Annual Financial Report

Serco Group plc 2008 Annual Review and Accounts

In compliance with paragraph 9.6.1 of the Listing Rules, Serco Group plc (the
"Company") has today submitted to the UK Listing Authority two copies of each
of the documents listed below:

(a) Annual Review and Accounts 2008;

(b) Annual Review and Summary Financial Statement 2008

(c) Notice of the 2009 Annual General Meeting (including the proposed
amendments to the Company's articles of association for the purpose of DTR
6.1.2); and

(d) Proxy form for the 2009 Annual General Meeting.

Copies of the above documents will be available for inspection at the UK
Listing Authority's Document Viewing Facility which is situated at:

Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

The documents are being sent to shareholders today. The Annual Review and
Accounts 2008, the Annual Review and Summary Financial Statement 2008, Notice
of the 2009 Annual General Meeting and the proposed revised articles of
association may be viewed and downloaded on the Company's website at
www.serco.com.

In compliance with paragraph 6.3.5 of the Disclosure and Transparency Rules
(DTR), a responsibility statement, a description of the principal risks and
uncertainties and details of related party transactions are set out below in
full unedited text. A condensed set of financial statements was included in the
Company's 2008 final results announcement issued on 27 February 2009.

References below to Financial Statements and the Directors' Report refer to
those items in the Annual Review and Accounts 2008.

For further information please contact Serco:

T [phone]

Charles King, Head of Investor Relations

Dominic Cheetham, Director of Corporate Communications

Directors' responsibilities

Kevin Beeston - Chairman

Christopher Hyman - Chief Executive

Andrew Jenner - Finance Director

Leonard Broese van Groenou - Non Executive Director

Tom Corcoran - Non Executive Director

Margaret, Baroness Ford of Cunninghame - Senior Independent Director

David Richardson - Non Executive Director

We confirm to the best of our knowledge:

1. the Financial Statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and

2. the management report, which is incorporated into the Directors' Report,
includes a fair review of the development and performance of the business and
the position of the Company and the undertakings included in the consolidation
taken as a whole, together with a description of the principal risks and
uncertainties they face.

Principal risks and uncertainties

The Group has a well-established and embedded system of internal control,
including financial, operational and compliance controls and risk management
designed to safeguard shareholders' investments and the Group's assets and
reputation. Whilst the Board has overall responsibility for the Group's system
of internal control and for reviewing its effectiveness, it is the role of
management to implement the policies on risk and control.

The Group's risk management process identifies the key risks facing each
business and the Group as a whole and reports to the Board on how those risks
are being managed. These processes are reviewed regularly by the Board and
conform to the requirements of the Combined Code. Such a system, however, can
only be designed to mitigate, rather than eliminate, the risk of failure to
achieve business objectives, and can only provide reasonable, and not absolute
assurance, against misstatement or loss. The Board confirms that this process
has been in place for the year under review and up to the date of approval of
the Annual Review and Accounts.

The Serco Management System (SMS) is the framework within which business
divisions, operating companies and contracts implement processes and procedures
that are appropriate to the business being undertaken. Divisional chief
executives and business unit managers have the responsibility and authority to
implement and monitor the system within their businesses. The SMS incorporates:
the Group's vision and strategy; the core values and business principles that
define the corporate behaviour of the organisation; the operating structure and
roles and responsibilities of the principal elements of the organisation; and
its core processes.

Policy statements and standards

As part of the SMS, the Board has authorised a set of policy statements, which
are supported by standards, guidance and training material. An ethical standard
defines the following principles that apply to all our business activities:

- We will comply with the laws of the country in which business is being
transacted

- We will respect the rights of the individual

- We will respect the traditions and culture of communities and protect the
environment within which we operate

- We will undertake our business activities in accordance with the highest
standards of professionalism, integrity and honesty.

These broad principles are further interpreted in respect of individual and
corporate behaviours. A separate corporate responsibility standard defines the
corporate responsibility programme that is implemented throughout the Group.
The Group's risk management standard defines the processes required in the
organisation to manage and mitigate threats to our business objectives.

The risk management process is described in a risk management manual and a set
of guidance notes covering specific aspects appropriate to particular business
activities. An internally developed and supported risk database tool supports
the risk management process at all levels of the business and is used to create
the risk, opportunity, assumption and issue registers that support the
decision-making processes. Risk registers are maintained at a contract,
business unit, divisional and Group level and are reviewed at least quarterly
and more frequently as required.

During 2008, the risk management process has been incorporated into an
over-arching resilience management framework that incorporates risk, security,
business continuity and crisis management. The resilience management framework
is supported by a set of top-level requirements, more detailed process
descriptions and guidance and tools to support the implementation of the
framework across the Group.

The risk registers identify the key risks, the probability of those risks
occurring, their potential impact on the business and the actions being taken
to reduce and mitigate the risks. Guidance on the risk appetite of the Group
has been issued which defines the appetite/tolerance levels both for individual
risks and for projects or business units where multiple risks are present.

Principal risks

The Group risk register identifies the principal risks facing the business,
including those that are managed directly at a Group level. The process
specifically identifies the business objectives and the interests not only of
shareholders but also of other stakeholders that are likely, directly or
indirectly, to influence the performance of the business and its value.

These include, but are not limited to, shareholders, customers, suppliers,
staff, trade unions, government, regulators, banks and insurers. The interests
of the wider community in areas such as social, environmental and ethical
impact are recognised in the Group's corporate responsibility programme.

The Group risk register is updated at least quarterly, reviewed six-monthly by
the Risk Oversight Group and discussed at quarterly Board meetings. Active
risks are ranked by importance and grouped under the following six headings:

- Strategic - covering threats to the long-term deliverability of the Group's
strategy. Principal risks include loss of competitive position and risks
associated with acquisitions

- Financial/Commercial - covering threats to the short- to medium-term
performance. Principal risks include financial market instability, the loss of
key contracts, failure to meet financial business plans, pension fund
liabilities and delays or cost over-runs in major transition programmes

- Compliance - covering compliance with all relevant legislation and
regulations. Principal risks include legal action resulting from compliance
failures, loss or compromise of personal data and unethical behaviour by
Directors or members of staff

- Safety and Security - covering threats to the safety of staff,
sub-contractors, members of the public and the environment and the security of
the Group's assets and staff. Risks include the responsibility for a major
accident or incident where public safety is concerned, environmental pollution,
assaults on staff in the course of their duties, loss of sensitive information
and crime, fraud and terrorism

- Operational - covering threats to the continuity of business operations.
Principal risks include the failure of information systems, loss of key
infrastructure and the recruitment and retention of key staff

- Management - covering possible internal failures of managers or management
systems.

Principal risks include failures of internal controls and management systems.
For the Group, the most significant risks relate to the strategy and safety
areas. Social, environmental and ethical issues, while recognised within a
number of the Group's risks, do not represent significant threats to the
Group's strategy at present. Reputational and emerging risks are kept under
active review and the Board informed of changes. Emerging risks cover
longer-term risks that could represent a threat to the Group's activities but
which are not yet sufficiently defined to be included as active risks. Examples
of these risks include influenza pandemic, climate change and changes in key
markets.

In quantifying and ranking risks, Serco uses a risk scoring system based on
assessments of probability and impact. The guidance provided in internal
documents requires the assessment to address the impact on business objectives
as well as wider stakeholder interests.

As Serco operates in a number of business sectors such as aviation, rail and
nuclear, where public safety is involved, societal concerns such as public
safety and environmental damage are specifically identified in the assessment
criteria. The criteria are generally subjective rather than financially based
since it is difficult to quantify the financial impact of a major incident
involving loss of life.

Serco's approach to the reporting of risks that have social, environmental or
ethical implications is summarised below. It is based on the assessment of
three factors:

- Significance of the risk to the achievement of Serco's business objectives

- Significance of the risk to wider society

- Ability of Serco to influence or control the risk.

Risks that could have a significant impact on Serco's business objectives are
strategically important and are reported externally. Where this impact is
combined with a high significance to society and Serco has a direct
responsibility for the management of the risk, additional performance
indicators are also included in external reporting. Examples of such risks
include public safety, environmental protection and data protection.

Risk mitigation

Each risk in the Group register is assigned an owner at Board or senior
management level and specific risk reduction and risk mitigation actions are
identified.

The Board may ask for additional information in respect of risk reduction or
mitigation actions or request that an audit is undertaken to provide additional
assurance. Risk management techniques used include appropriate systems, staff,
internal controls, public and media relations and business continuity planning.
These techniques are designed with clarity of accountability and responsibility
and with certain formal policies covering areas such as compliance, safety and
environmental protection.

Serco's business units build and maintain an understanding of their operational
risk profiles and are expected to fully understand the likelihood and potential
impact of any operational incidents, at the same time making appropriate and
informed decisions that balance the risks against the potential returns and
opportunities. While operational risk can never be eliminated, the Group
endeavours to minimise the impact by ensuring that appropriate infrastructure,
controls, systems, staff and processes are in place.

Some of the key management and control techniques are set out below:

- The principles of clear delegation of authority and segregation of duties are
fully reflected in the Group's operating processes

- Comprehensive business review processes ensure that our services and products
meet customer expectations, performance criteria, operational effectiveness,
regulatory requirements, investment returns, cash flow requirements and
profitability

- An Investment Committee meets on a monthly basis to consider new or
developing projects against a defined set of criteria

- There is a formal review and approval process for all proposals and business
acquisitions including delegated authority for sign-off based on the financial
value and capital requirement of the transaction and the assessed risk of the
project

- Sound project management and change implementation disciplines are applied to
all major development projects including new contract transitions,
acquisitions, new technology applications, change programmes and other major
initiatives

- The commitment and capability of staff is critical for the effective
management of operational risk. Ongoing training and career development
constantly improves the skills of our employees. Selective recruitment,
succession planning and other human resource policies and practices are in
place to ensure that staff skills are aligned with the current and future needs
of the organisation

- Safety management systems in the Group's aviation, rail, defence, nuclear and
marine businesses have been addressed by the appointment of safety specialists
for each area who report directly to the Board and maintain and further develop
the very high standards expected in these industries

- The Group's approach to health, safety and environmental protection is
described in the Directors' Report. Qualified and experienced staff in each
business unit provide advice and support on health, safety and environmental
issues and undertake regular audits

- The Chief Information Officer is responsible for ensuring that systems and
processes are in place to ensure the confidentiality, integrity and
availability of sensitive information and the associated information systems
that support the Group's business activities

- An Ethics Committee, comprising the Executive Team, has been established with
responsibility for the review of ethical issues that may arise from the Group's
current and possible future activities

- The Company Secretary manages the confidential reporting service, to which
staff can report illegal, dangerous, dishonest or unethical activities

- A programme of internal audits confirms the extent to which key controls are
applied across the Group. Audit priorities are established on the basis of risk
assessments, regulatory requirements and business imperatives

- The operational risk framework tracks key indicators. These include analysis
of business performance and variances from plan, customer satisfaction and
retention data, staff turnover and satisfaction levels, occupational health and
safety incidents, and error and exception reporting.

The Group maintains insurance policies to provide for losses arising from
circumstances such as damage or destruction of physical assets, theft, legal
liability for third party loss and professional advice. The adequacy of the
insurance cover is reviewed at regular intervals.

Corporate Assurance Group

The Corporate Assurance Group (CAG) oversees and reviews internal controls and
risk policies, procedures and management frameworks and develops guidance,
training material and management training to ensure the business needs are met.

The Board recognises its responsibilities to shareholders and the wider
community where social, environmental and ethical issues are very important.
CAG is responsible for developing and overseeing the corporate responsibility
activities within the Group.

Every quarter, CAG reports formally to the Board, providing analyses of the
health, safety and environmental performance of the Group against targets and
advises the Board on policy and future activities to enhance best practice. A
separate resilience report covering risk, security, business continuity and
crisis management is also submitted to the Board on a quarterly basis. CAG
works closely with the internal audit function to provide an appropriate level
of business assurance to the Board.

CAG sponsors five specialist groups:

- A Health, Safety and Environment Oversight Group, chaired by the Director,
Health, Safety and Environment, and comprising senior assurance representatives
from across the Group. During the year, this group met four times to review
health, safety and environmental policy and procedures, and to review the
performance of the operating divisions against safety and environmental targets

- A Risk Oversight Group, chaired by the Risk Director, comprising operational
and assurance representatives from across the Group, which met twice during the
year to review the Group risk register and key risk controls. This group
provides additional assurance in relation to the system of internal control and
risk management and enhances the Board's ability to discharge its
responsibilities in relation to internal control

- An Aviation Safety Oversight Group, chaired by an independent aviation safety
professional and comprising the aviation safety representatives from across the
Group, which met once during the year. This group has been responsible for the
implementation of the aviation safety management system across the Group and
for transferring best practice between Serco's aviation operating companies

- A Transportation Safety Oversight Group, chaired by the Integrated Transport
Non-Executive Director with Special Interest in Safety and comprising the rail
and road safety representatives from across the Group, oversees the safety
management systems within Serco's rail and road businesses in the United
Kingdom, Middle East and Australia

- A Corporate Responsibility Steering Group, chaired by the Assurance Director,
provides direction on projects that address the social and environmental issues
affecting our staff and the communities within which we work.

Internal audit

During the first half of 2008, Grant Thornton continued to provide an
outsourced internal audit function within the Group, in addition to that
provided by internal peer review and CAG. On 1 July 2008, KPMG LLP took over
responsibility for the outsourced internal audit programme with a revised scope
of work. At the same time, a Head of Internal Audit was appointed with
responsibility for coordinating the work carried out by KPMG and the audit
programme carried out within the operating divisions. The risk-based audit
programme has been designed to address the internal control and risk management
processes and the recommendations of the Combined Code.

The outsourced internal auditors reported to the Audit Committee twice during
the year. There were no material weaknesses identified as a result of the
audits undertaken and corrective action has been taken where deficiencies were
found. As a result of recommendations made by KPMG, the internal audit
processes and reporting activities have been strengthened and more closely
integrated with the risk management process.

Joint ventures

In addition to contracts held in Serco's name, the Group has material
investments in a number of joint ventures. Where investments are not wholly
owned by Serco, the Group can influence, but not control, management practices.
Serco representatives within these companies ensure that the processes and
procedures for identifying and managing risk are appropriate for the business
and that internal controls exist and are regularly monitored. Employees from
the Group's joint ventures participate in the Health, Safety and Environment
Oversight Group, the Risk Oversight Group and the Transportation Safety
Oversight Group.

Review of internal controls

The Board confirms that the actions it considers necessary have been taken to
remedy such failings and weaknesses which it has determined to be significant
from its review of the internal controls. The Board also confirms that it has
not been advised of material weaknesses in that part of the internal control
system that relates to financial reporting.

Corporate responsibility

Corporate responsibility is about living the values and principles that govern
the way we operate and behave. Our approach reflects the importance corporate
responsibility has to those with whom we come into contact. It is also good
business practice, which we believe will ultimately help us deliver better
returns to shareholders.

The responsibilities of CAG, which reports directly to the Board, include
developing and overseeing our corporate responsibility activities. Our
corporate responsibility model encompasses four elements:

- Safety - recognising our legal responsibility for the safety of our staff,
sub-contractors and the general public for whom we have a duty of care

- People - addressing our legal and moral responsibility for our employees

- Community - addressing our social responsibility for the communities within
which we operate

- Environment - recognising our legal and moral responsibility to protect the
environment from damage as a direct result of our operations and to promote
activities to protect and sustain the wider environment.

A summary of our performance in 2008 and targets and objectives for 2009 can be
found in the 2008 Corporate Responsibility Review and at www.serco.com.

36. Related party transactions

Transactions between the Company and its wholly owned subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed in
this note. Transactions between the Group and its joint venture undertakings
are disclosed below, with the relevant proportion being eliminated on
consolidation. Transactions between the Company and its subsidiaries and joint
ventures are disclosed in the Company's separate financial statements.

Trading transactions

During the year, Group companies entered into the following material
transactions with joint ventures:

                                              2008      2007
                                                £m        £m

Royalties and management fees receivable       1.4       1.2

Dividends receivable                          37.2      36.9

                                              38.6      38.1

The following receivable balances relating to joint ventures were included in
the consolidated balance sheet:

                                              2008      2007
                                                £m        £m

Current
Loans                                          1.2       1.7

                                              2008      2007
                                                £m        £m

Non-current
Loans                                          0.7       0.6

Joint venture receivable and loan amounts outstanding have arisen from
transactions undertaken during the general course of trading, are unsecured,
and will be settled in cash. No guarantee has been given or received. No
provisions are required for doubtful debts in respect of the amounts owed by
the joint ventures.

Remuneration of key management personnel

The Directors of Serco Group plc had no material transactions with the Group
during the year other than service contracts and directors' liability
insurance.

The remuneration of the key management personnel of the Group, is set out below
in aggregate for each of the categories specified in IAS 24 `Related Party
Disclosures':

                                              2008      2007
                                                £m        £m

Short-term employee benefits                   3.6       3.8

Termination arrangements                       0.7         -

Post-employment benefits                       0.4       0.7

Share-based payment expense                    1.9       1.9

                                               6.6       6.4

The key management personnel comprise the Executive Directors, Non-Executive
Directors and key members of the Global Management Board.