7 April 2015 Capita plc (the "Company")Annual Financial ReportIn compliance with Disclosure and Transparency Rule 4.1, the Company announcesthe publication of its Annual Financial Report for the year ended 31 December2014. 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.morningstar.co.uk/uk/NSM. The document is alsoavailable on the Company's website: www.capita.co.uk.Additional InformationA 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 26 February 2015. That information, together with theinformation set out below, which is extracted from the Annual Report andAccounts 2014, 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 2014. Page and note referencesbelow refer to the corresponding pages and/or notes in the Annual Report andAccounts 2014.Principal risks and uncertaintiesRisk managementControlled risk taking is fundamental to the organisation's success, ensuringthat risks and rewards are balanced in the pursuit of sustainable, profitablegrowth. Capita is not risk averse, it looks to actively manage risks which ithas scrutinised and has an appetite for within our underlying risk andtolerance framework.We believe that conducting our business with integrity, applying a high levelof skill, care and diligence to what we do, services the interests of all ourstakeholders. This allows us to grow in a controlled manner, and achieve ourbusiness goals.The risks Capita faces evolve over time as a result of both the changing sizeand complexity of our business and its services but also through changes in theexternal legal, economic and regulatory environment. In 2014, we have seen thefollowing developments in the wider risk environment: * increased understanding of the extent of `cyber' threats facing UK plc including the activity of hacktivists and those seeking fraudulent access to funds, data and information * increased European regulation in areas such as data protection and asset management * economic pressures raising litigation risk around asset performance * UK regulatory developments around `conduct' requiring greater focus on end customer outcomes in financial services and utility industries * increased focus on environmental risks through carbon pricing and energy.Our risk management activities seek to protect the business from unnecessaryrisk exposure, whilst still allowing divisional and business management tooperate with sufficient flexibility to react to market needs. It also helps usdemonstrate to clients, end customers and regulators how we take ourresponsibilities seriously.As Capita's business model devolves certain authority and responsibility tobusiness management at all levels, risk management is primarily theresponsibility of those who are in the best position to understand and acteffectively. They apply risk management in line with the Group-wide Risk Policyset to reflect the risk appetite set by the Board and within an industrystandard `three lines of defence' model.Principal risk categoriesWe operate a total of 22 risk categories which are kept under regular review.Those deemed to have significant potential impact or exposure, as identifiedthrough the Group's Risk Management Framework, are detailed below:Key risk Potential risks and Mitigating activities 2014 developmentscategories impacts includeBusiness * Changes to the * Focus on widening * Successful entryenvironment political, scope of existing to new markets commercial or contracts and sectors for market landscape Capita including affect the * Focus on 11 mortgage viability of diverse public and administration, Capita's private sector electronic businesses. Key markets monitoring and elements of AXELOS, our Capita's business * Continual work to public sector model fail to diversify business subsidiary adjust to operation across partnership with changing market new private/public the Cabinet needs on a timely sector markets and Office basis and become market segments. diluted or * Actively obsolete monitored potential * Actions of political and competitors other impact Capita's developments competitive position. * Focus from CEO on innovation and responsiveness to change.Operational * Failure to meet * Operating * Significant anddelivery contractual performance complex projects terms, milestones indicators in now brought and service level place for all within single agreements in business and key division to major contracts contracts share management expertise and * Delivery of * Robust contractual learnings contracts fail to and governance regarding robust meet quality, mechanism oversight and cost or support help performance * MOB and Risk focus right expectations Committee management challenge and oversight and * Financial client oversight support service penalties * Risk-based * Refreshed risk * Mismanagement of independent governance complex client assurance (GIA) through new relationship framework to structures * Cross-relationship track issues and operational, mitigate * Loss of contract. technical and earlier. commercial oversight and governance.Duty of care * Failure to * Safeguarding * Successful provide adequate policy, process introduction of duty of care to and standards Group-wide staff, Safeguarding stakeholders, * Widespread focus policy clients and end on `conduct risk' customers of our and the delivery * New health & services of end customer safety and outcomes property portal * End customer for reporting detriment * Rigorously applied and issue Group-wide health tracking/ * Adverse impact on and safety policy, resolution. wellbeing of our process, training employees and audits * Failure of health * Incident and safety management system compliance that includes issues around duty * Failure of of care clinical governance in our * Robust operational health-related monitoring and businesses. oversight of our health-related activities.Technical * Failure to * Adoption of * Appointment ofinfrastructure provide adequate industry standard CIO to takeand resilience IT services to managed service forward greater support core standards and development of services and controls Group's IT business needs strategy and * Robust business central * Loss of core continuity/ provisioning systems/ disaster recovery technology with programme * Commencement of long term impact Group-wide on client * Deployment of business impact delivery issue detection assessments to software and draw up single * System resilience resolution view of and stability practices resilience does not meet issues service delivery * Adoption, where needs or appropriate, of * Acquisitions of expectations ISO27001 standards Updata and other IT/ network * Legacy system * Investment into firms strengthen maintenance upgraded core IT our core network infrastructure. provision * Inadequate business * Development of continuity/ cloud capability disaster recovery and move of core arrangement. systems commenced in 2014.Information * Exposures and * Group-wide * Refresh of oursecurity subsequent policies and Group contractual and procedures Information regulatory Security penalties brought * Single information standards about through security framework failure to * Group-wide protect * Risk Committee information information/ data oversight at all threat assets of Capita, business levels assessment with our clients or assistance of end customers * Staff training and third party from loss, theft, monitoring consultancy alteration or programme destruction * Recognition of * Incident importance of * Failure in the management system Cyber Security mechanisms to risks by Board. secure or recover * Cross-Group forum sensitive to evaluate issues information and effective controls * Loss or theft of intellectual * Local divisional property skilled specialist information * Cyber crime. security resource.Human * Failure to * Comprehensive * Further roll outresources attract, manage succession of our vetting or retain planning process to new sufficient, Capita skilled or * Continual businesses and experienced staff development and internal movers performance to sensitive * Morale issues management roles impact productivity and * Extensive training * Refresh of innovation and development `Speak Up' for all staff and Public Interest * Costs of management Disclosure increased/ Policy excessive * Comprehensive turnover of staff screening/vetting * Talent process in line management * Impact on with roles initiatives Capita's launched to credibility as an * Whistleblowing identify and employer line to ensure any nurture existing significant staff Capita talent. * Key person issues can be reliance/ reported and management escalated stretch. appropriately.Partnerships/ * Contractual * Group outsourcing * Refresh andthird parties/ dispute with (material roll-out ofoutsourcing contracted firms suppliers) policy revamped material * Disruption to * Review of key suppliers policy supply chain third party contracts by * Greater controls * Service commercial teams over contract interruption documentation where reliance is * Monitoring of key and retention placed on the outsourced resilience of services Service * AXELOS public partner, third Level Agreements sector party or (SLAs) subsidiary outsourced partnership with relationship * Partnership Cabinet Office governance launched January * Partners and/or 2014. third parties do * Business not act within resilience the intended arrangement of limits of their third parties in authority or do place to protect not perform in a key services. manner consistent with Capita's strategies and objectives * Liabilities for actions of third parties * Failure in third parties governance/ inappropriate business practices.Integration, * Planned synergies * Due diligence on * Refreshedtransition and failing to broad approach tochange achieve targets categorisation of business risk exposures integration * Detrimental focusing on impact on growth * `Black Hat' local management and performance governance process ownership with of business appropriate * Group Board review oversight. * Integration and approval of challenges acquisition and resulting in significant bids increased operational risks * Commercial and contractual terms * Mispricing of closely reviewed long term major to ensure clarity contracts * Early adoption of * Impairment of MOB & risk goodwill and management intangible assets processes through underperformance * Emerging risk or unforeseen review and developments in appropriate acquired escalation businesses * Integration and * Multi-stakeholder transition process relationships * Strong financial * Mismanagement of controls operated priority by unified deliverables and financial business as structure and usual. system * Robust change gap analysis activities and remediation planning.Financial * Risk of financial * Strong financial * Group Internalexposure loss or failure controls operated Audit reviews of to operate within by a unified completeness of financial targets finance structure income across as a consequence and system spread of of external or businesses internal * Monthly finances vulnerabilities reviewed in MOB * Introduction of "My Purchasing" * Adverse effect on * Rigorous capital process to business expenditure strengthen financial approval and procurement performance from, monitoring controls and e.g. mispricing, controls link to performance invoicing. issues, client * Robust procurement dispute or process to further changing market strengthen landscape expenditure controls * Adverse investor impact (share * Business disposal. price).Legal risk * Failure to comply * Commercial and * New Commercial with legislative, contractual terms Risk Awareness contractual, closely reviewed training fiduciary, to ensure clarity launched for statutory and/ or wider business judicial * Contractual leadership to requirements warranty enhance knowledge of key * Criminal * Monitoring and contracting liability. tracking of process and legislative commercial risk requirements management. across all Capita jurisdictions * Proactive and reactive Group legal support.Financial * Financial impact * Board led * Appointment ofcrime of fraud anti-corruption new Group Head and anti-fraud of Financial * Significant civil culture; zero Crime Prevention and criminal tolerance approach to better penalties in with robust coordinate Group cases of bribery/ disciplinary policies and corruption and process standards subsequent potential * Formal risk * Enhanced prohibition from assessment of policies and public sector vulnerabilities oversight of contracts financial crime * Appropriate risks in Group * Exposure to policies and to reflect parties procedures in growth of Capita exploiting place including a into new sectors vulnerabilities Group-wide and through a variety whistleblowing jurisdictions of fraudulent or policy criminal acts * Refresher * Comprehensive training * Failure in training of senior undertaken for supervision or management across Board and senior corrective Capita management on actions bribery risks. associated with * Fraud financial crime. investigations team to investigate and prosecute cases, identify root causes and embed remedial work.Regulatory * Non-compliance of * Appropriate * Introduction ofrisk our businesses policies and consumer credit with the processes regulation by requirements of FCA managed regulated bodies * Monitoring by across Group in the UK or compliance teams firms overseas in Group, Divisions and * Ongoing * Regulatory, Business units and relationship financial and Internal Audit with FCA contractual oversight maintained penalties * Supervisory teams * New regulator * New regulatory for Group firms * Rigorously applied with the requirements for environmental purchase of a emerging Capita policy and process Solicitors businesses Regulatory * Measure and manage Authority * Non-compliance carbon footprint supervised firm with exposure and environmental achieve energy * Further regulations. reduction development of knowledge of our * Reduction in paper exposures to use and increase Ofcom, Ofgem in recycling. regulatory regimes.Brand and * Internal or * Centralised * Furtherreputation external proactive PR team strengthening of activities and management events affect * Incident support control around Capita's brand or by internal PR key contracts reputation team such as the Recruitment * Failure to * Reactive PR Partnering maintain client strategy in Project to or market sector association with provide even trust in the business, clients greater line of Capita brand and public sector sight for Board subsidiary * Threat of hostile partnerships * Greater or sustained understanding media attention * Investor relations across business towards Capita strategy to of activities of businesses and develop and central PR team activities or maintain open corporate actions relationships with * Re-launch of investment Capita values, * Adverse investor community. emphasising impact. service delivery excellence and fair treatment of customers * Increased recognition of potential brand and reputation risks through specific inclusion on the risk framework.Related party transactionsCompensation of key management personnel 2014 2013 £m £mShort term employment 9.0 8.1benefitsPension 0.2 0.2Share based payments 6.8 6.0Total 16.0 14.3Gains on share options exercised in the year by Capita plc executive directorswere £6.6m (2013: £5.2m) and by key management personnel £2.1m (2013: £1.1m),totalling £8.7m (2013: £6.3m).During the year, the Group rendered administrative services to Smart DCC Ltd, awholly owned subsidiary which is not consolidated. The Group received £25.8m ofrevenue for these services. The services are procured by Smart DCC on an arm'slength basis under the DCC licence. The services are subject to review by Ofgemto ensure that all costs are economically and efficiently incurred by SmartDCC.Capita Pension and Life Assurance Scheme is a related party of the Group.Transactions with the Scheme are disclosed in note 32 - Employee benefits onpage 154.The following companies are substantial shareholders in the Company andtherefore a related party of the Company (in each case for the purposes of theListing Rules of the UK Listing Authority). The number of shares held on 18February 2015 was as below:Shareholder No. of shares % of voting rightsMarathon Asset Management LLP 22,933,805 3.46Woodford Investment Management LLP 35,060,250 5.30Invesco Asset Management 68,877,348 10.41Veritas Asset Management LLP 48,291,643 7.30Legal & General Investment 19,920,066 3.01ManagementStatement of Directors' responsibilityThe 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 BoardA Parker G M Hurst*Chief Executive Group Finance Director25 February 2015Forward-looking statementThe Directors present the annual report for the year ended 31 December 2014which includes the strategic report, governance and audited Group accounts forthe year. Pages 1 to 108 of the annual report comprise a report of theDirectors that has been drawn up and presented in accordance with Englishcompany law and the liabilities of the Directors in connection with that reportshall be subject to the limitations and restrictions provided by such law.Where we refer in this report to other reports or material, such as a websiteaddress, this has been done to direct the reader to other sources of Capitainformation which may be of interest to the reader. Such additional materialsdo not form part of the report.Contact: Francesca Todd, Group Company Secretary, 020 7202 0641*G M Hurst retired from the Board on 28 February 2015