Capita Regulatory News (CPI)

31 March 2014 Capita plc (the "Company") Annual Financial Report In compliance with Disclosure and Transparency Rule 4.1, the Company announcesthe publication of its Annual Financial Report for the year ended 31 December2013. Pursuant to Listing Rule 9.6.1, a copy of this document has beensubmitted to the National Storage Mechanism and will shortly be available forinspection at http://www.hemscott.com/nsm.do. The document is also available onthe Company's website: www.capita.co.uk. Additional Information A condensed set of the Company's financial statements and information onimportant events that have occurred during the financial year and their impacton the financial statements, were included in the preliminary resultsannouncement released on 27 February 2014. That information, together with theinformation set out below, which is extracted from the Annual Report andAccounts 2013, is provided in accordance with the Disclosure and TransparencyRule 6.3.5. This information should be read in conjunction with the Company'spreliminary results announcement. This announcement is not a substitute forreading the full Annual Report and Accounts 2013. Principal risks and uncertainties Managing our risks It is our policy to observe high standards of integrity and fair dealing in theconduct of our business and to act with due skill, care and diligence. Taking and managing appropriate levels of risk is an integral part of all ourbusiness activities. Risk management, performed rigorously and comprehensively,creates stability, contributes to business success and growth and is a keyelement of operational management. It also provides the framework for themanagement of business and operational risk in the performance of Capita'sactivities, to meet the requirements of good corporate governance and protectthe interests of our clients and stakeholders. Capita's business model is `decentralised' and our approach to risk managementmirrors this. It is the responsibility of management at all levels of theorganisation to ensure that risks are understood and appropriately managed inaccordance with the Group Risk policies and within the Board's risk appetite.This is in line with the standard `three lines of defence' model that has beenadopted. Principal risk categories, potential impacts, examples of mitigations anddevelopments in 2013 Key risk Potential impacts Mitigating activities 2013 developmentscategories include Financial * Adverse effect on * Strong financial * Greaterexposure business controls operated stakeholder financial by unified interest in performance from finance structure robustness of e.g. mispricing controls long term * Assurance contracts, client provided by Group * Increased use of disputes or Internal Audit GIA to provide changing market (GIA) assurance landscape * Monthly finances * New procurement * Adverse investor reviewed in MOB processes rolled impact and out to strengthen detriment * Capital current expenditure is expenditure * Impact to brand subject to control reputation. rigorous approvals and * Disposal of some monitoring of our insurance distribution * `Black Hat' businesses and process across closure of our significant bids SIP (Self and acquisitions. Invested Pensions) administration business. Partnership/ * Contractual * Review of key * Strengthening of dispute with third party Material Supplierthird party client firms contracts by Policy and commercial teams adoption * Reputation risk Group-wide * Monitoring of key * Potential outsources * Increased financial loss to services SLAs regulatory (FCA) Capita focus on * Group Outsourcing outsourced * Potential (Material services disruption to Suppliers) Policy supply chain and * New partnerships service * Individual (London Borough interruption. business unit of Barnet, risk reviews Staffordshire County Council, * Partnership Cabinet Office) governance. and go-live RPP. Client * Failure to meet * Operating * Increaseddelivery contractual performance regulatory focus terms, indicators in on `conduct risk' mobilisation place for all - delivery of end milestones and businesses and customer outcomes service level key contracts agreements in * Greater major contracts * Robust stakeholder contractual and scrutiny in * Client service governance public sector financial mechanism for contracts penalties management for third parties * New operating * End customer frameworks detriment * Risk Committees finalised for and MOB challenge insurance * Potential loss of and oversight businesses contracts * Risk-based * Development of * Liabilities for independent new risk actions of third assurance (GIA) framework parties includes * Business `customer * Impact to brand resilience delivery' risk. reputation. arrangements to protect key services * Incident support by internal PR team. Bids and * Planned synergies * Strong financial * Changes inacquisitions failing to controls operated legislation achieve financial by unified extend historic targets finance structure liability reach, e.g. acquired * Detrimental * Due diligence on liability risk in impact on growth financial, anti-bribery and and performance operational, corruption and of business market and risk data security matters, often * Integration using external * 2013 acquisitions challenges advisers and contracts resulting in have extended higher * `Black Hat' regulatory operational risks governance footprint (e.g. data process security, * Implementation of customer * Group Board Group Due delivery) review and Diligence and approval of Integration * Mispricing of acquisitions and Policy across all long term major significant bids Capita businesses contracts * Commercial and * Strengthening of * Impairment of contractual terms Group risk and goodwill and closely reviewed compliance intangible assets to ensure clarity oversight of through non-financial underperformance * Integration and service deals. or unforeseen transition developments in process. acquired businesses. Economic and * Weaker economic * Focus on 11 * Supply ofmarket conditions are a diverse public services thatlandscape key driver for and private support essential outsourcing, sector markets client functions however, extreme rather than economic * Focus on widening discretionary uncertainty can scope of existing activities result in a delay contracts to help in buying client save money * Initiatives to decisions and increase the lower * Proactively efficiency of discretionary diversified our Group operations spend across some business market segments operations across * Newer operations numerous private in justice and * General Elections and public sector emergency may cause a pause markets and services and in bid decisions market segments. customer in central management have government. continued to open up bid opportunities with new clients. Human * Failure to * Extensive * Introduction ofresources recruit and training and new Capita retain quality developments for Vetting Policy to people impacts all staff and better detect business delivery management issues with and strategic candidates plans * Continual development and * Increased staff * Morale issues performance numbers through weigh on appraisals contract growth/ productivity and acquisition to innovation * Competitive manage incentive and consistently * Higher costs bonus plans likely from * Whistleblowing increased * Succession line refresh to turnover of planning ensure staff. significant staff * Comprehensive issues escalated vetting process appropriately. in line with roles. Information * Contractual and * Group-wide * Appointment ofsecurity regulatory policies and divisional penalties procedures information security * Loss or theft of * Single directors to customer/client information better focus data security local business framework, effort * Loss or theft or including intellectual policies and * Executive level property processes Group Security Risk Board and * Adverse media * Risk Committee governance comment and oversight at all structure set-up reputation impact business levels on brand * Potential changes * Staff training in EU Data * End customer and monitoring Protection detriment. programme legislation requires * Implementation of considerable work Group information and shifts the security policies liability and protocols by landscape. acquired businesses * Cross-Group forum to discuss issues, effective controls * Regular oversight by Group Risk and Compliance and Group Internal Audit * Centralised proactive and reactive PR team. Technical * Failure of IT * Adoption of * Increasedinfrastructure managed services industry standard investment intoand systems to support core managed service core ITavailability services and standards and infrastructure business needs controls * Refresh of * Inability to * Disaster recovery managed services adequately testing recover after * Greater internal disaster/incident * Deployment of and external impacting service robust issue stakeholder delivery detection expectations software and * Failure to resolution * Investment in protect client, practices internal IT risk end customer and management Capita data. * Adherence to framework. higher level security environments as clients require * Adoption, where appropriate and effective, of ISO 27001 standards. Fraud, bribery * Significant civil * Appropriate * Changes inand corruption and criminal policies and whistleblowing penalties in procedures in legislation cases of bribery/ place including a increased risk/ corruption Group-wide onus on employers `whistle blowing' * Potential policy * Enhanced vetting prohibition from and screening bidding for * Board led procedures public sector anti-corruption introduced on new contracts and anti-fraud staff culture; * Client and end zero-tolerance * Refreshed fraud customer approach with a policies. detriment robust disciplinary * Financial impact process of fraud * Training of * Impact to brand senior management reputation. across Capita * Formal risk assessments of vulnerabilities * Oversight by Group Risk and Compliance * Fraud investigation team to investigate and prosecute cases, identify root causes and remedial work. Regulatory and * Non-compliance of * Appropriate * New financiallegal risk our businesses policies and services with the procedures regulator and requirements of supervision team our regulatory * Monitoring by for Capita bodies in the UK compliance teams or overseas, e.g. in business, * Increased number our fund Group Risk and of FCA supervised administration Compliance and firms in Capita operation and Group Internal to follow client money Audit providing consumer credit obligations further oversight changes * Regulatory, * Risk Committee * New key financial and oversight at all regulators for contractual business levels Capita businesses penalties including * Risk-based Solicitors * Client and end assurance and Regulatory customer actions for Authority. detriment improvement * Impact on brand * Independent reputation reporting to Group Audit and * Potential legal Risk Committee action from and Group clients, Financial customers and Services Risk suppliers. Committee. Health and * Non-compliance * Rigorously * Asbestos policysafety with health and applied Health and management safety and Safety Policy system is now in regulations and processes place and most of the training has * Adverse impact on * Health and safety been completed - well-being of our training although we have employees. had a number of * Comprehensive incidents in Group-wide health 2013, risk has and safety audits been reduced. undertaken twice a year * Environmental management system in place. Environmental * Non-compliance * Rigorously * Packaging with applied regulations risk environmental Environmental in Capita Secure regulations Policy and Information processes Services reduced * As a low impact through working company our key * Raising awareness more closely with environmental of environmental IT Services to impacts are issues across the improve packaging energy use, Group data collection. business travel, resource use and * Continue to waste management measure and mange which we manage our carbon proactively. footprint and achieve energy reductions. * Environmental site audits carried out twice a year * Reduction of paper use and increase in recycling * Reducing energy use to reduce energy CRC Allowance costs. Related party transactions Compensation of key management personnel 2013 2012 £m £m Short term employment 8.1 7.6benefits Pension 0.2 0.1 Share based payments 6.0 3.6 Total 14.3 11.3 Gains on share options exercised in the year by key management personneltotalled £6.3m (2012: £4.6m). Statement of Directors' responsibility The Directors confirm that, to the best of their knowledge: a. the consolidated financial statements in this report, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS, give a true and fair view of the assets, liabilities, financial position and profit of the Group taken as a whole; b. the parent company financial statements in this report, which have been prepared in accordance with United Kingdom Accounting Standards (UK GAAP) and applicable law, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and c. the management report contained in this report includes a fair review of the development and performance of the business and position of the Company and the Group taken as a whole, together with a description of the principal risks and uncertainties that they face. By order of the Board P R M Pindar G M Hurst Chief Executive Group Finance Director 26 February 2014 Forward-looking statement The Directors present the annual report for the year ended 31 December 2013which includes the strategic report, governance and audited Group accounts forthe year. Pages 1 to 92 of the annual report comprise a report of the Directorsthat has been drawn up and presented in accordance with English company law andthe liabilities of the Directors in connection with that report shall besubject to the limitations and restrictions provided by such law. Where werefer in this report to other reports or material, such as a website address,this has been done to direct the reader to other sources of Capita informationwhich may be of interest to the reader. Such additional materials do not formpart of the report.

Contact: Francesca Todd, Deputy Group Company Secretary, 020 7202 0641