketed millions of

dollars of bonuses because they made it appear that Vodafone had achieved certain key performance

indicators in F04-F05, triggering those multi-million dollar bonuses, even though, in fact, had the

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truth been told, those performance indicators would not have been achieved and those bonuses

would not have been paid, at least in the amounts they were paid.

13. Due to defendants’ continued reporting of false financial results and continuing false

assurances regarding the state of Vodafone’s Japanese, German and Italian operations, its future cash

flows, the success of the One Vodafone program and the level of Vodafone’s future cash tax

payments, Vodafone’s publicly traded securities continued to trade at artificially inflated prices. On

11/14/05, Vodafone’s ADRs and common/ordinary shares traded as high as $25.30 and £1.46,

respectively.

14. Then, between 11/15/05 and 2/27/06, Vodafone made a series of company-specific

revelations contradicting and indicating the falsity of defendants’ prior positive representations. On

11/15/05, Vodafone shocked the securities markets by reporting a 23% decline in operating profits

for the six-month period ended 9/30/05, abandoning its F06 revenue growth and profit margin

forecasts and revealing that it faced at least $7 billion in cash flow impairments due to cash tax

payments to be made in F06-F08, and that the EBITDA of its Japanese operations would fall sharply

in F06 due to higher capital expenditures. As a proximate result of these revelations, Vodafone’s

stock and ADRs collapsed from $25.30 on 11/14 to $21.90 on 11/16, while its common/ordinary

shares collapsed from £1.46 on 11/14 to £1.26 on 11/16 – a company-specific price decline of 20%,

which was not due to market forces or other matters unrelated to the revelations of information

contradicting, and thus indicating the falsity of some of defendants’ prior positive statements,

assurances and forecasts, all of which inflicted substantial damage on prior Class Period purchasers

of Vodafone’s publicly traded securities. However, defendants also reassured the investing public

that Vodafone’s Japanese turnaround plan was still “on plan” and “on course,” and that the carrying

value of its Japanese assets was not impaired and thus Vodafone’s ADRs and ordinary shares

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continued to trade at artificially inflated, albeit lower prices. The revelations of 11/15/05, which

indicated that Vodafone’s European operations were more troubled than had previously been

revealed were compounded on 2/27/06, when Vodafone revealed a $40-$49 billion asset write-down

due to the impaired value of its German (Mannesmann), Italian and Japanese operations, admissions

that the operations in these countries were much less successful (or less capable of being turned

around) than had previously been represented, that the value of these assets on Vodafone’s F04-F06

financial statements had been vastly overstated, and thus that Vodafone had actually been suffering

large operating losses in these operations due to the excessive valuations at which it carried them on

its books. This led to a further decline in Vodafone’s ADRs to $19.51 per share and in its ordinary

shares to £1.09 per share, inflicting further damage on prior Class Period purchasers of those

securities, taking the prices of these securities back down to the levels they had been when the

fraudulent scheme to inflate them began. Shortly thereafter, Vodafone confirmed its inability to turn

around its Japanese operation and that operation’s lack of long-term viability by selling the Japanese

operations – incurring a huge $8.6 billion loss! As a result of this debacle, MacLaurin, Gent, Paul

Hazen, Vodafone’s Deputy Chairman, Bamford and Horn-Smith left the Company and there was the

implementation of yet another “new” organizational structure of the management of the Company.

15. After the end of the Class Period, Vodafone admitted it had “a lower view of growth

prospects, particularly in the medium to long term.” Sarin admitted the previously forecast growth

and cost savings would not be achieved in the stated timeframes and, in fact, capital expenditures

would increase, not fall, while free cash flow would fall sharply to as low as £4 billion in F07 due to

the higher tax payments and higher capital expenditures.

16. The statements issued during the Class Period were false and misleading when made.

The statements were affirmatively false in misstating facts regarding Vodafone’s business and

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finances. In addition, the statements were false and misleading in failing to disclose the following

true facts – then known to or recklessly disregarded by defendants:

(a) Throughout the Class Period, Vodafone’s financial statements and reports, as

disseminated to the investing public, its shareholders and as filed with the SEC, were materially

falsified and overstated, including a massive overstatement of its assets, goodwill (intangible assets)

and shareholder equity, and its EBITDA and operating earnings were inflated due to the over-

valuation of its German, Italian and Japanese operations;

(b) Vodafone’s Mannesmann (German) operations had not been successfully

integrated into Vodafone’s overall operations and were suffering from significant operational

problems, inefficiencies and a lack of growth and profitability adequate to permit Vodafone to

recover its investment in Mannesmann;

(c) Vodafone’s Italian operations were also substantially overvalued and suffering

from operational problems, inefficiencies, an impaired competitive position and a lack of growth

adequate to permit Vodafone to recover its investment in that operation;

(d) Contrary to Vodafone’s representations that its Japanese operations could,

would and were being turned around, in fact, Vodafone’s Japanese operations were not only severely

troubled but those problems were getting materially worse, which would require massive additional

capital expenditures in an effort to salvage that business, or the sale of that business at a huge loss;

(e) Vodafone’s Japanese operations were materially overvalued on Vodafone’s

financial statements due to the failure to hold or gain sufficient market share so as to permit

Vodafone to recover its investment in its Japanese operations;

(f) Vodafone’s introduction of 3-G service and products was a failure in Japan,

where the level of service was defective and far worse than that of competitors, which, combined

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with the poor quality and functionality of Vodafone’s new 3-G handsets, was leading to increased

customer dissatisfaction and rejection of Vodafone’s service in Japan and a lack of adequate market

share and growth in that operation sufficient to justify Vodafone ever recapturing its investment in

its Japanese operations;

(g) Vodafone’s worldwide scale of operations did not give it a competitive

advantage; in fact, it placed Vodafone at a considerable competitive disadvantage, burdening it with

excessive costs, infrastructure and bureaucracy, which inhibited the implementation of business

decisions and strategies necessary for Vodafone to achieve the type of growth and success its

executives were forecasting for it;

(h) Vodafone’s “One Vodafone” cost savings and operational efficiency initiative

was not succeeding or achieving any significant cost savings and would not result in Vodafone

achieving anywhere near the £2.5 billion improvement (pre-tax) in cash flow by F07-F08, as was

being forecast;

(i) Vodafone knew from discussions and interactions with tax authorities in

several countries that it would have to make multi-billion dollar cash tax payments beginning in F06

or F07, which would amount to over $1.5 billion per year, for several years, meaning that Vodafone

could not possibly achieve the levels of cash flow being forecast for F07, F08 and beyond;

(j) Vodafone’s top management was in a state of dissention and disarray,

virtually paralyzed by bitter in-fighting between Gent, Sarin, MacLaurin and others, such that

business and strategic decisions were being deferred or not properly or promptly implemented,

which was hurting Vodafone’s business;

(k) The large stock buy-back activities which defendants were causing Vodafone

to implement were not being done because defendants believed that Vodafone’s ordinary shares

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were undervalued, represented a good value or investment, or that such expenditures were a wise use

of Vodafone’s corporate resources; rather, such buy-backs were being engaged in by defendants to

support and, if possible, artificially inflate Vodafone’s stock price and assist key insiders in

unloading large numbers of their Vodafone shares at inflated and, for them, highly profitable prices;

(l) Contrary to defendants’ representations, Vodafone’s German and Italian

operations were not succeeding in spite of increased and intensifying competition; in fact, to the

contrary, those operations were faltering and losing ground to competitors, such that it was

increasingly unlikely that Vodafone would ever be able to recover its investment in those operations;

and

(m) Due to the foregoing adverse factors, which were negatively impacting

Vodafone’s operations and financial performance, defendants knew that the levels of financial

performance being forecast for Vodafone for F06 and F07 would not and could not be achieved and

that those forecasts were actually false when made.

17. The stock chart set forth below graphically presents these events demonstrating how

Vodafone’s ADRs and common/ordinary shares were artificially inflated during the Class Period and

outperformed stocks of its peer group and how the Company’s ADRs and common/ordinary shares

suffered company-specific material price declines as the truth entered the market, exposing

defendants’ prior falsifications, resulting in the previous artificial inflation in the price of those

shares coming out of the shares, inflicting damage and economic loss on Class Period purchasers.

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JURISDICTION AND VENUE

18. Jurisdiction is conferred by §27 of the 1934 Act. The claims asserted herein arise

under §§10(b) and 20(a) of the 1934 Act and Rule 10b-5.

19. Venue is proper in this District pursuant to §27 of the 1934 Act. Many of the false

and misleading statements were made in or issued from this District. Vodafone has major business

operations here and has been sued here in the past. In terms of its business, shareholders and legal

compliance, Vodafone has had and continues to have very extensive contacts with the United States.

Vodafone has a significant presence in the United States. Vodafone owns 45% of Verizon Wireless.

Verizon Wireless operates a nationwide network, covering almost 90% of the U.S. population and 96

of the top 100 mobile telecommunications markets within the United States. The Company’s

ordinary shares are listed on the London Stock Exchange and the Frankfurt Stock Exchange and the

Company’s ADRs are listed on the NYSE.

20. The Bank of New York, as custodian of the Company’s ADR program, holds

approximately 12.2% of the Company’s ordinary shares as nominee. The total number of ADRs

outstanding at 5/07 was 647,375,153. Vodafone has 53 billion common shares outstanding. As of

5/07, 1,138 holders of record of ordinary shares had registered addresses in the United States. The

Company has American Depositary Shares (“ADSs”) which are evidenced by ADRs issued by the

Bank of New York, as Depositary, under a Deposit Agreement. ADS holders may instruct The Bank

of New York on the exercise of voting rights relative to the number of ordinary shares represented

by their ADRs. At 3/07, approximately 30.60% of the Company’s shares were held in North

America.

21. MacLaurin admitted in Vodafone’s 2004 Annual Report that Vodafone is “subject to

the . . . U.S. securities laws.” According to his letter in the 2004 Annual Report:

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Corporate governance continues to be at the forefront of your Board’s considerations. During the year we have fully complied with the Combined Code relating to corporate governance, as appended to the Listing Rules of the UK Listing Authority. In addition, we also have to comply with US securities laws. The Sarbanes-Oxley Act of 2002 has introduced a number of changes to corporate governance requirements with which we have complied this year and with which we will comply as new requirements are introduced over the coming years.

22. Vodafone makes periodic filings with the U.S. SEC and presents its financial results

in accordance with U.S. GAAP. Vodafone’s annual and other reports to shareholders and its written

releases all contain forward-looking statement disclaimers and warnings, which are unique to the

laws of the United States.

23. The Company’s ordinary shares are listed on the London Stock Exchange and the

Frankfurt Stock Exchange and the Company’s ADRs are listed on the NYSE. The ADRs represent

10 ordinary shares. The ADRs and ordinary shares trade in efficient markets and significant

arbitrary trading between them goes on as the trading of each of the shares influences the other.

According to Vodafone, “the Company holds briefing meetings with its major institutional

shareholders in . . . the US . . . usually twice each year after the interim results and preliminary

announcement, to ensure that the investing community receives a balanced and complete view of

the Group’s performance and the issues faced by the Group.” Also, “[a]ll . . . resolutions at the

Company’s [Annual General Meetings] are decided on a poll. . . . The proxy votes cast in relation to

all resolutions are disclosed to those in attendance at the meeting and the results of the polls are

published in national newspapers in the . . . US . . . .” Vodafone forwards information regarding its

financials and other business operations to investors worldwide, and its ADR/ordinary shareholders

at the same time.

20

THE PARTIES

24. Plaintiff The City of Edinburgh Council on Behalf of the Lothian Pension Fund

purchased Vodafone publicly traded securities, as set forth in their certification previously filed in

this litigation and incorporated by reference herein, and was damaged thereby.

25. Defendant Vodafone operates as a mobile telecommunications company principally

in the United States, Europe, and Asia Pacific.

26. Defendant Sarin, during the Class Period, was and is CEO of Vodafone. During the

Class Period, Sarin received a bonus of $1.8 million for 2005 tied to Vodafone’s reported 2005

performance and the 2005 performance of its stock in addition to his $1.8 million salary. During the

Class Period, Sarin also sold 2,110,000 shares of his Vodafone stock for proceeds of nearly $5.7

million, while in possession of adverse undisclosed information about Vodafone. This defendant’s

pre- and Class Period stock sales are shown below:

Vodafone GroupDefendant Arun Sarin’s Insider Stock Sales Proceeds

J F M A M J J A S O N D J F M A M J J A S O N D J F$1.50

$2.00

$2.50

$3.00

$0

$4

$8

$12

Millions

2004 2005 2006

January 2, 2004 - February 27, 2006

Class Period: June 10, 2004 - February 27, 2006

Total Shares Sold: 2,110,000Total Sales Proceeds: $5.70 million% of Shares Owned Sold: 30%

27. Defendant Sir Julian M. Horn-Smith (“Horn-Smith”) was Deputy Chief Executive

and Chief Operating Officer of Vodafone during the Class Period until he left the Company in 7/06.

During the Class Period, Horn-Smith received a bonus of $1.3 million for 2005 tied to Vodafone’s

21

reported 2005 performance and the 2005 performance of its stock in addition to his salary of $1.3

million. During the Class Period, Horn-Smith sold 1,210,459 shares of his Vodafone stock for

proceeds of $3.2 million – 37% of the shares he owned – while in possession of adverse undisclosed

information about Vodafone. This defendant’s pre- and Class Period stock sales are shown below:

Vodafone GroupDefendant Sir Julian M. Horn-Smith’s Insider Stock Sales Proceeds


$2.00

$2.50

$3.00

$0

$2

$4

Millions


2004 2005 2006



28. Defendant Andrew N. Halford (“Halford”) has been, since 7/05, Chief Financial

Officer (“CFO”) and a director of Vodafone. From April 2002 to December 2004, Halford was Vice

President and CFO of Verizon Wireless. Halford had no vested stock options during the Class

Period and thus could not and did not sell any Vodafone stock.

29. Defendant MacLaurin was Chairman of the Board from July 1998 until he announced

his retirement in March 2006. MacLaurin joined the Board of Vodafone in January 1997 and was

Chairman of the Nominations and Governance Committee.

30. Defendant Peter R. Bamford (“Bamford”) was Chief Marketing Officer and a director

of Vodafone during the Class Period until he left the Company in 4/06. Defendant Bamford sold

1,295,384 shares of his Vodafone stock for proceeds of $2.86 million – 84% of the shares he owned

22

– while in possession of material undisclosed information about Vodafone. This defendant’s pre-

and Class Period stock sales are shown below:

Vodafone GroupDefendant Peter R. Bamford’s Insider Stock Sales Proceeds



$2.00

$2.50

$3.00

$0

$1

$2

Millions


2004 2005 2006


31. Defendant Paul M. Donovan (“Donovan”) was CEO, Central Europe, Middle East,

Asia Pacific and Affiliates of Vodafone since 1/05. Defendant Donovan sold 692,536 shares of his

Vodafone stock for proceeds of $1,832,450 – 66% of the shares he owned – while in possession of

material undisclosed information about Vodafone. This defendant’s pre- and Class Period stock

sales are shown below:


23

Vodafone GroupDefendant Paul M. Donovan’s Insider Stock Sales Proceeds


$2.00

$2.50

$3.00

$0

$1

$2

Millions


2004 2005 2006


Total Shares Sold: 692,536Total Sales Proceeds: $1.83 million% of Shares Owned Sold: 66%

32. Defendant Jürgen von Kuczkowski (“von Kuczkowski”) was CEO, Northern

European Region, and CEO of Vodafone-Germany. Defendant von Kuczkowski sold 2,091,802

shares of his Vodafone stock for proceeds of $5.8 million – 99% of the shares he owned – while in

possession of material undisclosed information about Vodafone. This defendant’s pre- and Class

Period stock sales are shown below:

Vodafone GroupDefendant Jurgen Von Kuczkowski’s Insider Stock Sales Proceeds


$2.00

$2.50

$3.00

$0

$2

$4

$6

$8

Millions


2004 2005 2006


Total Shares Sold: 2,091,802Total Sales Proceeds: $5.8 million% of Shares Owned Sold: 99.85%

24

33. Defendant Thomas Geitner (“Geitner”) was Chief Technical Officer and a director of

Vodafone from 2002 until 12/06. Defendant Geitner sold 792,680 shares of his Vodafone stock for

proceeds of $1.85 million – 65% of the shares he owned – while in possession of material

undisclosed information about Vodafone. This defendant’s pre- and Class Period stock sales are

shown below:

Vodafone GroupDefendant Thomas Geitner’s Insider Stock Sales Proceeds


$2.00

$2.50

$3.00

$0.0

$0.5

$1.0

Millions



2004 2005 2006

Total Shares Sold: 792,680Total Sales Proceeds: $1.85 million% of Shares Owned Sold: 65%

34. Defendant Alan P. Harper (“Harper”) was Group Strategy and Business Integration

Director of Vodafone since 7/00. Harper joined Vodafone in 1995 as Group Commercial Director

and subsequently became Managing Director of Vodafone U.K. until appointed to his current

position. Defendant Harper sold 2,931,242 shares of his Vodafone stock for proceeds of $7.7

million – 81% of the shares he owned – while in possession of material undisclosed information

about Vodafone. This defendant’s pre- and Class Period stock sales are shown below:

25

Vodafone GroupDefendant Alan P. Harper’s Insider Stock Sales Proceeds


$2.00

$2.50

$3.00

$0

$2

$4

$6

$8

Millions


2004 2005 2006



35. Defendant Kenneth J. Hydon (“Hydon”) was CFO of Vodafone during the Class

Period until he left the Company in 7/05. During the Class Period, Hydon received a bonus of about

$1.1 million for 2005 tied to Vodafone’s reported performance and the 2005 performance of its stock

in addition to his salary of about $1.1 million.

MOTIVE AND OPPORTUNITY/SCIENTER

36. Vodafone’s Board members and its Group Executive Committee ran Vodafone’s

business. According to Vodafone’s 2004 Annual Report:

Directors and Senior Management

The business of the Company is managed by its Board of Directors. The Company’s Articles of Association provide that, until otherwise determined by ordinary resolution, the number of directors will not be less than three. Biographical details of the directors and senior management are as follows:

Directors

Chairman

Lord MacLaurin of Knebworth, DL, aged 62, has been a member of the Board of directors since June 1999 and became Deputy Chairman and the Board’s nominated senior non-executive director in May 2000. He is Chairman of the Audit Committee and a member of the Nominations and Governance Committee. He became a director of AirTouch in April 1993. In 2001, he retired as Chairman and Chief

26

Executive Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo Bank, NA. Paul Hazen is also a director of Safeway, Inc., Willis Group Holdings Limited, Xstrata AG and E.piphany and he is Chairman of Accel-KKR.

Deputy Chairman

Paul Hazen, aged 63, has been a member of the Board of directors since June 1999 and became Deputy Chairman and the Board’s nominated senior independent director in May 2000. He is Chairman of the Audit Committee and a member of the Nominations and Governance Committee. In 2001, he retired as Chairman and Chief Executive Officer of Wells Fargo & Company and its principal subsidiary, Wells Fargo Bank, NA. Paul Hazen is Chairman of Accel-KKR and KKR Financial Corp. and is also a director of Safeway, Inc., Willis Group Holdings Limited and Xstrata AG.

Executive Directors

Arun Sarin, Chief Executive, aged 49, has been a member of the Board of directors since June 1999 and is a member of the Nominations and Governance Committee. He was a director of AirTouch from July 1995 and was President and Chief Operating Officer from February 1997 to June 1999. He was Chief Executive Officer for the United States and Asia Pacific region until 15 April 2000, when he became a non-executive director. He was appointed Chief Executive after the AGM on 30 July 2003. Arun Sarin joined Pacific Telesis Group in San Francisco in 1984 and has served in many executive positions in his 20 year career in telecommunications. He has also served as a director of The Gap, Inc., The Charles Schwab Corporation and Cisco Systems, Inc.

Julian Horn-Smith, Group Chief Operating Officer, aged 55, has been a member of the Board of directors since June 1996. He was appointed Group Chief Operating Officer on 1 April 2001, having been Chief Executive of Vodafone’s Continental Europe businesses and a director of several of the Group’s overseas operating companies. He is responsible for ensuring the operating performance of Group businesses. Julian Horn-Smith is the Chairman of the Supervisory Board of Vodafone Deutschland GmbH and is a non-executive director of Smiths Group Plc.

Peter Bamford, Chief Marketing Officer, aged 50, has been a member of the Board of directors since April 1998. He is responsible for the full range of marketing and commercial activities including brand, product development, content management, Partner Networks and global accounts. He is also responsible for the Group’s operations in the UK & Ireland. Previously, he was Chief Executive, Northern Europe, Middle East & Africa Region. He was Managing Director of Vodafone UK until April 2001. Before joining Vodafone in 1997, Peter Bamford held senior positions with Kingfisher Plc and Tesco Plc and was a director of WH Smith Plc.

Vittorio Colao, Chief Executive, Southern Europe, Middle East and Africa Region, aged 42, joined the Board of directors on 1 April 2002. He has had responsibility for

27

the Group’s businesses in Southern Europe since April 2001. He spent the early part of his career at McKinsey & Co, where he was a Partner, before joining Omnitel Pronto Italia S.p.A. as its Chief Operating Officer. In 1999, he became the Chief Executive Officer of Omnitel Pronto Italia S.p.A. (now operating as Vodafone Italy). Vittorio Colao is currently a member of the Aspen Institute and non-executive director of RAS Insurance in Italy.

Thomas Geitner, Chief Technology Officer, aged 49, has been a member of the Board of directors since May 2000. He is responsible for Group Technology & Business Integration and will be leading the implementation of a standardised architecture for business processes, Information Technology and network systems. Prior to joining the Group, he was a member of the Management Board of RWE AG. Thomas Geitner is a member of the Management Board of Vodafone Holding GmbH and Vodafone Deutschland GmbH and a member of the supervisory board of Singulus Technologies AG.

Ken Hydon, Financial Director, aged 59, has been a member of the Board of directors since 1985. He is a Fellow of the Chartered Institute of Management Accountants, the Association of Chartered Certified Accountants and the Association of Corporate Treasurers. He is a director of several subsidiaries of the Company and is a member of the Board of Representatives of the Verizon Wireless partnership in the United States. Ken Hydon has recently been appointed a non-executive director of Reckitt Benckiser Plc and Tesco Plc. He will retire from the Board on conclusion of the AGM in 2005.

37. Pursuant to Vodaphona’s 2005 Annual Report:

Members of the Executive Committee who are not also executive directors are regarded as senior managers of the Company. Chaired by Arun Sarin, this committee focuses on the Group’s strategy, financial structure and planning, succession planning, organisational development and Group-wide policies. The Executive Committee comprises the executive directors, details of whom are shown above, and the senior managers listed below

* * *

Paul Donovan, Chief Executive, Other Vodafone Subsidiaries, aged 46, was appointed to this position in January 2005. He joined Vodafone in 1999 as Managing Director-Commercial, and was appointed Chief Executive of Vodafone Ireland in 2001. He has over fifteen years experience in the telecommunications and IT industries and has held senior roles at BT, One2One and Optus Communications and, prior to that, marketing roles at the Mars Group, Coca Cola and Schweppes Beverages.

* * *

28

Alan Harper, Group Strategy and Business Integration Director, aged 48, joined Vodafone in 1995 as Group Commercial Director and he subsequently became Managing Director of Vodafone UK. He was appointed to his current position in July 2000. Prior to joining the Group he held the post of Business Strategy Director with Mercury One2One and senior roles with Unitel and STC Telecoms. He is also a member of the Vodafone D2 GmbH Supervisory Board and Chairman of the Vodafone UK Foundation.

* * *

Jürgen von Kuczkowski, Chief Executive of Vodafone D2 GmbH (Germany), aged 64, was appointed to this position in June 1994. He joined Mannesmann Mobilfunk GmbH (now Vodafone D2 GmbH) in October 1990, initially as Director of Sales and Distribution. He was previously the Chief Executive, Central Europe Region and Chief Executive, Northern Europe Region.

38. Vodafone’s 2005 Annual Report also provided that:

Executive Management

The executive directors, together with certain other Group functional heads and regional Chief Executives, meet monthly as the Executive Committee and the Integration and Operations Committee, both under the chairmanship of the Chief Executive. The Executive Committee is responsible for the day-to-day management of the Group’s businesses, the overall financial performance of the Group in fulfilment of strategy, plans and budgets and Group capital structure and funding. It also reviews major acquisitions and disposals. The Integration and Operations Committee is responsible for setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources.

39. In addition, Vodafone’s 2005 Annual Report represented that the Company had two

management committees, which oversaw the execution of its business strategy:

• The Executive Committee

The Executive Committee is responsible for the day-to-day management of the Group’s businesses, the overall financial performance of the Group in fulfilment of strategy, plans and budgets and Group capital structure and funding. t also reviews major acquisitions and disposals. The Integration and Operations Committee is responsible for setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources.

• Integration and Operations Committee

29

On 1 January 2005, a new Integration and Operations Committee came into effect. Chaired by Arun Sarin, the Committee is responsible for setting operational plans, budgets and forecasts, product and service development, customer segmentation, managing delivery of multi-market propositions and managing shared resources. The Committee comprises the members of the Executive Committee . . .

40. According to Vodafone’s 2004 Annual Report:

The Board has a formal schedule of matters specifically referred to it for decision, including the approval of Group commercial strategy, major capital projects, the adoption of any significant change in accounting policies or practices and material contracts not in the ordinary course of business.

* * *

The executive directors, together with certain other Group functional heADR and regional Chief Executives, meet on ten occasions each year as the Group Executive Committee under the chairmanship of the Chief Executive. This Committee is responsible for the day-to-day management of the Group’s businesses, the overall financial performance of the Group in fulfillment of strategy, plans and budgets and Group capital structure and funding. It also reviews major acquisitions and disposals.

Two management committees, the Group Operational Review Committee and the Group Policy Committee, oversee, together with the Group Executive Committee, the execution of the Board’s strategy and policy.

The Group Operational Review Committee, which meets ten times a year under the chairmanship of the Group Chief Operating Officer, comprises other executive directors, certain Group functional heADR and regional Chief Executives. This Committee is responsible for the operational performance and achievement of targets of the Group’s business, with a focus on the enhancement of voice services and growth of non-voice services, new global products and services, brand development, technology and other cost and revenue synergies within the Group’s regions.

The Group Policy Committee, which meets six times each year, is chaired by the Chief Executive. The Financial Director and the Group Chief Operating Officer, together with certain other Group functional heADR, join him on the Committee, which is responsible for the determination of policy and the monitoring of non-operational areas of activity which are important to the Group overall, including strategy, finance, human resources, legal, regulatory and corporate affairs.

41. The individuals named as defendants in ¶¶25-34 are referred to herein as the

“Individual Defendants.” The Individual Defendants, because of their positions with the Company,

30

possessed the power and authority to control the contents of Vodafone’s periodic reports, press

releases and presentations to securities analysts, money and portfolio managers and institutional

investors, i.e., the market. Each defendant was provided with copies of the Company’s reports and

releases alleged herein to be misleading prior to or shortly after their issuance and had the ability and

opportunity to prevent their issuance or cause them to be corrected. Because of their positions and

access to material non-public information available to them but not to the public, each of these

defendants knew that the adverse facts specified herein had not been disclosed to and were being

concealed from the public and that the positive representations which were being made were then

materially false and misleading. The Individual Defendants are liable for the company-issued false

statements pleaded herein, as those statements were each “group-published” information, the result

of the collective actions of the Individual Defendants.

42. Defendants knew or recklessly disregarded that the misleading statements and

omissions complained of herein would adversely affect the integrity of the market for the

Company’s securities and would cause the prices of the Company’s publicly traded securities to

become artificially inflated. Defendants acted knowingly or in such a reckless manner as to

constitute a fraud and deceit upon Plaintiff and other members of the Class. The Individual

Defendants were motivated to engage in the manipulations alleged herein, in part because their

compensation was largely based on performance measures, including EBITDA and operating profits.

The Individual Defendants also received performance shares and options which vested based on the

growth in the apparent value of the Company. The 2004 Annual Review & Summary Financial

Statement showed how this worked:

However, awards of short and long term incentives were determined so that this positioning would only be attained if the Company achieves exceptionally demanding performance levels. To deliver this level of remuneration, the Chief Executive received performance shares with a face value of two times salary and

31

options with a face value of eight times salary in 2003. The graph below illustrates the approximate pre-tax long term incentive gains to the Chief Executive that would be achieved based on various Company growth, EPS and TSR performance scenarios:

“For example, if the Company’s share price increases by 50% from 145 pence to approximately 219

pence . . . there is 50% vesting of long term incentives. The Chief Executive would have a pre-tax

gain of just under £5 million. . . .” It is unusual for a public company to have an executive bonus

compensation scheme which is directly tied to an increase in the price of the Company stock, as this

gives the executive a direct motive to inflate the price of the stock, even for the short term, to trigger

vesting, payments or grants.

43. Each defendant is liable for: (i) making false statements; or (ii) failing to disclose

adverse facts known to him about Vodafone. Defendants’ fraudulent scheme and course of business

that operated as a fraud or deceit on purchasers of Vodafone publicly traded securities was a success,

as it: (i) deceived the investing public regarding Vodafone’s prospects and business; (ii) artificially

inflated the prices of Vodafone’s publicly traded securities; (iii) permitted defendants to receive

bonuses and have their performance shares vest based on the growth in the value of the Company;

32

and (iv) caused Plaintiff and other members of the Class to purchase Vodafone publicly traded

securities at inflated prices.

BACKGROUND

44. Vodafone was formed in 1983. Vodafone grew rapidly through acquisitions and by

2000 owned stakes in wireless carriers around the globe. Vodafone made acquisitions of Germany’s

Mannesmann and Italy’s Omnitel networks. Vodafone combined its U.S. wireless operations

(acquired when the Company bought AirTouch in 1999) with those of Bell Atlantic and GTE to

form Verizon Wireless, the No. 1 U.S. wireless provider and 45%-owned by Vodafone.

45. During the telecom boom at the turn of the last century, Vodafone grew into one the

world’s largest providers of mobile, i.e., wireless, telephone services, with worldwide operations in

28 countries, including in the United States, Germany, Italy and Japan. Vodafone’s rapid growth

occurred while MacLaurin and Gent were its Chairman and CEO, respectively, which they

accomplished by causing Vodafone to spend over $300 billion to make several acquisitions. The

largest and most notable acquisition was the acquisition of Mannesmann in Germany in 2000 for

$170 billion, one of the largest acquisitions in business history. At the height of the telecom boom

and Vodafone’s growth, Vodafone’s ADRs on the NYSE reached a high of $63 per share, while its

common/ordinary shares traded elsewhere reached a high of £4.00 per share, giving the Company a

market capitalization of over £230 billion, based on its 67+ billion outstanding common/ordinary

shares – making it one of the world’s four most valuable companies.

46. However, Vodafone imploded in F02-F03 as the telecom bubble burst. The Company

suffered huge losses and took billions in asset value write-downs. For F02, ended 3/31/02,6

6 Vodafone’s fiscal year ends 3/31 of each year.

33

Vodafone suffered a loss of almost $24 billion due in large part to massive write-downs of over $10

billion from prior overvalued acquisitions, including $7.0 billion due to the Mannesmann

acquisition. As a result, Vodafone’s ADRs and ordinary shares collapsed to as low as $13.10 and

£.80 per share, respectively.

47. This collapse in the prices of Vodafone’s publicly traded securities resulted in great

consternation among its stockholders and contributed to the widespread belief that Vodafone had

made serious mistakes in attempting to grow the Company so fast through large acquisitions. As

Vodafone attempted to recover from the 2002-2003 debacle, on 7/30/03, Gent was “pushed upstairs”

and made Vodafone’s Life President and MacLaurin handpicked Sarin as the new CEO of Vodafone,

charged with the responsibility of restoring stockholder value after the horrible collapse in

Vodafone’s stock and ADR prices, This restoration of shareholder value was to be accomplished by

capturing the economies of scale in Vodafone’s huge size and global scale and by the integration of

Vodafone’s past acquisitions, thus improving Vodafone’s operations and generating increasing free

cash flow each year over the next several years and by avoiding, i.e., not making, more large

acquisitions of the type that had harmed Vodafone in the past.

48. During 2002, Vodafone supposedly took all the asset value write-downs necessary to

cause its prior acquisitions to reflect their current fair value – write-downs totaling $10+ billion,

including $7.0 billion for its German (Mannesmann) acquisition, such that the goodwill earned on

Vodafone’s balance sheet was not inflated, causing investors to believe Vodafone’s future operating

earnings would not be hurt by further huge asset (goodwill) write-downs. In connection with

Vodafone’s Mannesmann write-down, Vodafone wrote down only Mannesmann’s ground line assets

– not its mobile assets – which it insisted were fairly valued, representing to investors that no further

asset impairment write-downs were required for Mannesmann, as its future operations would enable

34

Vodafone to fully recover its investment in that entity. When Sarin’s efforts appeared to be leading

Vodafone toward financial recovery during F04, Vodafone’s ADR and common/ordinary share

prices recovered significantly, reaching highs of $27.88 and £1.50, respectively, in 1/04.

49. However, in early 2004, Sarin and MacLaurin shocked Vodafone stockholders and

the investment community by causing Vodafone to attempt to acquire AT&T’s wireless assets for

$38 billion, another gigantic telecom acquisition of the type which had been harmful to Vodafone in

the past. Investors reacted very negatively to this acquisition attempt which forced MacLaurin and

Sarin to abandon it. In reaction to this ill-fated acquisition attempt and as Vodafone revealed serious

problems with Vodafone’s Japanese operations (Vodafone KK), its ADRs and common/ordinary

shares plunged lower.

50. These declines, which wiped out billions of dollars of shareholder value, caused a

further growing “chorus of complaints” in the investment community against the Sarin/MacLaurin

executive team. Major financial publications ran articles in the Summer of 2004, criticizing

Vodafone’s “dismal” performance, some asserting that Vodafone had “misled” and “failed” the

City, i.e., London’s important financial community, had “failed” its shareholders and that “the

Company’s best days are behind it” and that matters had to be “put right” by the Company.

Vodafone’s 2004 stock price decline also significantly impaired the value of stock options held by

Sarin and other members of the Sarin/MacLaurin management team to buy Vodafone shares and

made it unlikely that they would be able to obtain the type of multi-million dollar bonuses from

Vodafone they wanted, the amount of which depended in part on whether Vodafone achieved

targeted performance indicators, including Vodafone stock price appreciation. All of this put

tremendous pressure on Sarin, the new, high-profile CEO of Vodafone, and MacLaurin, Vodafone’s

long-time Chairman, who had spearheaded Vodafone’s prior growth strategy and hand picked Sarin

35

as CEO, to show concrete operative and financial progress in their management of Vodafone and to

pacify Vodafone stockholders, halt the decline in Vodafone’s stock and ADR prices and, if possible,

boost Vodafone’s share and ADR prices not only to restore value to the Vodafone executives’ stock

options, but also so that Sarin and MacLaurin and their top cohorts could hold onto their lucrative

executive positions, allowing them to pocket millions of dollars a year in pay and performance

bonuses.

CLASS PERIOD EVENTS AND FALSE STATEMENTS

51. On or about 6/10/04, the first day of the Class Period, Vodafone issued its 2004

Annual Report. The 2004 Annual Report contained a letter from MacLaurin, stating:

It is my privilege to report, once again, another highly successful year for your company, with an excellent overall operating performance generating further substantial growth in profits. . . .

. . . In February, we launched the Vodafone Mobile Connect 3G/GPRS datacard, which provides fast, secure access to corporate networks from lap top computers. . . . I believe that this technological evolution offers us significant growth opportunities and Vodafone is very well positioned to take advantage of these opportunities due to its global footprint and its continued strong performance.

* * *

Vodafone is a vibrant company, dedicated to the creation of shareholder value. This value is achieved through . . . the advance in technology – 3G – and the investment in assets where positive returns may be clearly identified.

52. The 2004 Annual Report also contained a letter from Sarin, stating:

This past year, Vodafone has delivered another set of solid financial results. We have had . . . continued margin improvement . . . .

* * *

Another significant force impacting our business is competition. We face different competitors across our markets, but we have a tremendous advantage. Vodafone can draw from resources across all our markets and respond competitively in a way that does not impact the performance of the organisation as a whole.

36

* * *

By delivering on our goals and conducting rigorous economic and financial analyses before we make pricing, acquisition and scale decisions, we demonstrate the discipline to always act in the best interests of our shareholders.

* * *

Leverage global scale and scope

Another unique advantage for Vodafone is our expansive global footprint. Operating in 26 markets puts us in an enviable position to leverage our global scale and scope. We are using this advantage to deliver exceptional 3G-based services. When we introduce 3G handsets in large volumes later this year we will be well equipped to drive demand and attract even higher market share in the 3G world.

Another competitive advantage is our leadership position on cost and time to market. From network services to sales, and marketing to customer care and billing, we have many varied systems in use across the business. With strong cooperation between our various operating companies we can achieve further savings.

* * *

We have just reinforced our long term commitment to Japan by making a further investment of up to £2.6 billion. Our transactions in Japan will simplify the structure, confirm our commitment to the Japanese marketplace and enable us to deliver on the changes needed to improve our position.

53. Vodafone’s 2004 Annual Report also represented:

Mannesmann synergies

Mannesmann has been integrated into the Group and the expected synergies for the year ended 31 March 2004 announced at the time of the acquisition have been achieved, exceeding the target mainly as result of higher savings from capital expenditure, handset procurement and additional revenue opportunities.

54. Vodafone’s 2004 Annual Report discussed the Company’s German, Italian and

Japanese operations:

Germany

Vodafone Germany performed well in the year, further improving its operational performance.

* * *

37

Operating profit before goodwill amortisation and exceptional items improved by £306 million to £1,741 million, principally driven by cost efficiencies in the second half of the year, particularly in network and IT costs.

* * *

Italy

Vodafone Italy produced another strong set of results, in spite of the increasingly competitive and highly penetrated market.

* * *

Operating profit before goodwill amortisation and exceptional items grew significantly. . . .

* * *

Japan

This financial year has been challenging for Vodafone Japan due to the strength of competitor offerings.

* * *

The Group is developing a full range of 3G handsets which are expected to be available in the quarter leading up to Christmas 2004 and are expected to put Vodafone Japan in a better competitive position. . . . A plan is in place to improve Vodafone Japan’s performance and competitive position, focusing on cost reductions through leveraging the Group’s global scale and scope. . . .

55. The 2004 Annual Report also stated:

Goodwill and intangible assets

The relative size of the Group’s goodwill and other intangible assets makes a number of judgements surrounding the determination of their carrying value, and related amortisation, critical to the Group’s financial position and performance.

At 31 March 2004, intangible assets, including goodwill attributable to the acquisition of interests in associated undertakings, amounted to £93,622 million (2003: £108,085 million), and represented 70% (2003: 70%) of the Group’s total fixed assets. . . .

* * *

38

Impairment reviews

Asset recoverability 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. . . .

UK GAAP requires management to undertake a review for impairment if events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Group management currently undertakes a review of goodwill, intangible assets and investments in associated undertakings at least annually to consider whether a full impairment review is required.

56. In Vodafone’s 2004 financial statements, it was stated:

Notes to the Consolidated Financial Statements

* * *

In accordance with accounting standards the Group regularly monitors the carrying value of its fixed assets. A review was undertaken at 31 March 2004 to assess whether the carrying value of assets was supported by the net present value of future cash flows derived from assets using cash flow projections for each asset in respect of the period to 31 March 2014.

* * *

The results of the review undertaken at 31 March 2004 indicated that no impairment charge was necessary.

57. Vodafone’s 2004 Annual Report also contained the following certifications required

by Sarbanes Oxley:

RULE 13a-14(a) CERTIFICATION

I, Arun Sarin, certify that:

1. I have reviewed this annual report on Form 20-F of Vodafone Group Plc (the “Company”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial

39

condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarise and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: June 9, 2004 /s/ Arun SarinArun Sarin Chief Executive

* * *

RULE 13a-14(b) CERTIFICATION

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned

40

officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:

The Annual Report on Form 20-F for the year ended March 31, 2004 (the “Report”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 9, 2004 /s/ Arun Sarin Arun Sarin Chief Executive

* * *


I, Kenneth J. Hydon, certify that:



3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;




41





Date: June 9, 2004 /s/ Kenneth J. Hydon Kenneth J. Hydon Financial Director

* * *


Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Vodafone Group Plc, a company incorporated under the laws of England and Wales (the “Company”), hereby certifies, to such officer’s knowledge, that:


Date: June 9, 2004 /s/ Kenneth J. Hydon Kenneth J. Hydon Financial Director

58. On 7/26/04, Vodafone issued its 6/30/04 quarterly report via a release headlined and

stating:

Vodafone Continues Strong Performance in Customer and Revenue Growth

42

Vodafone Group Plc (“Vodafone”) announces today key performance indicators for the quarter ended 30 June 2004. . . .

* * *

Arun Sarin, Chief Executive of Vodafone, commented

“. . . We have recorded good performances. . . . [O]ur business is progressing well, despite a tougher competitive environment. . . .

* * *

Germany

Net customer additions of 462,000 demonstrate continued strong growth in Germany. . . .

* * *

Strong customer growth was the primary driver behind a 7% increase in service revenue for the quarter compared to the same quarter last year. . . .

Italy

Proportionate net customer additions were 205,000 in the quarter. . . . Churn remained broadly stable.

Service revenue for the quarter increased 10% on the same quarter last year. . . .

Net acquisitions and retention costs as a percentage of service revenues in the quarter slightly increased on the same period last year, reflecting the increase in competitive activity in the Italian market. However, these costs remain at very low levels when compared to the rest of the Group.

59. In mid-8/04, Sarin went on a “road show” to meet with important securities analysts

from major investment firms to provide them information about Vodafone and to try to boost

Vodafone’s stock and ADR prices. The following analyst reports resulted from Sarin’s meetings and

communications with analysts, who reported to the market what he had said to the analysts:

• 8/13/04, Bear Stearns:

*** One on One meeting with Arun Sarin was comforting with respect to . . . operational progress in Europe. . . .

43

* * *

*** Operations appear robust in Europe. . . .

* * *

Comfortable with operations across Europe. Management remain comfortable with operational progress to date in Europe. . . .

• 8/16/04, Deutsche Bank:

We had a one-one meeting with Vodafone’s CEO, Arun Sarin.

* * *

Revenue growth/margins. Vodafone believes consensus for the next few years (post 04/05) is low and revenue growth above this will be driven by subscriber growth, as well as voice and data usage. Vodafone’s MI systems enable Mr. Sarin to review subscriber metrics weekly, operational data monthly and the company operates a 3mth forecasting process. He remains confident regarding the margin uplift potential in Europe.

* * *

– Capex. . . . Mr. Sarin expects capex to have reached its peak at c.GBP5bn. . . . He reiterated the company’s 10 pc capex/sales guidance for 07/08.

– Margins. . . . . He remains confident regarding the margin uplift potential in Europe and cited that it would be achieved in different ways. . . .

– Revenue growth. The company believes consensus for the next few years (post 04/05) is low . . . .

• 8/18/04, Investec:

Positive Meeting with Arun Sarin

• . . . Earlier this week, we had a positive meeting with Vodafone CEO, Arun Sarin.

* * *

• . . . Vodafone shares have rallied somewhat in the last week, aided by analyst meetings . . . .

• 9/8/04, Citigroup:

* We were very pleased to meet with Arun Sarin, CEO Vodafone, now in his second year in the hot seat. The colour of the meeting was upbeat. . . .

44

• 9/8/04, J.P. Morgan:

Meeting with Arun Sarin: Positive on . . . FY06 outlook

* * *

We met with Vodafone CEO, Arun Sarin yesterday afternoon. Here we focus on the points he made incremental to the already widely-communicated statements from the post-KPI analyst meetings held last month.

* * *

* FY06 outlook: continued healthy revenue growth and margin momentum achievable assuming no deterioration in the competitive outlook

* We viewed the overall message as positive and capable of sustaining share price recovery.

60. On 9/27/04, Vodafone held a huge meeting for analysts and institutional investors.

On the day of this event, Vodafone issued a release stating:

VODAFONE ANALYST AND INVESTOR DAY

* * *

The day will principally consist of a series of presentations by the senior management from Vodafone’s largest operating companies. . . . Vodafone Japan, Vodafone Italy . . .and Vodafone Germany will provide an overview of each of the individual businesses.

Arun Sarin, Chief Executive of Vodafone, will introduce the day’s events by reiterating the guidance for the current financial year as outlined at the company’s preliminary results announcement in May 2004.

In addition, Vodafone will confirm that it expects to reduce mobile capital expenditure to less than 10% of mobile revenue in the year to 31 March 2008.

Vodafone will also disclose its expectations of the financial benefits of its One Vodafone programme to deliver the benefits of scale and scope. The One Vodafone initiatives are expected to achieve £2.5 billion of annual pre-tax operating free cash flow improvements by the year ending 31 March 2008. Cost initiatives are anticipated to generate improvements of £1.4 billion, with a further £1.1 billion from revenue initiatives.

61. During the 9/27/04 Analyst Day presentation by Vodafone, the following slides were

displayed and discussed:

45

62. During the 9/27/04 conference, the following was stated:

[SARIN:] . . . [W]elcome to Vodafone’s Investor Day. . . . We’ve got five operating companies presenting here today. The UK, Germany, Italy, Japan and the United States. . . . First of all, our operating performance is on-track. . . . And most importantly, we have quantified One Vodafone. We’ve announced today that by the year 2007, 2008, we expect to achieve One Vodafone benefits to the tune of 2.5 billion pounds annually on a going forward basis, on a pre-tax basis on a cash flow basis. . . . Our margins in Germany will be up. There is more competition in Italy, these days. We think our margins in Italy are likely to be flattish, on very high margins, you will recall. . . . [W]e believe that our mobile cap-ex-to-sales ratio will be below 10% by the year 2007, 2008. So, I’m simply reiterating guidance on the back of excellent performance on part of our operating companies . . . . The bottom line though is that our belief is that because we are one company that we think we will have an advantage to the tune of 2.5 billion pounds annually, starting 2007, 2008. . . . It is a cash number and it is a significant number.

63. On 9/28/04, The Times (London) reported on Vodafone’s investor/analyst conference:

Arun Sarin, chief executive of Vodafone, yesterday sought to regain investor confidence after the company’s failed bid for AT&T Wireless by outlining cost cuts of £2.5 billion . . . .

Speaking at an investor conference ahead of the mobile giant’s half-year results in November, Mr. Sarin outlined a series of measures which he said would

56

boost annual pre-tax operating free cashflow by £2.5 billion by the end of March 2008.

* * *

The one-day conference was aimed at part in silencing critics who accused the group of a lack of visibility.

Since the company’s abortive attempt to buy AT&T Wireless, the third largest mobile phone business in the US, Mr. Sarin has been on a City charm offensive, seeking to regain investor confidence in both him and the company.

During the summer he staged a series of one-to-one meetings with analysts and investors.

64. On 9/28/04, Deutsche Bank issued a report on Vodafone’s investor/analyst day

meeting, reflecting management’s presentation:

INVESTOR DAY – MANAGEMENT OPTIMISM

* * *

The only material incremental news was the unveiling of what management believes it can extract from the “One Vodafone” program – namely £2.5bn of FCF benefit through ‘07/08.

* * *

• . . . German management made an upbeat presentation. . . .

65. On 9/29/04, Investec issued a report on Vodafone’s investor/analyst day meeting,

reflecting management’s presentation:

Positive Tone on Margins and Re-iteration of Returns Guidance

• . . . Vodafone’s presentation on Monday provided an upbeat tone on margins, disclosure and re-iterated positive noises on shareholder returns ahead on November’s interims. . . .

• One Vodafone Provides Confidence on Margins Vodafone outlined further detail on its plans to further exploit its economies of scale. . . . Vodafone stated that it could secure £2.5bn of incremental pre-tax operating cash flow by y/e March ‘08. This is to be achieved from £1.1bn of incremental revenue and £1.4bn of OpEx, CapEx and handset savings. In terms of total OpEx and CapEx, Vodafone was therefore implying that March ‘04’s total cost base of £11.5bn would be broadly flat until 2008. This creates positive margin sentiment and much wanted detail on the

57

potential for Vodafone to exploit its scale advantage. . . . [T]he fact is that CEO Sarin – together with the majority of its country presentations during the day – was talking a positive tone on margins.

66. On 9/29/04, Sarin made a presentation to brokers, analysts, institutional investors and

company managers at the Sanford C. Bernstein & Co. 1st Annual Pan European Strategic Decisions

Conference 2004. Sarin stated:

One, our business is performing well. . . . The guidance remains very strong. The reason to highlight that is as this year has come along many of our competitors aren’t reporting results that are as robust as our results here.

* * *

I want to reiterate the fact that we’re very excited. And again, the reason I highlight that is over the weekend there was some news about some of our competitors saying that they weren’t quite as confident. . . .

. . . One Vodafone is basically the scale and scope benefits of our Company. As you know, we’ve acquired a number of companies over the last years. The question is – what is the payback? What difference does it really make to be as large and as global as we are? And we’ve quantified it for you. £2.5b by the year 2007/2008 on an ongoing basis, annual on a cash flow basis.

* * *

Margins in Germany are going to be up. We’re feeling more competition in Italy and I think we’ll end up with flattish margins in Italy. May I just remind you that the margins in Italy are in the low 50s, so we are quite high to begin with.

* * *

We have previously stated that our CapEx to sales ratio by the year 2007/2008 will be less than 10%. We’re reiterating that guidance at this time.

* * *

I’d just like to reiterate and say business is going well. . . .

* * *

QUESTION AND ANSWER

* * *

58

[ANALYST:] Some questions about your commitment to shareholder value. There’s a lot of frustration with the performance of the stock price over the last several years. What priority does the stock price have to you? How do you intend to try and address people’s concerns in that regard?

[SARIN:] If I can take you back to the first chart here, I hoped you would see from the first chart that increasing shareholder value is the very, very important strategic goal for me, for the Company. So we’re obviously very interested in making sure that we can have a good share price. . . .

As you can imagine, we don’t set the share price on a daily basis. Yes, we are buying back some shares these days. We are highly confident about the fact that we feel that these are very, very good value for us to buy back our shares and hence we are buying back our shares.

* * *

Yes, we are buying back some shares these days. We are highly confident about the fact that we feel that these are very, very good value for us to buy back our shares and hence we are buying back our shares.

67. On 9/30/04, Sanford Bernstein issued a report on Vodafone based on the recent

Vodafone/Sarin presentation:

VOD: Insights from CEO presentation at Bernstein Conference.

* * *

• Mr. Sarin reiterated his confidence in Vodafone reducing capex-to-sales below 10% by March ‘08 (a controversial target).

68. The statements issued between 6/10/04 and 9/29/04 were false and misleading when

made. The statements were affirmatively false in misstating facts regarding Vodafone’s business

and finances. In addition, the statements were false and misleading in failing to disclose the

following true facts – then known to or recklessly disregarded by defendants:

(a) As detailed herein, Vodafone’s F04 and 1stQ F05 financial statements and

reports, as disseminated to the investing public, its shareholders and as filed with the SEC, were

materially falsified and overstated, including a massive overstatement of its assets and its goodwill

59

(intangible assets) and shareholder equity, and its EBITDA and operating earnings were inflated due

to the over-valuation of its German, Italian and Japanese operations;






from operational problems, inefficiencies and a lack of growth adequate to permit Vodafone to

recover its investment in that operation;








(f) Vodafone’s worldwide scale of operations did not give it a competitive





(g) Vodafone’s “One Vodafone” cost savings and operational efficiency initiative


60


being forecast;

(h) Vodafone knew from discussions and interactions with tax authorities in




(i) The large stock buy-back activities which defendants were causing Vodafone

to implement were not being done because defendants actually believed that Vodafone’s ordinary

shares were undervalued, represented a good value or investment, or that such expenditures were a

wise use of Vodafone’s corporate resources; rather, such buy-backs were being engaged in by

defendants to support and, if possible, artificially inflate Vodafone’s stock price and assist key

insiders in unloading large numbers of their Vodafone shares at inflated and, for them, highly

profitable prices;

(j) Contrary to defendants’ representations, Vodafone’s German and Italian




and

(k) Due to the foregoing adverse factors which were negatively impacting




61

69. On 10/1/04, Vodafone issued a release stating:

CHANGE IN US GAAP ACCOUNTING FOR INTANGIBLE ASSETS – NO IMPACT ON VODAFONE’S RESULTS UNDER UK GAAP

On 29 September 2004 the Staff of the United States Securities and Exchange Commission (“SEC”) announced new guidance in the interpretation of accounting principles generally accepted in the United States (“US GAAP”) in relation to accounting for intangible assets.

The new SEC guidance will not affect the presentation of Vodafone Group Plc’s (“Vodafone”) results or the carrying values of any assets under UK GAAP (or, in the future, under IFRS).

70. On 10/13/04, Vodafone issued the following release:

BOARD CHANGES AND NEW ORGANISATIONAL STRUCTURE AT VODAFONE

* * *

Vodafone will simplify its existing regional structure with major countries and business areas reporting into the Chief Executive. All first line management functions in the Operating Companies will have a dual reporting line to the respective functions at Group level.

Arun Sarin, Chief Executive said: “We are creating an organisation that is better positioned to respond to the high expectations of our customers. Faster execution will enable us to extend our lead within the mobile industry and deliver the benefits to customers, our employees and our shareholders.”

* * *

Vodafone’s operating company structure will be streamlined to ensure effective and fast decision-making, enabling improved time to market across a number of business initiatives. Consequently, the following operating companies and business areas will report directly into the Chief Executive:

* * *

• Germany . . . ;

• Italy . . . ;

* * *

• . . . Japan. . . .

62

71. On 11/10/04, Vodafone issued a release announcing the launch of its 3-G service:

Global launch of Vodafone live! with 3G

Vodafone today announces the global launch of Vodafone live! with 3G across an unrivalled 13 countries. Vodafone live! with 3G will be available in Austria, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Portugal, Spain, Switzerland and the UK.

• Extensive range of 10 new 3G handsets offering a wide choice for customers

* * *

Arun Sarin, Chief Executive, Vodafone, said:

“Today is an important day for Vodafone and the start of a new era in mobile communications.

“Vodafone live! with 3G will dramatically change the way our customers experience their Vodafone services and we are confident that Vodafone live! with 3G will be a success. . . .

“Vodafone live! with 3G provides Vodafone with a new platform for profitable growth.”

* * *

Handsets

Vodafone will offer an initial, extensive range of 10 new 3G handsets for the Christmas period from Sharp, Motorola, Sony Ericsson, NEC, Nokia and Samsung. Seven of the handsets are exclusive to Vodafone and the range has been designed to offer a wide customer choice of high, mid and low tier priced 3G devices. Seven handsets from this range will be available in Japan, with nine available in Europe.

Individual Vodafone operating companies have selected the most appropriate handsets for their local customer needs from this range.

The handsets have been designed in close collaboration with Vodafone’s manufacturing partners to ensure easy to use service delivery with the now improved Vodafone live! portal.

Enhanced handset features now include:

• Better imaging capabilities: Europe’s first 2 mega pixel camera phone

• Improved audio: stereo speakers, full track music download

63

• Expandable memory storage: 32MB provided as standard

* * *

Networks

Core to the delivery of Vodafone live! with 3G are Vodafone’s 3G networks. Vodafone has invested significantly to ensure its customers have 3G services of the highest quality. Vodafone customers have seamless handover of voice and data services from 3G to 2G, ensuring high quality service delivery of Vodafone live! with 3G.

Vodafone’s strategy is to deploy 3G network coverage which delivers a high quality service. . . .

72. On 11/16/04, Vodafone issued a release reporting its results for the six months ended

9/30/04, stating:

• Group operating profit, before goodwill amortisation and exceptional items, of £5.7 billion, with organic growth at constant exchange rates of 5%

• Earnings per share, before goodwill amortisation and exceptional items, increased by 10% to 5.28 pence.

* * *

Arun Sarin, Chief Executive, commented:

I am very pleased to present a robust set of half year results demonstrating a strong overall operational performance. . . . [W]e are excited about our growth opportunities and ability to leverage global scale and scope advantages.

* * *

Chief Executive’s Statement

Our first half results demonstrate a robust operational performance, which reflects Vodafone’s industry leading position and a global footprint.

* * *

We continue to be excited about the future growth opportunities for our businesses. . . . Our 3G launch . . . significantly improves our competitive position in Japan.

* * *

64

Another core focus of the Group is to leverage our scale and scope advantage through the One Vodafone programme.

* * *

Overall the business is performing well and on track with our expectations at the beginning of the year. For the full year, we expect . . . free cash flow of around £7 billion.

* * *

Germany

Vodafone is well positioned in the German mobile market . . . [and] is significantly ahead of the other two operators. Profitability . . . has improved and Vodafone Germany’s EBITDA margin represents the highest in the market.

* * *

Italy

* * *

The increasing customer base continued to be the main driver of service revenue growth, with average customers for the period 9% higher than the comparative period.

* * *

Japan

* * *

An ongoing transformation plan is expected to improve Vodafone Japan’s performance and competitive position in the market. This is focusing on cost reductions through leveraging the Group’s global scale and scope. . . . In most areas of the plan, positive results are expected in the next financial year, though good progress has been achieved in the consolidation of the regional structure and cost reductions.

* * *

One Vodafone

The One Vodafone programme continues to make strong progress. . . .

73. On 11/16/04, Vodafone held a conference call to discuss its interim six month results.

During this call, the following occurred:

65

[SARIN:] . . . [O]ur businesses are performing well. . . . [I]n Japan or in Germany or in Italy . . . our businesses are performing well. And it’s on that basis that we are giving your guidance that we are reiterating this year’s guidance for the rest of the year.

The second thing that’s exciting is that we have launched 3G. . . . [T]he product is good, the services are good, the content is good, the pricing is good, and frankly, we are feeling very good about the fact that it’s out in the marketplace and it’s doing well.

The third thing that’s exciting is that we are making really good progress on our One Vodafone. . . . [W]e are beginning to realize some of the benefits that we’ve talked to you about in the past.

* * *

The bottom line is we are growing nicely. Our margins are relatively stable, our businesses are performing well.

If you then go to free cash flow . . . [w]e’re well on our way to producing the £7b.

* * *

One Vodafone is an important program. . . . We have told you that by the year 2007/2008 we expect £2.5b in pre-tax cash flows on an annual benefit basis to be realized by the Group being one company. That’s a big number. We’re going hard for it. As you know, £1.4b of that is coming from capital expenditure, operating expenditure, hand sets, those kinds of cost issues. And £1.1b is coming from revenue and market share.

* * *

[HYDON]: . . . [O]ur financial results show good operational growth, and a healthy financial position.

* * *

Before I finish, I’d just like to provide you with a brief update on our transition to International Finance Reporting Standards. This project continues to go well. Further to the IFRS update we provided at our recent investor day, I can confirm that our existing UK GAAP goodwill balances will be the same under IFRS as they are under UK GAAP. . . .

* * *

[HORN-SMITH:] . . . This has been a good operational performance during the first half.

66

* * *

Costs in our German mobile business continued to be managed very diligently. . . .

. . . This strong control over cost and drive for efficiency has delivered a continued uplift in EBITDA margin, which now stands at nearly 47%. Germany has turned in a very solid performance during the first half, and is poised for continued growth and improvement in margin year-on-year.

Now to Italy. Our Italian business has continued to perform well in all key areas.

* * *

[SARIN:] . . . You’ve now heard the story of Vodafone in the last 6 months. I’m here to tell you a little bit about the outlook, where we’re going from here and what does next year look like.

. . . So on revenue growth we’re in the high single digits, on EBITDA margins we’re broadly stable. . . and on free cash flow we’re around £7b.

* * *

So fundamentally we’re growing in the high single digits. . . .

* * *

. . . One Vodafone is doing well. We’ve reorganized the Company so that we can provide more organizational efficiency and direct line of sight to the customer.

* * *

[HYDON:] . . . Do we have a provision in the balance sheet for tax payable on a dividend from Italy? No, we don’t.

Is there a tax payable on a dividend from Italy? In principle, yes. We’ve got a lot of very clever tax people in the tax area in Vodafone, so they’ll be working hard to optimize the situation. And so today it’s impossible to say how much that tax might be, not only for the reason that we’re working on it but also no one has declared a dividend yet, no one has asked for a dividend. . . . So that’s not predictable really today.

74. On 11/16/04, Deutsche Bank issued a report on Vodafone, stating:

Vodafone reported a solid set of H1 04/05 results.

67

* * *

Guidance: . . . Guidance for 2005/06 is slightly ahead of consensus at high single digit revenue growth (consensus is at c5%) with margins to remain flat (we had forecast a 10 bps reduction in margin).

Summary: a solid set of numbers, we have gained comfort from the company’s guidance. . . .





(a) As detailed herein, Vodafone’s F04 and 1stQ and 2ndQ F05 financial

statements and reports, as disseminated to the investing public, its shareholders and as filed with the

SEC, were materially falsified and overstated, including a massive overstatement of its assets and its

goodwill (intangible assets) and shareholder equity, and its EBITDA and operating earnings were

inflated due to the over-valuation of its German, Italian and Japanese operations;










68








with the extremely poor quality and functionality of Vodafone’s new 3-G handsets, was leading to

increased customer dissatisfaction and rejection of Vodafone’s service in Japan and a lack of

adequate market share and growth in that operation sufficient to justify Vodafone ever recapturing

its investment in its Japanese operation;









being forecast;



69













profitable prices;





and

(m) Due to the foregoing adverse factors which were negatively impacting




70

76. On 1/20/05, Vodafone issued a release stating:

UPDATE ON ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS

Vodafone Group Plc (“Vodafone”) is preparing for the adoption of International Financial Reporting Standards (“IFRS”) as its primary accounting basis for the year ending 31 March 2006. . . .

Vodafone will report under UK Generally Accepted Accounting Practice (“UK GAAP”) for the year ending 31 March 2005, and will subsequently present this financial information in accordance with IFRS.

* * *

Ken Hydon, Financial Director, commented:

“The financial information provided today shows how IFRS impacts on Vodafone’s recent results in advance of its adoption in the next financial year. The most significant change is that Vodafone will no longer amortise goodwill, resulting in a clearer presentation of underlying business performance.

* * *

a) Goodwill and acquired intangible asset amortisation

IAS 38, “Intangible Assets” requires that goodwill is not amortised. Instead it is subject to an annual impairment review. As the Group has elected not to apply IFRS 3 retrospectively to business combinations prior to the opening balance sheet date under IFRS, the UK GAAP goodwill balance at 31 March 2004 (£96,931m) has been included in the opening IFRS consolidated balance sheet and is no longer amortised.

* * *

IFRS 1 requires that an impairment review of goodwill be conducted in accordance with IAS 36, “Impairment of Assets” at the date of transition irrespective of whether an indication exists that goodwill may be impaired. No impairments were necessary as at 1 April 2004 following the review carried out in accordance with this standard.

77. On 1/20/05, Vodafone held a conference call for analysts to discuss the impact of

IFRS:

Ken [Hydon:] Hello everyone, good afternoon. And thank you for joining this call. With me today is Robbie Barr, the Group Financial Controller and Paul Stevenson, the Director of Financial Reporting. . . . It’s now only ten weeks before the Group’s primary reporting moves to IFRS. . . . Robbie Barr will highlight certain

71

important features of the transition to IFRS, particularly . . . the key impacts on the financial statements. . . . I will then take you through our IFRS outlook statements which should leave us with plenty of time for questions.

* * *

Operator: The next question comes from Mr. Paul Howard, please state your company name followed by your question.

Paul: Uh, thank you. Paul Howard at Cosmo. Uh, two questions. Just going forward uh, you’re obviously carrying still a large intangible asset base. Is there any change to the methodology about impairment tax going forward under IFRS, anything we should think about in that respect? Uh and then secondly, uh, I note that the adjustment for current deferred tax in the half-year ending September, actually you gave your positive contribution compared to the usual negative contribution in the year before. Is that what we should expect for the full year March ‘05 before we see this sort of half to one percent increase uh in effective tax rates going forward?

Unknown: Thank you, Paul. What Robbie thinks about the deferred tax. The short answer to our question on impairment reviews and the methodology by which the carrying value of good will is assessed. They’re unchanged between uh UK GAAP and IFRS. So, we bring forward the UK GAAP good will figures into our IFRS balance sheet and the impairment review is conducted in just the same way as it has been in the past.

* * *

Unknown: So, Robbie would like you to verify deferred tax?

Robbie: Uh, in deferred tax, you’re right. We have got a large deferred tax balance. Some of that will reverse as we go forward in relation to, some of it relates to uh issues that we have with, in jurisdictions in terms of the timing it takes us for to [sic] resolve our tax issues and we’ll unwind in due course. . . . [O]ff the top of my head, you know, can’t give you a split on, you know, how much of that we can say will be indefinitely carried forward, how much will be split or give you an accurate timing on that. It is very difficult to predict the exact timing of uh tax unwinds given the, it depends on tax authorities and also depends on future capital expenditure plans.

78. The statements issued on 1/20/05 were false and misleading when made. The

statements were affirmatively false in misstating facts regarding Vodafone’s business and finances.

In addition, the statements were false and misleading in failing to disclose the following true facts –

then known to or recklessly disregarded by defendants:

72

(a) As detailed herein, Vodafone’s F04 and interim F05 financial statements and










from operational problems, inefficiencies and a lack of adequate growth to permit Vodafone to









(f) Vodafone’s introduction of 3-G service and products was a failure in Japan




73





excessive costs, infrastructure and bureaucracy which inhibited the implementation of business






being forecast;













74



profitable prices;





and





79. On 1/25/05, Vodafone issued the following release:

VODAFONE REACHES 150 MILLION CUSTOMERS – STRONGEST QUARTER SINCE DECEMBER 2000

* * *

Arun Sarin, Chief Executive of Vodafone, commented:

“I am very pleased to announce another impressive quarter for customer and revenue growth. We have seen consistently strong performance across Europe. . . .

* * *

Germany

Net customer additions of 843,000 demonstrated continued strong growth in Germany and resulted in a closing base of 26.9 million customers, with churn remaining stable compared to the previous quarter. . . .

* * *

Strong customer growth was the primary driver behind a 6% increase in service revenue for the quarter compared to the same quarter last year.

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* * *

Italy

Proportionate net customer additions were 359,000 in the quarter, leading to a total proportionate customer base of over 17 million. . . .

Service revenue for the quarter increased 8% compared to the same period last year. . . .

Net acquisition and retention costs as a percentage of service revenue in the quarter were higher than the same period last year, reflecting the increase in competitive activity in the Italian market. However, these costs remain at very low levels when compared to the rest of the Group.

* * *

Japan

* * *

The Group will continue to focus on executing a successful turnaround programme in Japan throughout 2005 and into 2006.

80. On 1/26/05, Morgan Stanley issued a report on Vodafone:

Top Line Momentum Intact

Quick Comment: Vodafone’s 3Q05 KPI’s surpised [sic] positively with stronger than expected subscriber growth across all markets, and better than expected ARPU readings in most markets.

* * *

We believe these numbers should provide the impetus for Vodafone to outperform over the coming months, as they can alleviate the market’s concerns regarding Vodafone’s competitive positioning.

* * *

Strong performance in continental Europe . . .

The general trend of strong subscriber growth and stable ARPUs translated to positive service revenue trends in all the major markets. Subscriber growth surprised on the upside virtually across the board. . . .

• Germany – solid fundamentals. . . .

• Italy – Competitive impact not yet felt. 76

81. On 3/10/05, Deutsche Bank issued a report on Vodafone based on discussions with

the new CFO of Vodafone, defendant Halford:

We met with the new CFO of Vodafone (Andy Halford) and CEO Arun Sarin. . . . Vodafone’s management appeared up beat. . . .

• Vodafone’s management stated that the business is performing well. . . .

* * *

• Japan. Management stated that it was 10 months into its 18-24 month turnaround which it believes should be complete by May ‘06 and is expected to be evidenced both by greater market competitiveness (net additions market share) as well as improved margins.

82. On 3/11/05, Morgan Stanley issued a report on Vodafone based on meeting with

Vodafone’s CFO Halford and CEO Sarin:

An Encouraging Meeting with Vodafone

Quick Comment: We attended a meeting with Vodafone CEO Arun Sarin and incoming CFO Andy Halford yesterday. . . .

We think that over the next 12-18 months, the market will be surprised by Vodafone’s ability to sustain revenue growth in the range of 5%-8% without materially depressing OpFCF margins or returns on capital. . . . We found the meeting encouraging overall.

* * *

Japan: We are in month 10 of 24 month turnaround process

Japan will remain the main drag within Vodafone’s portfolio of operations in the near term, we believe. Outdoor coverage and handsets were identified by management as the main challenges facing the company. Management expects to have addressed this coverage issue completely within the next ten months.

83. On 3/11/05, Investec issued a report on Vodafone based on a meeting with CFO

Halford and CEO Sarin:

Reassuring Meeting with New FD

• Overview Yesterday we had a reassuring meeting with the new Group FD Andy Halford. The meeting was with other sell-side analysts and was also attended by CEO Arun Sarin.

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* * *

• March ‘06 Guidance As expected, there was no change to the preliminary ‘06 guidance given in November.





(a) As detailed herein, Vodafone’s F04 and interim F05 financial statements and
















78




(f) Vodafone’s introduction of 3-G service and products was a failure in Japan














being forecast;





79











profitable prices;





and





85. On 5/24/05, Vodafone issued a release regarding its results for the year ended

3/31/05:

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Vodafone today announces preliminary results for the year ended 31 March 2005, which meet or exceed stated targets for the Group’s global operations across every metric. The highlights of the results are:

Strong financial performance:

* * *

• Earnings per share, before goodwill amortisation and exceptional items, increased by 14% to 10.41 pence.

* * *

Arun Sarin, Chief Executive, commented:

These strong results highlight both our operational and financial strength. We have met or exceeded all of our stated targets and significantly increased returns to shareholders. Whilst competitive pressures are increasing, there is clear evidence that our global scale and scope is enabling us to deliver innovative customer propositions and to produce superior results.

Chief Executive’s Statement

Vodafone Group has posted a strong set of annual results, highlighting both operational and financial strength. I am pleased to report that the Group met or exceeded our stated targets on every metric.

* * *

In our core European markets, good performances were also recorded by Italy and Germany. . . despite a very competitive backdrop.

* * *

We are on track to derive significant benefits from the “One Vodafone” programme and to deliver £2.5 billion additional pre-tax operating free cash flow by the 2008 financial year.

* * *

GROUP RESULTS

* * *

Before goodwill amortisation and exceptional items, total Group operating profit increased by 1% to £10,904 million, with underlying organic growth of 5%, broadly in line with the growth in turnover.

* * * 81

GERMANY

* * *

Vodafone has built on its strong position in the German mobile market following the successful launch of 3G services. The EBITDA margin improved compared to the previous year and continues to represent the highest of all mobile network operators.

A 9% growth in the average customer base compared to the prior year was the main driver of the 5% increase in service revenue in local currency. Customer growth was strong . . . .

* * *

ITALY

* * *

Vodafone continued to perform robustly in Italy . . . .

86. On 5/24/05, Vodafone held a conference call for analysts and investors to discuss its

3/31/05 year-end results:

[SARIN:] . . . [W]e have produced very strong operational and financial performance in the last year. . . . The thing that is most pleasing is that here in Europe we are outperforming our competitors.

The second thing that is exciting about our business is that we are creating a platform for growth in the future. . . . And we have One Vodafone embedded in our business. Both of these things will position us well for the future.

* * *

In Germany, we outperformed T-Mobile by 1.6%. In Italy, we grew faster than TIM, and increased our relative share by 1.5%.

* * *

Turning to EBITDA and EBITDA margin performance, again, we performed well against our peer group. In our major markets, margins were up in Germany [and] in Italy . . . .

* * *

In our view, the out-performance is because of our global scale and scope finally showing through.

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* * *

One Vodafone. We are progressing well. . . . This year we are implementing on our plans and we have got limited benefits flowing through our financial statements. Next year we will deliver more benefits and more improvements. And by ‘07/’08, we will deliver the annual targets that we have set, which was £2.5b pre-tax cash flow improvement because of One Vodafone.

* * *

Moving onto Japan . . . . Last year we made progress by launching 3G, strengthening management [and] controlling costs . . . .

* * *

Japan is fundamentally a good business.

* * *

[HALFORD:] Let me start with Vodafone Germany, which had a very successful year, consistently taking good market share of customer net addition.

* * *

In total, Vodafone Germany increased its share of mobile market revenues by 1.6% against the principle competitor. This strong growth did not come at the expense of profitability. Operating expenses and combined customer acquisition and retention costs were both lower as a percentage of revenue. This resulted in an increase in EBITDA margin of 1.4%, and importantly we now have the largest share of the EBITDA in the market again.

Now over to the Italian market, which became increasingly competitive during the year with the continued impact of Hutchison. Our core strategy of targeted promotional and seasonal campaigns and focused customer retention initiatives continues to prove successful and has been a good driver of both usage and customer growth.

* * *

We saw no impact from regulated price cuts during the year, but do anticipate a 16% termination rate reduction this summer.

* * *

Now I would like to focus on our One Vodafone initiative . . . .

* * *

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I confirm that by 2007/8, we are on track to deliver . . . mobile capital intensity under 10%.

* * *

[SARIN:] I would like to summarize by saying that . . . [y]ou can expect from us continued out-performance versus our competition here in Europe.

87. On 5/24/05, The Financial Times and FT.com reported:

The company said it now expected revenue growth of 6-9 per cent, down from “high single digits” and said margins would be flat or down 1 percentage point. It said margins would be “broadly stable”.

Arun Sarin, chief executive, said the change in guidance “reflects a more competitive backdrop” but he insisted the change was made only to give management more flexibility to compete in key markets: Japan, Germany, Italy and the UK.

88. On 5/26/05, Deutsche Bank issued a report on Vodafone reporting on a meeting with

Sarin and Halford:

We met with Arun Sarin (CEO) and Andy Halford (CFO) of Vodafone. The major points from the meeting were:

* * *

– Italy is going well given the high margins . . . .

. . . Germany (stable with O2 gaining share from TMOB)

– The cost reduction program appears to be progressing well . . . .

89. In 6/05, Vodafone issued its 2005 Annual Report. The 2005 Annual Report

contained a letter from defendant MacLaurin, stating:

It is my pleasure to report another year of achievement for your company . . . .

. . . I believe we have made significant progress, particularly with the consumer launch of 3G and the ongoing implementation of our One Vodafone programme.

* * *

84

In October, the merger of Vodafone Holdings K.K. and Vodafone K.K. in Japan was completed following our successful tender offer to increase our shareholdings in both companies. This clearly demonstrates our long-term commitment to the strategically important mobile market in Japan. The merger has created a simplified company structure which has already contributed towards greater operational effectiveness and financial efficiencies and, although the business is currently not performing as well as we would wish, I am confident that, in time, our investment will prove to be very rewarding.

90. The 2005 Annual Report contained a letter from CEO Sarin, stating:

This has been another successful year for Vodafone.

* * *

Our results are built on the base of a strong overall Group operational performance that has delivered on all our key targets.

* * *

Our operating performance in Europe remains robust. . . .

We face challenges in Japan, where we are half way through a two year plan to turnaround our business. This plan has three main objectives: to improve the attractiveness of 3G handsets and content in that market, to increase the effectiveness of our distribution channels and to improve the coverage of our 3G network.

Japan remains a strategically important mobile market for us and is a significant profit generator for the Group, contributing £0.8 billion of operating profit before goodwill amortisation in the last year. However, the pace of change and advanced state of 3G there requires additional focus to improve our competitive position. . . . [W]e have strengthened the management team and remain focused on a successful execution of our recovery plan.

As we look forward, we see both greater opportunities and greater challenges. . . . [P]enetration levels in many of our markets are now reaching saturation and competition is intensifying through existing network operators and the introduction of many more low cost operators and resellers. . . . We are also seeing continued regulatory led termination rate reductions.

In this environment, we see winners and losers. We believe Vodafone is uniquely positioned to succeed through our scale and scope. . . .

* * *

Another key goal is to deliver fully the benefits of our scale and scope. As the Group has expanded over the past few years, we have been able to achieve some

85

significant scale benefits. . . . The One Vodafone programme builds on this to further integrate our businesses and create sustainable competitive advantage.

* * *

During the year to March 2005, we have established objectives, plans and the supporting organisation to deliver on our programme. Whilst we are in the early stages, some initiatives are more advanced than others.

* * *

For the year ahead, our focus will be on implementing our plans and beginning to deliver improvements. The net benefit to us in the short term will be limited as we will incur costs in centralising certain activities. The first substantial benefits are expected in the year to March 2007, with the programme fully up and running in the year to March 2008.

* * *

The One Vodafone programme is targeted to deliver £2.5 billion of incremental pre-tax operating free cash flow improvements in the year ending March 2008.

* * *

Outlook

For the year ahead . . . [f]ree cash flow is anticipated to be in the £6.5 billion to £7 billion range. . . .

91. The 2005 Annual Report stated:

Goodwill and intangible assets

* * *

At 31 March 2005, intangible assets, including goodwill attributable to the acquisition of interests in associated undertakings, amounted to £99,718 million. . . .

92. The 2005 Annual Report indicated that Vodafone had recorded an impairment of the

carrying value of goodwill relating to Vodafone Sweden of £315 million. No impairment was

recorded for impaired goodwill in other countries, including Germany.

93. Vodafone’s 2005 Annual Report also contained the following certifications required

by Sarbanes Oxley:

86


I, Arun Sarin, certify that:










87


Date: June 8, 2005 /s/ Arun Sarin Arun Sarin Chief Executive

* * *




Date: June 8, 2005 /s/ Arun SarinArun Sarin Chief Executive

* * *


I, Kenneth J. Hydon, certify that:




88








Date: June 8, 2005 /s/ Kenneth J. HydonKenneth J. Hydon Financial Director

* * *



89


Date: June 8, 2005 /s/ Kenneth J. HydonKenneth J. Hydon Financial Director





(a) As detailed herein, Vodafone’s F04 and F05 financial statements and reports,

as disseminated to the investing public, its shareholders and as filed with the SEC, were materially

falsified and overstated, including a massive overstatement of its assets and its goodwill (intangible

assets) and shareholder equity, and its EBITDA and operating earnings were inflated due to the over-

valuation of its German, Italian and Japanese operations;










90








with extremely poor quality and functionality of Vodafone’s new 3-G handsets, was leading to












being forecast;



91













profitable prices;





and





92

95. On 7/14/05, Vodafone held a conference in Dusseldorf for analysts to discuss

Vodafone’s German operations:

[SARIN:] . . . Vodafone Germany is an outstanding company measured on any basis, whether it’s around customers, whether it’s around shareholder returns, whether it’s around management practices, whether it’s around employee satisfaction, we have a first-rate company. . . .

The principal speakers today are going to be Jurgen von Kuczkowski, who is the Chief Executive; Fritz Joussen, who is currently our Chief Operating Officer and will become Chief Executive in October; and Albert Weismuller, who is our Chief Financial Officer.

* * *

Our company here is outperforming our competition. . . . EBITDA market share is up 3.7% in the 12 months that we’ve just closed.

* * *

[VON KUCZKOWSKI:] This chart shows you that we are the profitability leader here in Germany, demonstrating how we can combine close wireless controlling costs. As a company, we still see good local scale efficiency opportunities combined with a huge potential of thriving benefits from being in the heart of Europe and One Vodafone.

* * *

Albert Weismuller – Vodafone Group – Chief Financial Officer

* * *

Despite rising revenues, we are keeping our operating costs well under control. And this hasn’t started only this year or the last year, it’s a measurement task over the last year within our management team in Germany. . . .

And despite a competitive marketplace, customer costs actually decreased as a percentage of service revenues.

* * *

So in summary, we continue to grow EBITDA. . . . The result of all this was the full year EBITDA margin of 46.4% which is an increase by 1.4% year on year.

96. On 7/15/05, Citigroup issued a report on Vodafone discussing the “German day”

presentation:

93

• German day shows the strength of this division, contributing 23% of free cash flow: good execution looks likely to continue

97. On 7/15/05, Morgan Stanley issued a report on Vodafone’s “German Investor Day”:

Vodafone hosted an upbeat investor meeting yesterday to present its German operation, which accounts for a leading 16% of the group’s proportionate EBITDA . . . .

98. On 7/15/05, JP Morgan issued a report on Vodafone’s German presentation:

Confident messages from Germany

* * *

• Management appears very comfortable that the combination of revenue market share gains and margin resilience it has delivered in Germany over the past year can be sustained.

• We came away reassured that our forecasts are readily achievable. . . .

1. Management seems untroubled about competitive trends in Germany.

* * *

Management appears very comfortable that the combination of revenue market share gains and margin resilience it has delivered in Germany over the past year can be sustained.

99. The statements issued on 7/14/05 were false and misleading when made. The

statements were affirmatively false in misstating facts regarding Vodafone’s business and finances.

In addition, the statements were false and misleading in failing to disclose the following true facts –

then known to or recklessly disregarded by defendants:

(a) Vodafone’s Mannesmann (German) operations had not been successfully




94

(b) Vodafone’s worldwide scale of operations did not give it a competitive





(c) Vodafone knew from discussions and interactions with tax authorities in

several countries – including Germany – that it would have to make multi-billion dollar cash tax

payments beginning in F06 or F07, which would amount to over $1.5 billion per year, for several

years, meaning that Vodafone could not possibly achieve the levels of cash flow being forecast for

F07, F08 and beyond; and

(d) Contrary to defendants’ representations, Vodafone’s German and Italian



increasingly unlikely that Vodafone would ever be able to recover its investment in those operations.

100. On 7/25/05, Vodafone issued a release reporting on its recent operating performance,

stating:

“We have seen strong performances across Europe . . . and we continue to focus on improving our business in Japan.

* * *

Overall these KPIs are in line with our expectations and we are therefore reiterating our guidance for the full year to March 2006.

Germany

Vodafone Germany delivered a quarter of strong customer growth . . . .

* * *

95

Italy

Proportionate net customer additions were 204,000 in the quarter. The total proportionate customer base was 17.5 million at the end of June. 6.4% higher year on year on an organic basis. Blended annual ARPU increased to 360 for the year to June compared to 359 for the year to March. Annual churn increased slightly when compared to March.

Service revenue for the quarter increased 6.5% compared to the same period last year, with continued customer growth being the primary driver. . . .

Net acquisition and retention costs as a percentage of service revenue in the quarter were higher than the same period last year and the quarter to March, reflecting the increase in competitive activity in the Italian market and a particular focus on attracting and retaining high value customers. However, these costs still remain at very low levels when compared to the rest of the Group.

101. On 7/25/05, Vodafone held a conference call for analysts and investors to discuss its

business:

[SARIN:] . . . As you have seen from our announcement earlier this morning, we’ve started the year well, and the business is running fully in line with our expectations. We set out in May, our guidance for this financial year, and we are reiterating that guidance to you today. As a reminder, we said that we would expect proportionate organic mobile revenue growth of 6% to 9%, proportionate mobile EBITDA margins of flat to minus 1% . . . and free cash flow in the range of 6.5 to 7 billion pounds.

* * *

Turning now to some of our major operations within Europe, we saw good, stable progress in all our major businesses when compared to the previous quarter and the comparable period a year ago. In Germany we saw continued good customer growth in both contract and prepay, which was the principal driver behind the 4.1% increase in service revenues year on year.

* * *

In Italy, we continue to see good customer growth with over 200,000 net adds for the quarter. . . . While we see a very competitive environment in Italy, we are also seeing good success in maintaining and growing our business through effective CRM and targeted promotions as well as delivery of a superior product suite.

* * *

To summarize for you the recent quarter has been excellent.

96

102. On 8/3/05, Vodafone filed a Prospectus Supplement with the SEC for the sale of $750

million in 5% Notes due 2015, which would be sold to underwriters who would then sell the Notes

to the public. The Prospectus Supplement incorporated by reference Vodafone’s false financial

statements previously reported, including the Company’s Form 20-F for the year ended 3/31/05.

103. On 9/19/05, Vodafone held a conference call for analysts and investors.

[SARIN:] . . . Last year at this time we quantified One Vodafone for you. We outlined certain programs, you’ll hear a lot about that today in terms of where are we and we’re making very good progress. We’re implementing most of these initiatives this year and we’ll start seeing the benefits next year and the years afterward. The progress is good. We’re very focused on turning around our business in Japan. As we’ve told you, it’s a multi-year program and clearly this is likely to suppress margins in the near- to medium-term, but we’re rebuilding the confidence both of our employees in Japan and, most importantly, our customers.

* * *

So how is this year going so far? . . . The trends in Europe are that our companies are pressing down on 3G, accelerating growth. Our companies are taking share. I have to tell you that competition is there and frankly in the next six months we can expect greater competition from . . . T-Mobiles in Germany and DoCoMo and AU in Japan.

Regulatory intervention also continues in that we continuously see termination rate cuts in most of our markets. This is not a surprise because we’ve got these baked into our business plans, but equally the termination rate cuts continue. In Japan I’d say that competitive intensity still stays pretty strong and the turnaround is on track . . . .

* * *

The next section is going to be about our Company in Italy . . . . At this stage, I would like to invite Pietro Guindani . . . to come join me on the podium here.

* * *

Pietro Guindani - Vodafone Italy - CEO

* * *

During the last year, as well as in more recent months, the market in Italy has recorded accelerated growth, with more gross and net additions than in previous periods.

97

* * *

In a fast growing market, Vodafone Italy keeps outperforming Telecom Italia Mobile.

* * *

In the business space, we have won our battle for growth and value, matching for the first time the marketshare of our principal competitor.

* * *

As a result, of our strong, very strong . . . competitive position, in the last fiscal year, as you know, we have grown our customers by 6% with stable ARPU and stable inactivity rates. A real success, I believe, in a market with 114% penetration and despite the aggressive strategies of Hutchinson. Our revenue growth of 7% allowed us to gain the largest share, as you can see on the pie chart, of the total market revenue growth; i.e., 37% of the total, solidly ahead of any other competitors.

To sum up all what I have been saying . . . Vodafone in Italy keeps enjoying undisputed customer satisfaction leadership. Secondly, we have outperformed Telecom Italia Mobile through differentiation; and the marketshare gap between us and our principal competitor keeps shrinking year in, year out. We have promptly and I believe successfully fenced off Hutchinson’s attack. Finally, we believe that we have continued to build solid foundations to compete and succeed in the Italian market also in the future.

* * *

[SARIN:] Coming up next is Japan. So I would like to invite Bill Morrow and Tsuda-san up to the stage here. . . .

Bill Morrow has been the Chief Executive for a few months in Japan.

* * *

Bill Morrow - Vodafone Japan - President

Thank you, Tsuda-san; and now good afternoon, everyone. So as you recall from our presentation in May, we gave you an overview of our improvement plan. I’m pleased to say that we are on track and we have already observed some encouraging results.

* * *

So we know well what is in front of us. We’re dealing with this. We have reorganized around our targeted customer segments. We have brought in a stronger

98

local senior management team, hiring executives from Sony, Japan Telecom, DoCoMo, and Fandango. . . .

So I hope you can see we’re confident in our turnaround plan, but it is not yet complete. The first half of this year will be better than what we had expected. But I would like to reiterate what we said before, in that we should be in a stable, monthly customer net growth position sometime during the second half of this financial year.

* * *

Fritz Joussen - Vodafone Germany – CEO Designate

* * *

I want to highlight that the German market is attractive and it is growing. Second, we are the market leader in the German market; a very good position to be in, in respect to service revenue [and] profitability . . . .

* * *

[SARIN:] Thomas and Mike, thank you very much. . . . Andy Halford is next. Andy Halford as you know is our new Chief Financial Officer. He will be talking to us about One Vodafone. . . .

. . . [HALFORD:] One Vodafone, if I want to just leave one message with you – and hopefully this has been coming our of almost all the presentations today – a year ago we set out our targets. Six months ago we were busy in the planning stage. Now we are in implementation. All six streams are now absolutely up and running.

* * *

We said that we would track that by our combined OpEx and CapEx in ‘07/’08, being broadly(ph) stable with (technical difficulty) ‘03/’04; i.e. we would keep them fairly constant over a four-year period, notwithstanding the increase in the size of the business over that time frame. Secondly, we said that we will outperform the revenue marketshare of our principal competitors by at least 1% over that period.

* * *

So that is a quick whistle-stop tour through the progress on One Vodafone. Key takeaways, this is absolutely now moved into execution mode. We are absolutely on track for delivering our flat OpEx and CapEx in ‘07/’08 compared with ‘03/’04. and we’re absolutely on track for delivering 1% market revenue share outperformance against our principal established competitors.

* * *

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[SARIN:] . . . One Vodafone is going well . . . .





(a) As detailed herein, Vodafone’s F04, F05 and interim F06 financial statements

and reports, as disseminated to the investing public, its shareholders and as filed with the SEC, were

















Vodafone to recover its investment in its Japanese operations; 100















being forecast;









101







profitable prices;





and





105. On 11/15/05, Vodafone stunned the securities markets by revealing that it faced $8.7

billion (£5.1 billion) in cash tax payments over the next few years, as well as lower than previously

forecast revenue growth and a decline in EBITDA and profit margins due to negative factors,

including increased capital expenditures in Japan that would result in “reduced,” i.e., lower than

forecasted, cash flow and “outweigh” the benefits of the One Vodafone program. These Company-

specific startling revelations caused Vodafone’s ordinary and ADRs to plunge lower – their largest

one-day declines in over seven years – falling to as low as £1.26 and $21.90, respectively. These

102

revelations contradicted prior Class Period representations, and as this truth entered the market, some

of the prior artificial price inflation in Vodafone’s publicly traded securities came out of these

securities, damaging prior Class Period purchasers. However, because defendants did not make full

and complete truthful disclosures and continued to make misrepresentations and false and

misleading statements, Vodafone’s publicly traded securities continued to trade at artificially inflated

prices.

106. On 11/15/05, FT.com and The Financial Times reported:

Vodafone shares suffered their sharpest one-day fall for more than seven years on Tuesday, after the UK mobile phone operator warned that margins would drop next year, hit by continued heavy investment in its troubled Japanese arm and intensifying competition in core European markets.

Investor confidence was further undermined by the group’s disclosure that it expected to see GBP5bn ($8.7bn) in tax liabilities crystallise in the net three years.

. . . One analyst identified the disclosure of the tax liabilities as the “thing that put the skids under the share price”, saying it could cut GBP4bn from the valuation of the business.

The extra investment in Japan also surprised investors. . . .

There has been speculation that Vodafone could pull out of Japan, but Mr. Sarin insisted on Tuesday that the group was there “for the long term”.

107. Also on 11/15/05, FT.com and The Financial Times reported:

Vodafone warned of a slow down in top-line growth next year and a drop in margins due to the increasing saturation and competition in many of its markets and continued regulatory intervention. The shares were down more than 6 per cent in early trading at 135lp as investors reacted with disappointment . . . .

. . . The operator also said further cuts by regulators in so-called termination rates, where one operator pays a fee to another for a call that “terminates” on the latter’s network, would also have an impact. Both factors would outweigh the impact of the group’s cost-saving programme dubbed “One Vodafone”. The termination rate cuts and the higher customer acquisition costs would also hit revenue growth, which would be “slightly lower” than the 6 to 9 per cent growth rate forecast for the current year. In Japan, Vodafone said it was confident of rebuilding its market share next year but warned it would come at a cost and forecast a “further

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significant reduction” in ebitda margin. . . . A new management team went in earlier this year to try to turn the business around and Arun Sarin, chief executive, said the three year plan was “on course.” Mr. Sarin has given his new team till the middle of 2007 to show progress. He said the team was already “slightly ahead” of target after the subsidiary reported three months of net subscriber growth. “Vodafone Group continued to prosper in a competitive and challenging environment,” said Mr. Sarin. “I am very satisfied with progress and believe that the group is uniquely placed to take advantage of the many opportunities to deliver shareholder value in the future.”

108. On 11/16/05, The New York Times reported:

Facing fierce competition in Europe and poor results in Japan, the Vodafone Group warned Tuesday that its profit margins would narrow through early 2007.

Vodafone . . . issued its cautionary statement as it announced lower earnings for the latest six-month period. Its stock tumbled 10.9 percent in London, its steepest one-day drop since September 1998.

Vodafone said that compared with the period a year earlier, organic profit margins, after interest and taxes, for the fiscal year ending in March would be in the “flat to 1 percent lower range,” leaning toward the lower end.

For the fiscal year ending in March 2007, the company also predicted narrowing profit margins as well as “slightly lower” revenue growth than it had anticipated for fiscal 2006.

The warning unnerved the markets . . . .

* * *

Vodafone’s chief executive, Arun Sarin, however, said during a conference call that the company’s turnaround plan in Japan was on track and that profits margins would increase in Japan in the fiscal year ending March 2008.

109. On 11/16/05, The Financial Times reported:

More than Pounds 9bn was wiped from Vodafone’s market value yesterday as the telecommunications group endured its worst one-day performance for more than seven years.

Shares in Vodafone, the world’s largest mobile phone group, fell 10.9 per cent to 129 1/4p as it unnerved the market with a warning of a slowdown in top-line growth next year and weakening margins.

* * *

A massive 2.2bn Vodafone shares changed hands . . . .

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110. On 11/16/05, The Financial Times also reported:

If Arun Sarin, now just over two years into his job as chief executive of Vodafone, was smarting at his group’s worst day on the stock market in seven years, he tried hard not to show it.

In the market, the mood was much darker.

Vodafone’s share price fell 11 per cent on worries about European growth and prospects for the group’s business in Japan.

* * *

The head of the world’s largest mobile phone operator by revenues identified . . . reasons why the company’s shares fell so sharply.

First, the likelihood that Pounds 5bn in tax liabilities would crystallise over three years, he conceded, had surprised investors, despite the fact that the company carried a Pounds 9bn reserve on its balance sheet. . . .

Second, he acknowledged that the extra spending in the troubled business in Japan in the next financial year “would be a little bit of a surprise” . . . .

111. On 11/16/05, Oppenheimer issued a report on Vodafone:

Vodafone’s outlook for FY 2006/7 ended in a disaster, as the stock lost about 10% on one day. Saying that Japanese business would suffer another significant decline . . . .

* * *

Outlook for 2006/7 was dull, as Vodafone says it expects free cash flow decline compared to this FY due to margin pressure, higher capex, as well as higher tax payments.

. . . BUT OUTLOOK SHOCKING

This bundle of bad news shocked markets . . . .

112. On 11/16/05, Investec issued a report on Vodafone:

We are downgrading . . .Vodafone . . . :

1. Lowered forecasts, and reduced earnings visibility – We have cut our 2006 to 2008 EBITDA, PBT and EPS forecasts . . . .

* * *

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The key factors behind the changes are sharply lower margins in Japan, reduced margins in Europe and a higher effective P&L tax rate.

113. On 11/16/05, Deutsche Bank issued a report on Vodafone:

Taxing the patience: Rating Lowered . . .

Unexpected timing on tax unwind & Japan weakens again

Ourselves, analysts and investors were surprised by the magnitude (£5bn) and moreover timing (spread over 3 years) of a releasing of tax deferrals through the cash flow. In addition, guidance for Japan disappointed . . . . Vodafone’s problems looking into 2006 are structural (market competition in Europe, Japanese distribution channel) and as such we see limited operational momentum. . . . [R]educ[ing] our recommendation . . . .

. . . FCF fell 13% short of forecasts reflecting higher cash tax and capex. . . .

Surprise in the guidance due to cash tax, Japan

Vodafone’s management highlighted a potential incremental £5bn cash tax to be paid over 3 years (from ‘06/07E) which, combined with a further deterioration in margins in Japan and to a lesser extent, Europe, resulted in the company stating ‘06/07E guidance would be lower than that ‘05/06E.

* * *

The clear surprise to us, investors and other analysts was the magnitude of the FCF drop expected in ‘06/07E. The majority of the delta between our old FCF forecast of £7.1bn and our new target of £5.2bn reflects the addition of £1.5bn of tax . . . .

The company has stated the slow down in revenue growth reflects primarily lower termination rate charges across Europe and an increased competitive environment. The markets where significant rate cuts are expected are Germany (-15% December) . . . and Italy (-19% September).

114. On 11/16/05, CS First Boston issued a report on Vodafone:

• . . . Vodafone appears to see a worsening outlook next year . . . .

• Add to this guidance yet more downgrades to Vodafone Japan, higher CAPEX, higher tax accruals and up to £5bn of extra cash tax from previous schemes being challenged, and consensus forecasts are moving substantially down.

Later, on 2/20/06, CS First Boston issued a report on Vodafone stating “Our FCF forecasts fall 5%.

. . . We do not expect Vodafone to return to FYMar06E FCF levels until FYMar2012E.”

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115. J.P. Morgan wrote on 11/16/05: “[M[ost of the reduction seems to relate to a

significant increase in cash tax. VOD revealed for the first time yesterday that Str5bn of tax

provisions are likely to unwind over the next three years as settlements are reached with national

tax authorities.” Bear Stearns noted “Our historic conversations on deferred tax liabilities with the

Company suggested that any imminent unwinding was not likely to occur.”

116. ABN Amro analyst Brad McMaster told The Sunday Times that “Credibility is quite

extensively damaged – to the point where Sarin has been advised to apologise for any

misconceptions there might have been.” Sarin’s ‘bullshit spin’ was too smooth, he said.

117. Notwithstanding the revelation of 11/15/05, on 11/15/05, Vodafone made a number of

false reassurances both in a release and in a conference call that day. Vodafone’s 11/15/05 release

stated:

VODAFONE GROUP PLC INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2005

* * *

Robust financial performance

* * *

* Adjusted basic earnings per share increased by 8.5% to 5.37 pence. Basic earnings per share were 4.36 pence. Profit before taxation for the period was £4.1 billion after an impairment charge of £0.5 billion.

* * *

Arun Sarin. Chief Executive, commented:

“I am pleased to announce another strong set of results. . . . We continue to outperform our competitors in most of our markets . . . .”

Chief Executive Statement

Vodafone Group has posted another good set of results for the first half of this financial year, underpinned by a strong operational performance.

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* * *

In Japan, execution of our turn-around is on track and I am pleased with the progress we are making.

(Footnote omitted.)

118. During Vodafone’s 11/15/05 conference call for analysts to discuss Vodafone’s

finances and business, defendants repeated their reassurances:

[SARIN:] If you look at it on an operating basis, out of Japan, the Company is performing really well . . . .

* * *

[W]e are reiterating guidance. We are reiterating guidance for this financial year in terms of revenues and margins and free cash flow, and also we are indicating for the next financial year that we will have similar underlying trends.

* * *

Now, a word or two about Japan. Back in May, we stood before you and we said this is what we see in Japan in ‘05/’06, our turnaround will require us to have sustained monthly adds in the positive category in the second half. And, as you know from the results published in the last few months, that we are actually in positive territory now, even though the numbers are modest.

We were on track to hit the various milestones. Our handsets have improved. Our pricing has improved. Our content has improved. Our network quality has improved. We are coming onto the front foot in Japan, and the margin decline is simply the investment that we’re making in our customers. And frankly, this investment will continue through the rest of the year into next year, when we see number portability.

There are other trends that are positive. . . . The whole Company in Japan is more invigorated and if you looked on the things that we said we would do in ‘05/’06, they’re beginning to happen.

* * *

So, in terms of outlook, I’d say we are going to see slightly lower organic proportionate mobile revenue growth, principally because of termination rates, as compared to this year.

In terms of margins, EBITDA margins, first without Japan, we see a small reduction in the organic proportionate mobile EBITDA margin, principally because of competitve activity. As you know, our margins in Italy and Germany

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are quite robust . . . . These margins may come under attack as our competitors compete aggressively in those two markets and so we may come off a little bit outside Japan.

* * *

[HALFORD:] . . . I want to give you a short overview of the financial results for the first half of the year . . . .

* * *

Starting in Europe, Germany continues to deliver strong customer growth, principally from pre-pay customers. Taken together with the reduction in termination rates in December last year, service revenue grew by 3% in the first half. In an increasingly competitive market, the margin improved as further efficiencies in overheADR offset additional customer investment, particularly in retention.

In Italy, strong data revenue growth and focused customer propositions resulted in sustained levels of service revenue growth of 6% in the first half. The one-month termination rate cuts in September impacted growth in the second quarter by 2%, reinforcing the underlying strong performance. The EBITDA margin was also slightly higher as lower interconnect costs through on-net promotions offset higher customer costs, which still remain very low by Group standards.

* * *

[ANALYST:] It’s Terry Sinclair from Citigroup. I appreciate that you wanted to isolate Japan from the operational story you’re painting, but the problem is that we have to value your business including Japan, unless you indicate to us that you intend to sell it, which I think is not what you’re saying.

So there are two questions. First of all, when you were speaking earlier you said that Japan is less than 10% of the value of the business. On what basis do you make that assertion?

And secondly, when you last conducted an impairment test for Japan, did you include the margin and CapEx guidance that you’ve indicated today?

* * *

[HALFORD:] Yes. We obviously do impairment tests from time to time. We will do it on the best available information we have got as to our views of the prospects for the business. Those views are entirely consistent with what we have given in our outline guidance today.

[SARIN:] Terry, every six months we do a mini impairment; at the end of the year we do a full impairment. We share these numbers with our Board. So absolutely, the numbers we are sharing with you are numbers that we’ve shared

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with our Board. We have looked at the impairment tests, and it is a business that is a good ongoing business.

* * *

[S]o we do an impairment test, and the value that we’re showing on our books is consistent with the value from a discounted present value approach, and so there’s no reason for impairment here.

119. On 11/17/05, FT.com reported:

Arun Sarin, chief executive of Vodafone, on Thursday apologised to investors for the mobile operator’s failure this week to communicate some of the financial information he felt contributed to the worst slump in the company’s share price in seven years.

The shares of the world’s largest mobile operator by revenues are still in the doldrums after falling almost 11 percent on Tuesday, when the group revealed that margins would fall next year because of increased spending at its Japanese unit and intensifying competition in Europe.

Vodafone believes investor confidence was further undermined by the group’s disclosure that it expected to see GBP5bn ($8.6bn) in tax liabilities crystallise in the next three years. Mr. Sarin, addressing investors at a Morgan Stanley conference in Barcelona, admitted that guidance on the tax issue could have been better: “Maybe the messaging wasn’t good and for that I take responsibility.”

* * *

Mr. Sarin . . . sought to reassure the market over his Japanese strategy. “The Japanese company is going to be just fine in the next 18 to 24 months,” he said, repeating his assertion that the recovery programme was ahead of schedule. He told his audience that, fundamentally, nothing had changed at Vodafone overall to cast it in a negative light. “I just want to reassure all our investors our company is just as strong today as it was a week ago.”

120. On 11/20/05, The Sunday Times (London) reported:

Sarin said he was “completely confident” that Vodafone KK [Japan] would be a success. “The whole noise about selling Japan has turned down,” he said. “Everybody understands today that if we sell Japan we are selling at a low point. We are not traders, we are operators.”

121. On 1/24/06, the Company issued a press release entitled “Vodafone Reports Third

Quarter KPIs and Reiterates Guidance,” which stated, in part:

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Vodafone Group Plc today announces key performance indicators for the quarter ended 31 December 2005. The main highlights are:

• Good overall operating performance in challenging markets

* * *

• Vodafone reiterates its current year guidance. The Group expects organic growth for this financial year in proportionate mobile revenue in the middle of the 6% to 9% range. Vodafone also expects the organic proportionate mobile EBITDA margin for this financial year to be at the lower end of the flat to 1 percentage point lower range

• Vodafone’s preliminary outlook for the next financial year remains unchanged

Arun Sarin, Chief Executive of Vodafone, commented:

“Vodafone has delivered a good operational performance in a challenging environment. . . . We expect to deliver full year results in line with our existing guidance and our preliminary outlook for next year remains unchanged.”

122. On 1/24/06, Vodafone held a conference call to discuss its business:

[SARIN:] Now, I’d like to say a word about Japan. We are pleased to achieve somewhat higher net gains in each of November and December, and while January net gains will not be quite as strong, we are still confident that we will achieve our stated aim of delivering sustained, positive net additions in the second half of this fiscal year.

* * *

Paul Howard – Cazenove Group – Analyst

It’s Paul Howard at Cazenove. A couple of questions – firstly, on the margin guidance, the guidance overall is unchanged but the pressure does seem to be growing very much in Germany and Italy. Was this anticipated, or is it being offset elsewhere? In terms of longer-term outlook, would you expect the Italian and German margins to remain above those in other markets, or do you see convergence happening?

* * *

[SARIN:] . . . In terms of margin guidance, I think the competitive activity that we are seeing in Germany and Italy in particular is one the heavier side of what we are forecasting, but equally, the Company has many other assets and in the whole, in the main, we have said previously that we would come in at the lower end of our 0 to 1% - minus 1% margin range, and we are reiterating that.

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In terms of longer-term Germany/Italy margins, which are 47, 52% respectively, I do expect these margins to be above the average, for example the group average, but equally, we will see margins coming off a little bit? It would say yes; I can see margins coming off a little bit, but not in a dramatic fashion in the near term.

* * *

In Japan, we have indicated that, for the balance of this year, we would expect to see good, solid, positive net gains. In the middle of the year and kind of the following fiscal year, ‘06/’07, we would expect our net gain position to strengthen a bit more than what we have seen this year.





(a) As detailed herein, throughout the Class Period, Vodafone’s financial

statements and reports, as disseminated to the investing public, its shareholders and as filed with the

SEC, were materially falsified and overstated, including a massive overstatement of its assets and its

goodwill (intangible assets) and shareholder equity, and its EBITDA and operating earnings were

inflated due to the over-valuation of its German, Italian and Japanese operations;










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being forecast;

(i) Vodafone’s top management was in a state of dissention and disarray,


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(j) The large stock buy-back activities which defendants were causing Vodafone






profitable prices;

(k) Contrary to defendants’ representations, Vodafone’s German and Italian




and

(l) Due to the foregoing adverse factors which were negatively impacting



that those forecasts were actually false when being made.

124. On 2/27/06, Vodafone again shocked the markets by revealing a massive goodwill

write-down in the goodwill for Vodafone Germany (“most . . . attributable to Vodafone Germany”),

Vodafone Italy and, particularly, Vodafone Japan, “in the range of £23 billion to £28 billion [$40-

$50 billion], reflecting a lower view of growth prospects, particularly in the medium to long term,

than those it had used previously” – this was one of the largest goodwill asset wipeouts in the

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history of public company financial reporting, which would adversely impact Vodafone’s

“operating” profits and eliminated – in one day – 25% of Vodafone’s equity base!

125. As The Evening Standard reported on 2/27/06:

Mobile phones giant Vodafone stunned the stock market today by saying it will make a massive writedown on the value of its business and warning that revenues and profit margins in the coming year will be at the bottom end of expectations.

The shock announcement comes just three months after Vodafone shares plunged more than 10% when it revealed a potential Pounds 5 billion tax bill and warned of a slowdown in growth with its half-year results in November.

* * *

It added that it had incorporated in its 10-year plan a “lower view of growth prospects for a number of key operating companies, particularly in medium to long term, than those used previously.”

126. On 2/27/06, Citigroup issued a report on Vodafone:

– Vodafone has issued an unexpected warning today. This can be split into two components: 1) an impairment charge, and 2) reduced YTM07 guidance

– The impairment charge amounts to a £23-£28bn reduction in asset value. This is equivalent to 25% of the equity base

– The main reason is lower growth. The majority will come from Vodafone Germany, but also Italy and potentially Japan

127. On 2/27/06, Morgan Stanley issued a report on Vodafone:

Quick Comment: Vodafone has announced a write-down of acquisition goodwill of £23-£28bn to be taken in March 2006.

* * *

It is unclear why the write-down did not occur with the opening IFRS balance sheet or at the half year stage (market valuations of these businesses have been lower than the goodwill carrying values for some time).

128. On 2/28/06, Oppenheimer issued a report on Vodafone:

NEGATIVE NEWS FLOW CONTINUES

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Vodafone once again gave investors another reason for disappointment, indicating GBP23-28bn goodwill impairment for the current year due to lower growth prospects in the mid to long term. . . .

GOODWILL IMPAIRMENT OF UP TO GBP28BN

Vodafone said that it will likely announce goodwill impairment of about GBP23-28bn due to lower growth assumptions in its 2007 budget for markets in Germany, Italy and likely also Japan. . . . Management announced this news at a very late stage and lost further credibility after the profit warning in November.

OUTLOOK DETERIORATES FURTHER

. . . [G]uidance for 2006/7 is implicitly down, as the company indicates 5%-6.5% proportionate mobile revenue growth (excl. Japan and acquisitions) and 1% decline in EBITDA margins.

* * *

Most of the impairment is attributable to the German business after the acquisition of former Mannesmann . . . .

. . . [I]t certainly does not help management to build up confidence, which also suffered after the profit warning in November last year.

129. On 2/28/06, The Financial Times reported:

Vodafone’s epic battle for Mannesmann, the German mobile operator, signified a swaggering self-confidence that seemed awfully distant yesterday.

* * *

When the Pounds 101bn deal completed, Vodafone was the fourth most highly valued company in the world. Its balance sheet groaned under Pounds 80bn of Mannesmann-related goodwill.

Yesterday’s write-down of up to Pounds 28bn of assets, most of which were inherited from Mannesmann, is the clearest financial acknowledgement yet of just how hubristic the deal was.

* * *

The write-down is one of the largest re-evaluations of past excesses in corporate history, but yesterday’s announcement may be remembered instead for what it says about Vodafone’s view of its future.

* * *

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Yesterday’s announcement came just a month after the group told investors its profit margins would be at the lower end of expectations, and three months after news of an unexpected tax bill, combined with margin pressure, knocked it share price by 11 per cent in a day.

Those earlier warnings were a catalyst for investor concerns about Vodafone’s global strategy under Arun Sarin, who replaced Sir Christopher Gent as chief executive in 2003.

Yesterday’s bolt from the blue prompted the further questions from shareholders about whether Vodafone has fully appreciated the extent to which its markets and prospects have changed since the boom years.

This is the latest “reality check”, says one shareholder. “The company’s recent history is that it is too optimistic.”

* * *

Some shareholders say that, if yesterday’s announcement is the beginning of a new realism of Vodafone about its growth pressures, it may be an encouraging sign of capital discipline. This, though, may not remove the pressure on Mr. Sarin, given his close association with Vodafone’s pursuit of growth.

“If the company is moving down this road and acknowledging that growth is hard to come by, then how credible will be Mr. Sarin in delivering the message?” one shareholder says. “He is on shaky ground.”

130. On 3/4/06, The Times (London) reported:

Vodafone’s torrid five-year experience in the world’s most technologically advanced mobile phone market has been a litany of dismal business failures and wasted opportunities . . . .

“Confused management and wrong-headed decisions,” one senior Tokyo-based fund manager said, had made what could have been a brilliant strategic move a heavy drag on the overall ambitions of the group.

Vodafone’s embarrassing pullout from the Japanese market comes as a new blast of competition was about to make its life in Japan even harder.

* * *

In 2004 Arun Sarin, the chief executive, promised that by March 2006 Vodafone would have ten million global-third generation customers, of whom half would be based in Japan. The Japanese unit managed to stem heavy customer losses only last summer, and the pick-up in 3G subscriber numbers has never come close to the required rate.

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* * *

The British company has watched helplessly as its big Japanese competitors have beaten it to the introduction of countless innovations, including the Edy or Suica payment systems built into the handsets of rival operators that allow cash free purchases of anything from canned drinks to a three-course lunch.

Japan has also been the scene of one of Vodafone’s most spectacular errors of judgment – the decision to introduce a range of clunky 3G Nokia handsets from the European market. Japanese customers ignored the phones, dealing a heavy blow to Vodafone’s already delayed 3G roll-out.

* * *

Last year Vodafone was forced to announce the investment of more than £1.3 billion in a desperate attempt to bring its often weak-signalled 3G network up to scratch with rivals.

131. The revelations of 11/15/05, which indicated that Vodafone’s European operations

were more troubled than had previously been revealed, were compounded on 2/27/06, when

Vodafone revealed a $49 billion asset write-down due to the impaired value of its German

(Mannesmann), Italian and Japanese operations, admissions that the operations in those countries

were much less successful (or capable of being turned around) than had previously been represented

and that the value of these assets on Vodafone’s F04-F06 financial statements had been vastly

overstated and thus Vodafone had actually been suffering large operating losses in these operations

due to the excessive valuations at which it carried them on its books. This led to a further decline in

Vodafone’s ADRs to $19.51 per share and in its ordinary shares to £1.09 per share, inflicting further

damage on prior Class Period purchasers of those securities, taking the prices of these securities back

down to the levels they had been at when the fraudulent scheme to inflate them began. Shortly

thereafter, Vodafone confirmed its inability to turn around its Japanese operation and that

operation’s lack of long-term viability by selling those Japanese operations – incurring a huge $8.6

billion loss! As a result of this debacle, MacLaurin, Gent, Hazen, Vodafone’s Deputy Chairman,

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Bamford and Horn-Smith left the Company and there was the implementation of yet another “new”

organizational structure of the management of the Company.

132. After the end of the Class Period, Vodafone admitted it had “a lower view of growth

prospects, particularly in the medium to long term.” Sarin admitted the previously forecast growth

and cost savings would not be achieved in the stated timeframes and, in fact, capital expenditures

would increase, not fall, while free cash flow would fall sharply to as low as £4 billion in F07 due to

the higher tax payments and higher capital expenditures. Many large Vodafone shareholders have

demanded Sarin’s ouster due to this disaster.

FALSE FINANCIAL STATEMENTS DURING THE CLASS PERIOD

133. In order to overstate its earnings in F04-F06, Vodafone violated IFRS, U.K. and U.S.

GAAP and SEC rules by failing to properly record tens of billions of dollars of impaired goodwill

(intangible assets) to reflect the diminished future economic benefits associated with its investments

in operations in Mannesmann (Germany), Japan, Italy, Sweden and elsewhere. Vodafone has now

admitted that the value of the goodwill is dramatically impaired and has taken a $49 billion write-

down (including $8 billion impairment related to Japan), one of the largest write-downs in history.

134. Vodafone reported the following financial results during the Class Period:

Year ended 3/31/04

6 months ended 9/30/04

Year ended 3/31/05

6 months ended 9/30/05

Turnover £33.55B £16.79B £34.13B £18.25B EBITDA £12.64B £6.51B £13.04B £6.71B Profit (loss) (£9.01B) (£3.19B) (£7.54B) £2.81B Intangible assets £93.62B £90.39B £83.46B £97.79B

These results were materially false due to Vodafone’s failure to write off the billions of dollars in

goodwill (intangible assets) on its books at each of the above financial reporting periods.

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135. Statements of International Accounting Standards issued by the Board of the

International Accounting Standards Committee (“IASC”) between 1973 and 2001 are designated

“International Accounting Standards” (“IAS”). The International Accounting Standards Board

(“IASB”) announced in 4/01 that its accounting standards would be designated IFRS. Also in 4/01,

the IASB announced that it would adopt all of the IAS issued by the IASC. The Interpretations of

IAS issued by the International Financial Reporting Interpretations Committee (formerly, the

“Standing Interpretations Committee”) do not have the same status as IAS, but, in accordance with

IAS No. 1, ¶11, “financial statements should not be described as complying with International

Accounting Standards unless they comply with all the requirements of each applicable Standard and

each applicable interpretation of the Standing Interpretations Committee.”

136. U.S. GAAP are those principles recognized by the accounting profession as the

conventions, rules and procedures necessary to define accepted accounting practice at a particular

time. Regulation S-X (17 C.F.R. §210.4-01(a) (1)) states that financial statements filed with the

SEC which are not prepared in compliance with GAAP are presumed to be misleading and

inaccurate. Regulation S-X requires that interim financial statements must also comply with GAAP,

with the exception that interim financial statements need not include disclosure which would be

duplicative of disclosures accompanying annual financial statements. 17 C.F.R. §210.10-01(a).

137. IFRS require that goodwill be tested for impairment at least annually and when

indicators are identified that an asset may be impaired. IFRS require that companies compare the

carrying value of an asset to the recoverable amount, on fair value. Any shortfall should be recorded

as a loss.

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138. U.S. GAAP, as set forth in FASB Statement of Financial Accounting Standard

(“SFAS”) No. 142, require that companies recognize an impairment loss for goodwill when the

carrying amount exceeds its fair value. SFAS No. 142 states, in part:

19. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of a reporting unit with its carrying amount including goodwill. . . . If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test shall be performed to measure the amount of impairment loss, if any.

20. The second step of the goodwill impairment test, used to measure the amount of impairment loss, compares the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. The guidance in paragraph 21 shall be used to estimate the implied fair value of goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. . . .

21. The implied fair value of goodwill shall be determined in the same manner as the amount of goodwill recognized in a business combination is determined. That is, an entity shall allocate the fair value of a reporting unit to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. The excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities is the implied fair value of goodwill. . . .

22. If the second step of the goodwill impairment test is not complete before the financial statements are issued and a goodwill impairment loss is probable and can be reasonably estimated, the best estimate of that loss shall be recognized in those financial statements.

(Footnotes omitted.)

139. By the time it reported its interim F04 results, Vodafone’s goodwill investment in

Germany (Mannesmann), Italy and Japan had deteriorated dramatically as compared to the value at

the acquisition dates, including when Vodafone paid hundreds of billion of dollars for Mannesmann

in early 2000. In addition to the businesses not growing as expected when acquired, even the cost of

Mannesmann looked increasingly inflated by 2004, at the latest, due to the lack of growth in that

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business and similar businesses. Thus, the defendants were increasingly aware that the impairment

indicators existed.

140. In any event, Vodafone had no margin of error with Mannesmann due to the

extremely high price it had paid for the Company. Vodafone merged with Mannesmann in early

2000 in a hostile takeover. Mannesmann management agreed to the merger only after: (a) Vodafone

sweetened the offer from offering Mannesmann shareholders 42% of the combined company to more

than 49%; (b) Vodafone entered an agreement with French company Vivendi to prevent Vivendi

from serving as a white knight7; and (c) Vodafone’s stock appreciated significantly. To accomplish

the last condition (Vodafone’s stock appreciation), Gent attended “hundreds” of shareholder

meetings talking up the value of the merger.

141. Thus, once the German results were even the slightest bit disappointing, impairment

would exist. From 2002 to 2004, German semi-annual sales grew only from £2.0 billion to £2.6

billion and, more alarmingly, EBITDA for each six-month period remained stubbornly below £1

billion. This was not much of a return for the £100+ billion merger. By 2002, Vodafone had seen a

downward trend in the number of German customers and significant “inactive” customers that were

not generating new revenue to Vodafone. By 2003, the average revenue per user (“ARPU”) for

contract customers was not improving, due to lower spending contract customers.

142. Vodafone did record impairment in 2002 for German operations, but this was

primarily for Arcor-Mannesmann’s fixed-line business. This had been a part of the business

Vodafone was not that interested in anyway. The mobile business had been the target of Vodafone’s

acquisition. This was the part of the acquisition that was not generating anywhere near the returns

7 One analyst termed the Vodafone-Vivendi agreement as follows: “It is an excellent deal for Vivendi shareholders.” “Vodafone has given 50% of the (future) value away.”

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anticipated at the time of the acquisition. Yet Vodafone failed to record any impairment related to

disappointing German wireless operations. The German telecom market did nothing but deteriorate

from the time of the Mannesmann acquisition through 2004, and ultimately through 2005. Note the

price chart of Deutsche Telecom, which dropped from €100 per share in 2000 to below €20 per share

from 2002 through the end of the Class Period:

143. Italian results and Japanese operations were also disappointing, reflecting impairment,

but Vodafone recorded no impairment for the assets associated with these business. In Japan,

Vodafone’s mobile subscribers had actually declined for the first time in 8/04, yet no write-off was

taken. Further demonstrating Vodafone’s overstatement of the Japanese assets is the fact that after

Softbank acquired Vodafone’s Japanese business (at a loss to Vodafone), Softbank immediately

wrote down the assets by half, or some $4.5 billion. As The Wall Street Journal reported on August

28, 2006:

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Green-eyeshade crew, take a bow: Japan’s biggest Internet conglomerate cut by half the value of the unit’s assets, an accounting move that lowered the mobile-phone operations’ costs and raised its margins.

* * *

Softbank spokesman Katsumasa Tochihara declined to comment on criticisms of a lack of transparency but said the move was tied to outdated estimates of the value of fixed assets it acquired earlier this year from Vodafone Group PLC of the United Kingdom. “We acted properly in accordance with the advice of our auditor” about the way the company handled every aspect of revaluing those assets,” he said.

* * *

When it was owned by Vodafone, the mobile service was plagued by an exodus of customers who were fed up with its spotty coverage and pricey services.

* * *

Vodafone had valued the mobile unit’s fixed assets – its network, transmission towers and other infrastructure – at a little more than $9 billion. But when Softbank released its first-quarter earnings on Aug. 8, it declared the value to be about half that figure.

144. Pursuant to IFRS and U.S. GAAP, the Company was required to recognize a loss to

reflect the impairment in goodwill. Contrary to these standards, the Individual Defendants caused

Vodafone to not reflect such losses, as to do so would have so reduced the Company’s earnings

during the Class Period as to be an admission that the Company’s current business and future

prospects in those countries were bleak, at best, and that the integration of the acquisitions was a

failure. In fact, had Vodafone properly recorded goodwill impairment as required by the relevant

accounting standards, its earnings during the Class Period would have been wiped out.

145. Further, the undisclosed adverse information concealed by defendants during the

Class Period, including failing to adequately disclose Vodafone’s tax liability, is the type of

information which, because of SEC regulations, regulations of the national stock exchanges and

customary business practice, is expected by investors and securities analysts to be disclosed and is

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known by corporate officials and their legal and financial advisors to be the type of information

which is expected to be and must be disclosed.

VODAFONE LACKED ADEQUATE INTERNAL CONTROLS

146. Defendants were able to scheme Vodafone shareholders and inflate Vodafone stock

prices through accounting improprieties that resulted in materially misstated financial statements by

means of circumventing and failing to establish and maintain adequate internal accounting control

over accounting for goodwill and recording impairment on a timely and adequate basis.

147. Defendants issued false certifications as to Vodafone’s internal controls with their

SEC filings. Sarbanes-Oxley applied to the Company and required truthful certifications by Sarin

and Hydon as to their responsibility for Vodafone’s internal controls.

148. Section 13(b)(2) of the 1934 Act states, in pertinent part, that every reporting

company must:

(A) make and keep books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

(B) devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that –

* * *

(ii) transactions are recorded as necessary . . . to permit preparation of financial statements in conformity with [GAAP].

149. These provisions require an issuer to employ and supervise reliable personnel, to

maintain reasonable assurances that transactions are executed as authorized, to properly record

transactions on an issuer’s books and, at reasonable intervals, to compare accounting records with

physical assets. SEC v. World-Wide Coin Inv., 567 F. Supp. 724, 746 (N.D. Ga. 1983).

150. Defendants caused Vodafone to violate §13(b)(2)(A) of the 1934 Act by failing to

maintain accurate records concerning its accounting for assets acquired among other accounting

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improprieties. Vodafone’s inaccurate and false records were not isolated or unique instances

because they were improperly maintained for multiple reporting periods. Accordingly, Vodafone

violated §13(b)(2)(A) of the 1934 Act.

151. In addition, defendants caused Vodafone to violate §13(b)(2)(B) of the 1934 Act by

failing to implement procedures reasonably designed to prevent accounting irregularities. Vodafone

failed to ensure that proper review and checks were in place to ensure that it was recording and

properly reporting accounting for assets acquired. In fact, despite knowing the true dismal state of

the Company’s lack of adequate controls, defendants regularly issued quarterly financial statements

throughout the Class Period without ever disclosing the deficiencies in Vodafone’s internal

accounting controls and falsely asserted that its financial statements complied with GAAP.

152. Financial reporting includes not only financial statements, but also other means of

communicating information that relates directly or indirectly to the information in the financial

statements. See FASB Statement of Financial Accounting Concepts No. 1, ¶7. For this reason, in

addition to Vodafone’s failure to make the required disclosures in its financial statements and in its

SEC filings, Vodafone also shirked its duty to make such disclosures in its conference calls, its press

releases and its Annual Reports. As defendants allowed and were responsible for initiating a gross

lack of internal controls over financial reporting, defendants were able to scheme Vodafone

shareholders and inflate stock prices through accounting improprieties which resulted in materially

misstated publicly filed financial statements.

DEFENDANTS’ INSIDER TRADING

153. Defendants took advantage of the temporary inflation in Vodafone’s stock price,

selling 11.1 million shares of their Vodafone stock for proceeds of $29 million. Defendants made

the following sales:

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Defendant Date Shares Sold

Price (USD) Proceeds

Percent Sold

Bamford 7/1/2004 485,384 $2.16 $1,048,429 8/4/2004 600,000 $2.12 $1,274,400 12/13/2004 210,000 $2.57 $540,540 1,295,384 $2,863,369 84.37% Donovan 8/3/2005 263,759 $2.65 $697,906 8/3/2005 428,777 $2.65 $1,134,544 692,536 $1,832,450 65.69% Geitner 7/1/2004 396,340 $2.16 $856,094 7/8/2005 396,340 $2.50 $991,643 792,680 $1,847,737 64.72% Harper 8/2/2005 2,931,242 $2.65 $7,756,066 2,931,242 $7,756,066 80.50% Horn-Smith 7/1/2004 55,295 $2.16 $119,437 8/31/2005 1,155,164 $2.74 $3,160,529 1,210,459 $3,279,966 36.69% von Kuczkowski 8/23/2005 2,091,802 $2.77 $5,798,475 99.85% Sarin 12/15/2004 2,110,000 $2.70 $5,697,000 2,110,000 $5,697,000 30.34% TOTALS: 11,124,103 $29,075,064

154. During the Class Period, as part of the defendants’ fraudulent scheme and course of

conduct, they caused Vodafone to spend $13.2 billion to purchase 5.3 billion of Vodafone’s ordinary

shares on the open market to help inflate Vodafone’s stock price, using corporate funds to purchase

shares they knew were inflated so they could more easily unload their own personal shares of

Vodafone stock. Defendants lied, stating that the shares were a good investment and value to justify

127

the expenditure of corporate funds when, in fact, the shares were overvalued and defendants’ true

purpose was to support and inflate the stock price while they were bailing out.

LOSS CAUSATION/ECONOMIC LOSS

155. During the Class Period, as detailed herein, defendants engaged in a scheme to

deceive the market and a course of conduct that artificially inflated Vodafone’s stock price and

operated as a fraud or deceit on Class Period purchasers of Vodafone stock by misrepresenting the

Company’s financial results, business success and future business prospects. Defendants achieved

this façade of success, growth and strong future business prospects by blatantly concealing the

Company’s huge tax liabilities, concealing its difficulties in Germany and Japan, and falsifying the

Company’s financial statements by failing to record goodwill impairment. Later, however, when

defendants’ prior misrepresentations and fraudulent conduct began to be disclosed and became

apparent to the market, Vodafone stock fell as the prior artificial inflation came out of Vodafone’s

ADRs and ordinary share prices. As a result of their purchases of Vodafone shares during the Class

Period, Plaintiff and other members of the Class suffered economic loss, i.e., damages under the

federal securities laws.

COUNT I

For Violation of §10(b) of the 1934 Act and Rule 10b-5 Against All Defendants

156. Plaintiff incorporates ¶¶1-154 by reference.

157. During the Class Period, defendants disseminated or approved the false statements

specified above, which they knew or recklessly disregarded were misleading in that they contained

misrepresentations and failed to disclose material facts necessary in order to make the statements

made, in light of the circumstances under which they were made, not misleading.

158. Defendants violated §10(b) of the 1934 Act and Rule 10b-5 in that they:

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(a) Employed devices, schemes, and artifices to defraud;

(b) Made untrue statements of material facts or omitted to state material facts

necessary in order to make the statements made, in light of the circumstances under which they were

made, not misleading; or

(c) Engaged in acts, practices, and a course of business that operated as a fraud or

deceit upon Plaintiff and others similarly situated in connection with their purchases of Vodafone

publicly traded securities during the Class Period.

159. Plaintiff and the Class have suffered damages in that, in reliance on the integrity of

the market, they paid artificially inflated prices for Vodafone publicly traded securities. Plaintiff and

the Class would not have purchased Vodafone publicly traded securities at the prices they paid, or at

all, if they had been aware that the market prices had been artificially and falsely inflated by

defendants’ misleading statements.

160. As a direct and proximate result of these defendants’ wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their purchases of Vodafone

publicly traded securities during the Class Period.

COUNT II

For Violation of §20(a) of the 1934 Act Against All Defendants

161. Plaintiff incorporates ¶¶1-159 by reference.

162. The Individual Defendants acted as controlling persons of Vodafone within the

meaning of §20(a) of the 1934 Act. By reason of their positions as officers and/or directors of

Vodafone, and their ownership of Vodafone stock, the Individual Defendants had the power and

authority to cause Vodafone to engage in the wrongful conduct complained of herein. Vodafone

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controlled each of the Individual Defendants and all of its employees. By reason of such conduct,

the Individual Defendants and Vodafone are liable pursuant to §20(a) of the 1934 Act.

CLASS ACTION ALLEGATIONS

163. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules

of Civil Procedure on behalf of all persons who purchased Vodafone’s publicly traded securities,

including ADRs and ordinary shares, on the open market during the Class Period (the “Class”).

Excluded from the Class are defendants.

164. The members of the Class are so numerous that joinder of all members is

impracticable. The disposition of their claims in a class action will provide substantial benefits to

the parties and the Court. Vodafone had billions of ADRs and shares of stock outstanding, owned by

thousands of persons.

165. There is a well-defined community of interest in the questions of law and fact

involved in this case. Questions of law and fact common to the members of the Class which

predominate over questions which may affect individual Class members include:

(a) Whether the 1934 Act was violated by defendants;

(b) Whether defendants omitted and/or misrepresented material facts;

(c) Whether defendants’ statements omitted material facts necessary to make the

statements made, in light of the circumstances under which they were made, not misleading;

(d) Whether defendants knew or recklessly disregarded that their statements were

false and misleading;

(e) Whether the prices of Vodafone’s publicly traded securities were artificially

inflated; and

(f) The extent of damage sustained by Class members and the appropriate

measure of damages. 130

166. Plaintiff’s claims are typical of those of the Class because Plaintiff and the Class

sustained damages from defendants’ wrongful conduct.

167. Plaintiff will adequately protect the interests of the Class and has retained counsel

who are experienced in class action securities litigation. Plaintiff has no interests which conflict

with those of the Class.

168. A class action is superior to other available methods for the fair and efficient

adjudication of this controversy.

STATUTORY SAFE HARBOR

169. The statutory safe harbor provided for forward-looking statements under certain

circumstances does not apply to any of the allegedly false forward-looking statements pleaded in this

Complaint. The safe harbor does not apply to Vodafone’s allegedly false financial statements. Many

of Vodafone’s oral presentations to analysts, investors and the like did not include any Safe Harbor

warning of any kind, including the 9/29/04, 11/16/04, 1/20/05, 5/24/05 and 9/19/05 presentations.

Meaningful cautionary statements identifying important factors that could cause actual results to

differ materially from those in the forward-looking statements did not accompany forward-looking

statements. Each of the forward-looking statements alleged herein to be false was authorized by an

executive officer of Vodafone and was actually known by each of the Individual Defendants to be

false when made.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment as follows:

A. Declaring this action to be a proper class action pursuant to Rule 23 of the Federal

Rules of Civil Procedure;

B. Awarding Plaintiff and the members of the Class compensatory damages;

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CERTIFICATE OF SERVICE

I, Samuel H. Rudman, hereby certify that on March 26, 2008, I caused a true and

correct copy of the attached:

Amended Complaint for Violation of the Federal Securities Laws to be: (i) filed by hand with the Clerk of the Court; and (ii) served by first-class mail to

all counsel on the attached service list.

/s/ Samuel H. Rudman Samuel H. Rudman

VODAFONE 07Service List - 1/10/2008Page 1 of 1

(07-0242)

Counsel For Defendant(s)

Theodore Edelman

125 Broad StreetNew York, NY 10004-2498

212/558-4000212/558-3588(Fax)

Sullivan & Cromwell LLP

Counsel For Plaintiff(s)

Samuel H. RudmanDavid A. Rosenfeld

58 South Service Road, Suite 200Melville, NY 11747

631/367-7100631/367-1173(Fax)

Coughlin Stoia Geller Rudman & Robbins LLP

city of edinburgh council, et al. v. vodafone group,...

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