THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank, solicitor, accountant, fund manager or other appropriate independent financial adviser who is authorised under FSMA if you are resident in the United Kingdom, or, if you are not, from another appropriately authorised independent financial adviser.

This document, which comprises a circular and a prospectus relating to Costain and the Capital Raising, has been prepared in accordance with the Prospectus Rules of the UK Listing Authority made under section 73A of FSMA and has been approved by the FCA in accordance with section 85 of FSMA. This prospectus has been filed with the FCA and made available to the public in accordance with Rule 3.2.1 of the Prospectus Rules by the same being available at www.costain.com. This document can also be obtained on request from the Receiving Agent.

If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares you should send any Application Form, if and when received, as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer is/ was effected for delivery to the purchaser or the transferee. However, the distribution of this document, the Application Forms and/or any related documents, and/or the transfer of the Open Offer Entitlements through CREST into jurisdictions other than the UK may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws or regulations of such jurisdictions. In particular, this document, the enclosures and any other such documents should not be distributed, forwarded to or transmitted in or into the United States or any other Restricted Jurisdiction. In such circumstances, if you sell or have sold or otherwise transferred only part of your holding of Existing Ordinary Shares, you should retain any such documents received.

25FEB201418195894 (incorporated and registered in England and Wales with registered number 01393773)

Firm Placing of 11,111,112 New Ordinary Shares at 225 pence per share

Placing and Open Offer of 22,270,956 New Ordinary Shares at 225 pence per share

and

Notice of General Meeting

Rothschild

Investec Liberum Capital

Joint Global Co-ordinator and Bookrunner Joint Global Co-ordinator and Bookrunner

The Existing Ordinary Shares have been admitted to the premium listing segment of the Official List, and to trading on the London Stock Exchange's main market for listed securities. Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities (together 'Admission'). It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence by 8.00 a.m. on 18 March 2014.

Your attention is drawn to the letter from the Chairman of Costain which is set out in Part I (Letter from Chairman of Costain) of this document. You should read the whole of this document and any documents incorporated herein by reference. Shareholders and any other persons contemplating the acquisition of New Ordinary Shares should refer to the section of this document entitled 'Risk Factors' for a description of certain important factors, risks and uncertainties that may affect the Costain Group's business and New Ordinary Shares and which should be taken into account when considering whether or not to subscribe for or acquire New Ordinary Shares.

A notice convening the General Meeting to be held at Investec Bank plc, 2 Gresham Street, London EC2V 7QP on 17 March 2014 at 10.00 a.m. is set out at the end of this document. A Form of Proxy for use in connection with the General Meeting is enclosed with this document. Whether or not you intend to attend the General Meeting in person, to be valid, the Form of Proxy should be completed, signed and returned in accordance with the instructions printed on it so as to be received by Equiniti, as soon as possible, and in any event, by no later than 10.00 a.m. on 15 March 2014. You may also submit your proxy electronically at www.sharevote.co.uk using the Voting ID, Task ID and Shareholder Reference Number (SRN) on the Form of Proxy. Alternatively, if you have already registered with Equiniti's online portfolio service, Shareview, you can submit your Form of Proxy at www.shareview.co.uk. Full instructions are given on both websites. If you hold Existing Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti (CREST participant ID RA19), so that it is received by no later than 10.00 a.m. on 15 March 2014. The completion and return of a Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending and voting in person at the General Meeting or any adjournment thereof, if you wish to do so and are so entitled.

The latest time and date for acceptance and payment in full under the Open Offer is 11.00 a.m. on 14 March 2014. The procedures for acceptance and payment are set out in Part IV (Terms and Conditions of the Capital Raising) of this document and, where relevant, in the Application Form. Qualifying Non-CREST Shareholders will be sent an Application Form. Qualifying CREST Shareholders (who will not receive an Application Form) will receive a credit to their appropriate stock accounts in CREST in respect of their Open Offer Entitlements which is expected to be enabled for settlement on 28 February 2014.

Applications under the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim arising out of a sale or transfer of Ordinary Shares prior to the date on which the Ordinary Shares were marked 'ex' the entitlement by the London Stock Exchange. Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors regarding the action to be taken in connection with this document and the Open Offer. The Application Form is personal to Qualifying Shareholders and cannot be transferred, sold, or assigned except to satisfy bona fide market claims. Holdings of Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Open Offer. No statement in this document or incorporated by reference into this document is intended as a profit forecast or profit estimate for any period and no statement in this document or incorporated by reference into this document should be interpreted to mean that the earnings or earnings per share will necessarily be greater or lesser than those for the relevant preceding financial periods for Costain.

Investors should only rely on the information contained in this document and contained in any documents incorporated into this document by reference. No person has been authorised to give any information or make any representations other than those contained in this document and any document incorporated by reference and, if given or made, such information or representation must not be relied upon as having been so authorised by Costain, the Costain Board or Rothschild. Costain will comply with its obligation to publish supplementary prospectuses containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish additional information.

The release, publication or distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and, therefore, any persons who are subject to the laws of any jurisdiction other than the United Kingdom should inform themselves about, and observe, any applicable requirements. Failure to comply with any such restrictions may constitute a violation of the securities laws of any jurisdiction. This document has been prepared to comply with requirements of English law, the Listing Rules, the Prospectus Rules and the Rules of the London Stock Exchange and information disclosed may not be the same as that which would have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside England.

Rothschild, which is authorised by the PRA and regulated by the FCA and PRA in the United Kingdom, is acting exclusively for Costain and no-one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this document) as clients of Rothschild in relation to the Capital Raising and will not be responsible for providing the protections afforded to Rothschild clients nor for giving advice in relation to the Capital Raising, or any arrangement referred to in, or information contained in, this document.

Investec, which is authorised and regulated by the PRA and regulated by the FCA in the United Kingdom, and Liberum, which is authorised and regulated by the FCA in the United Kingdom, are acting exclusively for Costain and no-one else in connection with the Capital Raising and will not regard any other person (whether or not a recipient of this document) as their respective clients in relation to the Capital Raising and will not be responsible to anyone other than Costain for providing the protections afforded to their respective clients nor for providing advice in connection with the Capital Raising, or any arrangement referred to in, or information contained in, this document.

Apart from the responsibilities and liabilities, if any, which may be imposed on Rothschild or the Bookrunners under FSMA or the regulatory regime established thereunder, none of Rothschild or the Bookrunners accepts any responsibility whatsoever or makes any representation or warranty, express or implied, concerning the contents of this document including its accuracy, completeness or verification or concerning any other statement made or purported to be made by any of them, or on behalf of them, in connection with Costain, the New Ordinary Shares, the Capital Raising or Admission and nothing in this document is or shall be relied upon as a promise or representation in this respect, whether as to the past or future. Subject to applicable law, each of Rothschild and the Bookrunners accordingly disclaim all and any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise (save as referred to above)) which any of them might otherwise have in respect of this document or any statement purported to be made by them, or on their behalf, in connection with the Company, or the arrangements described in this document.

THE CAPITAL RAISING DESCRIBED IN THIS DOCUMENT IS NOT BEING AND WILL NOT BE MADE TO SHAREHOLDERS OR INVESTORS IN THE UNITED STATES OR ANY OF THE OTHER RESTRICTED JURISDICTIONS. All Restricted Shareholders and any person (including, without limitation, a nominee or trustee) who has a contractual or legal obligation to forward this document or any Application Form, if received, or other document to a jurisdiction outside the United Kingdom should read section 8 of Part IV (Terms and Conditions of the Capital Raising) of this document.

NOTICE TO US INVESTORS

This document, including the Application Form, does not constitute an offer of New Ordinary Shares to any person with a registered address in, or who is resident in, the United States or any other Restricted Jurisdiction. New Ordinary Shares have not been and will not be registered under the Securities Act, or with any regulatory authority or under the applicable securities laws of any state or other jurisdiction of the United States, or the relevant laws of any state, province or territory of any other Restricted Jurisdiction, or any other Restricted Jurisdiction, and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States or any other Restricted Jurisdiction. This document does not constitute an offer to sell or a solicitation of an offer to buy New Ordinary Shares in any jurisdiction in which such offer or solicitation is unlawful. Neither this document nor the Application Forms will be distributed in or into the United States or any of the other Restricted Jurisdictions.

The New Ordinary Shares have not been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the United States. There will be no public offer of the New Ordinary Shares in the United States.

Notice to Overseas Shareholders

EXCEPT AS OTHERWISE SET OUT HEREIN, THE CAPITAL RAISING DESCRIBED IN THIS DOCUMENT IS NOT BEING MADE TO SHAREHOLDERS OR INVESTORS IN ANY RESTRICTED JURISDICTIONS. NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

For a description of the restrictions on offers, sales and transfers of the New Ordinary Shares and the distribution of this document, see Part IV (Terms and Conditions of the Capital Raising) of this document.

All Overseas Shareholders and any person (including, without limitation, a nominee, custodian or trustee who has a contractual or other legal obligation to forward this document or any Application Form, if and when received, or other document to a jurisdiction outside the UK), should read section 8 of Part IV (Terms and Conditions of the Capital Raising) of this document.

Capitalised terms have the meanings ascribed to them in the section entitled 'Definitions' of this document.

Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents or use of any information for any purposes other than in considering an acquisition of New Ordinary Shares is prohibited, except to the extent such information is otherwise publicly available. By accepting delivery of this document, each offeree of the New Ordinary Shares agrees to the foregoing.

No person has been authorised to give any information or make any representations other than those contained in this document and, if given or made, such information or representations must not be relied upon as having been authorised by Costain, Rothschild or the Bookrunners. None of Costain, Rothschild, Investec or Liberum takes any responsibility for, or can provide assurance as to the reliability of, other information that you might be given. Costain will comply with its obligation to publish a supplementary prospectus containing further updated information required by law or by any regulatory authority but assumes no further obligation to publish further information. Subject to FSMA, the Listing Rules, the Disclosure and Transparency Rules and the Prospectus Rules, neither the delivery of this document nor any subscription or sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of Costain since the date of this document or that the information in this document is correct as at any time after this date. Without limitation, the contents of the Group's website do not form part of this document.

THE CONTENTS OF THIS DOCUMENT OR ANY SUBSEQUENT COMMUNICATION FROM COSTAIN OR ROTHSCHILD OR ANY OF THEIR RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS ARE NOT TO BE CONSTRUED AS LEGAL, FINANCIAL OR TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT HIS, HER OR ITS OWN SOLICITOR, INDEPENDENT FINANCIAL ADVISER OR TAX ADVISER FOR LEGAL, FINANCIAL OR TAX ADVICE.

The date of this document is 27 February 2014.

	Page
SUMMARY	1
RISK FACTORS	11
FORWARD LOOKING STATEMENTS	18
EXPECTED TIMETABLE OF PRINCIPAL EVENTS	19
CAPITAL RAISING STATISTICS .	20
INFORMATION INCORPORATED BY REFERENCE	21
DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS .	24
PART I LETTER FROM CHAIRMAN OF COSTAIN .	25
PART II SOME QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING	34
PART III INFORMATION ON THE NEW ORDINARY SHARES	39
PART IV TERMS AND CONDITIONS OF THE CAPITAL RAISING	41
PART V INFORMATION ON COSTAIN	59
PART VI OPERATING AND FINANCIAL REVIEW OF COSTAIN .	72
PART VII HISTORICAL FINANCIAL INFORMATION RELATING TO COSTAIN .	77
PART VIII UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE COSTAIN GROUP	79
PART IX UNITED KINGDOM TAXATION CONSIDERATIONS	83
PART X DIRECTORS, RESPONSIBLE PERSONS, SENIOR MANAGEMENT, CORPORATE GOVERNANCE AND EMPLOYEES	87
PART XI ADDITIONAL INFORMATION	112
APPENDIX I DEFINITIONS	130
APPENDIX II RELEVANT DOCUMENTATION	136
NOTICE OF GENERAL MEETING	137

(This page has been left blank intentionally.)

SUMMARY

Summaries are made up of disclosure requirements known as 'Elements'. These elements are numbered in sections A — E (A.1 — E.7). This summary contains all the Elements required to be included in a summary for this type of securities and issuer. Because some Elements are not required to be addressed, there may be gaps in the numbering sequence of the Elements. Even though an Element may be required to be inserted in the summary because of the type of securities and issuer, it is possible that no relevant information can be given regarding the Element. In this case a short description of the Element is included in the summary with the mention of 'not applicable'.

	Section A — Introduction and warnings
Element	Disclosure Requirement	Disclosure
A.1	Warning	This summary should be read as an introduction to this document. Any decision to invest in the New Ordinary Shares should be based on consideration of this document as a whole. Where a claim relating to the information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the member states of the EEA, have to bear the costs of translating this document before the legal proceedings are initiated. Civil liability attaches only to those persons who have tabled the summary including any translation thereof, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of this document or it does not provide, when read together with the other parts of this document, key information in order to aid investors when considering whether to invest in such securities.
A.2	Resale or final placement of securities through financial intermediaries	Not applicable. Costain is not engaging any financial intermediaries for any resale of securities or final placement of securities after publication of this document.

	Section B — Issuer
Element	Disclosure Requirement	Disclosure
B.1	Legal and commercial name	Costain Group PLC.
B.2	Domicile / legal form / legislation under which the issuer operates / country of incorporation	The Company is incorporated in England as a public limited company, limited by shares. Its registered office is situated in England and its registered number is 01393773. The principal legislation under which the Company operates is the Companies Act 2006.

	Section B — Issuer
Element	Disclosure Requirement	Disclosure
B.3	Current operations / principal activities / principal markets	Costain is one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services to major blue-chip customers in targeted market sectors. Costain focuses on major customers who are continuing to invest billions of pounds in capital, operations and maintenance contracts to address essential national infrastructure requirements across the transport, energy, water and waste sectors.
		In November 2012, the Group announced the formation of a new operational structure of two core divisions, with effect from 1 January 2013: the Natural Resources operating division, encompassing the Group's activities in the water, oil and gas, nuclear process and waste sectors; and the Infrastructure division, which includes the Group's activities in the rail, highways, power and airport sectors. The operations of the two core divisions are predominantly based in the UK, with some operations in the rest of the world. The operations of the non-core Land Development activity are based in Spain.
		For the year ended 31 December 2013, revenue, including the Group's share of joint ventures and associates, for the year was £960.0 million (2012: £934.5 million). Costain's focus on higher margin activities led to an increase of 12% in Group underlying profit from operations of £27.4 million (2012: £24.5 million). Adjusted profit before tax was £31.0 million (2012: £28.1 million) and adjusted basic earnings per share were 44.1 pence (2012: 39.7 pence).
B.4a	Most significant	Industry
recent trends of the Company and its industry	During 2012 and 2013 the Company saw a continuing trend amongst its major customers to consolidate their supply chains, as they seek to derive business benefits by working in a much more strategic and collaborative manner with a reduced number of preferred tier one service providers who have the ability to deliver the entirety of their service needs.
		As a consequence, the Company's customers are rapidly changing their procurement approach, consolidating a broader range of services across consulting, project delivery and operations activities into larger, longer term contracts. As examples of this trend, in 2012 the Company was appointed by Magnox as one of two service providers under a 10-year framework contract that now covers all ten of their UK nuclear sites, and the Company was appointed by the Oil & Pipelines Agency on a 3-year operations and maintenance contract that now covers the whole of their estate.
		Costain
		To meet its customers' evolving requirements, the Company has been transformed in recent times. It now delivers engineering services across the full asset life-cycle, from advisory and design to operations and maintenance.
		In 2013, Costain was awarded new contracts and extensions worth more than £1.5 billion to the Costain Group. The range of contracts won by Costain reflects the transition in Costain's market positioning, the increased breadth of its service offering (achieved both organically and through targeted in-fill acquisitions) and its customers' endorsement of Costain as a tier one engineering solutions provider.

	Section B — Issuer
Element	Disclosure Requirement	Disclosure
		The Directors believe that Costain's collaborative approach and reputation for excellent delivery are primary factors behind its ability to secure such a high level of repeat order business. Additionally, the increasingly strategic nature of Costain's long-term customer relationships has ensured that over 90% of the order book is now for some form of target cost, cost reimbursable contract. Whilst this has contributed to the reduction in Costain's net cash balance, it has also significantly improved the risk profile of the Costain Group and afforded Costain increased visibility over long term margins for its projects in the future.
		The Directors intend to continue to grow the business both organically and by targeted acquisition. Since 30 June 2013, Costain has announced the acquisition of EPC Offshore and the launch of Costain Upstream, which will deliver a broad range of engineering services for assets in the upstream oil and gas sector.
B.5	Group structure	Costain is the parent company of the Costain Group. The following table contains a list of the principal subsidiaries of Costain as at the date of this document.
			Percentage ownership
		Name	interest
		Principal Costain subsidiaries ClerkMaxwell Limited Costain Abu Dhabi Co WLL Costain Limited Costain Building & Civil Engineering Limited . Costain Engineering & Construction Limited Costain Oil, Gas & Process Limited Promanex (Civils & Industrial Services) Limited Promanex (Construction & Maintenance Services) Limited . Promanex (Total FM & Environmental Services) Limited Richard Costain Limited EPC Offshore Ltd	100 49 100 100 100 100 100 100 100 100 100
B.6	Notifiable interests	As at 26 February 2014 (being the latest practicable date prior to the publication of this document), the Company had been notified in accordance with DTR5 of the Disclosure and Transparency Rules of the following interests in its Ordinary Shares:
		Number of Shares	Percentage interest of issued ordinary share capital
		UEM Builders Berhad 13,810,850 Mohammed Abdulmohsin Al-Kharafi & Sons Co. WLL 13,789,490	20.7% 20.6%
		Save as disclosed in this section, Costain is not aware of any person who, as at 26 February 2014 (being the latest practicable date prior to the publication of this document), directly or indirectly, has a holding which is notifiable under English law.
		Costain and the Costain Directors are not aware of any persons who, as at 26 February 2014 (being the latest practicable date prior to the publication of this document), directly or indirectly, jointly or severally, exercise or could exercise control over Costain nor is it aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.

Section B — Issuer
Element	Disclosure Requirement	Disclosure
	Different voting rights / controlling interests	Not applicable; none of the Company's major shareholders have different voting rights.
		Not applicable; to the extent known to the Company, the Company is not directly or indirectly owned or controlled by any person or any group of persons.
B.7	Historical key financial information for the Company	Selected historical financial information relating to Costain which summarises the financial condition of Costain for the four financial years ended 31 December 2013 is set out in the following table.
		Statement of financial position (2012 has been restated for consistency with 2013 — changes resulting from IAS 19 (revised))
			Audited financial results for the year ended 31 December 2010	Audited financial results for the year ended 31 December 2011	Audited financial results for the year ended 31 December 2012	Unaudited preliminary financial results for the year ended 31 December 2013
		Total non-current assets	87.0	(£m) 108.4	103.1	104.8
		Total current assets	309.3	332.0	290.6	276.5
		Total assets Total liabilities	396.3 (358.7)	440.4 (409.6)	393.7 (361.9)	381.3 (338.0)
		Total net assets/ (liabilities)	37.6	30.8	31.8	43.3
		Consolidated income statement
					Audited	Unaudited
			Audited financial results for the year ended 31 December 2010	Audited financial results for the year ended 31 December 2011	financial results for the year ended 31 December 2012 (restated)	preliminary financial results for the year ended 31 December 2013
				(£m)
		Revenue Less: Share of revenue of joint ventures and	1,022.5	986.3	934.5	960.0
		associates	(98.0)	(117.8)	(86.1)	(74.8)
		Group Revenue Cost of sales	924.5 (883.9)	868.5 (818.8)	848.4 (794.2)	885.2 (826.7)
		Gross profit Administrative costs	40.6 (23.2)	49.7 (25.6)	54.2 (29.1)	58.5 (31.1)
		Exceptional transaction
		costs Amortisation of acquired	—	—	—	(3.7)
		intangibles Employment related and other deferred	—	(0.9)	(1.7)	(1.8)
		consideration Operating profit before	—	(0.7)	(1.7)	(2.8)
		exceptional items Share of results of joint ventures and associates (2013 includes land expense, which the	17.4	22.5	18.3	19.1
		Company may wish to show separately) Profit on sales of interests	(0.5)	(1.3)	(1.4)	(11.3)
		in joint ventures and associates	12.5	0.8	10.5	9.1
		Finance income Finance costs	30.7 (32.2)	34.1 (32.2)	1.0 (3.7)	0.7 (4.7)
		Profit before tax	27.9	23.9	24.7	12.9
		Tax on profit Profit attributable to equity	(4.8)	(5.2)	(1.6)	(0.4)
		holders Basic earnings per	23.1	18.7	23.1	12.5
		share (p)	36.4p	29.2p	35.4p	18.8p
		Diluted earnings per share (p)	35.4p	28.2p	34.2p	18.1p
		In the financial years ending 31 December 2010, 2011, 2012 and 2013 the Costain £986.3 million, £934.5 million and £960.0 million respectively.	Group's	revenue	was £1,022.5	million,

Section B — Issuer
Element	Disclosure Requirement	Disclosure
		Adjusted profit from operations in the 2010, 2011, 2012 and 2013 financial years was £29.4 million, £23.6 million, £30.8 million and £35.0 million respectively. The Costain Group's profit operations in 2013 increased compared to 2012 due to a profit of £9.1 million on the sale of three joint venture companies and a continued focus on higher margin work, including increased engineering consultancy work. The Costain Group's profit from operations in 2012 increased compared to 2011 due to the net contribution of £7.7 million from a profit of £10.5 million from the transfer of assets in to the Costain Pension Scheme less a £2.8 million pension liability management cost in 2012 and a focus on higher margin work. The Costain Group's profit from operations in 2011 decreased compared to 2010 due to a profit of £11.2 million in 2010 from the transfer of assets into the Costain Pension Scheme. Excluding this item, the profit from operations increased on a like-for-like basis from £18.2 million to £23.6 million from 2010 to 2011. The order book for the Costain Group in the 2010, 2011, 2012 and 2013 financial years was £2.4 billion, £2.5 billion, £2.4 billion and £3.0 billion respectively. The net cash balance for the same periods was £144.3 million, £140.1 million, £105.7 million and £57.7 million respectively. The factors contributing to the reduction in the 2012 year-end cash balance compared to 2011 and 2013 compared		from
		to 2012 include the transition to target cost based contracts, a lower level of customer advance payments, the cash flow implications of a delayed contract and an increasing emphasis on support services activities. Save as set out above, there has been no significant change to Costain's financial condition and operating results during or subsequent to the period covered by the historical key financial information on Costain set out in this section.
B.8	Selected key pro forma financial information	Selected pro forma financial information which illustrates the effect of the Capital Raising on the Costain Group's net assets as if it had occurred on 31 December 2013 is set out below. The unaudited pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and therefore does not represent the Costain Group's actual financial position or results.
			Costain as at		Adjustments	Pro forma as at
			31 December 2013 (unaudited)	Issue of New Ordinary Shares	Transaction costs	31 December 2013 (unaudited)
		Total non-current assets	£m 104.8	—	—	£m 104.8
		Total current assets Total assets	276.5 381.3	75.1 75.1	(4.8) (4.8)	346.8 451.6
		Total current liabilities Total non-current liabilities	296.1 41.9	— —	— —	296.1 41.9
		Total liabilities Net assets	338.0 43.3	— 75.1	— (4.8)	338.0 113.6
B.9	Profit forecast and estimate	Not applicable; Costain has not made a profit forecast or estimate.

Section B — Issuer
Element	Disclosure Requirement	Disclosure
B.10	Qualifications in the audit reports	Not applicable; the audit reports on the historical financial information contained in, or incorporated by reference into, this document are not qualified.
B.11	Working capital explanation	Not applicable; Costain is of the opinion that, after taking into account existing available facilities, the working capital available to the Costain Group is sufficient for its present requirements, that is for at least the next 12 months from the date of publication of this document.

Section C — Securities
Element	Disclosure Requirement	Disclosure
C.1	Type and the class of the securities	Costain will issue 33,382,068 Ordinary Shares pursuant to the Capital Raising. The ISIN the New Ordinary Shares will trade under is GB00B64NSP76.
C.2	Currency of the securities issue	The Existing Ordinary Shares are priced in Pounds Sterling, and the New Ordinary Shares will be quoted and traded in Pounds Sterling.
C.3	Shares issued / value per share	As at 26 February 2014 (being the latest practicable date prior to the publication of this document) the Company has in issue 66,812,868 fully paid Ordinary Shares of 50 pence each.
C.4	Description of the rights attaching to the securities	The New Ordinary Shares will be issued credited as fully paid and with the exception of the proposed final dividend for the year ended 31 December 2013, the New Ordinary Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Costain.
		Subject to any special rights, restrictions or prohibitions as regards voting for the time being attached to any Ordinary Shares (for example, in the case of joint holders of a share, the only vote which will count is the vote of the person whose name is listed before the other voters on the register for the share), Costain Shareholders shall have the right to receive notice of and to attend and vote at general meetings of Costain. Subject to the provisions of the Companies Act, Costain may from time to time declare dividends and make other distributions on the Ordinary Shares. Costain Shareholders are entitled to participate in the assets of Costain attributable to their shares in a winding-up of Costain or other return of capital, but they have no rights of redemption.
C.5	Restrictions on free transferability of the securities	Not applicable; there are no restrictions on the free transferability of the Ordinary Shares.
C.6	Admission / regulated markets where the securities are traded	Application will be made to the UK Listing Authority and to the London Stock Exchange for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that admission of the New Ordinary Shares will become effective, and that dealings in the New Ordinary Shares will commence, by 8.00 a.m. on 18 March 2014.

	Section C — Securities
Element	Disclosure Requirement	Disclosure
C.7	Dividend policy	For the year ended 31 December 2013, the Board of Costain has proposed an increased final dividend of 7.75 pence per share (2012: 7.25 pence per share). This, together with the 2013 interim dividend of 3.75 pence per share, represents a total dividend for the year ending 31 December 2013 of 11.5 pence per share (2012: 10.75 pence per share), equivalent to an increase of 7% over the prior year and representing a seventh successive year of increase.
		The proposed final dividend is payable in respect of the Existing Ordinary Shares only and is subject to approval by Shareholders at the General Meeting to be held on 17 March 2014. If approved, it will be paid on 25 April 2014 to Shareholders on the register at the close of business on the Record Date. The Ex-Dividend Date will be 12 March 2014.
		With the exception of the proposed final dividend for the year ended 31 December 2013, the New Ordinary Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Costain.

	Section D — Risks
Element	Disclosure Requirement	Disclosure
D.1	Key information on the key risks that are specific to the Company or its industry	Key information on the key risks specific to Costain and its industry are: • The global economy has deteriorated in recent years and the outlook remains uncertain. If either or both of the United Kingdom's and the world's economy deteriorate further, there may be volatility in exchange rates, increases in exchange rates or inflation and the business, financial condition and results of the Costain Group may be adversely affected. The current uncertainty about economic recovery and the pace of growth may also negatively affect the level of demand from existing and prospective customers. • Two customers, each through multiple contracts, each accounted for more than 10% of the Costain Group's revenue in the year ended 31 December 2013. Each of these two customers have a number of contracts with the Costain Group currently in force. If multiple contracts with either of these customers are not renewed or are terminated, or, to the extent relevant, if contract negotiations, amendments or documentation are not satisfactorily resolved or, to the extent relevant, if the Costain Group's business is not able to replace lost turnover with profitable new contracts in a timely manner, the Costain Group's business, results of
		operations or financial condition could be materially adversely affected.

Section D — Risks
Element	Disclosure Requirement	Disclosure
		• Certain of the Costain Group's operations are dependent on government policy with regard to improving public infrastructure, buildings and services, notably in the education, roads, health, secure establishments and defence sectors. The UK Government may decide in future to change its priorities and programmes, including reducing present or future investment in transport, health or defence projects or other areas in which the Costain Group would expect to compete for work. Any reduction in such government investment and funding may adversely affect the Costain Group's future revenues and profitability in the relevant sectors.
		• The Costain Group is reliant on its supply chain. If a sub-contractor or supplier of goods or services fails financially or is responsible for late or inadequate delivery or poor quality of work on a project then it could damage the Costain Group's reputation and/or cause it to suffer financial losses. Any sub-contractor employed by the Costain Group would be likely to be subject to the same challenging market conditions as the Costain Group, probably increasing the risk of its financial failure compared with the risk during more favourable conditions.
		• Failure to follow best practice guidelines could mean that projects are not delivered to time, cost, quality or appropriate health and safety and environmental standards and therefore do not meet customers' expectations. Failure to follow Company standards, policies, procedures and guidelines could adversely affect the Costain Group's reputation and/or expose the Costain Group to financial liabilities and adversely affect the operational, financial and share price performance.
		• Over a number of years, the Costain Board has sought to address the deficit of the Costain Pension Scheme, a defined benefit pension scheme. Recent and prospective changes in the regulatory environment and funding requirement principles may lead to requirements to increase funding in respect of the scheme in future years. This could have an adverse impact on the Costain Group's operational results and cash flow.
D.3	Key information on the key risks that are specific to the securities	Key information on the key risks specific to the New Ordinary Shares are: • Prospective investors should be aware that the value of an investment in New Ordinary Shares may go down as well as up and any fluctuations may be material and may not reflect the underlying asset value. For example, following the Capital Raising, operating results and prospects from time to time may be below expectations of market analysts and investors, which could result in a decline in the market price of the New Ordinary Shares. • Any future issue of shares will further dilute the holdings of Costain Shareholders and could adversely affect the market price of Ordinary Shares. For example, an additional offering, or significant sales of Ordinary Shares by major Shareholders, could have a material adverse effect on the market price of Ordinary Shares as a whole.

Section E — Offer
Element	Disclosure Requirement	Disclosure
E.1	Total net proceeds and costs of the issue	The Company expects to raise net proceeds of approximately £70.3 million through the Capital Raising after deduction of estimated expenses of approximately £4.8 million. No expenses will be charged by the Company to Shareholders who acquire New Ordinary Shares.
E.2a	Reasons for the offer / use of the proceeds	The Costain Directors believe that the Capital Raising will enable Costain to take greater advantage of the opportunities in its chosen markets and thereby accelerate the Group's medium and long term growth prospects.
		Specifically, the proceeds will be utilised:
		• to demonstrate to customers the Group's financial capacity to support the anticipated further increases in contract size and duration;
		• to invest in innovation and technology necessary to enhance the service offering to customers;
		• to finance bid costs associated with a greater number of large scale projects for which the Company is in a position to tender;
		• to fund likely increased working capital requirements arising from the move in the market towards target cost, cost reimbursable contracts;
		• to provide flexibility to make selected in-fill acquisitions to complement Costain's existing capabilities as opportunities arise; and
		• for general corporate purposes.
E.3	Terms and conditions of the offer	The Bookrunners, as agents of the Company, have made arrangements to conditionally place the Firm Placing Shares at the Offer Price pursuant to the Placing Agreement. The Bookrunners, as agents of the Company, have also made arrangements to conditionally place all of the Placing Shares with institutional investors on behalf of the Company at the Offer Price, subject to clawback by Qualifying Shareholders in order to satisfy valid applications under the Open Offer.
		The Offer Price of 225 pence per New Ordinary Share represents an effective 29.6% discount to the Closing Price of 319.5 pence on 26 February 2014, being the Business Day prior to the announcement of the Capital Raising. The Offer Price has been set by the Directors following their assessment of market conditions and following discussions with a number of institutional investors. The Directors are in agreement that the level of discount and method of issue are appropriate to secure the investment necessary.
		The Capital Raising is conditional upon the following:
		• the First Resolution being passed by Shareholders at the General Meeting;
		• the Placing Agreement becoming unconditional; and
		• Admission becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

	Section E — Offer
Element	Disclosure Requirement	Disclosure
		Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Capital Raising will not proceed and any Open Offer Entitlements admitted to CREST will thereafter be disabled.
		Costain has received irrevocable undertakings from Costain Shareholders and certain Directors who hold Ordinary Shares in respect of approximately 42% of Costain's existing issued share capital to vote in favour of the First Resolution and the Second Resolution to be proposed at the General Meeting relating to, amongst other things, the Capital Raising.
E.4	Interests that are material to the issue / conflicting interests	Not applicable; there are no interests, known to the Company, material to the issue of New Ordinary Shares or which are conflicting interests.
E.5	Name of the offeror / lock-up agreements	Costain Group PLC. Both Kharafi and UEM have agreed not to dispose of any Ordinary Shares in the Group, save in certain specified circumstances, for a period of 6 months from the date of this document.
E.6	Dilution	Following the issue of New Ordinary Shares to be allotted pursuant to the Capital Raising, Qualifying Shareholders who take up their full Open Offer Entitlements will suffer a dilution of up to 11.1% to their interests in the Company.
		Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of up to 33.3% to their interests in the Company.
E.7	Estimated expenses charged to the investor	Not applicable; no expenses will be directly charged to the investor by Costain.

RISK FACTORS

Any investment in Costain or in the New Ordinary Shares carries a number of risks. Prospective investors should review this prospectus carefully and in its entirety (together with any documents incorporated by reference into it) and consult with their professional advisers before acquiring any New Ordinary Shares. You should carefully consider the risks and uncertainties described below, together with all other information in this document and the information incorporated into this document by reference, before making any investment decision. Prospective investors should note that the risks relating to the Costain Group, its industry and the New Ordinary Shares summarised in the section of this document headed 'Summary' are the risks that the Costain Directors believe to be most essential to an assessment by a prospective investor of whether to consider an investment in such securities.

The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the New Ordinary Shares and should be used as guidance only. Additional risks and uncertainties relating to the Costain Group that are not currently known to the Costain Group, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the Costain Group's business, prospects, results of operations and financial position and, if any such risk should occur, the price of such securities may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the New Ordinary Shares is suitable for them in the light of the information in this document and their personal circumstances.

The information given is as of the date of this document and, except as required by the FCA, the London Stock Exchange, the Listing Rules, the Prospectus Rules or any other applicable law, will not be updated. Any forward looking statements are made subject to the reservations specified under 'Forward Looking Statements' on page 18 of this document.

Risks relating to the Costain Group

1. Adverse economic conditions

The global economy has deteriorated in recent years and the outlook remains uncertain. This deterioration has affected countries worldwide, including the United Kingdom and other countries in which the Costain Group currently operates. Global concerns over issues such as inflation, geopolitical issues, terrorism, energy costs, the availability and cost of credit, sovereign debt levels, and the possible break-up of the Eurozone, have contributed to and diminished expectations for national and global economies in the medium to long-term.

If either or both of the United Kingdom's and the world's economy deteriorate further, there may be volatility in exchange rates, increases in exchange rates or inflation and the business, financial condition and results of the Costain Group may be adversely affected.

The current uncertainty about economic recovery and the pace of growth may also negatively affect the level of demand from existing and prospective customers. Additional factors that could influence customer demand include access to credit, budgetary constraints, unemployment rates, affordability concerns and consumer confidence. These factors affect customers' ability and confidence to place orders and may lead to a rise in the number of customers who are not able to pay for the services, which, in turn, may affect the revenue streams of the Costain Group.

2. Competition

Contractors are required to compete for new work, which is won through a process of competitive tendering or bilateral negotiation. The contractor's reputation, prior experience with the client and pricing will all have a bearing on gaining new work. The failure by the Costain Group to compete effectively on these criteria could reduce their revenue, profitability and cash flow.

The Costain Group competes with international, national and local support services and construction groups. Some of these groups are larger than the Costain Group and have greater financial, technical and operating capabilities. The sectors in which the Costain Group operates are highly competitive on the basis of both price and service. As a result of this competition, the Costain Group may suffer the risk that it may fail to win new contracts in its chosen growth markets or may fail to win contracts which are sufficiently profitable to maintain and improve the financial condition of the Costain Group.

3. Environmental, health and safety laws, regulations and standards

The Costain Group is subject to a broad range of laws, regulations and standards, including those relating to pollution, the health and safety of employees, protection of the public, protection of the environment and the storage and handling of hazardous substances and waste materials. These regulations and standards are becoming increasingly stringent.

It is the policy of the Costain Group to require that all subsidiaries, employees, suppliers and sub-contractors comply with applicable laws, regulations and standards. However, violations of such laws, regulations and standards, in particular, environmental and health and safety laws, could result in restrictions on the operations of the Costain Group's sites, damages, fines or other sanctions, increased costs of compliance, potential reputational damage and potential loss of future contracts.

4. Major incident exposing an inadequate safety regime

The nature of the business conducted by the Costain Group requires the adoption and maintenance of a rigorous health and safety programme. The Costain Group works on a number of significant and high profile projects and therefore its health and safety performance is critical to the success of all areas of the Costain Group's business. The Costain Group takes the management of both operational and occupational safety seriously. Any failure in health and safety performance which results in a major or significant health and safety incident is likely to be costly for the relevant business in terms of potential liabilities incurred as a result. If the Costain Group's disaster recovery procedures are not sufficient to mitigate the harm that may result from such a disaster or disruption, it could have an adverse effect on the Costain Group's future prospects, financial condition and results of operations. Furthermore, such a failure could generate significant adverse publicity and have a negative impact on the Costain Group's reputation and its ability to win new business, which in turn could adversely affect its operating, financial and share price performance.

5. Interruption or failure of information technology ('IT') systems

The efficient operation and management of the Costain Group's businesses depends in part on the proper operation, performance and development of their IT systems and processes. New IT systems and change management systems may not be successfully implemented and managed. These factors may lead to an IT environment that is inadequate to support the needs and objectives of the Costain Group's business. A significant performance failure of the Costain Group's IT systems could lead to loss of control over critical business information and/or systems (such as contract costs, invoicing, payroll management and/or internal porting), resulting in an adverse impact on the ability of the business affected to operate effectively or to fulfil its contractual obligations which may in turn lead to a loss of custom, revenue and profitability and the incurring of significant consequential and remedial costs.

6. Failure to attract, develop and retain appropriately skilled management or personnel

The success of the Costain Group is dependent on recruiting, retaining, motivating and developing sufficient appropriately skilled and competent people at all levels of its organisation. The Costain Group faces intense competition for personnel from other companies and organisations. There may at any time be shortages in the availability of appropriately skilled people at all levels within the Costain Group and these shortages may have a negative effect on the business. The Costain Group's success depends, to a significant extent, on the continued services of its senior management team, which has substantial knowledge of, and experience and expertise in, the industry. The members of the senior management team contribute to the Costain Group's ability to obtain, generate, manage and develop opportunities. If the Costain Group is unable successfully to attract and retain such personnel, it may not be able to maintain standards of service or continue to grow its business as anticipated. The loss of such personnel, or the inability to attract and retain additional appropriately skilled employees required for its activities, could have an adverse effect on the Costain Group's business and prospects. There is no guarantee that any of the senior management team will remain employed by the Costain Group. The loss of services of key members of the senior management team and the failure to maintain a robust management reporting process may lead to a lack of, or inadequate, information being provided to decision makers in the Costain Group's business which could have an adverse effect on the future prospects, financial conditions or results of operations of the Costain Group.

7. Dividends

Costain is the ultimate holding company of the Costain Group. Costain will therefore be entirely dependent on the cash flows from its subsidiaries to pay dividends to its shareholders (to the extent the boards of those companies consider it appropriate so to do). The future prospects, financial condition and results of operations of Costain are primarily dependent on the respective trading performance of members of its Group and upon the level of distributions, interest payments and loan repayments, if any, received from them and upon any amounts received on asset disposals and the level of their respective cash balances. The failure of the Costain Group's subsidiaries to generate profits and cash may result in Costain having insufficient funds to make dividend payments to its shareholders.

8. Loss of material contracts

Two customers, each through multiple contracts, each accounted for more than 10% of the Costain Group's revenue in the year ended 31 December 2013. Each of these two customers have a number of contracts with the Costain Group currently in force. If multiple contracts with either of these customers are not renewed or are terminated, or, to the extent relevant, if contract negotiations, amendments or documentation are not satisfactorily resolved or, to the extent relevant, if the Costain Group's business is not able to replace lost turnover with profitable new contracts in a timely manner, the Costain Group's business, results of operations or financial condition could be materially adversely affected.

Costain also relies on continuing existing strategic relationships and forming new ones with joint venture partners. The Costain Group's business derived 33% of its turnover from activities carried out in joint venture during the year to 31 December 2013. There can be no assurance that such existing relationships will continue to be maintained or that new ones will be successfully formed. The Costain Group's business, financial condition and results of operations and prospects could therefore be materially adversely affected by changes to such relationships or difficulties in forming new ones.

9. Change of government policy

Certain of the Costain Group's operations are dependent on government policy with regard to improving public infrastructure, buildings and services, notably in the education, roads, health, secure establishments and defence sectors. The UK Government may decide in future to change its priorities and programmes, including reducing present or future investment in transport, health or defence projects or other areas in which the Costain Group would expect to compete for work. Any reduction in such government investment and funding may adversely affect the Costain Group's future revenues and profitability in the relevant sectors.

10. Contract mobilisation and bidding

If Costain is unable to estimate accurately the overall risks, revenues or costs on a particular contract, then a lower than anticipated profit may be achieved or a loss incurred on such contract. The Costain Group generally enters into four principal types of contracts with clients: fixed price contracts; 'cost plus' or 'target cost' contracts; framework contracts with clients that span a number of years and incorporate an agreed mechanism for bearing costs and sharing profits; and long-term PFl projects.

A significant proportion of the Costain Group's business depends for its profit on costs being controlled and projects being completed on time, such that costs are contained within the pricing structure of the relevant contract.

The market in which Costain operates is moving away from fixed price contracts and towards 'target cost' contracts, which are more suited to long term, complex projects and are lower risk for Costain as programme deliverer. 'Target cost' contracts provide for reimbursement of the costs required to complete a project, but generally have a lower base fee and an incentive fee based on cost and/or scheduled performance. If actual costs exceed the revenues available under such a contract or are not allowable under the provisions of the contract, the Costain Group may not receive reimbursement for all of these costs.

Cost overruns, whether due to inefficiency, poor design or design faults where the contractor has design responsibilities, faulty estimates, cost escalation, and/or cost overruns by sub-contractors or other factors, result in lower profit or a loss on a project. A significant number of contracts are based in part on cost estimates that are subject to a number of assumptions. If estimates of the overall risks, revenues or costs prove inaccurate or circumstances change, then a lower profit or a loss on the contract may result. Moreover, if the Costain Group fails to win major work from a key client, this could cause short-term turnover and profitability issues.

The Costain Group's contracts may require extra or change order work as directed by the customer even if the customer has agreed in advance on the scope or price of the work to be performed. This process may result in disputes over whether the work performed is beyond the scope of the work included in the original project plans and specifications or, if the customer agrees that the work performed qualifies as extra work, the price the customer is willing to pay for the extra work. Even when the customer agrees to pay for the extra work, the Costain Group may be required to fund the cost of such work for a period of time until the change order is approved and funded by the customer.

11. Sub-contractor and supplier failure

The Costain Group is reliant on its supply chain. If a sub-contractor or supplier of goods or services fails financially or is responsible for late or inadequate delivery or poor quality of work on a project then it could damage the Costain Group's reputation and/or cause it to suffer financial losses. Any sub-contractor employed by the Costain Group would be likely to be subject to the same challenging market conditions as the Costain Group, probably increasing the risk of its financial failure compared with the risk during more favourable conditions.

12. Procurement delay or failure

Certain government-related projects on which the Costain Group may work may require relevant approvals from government ministers or senior civil servants. It is possible that, due to difficulties obtaining such approvals, projects may be delayed before procurement has started, during the tender stage or during the period between the appointment of a preferred bidder and the exchange of contracts. These matters are likely to be beyond the control of the Costain Group and any resulting delays could affect future revenue streams of the Costain Group and have an adverse impact on the Costain Group's businesses, results of operations and financial condition.

13. Operational delivery

Failure to follow best practice guidelines could mean that projects are not delivered to time, cost, quality or appropriate health and safety and environmental standards and therefore do not meet customers' expectations. Failure to follow Company standards, policies, procedures and guidelines could adversely affect the Costain Group's reputation and/or expose the Costain Group to financial liabilities and adversely affect the operational, financial and share price performance.

14. Pension liabilities

Over a number of years, the Costain Board has sought to address the deficit of the Costain Pension Scheme, a defined benefit pension scheme which has been closed to new members since 1 June 2005 and to future accrual since 1 October 2009.

As at 31 December 2013, the Group's pension scheme deficit in accordance with IAS 19, net of deferred tax, was £29.4 million (2012: £40.0 million). The scheme deficit position has reduced primarily as a result of the return on assets and Company contributions exceeding the increased liabilities arising from changes in the financial assumptions.

Pensions legislation requires the Costain Pension Trustee, having taken actuarial advice, to determine appropriately prudent assumptions to value the liabilities of the Costain Pension Scheme. Those assumptions must be agreed with the sponsoring employer or, in default of such agreement, determined by the Pensions Regulator. This process determines the value of the Costain Pension Scheme's liabilities for statutory ongoing funding purposes and, to the extent there is a shortfall in the Costain Pension Scheme's assets as against that value, the Costain Pension Trustee must agree with the employer (or have set by the Pensions Regulator) a recovery plan setting out a programme for clearing the deficit.

A recovery plan, based on the results of the actuarial valuation of the Costain Pension Scheme carried out as at 31 March 2010, was agreed with the Costain Pension Trustee, and the Costain Group has complied with the provisions of that plan. In February 2012, the Costain Group announced two further actions being taken to manage the obligations in the Costain Pension Scheme. The first of these was the transfer of the Costain Group's interest in two PFI investments into the Costain Pension Scheme at an

agreed value of £20.3 million which was completed on 22 February 2012 and resulted in an accounting profit on the transfer of £10.5 million. The second action was the implementation of Enhanced Transfer Value ('ETV') and Pension Increase Exchange ('PIE') offers to the members of the Costain Pension Scheme. The ETV and PIE exercises have now been completed and resulted in a reduction in the scheme liabilities and assets of approximately £35 million and has resulted in a one-off accounting cost of £2.8 million expensed in 2012.

In accordance with the requirement for a triennial review, a full actuarial valuation of the Costain Pension Scheme as at 31 March 2013 is being carried out. The Costain Pension Trustee and the relevant members of the Costain Group are currently reviewing the provisional results of the actuarial valuation as at 31 March 2013 with a view to agreeing a new recovery plan (setting out a programme for clearing the deficit) following the completion of the review. The Costain Directors do not anticipate that the new recovery plan will require additional contributions, in excess of those required under the existing plan, to be made in the short-term.

The value of the deficit recognised in the Costain Group's balance sheet pursuant to IAS 19 is dependent on the market value of the assets of the Costain Pension Scheme and certain critical assumptions in relation to the value of the liabilities of the Costain Pension Scheme including mortality rates, inflation levels and investment returns and is likely to vary from year to year. Recent and prospective changes in the regulatory environment and funding requirement principles may lead to requirements to increase funding in respect of the scheme in future years (possibly to a level in excess of that needed to achieve solvency on an IAS 19 basis). The powers of the Pensions Regulator may also impact on any plans to make returns of capital from the Costain Group to Costain Shareholders. For example, the Pensions Regulator has powers to levy contribution notices and financial support directions in certain circumstances in order to ensure that additional contributions are paid into a pension scheme or that other financial support is put in place to the benefit of a pension scheme. In the event that the market value of the scheme's assets declines in relation to its assessed liabilities, the Costain Group may be required to increase its contributions to cover any further funding shortfalls. This could have an adverse impact on the Costain Group's operational results and cash flow.

15. Major shareholders

As at the date of this document, UEM Builders Berhad ('UEM') and Mohammed Abdulmohsin Al-Kharafi & Sons For General Trading, General Contracting And Industrial Structures W.L.L. ('Kharafi') hold approximately 20.7% and 20.6%, respectively, of the issued ordinary share capital of Costain Group PLC. In addition, Kharafi currently has a nominee on the Costain Board. Following completion of the Capital Raising, UEM and Kharafi are expected to each hold approximately 13.8% of the issued ordinary share capital of the Costain Group. Each of UEM and Kharafi are currently able to, and following the Capital Raising will continue to be able to, exercise a significant degree of influence over matters requiring Costain Shareholder approval, including the approval of significant corporate transactions, and this may have the effect of delaying, preventing or deterring a change in control of the Costain Group, could deprive Costain Shareholders of an opportunity to receive a premium for their Ordinary Shares as part of a sale of the Costain Group and might affect the market price of the Ordinary Shares. In addition, any decision by either of UEM or Kharafi to sell all or a portion of the Ordinary Shares held by it could adversely affect the market price of the Ordinary Shares.

16. Costain is exposed to geopolitical risk

Costain's operations may also be affected by political or economical instability in the countries in which it operates. Such instability could be caused by, among other things, terrorism, civil war, civil disorder, crime, workforce instability, change in government policy or the ruling party, extreme fluctuations in currency exchange rates or high inflation.

17. Insurance

the event that a material claim cannot be made under Costain's policies of insurance, or if the relevant counterparty refuses payment under Costain's policies, or if Costain is unable to renew its policies or obtain insurance coverage for new risks, this could adversely affect the future prospects and financial condition of Costain.

Risks relating to the Capital Raising

18. Prospective investors should be aware that the value of an investment in New Ordinary Shares may go down as well as up and any fluctuations may be material and may not reflect the underlying asset value

The market price of the New Ordinary Shares could be subject to significant fluctuations due to a change in sentiment in the market regarding the New Ordinary Shares. The fluctuations could result from national and global economic and financial conditions, the market's response to the Capital Raising, market perceptions of Costain and various other factors and events, including but not limited to regulatory changes affecting the Costain Group's operations, variations in the Costain Group's operating results, business developments of the Costain Group and/or its competitors and the liquidity of the financial markets. Furthermore, the Costain Group's operating results and prospects from time to time may be below the expectations of market analysts and investors. Any of these events could result in a decline in the market price of the New Ordinary Shares.

19. Any future issue of shares will further dilute the holdings of shareholders of the Costain Group and could adversely affect the market price of Ordinary Shares

Other than pursuant to the Capital Raising, Costain has no current plans for an offering of shares apart from possible offerings in relation to employee share plans or scrip dividend schemes. However, it is possible that Costain may decide to offer additional shares in the future either to raise capital or for other purposes. If Costain Shareholders did not take up such offer of shares or were not eligible to participate in such offering, their proportionate ownership and voting interests in Costain would be reduced and the percentage that their Ordinary Shares would represent of the total share capital of Costain would be reduced accordingly. An additional offering, or significant sales of shares by major shareholders, could have a material adverse effect on the market price of Ordinary Shares as a whole.

20. The market price for Ordinary Shares may decline below the Offer Price

There is no assurance that the public trading market price of the Ordinary Shares will not decline below the Offer Price. Should that occur, relevant Shareholders will suffer an immediate loss as a result. Moreover, there can be no assurance that, following Shareholders' acquisition of New Ordinary Shares, Shareholders will be able to sell their New Ordinary Shares at a price equal to or greater than the acquisition price for those shares.

21. Shareholders who do not (or who are not permitted to acquire New Ordinary Shares in the Firm Placing and/or the Open Offer) will experience dilution in their ownership of the Company

If Shareholders do not participate in the Firm Placing or subscribe in full for their Open Offer Entitlements to New Ordinary Shares under the Open Offer or are not eligible to participate in the Open Offer, their proportionate ownership and voting interests in Costain will be reduced and the percentage that their Ordinary Shares will represent of the total issued share capital of Costain will be reduced accordingly.

22. The ability of Overseas Shareholders to bring actions, or to enforce judgments, against Costain, the Costain Directors or the officers of Costain may be limited

The ability of an Overseas Shareholder to bring an action against Costain may be limited under law. Costain is a public limited company incorporated in England and Wales. The rights of holders of Ordinary Shares are governed by English law and the Costain Articles. These rights differ from the rights of shareholders in typical US corporations and some other non-UK corporations. An Overseas Shareholder may not be able to enforce a judgment against some or all of the Costain Directors and the Costain Group's executive officers. The majority of the Costain Directors and the Costain Group's executive officers are residents of the UK and none are citizens or residents of the United States. Consequently, it may not be possible for an Overseas Shareholder to effect service of process upon the Costain Directors and the Costain Group's executive officers within the Overseas Shareholder's country

of residence or to enforce against the Costain Directors and the Costain Group's executive officers judgments of courts of the Overseas Shareholder's country of residence based on civil liabilities under that country's securities laws. There can be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercial matters or any judgments under the securities laws of countries other than the UK against the Costain Directors or the Costain Group's executive officers who are residents of the UK or countries other than those in which judgment is made. In addition, English or other courts may not impose civil liability on the Costain Directors or the Costain Group's executive officers in any original action based solely on foreign securities laws brought against the Costain Group or the Costain Directors or the Costain Group's executive officers in a court of competent jurisdiction in England or other countries.

23. Overseas Shareholders may be subject to exchange rate risks

The Ordinary Shares are priced in Pounds Sterling, and will be quoted and traded in Pounds Sterling. In addition, any dividends Costain may pay will be declared and paid in Pounds Sterling. Accordingly, holders of Ordinary Shares resident outside the UK jurisdictions are subject to risks arising from adverse movements in the value of their local currencies against the Pound Sterling, which may reduce the value of the New Ordinary Shares, as well as that of any dividends paid.

24. Admission of the New Ordinary Shares may not occur when expected

Application for Admission of the New Ordinary Shares is subject to the approval (subject to satisfaction of any conditions which such approval is expressed) of the UK Listing Authority and Admission will become effective as soon as a dealing notice has been issued by the UK Listing Authority and the London Stock Exchange has acknowledged that the New Ordinary Shares will be admitted to trading. There can be no guarantee that any conditions to which Admission is subject will be met or that the UK Listing Authority will issue a dealing notice. See the 'Expected Timetable of Principal Events' on page 19 of this document for further information on the expected dates of these events.

FORWARD LOOKING STATEMENTS

Certain statements contained in this document, including those in the Parts headed 'Summary', 'Risk Factors', 'Letter from Chairman of Costain', 'Information on Costain' and 'Operating and Financial Review of Costain', constitute 'forward looking statements'. In some cases, these forward looking statements can be identified by the use of forward looking terminology, including the terms 'believes', 'estimates', 'plans', 'prepares', 'anticipates', 'expects', 'intends', 'may', 'will' or 'should' or, in each case, their negative or other variations or comparable terminology. Investors should specifically consider the factors identified in this document, which could cause actual results to differ, before making an investment decision. Such forward looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Costain, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such forward looking statements are based on numerous assumptions regarding Costain's present and future business strategies and the environment in which Costain will operate in the future. Such risks, uncertainties and other factors are set out more fully in the section of this document headed 'Risk Factors' and include, among others risks relating to: 'Adverse economic conditions'; 'Competition'; 'Environmental, health and safety laws, regulations and standards'; 'Major incident exposing an inadequate safety regime'; 'Failure to attract, develop and retain appropriately skilled management or personnel'; 'Dividends'; 'Loss of material contracts'; 'Change of government policy'; 'Contract mobilisation and bidding'; 'Sub-contractor and supplier failure'; 'Procurement delay or failure'; 'Pension liabilities'; and 'Major shareholders'. These forward looking statements speak only as at the date of this document. Except as required by the FCA, the London Stock Exchange or applicable law (including as may be required by the FCA's Listing Rules, Prospectus Rules and the Disclosure and Transparency Rules), Costain expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained in this document to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change. Please read the notes for this timetable set out below.

	Date (2014)
Record Time for entitlements under the Open Offer	6.00 p.m. 24 February
Announcement of the Capital Raising	27 February
Publication and posting of the Prospectus, Form of Proxy and Application Form	27 February
Ex-Entitlements Date for the Open Offer	27 February
Open Offer Entitlements credited to stock accounts of Qualifying CREST Shareholders in CREST	as soon as possible after 8.00 a.m. on 28 February
Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST (i.e. if your Open Offer Entitlements are in CREST and you wish to convert them to certificated form)	4.30 p.m. on 10 March
Latest time and date for depositing Open Offer Entitlements into CREST	3.00 p.m. on 11 March
Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only)	3.00 p.m. on 12 March
Ex-Dividend Date for 2013 final dividend	12 March
Record Date for the 2013 final dividend .	14 March
Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer or settlement of relevant CREST instruction (as appropriate)	11.00 a.m. on 14 March
Latest time and date for receipt of Forms of Proxy or electronic proxy appointments	10.00 a.m. on 15 March
General Meeting	10.00 a.m. on 17 March
Results of the Capital Raising announced through a Regulatory Information Service .	17 March
Admission and commencement of dealings in New Ordinary Shares .	by 8.00 a.m. on 18 March
New Ordinary Shares credited to CREST accounts (uncertificated holders only)	by 8.00 a.m. on 18 March
Expected despatch of definitive share certificates (where applicable) .	on or around 25 March
Payment of 2013 final dividend .	25 April

Notes:

⁽¹⁾ Each of the times and dates set out in the above timetable and mentioned in this document, the Application Form and in any other document issued in connection with the Capital Raising is subject to change by the Company (with the agreement of, in certain instances, Rothschild and the Bookrunners), in which event details of the new times and dates will be notified to the UK Listing Authority and, where appropriate, to Shareholders.

⁽²⁾ Any reference to a time in this document is to London time, unless otherwise specified.

⁽³⁾ The ability to participate in the Open Offer is subject to certain restrictions relating to Shareholders with registered addresses or located or resident in countries outside the UK, details of which are set out in Part IV (Terms and Conditions of the Capital Raising) of this document.

CAPITAL RAISING STATISTICS

Offer Price	225 pence per New Ordinary Share
Discount of New Ordinary Shares to the Closing Price on 26 February 2014 (being the last Business Day prior to the date of the announcement of the Capital Raising)	29.6%
Number of Ordinary Shares in issue at 26 February 2014 (being the latest practicable date prior to the publication of this document)	66,812,868
Number of New Ordinary Shares to be issued pursuant to the Capital Raising	33,382,068
Number of New Ordinary Shares to be issued by the Company pursuant to the Firm Placing	11,111,112
Number of New Ordinary Shares to be issued by the Company pursuant to the Placing and Open Offer	22,270,956
Number of Ordinary Shares in issue immediately following Admission(1)	100,194,936
New Ordinary Shares as a percentage of the Enlarged Share Capital immediately following Admission(1)	33.3%
Estimated gross proceeds of the Capital Raising	£ 75.1 million
Estimated net proceeds of the Capital Raising (after deduction of expenses) .	£ 70.3 million

Notes:

(1) On the assumption that no further Ordinary Shares are issued as a result of the exercise of any options under the Costain Share Schemes between 26 February 2014 (being the latest practicable date prior to the publication of this document) and Admission.

INFORMATION INCORPORATED BY REFERENCE

The following documents, which have been approved by, filed with or notified to the FCA, and which are available for inspection in accordance with section 16 of Part XI (Additional Information), contain information about Costain and the Costain Group which is relevant to this document:

Costain's Preliminary Results 2013, containing Costain's unaudited consolidated preliminary financial statements for the financial year ended 31 December 2013;
Costain's Annual Report and Accounts 2012, containing Costain's audited consolidated financial statement in respect of the financial year ended 31 December 2012, together with the audit report in respect of that period and a discussion of Costain's financial performance;
Costain's Annual Report and Accounts 2011, containing Costain's audited consolidated financial statement in respect of the financial year ended 31 December 2011, together with the audit report in respect of that period and a discussion of Costain's financial performance; and
Costain's Annual Report and Accounts 2010, containing Costain's audited consolidated financial statement in respect of the financial year ended 31 December 2010, together with the audit report in respect of that period and a discussion of Costain's financial performance.

The table below sets out the sections of these documents which are incorporated by reference into, and form part of, this document, and only the parts of the documents indentified in the table below are incorporated into, and form part of, this document. The parts of these documents which are not incorporated by reference are either not relevant for investors or are covered elsewhere in this document. To the extent that any part of any information referred to below itself contains information which is incorporated by reference, such information shall not form part of this document.

Reference document	Information incorporated by reference into this document	Page number(s) in reference document
For the year ended 31 December 2013
Preliminary Results for the year ended
31 December 2013	Chairman's Statement	3-5
Preliminary Results for the year ended
31 December 2013	Chief Executive's Review	8-11
Preliminary Results for the year ended
31 December 2013	Finance Director's Review	12-15
Preliminary Results for the year ended
31 December 2013	Consolidated Income Statement	18
Preliminary Results for the year ended
31 December 2013	Consolidated Statement of	19
	Comprehensive Income and Expense
Preliminary Results for the year ended
31 December 2013	Consolidated Statement of Changes in Equity	19-20
Preliminary Results for the year ended
31 December 2013	Consolidated Statement of Financial Position	20-21
Preliminary Results for the year ended
31 December 2013	Consolidated Cash Flow Statement	21-22
Preliminary Results for the year ended
31 December 2013	Notes to the Financial Statements	22-32
For the year ended 31 December 2012
Costain Annual Report and Accounts
2012	Overview	4-5
Costain Annual Report and Accounts
2012	Chairman's Statement	6-7
Costain Annual Report and Accounts
2012	Business Review	8-13

Reference document	Information incorporated by reference into this document	Page number(s) in reference document
Costain Annual Report and Accounts
2012	Chief Executive's Review	14-17
Costain Annual Report and Accounts 2012	Business Model	18-24
Costain Annual Report and Accounts 2012	Performing Responsibly	25-39
Costain Annual Report and Accounts 2012	Managing Risk	40-42
Costain Annual Report and Accounts 2012	Key Performance Indicators	42-43
Costain Annual Report and Accounts 2012	Group Finance Director's Review	44-47
Costain Annual Report and Accounts 2012	Auditor's report	76
Costain Annual Report and Accounts 2012	Consolidated Income Statement	78
Costain Annual Report and Accounts 2012	Consolidated Statement of	79
Costain Annual Report and Accounts	Comprehensive Income and Expense
2012	Consolidated Statement of Financial Position	80-81
Costain Annual Report and Accounts
2012	Consolidated Statement of Changes in Equity	82
Costain Annual Report and Accounts 2012 Costain Annual Report and Accounts	Consolidated Cash Flow Statement	83
2012	Notes to the Financial Statements	85-120
Costain Annual Report and Accounts 2012	Five-year financial summary	121
For the year ended 31 December 2011
Costain Annual Report and Accounts 2011	Overview	2-5
Costain Annual Report and Accounts 2011	Chairman's Statement	6-7
Costain Annual Report and Accounts
2011 Costain Annual Report and Accounts	Group CEO's Review	10-13
2011 Costain Annual Report and Accounts	Group Strategy	16
2011	Corporate Responsibility	26-37
Costain Annual Report and Accounts 2011	Business Review	27-30
Costain Annual Report and Accounts 2011	Risk Framework	38-40
Costain Annual Report and Accounts 2011	Financial Review	42-44
Costain Annual Report and Accounts 2011	Auditor's Report	72
Costain Annual Report and Accounts 2011	Consolidated Income Statement	74
Costain Annual Report and Accounts 2011	Consolidated Balance Sheet	76

Reference document	Information incorporated by reference into this document	Page number(s) in reference document
Costain Annual Report and Accounts
2011	Consolidated Statement of Changes in Equity	78
Costain Annual Report and Accounts
2011	Consolidated Cash Flow Statement	79
Costain Annual Report and Accounts
2011	Notes to the Accounts	81-116
Costain Annual Report and Accounts 2011	Five Year Record as at 31 December 2011	117
For the year ended 31 December 2010
Costain Annual Report and Accounts
2010	Group Strategy	8-9
Costain Annual Report and Accounts
2010	Group CEO's Review	18-21
Costain Annual Report and Accounts
2010 Costain Annual Report and Accounts	Business Review	26-33
2010	Financial Review	43-45
Costain Annual Report and Accounts
2010	Auditor's Report	71
Costain Annual Report and Accounts
2010	Consolidated Income Statement	74
Costain Annual Report and Accounts 2010	Consolidated Balance Sheet	76
Costain Annual Report and Accounts
2010	Consolidated Statement of Changes in Equity	78
Costain Annual Report and Accounts
2010	Consolidated Cash Flow Statement	79
Costain Annual Report and Accounts
2010	Notes to the Accounts	81-114
Costain Annual Report and Accounts 2010	Five Year Record as at 31 December	115
	2010

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

DIRECTORS

Andrew Wyllie Chief Executive

David Allvey Non-Executive Chairman Anthony Bickerstaff Group Finance Director James Morley Independent Non-Executive Director Michael Alexander Independent Non-Executive Director Jane Lodge Independent Non-Executive Director Ahmed Samy Non-Executive Director Alison Wood Independent Non-Executive Director

The business address of each of the Directors is the Company's registered address at Costain House, Vanwall Business Park, Maidenhead, Berkshire SL6 4UB.

COMPANY SECRETARY REGISTERED OFFICE

Tracey Wood Costain House, Vanwall Business Park, Maidenhead, Berkshire SL6 4UB Registered in England and Wales with number 01393773 +44 (0) 16 2884 2444

SPONSOR AND FINANCIAL ADVISER

Rothschild New Court St Swithin's Lane London EC4N 8AL

JOINT GLOBAL CO-ORDINATOR, JOINT GLOBAL CO-ORDINATOR, BOOKRUNNER AND BROKER BOOKRUNNER AND BROKER

One Bunhill Row 22 Grenville Street Citypoint

AUDITORS REPORTING ACCOUNTANTS REGISTRARS KPMG Audit plc KPMG LLP Equiniti Limited 15 Canada Square 15 Canada Square Aspect House London E14 5GL London E14 5GL Spencer Road

Investec Bank plc Liberum Capital 2 Gresham Street Ropemaker Place, Level 12 London EC2V 7QP 25 Ropemaker Street London EC2Y 9LY

LEGAL ADVISER TO THE LEGAL ADVISER TO THE LEGAL ADVISER TO THE COMPANY COMPANY SPONSOR, FINANCIAL ADVISER AS TO ENGLISH LAW AS TO JERSEY LAW AND BOOKRUNNERS AS TO ENGLISH LAW

Slaughter and May Mourant Ozannes Simmons & Simmons LLP London EC1Y 8YY St Helier One Ropemaker Street Jersey JE4 8PX London EC2Y 9SS

Lancing West Sussex BN99 6DA

PART I

LETTER FROM CHAIRMAN OF COSTAIN

To the holders of Ordinary Shares 27 February 2014

Dear Shareholder,

PROPOSED CAPITAL RAISING

1. Introduction to the Capital Raising

It was announced on 27 February 2014 that the Company proposes to raise approximately £70.3 million (net of expenses) by way of a Firm Placing and Placing and Open Offer of, in aggregate, 33,382,068 New Ordinary Shares at an issue price of 225 pence per New Ordinary Share. 11,111,112 New Ordinary Shares will be issued through the Firm Placing and 22,270,956 New Ordinary Shares will be issued through the Placing and Open Offer on the basis of 1 New Ordinary Share for every 3 Existing Ordinary Shares.

The Offer Price represents a discount of 29.6% to the Closing Price of 319.5 pence per Ordinary Share on 26 February 2014 (being the last Business Day before the announcement of the Capital Raising).

The Capital Raising has been fully underwritten by Investec and Liberum.

The Capital Raising is conditional upon, among other things, the approval of the First Resolution at the General Meeting. Costain has received irrevocable undertakings from Costain Shareholders and certain Directors who are Costain Shareholders in respect of approximately 42% of Costain's existing issued share capital to vote in favour of the First Resolution and the Second Resolution to be proposed at the General Meeting.

I am writing to give you further details of the Capital Raising, including the background to and reasons for it, to explain why the Costain Board considers it to be in the best interests of Costain and Costain Shareholders as a whole and to seek your approval of the Resolutions to be proposed at the General Meeting.

2. Background to, and reasons for, the Capital Raising

Costain is one of the leading tier one engineering solutions providers to the UK infrastructure, energy and water markets.

These markets are defined by significant and long term planned expenditure programmes underpinned by committed regulated spend and essential capital investment. The future opportunities in these markets for Costain are therefore substantial:

The UK Government (as set out in its recent National Infrastructure Plan) estimates that average annual infrastructure investment has increased to £45 billion per year compared to an average of £41 billion per year between 2005 and 2010. The National Infrastructure Plan sets out an overall investment of £224 billion to 2020 in an identified pipeline of projects in the UK. Rail remains a priority area of investment for the UK Government to stimulate economic growth with a 14% increase in demand for rail travel estimated over the next five years. To address this demand, £38 billion has been allocated to national rail networks in areas including electrification, track and network upgrades. A further £43 billion has been allocated for High Speed 2. In highways, the Chancellor promised in June 2013 the most extensive programme of road building in over 50 years. By 2020-21 the UK Government is expected to invest over £28 billion in enhancements and maintenance of national and local roads.
In energy, it is estimated that £110 billion is to be invested by 2020 in new energy infrastructure to meet the forecast energy supply capacity gap, and £50 billion in addressing the UK's nuclear waste legacy, whilst the ongoing capital investment in North Sea oil and gas is at its strongest for over 30 years (£13 billion forecast in 2013).
In water, there remains an ongoing need for asset performance improvements, increased water standards and a greater focus on the combination of capital and operating costs, with continuing regulated investment planned. The Directors believe that the 5 year AMP6 period commencing in

April 2015 is expected to include an investment level similar to the £21 billion invested over 5 years during AMP5.

Alongside these planned levels of infrastructure investment, Costain's major customers are consolidating their supply chains as they seek to derive business benefits by working in a more strategic and collaborative manner with a reduced number of preferred tier one engineering solutions providers such as Costain who have the ability to satisfy the full range of their service needs for increasingly complex and large scale projects. Accordingly, Costain has been taking steps to address these developments in recent years through adopting a partnership approach with major blue chip customers in its target markets and broadening its service capabilities across design, project delivery and operations and maintenance.

In addition to the broadening of service capabilities organically, Costain has completed 3 acquisitions since 2011, being ClerkMaxwell and EPC Offshore in the upstream oil and gas market (as more particularly described in section 5 of Part XI (Additional Information)) and Promanex (an industrial support services business providing facilities management, installation, repair, maintenance and general asset management).

As a result, Costain is now one of a limited number of companies with the integrated consulting, delivery and operational capability that Costain believes is required to meet the needs of major UK customers in the rapidly developing multi-billion pound infrastructure, energy and water markets.

The Company's strategic focus on providing innovative solutions to increasingly complex and large scale projects, along with its partnership approach, is enabling Costain to target longer-term sustainable margin contracts, and to build new and extend existing long term relationships with a range of major blue chip customers. The range of contracts won by Costain in recent years reflects the transition in Costain's market positioning, the increased breadth of its service offering and its customers' endorsement of Costain as a tier one engineering solutions provider. An example of this is the London Bridge station redevelopment project for Network Rail, in which Costain is providing integrated services including design, construction, logistical and environmental operations whilst ensuring the station remains open throughout the project. Other major contracts won in 2013 and to the date of this document include:

a joint venture AMP6 programme for Thames Water;
an AMP6 programme for Severn Trent;
a number of contracts for Crossrail including the design, fit-out and commissioning of the railway systems and the construction of New Paddington Yard;
the FEED design for Centrica's gas terminal at Barrow, following successful completion of the design and construction of the Easington terminal for the York field;
a highways framework contract with Transport for London including the Hammersmith Flyover strengthening project;
a contract with Lancashire County Council to construct the M6 Heysham Link;
for Network Rail, (i) the electrification upgrade of the West Coast Mainline, which is a new area of operation for Costain, (ii) an additional joint venture contract for the electrification of more than two thousand miles of the UK's rail system, and (iii) a five year multi-functional framework contract; and
a contract with EDF to design and deliver the water cooling systems for the new Hinkley Point C nuclear power station.

Today, Costain has a record order book of £3.0 billion (as at 31 December 2013) which increased 25% during 2013, with over 90% being repeat orders. In excess of £750 million of work has been secured for 2014. In addition, Costain has a strong preferred bidder position on contracts worth over £400 million, and the level of tendering activity across the Group's targeted markets remains high.

Costain has previously highlighted that its bid costs and working capital requirements are increasing, a trend being experienced across the industry, as projects increase in scale and the market moves away from fixed price contracts and towards target cost based, cost reimbursable contracts. Whilst this has contributed to the reduction in the Group's net cash position from £105.7 million as at 31 December 2012 to £57.7 million as at 31 December 2013, these new form contracts are positive developments for the Group as they are more suited to long term, complex projects and are lower risk for Costain as programme deliverer.

In order to support the trend towards such contracts, Costain has recently increased its banking facilities to £95 million and extended the maturity date of those facilities to 30 June 2017. The Board believes that it is now in the best interests of the Company and Shareholders to complement the Group's increased credit facilities with additional equity capital. This will position Costain to take greater advantage of the significant opportunities that will result from the continuing trends in its chosen markets in the medium and long term.

3. Information relating to Costain

Costain is one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services to major blue-chip customers in targeted market sectors. Costain focuses on major customers who are continuing to invest billions of pounds in capital, operations and maintenance contracts to address essential national infrastructure requirements across the transport, energy, water and waste sectors.

In November 2012, the Group announced the formation of a new operational structure of two core divisions, with effect from 1 January 2013: the Natural Resources operating division, encompassing the Group's activities in the water, oil and gas, nuclear process and waste sectors; and the Infrastructure division, which includes the Group's activities in the rail, highways, power and airport sectors. The operations of the two core divisions are predominantly based in the UK, with some operations in the rest of the world. The operations of the non-core Land Development activity are based in Spain.

For the year ended 31 December 2013, revenue, including the Group's share of joint ventures and associates, was £960.0 million (2012: £934.5 million). Costain's focus on higher margin activities led to an increase of 12% in Group underlying operating profit(1) of £27.4 million (2012: £24.5 million). Adjusted(2) profit before tax was £31.0 million (2012: £28.1 million) and adjusted basic earnings per share were 44.1 pence (2012: 39.7 pence).

There has been no significant change in the financial or trading position of Costain since 31 December 2013.

4. Use of proceeds

The Costain Directors believe that the Capital Raising will enable Costain to take greater advantage of the opportunities in its chosen markets and thereby accelerate the Group's medium and long term growth prospects.

Specifically, the proceeds of the Capital Raising will be utilised:

to demonstrate to customers the Group's financial capacity to support the anticipated further increases in contract size and duration;
to invest in innovation and technology necessary to enhance the service offering to customers;
to finance bid costs associated with a greater number of large scale projects for which the Company is in a position to tender;
to fund likely increased working capital requirements arising from the move in the market towards target cost, cost reimbursable contracts;
to provide flexibility to make selected in-fill acquisitions to complement Costain's existing capabilities as opportunities arise; and
for general corporate purposes.

⁽¹⁾ Underlying operating profit before Other items (amortisation of acquired intangible assets and employment related and other deferred consideration and in 2013 £3.7 million one-off costs associated with the offer for May Gurney Integrated Services plc) and in 2012 excludes the £2.8 million one-off costs resulting from pension scheme liability actions.

⁽²⁾ Results stated before Other items (amortisation of acquired intangible assets and employment related and other deferred consideration and in 2013 £3.7 million one-off costs associated with the offer made by Costain for May Gurney Integrated Services plc and non-cash impairment of £9.8 million on carrying value of assets in non-core Land Development activity in Spain). 2013 includes £9.1 million profit arising from the sale of minority holdings in three joint venture companies and 2012 includes £10.5 million profit arising from the transfer of PFI assets into the Group's pension scheme and the £2.8 million one-off costs resulting from pension scheme liability actions.

5. Financial effects of the Capital Raising

A pro forma statement of net assets, which illustrates the effect of the Capital Raising on the Costain Group's net assets as at 31 December 2013 as if the Capital Raising had been undertaken at that date, is set out in Part VIII of this document. This information is unaudited and has been prepared for illustrative purposes only. It shows that net proceeds from the Capital Raising of approximately £70.3 million (after tax) would have led to a pro forma movement in net assets from £43.3 million to £113.6 million as at 31 December 2013.

The Directors believe that, while the increased number of Ordinary Shares in issue following the Capital Raising will have a negative effect on Costain's reported earnings per share in the short term, it will position the Costain Group to take advantage of the growth opportunities in its chosen markets and increase shareholder value over the medium to long term.

This statement does not constitute a profit forecast and should not be interpreted to mean that the earnings per share in any financial period will necessarily match or be lesser or greater than those for the relevant preceding period.

In addition, the Capital Raising is expected to broaden the Company's investor base significantly and increase the liquidity of its shares on the London Stock Exchange.

6. Kharafi and UEM relationship

Kharafi and UEM have been major shareholders in Costain for more than 16 years. Over this period both shareholders have provided pro-active support to the stabilisation and subsequent rebuilding of Costain, which has led to its transformation into a leading tier one engineering solutions provider.

Kharafi and UEM continue to be fully supportive of the Board's strategy and have agreed that, as Costain moves into the next phase of its development, it would be in the interests of the Company as a whole to broaden the ownership of the Company, in order to introduce a greater number of longer term institutional shareholders and consequently increase the liquidity of Costain's shares on the stock market.

To facilitate the introduction of new shareholders, Kharafi and UEM have, therefore, irrevocably undertaken not to participate in the Capital Raising with the result that their shareholdings in the Company will each reduce from approximately 21% to approximately 14% of the Enlarged Share Capital. Kharafi and UEM have shareholders' agreements with the Company pursuant to which Kharafi and UEM each have a right to appoint a representative to the Board for as long they each hold 7% of Costain's issued share capital. Ahmed Samy has been Kharafi's representative on the Board since 30 November 2013, replacing Samer Younis. UEM have no current representative on the Board.

Kharafi and UEM, who together hold approximately 41% of the issued share capital of the Company, are fully supportive of the Capital Raising and have irrevocably undertaken to vote in favour of the First Resolution and the Second Resolution to be proposed at the General Meeting.

In addition, both Kharafi and UEM have agreed not to dispose of any Ordinary Shares in the Group, save in certain specified circumstances, for a period of 6 months from the date of this document.

7. Irrevocable undertakings

The Costain Directors who hold interests in Ordinary Shares have irrevocably undertaken to vote in favour of the Resolutions to be proposed at the General Meeting to approve the Capital Raising and related matters in respect of a total of 486,300 Ordinary Shares, representing, in aggregate, approximately 0.7% of Costain's issued share capital.

In addition, as noted in paragraph 6 above, Costain has also received irrevocable undertakings to vote in favour of the First Resolution and the Second Resolution to be proposed at the General Meeting to approve the Capital Raising and related matters from UEM and Kharafi in respect of a total of 27,600,340 Ordinary Shares, representing, in aggregate, approximately 41% of Costain's issued share capital.

Costain has therefore received irrevocable undertakings to, amongst other things, vote in favour of the First Resolution and Second Resolution to be proposed at the General Meeting to approve the Capital Raising and related matters in respect of a total of 28,086,640 Ordinary Shares, representing, in aggregate, approximately 42% of Costain's issued share capital.

8. Summary of the principal terms of the Capital Raising

The Company is proposing to raise approximately £75.1 million (approximately £70.3 million net of expenses) by way of a Firm Placing of 11,111,112 New Ordinary Shares to certain new and existing institutional investors and the Participating Directors, and a Placing and Open Offer of 22,270,956 New Ordinary Shares, representing, in aggregate, 33.3% of the Enlarged Share Capital, at an issue price of 225 pence per New Ordinary Share.

The issue price of 225 pence per New Ordinary Share represents an effective 29.6% discount to the Closing Price of 319.5 pence on 26 February 2014, being the Business Day prior to the announcement of the Capital Raising. The Offer Price has been set by the Directors following their assessment of market conditions and following discussions with a number of institutional investors. The Directors are in agreement that the level of discount and method of issue are appropriate to secure the investment necessary.

The Capital Raising is conditional upon the following:

(A) the First Resolution being passed by Shareholders at the General Meeting;
(B) the Placing Agreement becoming unconditional; and
(C) Admission becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

Accordingly, if any of such conditions are not satisfied, or, if applicable, waived, the Capital Raising will not proceed and any Open Offer Entitlements admitted to CREST will thereafter be disabled.

Application will be made for the New Ordinary Shares to be admitted to listing on the premium segment of the Official List and to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission of the New Ordinary Shares will become effective and dealings in the New Ordinary Shares will commence by 8.00 a.m. on 18 March 2014 (whereupon an announcement will be made by the Company to a Regulatory Information Service).

The New Ordinary Shares will, in aggregate, represent approximately 33.3% of the Company's issued Ordinary Shares following Admission of the New Ordinary Shares.

A cash box structure will be used for the issue of the New Ordinary Shares pursuant to the Capital Raising.

9. Dilution

Following the issue of New Ordinary Shares to be allotted pursuant to the Capital Raising, Qualifying Shareholders who take up their full Open Offer Entitlements will suffer a dilution of up to 11.1% to their interests in the Company.

Qualifying Shareholders who do not take up any of their Open Offer Entitlements will suffer a dilution of up to 33.3% to their interests in the Company.

10. The Firm Placing

The Bookrunners, as agents of the Company, have made arrangements to conditionally place firm the Firm Placing Shares at the Offer Price pursuant to the Placing Agreement. The Firm Placing Shares, which represent approximately 33.3% of the New Ordinary Shares and 11.1% of the Enlarged Share Capital have been placed with certain institutional investors and the Participating Directors (the 'Firm Placees'). The Firm Placees will not be able to participate in the Open Offer in respect of their allocation of Firm Placed Shares. The Firm Placing is conditional upon, amongst other things, the passing of the First Resolution.

The Firm Placing will raise gross proceeds of approximately £25.0 million.

For further details of the Placing Agreement, please see section 5 of Part XI (Additional Information) of this document.

11. The Placing and Open Offer

The Bookrunners, as agents of the Company, have also made arrangements to conditionally place the Placing Shares with new and existing institutional investors at the Offer Price. The Placing Shares represent approximately 66.7% of the New Ordinary Shares and 22.2% of the Enlarged Share Capital. The Placing Shares will be subject to clawback to satisfy valid applications under the Open Offer.

Qualifying Shareholders have the opportunity under the Open Offer to subscribe for Open Offer Shares at the Offer Price, payable in full on application and free of expenses, pro rata to their existing shareholdings, on the following basis:

1 Open Offer Share for approximately every 3 Existing Ordinary Shares

held by them and registered in their names at the Record Time and so in proportion to any other number of Existing Ordinary Shares then held, rounded down to the nearest whole number of Open Offer Shares, and otherwise on the terms and conditions as set out in this document and, in the case of Qualifying Non-CREST Shareholders, the Application Form. Qualifying Shareholders may apply for any whole number of Open Offer Shares up to their Open Offer Entitlement.

Shareholders should be aware that the Open Offer is not a rights issue. As such, Qualifying Non-CREST Shareholders should note that their Application Forms are not negotiable documents and cannot be traded. Qualifying CREST Shareholders should note that, although the Open Offer Entitlements will be admitted to CREST, and be enabled for settlement, the Open Offer Entitlements will not be tradeable or listed and applications in respect of the Open Offer may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim. New Ordinary Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer may be allocated to Placing Placees or, failing which, to the Bookrunners subject to the terms and conditions of the Placing Agreement.

The Placing and Open Offer will raise gross proceeds of approximately £50.1 million.

12. Overseas Shareholders

United States

The New Ordinary Shares have not been, and will not be, registered under the Securities Act or under the securities laws of any state, district or other jurisdiction of the United States. Accordingly, the New Ordinary Shares may not be offered, sold, resold, delivered, distributed or otherwise transferred, directly or indirectly, in, into or from the United States.

None of the securities referred to in this document have been approved or disapproved by the SEC, any state securities commission in the United States or any other US regulatory authority, nor have such authorities passed upon or determined the adequacy or accuracy of this document. Any representation to the contrary is a criminal offence in the United States.

Other jurisdictions

This document and any accompanying documents are not being made available to Overseas Shareholders with registered addresses in any Restricted Jurisdiction and may not be treated as an invitation to subscribe for any New Ordinary Shares by any person resident or located in such jurisdictions or any other Restricted Jurisdiction.

The New Ordinary Shares have not been, and will not be, registered under the applicable securities laws of any Restricted Jurisdiction. Accordingly, the New Ordinary Shares may not be offered, sold, delivered or transferred, directly or indirectly, in or into any Restricted Jurisdiction to or for the account or benefit of any national, resident or citizen of any Restricted Jurisdiction.

This document has been prepared to comply with English law, the Prospectus Rules and the Listing Rules, and the information disclosed may not be the same as that which could have been disclosed if this document had been prepared in accordance with the laws of jurisdictions outside the United Kingdom.

NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

13. Dividends and dividend policy

For the year ended 31 December 2013, the Board of Costain has proposed an increased final dividend of 7.75 pence per share (2012: 7.25 pence per share). This, together with the 2013 interim dividend of 3.75 pence per share, represents a total dividend for the year ending 31 December 2013 of 11.5 pence per share (2012: 10.75 pence per share), equivalent to an increase of 7% over the prior year and representing a seventh successive year of increase.

The proposed final dividend is payable in respect of the Existing Ordinary Shares only and is subject to approval by Shareholders at the General Meeting to be held on 17 March 2014. If approved, it will be paid on 25 April 2014 to Shareholders on the register at the close of business on the Record Date. The Ex-Dividend Date will be 12 March 2014.

Following the Capital Raising, future dividends paid by the Company will be rebased to reflect the Enlarged Share Capital of Costain. Thereafter, the Board intends to continue to pursue a progressive dividend policy, taking into account the Company's earnings growth potential, balance sheet and future investment plans, and will target an ongoing dividend cover of around two times underlying earnings per share.

It is intended that Costain will continue to offer a scrip dividend scheme for both annual and interim dividends, allowing for the allotment of Ordinary Shares in lieu of cash dividends to those Shareholders who elect to participate.

Under the current deficit recovery plan, Costain has an existing dividend-matching arrangement with the Costain Pension Scheme pursuant to which Costain pays to the Costain Pension Scheme, on an annual basis, an amount equal to 100% of the dividends declared and paid to Costain Shareholders.

As part of the agreement of a new recovery plan for clearing the deficit following completion of the ongoing triennial review of the Costain Pension Scheme, Costain and the Costain Pension Trustee have agreed in principle that any future dividend matching following completion of the Capital Raising (excluding the final dividend for the year ended 31 December 2013 which is payable in respect of the Existing Ordinary Shares only) will be based on the proportion of Existing Ordinary Shares in issue as a proportion of the total issued share capital of Costain immediately following completion of the Capital Raising.

14. The New Ordinary Shares

The New Ordinary Shares will be issued credited as fully paid and, save in respect of the final dividend for the year ended 31 December 2013, will rank pari passu in all respects with the Existing Ordinary Shares. The New Ordinary Shares will be created under the Companies Act and the legislation made thereunder, will be issued in registered form and will be capable of being held in both certificated and uncertificated form. The other rights attached to the New Ordinary Shares are set out in section 3 of Part XI (Additional Information) of this document.

Approval of the creation and issue of the New Ordinary Shares will be sought at the General Meeting. A summary of the First Resolution to be proposed at the General Meeting in connection with the creation and issue of the New Ordinary Shares is set out in section 16 below.

15. Settlement, listing and dealings of the New Ordinary Shares

Applications will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the Official List with a premium listing and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings for normal settlement in the New Ordinary Shares will commence on the London Stock Exchange by 8.00 a.m. on 18 March 2014.

The Existing Ordinary Shares are already admitted to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities and to CREST. It is expected that all of the New Ordinary Shares, when issued and fully paid, will be capable of being held and transferred by means of CREST. The New Ordinary Shares will trade under ISIN GB00B64NSP76.

16. General Meeting

First Resolution

The Capital Raising is subject to a number of conditions, including Shareholders' approval of the First Resolution to be proposed at the General Meeting. Notice convening the General Meeting to be held at 10.00 a.m. on 17 March 2014 at Investec Bank plc, 2 Gresham Street, London EC2V 7QP is set out at the end of this document. Shareholders are being asked to vote on, amongst other things, the First Resolution in order to provide the Directors with the necessary authority and power under the Companies Act to proceed with the Capital Raising. The Capital Raising is conditional on the passing of the First Resolution; if the Resolution is not approved at the General Meeting, the Company will be unable to complete the Capital Raising.

The First Resolution authorises the Directors to allot up to 33,382,068 Ordinary Shares, representing approximately 50% of the Company's current issued share capital as at 26 February 2014 (being the latest practicable date prior to the publication of this document) at a discount of 29.6% to the Closing Price of 319.5 pence on 26 February 2014, being the Business Day prior to the announcement of the Capital Raising. This will enable the Company to allot sufficient Ordinary Shares to satisfy its obligations in connection with the Capital Raising. This authority will expire at the conclusion of the next annual general meeting of the Company in 2014. The authority granted under the First Resolution is in addition to the authority to allot Ordinary Shares which was granted to the Directors at the Company's annual general meeting in 2013, which the Directors have no present intention of exercising and which will expire on the date of the annual general meeting of the Company to be held in May 2014 unless previously revoked or varied by the Company.

Second Resolution

Currently under the Costain Articles, the Costain Group has the power to borrow up to an amount of £90 million, although borrowings above that amount are permitted if sanctioned in advance by an ordinary resolution of the Costain Shareholders. The Second Resolution, if approved, will sanction by ordinary resolution an increase in permitted borrowings of up to £110 million above the £90 million threshold, which is considered by the Costain Board to be an appropriate threshold for the Costain Group going forward. The borrowing limit in the Costain Articles does not include bonding facilities of the Costain Group.

Third Resolution

The Third Resolution authorises the payment of a final dividend on the Existing Ordinary Shares of 7.75 pence per Existing Ordinary Share for the financial year ended 31 December 2013 on 25 April 2014 to Shareholders on the register at the close of business on the Record Date.

As at the date of this document, the Company holds no Ordinary Shares in treasury.

17. Actions to be taken

In respect of the General Meeting

Existing Costain Shareholders will find enclosed with this document a Form of Proxy for use at the General Meeting. You are requested to complete and sign the Form of Proxy whether or not you propose to attend the General Meeting in person in accordance with the instructions printed on it so as to be received by Costain's registrar, Equiniti, at the return address on the enclosed envelope, as soon as possible, and in any event no later than 10.00 a.m. on 15 March 2014. You may also submit your proxy electronically at www.sharevote.co.uk using the Voting ID, Task ID and Shareholder Reference Number (SRN) printed on the Form of Proxy. Alternatively, if you have already registered with Equiniti's online portfolio service, Shareview, you can submit your Form of Proxy at www.shareview.co.uk. Full instructions are given on both websites. CREST Shareholders may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Equiniti (CREST participant ID RA19). Electronic proxy appointments must also be received by no later than 10.00 a.m. on 15 March. The completion and return of the Form of Proxy (or the electronic appointment of a proxy) will not preclude you from attending the General Meeting and voting in person if you wish to do so.

In respect of the Open Offer

If you are a Qualifying Non-CREST Shareholder and not also a Restricted Shareholder and you wish to take up your Open Offer Entitlements in whole or in part, you should complete and return the enclosed Application Form, together with your remittance for the full amount of the subscription monies for the New Ordinary Shares being taken up in accordance with the instructions printed thereon and in Part IV (Terms and Conditions of the Capital Raising) of this document, by post or by hand, to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, so as to arrive by no later than 11.00 a.m. on 14 March 2014 being the latest time for acceptance and payment in full.

If you are a Qualifying CREST Shareholder and not also a Restricted Shareholder, no Application Form is enclosed and you will receive a credit to your appropriate stock account in CREST in respect of the Open Offer Entitlements representing your maximum entitlement under the Open Offer. The procedure for application and payment depends on whether, at the time at which application and payment is made, you have an Application Form in respect of your entitlement under the Open Offer or have Open Offer Entitlements credited to your stock account in CREST in respect of such entitlement. The latest time for applications under the Open Offer to be received is 11.00 a.m. on 14 March 2014.

Full details of the terms and conditions of the Open Offer and the procedure for application and payment are contained in Part IV (Terms and Conditions of the Capital Raising) of this document.

If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.

18. Recommendation and voting intentions

The Board believe that the Capital Raising and the Resolutions are in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommend that you vote in favour of the Resolutions, as the Costain Directors who are Costain Shareholders intend to do in respect of their own beneficial holdings.

Yours faithfully,

David Allvey Chairman

PART II

SOME QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING

The questions and answers set out in this Part II are intended to be generic guidance only and, as such, you should also read Part IV (Terms and Conditions of the Capital Raising) of this document for full details of what action you should take. If you are in any doubt about the action to be taken, you are recommended to seek your own personal financial advice immediately from your stockbroker, solicitor, accountant or other appropriate independent financial adviser duly authorised under FSMA. The attention of Overseas Shareholders is drawn to section 8 of Part IV (Terms and Conditions of the Capital Raising) of this document.

This Part II deals with general questions relating to the Capital Raising, as well as more specific questions about the Capital Raising relating to Ordinary Shares held by persons resident in the UK who hold their Ordinary Shares in certificated form only. If you hold your Ordinary Shares in uncertificated form (that is, through CREST) your attention is drawn to Part IV (Terms and Conditions of the Capital Raising) of this document which contains full details of what action you should take. If you are a CREST sponsored member, you should consult your CREST sponsor.

If you do not know whether your Ordinary Shares are held in certificated or uncertificated form, please call Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays.

1. What is the Firm Placing and the Placing and Open Offer?

A firm placing and placing and open offer is a way for companies to raise money. They usually do this by giving their existing shareholders a right to subscribe for further shares at a fixed price in proportion to their existing shareholdings (an open offer) and providing for new investors to subscribe for new shares in the Company (a firm placing and a placing). The fixed price is normally at a discount to the closing mid-market price of the existing ordinary shares prior to the announcement of the open offer.

2. What is the Company's Open Offer?

This Open Offer is an invitation by the Company to Qualifying Shareholders to apply to subscribe for an aggregate of 22,270,956 New Ordinary Shares at a price of 225 pence per New Ordinary Share. If you hold Ordinary Shares at the Record Time or have a bona fide market claim, and are not a Shareholder located in the United States or any other Restricted Jurisdiction (for further information, see section 8 of Part IV (Terms and Conditions of the Capital Raising) of this document), you will be entitled to subscribe for New Ordinary Shares under the Open Offer.

The Open Offer is being made on the basis of 1 New Ordinary Share for every 3 Existing Ordinary Shares held by Qualifying Shareholders (other than Restricted Shareholders) at the Record Time. If your entitlement to New Ordinary Shares is not a whole number, your fractional entitlement will be rounded down in calculating your entitlement to New Ordinary Shares. Fractional entitlements to New Ordinary Shares will be aggregated and will ultimately accrue for the benefit of the Company. New Ordinary Shares are being offered to Qualifying Shareholders in the Open Offer at a discount to the closing mid-market share price on the last dealing day before the details of the Capital Raising were announced on 27 February 2014.

New Ordinary Shares for which application has not been made under the Open Offer will not be sold in the market for the benefit of those who do not apply under the Open Offer and Qualifying Shareholders who do not apply to take up their entitlements will have no rights nor receive any benefit under the Open Offer. Any New Ordinary Shares which are not applied for under the Open Offer will be issued to the Placing Placees or, failing which, to the Bookrunners subject to the terms and conditions of the Placing Agreement, with the proceeds ultimately accruing for the benefit of the Company.

However, Shareholders should note that the Capital Raising is conditional upon: (i) the First Resolution being passed by Shareholders at the General Meeting; (ii) the Placing Agreement becoming unconditional; and (iii) Admission becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

3. When will the Capital Raising take place?

The Capital Raising is subject to Admission of the New Ordinary Shares becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

4. What is an Application Form?

It is a form sent to those Qualifying Shareholders who hold their Ordinary Shares in certificated form. It sets out your entitlement to subscribe for the New Ordinary Shares and is a form which you should complete if you want to participate in the Open Offer.

5. What if I have not received an Application Form?

If you have not received an Application Form and you do not hold your Ordinary Shares in CREST, this probably means that you are not eligible to participate in the Open Offer. Some Qualifying Shareholders, however, will not receive an Application Form but may still be able to participate in the Open Offer, including:

(A) Qualifying CREST Shareholders; and
(B) Qualifying Non-CREST Shareholders who bought Ordinary Shares before the Ex-Entitlements Date but were not registered as the holders of those Ordinary Shares at the Record Time (see question 6 below).

6. If I bought Ordinary Shares before 27 February 2014 (the Ex-Entitlements Date) will I be eligible to participate in the Open Offer?

If you bought Ordinary Shares before the Ex-Entitlements Date but you are not registered as the holder of those Ordinary Shares at 6.00 p.m. on 24 February 2014 (the 'Record Time') you may still be eligible to participate in the Open Offer. If you are in any doubt, please consult your stockbroker, bank or other appropriate financial adviser, or whoever arranged your share purchase, to ensure you claim your entitlement. You will not be entitled to the New Ordinary Shares in respect of any Ordinary Shares acquired on or after the Ex-Entitlements Date.

7. I hold my Ordinary Shares in uncertificated form in CREST. What do I need to do in relation to the Open Offer?

CREST members should follow the instructions set out in Part IV (Terms and Conditions of the Capital Raising) of this document. Persons who hold Ordinary Shares through a CREST member should be informed by the CREST member through which they hold their Ordinary Shares of the number of New Ordinary Shares which they are entitled to take up under the Open Offer and should contact them if they do not receive this information.

8. I hold my Ordinary Shares in certificated form. How do I know I am eligible to participate in the Open Offer?

If you receive an Application Form and are not a Shareholder with a registered address in a Restricted Jurisdiction, and are not physically located in the United States or any other Restricted Jurisdiction, then you should be eligible to participate in the Open Offer as long as you have not sold all of your Ordinary Shares before the Ex-Entitlements Date.

9. I hold my Ordinary Shares in certificated form. How do I know how many New Ordinary Shares I am entitled to take up?

If you hold your Ordinary Shares in certificated form and, subject to certain limited exceptions, do not have a registered address in the United States or any other Restricted Jurisdiction, you will be sent an Application Form that shows:

In Box 1, how many Ordinary Shares you held at the Record Time;
In Box 2, how many New Ordinary Shares are comprised in your Open Offer Entitlement; and
In Box 3, how much you need to pay in Pounds Sterling if you want to take up your right to subscribe for all of your Open Offer Entitlement.

If you would like to apply for any or all of the New Ordinary Shares comprised in your Open Offer Entitlement, you should complete the Application Form in accordance with the instructions printed on it and the information provided in this document. Completed Application Forms should be posted, along with a cheque or banker's draft drawn in the appropriate form, in the accompanying pre-paid envelope to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 14 March 2014, after which time Application Forms will not be valid.

10. I hold my Existing Ordinary Shares in certificated form and am eligible to receive an Application Form. What are my choices in relation to the Open Offer?

(a) If you do not want to take up your Open Offer Entitlement

If you do not want to take up your Open Offer Entitlement you do not need to do anything. In these circumstances, you will not receive any New Ordinary Shares. You will also not receive any money when the New Ordinary Shares you could have taken up are sold, as would happen under a rights issue provided the price at which they are sold exceeds the costs and expenses of effecting the sale. You cannot sell your Open Offer Entitlement to anyone else. If you do not return your Application Form subscribing for the New Ordinary Shares to which you are entitled by 11.00 a.m. on 14 March 2014, we have made arrangements under which we have agreed to issue the New Ordinary Shares comprising your Open Offer Entitlement to the Placing Placees. Shareholders are, however, encouraged to vote at the General Meeting by attending in person or completing and returning the Form of Proxy enclosed with this document. You may also submit your Form of Proxy electronically at www.sharevote.co.uk using the Voting ID, Task ID and Shareholder Reference Number (SRN) printed on the Form of Proxy. Alternatively, if you have already registered with Equiniti's online portfolio service, Shareview, you can submit your Form of Proxy at www.shareview.co.uk. Full instructions are given on both websites.

If you do not take up your Open Offer Entitlement then following the issue of the New Ordinary Shares pursuant to the Capital Raising, your interest in the Company will be diluted by approximately 33.3%.

(b) If you want to take up some but not all of the New Ordinary Shares under your Open Offer Entitlement

If you want to take up some but not all of the New Ordinary Shares under your Open Offer Entitlement, you should write the number of New Ordinary Shares you want to take up in Box 4 of your Application Form; for example, if you have an Open Offer Entitlement for 50 New Ordinary Shares but you only want to apply for 25 New Ordinary Shares, then you should write '25' in Box 4. To work out how much you need to pay for the New Ordinary Shares, you need to multiply the number of New Ordinary Shares you want (in this example, '25') by 225 pence giving you an amount of £56.25 in this example.

You should write this total sum in Box 5, rounding down to the nearest whole pence, and this should be the amount your cheque or banker's draft is made out for. You should then return the completed Application Form, together with a cheque or banker's draft for that amount, in the accompanying pre-paid envelope by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 14 March 2014, after which time Application Forms will not be valid.

All payments should be in Pounds Sterling and made by cheque or banker's draft made payable to 'Equiniti Limited re: Costain Open Offer' and crossed 'A/C payee only'. Cheques or banker's drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the UK, the Channel Islands or the Isle of Man and which is either a settlement member of the

Cheque and Credit Clearing Company Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker's drafts to be cleared through the facilities provided by either of those companies. Cheques and banker's drafts must bear the appropriate sorting code number in the top right-hand corner and must be for the full amount payable on application. Post-dated cheques will not be accepted.

Cheques drawn on a non-UK bank will be rejected. Third party cheques may not be accepted with the exception of building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder and the number of an account held in the applicant's name at the building society or bank by stamping or endorsing the cheque or draft to such effect. The account name should be the same as that shown on the application. Cheques or banker's drafts will be presented for payment upon receipt. Payments via CHAPS, BACS or electronic transfer will not be accepted. The Company reserves the right to instruct Equiniti to seek special clearance of cheques and banker's drafts to allow the Company to obtain value for remittances at the earliest opportunity. No interest will be paid on payments made before they are due. It is a term of the Open Offer that cheques shall be honoured on first presentation and the Company may elect to treat as invalid acceptances in respect of which cheques are not so honoured. All documents, cheques and banker's drafts sent through the post will be sent at the risk of the sender.

A definitive share certificate will then be sent to you for the New Ordinary Shares that you take up. Your definitive share certificate for New Ordinary Shares is expected to be despatched to you on or around 25 March 2014.

If you want to take up all of the New Ordinary Shares to which you are entitled, all you need to do is sign page 1 of the Application Form (ensuring that all joint holders sign (if applicable)) and send the Application Form, together with your cheque or banker's draft for the amount (as indicated in Box 3 of your Application Form), payable to 'Equiniti Limited re: Costain Open Offer' and crossed 'A/C payee only', in the accompanying pre-paid envelope by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 11.00 a.m. on 14 March 2014, after which time Application Forms will not be valid. If you post your Application Form by first class post, it is recommended that you allow at least four Business Days for delivery.

11. I am a Qualifying Shareholder, do I have to apply for all the New Ordinary Shares I am entitled to apply for?

You can take up any number of the New Ordinary Shares allocated to you under your Open Offer Entitlement. Your maximum Open Offer Entitlement is shown on your Application Form in Box 2. Any applications by a Qualifying Shareholder for a number of New Ordinary Shares which is equal to or less than that person's Open Offer Entitlement will be satisfied, subject to the Open Offer becoming unconditional. If you decide not to take up all of the New Ordinary Shares comprised in your Open Offer Entitlement, then your proportion of the ownership and voting interest in the Company will be reduced to a greater extent than if you had decided to take up your full entitlement. Please refer to answers (a), (b) and (c) of question 10 for further information.

12. Will I be taxed if I take up my entitlements?

If you are resident in the UK for UK tax purposes, you will not have to pay UK tax when you take up your right to receive New Ordinary Shares, although the Capital Raising may affect the amount of UK tax you pay when you sell your New Ordinary Shares.

Further information for Qualifying Shareholders who are resident in the UK for UK tax purposes is contained in Part IX (United Kingdom Taxation Considerations) of this document. Shareholders who are in any doubt as to their tax position or who are subject to tax in any jurisdiction other than the United Kingdom should consult their professional advisers immediately.

13. What should I do if I live outside the United Kingdom?

Your ability to apply to subscribe for New Ordinary Shares may be affected by the laws of the country in which you live and you should take professional advice as to whether you require any governmental or other consents or need to observe any other formalities to enable you to take up your Open Offer Entitlement. Shareholders with registered addresses or who are located in the United States or any other Restricted Jurisdiction are not eligible to participate in the Open Offer. Your attention is drawn to the information in section 8 of Part IV (Terms and Conditions of the Capital Raising) of this document.

14. What should I do if I need further assistance?

If you have any other questions, please telephone Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays. Other providers' costs may vary and international call charges will apply if you are calling from outside the United Kingdom. Please note that, for legal reasons, Equiniti are only able to provide information contained in this document (other than information relating to the Company's register of members) and, as such, will be unable to give advice on the merits of the Capital Raising or to provide financial advice. Equiniti staff can explain the options available to you, which forms you need to fill in and how to fill them in correctly.

Your attention is drawn to the further terms and conditions in Part IV (Terms and Conditions of the Capital Raising).

The contents of this document or any subsequent communication from Costain, Rothschild or the Bookrunners or any of their respective affiliates, officers, directors, employees or agents are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.

PART III

INFORMATION ON THE NEW ORDINARY SHARES

1. Description of the type and class of securities admitted

The New Ordinary Shares will be Ordinary Shares with a nominal value of 50 pence each. The ISIN of the New Ordinary Shares will be GB00B64NSP76, being the same ISIN as that of the Existing Ordinary Shares. The New Ordinary Shares will be created under the Companies Act and the Costain Articles. Following the Capital Raising, the Company will have one class of Ordinary Shares, the rights of which are set out in the Costain Articles.

The New Ordinary Shares will be credited as fully paid and free from all liens, equities, charges, encumbrances and other interests, and with the exception of the proposed final dividend for the year ended 31 October 2013, the New Ordinary Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Costain.

2. Listing

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and dealings will commence in the New Ordinary Shares by 8.00 a.m. on 18 March 2014.

Listing of the New Ordinary Shares will not be sought on any stock exchange in connection with the Capital Raising other than the London Stock Exchange.

3. Form and currency of the New Ordinary Shares

The New Ordinary Shares resulting from the Capital Raising will be issued in registered form and will be capable of being held in certificated and uncertificated form.

Title to the certificated New Ordinary Shares will be evidenced by entry in the register of members of the Company and title to uncertificated New Ordinary Shares will, in respect of Shareholders, be evidenced by entry in the operator register maintained by Euroclear (which forms part of the register of members of the Company). The registrar of the Company is Equiniti.

If any New Ordinary Shares are converted to be held in certificated form, share certificates will be issued in respect of those shares in accordance with the Costain Articles and applicable legislation.

The New Ordinary Shares will be denominated in pence.

4. Rights attached to the New Ordinary Shares

With the exception of the proposed final dividend for the year ended 31 December 2013, the New Ordinary Shares issued pursuant to the Capital Raising will rank pari passu in all respects with the Existing Ordinary Shares and rank in full for all other dividends and other distributions declared in respect of the ordinary share capital of Costain. Each New Ordinary Share will have the same voting rights, rights on a return of capital and restrictions as the other Ordinary Shares, as set out in the Costain Articles. These rights are set out in section 3 of Part XI (Additional Information) of this document.

5. Resolution, authorisations and approvals relating to the New Ordinary Shares

The New Ordinary Shares will be created, allotted and issued pursuant to the authority to be granted under the First Resolution proposed at the General Meeting.

6. Dates of issue and settlement

The New Ordinary Shares are expected to be issued and allotted on 18 March 2014.

7. Description of restrictions on free transferability

Save as set out below, the New Ordinary Shares are freely transferable.

The Company may, under the Companies Act, send out statutory notices to those it knows or has reasonable cause to believe have an interest in its shares, asking for details of those who have an interest and the extent of their interest in a particular holding of shares. When a person receives a statutory notice he has 14 days to comply with it. If he does not do so or if he makes a statement in response to the notice which is false or inadequate in some way, the Company can decide to restrict the rights relating to the identified shares and send out a further notice to the holder, known as a restriction notice. The restriction notice will take effect when it is delivered and will state, amongst other things, that the identified shares no longer give the Shareholder any right to attend or vote either personally or by proxy at a Shareholders' meeting or to exercise any other right in relation to Shareholders' meetings.

The Directors may also, without giving any reason, refuse to register the transfer of any Ordinary Shares which are not fully paid.

8. Mandatory takeover bids, squeeze-out and sell-out rules

8.1 Mandatory bids

The City Code on Takeovers and Mergers applies to the Company. Under the City Code, if an acquisition of interests in shares were to increase the aggregate holding of an acquirer and persons acting in concert with it to an interest in shares carrying 30% or more of the voting rights in the Company, the acquirer and, depending upon the circumstances, persons acting in concert with it, would be required (except with the consent of the Takeover Panel) to make a cash offer for the outstanding shares at a price not less than the highest price paid for any interest in shares by the acquirer or his concert parties during the previous 12 months. A similar obligation to make such a mandatory offer would also arise on the acquisition of an interest in shares by a person holding (together with any persons acting in concert) an interest in shares carrying between 30% and 50% of the voting rights in the Company if the effect of such acquisition were to increase that person's percentage of the voting rights.

8.2 Squeeze-out rules

Under the Companies Act, if a 'takeover offer' (as defined in section 974 of the Companies Act) is made for the Ordinary Shares and the offeror were to acquire, or unconditionally contract to acquire, not less than 90% in value of the shares to which the offer relates (the 'Offer Shares') and not less than 90% of the voting rights attached to the Offer Shares, within three months of the last day on which its offer can be accepted, it could acquire compulsorily the outstanding shares not assented to the offer. It would do so by sending a notice to outstanding shareholders telling them that it will acquire compulsorily their shares and then, six weeks later, it would execute a transfer of the outstanding shares in its favour and pay the consideration to the Company, which would hold the consideration on trust for outstanding shareholders. The consideration offered to the shareholders whose shares are acquired compulsorily under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer.

8.3 Sell-out rules

The Companies Act also gives minority shareholders a right to be bought out in certain circumstances by an offeror who has made a takeover offer. If a takeover offer related to all the Ordinary Shares and at any time before the end of the period within which the offer could be accepted the offeror held or had agreed to acquire not less than 90% of the Ordinary Shares to which the offer relates, any holder of Ordinary Shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those Ordinary Shares. The offeror is required to give any shareholder notice of his right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of the minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period. If a shareholder exercises his or her rights, the offeror is bound to acquire those Ordinary Shares on the terms of the offer or on such other terms as may be agreed.

8.4 Takeover bids

No public takeover bid has been made in relation to the Company during the last financial year or the current financial year.

9. Taxation

Please see Part IX (United Kingdom Taxation Considerations) of this document for information relating to UK taxation (including a discussion of UK stamp duty and SDRT which is relevant to holders of New Ordinary Shares irrespective of their tax residence).

PART IV

TERMS AND CONDITIONS OF THE CAPITAL RAISING

1. Introduction

As explained in Part I (Letter from Chairman of Costain), the Company is proposing to raise £70.3 million (net of expenses) by the issue of up to 33,382,068 New Ordinary Shares at the Offer Price through the Capital Raising. The Capital Raising consists of a Firm Placing of 11,111,112 New Ordinary Shares and a Placing and Open Offer of 22,270,956 New Ordinary Shares. The Firm Placees will not be able to participate in the Open Offer in respect of their Firm Placed Shares. The Open Offer is an opportunity for Qualifying Shareholders to apply for in aggregate 22,270,956 New Ordinary Shares pro rata to their current holdings at the Offer Price.

The Offer Price of 225 pence per New Ordinary Share represents a 29.6% discount to the Closing Price of 319.5 pence per existing Ordinary Share on 26 February 2014 (the last Business Day before the announcement of the Capital Raising).

The Capital Raising is conditional upon: (i) the First Resolution being passed by Shareholders at the General Meeting; (ii) the Placing Agreement becoming unconditional; and (iii) Admission becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

The New Ordinary Shares will be in registered form and capable of being held in certificated form or uncertificated form in CREST. The New Ordinary Shares will together represent approximately 33.3% of the Enlarged Share Capital of the Company immediately following the Capital Raising.

Had the Capital Raising completed on 31 December 2013 (being the last day of the period covered by the historical financial information incorporated into this document by reference, as explained in Part VIII (Unaudited Pro Forma Financial Information on the Costain Group) of this document), the net assets of the Company would have been increased by the net proceeds of the Capital Raising. The Capital Raising would not have had any effect on earnings, save for any interest earned on the net proceeds of the Capital Raising.

A cash box structure will be used for the issue of the New Ordinary Shares. The Company will allot and issue the New Ordinary Shares on a non pre-emptive basis to the Bookrunners, as nominees of the Firm Placees, the Placing Placees and to those Qualifying Shareholders who take up their Open Offer Entitlements pursuant to the Open Offer in consideration for Investec transferring its holding of ordinary shares and redeemable preference shares in JerseyCo to the Company. Accordingly, instead of receiving cash as consideration for the issue of New Ordinary Shares, at the conclusion of the Capital Raising, the Company will own the entire issued share capital of JerseyCo whose only asset will be its cash reserves, which will represent an amount approximately equal to the net proceeds of the Capital Raising.

2. Terms and conditions of the Open Offer

Subject to the terms and conditions set out below (and, in the case of Qualifying Non-CREST Shareholders, the Application Form), each Qualifying Shareholder who is not a Restricted Shareholder is being given an opportunity to apply for New Ordinary Shares at the Offer Price (payable in full and free of all expenses) on the following pro rata basis:

1 New Ordinary Share at 225 pence each for every 3 Existing Ordinary Shares

held and registered in their name at 6.00 p.m. on 24 February 2014 (the 'Record Time') and so on in proportion to any other number of Existing Ordinary Shares then held.

Any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements to New Ordinary Shares. Fractional entitlements to New Ordinary Shares will be aggregated and will ultimately accrue for the benefit of the Company. Applications by Qualifying Shareholders will be satisfied in full up to their Open Offer Entitlements.

The Offer Price represents a discount of approximately 29.6% to the Closing Price for an Ordinary Share of 319.5 pence on 26 February 2014 (being the last Business Day before the announcement of the Capital Raising). Holdings of Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating the Open Offer.

The attention of Shareholders and any persons (including, without limitation, custodians, nominees and trustees) who have a contractual or other legal obligation to forward this document or an Application Form into a jurisdiction other than the UK is drawn to section 8 of this Part IV relating to Overseas Shareholders, which forms part of the terms and conditions of the Capital Raising. In particular, Restricted Shareholders will not be sent this document or the Application Form.

Application will be made to the UK Listing Authority for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares will commence by 8.00 a.m. on 18 March 2014 (whereupon an announcement will be made by the Company to a Regulatory Information Service).

The Capital Raising has been fully underwritten by the Bookrunners. The Capital Raising is conditional upon: (i) the First Resolution being passed by Shareholders at the General Meeting; (ii) the Placing Agreement becoming unconditional; and (iii) Admission becoming effective by not later than 8.00 a.m. on 18 March 2014 or such later time and/or date as Rothschild and the Bookrunners may agree.

In the event that these conditions are not satisfied, the Capital Raising will not proceed. In such circumstances, application monies will be returned without payment of interest, as soon as practicable thereafter. No temporary documents of title will be issued in respect of the New Ordinary Shares held in uncertificated form. Definitive certificates in respect of New Ordinary Shares taken up are expected to be posted to the Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in certificated form on or around 25 March 2014. After Admission, the Placing Agreement will not be subject to any condition or right of termination (including in respect of statutory withdrawal rights). A summary of the principal terms of the Placing Agreement is set out in section 5 of Part XI (Additional Information) of this document.

The Existing Ordinary Shares are already CREST-enabled. No further application for admission to CREST is required for the New Ordinary Shares and all of the New Ordinary Shares when issued and fully paid may be held and transferred by means of CREST. In respect of those Qualifying Shareholders who have validly elected to hold their New Ordinary Shares in uncertificated form, the New Ordinary Shares are expected to be credited to their CREST stock accounts, by 8.00 a.m. on 18 March 2014.

Subject to the conditions above being satisfied and save as provided in this Part IV (Terms and Conditions of the Capital Raising), it is expected that:

(A) Equiniti will instruct Euroclear to credit the appropriate stock accounts of Qualifying CREST Shareholders (other than Restricted Shareholders) with such Shareholders' Open Offer Entitlements, with effect from 8.00 a.m. on 28 February 2014;

(B) New Ordinary Shares in uncertificated form will be credited to the appropriate stock accounts of relevant Qualifying CREST Shareholders who validly take up their Open Offer Entitlements by 8.00 a.m. on 18 March 2014;
(C) share certificates for the New Ordinary Shares will be despatched on or around 25 March 2014 to relevant Qualifying Non-CREST Shareholders who validly take up their Open Offer Entitlements. Such certificates will be despatched at the risk of such Shareholders.

All Qualifying Shareholders taking up their Open Offer Entitlements will be deemed to have given the representations and warranties set out in section 9(a) below (in the case of Qualifying Non-CREST Shareholders) and section 9(b) below (in the case of Qualifying CREST Shareholders) unless, in each case, such requirement is waived in writing by the Company.

All documents and cheques posted to or by Qualifying Shareholders and/or their transferees or renouncees (or their agents, as appropriate) will be posted at their own risk.

The attention of Overseas Shareholders is drawn to section 8 of this Part IV which forms part of the terms and conditions of the Open Offer.

References to dates and times in this document should be read as subject to adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of any revised dates or times.

3. Action to be taken in connection with the Open Offer

The action to be taken in respect of the Open Offer depends on whether, at the relevant time, a Qualifying Shareholder has received an Application Form in respect of his entitlement under the Open Offer or has had his Open Offer Entitlements credited to his CREST Stock account.

If you are a Qualifying Non-CREST Shareholder and you are not a Restricted Shareholder, please refer to paragraph 4 and paragraphs 6 to 13 (inclusive) of this Part IV (Terms and Conditions of the Capital Raising).

If you are a Qualifying CREST Shareholder and you are not a Restricted Shareholder, please refer to paragraphs 5 to 13 (inclusive) of this Part IV (Terms and Conditions of the Capital Raising) and to the CREST Manual for further information on the CREST procedures referred to above.

Qualifying CREST Shareholders who are CREST sponsored members should refer to their CREST sponsors, as only their CREST sponsors will be able to take the necessary actions specified below to apply under the Open Offer in respect of the Open Offer Entitlements of such members held in CREST. CREST members who wish to apply under the Open Offer in respect of their Open Offer Entitlements in CREST should refer to the CREST Manual for further information on the CREST procedures referred to above.

4. Action to be taken in relation to Open Offer Entitlements represented by Application Forms

4.1 General

Save as provided in section 8 of this Part IV below, Qualifying Non-CREST Shareholders will have received an Application Form with this document.

The Application Forms set out:

(A) in Box 1, on the Application Form, the number of Existing Ordinary Shares registered in such person's name at the Record Time (on which a Qualifying Non-CREST Shareholder's entitlement to New Ordinary Shares is based);
(B) in Box 2, the maximum number of New Ordinary Shares for which such persons are entitled to apply under the Open Offer, taking into account that any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements, such fractional entitlements being aggregated and ultimately accruing for the benefit of the Company;
(C) in Box 3, how much they would need to pay in Pounds Sterling if they wish to take up their Open Offer Entitlement in full;
(D) the procedures to be followed if a Qualifying Non-CREST Shareholder wishes to dispose of all or part of his entitlement or to convert all or part of his entitlement into uncertificated form; and
(E) instructions regarding acceptance and payment, consolidation and splitting.

Qualifying Non-CREST Shareholders may apply for less than their maximum Open Offer Entitlement should they wish to do so.

Qualifying Non-CREST Shareholders may also hold such an Application Form by virtue of a bona fide market claim.

The instructions and other terms set out in the Application Form constitute part of the terms and conditions of the Open Offer to Qualifying Non-CREST Shareholders.

The latest time and date for acceptance of the Application Forms and payment in full will be 11.00 a.m. on 14 March 2014. The New Ordinary Shares are expected to be issued on 18 March 2014. After such date the New Ordinary Shares will be in registered form, freely transferable by written instrument of transfer in the usual common form, or if they have been issued in or converted into uncertificated form, in electronic form under the CREST system.

Qualifying Shareholders who do not want to take up or apply for the New Ordinary Shares under the Open Offer should take no action and should not complete or return the Application Form. Qualifying Shareholders are, however, encouraged to vote at the General Meeting by attending in person or by completing and returning the enclosed Form of Proxy (either in hard copy or electronically) or by completing and transmitting a CREST Proxy Instruction.

4.2 Bona fide market claims

Applications to acquire New Ordinary Shares may only be made on the Application Form and may only be made by the Qualifying Non-CREST Shareholder named in it or by a person entitled by virtue of a bona fide market claim in relation to a purchase of Ordinary Shares through the market prior to 8.00 a.m. on 27 February 2014 (the date upon which the Ordinary Shares were marked 'ex' the entitlement to participate in the Open Offer). Application Forms may not be assigned, transferred or split, except to satisfy bona fide market claims prior to 3.00 p.m. on 12 March 2014.

The Application Form is not a negotiable document and cannot be separately traded. A Qualifying Non-CREST Shareholder who has sold or otherwise transferred all or part of his holding of Ordinary Shares prior to the date upon which the Ordinary Shares were marked 'ex' the entitlement to participate in the Open Offer, being 8.00 a.m. on 27 February 2014, should consult his broker or other professional adviser as soon as possible, as the invitation to acquire New Ordinary Shares under the Open Offer may be a benefit which may be claimed by the transferee.

Qualifying Non-CREST Shareholders who have sold all of their registered holdings prior to 8.00 a.m. on 27 February 2014 should, if the market claim is to be settled outside CREST, complete Box 6 on the Application Form and immediately send it to the broker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee, or directly to the purchaser or transferee, if known. The Application Form should not, however, be forwarded to or transmitted in or into any Restricted Jurisdiction, including the United States. If the market claim is to be settled outside CREST, the beneficiary of the claim should follow the procedures set out in the accompanying Application Form. If the market claim is to be settled in CREST, the beneficiary of the claim should follow the procedures set out in section 5 below.

Qualifying Non-CREST Shareholders who have sold or otherwise transferred part only of their Existing Ordinary Shares shown on Box 1 of their Application Form prior to 8.00 a.m. on 27 February 2014 should, if the market claim is to be settled outside CREST, complete Box 6 of the Application Form and immediately deliver the Application Form, together with a letter stating the number of Application Forms required (being one for the Qualifying Non-CREST Shareholder in question and one for each of the purchasers or transferees), the total number of Existing Ordinary Shares to be included in each Application Form (the aggregate of which must equal the number shown in Box 1 of the Application Form) and the total number of Open Offer Entitlements to be included in each Application Form (the aggregate of which must equal the number shown in Box 2), to the broker, bank or other agent through whom the sale or transfer was effected or return it by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received by no later than 3.00 p.m. on 12 March 2014. The Receiving Agent will then create new Application Forms, mark the Application

Forms 'Declaration of sale or transfer duly made' and send them by post to the person submitting the original Application Form. The Application Form should not, however, be forwarded to or transmitted in or into any Restricted Jurisdiction, including the United States.

4.3 Application procedures

Qualifying Non-CREST Shareholders who wish to apply to subscribe for all or any of the New Ordinary Shares in respect of their Open Offer Entitlement must return the Application Form in accordance with the instructions thereon. Completed Application Forms should be posted in the accompanying pre-paid envelope (in the UK only) or returned by post or by hand (during normal office hours only) to Equiniti so as to be received by Equiniti by no later than 11.00 a.m. on 14 March 2014, after which time, subject to the limited exceptions set out below, Application Forms will not be valid. Applications delivered by hand will not be checked upon delivery and no receipt will be provided. Qualifying Non-CREST Shareholders should note that applications, once made, will, subject to the very limited withdrawal rights set out in this document, be irrevocable and receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the UK, Qualifying Shareholders are recommended to allow at least four working days for delivery.

Completed Application Forms should be returned together with payment in accordance with paragraph 4.4 below.

4.4 Payment

All payments must be made by cheque or banker's draft in Pounds Sterling payable to 'Equiniti Limited re: Costain Open Offer' and crossed 'A/C payee only'. Cheques must be for the full amount payable on acceptance, and sent by post to Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA so as to be received as soon as possible and, in any event, not later than 11.00 a.m. on 14 March 2014. A pre-paid envelope for use within the UK only will be sent with the Application Form.

Third party cheques may not be accepted except building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque or banker's draft to such effect. It is recommended that the account name should be the same as that shown on the application. Cheques or banker's drafts must be drawn on an account at a bank or building society or a branch of a bank or building society which must be in the UK, the Channel Islands or the Isle of Man and which is either a settlement member of the Cheque and Credit Company Clearing Limited or the CHAPS Clearing Company Limited or which has arranged for its cheques or banker's drafts to be cleared through the facilities provided by either of those companies. Cheques and banker's drafts must bear the appropriate sorting code number in the top right-hand corner. Post-dated cheques will not be accepted. Payments via CHAPS, BACS or electronic transfer will not be accepted.

The Company reserves the right to have cheques and banker's drafts presented for payment on receipt. No interest will be allowed on payments made before they are due and any interest on such payments will be paid to the Company. It is a term of the Open Offer that cheques must be honoured on first presentation and the Company may elect to treat as invalid any acceptances in respect of which cheques are not honoured. Return of the Application Form with a cheque will constitute a warranty that the cheque will be honoured on first presentation.

If cheques or banker's drafts are presented for payment before the conditions of the Open Offer are fulfilled, the application monies will be kept in an interest-bearing account retained for the Company until all conditions are met. If the Open Offer does not become unconditional, no New Ordinary Shares will be issued and all monies will be returned (at the applicant's sole risk), without payment of interest, to applicants as soon as practicable, following the lapse of the Open Offer. The interest earned on such monies, if any, will be retained for the benefit of the Company.

If New Ordinary Shares are allotted to a Qualifying Shareholder and a cheque for that allotment is subsequently not honoured, the Company may (in its absolute discretion as to manner, timing and terms) make arrangements for the sale of such shares on behalf of such Qualifying Shareholder and hold the proceeds of sale (net of the Company's reasonable estimate of any loss that it has suffered as a result of the acceptance being treated as invalid and of the expenses of sale including, without limitation, any stamp duty or SDRT payable on the transfer of such shares, and of all amounts payable by such Qualifying Shareholder pursuant to the provisions of this Part IV in respect of the acquisition of such

shares) on behalf of such Qualifying Shareholder. Neither the Company nor any other person shall be responsible for, or have any liability for, any loss, expenses or damage suffered by any Qualifying Shareholder as a result.

All enquires in connection with the Application Forms should be addressed to Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. Alternatively, enquiries in connection with the Application Forms can be made to Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays. Other providers' costs may vary and international call charges will apply if you are calling from outside the United Kingdom.

4.5 Discretion as to validity of acceptances

If payment is not received in full by 11.00 a.m. on 14 March 2014, the offer to subscribe for New Ordinary Shares will be deemed to have been declined and will lapse. However, the Company may, but shall not be obliged to, treat as valid (a) Application Forms and accompanying remittances that are received through the post not later than 10.00 a.m. on 17 March 2014 (the cover bearing a legible postmark not later than 11.00 a.m. on 14 March 2014); and (b) acceptances in respect of which a remittance is received prior to 11.00 a.m. on 14 March 2014 from an authorised person (as defined in section 31(2) of FSMA) specifying the number of New Ordinary Shares to be acquired and undertaking to lodge the relevant Application Form, duly completed, by 10.00 a.m. on 17 March 2014 and such Application Form is lodged by that time.

The Company may also (in its absolute discretion) treat an Application Form as valid and binding on the person(s) by whom or on whose behalf it is lodged even if it is not completed in accordance with the relevant instructions or is not accompanied by a valid power of attorney where required.

The Company reserves the right to treat as invalid any application or purported application for the New Ordinary Shares pursuant to the Open Offer that appears to the Company to have been executed in, despatched from, or that provides an address for delivery of definitive share certificates for New Ordinary Shares in, a Restricted Jurisdiction, including the United States.

4.6 Effect of application

All documents and remittances sent by post by or to an applicant (or as the applicant may direct) will be sent at the applicant's own risk. By completing and delivering an Application Form the applicant:

(A) represents and warrants to each of the Company and the Bookrunners that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations, under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares or acting on behalf of any such person on a non-discretionary basis;
(B) agrees with each of the Company and the Bookrunners that all applications under the Open Offer and contracts resulting therefrom, and any non-contractual obligations related thereto, shall be governed by, and construed in accordance with, the laws of England;
(C) confirms to each of the Company and the Bookrunners that in making the application he is not relying on any information or representation other than that contained in this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any information or representation not so contained and further agrees that, having had the opportunity to read this document including any documentation incorporated by reference, he will be deemed to have had notice of all information contained in this document (including information incorporated by reference);
(D) confirms that in making the application he is not relying and has not relied on the Bookrunners or any other person affiliated with the Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his investment decision;
(E) represents and warrants to the Company and the Bookrunners that if he has received some or all of his Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
(F) represents and warrants to each of the Company and the Bookrunners that he is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he received such Open Offer Entitlements by virtue of a bona fide market claim;
(G) represents and warrants to the Company and the Bookrunners that he is not, nor is he applying on behalf of any person who is: (a) located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Restricted Jurisdiction or any jurisdiction in which the application for New Ordinary Shares is prevented by law, and (b) he is not applying with a view to re-offering, reselling, transferring or delivering any of the New Ordinary Shares which are the subject of his application to, or for the benefit of, a person who is located, a citizen or resident, or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Restricted Jurisdiction or any jurisdiction in which the application for New Ordinary Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares under the Open Offer;
(H) represents and warrants to each of the Company, the Bookrunners and the Receiving Agent that: (a) he is not in the United States, nor is he applying for the account of any person who is located in the United States; and (b) he is not applying for the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any New Ordinary Shares into the United States;
(I) represents and warrants to each of the Company and the Bookrunners that he is not, and nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986; and
(J) requests that the New Ordinary Shares to which he will become entitled be issued to him on the terms set out in this document, subject to the Costain Articles.

4.7 Money Laundering Regulations

To ensure compliance with the Money Laundering Regulations, Equiniti may require, at its absolute discretion, verification of the identity of the beneficial owner by whom or on whose behalf the Application Form is lodged with payment (which requirements are referred to below as the 'verification of identity requirements'). If an application is made by a UK-regulated broker or intermediary acting as agent and which is itself subject to the Money Laundering Regulations, any verification of identity requirements are the responsibility of such broker or intermediary and not of Equiniti. In such case, the lodging agent's stamp should be inserted on the Application Form.

The person lodging the Application Form with payment (the 'applicant'), including any person who appears to Equiniti to be acting on behalf of some other person, shall thereby be deemed to agree to provide Equiniti with such information and other evidence as Equiniti may require to satisfy the verification of identity requirements. Submission of an Application Form shall constitute a warranty that the Money Laundering Regulations will not be breached by the acceptance of remittance and an undertaking by the applicant to provide promptly to Equiniti such information as may be specified by Equiniti as being required for the purpose of the Money Laundering Regulations.

If Equiniti determines that the verification of identity requirements apply to any applicant or application, the relevant New Ordinary Shares (notwithstanding any other term of the Open Offer) will not be issued to the relevant applicant unless and until the verification of identity requirements have been satisfied in respect of that applicant or application. Equiniti is entitled, in its absolute discretion, to determine whether the verification of identity requirements apply to any applicant or application and whether such requirements have been satisfied, and neither Equiniti nor the Company will be liable to any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of the exercise of such discretion.

If the verification of identity requirements apply, failure to provide the necessary evidence of identity within a reasonable time may result in delays and potential rejection of an application. If, within a reasonable period of time following a request for verification of identity, Equiniti has not received evidence satisfactory to it as aforesaid, the Company may, in its absolute discretion, treat the relevant application as invalid, in which event the application monies will be returned (at the applicant's risk) without interest to the account of the bank or building society on which the relevant cheque or banker's draft was drawn.

The verification of identity requirements will not usually apply if:

(A) the applicant is a regulated UK broker or intermediary acting as agent and is itself subject to the Money Laundering Regulations;
(B) the applicant is an organisation required to comply with the EU Money Laundering Directive (No. 91/308/EEC) as amended by Directives 2001/97/EC and 2005/60/EC;
(C) the applicant is a company whose securities are listed on a regulated market subject to specified disclosure obligations;
(D) the applicant (not being an applicant who delivers his/her application in person) makes payment through an account in the name of such applicant with a credit institution which is subject to the Money Laundering Regulations or with a credit institution situated in a non-EEA State which imposes requirements equivalent to those laid down in that directive; or
(E) the aggregate subscription price for the relevant New Ordinary Shares is less than e15,000 (or its Pounds Sterling equivalent).

Submission of the Application Form with the appropriate remittance will constitute a warranty to each of the Company and the Bookrunners from the applicant that the Money Laundering Regulations will not be breached by application of such remittance.

Where the verification of identity requirements apply, please note the following as this will assist in satisfying the requirements. Satisfaction of these requirements may be facilitated in the following ways:

(i) if payment is made by cheque or banker's draft drawn on a branch of a bank or building society in the UK and bears a UK bank sort code number in the top right hand corner, the following applies. Cheques, which are recommended to be drawn on the personal account of the individual investor where they have sole or joint title to the funds, should be made payable to 'Equiniti Limited re: Costain Open Offer' and crossed 'A/C payee only'. Third party cheques may not be accepted except for building society cheques or banker's drafts where the building society or bank has confirmed the name of the account holder by stamping or endorsing the building society cheque/banker's draft to such effect. The account name should be the same as that shown on the application;
(ii) if the Application Form is lodged with payment by an agent which is an organisation of the kind referred to in sub-paragraph (B) above or which is subject to anti-money laundering regulations in a country which is a member of the Financial Action Task Force (the non-EU members of which are Argentina, Australia, Brazil, Canada, members of the Gulf Co-operation Council (being Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Hong Kong, Iceland, Japan, Mexico, Luxembourg, New Zealand, Norway, the Russian Federation, Singapore, South Africa, Switzerland, Turkey and the US), the agent should provide written confirmation that it has that status with the Application Form(s) and written assurances that it has obtained and recorded evidence of the identity of the person for whom it acts and that it will on demand make such evidence available to Equiniti and/or any relevant regulatory or investigatory authority; or
(iii) if an Application Form is lodged by hand by the applicant in person, he should ensure that he has with him evidence of identity bearing his photograph (for example, his passport) and evidence of his address.

To confirm the acceptability of any written assurance referred to in paragraph (ii) above, or in any other case, the applicant should contact Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays. Other providers' costs may vary and international call charges will apply if you are calling from outside the United Kingdom.

4.8 Issue of New Ordinary Shares in certificated form

Definitive share certificates in respect of the New Ordinary Shares to be held in certificated form are expected to be despatched by post on or around 25 March 2014, at the risk of the person(s) entitled to them, to accepting Qualifying Non-CREST Shareholders or their agents or, in the case of joint holdings,

to the first-named Shareholder, in each case at their registered address (unless lodging agent details have been completed on the Application Form).

5. Action to be taken in relation to Open Offer Entitlements credited in CREST

5.1 General

Save as provided in section 8 of this Part IV in relation to certain Overseas Shareholders, each Qualifying CREST Shareholder is expected to receive a credit to his CREST stock account of his Open Offer Entitlements equal to the maximum number of New Ordinary Shares for which he is entitled to apply to acquire under the Open Offer. Any fractional entitlements to New Ordinary Shares will be rounded down in calculating entitlements to New Ordinary Shares. Fractional entitlements to New Ordinary Shares will be aggregated and will ultimately accrue for the benefit of the Company.

The CREST stock account to be credited will be an account under the participant ID and member account ID that apply to the Ordinary Shares held at the Record Time by the Qualifying CREST Shareholder in respect of which the Open Offer Entitlements have been allocated.

If for any reason it is impracticable to credit the stock accounts of Qualifying CREST Shareholders by 28 February 2014 or such later time as the Company shall decide, Application Forms shall, unless the Company agrees otherwise, be sent out in substitution for the Open Offer Entitlements which have not been so credited and the expected timetable as set out in this document may be adjusted as appropriate. References to dates and times in this document should be read as subject to any such adjustment. The Company will make an appropriate announcement to a Regulatory Information Service giving details of the revised dates but Qualifying CREST Shareholders may not receive any further written communication.

Qualifying CREST Shareholders who wish to take up all or part of their entitlements in respect of New Ordinary Shares should refer to the CREST Manual for further information on the CREST procedures referred to below. If you are a CREST sponsored member, you should consult your CREST sponsor if you wish to take up your entitlement, as only your CREST sponsor will be able to take the necessary action to take up your entitlements in respect of New Ordinary Shares. If you have any queries on the procedure for acceptances and payment, you should contact Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines are open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays. Other providers' costs may vary and international call charges will apply if you are calling from outside the United Kingdom.

In accordance with the instructions in this Part IV, the CREST instruction must have been settled by 11.00 a.m. on 14 March 2014.

5.2 Bona fide market claims

The Open Offer Entitlements will constitute a separate security for the purposes of CREST and will have a separate ISIN. Although Open Offer Entitlements will be admitted to CREST and be enabled for settlement, applications in respect of Open Offer Entitlements may only be made by the Qualifying Shareholder originally entitled or by a person entitled by virtue of a bona fide market claim transaction.

5.3 USE Instructions

Qualifying CREST Shareholders who are CREST members and who wish to apply for New Ordinary Shares in respect of all or some of their Open Offer Entitlements in CREST must send (or, if they are CREST sponsored members, procure that their CREST sponsor sends) a USE Instruction to CREST which, on its settlement, will have the following effect:

(i) the crediting of a stock account of the Receiving Agent under the participant ID and member account ID specified below, with a number of Open Offer Entitlements corresponding to the number of New Ordinary Shares applied for; and
(ii) the creation of a CREST payment, in accordance with the CREST payment arrangements in favour of the payment bank of the Receiving Agent in respect of the amount specified in the USE Instruction which must be the full amount payable on application for the number of New Ordinary Shares referred to in (i) above.

5.4 Content of USE Instructions in respect of Open Offer Entitlements

The USE Instruction must be properly authenticated in accordance with Euroclear's specifications and must contain, in addition to the other information that is required for settlement in CREST, the following details:

(i) the number of New Ordinary Shares for which application is being made (and hence the number of the Open Offer Entitlement(s) being delivered to the Receiving Agent);
(ii) the ISIN of the Open Offer Entitlement. This is GB00BJWHXF77;
(iii) the CREST participant ID of the CREST member;
(iv) the CREST member account ID of the CREST member from which the Open Offer Entitlements are to be debited;
(v) the participant ID of the Receiving Agent in its capacity as a CREST receiving agent. This is 2RA31;
(vi) the member account ID of the Receiving Agent in its capacity as a CREST receiving agent. This is RA158901;
(vii) the amount payable by means of a CREST payment on settlement of the USE Instruction. This must be the full amount payable on application for the number of New Ordinary Shares referred to in (i) above;
(viii) the intended settlement date. This must be on or before 11.00 a.m. on 14 March 2014;
(ix) the Corporate Action Number for the Open Offer. This will be available by viewing the relevant corporate action details in CREST;
(x) a contact name and telephone number (in the free format shared note field); and
(xi) a priority of at least 80.

In order for an application under the Open Offer to be valid, the USE Instruction must comply with the requirements as to authentication and contents set out above and must settle on or before 11.00 a.m. on 14 March 2014. CREST members and, in the case of CREST sponsored members, their CREST sponsors, should note that the last time at which a USE Instruction may settle on 14 March 2014 in order to be valid is 11.00 a.m. on that day.

If the conditions to the Open Offer are not fulfilled on or before 8.00 a.m. on 18 March 2014, or such other time and/or date as may be agreed between the Company, Rothschild and the Bookrunners, the Open Offer will lapse, the Open Offer Entitlements admitted to CREST will be disabled and the Receiving Agent will refund the amount paid by a Qualifying CREST Shareholder by way of a CREST payment, without interest as soon as practicable thereafter.

The interest earned on such monies, if any, will be retained for the benefit of the Company.

5.5 CREST procedures and timings

Qualifying CREST Shareholders who are CREST members and CREST sponsors (on behalf of CREST sponsored members) should note that Euroclear does not make available special procedures in CREST for any particular corporate action. Normal system timings and limitations will therefore apply in relation to the input of a USE Instruction and its settlement in connection with the Open Offer. It is the responsibility of the Qualifying CREST Shareholder concerned to take (or, if the Qualifying CREST Shareholder is a CREST sponsored member, to procure that his CREST sponsor takes) the action necessary to ensure that a valid acceptance is received as stated above by 11.00 a.m. on 14 March 2014. Qualifying CREST Shareholders and (where applicable) CREST sponsors are referred in particular to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

5.6 Validity of application

A USE Instruction complying with the requirements as to authentication and contents set out above which settles by not later than 11.00 a.m. on 14 March 2014 will constitute a valid application under the Open Offer.

5.7 Incorrect or incomplete applications

If a USE Instruction includes a CREST payment for an incorrect sum, the Company, through the Receiving Agent, reserves the right:

(i) to reject the application in full and refund the payment to the CREST member in question (without interest);
(ii) in the case that an insufficient sum is paid, to treat the application as a valid application for such lesser whole number of New Ordinary Shares as would be able to be applied for with that payment at the Offer Price, refunding any unutilised sum to the CREST member in question (without interest); or
(iii) in the case that an excess sum is paid, to treat the application as a valid application for all the New Ordinary Shares referred to in the USE Instruction, refunding any unutilised sum to the CREST member in question (without interest).

5.8 Effect of application

A CREST member who makes or is treated as making a valid application in accordance with the above procedures thereby:

(i) represents and warrants to each of the Company and the Bookrunners that he has the right, power and authority, and has taken all action necessary, to make the application under the Open Offer and to execute, deliver and exercise his rights, and perform his obligations, under any contracts resulting therefrom and that he is not a person otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares or acting on behalf of any such person on a non-discretionary basis;
(ii) agrees with each of the Company and the Bookrunners to pay the amount payable on application in accordance with the above procedures by means of a CREST payment in accordance with the CREST payment arrangements (it being acknowledged that the payment to the Receiving Agent's payment bank in accordance with the CREST payment arrangements shall, to the extent of the payment, discharge in full the obligation of the CREST member to pay the amount payable on application);
(iii) agrees with each of the Company and the Bookrunners that all applications under the Open Offer and contracts resulting therefrom, and any non-contractual obligations relating thereto, shall be governed by, and construed in accordance with, the laws of England;
(iv) confirms that in making the application he is not relying and has not relied on the Bookrunners or any other person affiliated with the Bookrunners in connection with any investigation of the accuracy of any information contained in this document or his investment decision;
(v) confirms to each of the Company and the Bookrunners that in making the application he is not relying on any information or representation other than that contained in this document, and the applicant accordingly agrees that no person responsible solely or jointly for this document or any part thereof, or involved in the preparation thereof, shall have any liability for any such information or representation not so contained and further agrees that, having had the opportunity to read this document, including any documentation incorporated by reference, he will be deemed to have had notice of all the information contained in this document (including information incorporated by reference);
(vi) represents and warrants to the Company and the Bookrunners that if he has received some or all of his Open Offer Entitlements from a person other than the Company, he is entitled to apply under the Open Offer in relation to such Open Offer Entitlements by virtue of a bona fide market claim;
(vii) represents and warrants to each of the Company and the Bookrunners that he is the Qualifying Shareholder originally entitled to the Open Offer Entitlements or that he has received such Open Offer Entitlements by virtue of a bona fide market claim;
(viii) represents and warrants to the Company and the Bookrunners that he is not, nor is he applying on behalf of any person who is: (a) located, a citizen or resident, or a corporation, partnership or other entity created or organised in or under any laws, in or of any Restricted Jurisdiction or any jurisdiction in which the application for New Ordinary Shares is prevented by law; and (b) applying with a view to re-offering, reselling, transferring or delivering any of the New Ordinary Shares which are the subject of his application to, or for the benefit of, a person who is located, a citizen or resident or which is a corporation, partnership or other entity created or organised in or under any laws, in or of any Restricted Jurisdiction or any jurisdiction in which the application for New Ordinary Shares is prevented by law, nor acting on behalf of any such person on a non-discretionary basis nor a person(s) otherwise prevented by legal or regulatory restrictions from applying for New Ordinary Shares under the Open Offer;
(ix) represents and warrants to each of the Company, the Bookrunners and the Receiving Agent that: (a) he is not in the United States, nor is he applying for the account of a person who is located in the United States, and (b) he is not applying for the New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any New Ordinary Shares into the United States;
(x) requests that the New Ordinary Shares to which he will become entitled be issued to him on the terms set out in this document, subject to the Costain Articles; and
(xi) represents and warrants to each of the Company and the Bookrunners that he is not, and nor is he applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 93 (depository receipts) or section 96 (clearance services) of the Finance Act 1986.

5.9 Discretion as to rejection and validity of acceptances

The Company may:

(i) reject any acceptance constituted by a USE Instruction, which is otherwise valid, in the event of a breach of any of the representations, warranties and undertakings set out or referred to in paragraph 5.8 of this Part IV (Terms and Conditions of the Capital Raising). Where an acceptance is made as described in this paragraph 5 which is otherwise valid, and the USE Instruction concerned fails to settle by 11:00 a.m. on 14 March 2014 (or by such later time and date as the Company and the Bookrunners may determine), the Company shall be entitled to assume, for the purposes of their right to reject an acceptance as described in this paragraph 5.9(i), that there has been a breach of the representations, warranties and undertakings set out or referred to in paragraph 5.8 above unless the Company is aware of any reason outside the control of the Qualifying CREST Shareholder or CREST sponsor (as appropriate) concerned for the failure of the USE Instruction to settle;
(ii) treat as valid (and binding on the Qualifying CREST Shareholder concerned) an acceptance which does not comply in all respects with the requirements as to validity set out or referred to in this paragraph 5;
(iii) accept an alternative properly authenticated dematerialised instruction from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor as constituting a valid acceptance in substitution for, or in addition to, a USE Instruction and subject to such further terms and conditions as the Company may determine;
(iv) treat a properly authenticated dematerialised instruction (in this sub-paragraph, the 'first instruction') as not constituting a valid acceptance if, at the time at which Equiniti receives a properly authenticated dematerialised instruction giving details of the first instruction, either the Company or Equiniti has received actual notice from Euroclear of any of the matters specified in CREST Regulation 35(5)(a) in relation to the first instruction. These matters include notice that any information contained in the first instruction was incorrect or notice of lack of authority to send the first instruction; and
(v) accept an alternative instruction or notification from a Qualifying CREST Shareholder or (where applicable) a CREST sponsor, or extend the time for acceptance and/or settlement of a USE Instruction or any alternative instruction or notification if, for reasons or due to circumstances outside the control of any Qualifying CREST Shareholder or (where applicable) CREST sponsor, a Qualifying CREST Shareholder is unable validly to take up all or part of his Open

Offer Entitlement by means of the above procedures. In normal circumstances, this discretion is only likely to be exercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on the part of facilities and/or systems operated by Equiniti in connection with CREST.

5.10 Money Laundering Regulations

If you hold your New Ordinary Shares in CREST and apply to take up all or part of your entitlement as agent for one or more persons and you are not a UK or EU regulated person or institution (e.g. a bank, a broker or another UK financial institution), then, irrespective of the value of the application, Equiniti is required to take reasonable measures to establish the identity of the person or persons on whose behalf you are making the application. Such Qualifying CREST Shareholders must therefore contact Equiniti before sending any USE Instruction or other instruction so that appropriate measures may be taken.

Submission of a USE Instruction which constitutes, or which may on its settlement constitute, a valid acceptance as described above constitutes a warranty and undertaking by the applicant to the Company and the Bookrunners to provide promptly to Equiniti any information Equiniti may specify as being required for the purposes of the Money Laundering Regulations. Pending the provision of evidence satisfactory to Equiniti as to identity, Equiniti, having consulted with the Company, may take, or omit to take, such action as it may determine to prevent or delay settlement of the USE Instruction. If satisfactory evidence of identity has not been provided within a reasonable time, Equiniti will not permit the USE Instruction concerned to proceed to settlement (without prejudice to the right of the Company to take proceedings to recover any loss suffered by it as a result of failure by the applicant to provide satisfactory evidence).

5.11 Deposit of Open Offer Entitlements into, and withdrawal from, CREST

A Qualifying Non-CREST Shareholder's entitlement under the Open Offer as shown by the number of Open Offer Entitlements set out in his Application Form may be deposited into CREST (either into the account of the Qualifying Shareholder named in the Application Form or into the name of a person entitled by virtue of a bona fide market claim). Similarly, Open Offer Entitlements held in CREST may be withdrawn from CREST so that the entitlement under the Open Offer is reflected in an Application Form. Normal CREST procedures (including timings) apply in relation to any such deposit or withdrawal, (in the case or a deposit into CREST) as set out in the Application Form.

A Qualifying Non-CREST Shareholder who wishes to make such a deposit should sign and complete Box 9 of their Application Form, entitled 'CREST Deposit Form' and then deposit their Application Form with the CREST Courier and Sorting Service. In addition, the normal CREST stock deposit procedures will need to be carried out, except that (a) it will not be necessary to complete and lodge a separate CREST transfer form (as prescribed under the Stock Transfer Act 1963) with the CREST Courier and Sorting Service and (b) only the Open Offer Entitlement shown in Box 2 of the Application Form may be deposited into CREST.

If you have received your Application Form by virtue of a bona fide market claim, the declaration below Box 7 must be made or (in the case of an Application Form which has been split) marked 'Declaration of sale or transfer duly made'. If you wish to take up your Open Offer Entitlement, the CREST Deposit Form in Box 9 of your Application Form must be completed and deposited with the CREST Courier and Sorting Service in accordance with the instructions above. A holder of more than one Application Form who wishes to deposit Open Offer Entitlements shown on those Application Forms into CREST must complete Box 9 of each Application Form.

In particular, having regard to normal processing times in CREST and on the part of Equiniti, the recommended latest time for depositing an Application Form with the CREST Courier and Sorting Service, where the person entitled wishes to hold the Open Offer Entitlement set out in such Application Form as an Open Offer Entitlement in CREST, is 3.00 p.m. on 11 March 2014. CREST holders inputting the withdrawal of their Open Offer Entitlement from their CREST account must ensure that they withdraw their Open Offer Entitlement.

Delivery of an Application Form with the CREST deposit form duly completed, whether in respect of a deposit into the account of the Qualifying Shareholder named in the Application Form or into the name of another person, shall constitute a representation and warranty to the Company and Equiniti by the relevant CREST member(s) that it is/they are not in breach of the provisions of the notes under the paragraph headed 'Application Letter' on page 3 of the Application Form, and a declaration to the Company and the Receiving Agent from the relevant CREST member(s) that it/they is/are not located in, or citizen(s) or resident(s) of, any Restricted Jurisdiction or any jurisdiction in which the application for New Ordinary Shares is prevented by law, and that it/they is/are not located in the United States and, where such deposit is made by a beneficiary or a market claim, a representation and warranty that the relevant CREST member(s) is/are are entitled to apply under the Open Offer by virtue of a bona fide market claim.

5.12 Right to allot and issue New Ordinary Shares in certificated form

Despite any other provision of this document, the Company reserves the right to allot and to issue any New Ordinary Shares in certificated form. In normal circumstances, this right is only likely to be exercised in the event of an interruption, failure or breakdown of CREST (or of any part of CREST) or of a part of the facilities and/or systems operated by Equiniti in connection with CREST.

6. Taxation

Information on taxation with regard to the Capital Raising for Qualifying Shareholders who are resident in the UK for UK tax purposes is set out in Part IX (United Kingdom Taxation Considerations) of this document. The information contained in Part IX (United Kingdom Taxation Considerations) is intended only as a general guide to the current tax position in the United Kingdom and Qualifying Shareholders resident in the UK for UK tax purposes should consult their own tax advisers regarding the tax treatment of the Capital Raising in light of their own circumstances. Shareholders who are in any doubt as to their tax position or who are subject to tax in any other jurisdiction should consult their professional advisers immediately.

7. Withdrawal rights

Qualifying Shareholders wishing to exercise the withdrawal rights under section 87Q(4) of FSMA after the issue by the Company of a prospectus supplementing this document (if any) must do so by lodging a written notice of withdrawal, which shall not include a notice sent by facsimile or any other form of electronic communication, that must include the full name and address of the person wishing to exercise such statutory withdrawal rights and, if such person is a Qualifying CREST Shareholder, the participant ID and the member account ID of such Qualifying CREST Shareholder at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA, so as to be received no later than two Business Days after the date on which the supplementary prospectus is published. Notice of withdrawal given by any other means or which is deposited with or received by Equiniti after expiry of such period will not constitute a valid withdrawal. Furthermore, it is the Company's view that Qualifying Shareholders who have validly taken up their entitlements in accordance with the procedure laid down for acceptance and payment in this Part IV shall not be entitled to withdraw any such acceptance. In such circumstances, any such accepting Qualifying Shareholder or renouncee, wishing to withdraw is advised to seek independent legal advice.

8. Overseas Shareholders

This document has been approved by the FCA, being the competent authority in the UK. It is expected that Shareholders in each EEA State other than any Restricted Jurisdiction will be able to participate in the Open Offer.

It is the responsibility of any person (including, without limitation, custodians, nominees and trustees) outside the UK wishing to participate in the Open Offer to satisfy himself as to the full observance of the laws of any relevant territory in connection therewith, including the obtaining of any governmental or other consents which may be required, the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such territories. The comments set out in this paragraph 8 are intended as a general guide only and any Overseas Shareholder who is in doubt as to his, her or its position should consult his, her or its professional adviser without delay.

8.1 General

The distribution of this document and the Application Form and the making of the Open Offer to persons resident in, or who are citizens of, or who have a registered address in countries other than the United Kingdom may be affected by the law of the relevant jurisdiction. Those persons

should consult their professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to participate in the Open Offer.

This section sets out the restrictions applicable to Shareholders who have registered addresses outside the UK, who are physically located outside the UK, or who are citizens or residents of countries other than the UK, or who are persons (including, without limitation, custodians, nominees and trustees) who have a contractual or legal obligation to forward this document to a jurisdiction outside the UK, or who hold Ordinary Shares for the account or benefit of any such person.

Open Offer Entitlements will be issued to all Qualifying Shareholders holding Ordinary Shares at the Record Time. However, Application Forms have not been, and will not be, sent to, and neither Open Offer Entitlements nor New Ordinary Shares will be credited to CREST accounts of, Restricted Shareholders, or to their agent or intermediary.

Having considered the circumstances, the Directors have formed the view that it is necessary or expedient to restrict the ability of the Shareholders in the United States and the other Restricted Jurisdictions to participate in the Open Offer due to the time and costs involved in the registration of the document and/or compliance with the relevant local legal or regulatory requirements in those jurisdictions.

Receipt of this document and/or an Application Form or the crediting of Open Offer Entitlements to a stock account in CREST will not constitute an offer in or into any Restricted Jurisdiction, including the United States, and, in those circumstances, this document and/or an Application Form must be treated as sent for information only and should not be copied or redistributed. No person receiving a copy of this document and/or an Application Form and/or receiving a credit of Open Offer Entitlements to a stock account in CREST in any territory other than the UK may treat the same as constituting an invitation or offer to him, nor should he in any event use the Application Form or deal with Open Offer Entitlements in CREST unless, in the relevant jurisdiction (other than any Restricted Jurisdictions), such an invitation or offer could lawfully be made to him and the Application Form or Open Offer Entitlements in CREST could lawfully be used or dealt with without contravention of any unfulfilled registration or other legal or regulatory requirements.

Accordingly, persons receiving a copy of this document and/or an Application Form or whose stock account in CREST is credited with Open Offer Entitlements should not, in connection with the Capital Raising, distribute or send the same in or into, or transfer Open Offer Entitlements to any person in or into, any Restricted Jurisdiction, including the United States. If an Application Form or credit of Open Offer Entitlements in CREST is received by any person in any Restricted Jurisdiction, including the United States, or by their agent or nominee in any such territory, he must not seek to take up the entitlements referred to in the Application Form or in this document or renounce the Application Form or transfer the Open Offer Entitlements in CREST. Any person who does forward this document or an Application Form into any Restricted Jurisdiction (whether under contractual or legal obligation or otherwise) should draw the recipient's attention to the contents of this section.

The Company may treat as invalid any acceptance or purported acceptance of the offer of the Open Offer Entitlements which appears to the Company or its agents to have been executed, effected or despatched in a manner which may involve a breach of the laws or regulations of any jurisdiction or if it believes or they believe that the same may violate applicable legal or regulatory requirements or if, in the case of an Application Form, it provides an address for delivery of the definitive share certificates for New Ordinary Shares in, or, in the case of a credit of New Ordinary Shares in CREST, the Shareholder's registered address is in, a Restricted Jurisdiction, including the United States, or if the Company believes or its agents believe that the same may violate applicable legal or regulatory requirements.

Despite any other provisions of this document or the Application Form, the Company reserves the right to permit any Overseas Shareholder (other than Restricted Shareholders) to take up his entitlements if the Company in its sole and absolute discretion is satisfied that the transaction in question is exempt from or not subject to the legislation or regulations giving rise to the restriction in question. If the Company is so satisfied, the Company will arrange for the relevant Overseas Shareholder to be sent an Application Form if he is reasonably believed to be a Qualifying Non-CREST Shareholder or, if he is reasonably believed to be a Qualifying CREST Shareholder, arrange for the CREST Open Offer Entitlements to be credited to the relevant CREST stock account.

Those Overseas Shareholders who wish, and are permitted, to take up their entitlement should note that payments must be made as described in paragraphs 4 and 5 of this Part IV.

The provisions of paragraph 8 of this Part IV will apply generally to Restricted Shareholders and other Overseas Shareholders who do not or are unable to take up New Ordinary Shares.

Specific restrictions relating to certain jurisdictions are set out below.

(a) Offering restrictions relating to the United States

The New Ordinary Shares have not been and will not be registered under the Securities Act or any relevant securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States.

No offering is being made in the United States and neither this document nor the Application Form constitutes or will constitute an offer or an invitation to apply for, or an offer or an invitation to acquire or subscribe for, any New Ordinary Shares in the United States. The Applications Forms will not be sent to, and the Open Offer Entitlements will not be credited to a stock account in CREST of, any Shareholder with a registered address in the United States.

Application Forms should not be postmarked in the United States or otherwise despatched from the United States, and all persons acquiring New Ordinary Shares and wishing to hold such shares in registered form must provide an address for registration of the New Ordinary Shares issued upon exercise thereof outside of the United States.

Neither the New Ordinary Shares, the Form of Proxy, the Application Form, this document nor any other document connected with the Capital Raising have been or will be approved or disapproved by the SEC or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities or any securities commission passed upon or endorsed the merits of the offering of the New Ordinary Shares, the Form of Proxy, the Application Form, or the accuracy or adequacy of this document or any other document connected with this Capital Raising. Any representation to the contrary is a criminal offence in the United States.

Any person who subscribes for New Ordinary Shares will be deemed to have declared, represented, warranted and agreed to, by accepting delivery of this document or the Application Form or by applying for New Ordinary Shares in respect of Open Offer Entitlements credited to a stock account in CREST, and delivery of the New Ordinary Shares, the representations and warranties set out in section 9 of this Part IV.

The Company reserves the right, in its absolute discretion, to treat as invalid any Application Form: (i) that appears to the Company or its agents to have been executed in or despatched from the United States; or (ii) where the Company believes acceptance of such Application Form may infringe applicable legal or regulatory requirements, and the Company shall not be bound to issue any New Ordinary Shares in respect of any such Application Form. In addition, the Company reserves the right, in its absolute discretion, to reject any USE Instruction sent by or on behalf of any CREST member with a registered address in the United States in respect of the New Ordinary Shares.

(b) Other overseas territories

Application Forms will be posted to Qualifying Non-CREST Shareholders (other than those Qualifying Non-CREST Shareholders who have registered addresses in the Restricted Jurisdictions) and Open Offer Entitlements will be credited to the CREST stock accounts of Qualifying CREST Shareholders (other than those Qualifying CREST Shareholders who have registered addresses in the Restricted Jurisdictions). No offer of or invitation to subscribe for New Ordinary Shares is being made by virtue of this document or the Application Form into the Restricted Jurisdictions. Overseas Shareholders in jurisdictions other than the Restricted Jurisdictions may, subject to the laws of their relevant jurisdiction, accept their entitlements under the Capital Raising in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Application Form.

Shareholders who have registered addresses in or who are resident in, or who are citizens of, countries other than the United Kingdom should consult their appropriate professional advisers as to whether they require any governmental or other consents or need to observe any other formalities to enable them to take up their Open Offer Entitlements. If you are in any doubt as to your eligibility to accept the offer of New Ordinary Shares, you should contact your appropriate professional adviser immediately.

9. Representations and warranties relating to overseas territories

(a) Qualifying Non-CREST Shareholders

Any person accepting an Application Form or requesting registration of the New Ordinary Shares comprised therein represents and warrants to the Company that: (i) such person is not accepting an Application Form from within the United States or any other Restricted Jurisdiction; (ii) such person is not in any territory in which it is unlawful to make or accept an offer to subscribe for New Ordinary Shares or to use the Application Form in any manner in which such person has used or will use it; (iii) such person is not acting on a non-discretionary basis for a person located within the United States or any other Restricted Jurisdiction or any territory referred to in (ii) above at the time the instruction to accept or renounce was given; and (iv) such person is not acquiring New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States or any other Restricted Jurisdiction or any territory referred to in (ii) above.

The Company may treat as invalid any acceptance or purported acceptance of the allotment of New Ordinary Shares comprised in, or renunciation or purported renunciation of, an Application Form if it: (a) appears to the Company to have been executed in or despatched from the United States or any other Restricted Jurisdiction or otherwise in a manner which may involve a breach of the laws of any jurisdiction or if the Company believes the same may violate any applicable legal or regulatory requirement; (b) provides an address in any Restricted Jurisdiction, including the United States, for delivery of definitive share certificates for New Ordinary Shares (or any jurisdiction outside the UK in which it would be unlawful to deliver such certificates); or (c) purports to exclude the representation and warranty required by this section.

(b) Qualifying CREST Shareholders

A Qualifying CREST Shareholder who makes a valid acceptance in accordance with the procedure set out in paragraph 5 of this Part IV represents and warrants to the Company that: (i) he is not within any of the Restricted Jurisdictions, including the United States; (ii) he is not in any territory in which it is unlawful to make or accept an offer to acquire or subscribe for New Ordinary Shares; (iii) he is not acting on a non-discretionary basis for a person located within the United States or any other Restricted Jurisdiction or any territory referred to in (ii) above at the time the instruction to accept was given; and (iv) he is not acquiring New Ordinary Shares with a view to the offer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such New Ordinary Shares into the United States or any other Restricted Jurisdiction or any territory referred to in (ii) above.

The Company may treat as invalid any USE Instruction which: (a) appears to the Company to have been despatched from the United States or any other Restricted Jurisdiction or otherwise in a manner which may involve a breach of the laws of any jurisdiction or which they or their agents believe may violate any applicable legal or regulatory requirement; or (b) purports to exclude the representation and warranty required by this section.

10. Waiver

The provisions of sections 8 and 9 of this Part IV and of any other terms of the Capital Raising relating to Restricted Shareholders may be waived, varied or modified as regards specific Shareholder(s) or on a general basis by the Company in its absolute discretion. Subject to this, the provisions of sections 8 and 9 of this Part IV supersede any terms of the Capital Raising inconsistent herewith. References in sections 8 and 9 of this Part IV and in this section 10 of Part IV to Shareholders shall include references to the person or persons executing an Application Form and, in the event of more than one person executing an Application Form, the provisions of this section 10 of Part IV shall apply jointly to each of them.

11. Times and dates

The Company shall in its discretion be entitled to amend the dates that Application Forms are despatched or dealings in New Ordinary Shares commence and amend or extend the latest date for acceptance under the Open Offer and all related dates set out in this document and in such circumstances shall announce such amendments via a Regulatory Information Service and, if appropriate, notify Shareholders.

12. Governing law

The terms and conditions of the Capital Raising as set out in this document and the Application Form shall be governed by, and construed in accordance with, the laws of England.

13. Jurisdiction

The courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, which may arise out of or in connection with the Capital Raising, this document and the Application Form. By accepting entitlements under the Capital Raising in accordance with the instructions set out in this document and, in the case of Qualifying Non-CREST Shareholders only, the Application Form, Qualifying Shareholders irrevocably submit to the exclusive jurisdiction of the Courts of England and waive any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum.

PART V

INFORMATION ON COSTAIN

The selected historical financial information and other historical financial information in relation to the Company referred to in this Part V has, unless otherwise stated, been extracted without material adjustment from the audited historical financial information of the Company for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012 which has been prepared in accordance with IFRS as well as the unaudited preliminary results for the financial year ended 31 December 2013 and is set out in Part VII (Historical Financial Information Relating to Costain) of this document.

Investors should read the whole of this document and the documents incorporated herein by reference and should not just rely on the financial information set out in this Part V.

1. Introduction

Costain is one of the UK's leading engineering solutions providers, delivering integrated consulting, project delivery and operations and maintenance services, with a portfolio spanning almost 150 years of innovation and technical excellence. The Group's core business segments are in Infrastructure (Highways, Rail, Power and Airports) and Natural Resources (Water, Oil & Gas, Nuclear Process and Waste).

The Group's strategy involves focusing on blue chip customers in chosen sectors whose major spending plans are underpinned by strategic national needs, regulatory commitments or essential maintenance requirements. 'Engineering Tomorrow' is the Costain commitment to generating and delivering innovative, value-driven solutions to meet major national needs.

2. History

The Costain business was founded in 1865 in Liverpool. The business was originally involved in construction and later expanded into housing development, building houses throughout South East England during the 1920s and 1930s. It later expanded into civil engineering and international work in the Middle East in the 1930s and after the Second World War in central and southern Africa. The Company expanded rapidly in the 1960s and into the 1970s through its presence in the Middle East; and during the same period diversified into coal-mining and property in the UK, Australia and the US. In 1971, the Company became the first UK contractor to win the Queen's Award for Export Achievement. The Costain Group has been involved in the construction of some of the world's major infrastructure projects including the Thames Barrier, the Channel Tunnel, the airport platform in Hong Kong, Tsing Ma Bridge and the St Pancras Station redevelopment.

In recent years, the Company has refocused on the UK market and on meeting national needs for improved highways, railways and airports and improvements in the water, oil and gas, nuclear process and waste sectors.

Costain Group PLC, the ultimate holding company of the Costain Group, was incorporated and registered in England and Wales on 12 October 1978 as a company limited by shares under the original name Trushelfco (No. 192) Limited, which was subsequently changed to Costain Group Limited and eventually to Costain Group PLC. It is headquartered in Maidenhead, Berkshire.

3. Business overview

For further information on the risks relating to the Company's existing business your attention is drawn to the 'Risk Factors' section of this document.

In December 2013, Costain announced that it had entered into an agreement to sell its minority shareholdings in three joint venture companies to Severn Trent for an aggregate cash consideration of £12.0 million. Severn Trent will therefore become the 100% owner of the three companies, which provide services in the water sector. The gross asset value as at 30 June 2013 of the companies transferred was £1.1 million (31 December 2012: £1.8 million). The loss attributable to the companies transferred for the six months to 30 June 2013 was £0.2 million (for the 12 months to 31 December 2012 there was a profit of £0.6 million). As a result of the transaction, Costain realised a profit of £9.1 million in 2013.

Costain also announced in its Pre-Close Trading Update that at the period end, Costain acquired the 27% interest from its partner Serco plc in their Managed Motorway Technology joint venture arrangements for a cash consideration of £2.4 million. The joint venture arrangement, in which Costain already held the remaining 73% interest, has a place on the Highways Agency framework to deliver new technology-led highways improvements.

In the year ended 31 December 2013, revenue, including the Group's share of joint ventures and associates, for the year was £960.0 million (2012: £934.5 million). Costain's focus on higher margin activities led to an increase of 12% in Group underlying profit from operations of £27.4 million (2012: £24.5 million). Adjusted profit before tax increased by 10% to £31.0 million (2012: £28.1 million). Adjusted basic earnings per share were up 11% to 44.1 pence (2012: 39.7 pence).

In 2013 Costain also announced:

the acquisition of EPC Offshore Ltd ('EPC Offshore'), a specialist oil and gas project management services company, for an initial consideration of £10.6 million (including £1.0 million for excess cash). Additional consideration of between £2 million and a maximum of £14.4 million may be payable depending on financial performance in the years ending 31 December 2014, 2015 and 2016 as well as the retention of certain employees; and
the launch of Costain Upstream, which will provide services across the life-cycle of upstream offshore oil and gas assets.

Established in 2009, EPC Offshore is a field development and project management specialist providing client-side services to North Sea oil and gas companies. The company is differentiated by its programme management expertise and the highly effective application of proprietary in-house systems and processes.

Costain Upstream will combine the capabilities of ClerkMaxwell Limited ('ClerkMaxwell'), the oil and gas engineering and support services provider, which has more than doubled in size since its acquisition by Costain in 2011, and EPC Offshore to increase the scale of the Group's services in the growing, high-value North Sea upstream oil and gas market delivering engineering, capital projects and asset support services across four principal service lines — Field Development, Subsea Facilities, Topside Facilities, and Floating Systems — and comprises a resource pool of over 350 people including operating and support units in Maidenhead, Teesside, Manchester and Abu Dhabi.

4. Operating divisions

4.1 Natural Resources

The Natural Resources division focuses on the water and waste markets as well as the specific requirements of a number of long-term customers. Customer spending in this market is underpinned by regulatory and legislative requirements and is expected to grow over the medium and long-term as the market in the UK undergoes major change.

In the Water sector, the Costain Group is engaged in a number of AMP5 framework contracts with Northumbrian Water, Severn Trent, Southern Water, United Utilities and Welsh Water. The Group announced on 15 May 2013 that it had secured in joint venture its first AMP6 contract, an integrated service award by Thames Water worth approximately £450 million to Costain. The Group further announced on 9 December 2013 that it has been appointed by Severn Trent to its 2015 - 2020 investment programme, worth approximately £250 million to the Group. The Directors believe that the Group is well positioned to secure new contracts or extensions during a Regulatory Review cycle which is expected to require a more integrated service delivery.

In Oil and Gas, the Group has successfully completed to time and budget the Easington gas terminal for Centrica's York field.

The final, and largest, of the prefabricated modules for the EVAP D nuclear decommissioning project at Sellafield was shipped to site in October 2013 in line with the programme. Work is continuing on various Magnox sites following the award of the 10-year framework contract in 2012.

In the Waste sector, the Group is completing the PFI contract for the Greater Manchester Waste Disposal Authority, which utilises a range of sophisticated waste management technologies. Of the forty-six waste facilities under the contract, thirty-six have reached final acceptance, three are seeking to obtain final acceptance, six are currently in the post completion testing (warranty) period and one remains to be completed. Design faults have been identified at four sites, including the site that remains to be completed and remedial work and testing is ongoing in respect of that site. Costain is in discussions with the relevant contract counterparties and Costain's insurers regarding the issues that have arisen and expects a successful outcome to those discussions.

Revenue (including share of joint ventures and associates) in the division for the year ended 31 December 2013 was £397.6 million (2012: £437.7 million) with adjusted profit from operations, excluding the profit on PFI transfers, of £3.7 million (2012: £9.0 million). The reduction in revenue has been influenced by Costain's strategic priority on other activities in the Group. Profit from operations in this division declined significantly in the period following the one-off margin benefits from the successful close-out of a number of legacy issues within Costain's allowances in the comparative period and as a result of additional costs to complete a project. The division finished the year ended 31 December 2013 with a forward order book of £1.1 billion (2012: £0.9 billion).

4.2 Infrastructure

The Infrastructure division incorporates activities in the highways, rail and airports sectors. Since January 2013, it also includes the power sector activities of the Company.

Reflecting Costain's growing presence in the Rail market, during 2013 Costain secured, in joint venture, further Crossrail contracts including the installation and commissioning of the railway systems, the provision of the traction power supply and the construction of Paddington New Yard (between Crossrail's tunnels and the Great Western Railway). Good progress was made on the Network Rail redevelopment contracts at London Bridge and Reading stations, and Costain, in joint venture, was awarded its first electrification project on the West Coast main line. Costain was also awarded a five year-multi functional contract for Network Rail and is also involved in providing consultancy services for the design of High Speed 2. Costain also announced on 12 February 2014 that its joint venture, ABC Electrification Ltd, has been appointed by Network Rail as one of four suppliers to the £2 billion National Electrification Programme, delivering electrification to more than two thousand miles of the UK's rail system. The contract is valued at an initial £900 million to the joint venture under a seven year term, extendable by a further three years.

Costain continues to be a leading supplier to the Highways Agency and significant progress is being made across a large portfolio of professional services, construction and maintenance contracts. The Area 7 MAC contract was extended and work commenced on further junctions of the M1 managed motorway scheme. Transport for London awarded Costain the Hammersmith Flyover strengthening project following the appointment of Costain to their highways framework contract, and Lancashire County Council have awarded Costain a contract to construct the M6 Heysham link road following on from a three-year Early Contractor Involvement collaboration between Costain and Lancashire County Council.

In Power, Costain was awarded its first contract by UK Power Networks on the 132kV and 33kV overhead line framework. Costain continued to provide operating services and cooling tower re-pack maintenance at Fiddlers Ferry, Ferrybridge and Ratcliffe power stations for SSE and E.ON. Costain was also awarded a contract with EDF to design and deliver the water cooling systems for the new Hinkley Point C nuclear power station

Revenue (including share of joint ventures and associates) for the year ended 31 December 2013 increased to £560.6 million (2012: £494.9 million) as investment in business development enabled the Group to take advantage of a number of major opportunities in the market. As a result, adjusted profit from operations rose to £31.4 million (2012: £23.5 million). The significantly improved profit performance reflects strong operating returns and additional gains on successfully completed and final accounted projects. The order book for the division has grown to £1.9 billion (2012: £1.5 billion) and the level of tendering activity remains high.

4.3 Land Development

Costain's non-core Land Development activity in Spain continued to be subject to challenging market conditions. Revenue for the year ended 31 December 2013 was £1.8 million (2012: £1.9 million) and the loss after tax was £11.9 million (2012: £2.3 million). The loss reflects the running costs of the operations and with ongoing difficult economic conditions in Spain, a non-cash impairment of £9.8 million on the carrying value of assets. Costain continues its moratorium on development activity on its land-bank. The current activities are focused on the leisure businesses of golf courses and a 624 berth yacht marina adjacent to Gibraltar which has experienced increased levels of activity in the period.

5. Key strengths

The Costain Directors believe that the key strengths of the Costain Group are:

5.1 Business model

The Costain Group's business is focused on targeting and working with blue chip customers in sectors whose spending activity is underpinned by strategic national needs, regulatory commitments or essential maintenance requirements. The Costain Directors continue to believe that, over the next decade, increased infrastructure investment will be primarily in the critical areas of transport, energy, water and waste where national needs are being addressed.

The Costain Group places strong strategic importance on the development of close partnerships with its customers. Sustaining this customer focus remains at the heart of the business and strategy.

5.2 'One Costain' approach

The Costain Directors believe that the operational model for Costain provides the business with sufficient agility to respond to and address changing market conditions. The Costain Group's 'one company' focus ensures that the business focuses on the opportunities which best meet the overall ambitions of the Costain Group thereby maximising the Costain Group's return on investment.

5.3 Broadened capabilities

The Costain Group is continuing to transform itself through the implementation of its 'Engineering Tomorrow' strategy and is reinforcing its position as one of the UK's top tier one engineering solutions providers, with well-established positions in sectors such as highways, water and rail. The Costain Group is developing the skills, capabilities and service offering necessary to meet the changing needs of its major customers. These customers are increasingly expecting tier one suppliers to provide broad and bespoke solutions to meet their specific requirements by delivering an innovative service through larger and longer-term bundled contracts across engineering consultancy, construction, operations and maintenance.

5.4 Strong brand

The Costain Directors believe that the Costain brand is among the best known in its market place. The construction brand is known for its historical pedigree through delivery of complex construction projects and the involvement in the construction of some of the world's major infrastructure projects, including the Thames Barrier, the Channel Tunnel, the airport platform in Hong Kong, Tsing Ma Bridge and the St Pancras Station redevelopment.

5.5 Management

The Costain Group's management team is highly experienced and the Costain Directors believe its management team to be well regarded in the industry. Collectively, the Group's Executive Committee has over 200 years of experience in the industry. The core management team has formulated, executed and delivered a strategic plan that has helped the business into its current market position.

The Costain Group operates a management training programme, the intake of which have become some of the best managers working for the Costain Group today. Five members, representing more than 50% of the Executive Committee, are alumni of the Costain Group's management training programme.

5.6 Responsible business

Core to the Costain Group's transformation and the value proposition to customers is the 'Costain Cares' initiative which places responsible, effective and collaborative stakeholder relationships at the core of the Costain Group's business operations.

For its people, customers, supply chain and local communities, the Costain Group encourages open, honest and respectful communication. The Costain Group believes in strong and long-lasting relationships that are mutually beneficial. The Costain Group also works with its stakeholders to protect and, where possible, enhance the natural environment, as well as developing skills for the future, delivering innovation and supporting the growth of SMEs.

5.7 Innovative sustainable solutions

The Costain Directors believe that by providing innovative and sustainable solutions, the Costain Group is able to help its customers solve the problems they face. Key progress in the Costain Group's innovation include:

31 patents and patents pending (20 technology areas);
£2 million deployed annually to support research and development; and
£43 million directed government investment in progress.

6. Strategic priorities

The Costain Group's strategic aims are to seek to build on its market position as one of the UK's leading engineering solutions providers and to seek to deliver significant growth in its operating profit in the medium term. To achieve these aims, the Costain Group has built a strategy around developing strong customer relationships, greater scale and capability, underpinned by strong performance, cost competitiveness and innovation. Accordingly, the Costain Group's key strategic priorities are:

Operating safely, efficiently and responsibly Corporate responsibility is core to Costain's business. The Company is committed to delivering projects and services responsibly, efficiently and sustainably, ensuring that it meets its customers' and society's needs while managing the social, environmental and economic impacts of its business.
Enhance our customer insight Costain continues to enhance relationships with its customers in order to gain greater insight into their requirements.
Grow by broadening our services Costain continues to broaden and enhance its service line.
Developing a best in class management team Providing new solutions through insight and innovation requires a leadership team at all levels of the business closely aligned to the Company's customers' needs and its ability to deliver these solutions.
Inspiring and delivering innovative sustainable solutions The Company continues to invest significantly in innovation, research and technology that will provide new services to customers and address national needs where new markets are emerging.
Working in collaboration Costain focuses on developing strategic partnerships to support the development of broader services and technology.

7. Long-term strategy

This strategy involves a drive, both organically and through acquisitions, to grow the business and to broaden the Company's services across engineering, consultancy, construction and operations and maintenance, delivering integrated consulting, project delivery and operations and maintenance services demanded by its customers. As part of this strategy, the Company acquired:

• ClerkMaxwell, a front-end engineering and operations support services provider operating in the upstream oil and gas sector;

Promanex, an industrial support services business providing facilities management, installation, repair and maintenance and general asset management; and
EPC Offshore, a specialist oil and gas project management services company.

Costain's strategy also targets building new and extending existing long-term relationships with a range of major customers. These customers typically have committed long-term capital and operational spending plans. The Costain Board continues to believe that, over the next decade, expenditure will be primarily in the critical areas of transport, energy, water and waste, where ongoing national needs are being addressed. These areas provide a strong and sustainable pipeline of future investment to ensure energy security, the provision of a sustainable water supply and the creation of key transport infrastructure capable of supporting vital economic growth. The Company's long-term strategy aims to ensure that Costain is best placed to take advantage of the significant opportunities provided by major customers who are continuing to invest in capital, operations and maintenance contracts to address essential national infrastructure requirements across the transport, energy, water and waste sectors.

8. Suppliers and global sourcing

Costain has focused on strengthening its supply chain, ensuring that the identified companies were sustainable businesses procured in a uniform and responsible manner, particularly in relation to industry recognised social and ethical trading standards/initiatives. Costain has also implemented an accreditation scheme for assessing the capabilities and values of a supplier. An added benefit of implementing the scheme is the facility to track and analyse the percentage of suppliers that have achieved specific standards.

Costain monitors and measures its own performance biannually via 360-degree feedback reviews requested from the elected top 100 supply chain. The results are analysed to identify the formation of trends or cultures, which are addressed accordingly. In 2013, 197 reviews were received, which collectively gave Costain a performance review score of 78.4%.

Costain undertakes regular performance reviews with its supply chain, discussing issues such as supervision, competency, communication, teamwork, cost, quality, innovation, safety and environmental performance. Suppliers and project management are encouraged to conduct the performance review jointly to ensure the performance of Costain's supply chain is an accurate representation. This allows both parties to have an input. During 2013, 846 performance reviews were conducted on Costain's top 100 supply chain members, resulting in an average score across the Group of 68% (2012: 66%). The number of suppliers achieving the 'Costain Blue' standard (a minimum score of 80% in an individual performance review) increased to 255 in 2013 from 171 in 2012.

9. Employees

The average number of employees of the Costain Group for each of the previous four financial years was as follows:

Year ending	Employees
31 December 2010	4,349
31 December 2011	4,159
31 December 2012	4,283
31 December 2013	3,620

The figures above also included a number of employees in the Middle East, and the number of such employees at the year end of each of the previous four financial years was as follows:

Year ending	Employees
31 December 2010	1,359
31 December 2011	1,366
31 December 2012	1,194
31 December 2013 .	47

During 2013, the number of employees in the Middle East reduced from 1,194 to 47 by reason of redundancy as operations are restructured in the Middle East.

10. Property

The Costain Group operates from a number of freehold and leasehold properties in the United Kingdom. The Costain Group's principal properties are as follows:

	Approximate			Lease expiry	Lease rate (£) per
Property location	area (sq. ft)	Property use	Term of lease	date	annum
Block A, Costain House, Styal Road, Wythenshaw, Manchester	28,267	Group offices	25 years from 25.03.89	24.03.14	410,000
Block B, Costain House, Styal Road, Wythenshaw,
Manchester Block C, Costain House, Styal Road, Wythenshaw,	28,485	Group offices	25 years from 25.03.89	24.03.14	414,500
Manchester Costain House, Vanwall	27,731	Group offices	25 years from 25.03.89	24.03.14	393,200
Business Park, Maidenhead 5th Floor, Salveson House,	37,300	Group head office	17 years from 17.08.07	16.08.24	1,089,105
Blakies Quay, Aberdeen	3,470	Offices for ClerkMaxwell	5 years from 01.07.13	30.06.18	46,845
7th Floor, Salveson House,
Blakies Quay, Aberdeen	3,470	Offices for ClerkMaxwell	5 years from 01.07.13	30.06.18	46,845
9th Floor, Salveson House,
Blakies Quay, Aberdeen	2,388	Offices for ClerkMaxwell	5 years from 01.07.13	30.06.18	53,730
10th Floor, Salveson House,
Blakies Quay, Aberdeen	3,470	Offices for ClerkMaxwell	5 years from 01.07.13	30.06.18	46,845
1st Floor and Basement, 10 Foster Lane, London,
EC2 56 and 56A Carden Place,	2,384	Offices and storage	10 years from 27.02.12	26.02.22	113,905
Aberdeen	6,930	Offices	8 years and 8 months from 22.04.13	21.12.21	212,750

The Costain Group also expects to take up the lease of the following property shortly:

Property location	Approximate area (sq. ft)	Property use	Term of lease	Lease expiry date	Lease rate (£) per annum
1500 Aviator Way, Manchester	38,507	Group offices	Assignment of existing lease expected from March 2014	31.12.21	744,471

11. Environment

Costain's Environmental Management System ('EMS') is accredited to the international standard of environmental management ISO 14001:2004. The Group Environmental Policy Statement outlines Costain's intention to ensure it manages all its work and its impacts effectively, prevents pollution and continuously improves the operation and environmental management of its activities. Costain's commitment is to work with its customers and supply chain to, where possible: reduce its impact on climate change; conserve natural resources through effective waste management, minimising water consumption and sustainably sourcing materials; and protect and enhance the environment.

Costain remains committed to reducing its measured carbon emissions and, during 2012 and 2013, demonstrated significant improvements in the management of climate change and its overall performance. The Company achieved external accreditation to the Achilles Certified Emissions Measurement and Reduction Scheme ('CEMARS'), accrediting its data from 2009-2011. Costain was audited and re-accredited during 2013, which added 2012 data. This highlights Costain's ongoing dedication to accurate carbon emission reporting and disclosure, in addition to reducing its emissions. The CEMARS standard includes independent verification of the Company's data and a yearly review to ensure it continues to deliver reductions in emissions. Costain's method of reporting is in accordance with, and certified against, ISO 14064-1:2006 and is also in line with the Carbon Reduction Commitment Energy Efficiency Scheme reporting guidelines. As a result of this verification and increased accuracy in data the Company has reviewed and updated its climate change strategy and associated targets. Costain's restated target is to achieve a 55% reduction in carbon emission intensity by 2020, compared to 2009, and to work with its customers to provide them with low-cost low-carbon solutions.

Costain has joined the Climate Performance Leadership Index (CPLI) as one of the best performing companies in the Carbon Disclosure Project's annual FTSE 350 climate change report. Costain achieved a score of 84A in 2013, highlighting the positive impact the company has made in measuring and driving down its greenhouse gas emissions. It is also the only FTSE Small-Cap Company to achieve band 'A' status in 2013 and only the second small-cap company to achieve an 'A' band rating since the ratings were introduced in 2009. Costain was also included in the CDP Supplier Climate Performance Leadership Index. Costain was one of only 79 suppliers to feature in the international leadership index, meaning the Company was in the top 3% of all the companies who participated.

Costain continues to focus on waste management and the reduction of waste produced from all its activities. Costain successfully met its 2013 target increasing the waste diverted from landfill to 95%. In 2008, the Company pledged its support to the Waste & Resources Action Programme ('WRAP') 'Halving Waste to Landfill' commitment, setting a target to achieve a 50% reduction in the total tonnes of construction, demolition and excavation waste the Company sends to landfill by 2012. In 2012, Costain achieved this target by reducing the total tonnes of waste it sent to landfill by 92% compared to 2008.

Costain is committed to minimising its impact on the environment by ensuring, where possible, that its activities do not result in damage and that it reduces its overall environmental incidents year on year. Costain ensures that all environmental incidents are reported and investigated to capture lessons learnt and prevent recurrence. Costain's reported environmental incidents and the associated environmental incident frequency rate ('EIFR') remained the same in 2013 at 0.28, although the number of incidents decreased slightly. No major incidents were reported in 2012 and 2013 (compared to one in 2011) and no environmental prosecutions, cautions or notices have been received in the last seven years.

12. Health and Safety

The Health and Safety of the Costain workforce is of fundamental importance to the Company. The Company's aim is to provide an environment free from harm by promoting a positive safety culture and improving the health and wellbeing of its workforce. This commitment is demonstrated by the Company's management of Health and Safety and the continual drive towards zero accidents and incidents.

The Costain Group's operations are subject to numerous laws and regulations governing environmental and occupational health and safety matters. Under these laws and regulations, the Costain Group may be liable for, amongst other things, the costs of investigating and remedying contamination at the Costain Group's sites as well as sites to which it sends hazardous wastes for disposal or treatment regardless of fault, and also fines and penalties for non-compliance.

In March 2011, the Company launched the Costain Cares Programme, implementing the Company's vision for Safety, Health and Environment ('SHE') in Costain. The goal of SHE is to provide an environment free from harm. The Company will achieve this vision by focusing on the following three key areas:

12.1 Compliance

The Company's robust SHE Management System is accredited to both BS OHSAS 18001 and ISO 14001, ensuring that it meets and exceeds the requirements of all relevant health, safety and environmental legislation, codes of practice and guidelines. The Company continually monitors compliance to systems and benchmarks performance through an established audit and inspection regime.

12.2 Competence

A safe site is one where all workers are confident and qualified to carry out the tasks to which they are assigned. For this reason Costain insists on a fully qualified workforce and provides ongoing training and development for both its own employees and those of its supply chain partners.

The role of front-line supervisors is a key factor in improving Health and Safety performance, and in September 2012 Costain dedicated a week-long campaign to supervision in the workplace. The aim of the initiative was to achieve a premier standard of front-line supervision performance through the use of a number of techniques including workshops, assessments and feedback sessions.

12.3 Culture

The Company is constantly looking for new ways in which SHE performance can be improved. In 2007, the Company introduced the Costain Behavioural Safety ('CBS') programme which it continued to promote during 2012 and 2013. The aim is to significantly influence the delivery of sustained safety improvements which focus on safety leadership and the development of a culture where the people who work for Costain do the right things 'because they want to'.

In December 2011, the Company received international third-party accreditation from the Cambridge Centre for Behavioural Studies, Massachusetts USA, for its CBS Programme, making it the first company in the UK to have a third-party accredited Behavioural Safety Programme. Costain places the highest priority on the effective management of Safety, Health and Environment, and the Group's Accident Frequency Rate ('AFR') was 0.12, which continues to compare favourably with its major tier one peer group. Costain also received 19 Gold Awards from The Royal Society for the Prevention of Accidents and two prestigious Orders of Distinction.

13. Insurance

The Costain Group maintains policies of insurance in respect of major risks associated with its operations. These major risks arising from operating in the engineering and contracting industry include, but are not limited to: theft of, or damage to, the Costain Group's property, plant and equipment; theft of, or damage to, the Costain Group's motor vehicles; theft of, or damage to, marine cargo; claims arising from employer's liability; claims arising from professional liability; claims arising from the Directors' and officers' liability; and claims arising from damage caused by the services the Costain Group provides. The Company believes it has robust, comprehensive and adequate insurance cover but recognises that a claim could be made against it which exceeds the limits of insurance cover or is in respect of a matter that is uninsurable or the insured incident is subject to a large deductible. Insurance deductibles and any difference in cover are considered at tender stage. Through following the Company's best practice processes, insurable incidents should be reduced. Procedures are in place to ensure potential claims are reported quickly for assessment. Management regularly reviews the role of insurance in managing risks across the Company and brings any important issues to the attention of the Costain Board.

14. Dividend policy

The Company may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Costain Board. Subject to the Companies Act 2006, the Company may pay interim dividends, and also any fixed rate dividend, whenever the financial position of the Company, in the opinion of the Costain Board, justifies its payment.

Following the Capital Raising, future dividends paid by the Company will be rebased to reflect the enlarged issued share capital of Costain. Thereafter, the Board intends to continue to pursue a progressive dividend policy, taking into account the Company's earnings growth potential, balance sheet and future investment plans, and will target an ongoing dividend cover of around two times underlying earnings per share.

It is intended that Costain will continue to offer a scrip dividend scheme for both annual and interim dividends, allowing for the allotment of ordinary shares in lieu of cash dividends to those Shareholders who elect to participate.

15. Investments

In the financial year ended 31 December 2010, the Group invested by way of equity or loan:

£26,958 in Integrated Bradford Hold Co Two Ltd which is a joint venture among Costain, Amey Ventures Investments Ltd, HSBC Infrastructure Fund Management Ltd, Buildings Schools for the Future Investments LLP and Bradford Metropolitan District Council for construction and operation of schools;
£3,600 in Lewisham Schools for the Future Holdings 3 Ltd which is a joint venture among Costain, Babcock Project Investment Ltd (formerly VT Investments Ltd), Building Schools for the Future Investments LLP and the Mayor and Burgesses of the London Borough of Lewisham for the construction and operation of schools;
£3,600 in Lewisham Schools for the Future Holdings 4 Ltd which is a joint venture among Costain, Babcock Project Investment Ltd (formerly VT Investments Ltd), and the Mayor and Burgesses of the London Borough of Lewisham for the construction and operation of schools;
£14,051 in Severn Trent Costain Holdings Limited (formerly Coast to Coast Holdings Ltd) which was a joint venture between Costain and Severn Trent Water Services plc for the provision of water services;
£1,384,786 in Arden Partnerships (Lincolnshire) Ltd which is a joint venture between Costain and Carillion Project Investments Ltd (formerly Alfred McAlpine Project Investments Ltd) for construction and services in respect of the South Holland Community Hospital;
£484,631 in Arden Partnerships (Leicester) Ltd which is a joint venture between Costain and Carillion Project Investments Ltd (formerly Alfred McAlpine Project Investments Ltd) for construction and services in respect of the Leicester Learning Disabilities Unit;
£1,665,025 in Arden Partnerships (Derby) Ltd which is a joint venture between Costain and Carillion Project Investments Ltd (formerly Alfred McAlpine Project Investments Ltd) for construction and services to the Derbyshire Mental Health Services Trust; and
£2,441,673 in Alcaidesa Holding SA which is a property holding joint venture with Santander SA comprising two golf courses, land assets for development and a 30 year marina concession.

In the financial year ended 31 December 2011, the Group invested by way of equity or loan:

£8,486,800 in Integrated Bradford SPV Two Ltd which is a joint venture among Costain, Amey Ventures Investments Ltd, HSBC Infrastructure Fund Management Ltd, Buildings Schools for the Future Investments LLP and Bradford Metropolitan District Council for construction and operation of schools;
£848,680 in Integrated Bradford PSP Ltd which is a joint venture among Costain and Amey Ventures Ltd for construction and operation of schools;
£853,972 in Lewisham Schools for the Future Holdings 2 Ltd which is a joint venture among Costain, Babcock Project Investment Ltd (formerly VT Investments Ltd), Building Schools for the Future Investments LLP and the Mayor and Burgesses of the London Borough of Lewisham for the construction and operation of schools;
£94,886 in L21 Lewisham PSP Ltd which is a joint venture among Costain and Babcock Project Investment Ltd (formerly VT Investments Ltd) for the construction and operation of schools; and
£3,192,000 in Alcaidesa Holding SA which is a property holding joint venture with Santander SA comprising two golf courses, land assets for development and a 30 year marina concession.

In the financial year ended 31 December 2012, the Group invested by way of equity or loan:

£3,255,304 in Alcaidesa Holding SA which is a property holding joint venture with Santander SA comprising two golf courses, land assets for development and a 30 year marina concession;
£1,149,980 in Lewisham Schools for the Future Holdings 3 Ltd which is a joint venture among Costain, Babcock Project Investment Ltd (formerly VT Investments Ltd), Building Schools for the Future Investments LLP and the Mayor and Burgesses of the London Borough of Lewisham for the construction and operation of schools;
£127,776 in L21 Lewisham PSP Ltd which is a joint venture among Costain and Babcock Project Investment Ltd (formerly VT Investments Ltd) for the construction and operation of schools; and
£320,000 in Severn Trent Costain Ltd which was a joint venture among Costain and Severn Trent Water Services Ltd for the provision of water services.

In the financial year ended 31 December 2013, the Group invested by way of equity or loan:

£2,629,725 in Alcaidesa Holding SA which is a property holding joint venture with Santander SA comprising two golf courses, land assets for development and a 30 year marina concession;
£1,965,267 in Lewisham Schools for the Future Holdings 4 Ltd which is a joint venture among Costain, Babcock Project Investment Ltd (formerly VT Investments Ltd), and the Mayor and Burgesses of the London Borough of Lewisham for the construction and operation of schools;
£218,363 in L21 Lewisham PSP Ltd which is a joint venture among Costain and Babcock Project Investment Ltd (formerly VT Investments Ltd) for the construction and operation of schools;
£59,960 in Sleeperz Limited which is a joint venture among Costain, Andreas Hoffmann, Christopher Hutt and others for the construction and operation of hotels; and
£580,000 in Severn Trent Costain Ltd which was a joint venture among Costain and Severn Trent Water Services Ltd for the provision of water services.

In the period from 1st January 2014 to the date of this document, the Group has invested by way of equity or loan:

• £167,308 in Alcaidesa Holding SA which is a property holding joint venture with Santander SA comprising two golf courses, land assets for development and a 30 year marina concession;

In the financial year ended 31 December 2010, the Group transferred to the Costain Pension Scheme its equity and loan assets in:

Integrated Bradford Hold Co One Ltd;
Prime Care Solutions (Kingston) Holdings Ltd;
Lewisham Schools for the Future Holdings Ltd;
Arden Partnerships (Lincolnshire) Ltd;
Arden Partnerships (Leicester) Ltd; and
Arden Partnerships (Derby) Ltd.

In the financial year ended 31 December 2012, the Group transferred to the Costain Pension Scheme its equity and loan assets in:

Integrated Bradford Hold Co Two Ltd; and
Lewisham Schools for the Future Holdings 2 Ltd.

In the financial year ended 31 December 2013, Costain sold its minority interests in Severn Trent Costain Holdings Limited, Severn Trent Costain Services Limited and Severn Trent Costain Limited to Severn Trent for an aggregate cash consideration of £12.0 million.

16. Current trends and prospects

During 2012 and 2013 the Company saw a continuing trend amongst its major customers to consolidate their supply chains, as they seek to derive business benefits by working in a much more strategic and collaborative manner with a reduced number of preferred tier one service providers who have the ability to deliver the entirety of their service needs.

As a consequence, the Company's customers are rapidly changing their procurement approach, consolidating a broader range of services across consulting, project delivery and operations activities into larger, longer term contracts. As examples of this trend, in 2012 the Company was appointed by Magnox as one of two service providers under a 10-year framework contract that now covers all ten of their UK nuclear sites, and the Company was appointed by the Oil & Pipelines Agency on a 3-year operations and maintenance contract that now covers the whole of their estate.

In this changing and competitive environment, it is essential that the Company is able to demonstrate that it has the scale, skills, experience and financial strength necessary to secure, and then deliver, a strong performance on these increasingly large and complex contracts. To meet its customers' evolving requirements, the Company has been transformed in recent times. It now delivers engineering services across the full asset life-cycle, from advisory and design to operations and maintenance.

In 2013, Costain was awarded new contracts and extensions worth more than £1.5 billion to the Costain Group. The range of contracts won by Costain reflects the transition in Costain's market positioning, the increased breadth of its service offering (achieved both organically and through targeted in-fill acquisitions) and its customers' endorsement of Costain as a tier one engineering solutions provider. Major contracts won in 2013 include:

a joint venture AMP6 programme for Thames Water;
an AMP6 programme for Severn Trent;
a number of contracts for Crossrail including the design, fit-out and commissioning of the railway systems and the construction of New Paddington Yard;
the FEED design for Centrica's gas terminal at Barrow, following successful completion of the design and construction of the Easington terminal for the York field;
a highways framework contract with Transport for London including the Hammersmith Flyover strengthening project;
a contract with Lancashire County Council to construct the M6 Heysham Link;
for Network Rail, (i) the electrification upgrade of the West Coast Mainline, which is a new area of operation for Costain, (ii) an additional joint venture contract for the electrification of more than two thousand miles of the UK's rail system, and (iii) a five year multi-functional framework contract; and
a contract with EDF to design and deliver the water cooling systems for the new Hinkley Point C nuclear power station.

The Directors believe that Costain's collaborative approach and reputation for excellent delivery are primary factors behind its ability to secure such a high level of repeat order business. Additionally, the increasingly strategic nature of Costain's long-term customer relationships has ensured that over 90% of the order book is now for some form of target cost, cost reimbursable contract. Whilst this has contributed to the reduction in Costain's net cash balance, it has also significantly improved the risk profile of the Costain Group and afforded Costain increased visibility over long term margins for its projects in the future.

The Directors intend to continue to grow the business both organically and by targeted acquisition. Since 30 June 2013, Costain has announced the acquisition of EPC Offshore and the launch of Costain Upstream, which will deliver a broad range of engineering services for assets in the upstream oil and gas sector.

PART VI

OPERATING AND FINANCIAL REVIEW OF COSTAIN

The following discussion of Costain's financial condition and results of operations should be read in conjunction with the historical financial information on Costain and the notes related thereto set out in Part VII (Historical Financial Information Relating to Costain) (which has been incorporated by reference into this document). Except as otherwise stated, the financial information included in this Part VI has been extracted without material adjustment from the financial information referred to in Part VII (Historical Financial Information Relating to Costain) which has been incorporated into this document by reference. The historical financial information referred to in this discussion has been prepared in accordance with IFRS as explained in Part VII (Historical Financial Information Relating to Costain).

The following discussion of Costain's results of operations and financial condition contains forwardlooking statements. Costain's actual results could differ materially from those discussed in the forwardlooking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this document, particularly in the Parts headed 'Risk Factors' and 'Forward Looking Statements'.

1. Documents incorporated by reference

The operating and financial reviews included in the following documents are incorporated by reference into this document:

the Group's 2010 Annual Report and Accounts;
the Group's 2011 Annual Report and Accounts;
the Group's 2012 Annual Report and Accounts; and
the Group's 2013 unaudited year end Preliminary Results.

2. Cross-reference list

The following list is intended to enable investors to easily identify specific items of information which have been incorporated by reference into this document.

2.1 the Costain Group's 2010 Annual Report and Accounts

The page numbers below refer to the relevant pages of the Group's 2010 Annual Report and Accounts:

• Group Strategy	8–9;
• Group CEO's review	18–21;
• Divisional Performance	26–33; and
• Financial Review	43–45.

2.2 the Costain Group's 2011 Annual Report and Accounts

The page numbers below refer to the relevant pages of the Group's 2011 Annual Report and Accounts:

• Overview	2–5;
• Chairman's statement	6–7;
• Group CEO's review	10–13;
• Group Strategy	16;
• Divisional Performance	27–30;
• Corporate Responsibility	31–37
• Risk Framework	38–39; and
• Financial Review	42–44.

2.3 the Costain Group's 2012 Annual Report and Accounts

The page numbers below refer to the relevant pages of the Group's 2012 Annual Report and Accounts:

• Overview	4–5
• Chairman's Statement	6–7;
• Business Review	8–13;
• Chief Executive's Review	14–17;
• Business Model	18–24;
• Performing Responsibly	25–39;
• Managing Risk	40–42;
• Key Performance Indicators	42–43;
• Group Finance Director's Review	44–47;
• Consolidated Income Statement	78;
• Consolidated Statement of Comprehensive Income and Expense .	79;
• Consolidated Statement of Financial Position	80–81;
• Consolidated Statement of Changes in Equity	82;
• Consolidated Cash Flow Statement	83;
• Notes to the financial statements	85–120; and
• Five year financial summary	121.

2.4 the Costain Group's 2013 year end unaudited Preliminary Results

The page numbers below refer to the relevant pages of the Group's 2013 unaudited year end Preliminary Results:

Chairman's Statement	3–5;
Chief Executive's Review	6–11;
Finance Director's Review	12–15;
Consolidated Income Statement	18;
Consolidated Statement of Comprehensive Income and Expense	19;
Consolidated Statement of Changes in Equity	19–20;
Consolidated Statement of Financial Position	20–21; and
Consolidated Cash Flow Statement .	21.

3. Capitalisation and indebtedness

3.1 Capitalisation

The following table sets out the consolidated capitalisation of the Group as at 31 December 2013 and has been extracted without material adjustment from the Company's unaudited preliminary results for the year ended 31 December 2013:

	Notes	31 December 2013 £m
Shareholders' Equity 66.8 million issued and fully paid ordinary shares of 50p each		33.4
Share Capital		33.4
Share Premium		4.7
Retained Earnings		0.5
Other Reserves		4.7
Total Shareholders' Equity		43.3
Total capitalisation		43.3

There has been no significant change in the capitalisation of Costain since 31 December 2013.

3.2 Indebtedness

The following table shows the net indebtedness of Costain as at 31 December 2013.

		Notes	31 December 2013 £m
	Total Current Debt Guaranteed	1	(26.6) (26.6)
	Secured		—
	Unguaranteed / Unsecured		—
	Total Non-Current Debt (excluding current portion of long-term debt)		—
	Guaranteed Subordinated Loan Capital		—
	Guaranteed		—
	Secured		—
	Unguaranteed / Unsecured		—
A.	Cash	2	84.3
B. C.	Cash equivalent Trading securities		— —
D.	Liquidity (A) + (B) + (C)		84.3
E.	Current financial receivable		—
F.	Current bank debt		(26.6)
G.	Current portion of non current debt		—
H.	Other financial debt		—
I.	Current financial Debt (F) + (G) + (H)		(26.6)
J.	Net current financial indebtedness (I)(E)(D)		57.7
K.	Non current bank loans		—
L.	Bond issued		—
M.	Other non current loans		—
N.	Non current financial indebtedness (K) + (L) + (M)		—
O.	Net funds (J) + (N)		57.7

Notes:

Current debt comprises £25.0 million of interest bearing loans and borrowings and £1.6 million of bank overdrafts.
Cash includes the Costain Group's share of cash held by jointly-controlled operations of £25.6 million.

4. Liquidity and capital resources

		31 December 2013
	Notes	£m
Total Current Debt
Guaranteed		26.6
Secured		—
Unguaranteed/Unsecured		—
		26.6
Shareholders' Equity 66.8m issued and fully paid ordinary shares of 50p each
Share Capital		33.4
Legal Reserve		4.7
Other Reserves		5.2
Total Shareholders' Equity		43.3
Total capitalisation and indebtedness		69.9

Net cash used by operating activities

Cash from operations before changes in working capital and provisions was £27.8 million in 2013, £27.0 million in 2012, £27.9 million in 2011 and £23.3 million in 2010. Net interest and tax amounted to outflows of £2.6 million in 2013 and £0.8 million in 2012 and inflows of £0.1 million in 2011 and £0.3 million in 2010.

Changes in working capital and provisions produced outflows of £60.7 million in 2013 and £49.3 million in 2012 and inflows of £6.8 million and £8.1 million in 2011 and 2010 respectively. These figures include cash contributions to the defined benefit Costain Pension Scheme (including amounts matching the payments in dividends to shareholders, in line with the commitment made by the Company in 2007) of £8.2 million in 2013, £7.5 million in 2012, £7.0 million in 2011 and £20.1 million in 2010.

As a result of the Costain Group's ongoing strategic focus on major blue chip customers who increasingly utilised a target cost based form of contract in 2013, its net cash position included a lower level of advanced payments typically paid on lump sum contracts. Additionally, Costain's increasing emphasis on support service related activities and changing industry cash flow trends, together with the cash flow implications of a delayed contract, accounted for the reduction in net cash to £57.7 million in 2013 (2012: £105.7 million).

Net cash used by investing activities

Net capital expenditure on property, plant and equipment and intangible assets amounted to £2.3 million in 2013, £0.3 million in 2012 and £2.8 million in 2011. In 2010, there were net disposals of £2.7 million. In 2013, investments in joint ventures and associates amounted to £2.7 million. Loans to joint ventures and associates less repayments amounted to £2.2 million in 2013, £5.4 million in 2012, £13.1 million in 2011 and £5.4 million in 2010.

Dividends from joint ventures and associates generated £1.3 million in 2013, £0.6 million in 2012, £1.4 million in 2011 and £0.1 million in 2010.

Sales of investments in joint ventures and associates generated £11.7 million in 2013 and £0.3 million in 2011. The sale of a subsidiary generated £0.5 million in 2011.

In 2013, £9.4 million was spent on the acquisition of a subsidiary and £3.0 million paid in deferred consideration for a previous acquisition. In 2011, £21.1 million was spent on acquisitions of subsidiaries.

Net cash used by financing activities

Equity dividend payments were £6.7 million in 2013, £6.2 million in 2012, £5.8 million in 2011 and £5.4 million in 2010. In 2013, the exercise of options under Costain Share Schemes generated £0.8 million and in 2011 such exercises generated £1.5 million.

In 2013, £25.0 million was generated from drawdowns under a revolving credit facility (as more particularly described in section 5 of Part XI (Additional Information). There were no loan drawdowns in the period 1 January 2010 — 31 December 2012.

Future liquidity, financing arrangements and commitments

Costain's working capital requirements are funded by shareholders' equity, operating cash flow and existing borrowing facilities. The Costain Group's ongoing strategic focus on, and targeting of, major blue chip customers who predominantly utilise a target cost based form of contract, changes the working capital of the business because the net cash position no longer includes advanced payments typically paid on lump sum contracts. The increasing emphasis on support service related activities will also continue to be reflected in an increased working capital requirement.

Liquidity risk is managed by monitoring actual and forecast short and medium term cash flows and the maturity profile of financial assets and liabilities, and by maintaining adequate cash reserves. The nature and timing of the contract cash flows causes the working capital to vary over the month with the figure usually lowest at the month end.

The Costain Group's centralised treasury function manages financial risk, principally arising from movements in foreign currency rates, interest rates and inflation rates, in accordance with policies agreed by the Costain Directors. To manage these risks, forward foreign currency sale and purchase contracts are used in respect of foreign currency requirements and interest rate swaps are used for PFI investments. The Costain Group does not enter into speculative transactions.

Customers awarding long-term contracting work may, as a condition of the award, require the contractor to provide performance and other bonds. Consequently, the Costain Group is reliant on its ability to secure bank and surety bonds. It has facilities in place to provide these bonds and monitors the usage and regularly updates the forecast usage of these facilities.

The Costain Group has banking and bonding facilities totalling £495 million, including a £95 million Revolving Credit Facility, extending to 30 June 2017. The facilities have identical financial covenants based on profit, interest cover and leverage measured quarterly.

PART VII

HISTORICAL FINANCIAL INFORMATION RELATING TO COSTAIN

1. Basis of Financial Information

The financial statements of Costain included in the consolidated audited Annual Reports and Accounts of Costain for the financial years ended 31 December 2010, 31 December 2011 and 31 December 2012 were unqualified and were prepared in accordance with IFRS.

The unaudited preliminary results of Costain for the year ended 31 December 2013 are incorporated by reference into this document.

2. Cross reference list

The following list is intended to enable investors to identify easily specific items of information which have been incorporated by reference into this document.

2.1 Financial statements for the year ended 31 December 2010 and independent Audit Report thereon

The page numbers below refer to the relevant pages of the Annual Report and Accounts of Costain for the financial year ended 31 December 2010:

•	Auditor's report	71
•	Income statement .	74
•	Balance sheet	76
•	Statement of changes in equity	78
•	Cash flow statement .	79
•	Notes to the accounts	81 - 114
•	Five year record as at 31 December 2010	115
2.2	Financial statements for the year ended 31 December 2011 and independent Audit Report thereon
	The page numbers below refer to the relevant pages of the Annual Report and Accounts of Costain for the financial year ended 31 December 2011:
•	Auditor's report	72
•	Income statement .	74
•	Balance sheet	76
•	Statement of changes in equity	78
•	Cash flow statement .	79
•	Notes to the accounts	81 - 116
•	Five year record as at 31 December 2011	117

2.3 Financial statements for the year ended 31 December 2012 and independent Audit Report thereon

The page numbers below refer to the relevant pages of the Annual Report and Accounts of Costain for the financial year ended 31 December 2012:

•	Auditor's Report	76
•	Consolidated Income Statement	78;
•	Consolidated Statement of Comprehensive Income and Expense .	79;
•	Consolidated Statement of Financial Position	80 - 81;
•	Consolidated Statement of Changes in Equity .	82;
•	Consolidated Cash Flow Statement	83;
•	Notes to the financial statements	85 - 120; and
•	Five year financial summary	121.

2.4 Unaudited preliminary results for the year ended 31 December 2013

The page numbers below refer to the relevant pages of the unaudited preliminary results of Costain for the financial year ended 31 December 2013:

•	Consolidated Income Statement	18;
•	Consolidated Statement of Comprehensive Income and Expense .	19;
•	Consolidated Statement of Changes in Equity	19 - 20;
•	Consolidated Statement of Financial Position	20 - 21;
•	Consolidated Cash Flow Statement	21 - 22; and
•	Notes to the accounts .	22 - 32.

KPMG Audit plc has agreed that the unaudited preliminary results for the year ended 31 December 2013 referred to in this paragraph 2.4 are substantially consistent with the final figures to be published in the audited financial statements for the year ended 31 December 2013 which will be published in the 2013 Annual Report.

PART VIII

UNAUDITED PRO FORMA FINANCIAL INFORMATION ON THE COSTAIN GROUP

SECTION A: Unaudited pro forma statement of net assets of the Costain Group

The unaudited pro forma statement of net assets of the Group set out below has been prepared to illustrate the effect of the Capital Raising on the consolidated net assets of the Group as if the Capital Raising had taken place on 31 December 2013. The unaudited pro forma statement of net assets has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and therefore does not represent the actual financial position or results of the Group.

The unaudited pro forma statement of net assets is based on the consolidated balance sheet of the Group as at 31 December 2013 and has been prepared using the accounting policies adopted by Costain in preparing its financial statements for the period ended 31 December 2013 and on the basis of the notes set out below.

The unaudited pro forma statement of net assets has been prepared using IFRS as adopted in the EU (''adopted IFRS'').

	Adjustments
	Costain as at 31 December 2013 £m	Issue of New Ordinary Shares £m	Transaction costs £m	Pro forma as at 31 December 2013 £m
	Note 1	Note 2	Note 3
Non-current assets
Intangible assets	33.0	—	—	33.0
Property, plant and equipment . Investments in joint ventures	7.9 27.1	— —	— —	7.9 27.1
Investments in associates	0.2	—	—	0.2
Loans to equity accounted joint ventures	—	—	—	—
Loans to equity accounted associates	4.8	—	—	4.8
Other	22.0	—	—	22.0
Deferred tax	9.8	—	—	9.8
Total non-current assets	104.8	—	—	104.8
Current assets
Inventories	1.6	—	—	1.6
Trade and other receivables	190.6	—	—	190.6
Cash and cash equivalents	84.3	75.1	(4.8)	154.6
Total current assets	276.5	75.1	(4.8)	346.8
Total assets	381.3	75.1	(4.8)	451.6
Current liabilities
Trade and other payables	266.1	—	—	266.1
Income tax liabilities	1.6	—	—	1.6
Bank overdrafts .	1.6	—	—	1.6
Interest bearing loans and borrowings	25.0	—	—	25.0
Provisions for other liabilities and charges	1.8	—	—	1.8
Total current liabilities	296.1	—	—	296.1
Non current liabilities
Retirement benefit obligations	37.2	—	—	37.2
Other payables .	4.3	—	—	4.3
Provisions for other liabilities	0.4	—	—	0.4
Total non current liabilities	41.9	—	—	41.9
Total liabilities	338.0	—	—	338.0
Net assets	43.3	75.1	(4.8)	113.6
Capital and reserves
Share capital	33.4	16.7	—	50.1
Share premium .	4.7	58.4	(4.8)	58.3
Foreign currency translation reserve .	4.8	—	—	4.8
Hedging reserve Retained earnings .	(0.1) 0.5	— —	— —	(0.1) 0.5

Total equity attributable to equity shareholders of the Company	43.3	75.1	(4.8)	113.6

Notes:

The consolidated assets and liabilities of the Group have been extracted without material adjustment from the audited consolidated balance sheet of the Group as at 31 December 2013.
An adjustment has been made to reflect the proceeds of £75.1 million from the Capital Raising.
Transaction costs of £4.8 million relate to professional fees in relation to the Capital Raising.
No adjustment has been made to reflect the trading results of the Group since 31 December 2013.

KPMG LLP 15 Canada Square London E14 5GL

The Directors Costain Group PLC Costain House Vanwall Business Park Maidenhead Berkshire, SL6 4UB

27 February 2014

Dear Sirs

Costain Group PLC

We report on the pro forma financial information (the 'Pro forma financial information') set out in Part VIII of the combined circular and prospectus dated 27 February 2014, which has been prepared on the basis described in notes 1-4, for illustrative purposes only, to provide information about how the firm placing and placing and open offer might have affected the financial information presented on the basis of the accounting policies adopted by Costain Group PLC in preparing the financial statements for the period ended 31 December 2013. This report is required by paragraph 20.2 of Annex I of the Prospectus Directive Regulation and is given for the purpose of complying with that paragraph and for no other purpose.

Responsibilities

It is the responsibility of the directors of Costain Group PLC to prepare the pro forma financial information in accordance with paragraph 20.2 of Annex I of the Prospectus Directive Regulation.

It is our responsibility to form an opinion, as required by paragraph 7 of Annex II of the Prospectus Directive Regulation, as to the proper compilation of the Pro forma financial information and to report that opinion to you.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on any financial information used in the compilation of the Pro forma financial information, nor do we accept responsibility for such reports or opinions beyond that owed to those to whom those reports or opinions were addressed by us at the dates of their issue.

Save for any responsibility arising under Prospectus Rule 5.5.3R (2)(f) to any person as and to the extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement, required by and given solely for the purposes of complying with paragraph 23.1 of Annex I of the Prospectus Directive Regulation, consenting to its inclusion in the prospectus.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. The work that we performed for the purpose of making this report, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the Pro forma financial information with the directors of Costain Group PLC.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with reasonable assurance that the Pro forma financial information has been properly compiled on the basis stated and that such basis is consistent with the accounting policies of Costain Group PLC.

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in the United States of America or other jurisdictions and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

the Pro forma financial information has been properly compiled on the basis stated; and
such basis is consistent with the accounting policies of Costain Group PLC.

Declaration

For the purposes of Prospectus Rule 5.5.3R (2)(f) we are responsible for this report as part of the prospectus and declare that we have taken all reasonable care to ensure that the information contained in this report is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import. This declaration is included in the prospectus in compliance with paragraph 1.2 of Annex I of the Prospectus Directive Regulation.

Yours faithfully

KPMG LLP

PART IX

UNITED KINGDOM TAXATION CONSIDERATIONS

1. General

The following statements:

(A) do not constitute tax advice and are intended to apply only as a general guide to the position under current UK tax law and the published practice of HMRC as at the date of this document, either of which is subject to change at any time (possibly with retrospective effect);
(B) relate only to certain limited aspects of the UK taxation treatment of Qualifying Shareholders and are intended to apply only to Qualifying Shareholders who:
(i) are resident in (and only in) the UK for UK tax purposes (unless the context otherwise requires) and to whom split-year treatment does not apply;
(ii) hold their Ordinary Shares as investments; and
(iii) are the beneficial owners of their Ordinary Shares; and
(C) may not apply to certain classes of Qualifying Shareholders such as, for example, dealers in securities, insurance companies, collective investment schemes and Qualifying Shareholders who have (or who are deemed to have) acquired their Ordinary Shares by virtue of an office or employment.

Any person who is in any doubt as to his or her tax position or who may be subject to tax in any jurisdiction other than the United Kingdom should consult an appropriate professional tax adviser without delay.

2. Taxation of chargeable gains

2.1 Firm Placing Shares acquired pursuant to the Firm Placing

The issue of Firm Placing Shares under the Firm Placing will not constitute a reorganisation of the Company's share capital for the purposes of the UK taxation of chargeable gains and, accordingly, any Firm Placing Shares acquired by a Qualifying Shareholder pursuant to the Firm Placing will be treated as a separate acquisition from any Existing Holding.

2.2 Open Offer Shares acquired pursuant to the Open Offer

As a matter of UK tax law, the acquisition of New Ordinary Shares pursuant to the Open Offer may not, strictly speaking, constitute a reorganisation of share capital for the purposes of the UK taxation of chargeable gains. The published practice of HMRC to date has been to treat any subscription of shares by an existing shareholder which is equal to or less than the shareholder's minimum entitlement pursuant to the terms of an open offer as a reorganisation, but it is not certain that HMRC will apply this practice in circumstances where an open offer is not made to all shareholders. HMRC's treatment of the Open Offer cannot therefore be guaranteed and specific confirmation has not been requested in relation to the Open Offer.

To the extent that the acquisition of the New Ordinary Shares is regarded as a reorganisation of the share capital of the Company for the purposes of the UK taxation of chargeable gains, the New Ordinary Shares issued to a Qualifying Shareholder will be treated as the same asset as, and having been acquired at the same time as, the Qualifying Shareholder's Existing Holding. The amount of subscription moneys paid for the New Ordinary Shares will be added to the base cost of the Qualifying Shareholder's Existing Holding.

If, or to the extent that, the acquisition of New Ordinary Shares under the Open Offer is not regarded as a reorganisation, the New Ordinary Shares acquired by each Qualifying Shareholder under the Open Offer will, for the purposes of the UK taxation of chargeable gains, be treated as having been acquired as part of a separate acquisition of Ordinary Shares and the price paid for those Ordinary Shares will constitute their base cost.

2.3 Placing Shares acquired pursuant to the Placing

The issue of Placing Shares under the Placing will not constitute a reorganisation of the Company's share capital for the purposes of the UK taxation of chargeable gains and, accordingly, any Placing Shares acquired by a Qualifying Shareholder pursuant to the Placing will be treated as a separate acquisition from any Existing Holding.

2.4 Subsequent disposals of New Ordinary Shares

(A) Individual Qualifying Shareholders

A disposal of New Ordinary Shares may, depending on the circumstances and subject to any available exemption or relief, give rise to a chargeable gain or an allowable loss for the purposes of UK capital gains tax.

An individual Qualifying Shareholder who is resident in the UK for UK tax purposes and whose total taxable gains and income in a given tax year, including any gains made on the disposal or deemed disposal of his New Ordinary Shares, are less than or equal to the upper limit of the income tax basic rate band applicable in respect of that tax year (the 'Band Limit') will generally be subject to capital gains tax at the flat rate of 18% in respect of any gain arising on a disposal or deemed disposal of his New Ordinary Shares.

An individual Qualifying Shareholder who is resident in the UK for UK tax purposes and whose total taxable gains and income in a given tax year, including any gains made on the disposal or deemed disposal of his New Ordinary Shares, are more than the Band Limit will generally be subject to capital gains tax at the flat rate of 18% in respect of any gain arising on a disposal or deemed disposal of his New Ordinary Shares (to the extent that, when added to the Qualifying Shareholder's other taxable gains and income in that tax year, the gain is less than or equal to the Band Limit) and at the flat rate of 28% in respect of the remainder.

No indexation allowance will be available to an individual Qualifying Shareholder in respect of any disposal of New Ordinary Shares. However, each individual has an annual exemption, such that capital gains tax is chargeable only on gains arising from all sources during the tax year in excess of this figure. The annual exemption is £10,900 for the tax year 2013 - 2014.

Individuals who are temporarily non-resident may, in certain circumstances, be subject to tax in respect of gains realised while they are not resident in the UK.

(B) Corporate Qualifying Shareholders

Where a Qualifying Shareholder is within the charge to UK corporation tax, a disposal of New Ordinary Shares may, depending on the circumstances and subject to any available exemption or relief, give rise to a chargeable gain or an allowable loss for the purposes of corporation tax. Corporation tax is charged on chargeable gains at the rate of corporation tax applicable to that Qualifying Shareholder. In calculating the chargeable gain or allowable loss arising on a subsequent disposal of New Ordinary Shares, indexation allowance will apply to the amount paid for the New Ordinary Shares only from, generally, the date the subscription monies for the New Ordinary Shares were payable.

3. Taxation of dividends

The Company is not required to withhold tax at source from dividend payments that it makes.

3.1 Individuals

A Qualifying Shareholder who is an individual resident in the UK for UK tax purposes and who receives a dividend from the Company will be entitled to a tax credit which may be set off against his total income tax liability. The tax credit will be equal to 10% of the aggregate of the dividend and the tax credit (the 'gross dividend'), which is also equal to one-ninth of the amount of the cash dividend received.

In the case of such a Qualifying Shareholder who is not liable to UK income tax at either the higher or the additional rate, that Qualifying Shareholder will be subject to UK income tax on the gross dividend at the rate of 10%. The tax credit will, in consequence, satisfy in full the Qualifying Shareholder's liability to UK income tax on the gross dividend.

In the case of a Qualifying Shareholder who is liable to UK income tax at the higher rate, the Qualifying Shareholder will be subject to UK income tax on the gross dividend at the rate of 32.5% to the extent that the gross dividend falls above the threshold for the higher rate of UK income tax but below the threshold for the additional rate of UK income tax when it is treated as the top slice of the Qualifying Shareholder's income. The tax credit will, in consequence, satisfy only part of the Qualifying Shareholder's liability to

UK income tax on the gross dividend and the Qualifying Shareholder will have to account for UK income tax equal to 22.5% of the gross dividend (which is also equal to 25% of the cash dividend received). For example, if the Qualifying Shareholder received a dividend of £80 from the Company, the dividend received would carry a tax credit of £8.89 and therefore represent a gross dividend of £88.89. The Qualifying Shareholder would then be required to account for UK income tax of £20 on the gross dividend (being £28.89 (i.e. 32.5% of £88.89) less £8.89 (i.e. the amount of the tax credit)).

In the case of a Qualifying Shareholder who is liable to UK income tax at the additional rate, the Qualifying Shareholder will be subject to UK income tax on the gross dividend at the rate of 37.5% to the extent that the gross dividend falls above the threshold for the additional rate of UK income tax when it is treated as the top slice of the Qualifying Shareholder's income. After setting off the tax credit comprised in the gross dividend, the Qualifying Shareholder will, accordingly, have to account for UK income tax equal to 27.5% of the gross dividend (which is also equal to 30.55% of the cash dividend received). For example, if the Qualifying Shareholder received a dividend of £80 from the Company, the dividend received would carry a tax credit of £8.89 and therefore represent a gross dividend of £88.89. The Qualifying Shareholder would then be required to account for UK income tax of £24.44 on the gross dividend (being £33.33 (i.e. 37.5% of £88.89) less £8.89 (i.e. the amount of the tax credit)).

A UK resident individual Qualifying Shareholder whose liability to UK income tax in respect of a dividend received from the Company is less than the tax credit attaching to the dividend will not be entitled to any payment from HMRC in respect of any part of the tax credit attaching to the dividend.

3.2 Companies

A Qualifying Shareholder within the charge to UK corporation tax which is a 'small company' (for the purposes of the UK taxation of dividends) will not generally be subject to tax on dividends from the Company, provided certain conditions are met.

Other Qualifying Shareholders within the charge to UK corporation tax will not be subject to tax on dividends from the Company so long as the dividends fall within an exempt class and do not fall within certain specified anti-avoidance provisions and the Qualifying Shareholder has not elected for the dividends not to be exempt. Each Qualifying Shareholder's position will depend on its own individual circumstances, although it would normally be expected that dividends paid by the Company would fall within an exempt class. Examples of dividends that are within an exempt class are dividends in respect of portfolio holdings, where the recipient owns less than 10%, of the issued share capital of the payer (or any class of that share capital).

4. Stamp duty and SDRT

The following statements are intended as a general and non-exhaustive guide to the current UK stamp duty and SDRT position and apply regardless of whether or not a Qualifying Shareholder is resident in the UK for UK tax purposes.

4.1 Issue of New Ordinary Shares

No stamp duty or SDRT will generally be payable on the issue of New Ordinary Shares. Where New Ordinary Shares are credited in uncertificated form to an account in CREST, no liability to stamp duty or SDRT will generally arise.

Following the decision of the ECJ in HSBC Holdings and Vidacos Nominees (Case 569/07) and the First-tier Tax Tribunal decision in HSBC Holdings and The Bank of New York Mellon, HMRC has confirmed that SDRT is no longer payable when new shares are issued into a clearance service or depositary receipt service.

4.2 Subsequent dealings in New Ordinary Shares

Except in relation to depositary receipt systems and clearance services (to which the special rules outlined below apply), any subsequent dealings in New Ordinary Shares will be subject to stamp duty or SDRT in the normal way. Subject to an exemption for certain low value transactions, the transfer on sale of New Ordinary Shares effected outside CREST will generally be liable to stamp duty at the rate of 0.5% of the amount or value of the consideration payable (rounded up to the nearest multiple of £5) or, if an unconditional agreement to transfer New Ordinary Shares is not completed by a duly stamped transfer, or where the transfer is effected in CREST, SDRT at the rate of 0.5% of the amount or value of the consideration payable.

Where New Ordinary Shares are transferred (a) to, or to a nominee or an agent for, a person whose business is or includes the provision of clearance services or (b) to, or to a nominee or an agent for, a person whose business is or includes issuing depositary receipts, stamp duty or SDRT will generally be payable at the higher rate of 1.5% of the amount or value of the consideration given or, in certain circumstances, the value of the New Ordinary Shares. There is an exception from the 1.5% charge on the transfer to, or to a nominee or agent for, a clearance service where the clearance service has made and maintained an election under section 97A(1) of the Finance Act 1986, which has been approved by HMRC. In these circumstances, SDRT at the rate of 0.5% of the amount or value of the consideration payable for the transfer will arise on any transfer of shares in the Company into such an account and on subsequent agreements to transfer such shares within such account. Any liability for stamp duty or SDRT in respect of a transfer into a clearance service or depositary receipt system, or in respect of a transfer within such a service, which does arise will strictly be accountable by the clearance service or depositary receipt system operator or their nominee, as the case may be, but will, in practice, be payable by the participants in the clearance service or depositary receipt system.

PART X

DIRECTORS, RESPONSIBLE PERSONS, SENIOR MANAGEMENT, CORPORATE GOVERNANCE AND EMPLOYEES

1. Persons responsible

The Company and the Costain Directors, whose names appear at section 2 below, accept responsibility for the information contained in this document. To the best of the knowledge of the Company and the Costain Directors (who have taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information.

2. The Costain Directors

The following table sets out information relating to each of the Costain Directors:

Name	Current position in respect of Costain	Date of Birth
Executive Directors:
Andrew Wyllie	Chief Executive Officer	24 December 1962
Anthony Bickerstaff	Group Finance Director	2 June 1964
Non-Executive Directors:
David Allvey	Non-Executive Chairman	13 March 1945
James Morley	Senior Independent Director	15 February 1949
Michael Alexander	Independent Non-Executive Director	17 November 1947
Jane Lodge	Independent Non-Executive Director	1 April 1955
Ahmed Samy	Non-Executive Director	2 October 1955
Alison Wood	Independent Non-Executive Director	28 June 1963

The business address of each of the Costain Directors is Costain House, Vanwall Business Park, Maidenhead, Berkshire SL6 4UB.

3. Costain Directors' profiles

The name, business experience and principal business activities outside the Costain Group of the current Costain Directors, as well as the date of their initial appointment as Costain Directors, are set out below.

David Allvey (Non-Executive Chairman)

David was appointed chairman in January 2008 prior to which he was chairman of the audit committee. With a career that started in civil engineering and subsequently as a chartered accountant, his previous roles include group finance director for BAT Industries plc and Barclays Bank plc and chief operating officer for Zurich Financial Services, member of the UK Accounting Standards Board, member of the International Accounting Standards Insurance Group, non-executive director of Thomas Cook plc (2007-2012), senior non-executive director of Intertek Group plc (2002-2011), senior non-executive director of William Hill plc (2002-2011), senior independent director of Friends Life FPG Limited (formerly Friends Provident Group plc) (2009-2011) and chairman of Arena Coventry Ltd (2006-2012). David is chairman of Costain's nomination committee.

In addition to these directorships and those of the Costain Group, David holds the following directorships. He has not been a partner in any partnerships during the past five years.

Company	Status
Clydesdale Bank Plc	Current
National Australia Group Europe Limited	Current
Friends Life Group plc	Current

Andrew Wyllie (Chief Executive Officer)

Andrew was appointed chief executive in September 2005. He was previously managing director of Taylor Woodrow Construction Ltd (2001-2005) and a member of the Taylor Woodrow plc executive committee. Andrew joined Taylor Woodrow in 1984 and worked on major contracts in Africa, the Middle East, the Far East and the UK.

In addition to these directorships and those of the Costain Group, Andrew holds the following directorships. He has not been a partner in any partnerships during the past five years.

Company	Status
Scottish Water Horizons Holdings Limited	Current
Scottish Water Business Stream Holdings Limited	Current

Anthony Bickerstaff (Group Finance Director)

Tony is group finance director of the Costain Group and has been since June 2006. Tony has extensive knowledge of the construction and support services sectors both in the UK and overseas. He is responsible for all aspects of the financial management of the Costain Group as well as playing a major role in the Costain Group's strategic and operational development. Previously, Tony was with the Taylor Woodrow Group, which he joined in 1982 and became divisional operations director in charge of the group's PFI projects. He held a number of senior management and financial positions in Taylor Woodrow including finance director of Taylor Woodrow Construction Limited.

Save for directorships of members of the Costain Group, Tony has not held any other directorships or been a partner in any partnerships in the past five years.

James Morley (Senior Independent Director)

James served as chairman of the audit committee from January 2008 until the end of October 2012 and was appointed as the senior independent director at the start of January 2013. James is a chartered accountant with some 27 years' experience as a board member of both listed and private companies. Previous roles include chief operating officer of Primary Group Ltd (2006- 2007), group finance director of Cox Insurance Holdings plc (2002-2005), group finance director of Arjo Wiggins Appleton plc (1999-2001), group executive director, finance of Guardian Royal Exchange plc (1990-1999), deputy chief executive and finance director of Avis Europe plc (1976-1989), non-executive director of the Bankers' Investment Trust plc (1994-2008), non-executive director of W S Atkins plc (2001-2009) and non-executive director of Trade Indemnity Group plc (1991- 1996) and non-executive director of Acumus Limited (2011- 2012). James is a member of Costain's nomination, remuneration and audit committees.

In addition to these directorships and those of the Costain Group, James holds the following directorships. He has not been a partner in any partnerships during the past five years.

Company	Status
The Innovation Group plc	Current
Clarkson plc	Current
Speedy Hire plc	Current
BMS Associates Limited	Current
BMS Group Limited	Current

Michael Alexander (Independent Non-Executive Director)

Mike was appointed to the Board in July 2007 and has extensive experience of the energy market. Previous roles include chief executive of British Energy plc (2003-2005), managing director of British Gas Trading, chief operating officer and executive director of Centrica plc (1994-2003), deputy chairman and senior independent director of Russian Platinum PLC (2011-2013), non-executive chairman of Goldfish Bank Ltd (2002-2003), chairman of TGE Marine AG (2007-2010), chairman of the Association of Train Operators (2008-2009) and non-executive director of the Energy Saving Trust Ltd (1994-2001). Mike is also a member of the European advisory board for Landis & Gyr and a special adviser to EGS Energy Limited. Mike is the chairman of Costain's remuneration committee and a member of the audit and nomination committees.

In addition to these directorships and those of the Costain Group, Mike holds the following directorships. He has not been a partner in any partnerships during the past five years.

Company	Status
Payments Council Limited	Current
Lexican Limited	Current
Lexican Associates Limited	Current
Seplat Petroleum Development Company Limited	Current

On 22 August 2013, Costain announced that Mike will retire from the Costain Board on 31 March 2014.

Jane Lodge (Independent Non-Executive Director)

Jane was appointed as a non-executive director in August 2012 and was appointed chair of the audit committee with effect from the end of October 2012. Prior to this Jane spent 35 years, until 2011, at Deloitte LLP (UK), 25 as an audit partner advising global companies, particularly in the manufacturing, house-building and property and construction sectors. Jane was senior partner of the Birmingham office and the Deloitte UK Manufacturing Industry Sector. Jane is also a member of Costain's remuneration and nomination committees.

In addition to these directorships and those of the Costain Group, Jane holds the following directorships. Other than Deloitte LLP, she has not been a partner in any other partnerships during the past five years.

Company	Status
Black Country Living Museum Trust Ltd	Current
Devro plc	Current
DCC plc	Current
Bromsgrove School Foundation	Current

Ahmed Samy (Non-Executive Director)

Ahmed Samy was appointed as a non-executive director in November 2013. He is Deputy Director of General Investment Affairs of Mohammed Abdulmohsin Al-Kharafi & Sons Co. W.L.L., and his responsibilities include managing the company's offshore investments on international markets, evaluation and implementation of project/investment opportunities and undertaking various corporate actions including mergers and acquisitions. Previous to his 25 years in the investment field, Ahmed Samy gained 11 years of banking experience, culminating in his appointment as Staff Credit Officer at Commercial International Bank (formerly Chase National Bank), Egypt.

In addition to these directorships and those of the Costain Group, Ahmed holds the following directorships. He has not been a partner in any partnerships during the past five years.

Company	Status
Credit Bank of Albania	Current

Alison Wood (Independent Non-Executive Director)

Alison Wood was appointed as a non-executive director with effect from 1 February 2014 and will be appointed as chair of the remuneration committee from the beginning of April 2014. Alison is the former Global Director of Strategy and Corporate Development at National Grid plc (2008-2013). Before that, Alison spent nearly 20 years in a number of strategy and leadership roles at BAE Systems plc including Group Strategic Development Director. Alison has also held non-executive director positions with BTG plc (2004-2008) and Thus Group plc (2007-2008).

In addition to these directorships and those of the Costain Group, Alison holds the following directorships. She has not been a partner in any partnerships during the past five years.

Company	Status
Cobham plc	Current
e2v technologies plc	Current

4. Interests of the Costain Directors

As at 26 February 2014 (being the latest practicable date prior to the publication of this document), the interests (all of which are beneficial) of the Costain Directors, their immediate families and (so far as is known to them or could with reasonable diligence be ascertained by them) persons connected (within the meaning of section 252 of the Companies Act) with the Costain Directors in the issued share capital of Costain, including: (i) those arising pursuant to transactions notified to Costain pursuant to DTR 3.1.2R; or (ii) those of connected persons of the Costain Directors, which would, if such connected person were a Costain Director, be required to be disclosed under (i) above, together with such interests as are expected to subsist immediately following Admission are set out in the following table.

		As at 26 February 2014	Interests Immediately following completion of the Capital Raising(1)
	Number of Ordinary Shares	Percentage of issued share capital of Costain	Number of Ordinary Shares	Percentage of issued share capital of Costain
Costain Directors
David Allvey	5,250	0.01	14,138	0.01
Andrew Wyllie	289,089	0.43	297,977	0.30
Anthony Bickerstaff	145,860	0.22	154,748	0.15
James Morley	27,000	0.04	47,104	0.05
Michael Alexander	19,101	0.03	59,101	0.06
Jane Lodge	2,500	0.003	24,722	0.02
Ahmed Samy .	0	0	0	0
Alison Wood	0	0	6,666	0.007

(1) Figures are calculated assuming that 33,382,068 Ordinary Shares are issued in connection with Capital Raising and that no further issues of Ordinary Shares occur between publication of this document and Admission.

Taken together, the combined percentage interest of the Costain Directors in the issued ordinary share capital of Costain as at 26 February 2014 (being the latest practicable date prior to the publication of this document) was approximately 0.7%. Taken together, the combined percentage interest in the issued ordinary share capital of Costain of the Costain Directors immediately following Admission will be approximately 0.6%.

Details of options and awards over Ordinary Shares held by the Costain Directors are set out below. Those options and awards are not included in the interests of the Costain Directors shown in the table above.

There are outstanding options/awards under all five of Costain's plans whose details are set out below. However, no new options/awards may be granted under the LTIP 2002 or the SAYE 2002 (both defined below). For future options/awards, the LTIP 2002 and the SAYE 2002 have been replaced by two new plans which were approved by Costain Shareholders at the Costain annual general meeting on 9 May 2012, as further set out in section 10 below: the LTIP 2012 and the SAYE 2012 (both defined below). Future options/awards may also be granted under the DSBP (defined below). The executive Directors have been granted options under all five of Costain's plans and details are included in the following sections.

The Costain remuneration committee is committed to the concept of creating a genuine alignment of interests between Costain Shareholders and the Costain Board. The Costain remuneration committee has further aligned the interests of executives and Costain Shareholders by introducing a share ownership guideline under which executive Directors are encouraged to build up and maintain a shareholding worth not less than 100% of their base salary (50% in respect of senior managers). Executives and other senior managers are encouraged to retain up to 50% of the net number of Ordinary Shares received under any option/award granted pursuant to the LTIP 2002 or the DSBP until this guideline is satisfied. Furthermore, to ensure a true alignment of interests across the entire Costain Board, a similar share ownership guideline has been introduced for non-executive Directors who are encouraged to build up and maintain a shareholding in Costain of not less than 100% of their annual fee.

4.1 2012 Costain Long Term Incentive Plan ('LTIP 2012')

The LTIP 2012 was approved by Costain Shareholders at the Costain annual general meeting on 9 May 2012. It allows for the grant of conditional awards and options which may be subject to performance conditions. The Costain remuneration committee may also grant cash-based conditional awards. At the discretion of the Costain remuneration committee, all employees of the Costain Group are eligible to participate in the LTIP 2012, including executive directors. Full details of the LTIP 2012 are set out in section 10.1.

Options/awards were made shortly following adoption of the LTIP 2012 in May 2012 and were also awarded in May 2013. The performance conditions applying to these options/awards depend on the quantum of the option/award — with an aggregate EPS performance condition applying to that portion of an option/award over Ordinary Shares worth up to 50% of salary, and an operating profit performance condition applying to the portion of an option/award (if any) granted over Ordinary Shares worth in excess of 50% of salary.

Portion of options/awards over Ordinary Shares worth up to and including 50% of salary

With respect to that portion of options/awards made over Ordinary Shares worth up to and including 50% of salary, the performance condition is based on aggregate EPS targets over a period of three financial years ending with the 2014 financial year in respect of the 2012 grant and the 2015 financial year in respect of the 2013 grant. For the purposes of the performance conditions, EPS is calculated before pension interest.

The extent to which this portion of an option/award vests will be determined by applying the following sliding scale of aggregate EPS targets:

Aggregate EPS targets over the 2012 - 2014 financial years	Percentage of vesting of that portion of an option/award made over Ordinary Shares worth up to and including 50% of salary
Below 90 pence	0%
90 pence	15%
100 pence or more	100%
Between 90 pence and 100 pence	Between 15% and 100% vesting on a straight-line basis

Aggregate EPS targets over the 2013 - 2015 financial years	Percentage of vesting of that portion of an option/award made over Ordinary Shares worth up to and including 50% of salary

Below 88.7 pence .	0%
88.7 pence . 100 pence or more	15% 100%

Portion of options/awards over Ordinary Shares worth in excess of 50% of salary

With regard to the portion of options/awards made over Ordinary Shares worth more than 50% of salary, the performance condition is based on stretching operating profit targets for the 2014 financial year in respect of the 2012 grant and the 2015 financial year in respect of the 2013 grant. 'Operating profit' is defined as underlying profit before interest, tax, amortisation and employment related acquisition consideration but excluding any PFI transfer into the pension and risk management costs.

The extent to which this portion of an option/award vests will be determined as follows:

Operating profit for the 2014 financial year	Percentage of vesting of that portion of an option/award made over Ordinary Shares worth in excess of 50% of salary
£29.6 million or below .	0%
£37 million	50%
Between £29.6 million and £37 million	Between 0% and 50% on a straight-line basis
£44.4 million or more	100%
Between £37 million and £44.4 million	Between 50% and 100% on a straight line basis

£35 million or below	0%
£42 million	50%
Between £35 million and £42 million	Between 0% and 50% on a straight-line basis
£50 million or more	100%
Between £42 million and £50 million	Between 50% and 100% on a straight-line basis

Irrespective of the extent to which the operating profit performance condition shall be achieved, no part of this portion of an option/award will vest unless the following EPS underpins have been achieved:

EPS for the 2014 financial year in respect of the 2012 grant must be at least 35.5 pence and the EPS for the 2015 financial year in respect of the 2013 grant must be at least 37.3 pence; and
aggregate EPS over three financial years ending with the 2014 financial year in respect of the 2012 grant and the 2015 financial year in respect of the 2013 grant must equal 100 pence or more.

If these two EPS underpins have been met, the portion of the option/award subject to the operating profit performance condition will vest in accordance with the above table.

The Costain remuneration committee can set different performance conditions from those described above for future options/awards.

Details of the Costain executive Directors' current participation in the LTIP 2012 are as follows:

	Date granted	Outstanding as at 26 February 2014	Exercise Period
Andrew Wyllie	09/05/2012	207,044	From May 2015
	07/05/2013	163,293	From May 2016
Anthony Bickerstaff	09/05/2012	137,167	From May 2015
	07/05/2013	108,691	From May 2016

4.2 Costain Deferred Share Bonus Plan ('DSBP')

All Costain Group employees, including executive directors, are eligible to participate in the DSBP, which promotes greater alignment with Costain Shareholders through the grant of options over Ordinary Shares. Participation is determined by the Costain remuneration committee. Under the DSBP, options usually become exercisable on the second anniversary of grant and can usually be exercised up to the tenth anniversary of grant. Options may only be satisfied using Ordinary Shares which are purchased by a trust on behalf of the Costain Group and so there is no dilution of Costain Shareholders' interests. Full details of the DSBP are set out in section 10.3.

For the year ended 31 December 2012, both executive Costain Directors had a maximum DSBP opportunity of 50% of base salary. The performance measure was EBITA (as defined below), as described in the table below:

Costain Group EBITA for 2012	Percentage of relevant maximum award
£21.2 million or less	0%
Between £21.2 million and £23.5 million	Between 0% and 60% on a straight-line basis
£23.5 million	60%
Between £23.5 million and £28.2 million	Between 60% and 100% on a straight-line basis
£28.2 million or more	100%

The EBITA for the year ended 31 December 2012 was £23.7 million and accordingly 62% of the maximum DSBP award opportunity vested as confirmed by the remuneration committee. The number of Ordinary Shares over which a participant in the DSBP may be granted an option is calculated on the basis of the monetary value of the DSBP opportunity divided by the middle market quotation of a Costain Share at the time of grant. The grant of options for 2012 was made on 3 April 2013.

For the year ending 31 December 2013, the maximum DSBP opportunity for the executive Costain Directors remains unchanged. The Costain remuneration committee will disclose on a retrospective basis the EBITA measure (defined as underlying earnings before interest, tax, amortisation of acquired intangible assets and employment related acquisition consideration but excluding any PFI transfer into the pension scheme and pension risk management costs) for 2013 in the Annual Report 2013.

The DSBP includes a mechanism to allow the Company to deliver a combined arrangement at no additional cost to the Company by delivering to participants a combination of HMRC tax-approved market value share options (with an exercise price determined at the time of grant) over a fixed number of shares, together with non tax-approved combined deferred awards with a nil exercise price over a fixed value of shares. The tax-approved and non tax-approved options/awards are linked, in terms of value and exercise and mirror the same commercial terms as the deferred awards.

For certain grants made after 1 May 2012, the Costain remuneration committee have introduced clawback provisions with regard to any material misstatement to audited accounts due to fraud, wilful misconduct or negligence, a material error or inaccurate or misleading information or assumptions in the calculation of the number of Ordinary Shares under DSBP award. The clawback provisions can also be operated to effect clawback provisions in a linked bonus plan.

Details of the executive Costain Directors' current participation in the DSBP are as follows:

	Date granted	As at 01 Jan 2013	Granted during the course of 2013	Lapsed during the course of 2013	Exercisable during the course of 2013(4)	As at 26 February 2014	Exercise price	Exercisable from
Andrew Wyllie	12.04.11	82,644(1)	—	—	82,644	—	—	April 2013 - 2021
	04.04.12	78,258(1)	—	—	—	78,258		April 2014 - 2022
	03.04.13	—	36,401(1)	—	—	36,401		April 2015 - 2023
	03.04.13		10,771 £(29,997)(2)	—	—	10,771		April 2015 - 2023
	03.04.13	—	10,771(3)	—	—	10,771	278.5p	April 2015 - 2023
Anthony
Bickerstaff	12.04.11	54,752(1)	—	—	54,752	—	—	April 2013 - 2021
	04.04.12	51,846(1)	—	—	—	51,846	—	April 2014 - 2022
	03.04.13	—	20,394(1)	—	—	20,394		April 2015 - 2023
	03.04.13	—	10,771 £(29,997)(2)	—	—	10,771		April 2015 - 2023
	03.04.13	—	10,771(3)	—	—	10,771	278.5p	April 2015 - 2023

Notes:

(1) Number of Ordinary Shares under the Deferred Award.

(2) Maximum number and value of Ordinary Shares under the Combined Deferred Award.

(3) Number of Ordinary Shares under the Option.

(4) Andrew Wyllie exercised a total of 82,644 DSBP share awards (and thereby also received 2,967 dividend shares) on 12 April 2013 and Tony Bickerstaff exercised a total of 54,752 share awards (and thereby also received 1,965 dividend shares) on 27 August 2013. The market price of the Company's shares on 12 April 2013 and 27 August 2013 was £2.89 and £2.79 respectively. The gain (before tax and national insurance) received by these executive Directors was £247,509 for Andrew Wyllie and £158,308 for Tony Bickerstaff.

4.3 Costain Long-Term Incentive Plan ('LTIP 2002')

The LTIP 2002 was approved by Costain Shareholders at the Costain annual general meeting on 24 May 2002 and reached the end of its ten-year life in 2012. The LTIP 2002 continues to operate in respect of outstanding options/awards but no new options/awards may be granted under this plan.

The LTIP 2002 allowed for the grant of conditional awards and options, which are subject to performance conditions. Options/awards may be subject to a holding period following vesting, in which case participants may also receive matching options/awards (which are also subject to performance conditions). All employees of the Costain Group were eligible to participate in the LTIP 2002, including the executive Directors and participation was determined by the Costain remuneration committee. Full details of the LTIP 2002 are set out in section 10.4.

The EPS targets for the outstanding 2011 awards are:

Sum of the EPS for the financial years ending 31 December 2011, 2012 and 2013*	Vesting level for awards up to 50% of salary
102p .	15%
113p	100%
Between 102p and 113p	Pro-rata between 15% and 100%

Vesting level for awards from 50% to 100% of salary
0% 100%
Pro-rata between 0% and 100%

* EPS targets rounded as appropriate.

The Costain remuneration committee believed that EPS was the most appropriate metric to use in the LTIP, as growth in EPS is one of the key drivers of the price of Ordinary Shares together with operating profit. For grants made in 2011, EPS should be calculated before pension interest (itself calculated under IAS 19).

Details of the executive Costain Directors' participation in the LTIP 2002 in respect of which the final grants were made in 2011 are as follows:

	Outstanding as at 1 January 2013	Vested during the course of 2013	Outstanding as at 26 February 2014	Exercise period
Andrew Wyllie	81,632	81,632	—	From March 2013
	169,294	—	169,294	From March 2014
Anthony Bickerstaff	54,081	54,081	—	From March 2013
	112,157	—	112,157	From March 2014

4.4 Costain Group PLC Savings-Related Share Option Scheme ('SAYE 2002')

The SAYE 2002 was approved by Shareholders at the Costain annual general meeting on 24 May 2002 and reached the end of its ten year life in 2012. The SAYE 2002 continues to operate in respect of outstanding options but no new options may be granted under this plan.

The SAYE 2002 allowed for the grant of tax-favoured options with an exercise price. Subject to the rules of the scheme, all employees (including the executive Directors) of the Costain Group were eligible to participate in the SAYE 2002. Full details of the SAYE 2002 are set out in section 10.5.

Options granted on 11 October 2011 had an exercise price of 205p per Costain Share for participants under the 3-year savings contract and 182p per Costain Share for participants under the 5-year savings contract.

Details of the Costain executive Directors' options under the SAYE 2002 in respect of the final grants that were made under this scheme in 2011 are as follows:

	Outstanding as at 1 January 2013	Outstanding as at 26 February 2014	Exercise price	Exercise period
Andrew Wyllie	1,633	1,633	205p	Nov 2014 - May 2015
Anthony Bickerstaff	1,633	1,633	205p	Nov 2014 - May 2015

4.5 Costain Group PLC Savings-Related Share Option Scheme ('SAYE 2012')

The SAYE 2012 was approved by Shareholders at the Costain annual general meeting on 9 May 2012 in order to replace the SAYE 2002 which had reached the end of its ten year period.

The SAYE 2012 allows for the grant of tax-favoured options at an exercise price that is determined at the time of invitation to join the scheme under either a 3 or 5-year savings contract. All UK employees of the Costain Group are eligible to participate in the SAYE 2012, including the executive Directors subject to the rules of the scheme. Full details of the SAYE 2012 are set out in section 10.2.

The first options were granted under the SAYE 2012 on 30 September 2013 under a 3-year savings contract, with an exercise price of 222p per Costain Share.

Details of the Costain executive Directors' options under the SAYE 2012 that were granted in September 2013 are as follows:

	Date of grant	Maximum number of options granted	Exercise price	Exercise period
Andrew Wyllie	30/09/13	1,572	222p	Nov 2016 - May 2017
Anthony Bickerstaff	30/09/13	1,572	222p	Nov 2016 - May 2017

5. Interests of the Costain Directors

No Costain Director has or has had any interest in any transaction which is or was unusual in its nature or conditions, or is or was significant to the business of the Company, and which was effected by any member of the Group in the current or immediately preceding financial year or which was effected during an earlier financial year and remains in any respect outstanding or unperformed.

There are no guarantees provided by any member of the Costain Group for the benefit of the Costain Directors.

6. Remuneration of the Costain Directors

This section provides information on the remuneration arrangements for the Costain Directors. The aggregate remuneration for the Costain Directors for the year ended 31 December 2013 was £1,571,187 (2012: £1,404,342).

Base salaries for the executive Costain Directors are reviewed and approved annually by the remuneration committee and take effect from 1 April. The remuneration committee also gives guidance to the Chief Executive as to the matters to be taken into account in the salary review of other senior management and all other employees of the Costain Group. The Company's policy is to target broadly the median position in light of remuneration generally within the Company and other companies in the UK-based construction sector. Salaries are set with reference to individual performance, experience and responsibilities.

With effect from 1 April 2014, the Remuneration Committee have approved a 2.5% increase in the base salaries of the executive directors (2.5% in 2013), as indicated in the table below. A 2.5% salary increase budget will also be applied across the Company in 2014.

Details of the remuneration for Costain Directors for the year ended 31 December 2013 are as follows:

	Salary/ Fee £	Bonus £	Benefits £	2013 Total £	2012 Total £	2013 Pension £	2012 Pension(1) £
Executive Directors
Andrew Wyllie Anthony Bickerstaff	423,963(5) 302,860 280,876(6) 214,775		13,283 11,783	740,106 507,434	643,917 426,858	93,272 61,793	91,106 60,358
Non-Executive Directors
David Allvey	131,928(7)	—	—	131,928(7)	128,875	—	—
Michael Alexander(9)	48,839	—	—	48,839	47,705	—	—
Jane Lodge(2)	51,437	—	—	51,437	18,870	—	—
James Morley(3)	48,839	—	—	48,839	48,797	—	—
Ahmed Samy(8)	3,572	—	—	3,572	—
Alison Wood(10)	—	—	—	—	—	—	—
Former Directors
Samer Younis(8)	39,032	—	—	39,032	41,615	—	—
John Bryant(4)	—	—	—	—	47,705	—	—
Total	1,028,486	517,635	25,066	1,571,187	1,404,342	155,065	151,464

(1) Pension contributions in excess of £50,000 paid as a cash supplement.

(2) Jane Lodge was appointed a Non-Executive Director with effect from 1 August 2012 and became Chair of the audit committee at the end of October 2012, succeeding James Morley.

(3) James Morley became the Senior Independent Director at the end of December 2012.

(4) John Bryant retired as a Non-Executive Director with effect from 31 December 2012.

(5) Salary increased to £437,228 with effect from 1 April 2014.

(6) Salary increased to £289,664 with effect from 1 April 2014.

(7) Fee increased to £135,402 with effect from 1 April 2014.

(8) Ahmed Samy replaced Samer Younis on the board with effect from 30 November 2013

(9) Michael Alexander is due to retire from the board in March 2014.

(10) Alison Wood was appointed to the board with effect from 1 February 2014.

For the year ended 31 December 2013, 80% of the executive Directors' annual bonus metrics were set by the remuneration committee as measurable key financial targets. These metrics included Costain Group earnings before interest and tax, Costain Group overhead costs, cash flow, order book and health and safety targets. The remaining 20% was linked to health and safety targets (10%) and personal goals (10%) relating to building and developing the executive team and the talent pool within the organisation. For the year ending 31 December 2013, the maximum annual cash bonus potential for the executive Directors remained unchanged with each having a maximum bonus opportunity of 100% of base salary.

In addition, the executive Directors receive further benefits, principally a company car allowance, life assurance, private medical insurance (BUPA) and PDS cover.

Costain non-executive Directors' remuneration, other than the Chairman, is determined by the Board, following consultation between the Chairman and the Chief Executive. The Chairman's fee is recommended to and determined by the Costain Board following consultation between the remuneration committee and the Chief Executive. Fees are reviewed annually and any increase is effective from 1 April.

Remuneration for non-executive Directors, other than the Chairman, comprise a basic annual fee for acting as a non-executive director of the Company and additional fees for the Senior Independent Director, and the chairs of the audit and remuneration committees. The annual fees are as follows:

Year	Annual Fee	Senior Independent Director	Audit Committee Chairman	Remuneration Committee Chairman
2014	£43,936	£6,429	£9,109	£6,429
2013	£42,865	£6,273	£8,887	£6,273
2012	£41,820	£6,120	£8,670	£6,120
2011	£41,000	£6,000	£8,500	£6,000

During 2013, the Chairman was paid fees of £131,928. He does not receive any additional fees for committee memberships. With effect from 1 April 2014, he has been awarded an annual fee of £135,402.

7. Directors' service contracts and letters of appointment

7.1 Costain Directors' service contracts and letters of appointment

The executive Costain Directors have service contracts that can be terminated by either party on the giving of 12 months' notice. There is no provision for payment of predetermined compensation in case of wrongful termination by the Costain Group and the duty to mitigate loss applies.

Andrew Wyllie's service agreement is dated 25 April 2005 and Tony Bickerstaff's is dated 3 March 2006.

Each of the non-executive Costain Directors have letters of appointment. The appointment of the independent non-executive Directors can be terminated by reasonable notice. Michael Alexander, David Allvey, Jane Lodge, James Morley, Ahmed Samy and Alison Wood are not entitled to compensation for loss of office.

The nominee non-executive Directors of Costain hold office for as long as the shareholder nominating them holds a specific percentage of the issued share capital. The nominee non-executive Directors of Costain are required to stand for re-election in the usual way and are not entitled to compensation for loss of office. Currently, only one of the two major shareholders has appointed a nominee to sit on the Costain Board. The dates of each non-executive directors' original appointment are as follows:

Non-Executive Director	Date of Appointment	Expiry of Current Term(1)
David Allvey	01.11.2001	Close of the 2014 AGM
Michael Alexander	25.07.2007	Due to retire on 31 March 2014
James Morley	09.01.2008	Close of the 2014 AGM
Ahmed Samy	30.11.2013	Close of the 2014 AGM
Jane Lodge	01.08.2012	Close of the 2016 AGM
Alison Wood	01.02.2014	Close of the 2014 AGM

Note:

(1) Subject to election at the AGM following their appointment and subsequent re-election at intervals of no more than three years in accordance with the Costain Articles and the UK Corporate Governance Code.

8. Corporate governance

8.1 Board practices

The UK Corporate Governance Code recommends that at least half the members of the board of directors (excluding the chairman) of a public limited company incorporated in the UK should be independent in character and judgement and free from relationships or circumstances which are likely to affect, or could appear to affect, their judgement.

As at the date of this document, Costain is in full compliance with the provisions of the UK Corporate Governance Code, apart from provision B.2.3 of the Code which requires non-executive directors to be appointed for a specific term, because Costain's two major shareholders are entitled to appoint a non-executive director for so long as they each hold 7% of the then issued ordinary share capital of Costain.

8.2 Company Board structure

Currently, the Costain Board is composed of eight members, consisting of the non-executive Chairman and the Chief Executive, together with one other executive Director and five other non-executive Directors.

The roles of the Non-Executive Chairman and the Chief Executive are distinct and separate, with a clear division of responsibilities.

8.3 Board committees

The following committees continue to have formally delegated duties and responsibilities with written terms of reference. From time to time, separate committees may be set up by the Costain Group Board to consider specific issues when the need arises.

Nomination Committee

The nomination committee comprises David Allvey, Jane Lodge, James Morley, Michael Alexander, Ahmed Samy and Alison Wood. The Chairman of the nomination committee is David Allvey.

The principal role of the nomination committee is to identify, and nominate for Board approval, candidates to fill Board vacancies as and when they arise. It is required to prepare a description of the role, and capabilities required, for any appointment, and to maintain contact with major Costain Shareholders about appointments to the Costain Board.

It also reviews the induction process for newly appointed directors, reviews annually the time required of non-executive directors, keeps the structure, size and composition of the Costain Board under review, and considers succession planning for both executive and non-executive directors and for other senior executive posts.

Remuneration committee

The remuneration committee comprises Michael Alexander, Jane Lodge, James Morley and Alison Wood. The Chairman of the remuneration committee is Michael Alexander, who will retire from the Costain Board on 31 March 2014 (as announced by Costain on 22 August 2013). From 1 April 2014, Alison Wood will take over as Chair of the remuneration committee.

The remuneration committee is responsible for the broad policy on directors' and senior management's remuneration. It determines all aspects of the total individual remuneration packages of the executive directors and in consultation with the Chief Executive recommends to the Board the annual fee for the Chairman and reviews with the Chief Executive the remuneration package of each of the senior managers. It approves the design of and determines targets for performance linked annual bonus schemes for the executive Directors and the senior managers.

The remuneration committee also operates the Costain Share Schemes in which the executive Directors participate, including the determination of the levels of award and performance conditions.

In addition, the remuneration committee reports to shareholders in compliance with the London Stock Exchange and legal requirements and ensures that the Company maintains contact as required with its principal shareholders and with institutional shareholder bodies about remuneration policy and practice.

Audit committee

The audit committee comprises Jane Lodge, Michael Alexander, James Morley and Alison Wood. The Chairman of the audit committee is Jane Lodge.

The audit committee is responsible for:

monitoring the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance and reviewing significant financial reporting judgements contained in them;
reviewing the Company's internal financial controls and risk management systems;
monitoring and reviewing the effectiveness of the Company's internal audit function;
making recommendations to the Costain Board in relation to the appointment of the external auditor and approving the remuneration and terms of engagement of the external auditor;
reviewing and monitoring the external auditor's independence and objectivity and the effectiveness of the audit process; and
developing and implementing policy on the engagement of the external auditor to supply non-audit services.

The audit committee is required to report its findings to the Costain Board, identifying any matters in respect of which it considers that action or improvement is needed, and to make recommendations as to the steps to be taken.

9. Employees

The average number of employees of the Costain Group for the years ended 31 December 2009, 2010, 2011, 2012 and 2013 is set out below:

	2013	2012	2011	2010	2009
Number of employees (excluding Costain Directors)	3,620	4,283	4,159	4,349	4,003

10. Costain Share Schemes

Costain operates the following share schemes:

the LTIP 2012;
the SAYE 2012;
the DSBP;
the LTIP 2002; and
the SAYE 2002,

(together the 'Costain Share Schemes'). There are outstanding options/awards under all of the Costain Share Schemes. As explained in section 4, no new options/awards may be granted under the LTIP 2002 nor the SAYE 2002. Future options/awards may be granted under the LTIP 2012, the SAYE 2012 and/or the DSBP.

The principal features of the LTIP 2012, the SAYE 2012, the DSBP, the LTIP 2002 and the SAYE 2002 are summarised below. See also section 4 above for details in relation to options/awards held by executive Directors under the LTIP 2012, the SAYE 2012, the DSBP, the LTIP 2002 and the SAYE 2002.

Costain intend to implement a new LTIP to replace the existing 2012 LTIP together with a new annual incentive plan which will replace the existing DSBP and annual cash bonus arrangements (the 'New Plans'). The introduction of the New Plans will be subject to shareholder approval and full details will be set out in the notice of the 2014 annual general meeting.

Participants in the Costain Share Schemes shall be contacted in the event that the remuneration committee, following the Capital Raising, exercises its discretion to adjust (i) the number of Ordinary Shares under any outstanding awards, and (ii) where relevant, any exercise price or performance conditions.

10.1 LTIP 2012

(A) Outline

The LTIP 2012 was approved by Costain Shareholders at the Costain annual general meeting on 9 May 2012. It allows for the grant of conditional awards and options with a maximum total market value of up to 100% of annual base salary (or 200% of annual base salary in exceptional circumstances). The Costain remuneration committee may also grant cash-based conditional awards. Options and awards may be subject to performance conditions.

(B) Eligibility

Any employee (including an executive director) of Costain and its subsidiaries will be eligible to participate in the LTIP 2012 at the discretion of the Costain remuneration committee.

(C) Grant of options/awards

The Costain remuneration committee may grant options/awards to acquire Ordinary Shares within six weeks following Costain's announcement of its results for any period or at any other time when the Costain remuneration committee considers there are exceptional circumstances which justify the granting of options/awards. The Costain remuneration committee also had authority to grant options/ awards within six weeks of Costain Shareholder approval of the LTIP 2012. The first options/awards were made shortly following adoption of the LTIP 2012. No options/awards may be granted after 8 May 2022.

The Costain remuneration committee may grant awards as conditional awards or as options (either nil cost or with an exercise price). The Costain remuneration committee may also decide to grant cash-based conditional awards of an equivalent value to share-based conditional awards or to satisfy share-based options/awards in cash.

(D) Individual limit

An employee may not receive options/awards in any financial year over Ordinary Shares having a total market value in excess of 100% of his annual base salary. In exceptional circumstances, such as recruitment or retention, this limit may be increased to 200% of an employee's annual base salary.

Options granted under the 2012 LTIP in 2012 and 2013 had a market value of not more than 100% of basic salary for the executive Directors and between 30% to 40% of basic salary for the senior executives (and the level of vesting depends upon the satisfaction of performance targets).

(E) Vesting and exercise

Options and awards will usually vest at the later of the end of any applicable performance condition and the third anniversary of the date of grant.

Options will usually be exercisable from vesting until the tenth anniversary of the date of grant.

(F) Performance conditions

The vesting of options/awards may be subject to performance conditions set by the Costain remuneration committee.

The Costain remuneration committee may also, in exceptional circumstances, vary the performance conditions applying to existing awards if the Costain remuneration committee considers it appropriate to do so and provided the Costain remuneration committee acts fairly and reasonably in making the alteration.

(G) Cessation of employment

Cessation within 18 months from grant

With the exception of an acquisition-related redundancy (see below), an option/award will lapse if a participant ceases to hold employment or be a director with the Costain Group for any reason within 18 months from the grant of the option/award.

Cessation on or after 18 months of grant

If a participant ceases to be an employee or a director because of his injury or disability, his option/award will vest on the normal vesting date, subject to: (i) the extent to which any performance conditions have been satisfied at that time; and (ii) the pro-rating of the option/award to reflect the reduced period of time between its grant and the time of cessation. Options that so vest must usually be exercised within 12 months.
If a participant dies, his option/award will vest at that time, subject to: (i) the extent to which any performance conditions have been satisfied by reference to the date of cessation; and (ii) the pro-rating of the option/award to reflect the reduced period of time between its grant and vesting. Options that so vest must usually be exercised within 12 months.
If a participant ceases to be an employee or director in the Costain Group for any other reason (except an acquisition-related redundancy — see below), his option/award will lapse on cessation unless the Costain remuneration committee determines otherwise. If the Costain remuneration committee exercises its discretion in the participant's favour, then the option/award will vest on the normal vesting date, subject to (i) the extent to which any performance conditions have been satisfied at that time; and (ii) the pro-rating of the option/award to reflect the reduced period of time between its grant and the time of cessation. Options that so vest must usually be exercised within 12 months.

Cessation by reason of an acquisition-related redundancy before the normal vesting date

If a participant ceases to be an employee or a director in the Costain Group before the normal vesting date in circumstances where Costain or a Costain Group company has made an acquisition which results in the employee's or director's redundancy, his option/award will vest on the normal vesting date, subject to: (i) the extent to which any performance conditions have been satisfied at that time; and (ii) the pro-rating of the option/award to reflect the reduced period of time between its grant and the time of cessation. Options that so vest must usually be exercised within 12 months.

(H) Corporate events

In the event of a takeover or winding up of Costain or similar corporate event (not being an internal corporate reorganisation), all options/awards will vest early subject to: (i) the extent that any performance conditions have been satisfied at that time; and (ii) the pro-rating of the options/awards to reflect the reduced period of time between their grant and vesting, although the Costain remuneration committee can decide not to pro-rate an option/award if it regards it as inappropriate to do so in the particular circumstances.

In the event of an internal corporate reorganisation, options/awards will be replaced by equivalent new options/awards over shares in the new holding company unless the Costain remuneration committee decides that options/awards should vest on the basis which would apply in the case of a takeover.

(I) Variation of capital

In the event of any variation of Costain's share capital or in the event of a demerger, payment of a special dividend or similar event which materially affects the market price of the Ordinary Shares, the Costain remuneration committee may make such adjustment as it considers appropriate to the number of Ordinary Shares subject to an option/award and/or the exercise price payable (if any).

(J) Satisfaction of options/awards

LTIP 2012 options/awards may be satisfied using new issue Ordinary Shares, treasury Ordinary Shares or Ordinary Shares purchased in the market.

(K) Overall limit

In any ten calendar year period, Costain may not issue or transfer treasury Ordinary Shares (or grant rights to issue or to transfer treasury Ordinary Shares) in respect of more than:

• 10% of the issued Ordinary Share capital of Costain under the LTIP 2012 together with any other employee Costain share plan adopted by Costain; and

• 5% of the issued Ordinary Share capital of Costain under the LTIP 2012 together with any other executive Costain share plan adopted by Costain.

Treasury Ordinary Shares shall not count towards these limits if institutional investor guidelines cease to require them to be so counted.

(L) Alterations to the LTIP 2012

The Costain remuneration committee may, at any time, amend the LTIP 2012 in any respect, provided that the prior approval of Costain Shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, limits on participation, the overall limits on the issue of Ordinary Shares or the transfer of treasury Ordinary Shares, the basis for determining a participant's entitlement to, and the terms of, the Ordinary Shares or cash to be acquired, or the adjustment of awards and the amendment provisions.

The requirement to obtain the prior approval of Costain Shareholders will not, however, apply to a change to a performance condition (made in accordance with the plan rules) or any minor alteration made to benefit the administration of the LTIP 2012, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any company in the Costain Group.

(M) Clawback

The number of Ordinary Shares under option/award may be reduced (including to zero) to give effect to clawback provisions in any other share-based or cash-based incentive plan operated by the Costain Group.

(N) General

No payment is required for the grant of an option/award under the LTIP 2012. LTIP 2012 options/awards are not transferable, except on death, and shall lapse immediately on a participant's bankruptcy. LTIP 2012 options/awards are not pensionable.

LTIP 2012 awards/options may not be granted more than 10 years after Costain Shareholder approval of the plan.

(O) Participants' rights

LTIP 2012 options/awards will not confer any Costain Shareholder rights until awards have vested or options have been exercised and the participants have received the underlying Ordinary Shares.

(P) Rights attaching to underlying Ordinary Shares

Any Ordinary Shares allotted when an award vests or an option is exercised will rank equally with Ordinary Shares then in issue (except for rights arising by reference to a record date prior to their allotment).

(Q) Overseas plans

The Costain resolution (passed at Costain's 2012 AGM) to approve the LTIP 2012 allows the Costain Board, without further Costain Shareholder approval, to establish further plans for overseas territories, any such plan to be similar to the LTIP 2012, but modified to take account of local tax, exchange control or securities laws, provided that any Ordinary Shares made available under such further plans are treated as counting against the limits on individual and overall participation in the LTIP 2012.

10.2 SAYE 2012

(A) Outline

The SAYE 2012 was approved by Costain Shareholders at the Costain annual general meeting on 9 May 2012 and has been approved by HMRC as a scheme which provides UK tax-favoured options to UK employees. It allows for the grant of options to all employees of the Costain Group (though only UK employees can receive UK tax-favoured options) within certain limits. When granting options under the SAYE 2012, all UK resident tax-paying employees and full time directors must be invited to participate on the same terms.

(B) Eligibility

Employees and full-time Directors of the Company and any designated participating subsidiary who are UK resident taxpayers are eligible to participate. The Costain Board may require employees to have completed a qualifying period of employment of up to five years before the grant of options.

(C) Grant of options

Invitations to participate may be issued at any time but must take account of when the option price may be determined (see below). Options can only be granted to employees who enter into HMRC approved savings contracts, under which monthly savings are normally made over a period of three or five years. Options must be granted within 30 days (or 42 days if applications are scaled back) of the first day by reference to which the exercise price is set. The number of Ordinary Shares over which an option is granted will be such that the total exercise price payable for those Ordinary Shares will correspond to the proceeds on maturity of the related savings contract. No options may be granted after 8 May 2022.

(D) Savings limits

Monthly savings by an employee under all savings contracts linked to options granted under the SAYE 2012 and any other sharesave plan may not exceed the statutory maximum (currently £250). The Costain Board may set a lower limit in relation to any particular grant. The minimum monthly savings must not be less than the statutory minimum (currently £5) or more than £10.

(E) Exercise price

The exercise price per Ordinary Share payable upon the exercise of an option will not be less than 80% of the market value (defined in the plan rules) of an Ordinary Share on the day before invitations were sent to participants or on such later date set out in the invitation (which must be no later than the date of grant) and, if the option relates only to new issue Ordinary Shares, must also not be less than the nominal value of an Ordinary Share.

The exercise price will be determined by reference to dealing days which fall within the six week period starting on (i) the date of formal approval of the SAYE 2012 by HMRC, (ii) the dealing day following the announcement by Costain of its results for any period, or (iii) the date when a new savings contract prospectus is announced or comes into force, or at any other time when the Costain Board considers there to be exceptional circumstances which justify offering options under the SAYE 2012.

(F) Exercise of options

Options will normally be exercisable for a period of six months from the third or the fifth anniversary of the commencement of the related savings contracts, after which time the option will lapse.

(G) Cessation of employment

Early exercise is generally permitted in the following circumstances:

following a participant's death;
following cessation of employment by reason of injury, disability, redundancy, retirement, TUPE transfer or the business or company that the employee works for ceasing to be part of the Costain Group; or
following cessation of employment where employment ceases more than three years from grant for any reason other than dismissal for misconduct.

Except where stated above, options will lapse on cessation of employment or directorship with the Costain Group.

(H) Corporate Events

In the event of a takeover or voluntary winding-up of Costain, options may be exercised early. Alternatively, a participant may agree to exchange his options for an equivalent new option over shares in the new holding company.

(I) Variation of capital

If there is a variation in Costain's share capital then the Costain Board may, subject to prior HMRC approval, make such adjustments as it considers appropriate to the number of Ordinary Shares under option and the exercise price.

(J) Satisfaction of options

SAYE 2012 options may be satisfied using new issue Ordinary Shares, treasury Ordinary Shares or Ordinary Shares purchased in the market.

(K) Overall limit

In any ten calendar year period, Costain may not issue or transfer treasury Ordinary Shares (or grant rights to issue or to transfer treasury Ordinary Shares) more than 10% of the issued Ordinary Share capital of Costain under the SAYE 2012 and any other employee Costain share plan adopted by Costain.

Treasury Ordinary Shares shall not count towards these limits if institutional investor guidelines cease to require them to be so counted.

(L) Alterations to the SAYE 2012

The Costain Board may, at any time, amend the provisions of the SAYE 2012 in any respect, provided that: (i) no alteration to the material disadvantage of a participant is made unless the Costain Board invites every relevant participant to indicate whether or not he approves the alteration and the alteration is approved by a majority of the participants who give such an indication; and (ii) the prior approval of Costain Shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, individual limits on participation, the overall limits on the issue of Ordinary Shares or the transfer of treasury Ordinary Shares, the basis for determining a participant's entitlement to, and the terms of, the Ordinary Shares to be acquired, the adjustment of options in the event of a rights issue or other variation of capital, or the amendment provisions.

The requirement to obtain the prior approval of Costain Shareholders will not, however, apply to any minor alteration made to benefit the administration of the SAYE 2012, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any company in the Costain Group.

No alteration to a key feature of the SAYE 2012 may be made without the approval of HMRC.

(M) General

No payment is required for the grant of an option under the SAYE 2012. SAYE 2012 options are not transferable, except on death, and shall lapse immediately on a participant's bankruptcy SAYE 2012 options are not pensionable.

(N) Participants' rights

SAYE 2012 options will not confer any Costain Shareholder rights until options have been exercised and the participants have received the underlying Ordinary Shares.

(O) Rights attaching to underlying Ordinary Shares

Any Ordinary Shares allotted when an option is exercised will rank equally with Ordinary Shares then in issue (except for rights arising by reference to a record date prior to their allotment).

(P) Overseas plans

The Costain Shareholder resolution (passed at Costain's 2012 AGM) to approve the SAYE 2012 allows the Costain Board, without further Costain Shareholder approval, to establish further plans for overseas territories, any such plan to be similar to the SAYE 2012, but modified to take account of local tax, exchange control or securities laws, provided that any Ordinary Shares made available under such further plans are treated as counting against the limits on individual and overall participation in the SAYE 2012.

10.3 DSBP

Unless otherwise specified, this summary relates to unapproved options granted under the DSBP. The rules relating to any HMRC-approved options are substantially similar but have been modified so as to comply with schedule 4 to the Income Tax (Earnings and Pensions) Act 2003.

(A) Outline

The DSBP was approved by the Costain Board on 7 April 2009 and a tax-favoured schedule was approved on 3 March 2010. It allows for the grant of options with a maximum total market value of up to 50% of annual base salary after taking account of the market value of any Ordinary Shares under option where a linked HMRC-approved option is also granted on the same day.

(B) Eligibility

All employees of the Costain Group are eligible to participate in the DSBP on a discretionary basis.

(C) Grant of options

The Costain remuneration committee may only grant unapproved options to acquire Ordinary Shares as soon as reasonably practicable after Costain announces its annual results. For tax-approved options, the Costain remuneration committee may make grants within six weeks following Costain's announcement of its results for any period or at any other time if there are exceptional circumstances. No options may be granted after 31 December 2018.

The Costain remuneration committee may grant options on an unapproved basis or on an unapproved basis with a linked HMRC-approved option. See section 4.2 for further details.

(D) Individual limit

An employee may not receive options over Ordinary Shares having a total market value in excess of 50% of his annual base salary after taking account of the market value of any Ordinary Shares under option where an HMRC-approved option is also granted on the same day.

The market value of the Ordinary Shares subject to awards made under the DSBP for the executive directors is 50% of annual base salary and 30% to 40% of annual base salary for other senior executives. The DSBP awards are subject to the satisfaction of performance targets. The performance measure in respect of the 2013 DSBP awards (measured on the 2012 financial year end) resulted in 62% of the maximum DSBP award opportunity being granted.

(E) Exercise of options

Under the DSBP, options usually become exercisable on the second anniversary of grant and can usually be exercised up to the tenth anniversary of grant.

A participant may usually only exercise an unapproved option which is linked to an HMRC-approved option at the same time as he exercises the related HMRC-approved option.

(F) Cessation of employment

If a participant ceases to be an employee within the Costain Group (or receives or serves notice to so cease employment) because of death, permanent ill-health, permanent injury, permanent disability, redundancy, TUPE transfer, the company or business for which he works ceasing to be part of the Costain Group, or any other reason at the discretion of the Costain remuneration committee, any vested options will have their exercise periods curtailed to 12 months and any unvested options will become immediately exercisable for 12 months (or, where a linked HMRC-approved option has also been granted, a period of not more than 42 months from the date of grant, as determined by the Costain remuneration committee), in both cases following the date of such cessation (or receipt or serving of notice).

If a participant ceases employment within the Costain Group or receives or serves notice to cease employment for any other reason, that participant's options will lapse immediately, unless the Costain remuneration committee determines otherwise.

(G) Corporate events

In the event of a takeover or winding up of Costain, all options will become exercisable early unless (for unapproved options) the Costain remuneration committee decides that it is fair and reasonable for the options to be exchanged for equivalent new options over shares in another company or (for taxapproved options) participants consent to exchange their options for equivalent new options over shares in the acquiring company.

(H) Variation of capital

In the event of any variation of Costain's share capital, the Costain remuneration committee may adjust the options as it deems appropriate, subject (for tax-approved options) to HMRC approval.

(I) Satisfaction of options

Options may only be satisfied using Existing Ordinary Shares which are purchased by a trust on behalf of the Costain Group and so there is no dilution of Costain Shareholders' interests.

(J) Alterations to the DSBP

The Costain remuneration committee may amend the rules of the DSBP in any way provided that no change is made which would adversely affect any subsisting rights of a participant without his written consent or, for unapproved options, the consent of the majority of participants affected by the change or, for tax-approved options, unless every affected participant has been invited to approve the change and a majority who reply approve the change.

The requirement to obtain participant approval will not, however, apply to any amendment made to take account of any changes to any relevant law or to get or to keep favourable tax exchange control or regulatory treatment for participants or any member of the Costain Group, or to any minor changes made to benefit the administration of the plan.

For tax-approved options, prior HMRC approval is required for an amendment to a 'key feature' of the tax-approved part of the DSBP.

(K) Clawback

For grants made after 1 May 2012, the Costain remuneration committee have introduced clawback provisions with regard to any material misstatement to audited accounts due to fraud, wilful misconduct or negligence, a material error or inaccurate or misleading information or assumptions in the calculation of the number of Ordinary Shares under DSBP award. The clawback provisions can also be operated to effect clawback provisions in a linked cash bonus plan.

(L) General

No payment is required for the grant of an option under the DSBP. DSBP options are not transferable except on death, and shall lapse immediately on the participant's bankruptcy. DSBP options are not pensionable.

(M) Participant's rights

DSBP options will not confer any Costain Shareholder rights until options have been exercised and the participants have received the underlying Ordinary Shares.

(N) Rights attaching to underlying Ordinary Shares

Any Ordinary Shares allotted when an option is exercised will rank equally with Ordinary Shares then in issue (except for rights arising by reference to a record date prior to their allotment).

10.4 LTIP 2002

(A) Outline

The LTIP 2002 was approved by Costain Shareholders at the Costain annual general meeting on 24 May 2002 and reached the end of its ten year life in 2012. The LTIP 2002 continues to operate in respect of outstanding options/awards but no new options/awards may be granted under this plan.

It allows for the grant of conditional awards and options with a maximum total market value of up to 100% of annual base salary. Options and awards will be subject to performance conditions. Options/awards may be subject to a holding period following vesting, in which case participants may also receive matching options/awards (which are also subject to performance conditions).

(B) Eligibility

Any employee (including an executive director) of Costain and its subsidiaries will be eligible to participate in the LTIP 2012 on a discretionary basis provided that they are not within 6 months of their normal retirement date.

(C) Grant of options/awards

Grants under the LTIP 2002 are made by the trustee of an employee share ownership trust. As such, the consent of the trustee will be required before the Costain remuneration committee can exercise certain discretions.

Options/awards to acquire Ordinary Shares may be granted within 42 days following 24 May 2002, Costain's announcement of its results for any period or at any other time when the Costain remuneration committee considers there are exceptional circumstances which justify the granting of options/awards. No further options/awards may be granted under this plan.

Awards may be granted as conditional awards or as nominal cost options. Share-based options/awards may also, by prior agreement with participants, be satisfied in cash.

Options/awards may be subject to a holding period following vesting. If a holding period applies matching options/awards may be granted in respect of 25% of the related option/award on a one-to-one ratio.

(D) Individual limit

An employee may not receive options/awards (including options/awards granted under any other executive share plan) in any calendar year over Ordinary Shares having a total market value in excess of 100% of his annual base salary.

(E) Vesting and exercise

Options and awards will usually vest at the end of any applicable performance period (which will usually be 31 December in the calendar year in which the third anniversary of the date of grant falls). Options/ awards may be subject to a holding period following vesting.

Options will usually be exercisable from vesting (or the end of any applicable holding period) until the tenth anniversary of the date of grant.

(F) Performance conditions

The vesting of options/awards will be subject to performance conditions. If matching options/awards are granted, these must be subject to a performance condition.

The Costain remuneration committee may also, in certain circumstances, amend, relax or waive the performance conditions applying to existing options/awards if events occur which cause the Costain remuneration committee to consider that the original performance conditions have ceased to be appropriate and provided that, in the reasonable opinion of the Costain remuneration committee, the new performance condition is materially no more easy or difficult to satisfy than the performance condition being amended has when it was imposed (or last amended).

(G) Cessation of employment

If a participant ceases to be employed within or to be a director of the Costain Group for any reason, outstanding options/awards will lapse, unless the Costain remuneration committee determines otherwise either before such cessation or within 6 months after. Any vesting of options/awards shall be subject to the performance conditions being met unless the Costain remuneration committee determines that the provisions to amend, relax or waive the performance condition apply in these circumstances and so amend, relax or waive the performance condition.

If the cessation of employment was due to death, options/awards may vest or be released from any holding period immediately at the discretion of the Costain remuneration committee.

If the cessation of employment was for any other reason, options/awards may only vest on the normal vesting date and may only be released at the end of any normal holding period, unless the Costain remuneration committee allows early vesting/release.

(H) Corporate events

In the event of a takeover or winding up of Costain, any vested options will have their exercise periods curtailed. In the event of a takeover, any unvested options/awards will lapse, unless the Costain remuneration committee determines otherwise (taking into account the reduced period of time between their grant and vesting and Costain's performance over that period) and the trustee consents to such exercise of discretion. In the event of a takeover, if all options/awards can be replaced by equivalent new options/wards over shares in the new holding company, the Costain remuneration committee may decide the options/awards will be so exchanged.

(I) Variation of capital

In the event of any variation of Costain's share capital, including a demerger, capitalisation or rights issue or consolidation, sub-division or reduction of capital, the Costain remuneration committee may make such adjustment as it considers appropriate with the consent of the trustee.

(J) Satisfaction of options/awards

LTIP 2002 options/awards may be satisfied using new issue Ordinary Shares, treasury Ordinary Shares or Ordinary Shares purchased in the market.

(K) Overall limit

In any ten-year period, Costain may not issue or transfer treasury Ordinary Shares (or grant rights to issue or to transfer treasury Ordinary Shares) more than:

10% of the issued ordinary Costain Share capital of Costain under the LTIP 2002 together with any other employee share plan operated for the benefit of Costain Group employees in respect of the Ordinary Shares; and
5% of the issued Ordinary Share capital of Costain under the LTIP 2002 together with any other executive share plan operated for the benefit of Costain Group employees in respect of the Ordinary Shares.

(L) Alterations to the LTIP 2002

The Costain Board may, at any time, amend the LTIP 2002 in any respect, provided that: (i) no amendment is made which would materially prejudice participants' interests in subsisting options/ awards without such prior consent from those participants as would be required under the provisions for the alteration of class rights in the Costain Articles as if the underlying Ordinary Shares constituted a separate but single class of Ordinary Shares and such Ordinary Shares were entitled to such right; and (ii) the prior approval of Costain Shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, limits on participation, the overall limits on the issue of Ordinary Shares or the transfer of treasury Ordinary Shares, the basis for determining a participant's entitlement to, and the terms of, the Ordinary Shares or cash to be acquired and the adjustment of awards.

The requirement to obtain the prior approval of Costain Shareholders will not, however, apply to any minor alteration made to benefit the administration of the LTIP 2002, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any company in the Costain Group.

(M) General

No payment is required for the grant of an option/award under the LTIP 2002. LTIP 2002 options/awards are not transferable, except on death. LTIP 2002 options/awards are not pensionable.

(N) Participants' rights

LTIP 2002 options/awards will not confer any Costain Shareholder rights until awards have vested or options have been exercised and the participants have received the underlying Ordinary Shares.

(O) Rights attaching to underlying Ordinary Shares

10.5 SAYE 2002

(A) Outline

The SAYE 2002 was approved by Costain Shareholders at the Costain annual general meeting on 24 May 2002 and was approved by HMRC as a scheme which provides UK tax-favoured options to UK employees. The SAYE 2002 reached the end of its ten-year life in 2012. It continues to operate in respect of outstanding options but no new options may be granted under this plan.

The SAYE 2002 allowed for the grant of options to all employees of the Costain Group (though only UK employees can receive UK tax-favoured options) within certain limits. When granting options under the SAYE 2002, all UK resident tax-paying employees and full time directors must be invited to participate on the same terms.

(B) Eligibility

Employees and full-time directors of the Company and any designated participating subsidiary who are UK resident taxpayers are eligible to participate. The Costain Board may require employees to have completed a qualifying period of employment of up to five years before the grant of options. The Costain Board may also allow other employees to participate.

(C) Grant of options

Invitations to participate may have been issued within the 42-day period commencing on the date when the SAYE 2002 was approved by HMRC, the day following the announcement by Costain of its results for any period or the day when the Costain remuneration committee considers there to be exceptional circumstances which justify offering options under the SAYE 2002.

Options could only have been granted to employees who enter into HMRC approved savings contracts, under which monthly savings are normally made over a period of three or five years. Options must have been granted within 30 days (or 42 days if applications were scaled back and could not have been granted within 30 days) of the first day by reference to which the market value of the Ordinary Shares under option is set. The number of Ordinary Shares over which an option is granted will be such that the total exercise price payable for those Ordinary Shares will correspond to the proceeds on maturity of the related savings contract. No further options may be granted under this plan.

(D) Savings limits

Monthly savings by an employee under all savings contracts linked to options granted under the SAYE 2002 and any other sharesave plan may not exceed the statutory maximum (currently £250). The Costain Board may set a lower limit in relation to any particular grant. The minimum monthly savings must not be less than £5.

(E) Exercise price

The exercise price per Ordinary Share payable upon the exercise of an option must be not manifestly less than 80% (or such other percentage permitted by statute) of the market value (defined in the plan rules) of an Ordinary Share on the day invitations were sent to participants or on such later date on which the participants are notified of the exercise price and, if the option relates only to new issue Ordinary Shares, must also be not less than the nominal value of an Ordinary Share.

(F) Exercise of options

Options will normally be exercisable for a period of six months from the third or fifth anniversary of the commencement of the related savings contracts, after which time the option will lapse. Early exercise of options is permitted when an employee reaches 65 where options have been granted prior to 17 July 2013.

(G) Cessation of employment

Early exercise is generally permitted in the following circumstances:

following a participant's death;
following cessation of employment by reason of injury, disability, redundancy, retirement, TUPE transfer or the business or company that the employee works for ceasing to be part of the Costain Group; or
following cessation of employment where employment ceases more than three years from grant for any other reason.

Except where stated above, options will lapse on cessation of employment or directorship with the Costain Group.

(H) Corporate Events

(I) Variation of capital

If there is a variation in Costain's share capital then the Costain Board may, subject to prior HMRC approval, make such adjustments as Costain's auditors confirm in writing to be fair and reasonable to the number of Ordinary Shares under option and the exercise price.

(J) Satisfaction of options

SAYE 2002 options may be satisfied using new issue Ordinary Shares, treasury Ordinary Shares or Ordinary Shares purchased in the market.

(K) Overall limit

In any ten calendar year period, Costain may not issue or transfer treasury Ordinary Shares (or grant rights to issue or to transfer treasury Ordinary Shares) more than 10% of the issued Ordinary Share capital of Costain under the SAYE 2002 and any other employee share plan operated for the benefit of Costain Group employees in respect of Ordinary Shares.

(L) Alterations to the SAYE 2002

With the approval of the trustee, the Costain Board may, at any time, amend the provisions of the SAYE 2002 in any respect, provided that: (i) no alteration that would materially affect a participant's subsisting options is made unless 75% of participants (calculated on the basis of the number of Ordinary Shares under option) consent to such alteration; and (ii) the prior approval of Costain Shareholders is obtained for any amendments that are to the advantage of participants in respect of the rules governing eligibility, individual limits on participation, the overall limits on the issue of Ordinary Shares or the transfer of treasury Ordinary Shares, the basis for determining a participant's entitlement to, and the terms of, the Ordinary Shares to be acquired, or the adjustment of options in the event of a rights issue or other variation of capital.

The requirement to obtain the prior approval of Costain Shareholders will not, however, apply to any minor alteration made to benefit the administration of the SAYE 2002, to take account of a change in legislation or to obtain or maintain favourable tax, exchange control or regulatory treatment for participants or for any company in the Costain Group.

No alteration shall be effective until HMRC approval has been obtained. HMRC must be notified if any amendment is intended to cause the SAYE 2002 to lose its HMRC-approved status.

(M) General

No payment is required for the grant of an option under the SAYE 2002. SAYE 2002 options are not transferable, except on death, and shall lapse immediately on a participant's bankruptcy. SAYE 2002 options are not pensionable.

(N) Participants' rights

SAYE 2002 options will not confer any Costain Shareholder rights until options have been exercised and the participants have received the underlying Ordinary Shares.

(O) Rights attaching to underlying Ordinary Shares

Any Ordinary Shares allotted when an option is exercised will rank equally with Ordinary Shares then in issue (except for rights arising by reference to a record date prior to their allotment).

11. Pension benefits

The Costain Group operates defined contribution and defined benefit pension arrangements.

The Costain Group previously provided pension benefits to employees on a defined benefit basis through the Costain Pension Scheme. The Costain Pension Scheme was closed to new members from 1 June 2005 and was closed to future accrual on 30 September 2009. The Costain Pension Scheme remains a legacy liability which the Costain Group continues to fund in line with pensions legislation. As at 31 December 2013, there were 6,412 members of the Costain Pension Scheme.

The defined contribution arrangement operated for salaried employees is the Group Personal Pension Plan provided by Standard Life. The Group matches employees' contributions to the Group Personal Pension Plan between 4% and 10% of salary. The majority of employees contribute through a salary sacrifice arrangement. As at 31 December 2013, 2,153 employees were members of the Group Personal Pension Plan.

Under their terms of engagement, the executive Directors are entitled to an annual pension allowance of 22% of their base salary. In the year ended 31 December 2013, pension contributions made by the Group in respect of the Costain executive Directors amounted to £95,000 (2012: £151,464).

12. Directors' confirmations

None of the Costain Directors have, during the five years prior to the date of this document:

(a) been convicted in relation to a fraudulent offence;
(b) been associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the administrative, management or supervisory body or of senior manager of any company;
(c) been subject to any official public incrimination and/or sanction by statutory or regulatory authorities (including designated professional bodies); or
(d) been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any issuer or from acting in the management or conduct of the affairs of any issuer.

13. Conflicts of interest

In respect of any Costain Director, there are no actual or potential conflicts of interests between any duties they have to the Company, either in respect of the Capital Raising or otherwise, and the private interests and/or other duties they may also have. Save as disclosed in this Part X, there are no interests, including conflicting ones, that are material to the Capital Raising.

No Costain Director has a material interest in any significant contract with Costain or any of its subsidiaries.

No Costain Director was selected to be a Director of Costain pursuant to any arrangement or understanding with any major customer, supplier or other person having a business connection with the Costain Group.

No restrictions have been agreed by any Costain Director on the disposal within a certain period of time of his holding in Costain securities.

There are no family relationships between any of the Costain Directors.

PART XI

ADDITIONAL INFORMATION

1. The Company

The Company was incorporated and registered in England and Wales on 12 October 1978 with registered number 01393773 as a company limited by shares under the Companies Act 1948 to 1976 with the name Trushelfco (No. 192) Limited which was subsequently changed to Costain Group Limited. The Company's name was eventually changed to Costain Group PLC on 20 October 1981.

The principal legislation under which the Company operates, and pursuant to which the New Ordinary Shares will be created, is the Companies Act and regulations made thereunder.

The Company is domiciled in the United Kingdom and its registered and head office is at Costain House, Vanwall Business Park, Maidenhead, Berkshire, SL6 4UB.

The Existing Ordinary Shares are listed on the Official List of the London Stock Exchange. The ISIN of the Existing Ordinary Shares is GB00B64NSP76.

2. Share capital

2.1 The following table shows the issued share capital of the Company as at 26 February 2014, the latest practicable date prior to the publication of this document, and the issued share capital of the Company following completion of the Capital Raising:

		Ordinary Shares as at 26 February 2014	Ordinary Shares following completion of the Capital Raising
	Number	£	Number	£
Issued and fully paid	66,812,868	33,406,434	100,194,936	50,097,468

Save as disclosed in section 2.2 below, during the three years immediately preceding 26 February 2014 (being the latest practicable date prior to the publication of this document), there has been no issue of ordinary share capital of Costain, fully or partly paid, either in cash or for other consideration, and (other than in connection with the Capital Raising, the scrip dividend or the Costain Share Schemes) no such issues are proposed.

As at 26 February 2014 (being the latest practicable date prior to the publication of this document), 0.57% of the issued share capital of the Company was held on trust by ACS HR Solutions Share Plan Services (Guernsey) Limited as Trustee of the Costain Group Employee Trust in connection with the Costain Share Schemes. The Trustee does not exercise any right to vote or to receive a dividend in respect of this shareholding. As at the date of this document, Costain holds no treasury shares.

The Existing Ordinary Shares are admitted to the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the main market for listed securities of the London Stock Exchange.

2.2 History of ordinary share capital

As at 1 January 2010, the first day covered by the historical financial information incorporated by reference in this document, the Company's issued share capital amounted to £31,712,435.65 divided into 634,248,713 Ordinary Shares of 5 pence each. Since 1 January 2010, during the period covered by the historical financial information incorporated by reference in this document, the following changes have occurred to the issued share capital of the Company:

(i) On 6 May 2010 the issued share capital was consolidated from 634,248,713 Ordinary Shares of 5 pence each to 63,424,871 Ordinary Shares of 50 pence each.
(ii) On 5 April 2011 the issued share capital was increased by 351,847 shares to 63,838,779 Ordinary Shares by allotments of 351,847 Ordinary Shares.
(iii) On 1 July 2011 the issued share capital was increased by 389,819 shares to 64,288,271 Ordinary Shares by allotments of 389,819 Ordinary Shares.
(iv) On 8 July 2011 the issued share capital was increased by 56,100 shares to 64,344,371 Ordinary Shares by allotments of 56,100 Ordinary Shares.
(v) On 15 July 2011 the issued share capital was increased by 58,307 shares to 64,402,678 Ordinary Shares by allotments of 58,307 Ordinary Shares.
(vi) On 22 July 2011 the issued share capital was increased by 32,702 shares to 64,435,380 Ordinary Shares by allotments of 32,702 Ordinary Shares.
(vii) On 29 July 2011 the issued share capital was increased by 17,262 shares to 64,452,642 Ordinary Shares by allotments of 17,262 Ordinary Shares.
(viii) On 5 August 2011 the issued share capital was increased by 12,084 shares to 64,464,726 Ordinary Shares by allotments of 12,084 Ordinary Shares.
(ix) On 12 August 2011 the issued share capital was increased by 2,397 shares to 64,467,123 Ordinary Shares by allotments of 2,397 Ordinary Shares.
(x) On 26 August 2011 the issued share capital was increased by 1,918 shares to 64,469,041 Ordinary Shares by allotments of 1,918 Ordinary Shares.
(xi) On 2 September 2011 the issued share capital was increased by 13,426 shares to 64,482,467 Ordinary Shares by allotments of 13,426 Ordinary Shares.
(xii) On 9 September 2011 the issued share capital was increased by 18,796 shares to 64,501,263 Ordinary Shares by allotments of 18,796 Ordinary Shares.
(xiii) On 16 September 2011 the issued share capital was increased by 58,976 shares to 64,560,239 Ordinary Shares by allotments of 58,976 Ordinary Shares.
(xiv) On 23 September 2011 the issued share capital was increased by 22,824 shares to 64,583,063 Ordinary Shares by allotments of 22,824 Ordinary Shares.
(xv) On 30 September 2011 the issued share capital was increased by 10,836 shares to 64,593,899 Ordinary Shares by allotments of 10,836 Ordinary Shares.
(xvi) On 7 October 2011 the issued share capital was increased by 2,877 shares to 64,596,776 Ordinary Shares by allotments of 2,877 Ordinary Shares.
(xvii) On 14 October 2011 the issued share capital was increased by 7,672 shares to 64,604,448 Ordinary Shares by allotments of 7,672 Ordinary Shares.
(xviii) On 28 October 2011 the issued share capital was increased by 43,377 shares to 64,647,825 Ordinary Shares by allotments of 43,377 Ordinary Shares.
(xix) On 4 November 2011 the issued share capital was increased by 2,877 shares to 64,650,702 Ordinary Shares by allotments of 2,877 Ordinary Shares.
(xx) On 11 November 2011 the issued share capital was increased by 6,233 shares to 64,656,935 Ordinary Shares by allotments of 6,233 Ordinary Shares.
(xxi) On 18 November 2011 the issued share capital was increased by 4,795 shares to 64,661,730 Ordinary Shares by allotments of 4,795 Ordinary Shares.
(xxii) On 9 December 2011 the issued share capital was increased by 1,918 shares to 64,663,648 Ordinary Shares by allotments of 1,918 Ordinary Shares.
(xxiii) On 16 December 2011 the issued share capital was increased by 14,867 shares to 64,678,515 Ordinary Shares by allotments of 14,867 Ordinary Shares.
(xxiv) On 23 December 2011 the issued share capital was increased by 5,603 shares to 64,684,118 Ordinary Shares by allotments of 5,603 Ordinary Shares.
(xxv) On 30 December 2011 the issued share capital was increased by 22,807 shares to 64,706,925 Ordinary Shares by allotments of 22,807 Ordinary Shares.
(xxvi) On 5 January 2012 the issued share capital was increased by 3,800 shares to 64,710,725 Ordinary Shares by allotments of 3,800 Ordinary Shares.
(xxvii) On 5 April 2012 the issued share capital was increased by 634,767 shares to 65,345,492 Ordinary Shares by allotments of 634,767 Ordinary Shares.
(xxviii) On 25 May 2012 the issued share capital was increased by 133,133 shares to 65,478,625 Ordinary Shares by allotments of 133,133 Ordinary Shares.
(xxix) On 26 October 2012 the issued share capital was increased by 65,681 shares to 65,544,306 Ordinary Shares by allotments of 65,681 Ordinary Shares.
(xxx) On 3 April 2013 the issued share capital was increased by 605,533 shares to 66,149,839 Ordinary Shares by allotments of 605,533 Ordinary Shares.
(xxxi) On 24 May 2013 the issued share capital was increased by 93,558 shares to 66,243,397 Ordinary Shares by allotments of 93,558 Ordinary Shares.
(xxxii) On 1 July 2013 the issued share capital was increased by 297,076 shares to 66,540,473 Ordinary Shares by allotments of 297,076 Ordinary Shares.
(xxxiii) On 5 July 2013 the issued share capital was increased by 10,129 shares to 66,550,602 Ordinary Shares by allotments of 10,129 Ordinary Shares.
(xxxiv) On 12 July 2013 the issued share capital was increased by 40,185 shares to 66,590,787 Ordinary Shares by allotments of 40,185 Ordinary Shares.
(xxxv) On 19 July 2013 the issued share capital was increased by 57,788 shares to 66,648,575 Ordinary Shares by allotments of 57,788 Ordinary Shares.
(xxxvi) On 26 July 2013 the issued share capital was increased by 664 shares to 66,649,239 Ordinary Shares by allotments of 664 Ordinary Shares.
(xxxvii) On 2 August 2013 the issued share capital was increased by 1,660 shares to 66,650,899 Ordinary Shares by allotments of 1,660 Ordinary Shares.
(xxxviii) On 9 August 2013 the issued share capital was increased by 3,321 shares to 66,654,220 Ordinary Shares by allotments of 3,321 Ordinary Shares.
(xxxix) On 13 September 2013 the issued share capital was increased by 16,606 shares to 66,670,826 Ordinary Shares by allotments of 16,606 Ordinary Shares.
(xl) On 20 September 2013 the issued share capital was increased by 4,151 shares to 66,674,977 Ordinary Shares by allotments of 4,151 Ordinary Shares.
(xli) On 4 October 2013 the issued share capital was increased by 19,927 shares to 66,694,904 Ordinary Shares by allotments of 19,927 Ordinary Shares.
(xlii) On 11 October 2013 the issued share capital was increased by 8,303 shares to 66,703,207 Ordinary Shares by allotments of 8,303 Ordinary Shares.
(xliii) On 25 October 2013 the issued share capital was increased by 67,150 shares to 66,770,357 Ordinary Shares by allotments of 67,150 Ordinary Shares.
(xliv) On 1 November 2013 the issued share capital was increased by 2,657 shares to 66,773,014 Ordinary Shares by allotments of 2,657 Ordinary Shares.
(xlv) On 29 November 2013 the issued share capital was increased by 8,303 shares to 66,781,317 Ordinary Shares by allotments of 8,303 Ordinary Shares.
(xlvi) On 20 December 2013 the issued share capital was increased by 11,624 shares to 66,792,941 Ordinary Shares by allotments of 11,624 Ordinary Shares.
(xlvii) On 10 January 2014 the issued share capital was increased by 19,927 shares to 66,812,868 Ordinary Shares by allotments of 19,927 Ordinary Shares.

2.3 Share capital after the Capital Raising

Subject to Admission, the New Ordinary Shares will be issued with a nominal value of 50 pence each. This will result in the issued ordinary share capital of the Company increasing by approximately 50% (assuming no options or awards are exercised under the Costain Share Schemes between 26 February 2014 (being the last practicable date prior to the publication of this document) and Admission).

2.4 Existing shareholder authorities

At the annual general meeting of the Company on 8 May 2013, the following resolution was passed:

'To resolve that the directors be and are hereby authorised generally and unconditionally to exercise all the powers of the Company to allot relevant securities (as defined in section 551 of the Companies Act 2006) up to a nominal amount of £10,924,051 and so that the directors may impose any limits or restrictions and make any arrangements which they consider necessary or appropriate to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or laws of, any territory or any matter.

The authorities conferred on the directors to allot securities under this resolution will expire on the date of the AGM of the Company to be held in 2014 or on 08 May 2014 whichever is sooner, unless previously revoked or varied by the Company, and such authority shall extend to the making before such expiry of an offer or an agreement that would or might require relevant securities to be allotted after such expiry and the directors may allot relevant securities in pursuance of that offer or agreement as if the authority conferred hereby had not expired.'

2.5 Shareholder authority

At the General Meeting, Shareholders will be asked to consider and vote on the Resolutions, further details of which are set out in section 16 of Part I (Letter from Chairman of Costain) of this document

3. Costain Articles

The Costain Articles are available for inspection at the addresses specified in section 16 below. Costain's Memorandum of Association no longer sets out the objects of the Company, and its objects are unrestricted save to the extent otherwise provided in the Costain Articles.

The Costain Articles contain provisions, amongst others, to the following effect:

3.1 Share rights

Subject to other Costain Shareholders' rights, shares may be issued with such rights and restrictions as Costain may by ordinary resolution decide, or (if there is no such resolution or so far as it does not make specific provision) as the Costain Board may decide. Redeemable shares may be issued.

3.2 Voting rights

In the case of joint holders of an Ordinary Share, the only vote which will count is the vote of the person whose name is listed before the other voters on the register for the share.

3.3 Restrictions

No member shall be entitled to vote, unless the Costain Board determines otherwise, at any general meeting or class meeting in respect of any share held by him if any call or other sum then payable by him in respect of that share remains unpaid or if a member has been served with a restriction notice after failure to provide Costain with information concerning interests in those shares required to be provided under applicable law.

3.4 Dividends and other distributions

Subject to applicable law, Costain may by ordinary resolution from time to time declare dividends not exceeding the amount recommended by the Costain Board. The Costain Board may pay interim dividends, and also any fixed dividend, whenever the financial position of Costain, in the opinion of the Costain Board, justifies its payment. If the Costain Board acts in good faith, it is not liable for any losses Costain Shareholders may suffer because a lawful dividend has been paid on other shares which rank equally with or behind their shares.

The Costain Board may deduct from any dividend or other monies payable on or in respect of any shares all sums of money (if any) payable to Costain on account of calls or otherwise in respect of that share.

Except insofar as the rights attaching to, or the terms of issue of, any share otherwise provide, all dividends shall be apportioned and paid pro rata according to the amounts paid up on the share during any portion of the period in respect of which the dividend is paid.

No dividend or other monies payable on or in respect of a share shall bear interest as against Costain. Any dividend unclaimed after a period of 12 years from the date when it was declared shall be forfeited and revert to Costain unless the Costain Board decides otherwise.

3.5 Variation of rights

Subject to applicable law, Costain can vary the rights attached to any class of shares if this is approved either in writing by Costain Shareholders holding at least three quarters of the issued shares of that class by amount (excluding any shares of that class held as treasury shares) or by a special resolution held passed at a separate meeting of the holders of the relevant class of shares.

The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.

3.6 General meetings

Each Costain Shareholder shall be entitled to attend and speak at any general meeting. The chairman of a meeting can also allow anyone to attend and speak where he considers that this will help the business of the meeting.

3.7 Costain Directors

(A) Number of Costain Directors

The Costain Directors shall be not less than two and not more than 18 in number. Costain may by ordinary resolution vary the minimum and/or maximum number of Costain Directors.

(B) Directors' shareholding qualification

A Costain Director is not required to hold any shares in Costain.

(C) Appointment of Costain Directors

Costain Directors may be appointed by Costain, subject to the Costain Articles, by ordinary resolution or by the Costain Board provided that the total number of Costain Directors shall not exceed the maximum number. A Costain Director appointed by the Costain Board may only hold office until the next following annual general meeting of Costain and is then eligible for re-election by Costain Shareholders.

The Costain Board may from time to time appoint one or more Costain Directors to hold any executive office for such period and on such terms as they may determine and, without prejudice to any claim for damages that a Costain Director may have against Costain or Costain may have against a Costain Director, may also revoke or terminate any such appointment.

(D) Retirement and rotation of Costain Directors

At every annual general meeting the following Costain Directors shall retire from office:

(i) any Costain Director who has been appointed by the Costain Board since the last annual general meeting;
(ii) any Costain Director who held office at the time of the two preceding annual general meetings and who did not retire at either of them; and
(iii) any Costain Director who has been in office, other than as a Costain Director holding an executive position, for a continuous period of nine years or more at the date of the meeting.

Each retiring Costain Director shall be eligible for re-election.

Subject to the provisions of the Costain Articles, at the meeting at which a Costain Director retires Costain can pass an ordinary resolution to re-elect the Costain Director or to elect some other eligible person in his place.

(E) Removal of Costain Directors

Costain may by special resolution remove any Costain Director before the expiration of his period of office and (subject to the Costain Articles) by ordinary resolution appoint another person in his place.

(F) Vacation of office

Any Costain Director automatically stops being a Costain Director if:

(i) he gives Costain a written notice of resignation;
(ii) he gives Costain a written notice in which he offers to resign and the Costain Board decides to accept this offer;
(iii) all of the other Costain Directors (who must comprise at least three people) pass a resolution or sign a written notice requiring the Costain Director to resign;
(iv) he is or has been suffering from mental or physical ill health and the Costain Board passes a resolution removing the Costain Director from office;
(v) he has missed Costain Board meetings (whether or not an alternate director appointed by him attends those meetings) for a continuous period of six months without permission from the Costain Board and the Costain Board passes a resolution removing the Costain Director from office;
(vi) a bankruptcy order is made against him or he makes any arrangement or composition with his creditors generally;
(vii) he is prohibited from being a Costain Director under the legislation; or
(viii) he ceases to be a Costain Director under the legislation or he is removed from office under the Costain Articles.

(G) Proceedings of the Costain Board

Pursuant to the Costain Articles, the Costain Board may decide when and where to have meetings and how they will be conducted. The Costain Board can also adjourn meetings. The quorum necessary for the transaction of the business of the Costain Board may be fixed by the Costain Board and, unless so fixed at any other number, shall be two. A meeting of the Costain Board at which a quorum is present shall be competent to exercise all the powers and discretions exercisable by the Costain Board. A meeting of the Costain Board can be called by any Costain Director.

The Costain Board may appoint any Costain Director as chairman or as deputy chairman and can remove him from that office at any time. If no chairman or deputy chairman has been appointed, or if at any meeting of the Costain Directors no chairman or deputy chairman is present within five minutes after the time appointed for holding the meeting, the Costain Directors present may choose one of their number to be chairman of the meeting.

Questions arising at any meeting of the Costain Board shall be determined by a majority of votes. In the case of an equality of votes the chairman of the meeting shall have a second or casting vote.

The Costain Board may delegate any of its powers, authorities or discretions to Committees consisting of such person or persons as it thinks fit and any Committee formed shall conform to any regulations imposed by the Costain Board. The meetings and proceedings of any Committee consisting of two or more members shall be governed by the provisions contained in the Costain Articles for regulating the meetings and proceedings of the Costain Board so far as the same are applicable and are not superseded by any regulations imposed by the Costain Board.

All or any of the members of the Costain Board or any Committee may participate in a meeting of the Costain Board by means of a conference telephone or any communication equipment which allows all persons participating in the meeting to hear each other. A person so participating shall be deemed to be present at the meeting and shall be entitled to vote and to be counted in the quorum.

A resolution in writing signed by all Costain Directors for the time being entitled to receive notice of a meeting of the Costain Board shall be valid and effectual as a resolution passed at a meeting.

(H) Remuneration of Costain Directors

Any Costain Director who holds any executive office shall receive such remuneration by way of salary, commission or otherwise, as the Costain Board or any committee authorised by the Costain Board may determine, and either in addition to or in lieu of his remuneration as a Costain Director.

The Costain Board may repay to any Costain Director all such reasonable expenses as he may incur in attending and returning from meetings of the Costain Directors or any committee of the Costain Directors or Costain Shareholders' meetings or otherwise in connection with the business of Costain or in the discharge of his duties as a Costain Director. Any Costain Director who performs services which in the opinion of Costain Board go beyond the ordinary duties of a Costain Director may be paid such extra remuneration, by way of salary, commission or otherwise, as the Costain Board or any committee authorised by the Board may determine.

The aggregate amount of fees payable by Costain to the Costain Directors in any financial year shall not exceed £500,000, unless determined otherwise by ordinary resolution of Costain.

(I) Permitted interests of Costain Directors

A Costain Director must disclose the nature of any interest he has in a contract or arrangement with Costain to the Costain Board. Subject to disclosing the nature of his interest, a Costain Director can do any one or more of the following:

(i) have any kind of interest in a contract with or involving Costain or another company in which Costain has an interest;
(ii) hold any other office or place of profit with Costain (except that of auditor) in conjunction with his office of Costain Director for such period and upon such terms, including as to remuneration, as the Directors may decide;
(iii) alone, or through a firm with which he is associated do paid professional work for Costain or another company in which Costain has an interest (other than as auditor);
(iv) be or become a director or other officer of, or employed by or otherwise be interested in any holding company or subsidiary company of Costain or any other company in which Costain has an interest; and
(v) be or become a director of any other company in which Costain does not have an interest and which cannot reasonably be regarded as giving rise to a conflict of interest at the time of his appointment as a director of that other company.

A Costain Director does not have to hand over to Costain or the Costain Shareholders any benefit he receives or any profit he makes as a result of a conflict authorised by the Costain Board or a conflict allowed under the Costain Articles, nor is any type of related contract liable to be avoided.

(J) Restrictions on voting

Save as otherwise provided by the Costain Articles, no Costain Director may vote on or be counted in the quorum in relation to any resolution of the Costain Board in respect of any contract or arrangement in which he has an interest, or in relation to any resolution of the Costain Board concerning his own appointment or the terms or termination of his appointment but this prohibition shall not apply to any of the following matters, namely:

(i) a resolution about giving him any guarantee, indemnity or security for money which he or any other person has lent or obligations he or any other person has undertaken at the request of or for the benefit of Costain or any of its subsidiary undertakings;
(ii) a resolution about giving any guarantee, indemnity or security to another person for a debt or obligation which is owed by Costain or any of its subsidiary undertakings to that other person if the Costain Director has taken responsibility for some or all of that debt or obligation. The Costain Director can take this responsibility by giving a guarantee, indemnity or security;
(iii) a resolution about giving him any other indemnity where all other Costain Directors are also being offered indemnities on substantially the same terms;
(iv) a resolution about Costain funding his expenditure on defending proceedings or Costain doing something to enable him to avoid incurring such expenditure where all other Costain Directors are being offered substantially the same arrangements;
(v) a resolution relating to an offer by Costain or any of its subsidiary undertakings of any shares or debentures or other securities for subscription or purchase if the Costain Director takes part because he is a holder of shares, debentures or other securities or if he takes part in the underwriting or sub-underwriting of the offer;
(vi) a resolution about a contract in which he has an interest because of his interest in shares or debentures or other securities of Costain or because of any other interest in or through Costain;
(vii) a resolution about a contract involving any other company if the Costain Director has an interest of any kind in that company (including an interest by holding any position in that company or by being a shareholder in that company). This does not apply if he knows that he has a relevant interest in that company;
(viii) a resolution about a contract relating to a pension fund, superannuation or similar scheme or retirement, death or disability benefits scheme or employees' share scheme which gives the Costain Director benefits which are also generally given to the employees to whom the fund or scheme relates;
(ix) a resolution about a contract relating to an arrangement for the benefit of employees of Costain or of any of its subsidiary undertakings which only gives him benefits which are also generally given to the employees to whom the arrangement relates; and
(x) a resolution about a contract relating to any insurance which Costain can buy or renew for the benefit of Costain Directors or of a group of people which includes Costain Directors.

(K) Borrowing powers

The business of Costain is managed by the Costain Board which may exercise all the powers of Costain (whether relating to the management of the business of Costain or otherwise) which are not by applicable law or the Costain Articles required to be exercised by Costain in a general meeting. In particular, the Costain Board may exercise all the powers of Costain to borrow money, to indemnify and to mortgage or charge any of its undertakings, property, assets (present and future) and uncalled capital and to issue debentures and other securities and to give security for any debt, liability or obligation of Costain or of any third party. The Costain Board must restrict the borrowings of Costain and exercise all voting and other rights or powers of control exercisable by Costain in relation to its subsidiary undertakings so as to secure that the aggregate principal amount from time to time outstanding of all borrowings (as defined in the Costain Articles) by the Costain Group (exclusive of borrowings within the Costain Group) shall not at any time, without the previous sanction of an ordinary resolution of Costain, exceed an amount equal to £90,000,000.

(L) Untraced shareholders
(i) Costain can sell any certificated shares at the best price reasonably obtainable at the time of the sale if:
(a) during the 12 years before the earliest of the notices referred to in (b) below, the shares have been in issue either as certificated shares or as CREST shares, at least three cash dividends have become payable on the shares and no dividend has been cashed during that period;
(b) after the 12 year period, Costain has published a notice stating that it intends to sell the shares. The notice must have appeared in a national newspaper in the United Kingdom and in a local newspaper appearing in the area in the United Kingdom which includes the postal address held by Costain for serving notices relating to those shares; and
(c) during the 12 year period and for three months after the last of the notices referred to in (ii) above appear, Costain has not heard from the Costain Shareholder or any person entitled to the shares by law.
(ii) Costain can also sell at the best price reasonably obtainable at the time of the sale any additional certificated shares in Costain issued either as certificated shares or as CREST shares during the 12 year period referred in paragraph (i)(a) in right of any share to which paragraph (i) applies if the criteria in paragraphs (i)(b) and (i)(c) are satisfied in relation to the additional shares (but as if the words 'after the 12 year period' were omitted from paragraph (i)(c) and the words 'during the 12 year period and' were omitted from paragraph (i)(c)) and no dividend has been cashed on these shares.
(iii) To sell any shares in this way, the Costain Board can appoint anyone to transfer the shares. This transfer will be just as effective as if it had been signed by the holder, or by a person who is entitled to the shares by law. The person to whom the shares are transferred will not be bound to concern himself as to what is done with the purchase moneys nor will his ownership be affected even if the sale is irregular or invalid in any way.
(iv) The proceeds of sale will belong to Costain, but it must pay an amount equal to the sale proceeds less the costs of the sale to the Costain Shareholder who could not be traced, or to the person who is entitled to his shares by law, if that Costain Shareholder, or person, asks for it unless and until forfeited under the Costain Articles.
(v) After the sale, Costain must record the name of the Costain Shareholder, or (if known) the person who would have been entitled to the shares by law, as a creditor for the money in its accounts. Costain will not be a trustee of the money and will not be liable to pay interest on it. Costain can use the money, and any money earned by using the money, for its business or in any other way that the Costain Board decides. If no valid claim for the money has been received by Costain during a period of six years from the date on which the relevant shares were sold by Costain under the Costain Articles, the money will be forfeited and will belong to Costain.

4. Litigation

Save as described below, so far as Costain is aware, there are no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Costain Group is aware) during the period covering the 12 months preceding the date of this document which may have, or have had in the recent past, significant effects on the financial position or profitability of the Costain Group.

Potential claims in connection with use of database

On 5 November 2012, Costain received a letter from Sir Robert McAlpine Limited ('SRM') notifying Costain that SRM were the defendants in High Court proceedings relating to an alleged unlawful conspiracy with other construction companies in connection with the use of a database which was maintained by the Consulting Association. In that letter, SRM notified Costain of its intention to defend these proceedings and, in order to seek to further protect its position, to make an additional claim within the proceedings against Costain UK Ltd, a member of the Costain Group, as well as against the other subscribers to and/or users of the Consulting Association, as persons who would be, if the claim is successful, jointly liable for the resulting loss and damage under the Civil Liability (Contribution) Act 1978.

On 22 July 2013, Costain received SRM's defence to the High Court proceedings together with a claim for a contribution against thirty four companies alleged to be subscribers and/or users of the Consulting Association. Three of these companies are members of the Costain Group. It is not possible for Costain to currently quantify the likely financial effect on the Costain Group should such a contribution claim be successful. However, should the claim be successful, it is likely that liability will be borne by all of the thirty four companies against which a contribution is being sought together with any further subscribers to and/or users of the Consulting Association who are subsequently joined into the legal proceedings.

Following the claim for a contribution brought by SRM, Costain have received notice or are aware of three other actions in the High Court relating to claims arising out of or in connection with the database which was maintained by the Consulting Association. These claims are made against thirty four companies or persons alleged to be subscribers and/or users and/or office holders of the Consulting Association. Two of these companies are members of the Costain Group. Particulars of these claims have yet to be provided and it is not possible for Costain to currently quantify the likely financial effect on the Costain Group should such claims be successful. However, should the claims be successful, it is likely that liability will be borne by all of the thirty four companies against which the claims are being advanced together with any further subscribers to and / or users of the Consulting Association.

On 10 October 2013, eight major construction/engineering companies (including Costain) announced that they are working together to develop a scheme to compensate construction workers whose names were on the database which was maintained by the Consulting Association. The details of the scheme have yet to be finalised. However the purpose of the scheme is to make it as simple as possible for any worker with a legitimate claim to access compensation. The scheme is not an admission of liability and is intended to provide an alternative to court litigation. It is not possible for Costain to currently quantify the likely financial effect on the Costain Group of the scheme.

5. Material contracts

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by members of the Costain Group: (a) in the two years immediately preceding the date of this document and are, or may be, material to the Costain Group as at the date of this document; or (b) at any time which contain provisions under which any member of the Costain Group has any obligation or entitlement which is material to the Costain Group as at the date of this document:

(i) Purchase of EPC Offshore

On 1 August 2013, Costain Limited (a wholly-owned subsidiary of Costain) entered into a contract (the 'EPC SPA') with June Bremner and others (the 'EPC Sellers') to purchase the whole of the issued share capital of EPC Offshore Ltd ('EPC Offshore'), a field development and project management specialist providing client-side services to North Sea oil and gas companies.

The consideration consisted of an initial payment of £10,600,000 ('Initial Consideration'), including £1.0 million for excess cash, with additional earn out consideration becoming payable by Costain Limited on completion of the financial years 2014, 2015 and 2016, respectively, such consideration based on a percentage of the EBITDA of EPC Offshore, ClerkMaxwell and any other entity acquired by Costain Limited or the Costain Group (the 'Division EBITDA') ('Earn Out Consideration'). The applicable percentage of the Division EBITDA payable by way of Earn Out Consideration for each of the 2014 and 2015 financial years is 26.88% and the applicable percentage for the 2016 financial year is 80.64%, subject to a maximum aggregate Earn Out Consideration of £14,400,000 and certain adjustments should certain of the EPC Sellers cease to be employees of the Costain Group prior to 1 January 2016. An additional amount of deferred consideration of £2,000,000 minus any Earn Out Consideration due and payable is payable by Costain Limited to the EPC Sellers following the end of the 2016 financial year ('Deferred Consideration', and together with the Initial Consideration and the Earn Out Consideration, the 'Consideration').

The EPC Sellers agreed to a locked-box mechanism (the 'Locked-Box') to ensure that between the 31 May 2013 and the completion of the acquisition EPC Offshore did not undertake certain matters that could negatively affect the value of EPC Offshore (each matter being a 'Leakage'). The EPC Sellers agreed to pay Costain Limited an amount equal to any Leakage that occurred during that time provided such claim had been notified to the EPC Sellers prior to 31 December 2013 and proceedings (if relevant) having been served by 31 May 2014.

Each of the EPC Sellers provided customary undertakings to Costain Limited designed to protect the goodwill of EPC Offshore, including undertakings not directly or indirectly to compete with its business or solicit its customers, employees or suppliers for a period of three years from the date of the EPC SPA. Each of the EPC Sellers also gave undertakings in relation to the use of confidential information and intellectual property rights of EPC Offshore. Each of the EPC Sellers provided certain warranties to Costain Limited, including warranties as to title to EPC Offshore's shares. The EPC Sellers provided certain additional warranties to Costain Limited which are customary for a transaction of this nature, including, among other things, in respect of borrowings, working capital, charges, assets, insurance, material contracts, litigation, competition, compliance with the law, insolvency, intellectual property, the accounts and tax liabilities, employees, pensions, property and environmental liabilities.

The EPC Sellers and Costain Limited also entered into a tax deed on the same date as the EPC SPA (the 'EPC Tax Deed'), under which the EPC Sellers undertook to indemnify Costain Limited against certain tax liabilities of EPC Offshore which are referable to events occurring or profits arising prior to the completion of the acquisition.

Both the EPC SPA and the EPC Tax Deed included limitations on the ability of EPC Offshore to make a claim for breach of the warranties therein. The EPC Sellers' total aggregate liability for claims under the warranties in both the EPC SPA and the EPC Tax Deed was limited to 75% of the Consideration (excluding legal and professional fees and expenses paid by the EPC Sellers) with maximum proportions payable by each of the EPC Sellers. The EPC Sellers will not be liable for any warranty claim for less than £30,000. The EPC Sellers will also have no liability for any warranty claim unless and until warranty claims exceeding £30,000 exceed £225,000 in aggregate, and in which case the EPC Sellers will be liable for the full amount and not just the excess over £225,000). The EPC Sellers will also not be liable for breaches of warranties (other than certain warranties in relation to tax) that arise as a result of certain actions that involved Costain Limited or the Costain Group, that are recoverable pursuant to insurance or that are provided for, included as a liability or disclosed in EPC Offshore's accounts as at 31 July 2012 or the accounts relating to the Locked-Box.

Claims against the EPC Sellers' warranties (save in respect of the tax warranties contained in the EPC SPA) must be brought on or before the date falling 20 months after the date of the EPC SPA. Under the terms of the EPC Tax Deed, claims in relation to the tax warranties contained in the EPC SPA must be brought before the seventh anniversary of the completion of the acquisition.

To ensure the fair functioning of the deferred consideration provisions, Costain Limited agreed that it would not knowingly do or omit to do anything with the intention of undermining the Division EBITDA necessary for the EPC Sellers to receive any deferred consideration. Certain of the EPC Sellers who were remaining in the day-to-day management of the business agreed to use all reasonable endeavours to maximise the Division EBITDA and the EBITDA of the Costain Group as a whole (although not in such a way as to artificially increase the Division EBITDA to the detriment of the long term growth and prospects of EPC Offshore and the Costain Group).

(ii) Purchase of ClerkMaxwell Limited

On 7 April 2011, Costain Oil Gas & Process Limited ('COGP', a wholly-owned subsidiary of Costain) entered into a share purchase agreement, as modified by the letter amendment agreement dated 7 June 2013 (the 'ClerkMaxwell SPA') with Satnam Shoker and others (the 'ClerkMaxwell Sellers') to acquire 75% of the share capital of ClerkMaxwell, an Aberdeen-based front-end engineering and operations support services provider operating in the upstream oil and gas sector.

The consideration consisted of an initial payment of £2,194,539 in cash, with additional deferred consideration payments becoming payable by COGP on completion of the financial years ending 31 December 2012, 2013 and 2014 respectively, such consideration based on a percentage of the notional future value of ClerkMaxwell, calculated on the basis of an 8.0x multiple of EBITDA (with certain exclusions relating to costs and investments by Costain) and alterations for 2013 and 2014 where the 2013 EBITDA is lower than £2,223,962.

Each of the ClerkMaxwell Sellers provided customary undertakings to COGP designed to protect the goodwill of ClerkMaxwell, including undertakings not to directly or indirectly compete with its business or solicit its employees or suppliers for a period of three years following the completion of the acquisition (the 'ClerkMaxwell Completion'), which also occurred on 7 April 2011. Each of the ClerkMaxwell Sellers provided certain warranties to COGP, including warranties as to title to the shares and their power and authority to enter into the sale ClerkMaxwell SPA. Each of the ClerkMaxwell Sellers (except Rodney Coffey) (the 'Covenantors') provided certain additional warranties to COGP which are customary for a transaction of this nature, including, among other things, in respect of borrowings, charges, assets, insurance, material contracts, intellectual property, the accounts and tax liabilities, employees, pensions, property and environmental liabilities.

For the purposes of developing the provision of its services to the upstream oil and gas market, COGP (or any member of its group) was permitted to incorporate a new company ('Costain Upstream') and acquire or invest in companies trading in the upstream oil and gas market during the course of 2013 and thereafter. During the course of 2013, COGP (or any member of its group) require the prior consent of the ClerkMaxwell Sellers to transfer any part of ClerkMaxwell to another member of the COGP group, to require any of the ClerkMaxwell Sellers to spend more than 10 hours per month on the development of Costain Upstream or to compete with ClerkMaxwell. From 1 January 2014 ClerkMaxwell will be integrated into the business of Costain Upstream in such a manner and to such extent as Costain sees fit.

COGP and the Covenantors also entered into a tax deed (the 'ClerkMaxwell Tax Deed') on the same date with each of the Covenantors, under which the Covenantors provided joint and several undertakings to indemnify COGP against certain tax liabilities of the ClerkMaxwell Group which are referable to events occurring or profits arising prior to 7 April 2011.

Both the ClerkMaxwell SPA and the ClerkMaxwell Tax Deed included limitations on the ability of COGP to make a claim for breach of the warranties therein, and the ClerkMaxwell Sellers' and Covenantors' total aggregate liability for claims under the warranties in both the ClerkMaxwell SPA and the ClerkMaxwell Tax Deed was limited to the total of the initial consideration plus any deferred consideration actually paid, including the consideration for the Meteor Investments option agreement (below). The Covenantors will not be liable for any warranty claim for less than £30,000. The Covenantors will also have no liability for any warranty claim unless and until warranty claims exceeding £30,000 exceed £150,000 in aggregate (including, in each case, costs, interest, fines, penalties and surcharges; and in which case the Covenantors will be liable for the full amount and not just the excess over £150,000).

With the exception of certain warranties about ClerkMaxwell's tax situation, claims in relation to which must be brought before the seventh anniversary of the ClerkMaxwell Completion, claims against the Covenantors' warranties in the ClerkMaxwell SPA or the ClerkMaxwell Tax Deed must be brought before the earlier of (i) the signing by the auditors of ClerkMaxwell of ClerkMaxwell's Audit report in the audited accounts of ClerkMaxwell for the year ended 31 December 2012; or (ii) the date falling 24 months after the date of the ClerkMaxwell Completion.

COGP gave warranties to the ClerkMaxwell Sellers in respect of its power and ability to enter into the ClerkMaxwell SPA. COGP also provided the ClerkMaxwell Sellers with certain undertakings to ensure the fair functioning of the deferred consideration provisions, namely that COGP would not knowingly do or omit to do anything with the intention of frustrating the achievement by the business of any EBITDA necessary for the ClerkMaxwell Sellers to receive any deferred consideration, and that each of the ClerkMaxwell Sellers who were remaining in the day-to-day management of the business would use all reasonable endeavours to maximise the profits of the business and the Costain Group as a whole (although not in such a way as to artificially increase the EBITDA to detriment of the business in the long-term).

COGP also entered into an option agreement on the same date with Meteor Investments Limited (the 'Grantor') and ClerkMaxwell, under which the Grantor granted an option over its 25% shareholding in ClerkMaxwell to COGP at an option exercise price of £1 million. COGP exercised the option on 27 April 2011. Following the exercise of the option, COGP now owns the entire share capital of ClerkMaxwell.

(iii) Revolving Credit Facility

Costain is party to a revolving credit facility agreement (the 'Revolving Credit Facility Agreement') dated 17 July 2013, with Lloyds Bank plc as agent and Abbey National Treasury Services plc, HSBC Bank plc, Lloyds Bank plc and The Royal Bank of Scotland as mandated lead arrangers.

Under the terms of the Revolving Credit Facility Agreement, the arrangers agreed to provide Costain with a revolving credit facility of £95 million (the 'Revolving Credit Facility') to be used for general corporate purposes. Advances made pursuant to the Revolving Credit Facility are to be repaid on the last day of the interest period relating to the relevant advance, with no sums being able to be drawn or outstanding on or after 30 June 2017. As at 26 February 2014, (being the latest practicable date prior to the publication of this document) £35 million had been drawn down pursuant to the Revolving Credit Facility. The Revolving Credit Facility currently incurs interest at a rate of LIBOR (or, in the case of any loan in euro, EURIBOR) plus a margin of between 1.75% and 2.50% per annum (depending on the ratio of total net debt to adjusted EBITDA). The Revolving Credit Facility Agreement permits voluntary prepayments and voluntary cancellation of undrawn amounts (subject to payment of any applicable break costs). It also contains standard representations, undertakings and events of default as well as financial and general covenants that Costain must observe. The Revolving Credit Facility is guaranteed by Costain together with certain subsidiaries of Costain and has the benefit of security sharing provisions separately agreed between various creditors of Costain. Otherwise, the Revolving Credit Facility Agreement is unsecured. The Revolving Credit Facility Agreement includes provisions allowing certain wholly owned subsidiaries of Costain to accede as additional borrowers and/or additional guarantors.

(iv) Bonding Facilities and Surety Facilities

Costain together with certain of its subsidiaries (the 'Borrowers') are party to four bilateral bonding facility agreements (the 'Bonding Facility Agreements') with each of: (1) The Royal Bank of Scotland plc acting as agent for National Westminster Bank plc; (2) Abbey National Treasury Services plc; (3) HSBC Bank plc; and (4) Lloyds Bank plc. Costain together with certain of its subsidiaries (the 'Contractors') are also party to six facility and general agreements of indemnity (the 'Surety Facility Agreements') with each of: (1) Zurich Insurance plc; (2) QBE Insurance (Europe) Ltd; (3) Liberty Mutual Insurance Europe Ltd; (4) HCC International Insurance Company plc; (5) Euler Hermes Europe S.A.; and (6) AIG Europe Ltd. The Bonding Facility Agreements and the Surety Facility Agreements were originally entered into on 8 December 2011 and were subsequently amended pursuant to an amendment agreement dated 17 July 2013.

Under the terms of each Bonding Facility Agreement, each respective lender has agreed to make available to the Borrowers a bonding facility (a 'Bonding Facility') up to a maximum amount specified therein to be used to secure, guarantee or assure the performance by a Borrower of any of its obligations and liabilities from time to time to any of its respective employers or other persons dealing with it. The aggregate amount available to the Borrowers across all of the Bonding Facilities is £125 million.

Under the terms of each Surety Facility Agreement, each respective surety has agreed to issue, at the request of a Contractor, any bond, guarantee, indemnity or obligatory instrument in respect of the obligations of such Contractor (a 'Surety Facility') up to a maximum amount specified therein. The aggregate amount available across all of the Surety Facilities is £275 million.

Each of the Bonding Facility Agreements have substantially the same terms, except that the agreement with Lloyds Bank plc also includes an overdraft facility of £2.5 million (the 'Overdraft Facility'), to be used for general corporate purposes. Each of the Surety Facility Agreements have substantially the same terms. In addition, the Bonding Facility Agreements and the Surety Facility Agreements share many of the same terms. Both the Bonding Facilities and the Surety Facilities terminate on 30 June 2017. As at 26 February 2014, (being the latest practicable date prior to the publication of this document) £23.7 million of bonds were in issue pursuant to the Bonding Facilities and £125.2 million of surety guarantees were in issue pursuant to the Surety Facilities. The Bonding Facility Agreements and Surety Facility Agreements permit voluntary cancellation of the relevant available facility. They also contain standard representations, undertakings and events of default as well as financial and general covenants that Costain and certain subsidiaries of Costain must observe. The Bonding Facilities and Surety Facilities are guaranteed by Costain together with certain subsidiaries of Costain and have the benefit of security sharing provisions separately agreed between various creditors of Costain. Otherwise, the Bonding Facility Agreements and Surety Facility Agreements are unsecured. The Bonding Facility Agreements and the Surety Facility Agreements include provisions allowing certain wholly owned subsidiaries of Costain to accede as additional borrowers or contractors (as the case may be) and/or additional guarantors.

(v) Security Sharing Agreement

Costain and certain of its subsidiaries are party to a security sharing agreement (the 'Security Sharing Agreement') dated 19 July 2013, with Lloyds Bank plc, The Royal Bank of Scotland plc as agent for National Westminster Bank plc, Abbey National Treasury Services plc, HSBC Bank plc, HCC International Insurance Company plc, Euler Hermes Europe S.A. (N.V.), AIG Europe Ltd, Zurich Insurance plc, Liberty Mutual Insurance Europe Ltd and QBE Insurance (Europe) Ltd. The effect of the Security Sharing Agreement is that, following certain events of default in respect of Costain or its subsidiaries, available cash or cash equivalent balances held in accounts with the counterparties to the Security Sharing Agreement under Costain's name, or under the names of certain subsidiaries, will be shared between the providers of the Revolving Credit Facility, the Bonding Facilities and the Surety Facilities in accordance with a common regime set out in therein.

(vi) Placing Agreement

On the date of this Prospectus, the Company, Rothschild and the Bookrunners entered into the Placing Agreement pursuant to which (i) Rothschild was appointed to act as the sole sponsor to the Company in connection with the applications for Admission and (ii) the Bookrunners were appointed to act as Bookrunners and underwriters to the Company in connection with the Capital Raising. The Bookrunners have agreed severally, subject to certain conditions, to use reasonable endeavours to procure placees for the New Ordinary Shares, or failing which, to subscribe themselves for any New Ordinary Shares not taken up in the Firm Placing or the Placing and Open Offer, in each case at the issue price of 225 pence per New Ordinary Share.

In consideration of their services under the Placing Agreement, and subject to their obligations under the Placing Agreement having become unconditional and the Placing Agreement not being terminated, the Company has agreed to pay to the Bookrunners (i) an aggregate commission of 2.0% of the amount equal to the product of the issue price of 225 pence and the number of New Ordinary Shares and (ii) a performance fee of £500,000. In addition the Company has agreed to pay a placing commission of 1.25% of the amount equal to the product of the issue price of 225 pence and the number of New Ordinary Shares placed by the Bookrunners with Placing Placees, (other than those New Ordinary Shares which are the subject of the irrevocable undertakings given by UEM and Kharafi as detailed in section 6 of Part I (Letter from Chairman of Costain)), which commission is payable to the Placing Placees by the Bookrunners, as agent for and on behalf of the Company.

In addition to the commissions set out above (and whether or not the obligations of the Bookrunners and Rothschild become unconditional in all respects or the Placing Agreement is terminated), the Company has agreed to pay the costs and expenses of, and in connection with, the Placing Agreement, the Capital Raising, the fees and expenses of its professional advisers, advertising and printing costs, distribution costs of all documents and the Bookrunners' and Rothschild's legal fees and other 'out of pocket' expenses, all accountancy and other professional fees and all stamp duty and SDRT (if any) and other similar duties and taxes.

The Company has given certain customary undertakings, representations and warranties to the Bookrunners and Rothschild in relation to the issue and/or sale of Ordinary Shares, including a 90 day lock-up on issues of new shares, and in relation to other matters relating to the Group and its business. In addition, the Company has given customary indemnities to the Bookrunners and Rothschild and certain indemnified persons connected with each of them.

The obligations of the Bookrunners and Rothschild under the Placing Agreement in relation to the Capital Raising are subject to certain customary conditions including, amongst others, no breach of warranty and Admission becoming effective by 8.00 a.m. on 18 March 2014 or such later time and/or date (being not later than 8.00 a.m. on 31 March 2014) as the Company, the Bookrunners and Rothschild may agree.

If any of the conditions to the Placing Agreement are not satisfied (or waived by the Bookrunners and Rothschild) or have become incapable of being satisfied by the required time and/or date, each of the Bookrunners and Rothschild may terminate the Placing Agreement in certain circumstances, but only prior to Admission.

(vii) Subscription and transfer agreement and option agreement

In connection with the Capital Raising, the Company, Investec and JerseyCo have entered into several agreements, each dated the date of this Prospectus, in relation to the subscription and transfer of ordinary shares and redeemable preference shares in JerseyCo.

Under the terms of these agreements:

the Company and Investec will acquire ordinary shares in JerseyCo and enter into certain put and call options in respect of the ordinary shares in JerseyCo subscribed for by Investec that are exercisable if the Capital Raising does not proceed;
Investec will apply monies received under the Capital Raising, and held by Investec until Admission, to subscribe for redeemable preference shares in JerseyCo to an aggregate value equal to such monies, after deduction of the amount of certain commissions and expenses; and
the Company will allot and issue the New Ordinary Shares to those persons entitled thereto in consideration of Investec transferring its holding of redeemable preference shares and ordinary shares in JerseyCo to the Company.

Accordingly, instead of receiving cash as consideration for the issue of New Ordinary Shares, at the conclusion of the Capital Raising the Company will own the entire issued share capital of JerseyCo whose only asset will be its cash reserves, which will represent an amount approximately equal to the net proceeds of the Capital Raising.

Firm Placees, Placees and Qualifying Shareholders are not party to these arrangements and so will not acquire any direct right against Investec pursuant to these arrangements. The Company will be responsible for enforcing the obligations of Investec and JerseyCo thereunder.

6. Related party transactions

Other than as disclosed in the financial information incorporated by reference into this document for the years ended 31 December 2010, 2011 and 2012 and the unaudited preliminary results for the year ended 31 December 2013, there are no related party transactions by the Company or members of the Costain Group that were entered into during the years ended 31 December 2010, 2011, 2012 or 2013. There have been no additional related party transactions by the Company or members of the Costain Group that were entered into during the period between 31 December 2013 and 26 February 2014 (being the latest practicable date prior to the publication of this document).

In particular, further detail regarding related party transactions can be found on pages 119-120, 116 and 113-114 of the Company's Annual Report and Accounts for the year ended 31 December 2012, 2011 and 2010, respectively. Additional detail can be found on page 31 of the unaudited preliminary results for the year ended 31 December 2013.

7. Dividends

The following table sets out the dividend per Ordinary Share paid in respect of each of the years ended 31 December 2012, 2011, 2010 and 2009:

	2012 (pence)	2011 (pence)	2010 (pence)	2009 (pence)
Final dividend per Ordinary Share for each year ended 31 December	7.25	6.75	6.25	5.50
Interim dividend per Ordinary Share for each half year ended 30 June	3.50	3.25	3.00	2.75

The interim dividend per Ordinary Share for the half year ending 30 June 2013 was 3.75 pence.

8. Working capital

Costain is of the opinion that, after taking into account existing available facilities, the working capital available to the Costain Group is sufficient for its present requirements, that is for at least the next 12 months from the date of publication of this document.

9. No significant change

There has been no significant change in the trading or financial position of the Costain Group since 31 December 2013, the date to which Costain's latest unaudited year end preliminary financial information was prepared.

10. Significant shareholdings

10.1 As at 26 February 2014 (being the latest practicable date prior to the publication of this document), the Company had been notified, including pursuant to DTR5 of the Disclosure and Transparency Rules, of the following interests in its Ordinary Shares:

	Number of Shares	Percentage interest of issued ordinary share capital
UEM Builders Berhad	13,810,850	20.7%
Mohammed Abdulmohsin Al-Kharafi & Sons For General Trading,
General Contracting And Industrial Structures W.L.L.	13,789,490	20.6%

10.2 Save as disclosed in this section 10, Costain is not aware of any person who, as at 26 February 2014 (being the latest practicable date prior to the publication of this document), directly or indirectly, has a holding which is notifiable under English law.

10.3 Costain is not aware of any persons who, as at 26 February 2014 (being the latest practicable date prior to the publication of this document), directly or indirectly, jointly or severally, exercise or could exercise control over Costain nor is it aware of any arrangements the operation of which may at a subsequent date result in a change of control of the Company.
10.4 None of the Costain Shareholders referred to in this section 10 have different voting rights from any other holder of Ordinary Shares in respect of any Ordinary Shares held by them.

11. Subsidiaries

Costain is the parent company of the Costain Group. The following table contains a list of the principal (but not necessarily direct) subsidiaries of Costain:

Name	Percentage ownership interest	Field of Activity	Country of Incorporation	Registered Office
Principal Costain subsidiaries
ClerkMaxwell Limited .	100	Engineering and Support Services	UK	UK
Costain Abu Dhabi Co WLL	49	Process Engineering	UAE	UAE
Costain Limited .	100	Engineering, Construction and Maintenance	UK	UK
Costain Building & Civil Engineering
Limited	100	Engineering and Construction	UK	UK
Costain Engineering & Construction
Limited	100	Holding and Service Company	UK	UK
Costain Oil, Gas & Process Limited	100	Process Engineering	UK	UK
Promanex (Civils & Industrial Services)
Limited Promanex (Construction &	100	Support Services	UK	UK
Maintenance Services) Limited Promanex (Total FM & Environmental	100	Support Services	UK	UK
Services) Limited	100	Support Services	UK	UK
Richard Costain Limited .	100	Service Company	UK	UK
EPC Offshore Limited	100	Oil and gas consultancy	UK	UK

12. Mandatory takeover bids, squeeze-out rules, sell-out rules and takeover bids

12.1 Mandatory takeover bids

12.2 Squeeze-out rules

12.3 Sell-out rules

12.4 Takeover bids

No public takeover bid has been made in relation to the Company during the last financial year or the current financial year.

13. Consents

13.1 Rothschild whose address is New Court, St Swithin's Lane, London EC4N 8AL has given and has not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which they appear.
13.2 Investec whose address is 2 Gresham Street, London EC2V 7QP has given and has not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which they appear.
13.3 Liberum whose address is Ropemaker Place, Level 12, 25 Ropemaker Street, London EC2Y 9LY has given and has not withdrawn its written consent to the inclusion in this document of references to its name in the form and context in which they appear.
13.4 KPMG LLP whose address is 15 Canada Square, London E14 5GL has given and has not withdrawn its written consent to the inclusion in this document of its accountant's report in Part VIII of this document in the form and context in which it appears, and has authorised the contents of that report for the purposes of paragraph 5.5.3(2)(f) of the Prospectus Rules.

14. General

14.1 The financial information concerning Costain contained in this document does not constitute statutory accounts within the meaning of section 434(3) of the Companies Act. The consolidated financial statements of the Company in respect of the three years ended 31 December 2010, 2011 and 2012 incorporated by reference in this document were reported on by KPMG Audit plc, the auditors of the Company, within the meaning of section 495 of the Companies Act for the period of the historical financial information set out in this document. The auditors of the Company made reports under section 503 of the Companies Act in respect of the three years ended 31 December 2010, 2011 and 2012 incorporated by reference in this document and such reports were unqualified reports within the meaning of sections 836 to 841 of the Companies Act.
14.2 The Company remains subject to the continuing obligations of the Listing Rules with regard to the issue of securities for cash, and the provisions of section 561 of the Companies Act (which confers on Shareholders rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up in cash) apply to any further issuances of share capital of the Company.
14.3 The Existing Ordinary Shares are in registered form, are capable of being held in uncertificated form and are admitted to the Official List and are traded on the main market for listed securities of the London Stock Exchange.
14.4 The New Ordinary Shares will be in registered form and, from Admission, will be capable of being held in uncertificated form and title to such shares may be transferred by means of a relevant system (as defined in the CREST Regulations). Where New Ordinary Shares are held in certificated form, share certificates will be sent to the registered members by first-class post. Where New Ordinary Shares are held in CREST, the relevant CREST stock account of the registered members will be credited. The New Ordinary Shares will have the ISIN GB00B64NSP76.
14.5 The Company will make an appropriate announcement(s) to a Regulatory Information Service in relation to the results of the Capital Raising, which is expected to be on or around 17 March 2014.
14.6 The Company expects to raise net proceeds of approximately £70.3 million through the Capital Raising after deduction of estimated expenses of approximately £4.8 million.

15. Sources and bases of selected financial information

In this document:

15.1 Unless otherwise stated, financial information reported under IFRS relating to Costain has been extracted or provided (without material adjustment) from the consolidated audited annual report and accounts for Costain for the years ended 31 December 2010, 31 December 2011 and 31 December 2012 and from the unaudited preliminary results for Costain for the year ended 31 December 2013.
15.2 Unless otherwise stated, all prices quoted for Ordinary Shares are closing mid-market prices and are derived from the Daily Official List of the London Stock Exchange.
15.3 The value of the whole of the issued share capital of Costain of approximately £33,406,434 is based upon 66,812,868 Ordinary Shares being the number of existing issued Ordinary Shares of Costain as at the date of this document and a value of 50 pence per Ordinary Share.
15.4 All share prices expressed in pence and all percentages have been rounded to one decimal place unless otherwise shown.
15.5 Where information has been sourced from a third party, Costain confirms that the information has been accurately reproduced and, as far as Costain is aware and able to ascertain from information published by that third party, no facts have been omitted which would render the reproduced information inaccurate or misleading. Where third party information has been used, the source of such information has been identified wherever it appears in this document.

16. Documents available for inspection

Copies of the following documents:

16.1 the Costain Articles;
16.2 the audited consolidated accounts of the Costain Group for the three years ended 31 December 2010, 2011 and 2012 and the unaudited preliminary results for the year ended 31 December 2013;
16.3 the consent letters referred to in section 13 above;
16.4 the report from KPMG LLP set out in Part VIII, section B, 'Accountant's Report on Pro Forma Financial Information';
16.5 the irrevocable undertakings referred to in section 7 of Part I (Letter from Chairman of Costain) of this document; and
16.6 this document,

are available for inspection during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for a period from the date of publication of this document until Admission at:

(A) the registered office of Costain, Costain House, Vanwall Business Park, Maidenhead, Berkshire, SL6 4UB; and
(B) the offices of Slaughter and May, One Bunhill Row, London EC1Y 8YY.

APPENDIX I

DEFINITIONS

The following definitions apply throughout this document unless the context otherwise requires:

'Admission'	means the admission of the New Ordinary Shares to the premium listing segment of the Official List becoming effective in accordance with the Listing Rules and the admission of the New Ordinary Shares to trading on the London Stock Exchange's main market becoming effective in accordance with the Admission and Disclosure Standards;
'Admission and Disclosure Standards'	means the requirements contained in the publication 'Admission and Disclosure Standards' dated April 2002 (as amended from time to time) containing, amongst other things, the admission requirements to be observed by companies seeking admission to trading on the London Stock Exchange's market for listed securities;
'AGM'	means annual general meeting;
'AMP5'	means OFWAT's asset management plan for the planning period for 2010-2015;
'AMP6'	means OFWAT's asset management plan for the planning period for 2015-2020;
'Application Form'	means the personalised application form on which Qualifying Non-CREST Shareholders may apply for New Ordinary Shares under the Open Offer;
'Board' or 'Costain Board'	means the board of directors of Costain;
'Bookrunners'	means Investec and Liberum;
'Business Day'	means any day (other than a Saturday or Sunday) on which banks generally are open for business in London (other than solely for settlement and trading in Euro);
'Capital Raising'	means the Firm Placing and the Placing and Open Offer;
'City Code'	means the City Code on Takeovers and Mergers of the United Kingdom;
'Closing Price'	means the closing middle market quotation of an Existing Ordinary Share as derived from the Daily Official List;
'Companies Act'	means the Companies Act 2006, as amended;
'Costain' or the 'Company'	means Costain Group PLC;
'Costain Articles'	means the articles of association of Costain;
'Costain Directors'	means the directors of Costain, and 'Costain Director' means any one of them;
'Costain Group' or 'Group'	means Costain and its subsidiaries and subsidiary undertakings;
'Costain Pension Scheme'	means the Costain Pension Scheme, governed and administered in accordance with the provisions of a definitive trust deed and rules dated 4 March 2011, as amended;
'Costain Pension Trustee'	means Costain Pension Scheme Trustee Limited, as trustee of the Costain Pension Scheme;
'Costain Share Schemes'	means the LTIP 2012, the SAYE 2012, the DSBP, the LTIP 2002 and the SAYE 2002;
'Costain Shareholders'	means holders of Ordinary Shares;

'Court'	means the High Court of Justice in England and Wales;
'CREST'	means the relevant system (as defined in the CREST Regulations) in respect of which Euroclear is the operator (as defined in the CREST Regulations);
'CREST Deposit Form'	means the CREST deposit form set out on page 4 of the Application Form;
'CREST Manual'	means the rules governing the operation of CREST, consisting of the CREST Reference Manual, CREST International Manual, CREST Central Counterparty Service Manual, CREST Rules, Registrars Service Standards, Settlement Discipline Rules, CCSS Operations Manual, Daily Timetable, CREST Application Procedure and CREST Glossary of Terms (all as defined in the CREST Glossary of Terms promulgated by Euroclear on 15 July 1996, as amended);
'CREST member'	means a person who has been admitted by Euroclear as a system-member (as defined in the Uncertificated Securities Regulations);
'CREST Proxy Instruction'	has the meaning ascribed to it in paragraph 13 of the notes to the Notice of General Meeting;
'CREST Regulations'	means the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time;
'CREST sponsored members'	means a CREST member admitted to CREST as a sponsored member;
'CREST sponsors'	means a CREST participant admitted to CREST as a CREST sponsor;
'Daily Official List'	means the daily official list of the London Stock Exchange;
'dealing day'	means a day upon which dealings in domestic securities may take place on the London Stock Exchange;
'Directors'	means Costain Directors;
'Disclosure and Transparency Rules'	means the disclosure rules and transparency rules made by the UK Listing Authority acting under Part VI of FSMA (as set out in the FCA Handbook), as amended from time to time;
'DSBP'	means the Costain Deferred Share Bonus Plan which was approved by the Costain Board on 7 April 2009 and whose tax-favoured schedule was approved by the Costain Board on 3 March 2010;
'EBITA'	means operating profit before amortisation and non-recurring costs after writing off bidding and mobilisation costs incurred;
'EEA'	means the European Economic Area;
'EEA State'	means a member state of the EEA;
'Enlarged Share Capital'	means the expected issued ordinary share capital of the Company immediately following the issue of the New Ordinary Shares pursuant to the Capital Raising;
'EPS'	means underlying earnings per share, before non-recurring items;
'Equiniti'	means Equiniti Limited, or, in certain circumstances, Equiniti Financial Services Limited, an affiliate of Equiniti Limited, both of Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA;

'Euro' or 'g'	means the single currency of the member states of the European Union that adopt or have adopted the euro as their lawful currency under the Treaty on the Functioning of the European Union;
'Euroclear'	means Euroclear U.K. & Ireland Limited;
'Ex-Dividend Date'	means 12 March 2014;
'Ex-Entitlements Date'	means the date on which the Existing Ordinary Shares are marked ex-entitlement, being 8.00 a.m. on 27 February 2014;
'Existing Holding'	means a Qualifying Shareholder's holding of Ordinary Shares at the Record Time;
'Existing Ordinary Shares'	means the Ordinary Shares in issue as at the date of this document;
'Existing Ordinary Shareholders'	means holders of Existing Ordinary Shares;
'FCA'	means the Financial Conduct Authority in the UK;
'Firm Placee'	means any person that has conditionally agreed to subscribe for Firm Placing Shares;
'Firm Placing'	means the conditional placing by the Bookrunners, as agents of and on behalf of Costain, of the Firm Placing Shares on the terms and subject to the conditions contained in the Placing Agreement;
'Firm Placing Shares'	means the 11,111,112 New Ordinary Shares which are to be issued pursuant to the Firm Placing;
'First Resolution'	means the first resolution to be proposed at the General Meeting as set out in the Notice of General Meeting;
'Form of Proxy'	means the form of proxy for use at the General Meeting which accompanies this document;
'FSMA'	means the Financial Services and Markets Act 2000, as amended;
'General Meeting'	means the general meeting of Costain to be held on 17 March 2014, or any adjournment thereof, to consider and, if thought fit, to approve the Resolutions;
'HMRC'	means HM Revenue & Customs;
'IFRS'	means the International Financial Reporting Standards;
'Investec'	means Investec Bank plc;
'JerseyCo'	means Chelsea Funding Limited;
'Joint Global Co-ordinators'	means Investec and Liberum;
'Kharafi'	means Mohammed Abdulmohsin Al-Kharafi & Sons For General Trading, General Contracting And Industrial Structures W.L.L.;
'Liberum'	means Liberum Capital Limited;
'Listing Rules'	means the rules and regulations made by the FCA in its capacity as the UK Listing Authority under FSMA and contained in the UK Listing Authority's publication of the same name;
'London Stock Exchange'	means London Stock Exchange plc;
'LTIP 2002'	means the Costain Long-Term Incentive Plan which was approved by Costain Shareholders at Costain's annual general meeting in 2002;

'LTIP 2012'	means the 2012 Costain Long-Term Incentive Plan which was approved by Costain Shareholders at Costain's annual general meeting on 9 May 2012;
'Money Laundering Regulations'	means the Money Laundering Regulations (2007) S.I. 2012/2157, as amended;
'New Ordinary Shares'	means 33,382,068 new Ordinary Shares to be issued by the Company pursuant to the Capital Raising;
'Notice of General Meeting'	means the notice of General Meeting that is found at the end of this document at page 137;
'Offer Price'	means 225 pence per New Ordinary Share;
'Official List'	means the list maintained by the UK Listing Authority;
'OFWAT'	means the Water Services Regulation Authority, being the body responsible for economic regulation of the privatised water and sewerage industry in England and Wales;
'Open Offer'	means the conditional invitation to Qualifying Shareholders to subscribe for the Open Offer Shares at the Offer Price on the terms and subject to the conditions set out in this document and in the case of Qualifying Non-CREST Shareholders only, the Application Form;
'Open Offer Entitlements'	means entitlements to subscribe for the Open Offer Shares, allocated to a Qualifying Shareholder pursuant to the Open Offer;
'Open Offer Shares'	means the 22,270,956 New Ordinary Shares for which Qualifying Shareholders are being invited to apply to be issued pursuant to the terms of the Open Offer;
'Ordinary Shares'	means ordinary shares of 50 pence each in the capital of Costain (including, if the context requires, the New Ordinary Shares);
'Overseas Shareholders'	means Costain Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom;
'Participating Directors'	means David Allvey, Andrew Wyllie, Anthony Bickerstaff, James Morley, Mike Alexander, Jane Lodge and Alison Wood;
'pence', 'Pounds', '£', 'Pounds Sterling', 'Sterling' or 'UK pence'	means the lawful currency of the United Kingdom;
'Pensions Regulator'	means the regulator established under Part 1 of the Pensions Act 2004 (as amended) in the United Kingdom;
'Placing'	means the conditional placing, by the Bookrunners, as agents of and on behalf of the Company, of the Placing Shares subject to clawback pursuant to the Open Offer, on the terms and subject to the conditions contained in the Placing Agreement;
'Placing Agreement'	means the placing agreement dated 27 February 2014 between the Company, Rothschild and the Bookrunners, details of which are set out in section 5 of Part XI (Additional Information) of this document;
'Placing Placee'	means any person who has conditionally agreed to subscribe for the Placing Shares;
'Placing Price'	means 225 pence per New Ordinary Share;

'Placing Shares'	means the New Ordinary Shares proposed to be issued by the Company pursuant to the Placing;
'PRA'	means the Prudential Regulation Authority in the UK;
'Prospectus' or 'this document'	means this document, comprising a circular and a prospectus relating to the Company for the purpose of the Capital Raising and Admission;
'Prospectus Directive Regulation'	means the EU directive 2003/71/EC and any implementing measure in each member state of the European Economic Area that has implemented directive 2003/71/EC;
'Prospectus Rules'	means the Prospectus Rules brought into effect on 1 July 2005 pursuant to Commission Regulation (EC) No. 809/2004;
'Qualifying CREST Shareholders'	means Qualifying Shareholders holding Ordinary Shares in uncertificated form;
'Qualifying Non-CREST Shareholders'	means Qualifying Shareholders holding Ordinary Shares in certificated form;
'Qualifying Shareholders'	means holders of Ordinary Shares on the register of members of the Company at the Record Time with the exclusion of the Restricted Shareholders;
'Receiving Agent'	means Equiniti;
'Record Date'	means 14 March 2014;
'Record Time'	means 6.00 p.m. on 24 February 2014;
'Regulatory Information Service' or 'RNS'	means any of the services set out in Schedule 12 to the Listing Rules of the UK Listing Authority;
'Resolutions'	means the First Resolution, the Second Resolution and the Third Resolution;
'Restricted Jurisdiction'	means any jurisdiction, including but not limited to Australia, Canada, Japan, Switzerland, New Zealand, the Republic of South Africa and the United States of America, where the extension or availability of the Capital Raising (and any other transaction contemplated thereby) would (i) result in a requirement to comply with any governmental or other consent or any registration filing or other formality which Costain regards as unduly onerous, or (ii) otherwise breach any applicable law or regulation;
'Restricted Shareholder'	means, subject to certain exceptions, Shareholders who have registered addresses in, who are incorporated in, registered in or otherwise resident or located in, the United States or any other Restricted Jurisdiction;
'Rothschild'	means N M Rothschild & Sons Limited, New Court, St. Swithin's Lane, London EC4N 8AL;
'SAYE 2002'	means the Costain Savings-Related Share Option Scheme which was approved by Costain Shareholders at Costain's annual general meeting in 2002;
'SAYE 2012'	means the Ordinary Sharesave Plan which was approved by Costain Shareholders at Costain's annual general meeting in 2012;
'SDRT'	means stamp duty reserve tax;
'SEC'	means the US Securities and Exchange Commission;

'Second Resolution'	means the second resolution to be proposed at the General Meeting as set out in the Notice of General Meeting;
'Securities Act'	means the US Securities Act of 1933, as amended;
'Shareholders'	means Costain Shareholders;
'subsidiary'	has the meaning given in section 1159 of the Companies Act 2006, unless otherwise provided in this document;
'subsidiary undertaking'	has the meaning given in section 1162 of the Companies Act 2006;
'Takeover Panel'	means the United Kingdom Panel on Takeovers and Mergers;
'Third Resolution'	means the third resolution to be proposed at the General Meeting as set out in the Notice of General Meeting;
'TUPE'	means the Transfer of Undertakings (Protection of Employment) Regulations 2006;
'UEM'	means UEM Builders Berhad;
'UK' or 'United Kingdom'	means the United Kingdom of Great Britain and Northern Ireland;
'UK Corporate Governance Code'	means the UK Corporate Governance Code on the Principles of Good Governance and Code of Best Practice published in September 2012 by the Financial Reporting Council in the UK;
'UK Listing Authority'	means the FCA in its capacity as the competent authority for listing under Part VI of FSMA;
'uncertificated' or 'in uncertificated form'	means a share or other security recorded on the relevant register of the share or security concerned as being held in uncertificated form in CREST and title to which, by virtue of the Uncertificated Securities Regulations, may be transferred by means of CREST;
'Uncertificated Securities Regulations'	means the Uncertificated Securities Regulations (2001) S.I. 2001/3755;
'US' or 'United States' or 'United States of America'	means the United States of America, its territories and possessions, any State of the United States and the District of Columbia; and
'US\$' or 'US dollar'	means the lawful currency of the United States.

All references to legislation in this document are to the legislation of England and Wales unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.

APPENDIX II RELEVANT DOCUMENTATION

The following documentation, which was sent to Costain Shareholders at the relevant time and/or is available for inspection in accordance with section 16 of Part XI (Additional Information), contains information which is relevant to the Capital Raising:

Information incorporated by reference into this document	Location of incorporation in this document	Page number in this document
Unaudited Preliminary Results for the year ended
31 December 2013 in relation to Costain	Part VII	78
Annual Report and Accounts for the year ended
31 December 2012 in relation to Costain	Part VII	78
Annual Report and Accounts for the year ended
31 December 2011 in relation to Costain	Part VII	77
Annual Report and Accounts for the year ended
31 December 2010 in relation to Costain	Part VII	77

Copies of the documents which are incorporated by reference in this document are available as provided in section 16 of Part XI (Additional Information) of this document.

NOTICE OF GENERAL MEETING

COSTAIN GROUP PLC

(Incorporated in and registered in England and Wales with registered number 01393773)

NOTICE IS HEREBY GIVEN that a general meeting of Costain Group PLC (the 'Company') will be held at Investec Bank plc, 2 Gresham Street, London EC2V 7QP on 17 March 2014 at 10.00 a.m. (the 'Meeting') for the purpose of considering and, if thought fit, passing the following resolutions.

Unless expressly stated otherwise, terms defined in the prospectus of the Company dated 27 February 2014 shall have the same meaning in this Notice of General Meeting.

ORDINARY RESOLUTIONS

THAT:

1. The Directors be and are hereby generally and unconditionally authorised:
(A) to exercise all powers of the Company in accordance with section 551 of the Companies Act 2006 (the 'Act') to allot shares in the Company and to grant rights to subscribe for or to convert any security into such shares (all of which transactions are hereafter referred to as an allotment of 'relevant securities') up to an aggregate nominal amount of £16,691,034 pursuant to the Capital Raising, which authority shall be in addition to the existing authority conferred on the Directors on 8 May 2013, which shall continue in full force and effect. The authority conferred by this resolution shall expire at the Company's next annual general meeting (unless previously revoked or varied by the Company in a general meeting), save that the Company may, before such expiry, revocation or variation, make an offer or agreement which would or might require relevant securities to be allotted after such expiry, revocation or variation and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority hereby conferred had not expired or been revoked or varied; and
(B) to allot the New Ordinary Shares pursuant to the Capital Raising, at an issue price of 225 pence, which is at a 29.6% discount to the Closing Price of the Ordinary Shares as at 26 February 2014 (being the last Business Day before the announcement of the Capital Raising) such power (unless and to the extent previously revoked, varied or renewed by the Company in a general meeting) to expire on the conclusion of the next annual general meeting of the Company.
1. The Directors be and are hereby generally and unconditionally authorised for the purposes of Article 92 of the articles of association of the Company to incur and permit subsidiaries of the Company to incur and have outstanding borrowings (including any refinancing of such borrowings) up to an amount of £110 million in excess of the limit set out in Article 92(B)(I) of the articles of association of the Company.
1. The Directors be and are hereby generally and unconditionally authorised to pay, on 25 April 2014, a final dividend on Existing Ordinary Shares of 7.75 pence per Existing Ordinary Share for the financial year ended 31 December 2013 to Shareholders on the register at the close of business on the Record Date.

Tracey Wood Company Secretary

27 February 2014 Registered No: Registered office: 01393773 Costain House Vanwall Business Park, Maidenhead Berkshire SL6 4UB

By order of the Board

NOTES TO THE NOTICE OF GENERAL MEETING

1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the Meeting. A shareholder may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company. A form of proxy which may be used to make such appointment and give proxy instructions accompanies this notice. If you do not have a form of proxy and believe that you should have one, or if you require additional forms, please contact the Company's registrars, Equiniti on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls cost 8p per minute plus network extras. Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays. You can only appoint a proxy using the procedures set out in these notes and the notes to the form of proxy.
1. In order to be valid, a completed form of proxy must be returned to the Company by one of the following methods:
(A) in hard copy form by post, by courier or by hand to the Company's Registrar, Equiniti at the address shown on the form of proxy;
(B) as an alternative to completing the hard copy form of proxy, you can appoint a proxy electronically by (i) logging onto the website www.sharevote.co.uk and entering your Voting ID, Task ID and Shareholder Reference Number (SRN) shown on your form of proxy, or (ii) if you have already registered with Equiniti's online portfolio service, Shareview, you can submit your form of proxy at www.shareview.co.uk. Full instructions are given on both websites; or
(C) in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below,

and in each case must be received by Equiniti not less than 48 hours before the time fixed for the Meeting or any adjournment(s) thereof. Please note that any electronic communication sent to Equiniti in respect of the appointment of a proxy that is found to contain a computer virus will not be accepted.

1. To change your proxy instructions you may return a new proxy appointment using the methods set out above. Where you have appointed a proxy using the hard copy form of proxy and would like to change the instructions using another hard copy form of proxy, please contact Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA. The deadline for receipt of proxy appointments (see above) also applies in relation to amended instructions. Any attempt to terminate or amend a proxy appointment received after the relevant deadline will be disregarded. Where two or more valid separate appointments of proxy are received in respect of the same share in respect of the same meeting, the one which is last sent shall be treated as replacing and revoking the other or others.
1. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in note 13 below) will not prevent a shareholder attending the Meeting and voting in person if he/she wishes to do so.
1. In the case of a member which is a company, the form of proxy must be executed under its common seal or signed on its behalf by an officer of the company or an attorney for the company.
1. Any power of attorney or any other authority under which the form of proxy is signed (or a duly certified copy of such power or authority) must be included with the form of proxy.
1. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her discretion.
1. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a 'Nominated Person') may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
1. The statement of the rights of shareholders in relation to the appointment of proxies in notes 1 and 2 above does not apply to Nominated Persons. The rights described in these paragraphs can only be exercised by shareholders of the Company. Nominated persons are reminded that they should contact the registered holder of their shares (and not the Company) on matters relating to their investment in the Company.
1. To be entitled to attend and vote at the Meeting (and for the purpose of the determination by the Company of the votes they may cast), shareholders must be registered in the register of members of the Company at 6.00 p.m. on 15 March 2014 (or, in the event of any adjournment, by 6.00 p.m. on the day which is two days before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.
1. As at 26 February 2014 (being the latest practicable date prior to the publication of this Notice) the Company's issued share capital consists of 66,812,868 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 26 February 2014 are 66,812,868. The Company does not hold any shares in treasury.
1. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
1. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a 'CREST Proxy Instruction') must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications, and must contain the information required for such instruction, as described in the CREST Manual (available via www.euroclear.com). The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA19) by 10.00 a.m. on 15 March 2014. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
1. CREST members and, where applicable, their CREST sponsors or voting service providers, should note that Euroclear UK & Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
1. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
1. In each case the proxy appointments must be received by the Company not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
1. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company's register of members in respect of the joint holding (the first-named being the most senior).
1. Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a member provided that they do not do so in relation to the same shares.
1. Any member attending the Meeting has the right to ask questions. The Company must cause to be answered any such question relating to the business being dealt with at the Meeting but no such answer need be given if:
(i) to do so would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential information,
(ii) the answer has already been given on a website in the form of an answer to a question; or
(iii) it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered.
1. The Company offers a scrip dividend scheme (the 'Scrip Dividend Scheme') allowing for the allotment of ordinary shares in lieu of cash dividends to those shareholders who elect to participate. The Scrip Dividend Scheme applies to both interim and final dividends and enables shareholders to increase their holding in the Company without incurring dealing costs or stamp duty. Those shareholders who have already elected to join the Scrip Dividend Scheme will not need to take any action. Shareholders wishing to join the Scrip Dividend Scheme for the proposed final dividend for 2013 (and all future dividends) should return a completed mandate form to the Company's registrars, Equiniti, by 2 April 2014. The relevant contact details for Equiniti can be found on page 122 of the 2012 Annual Report and Accounts. Copies of the mandate form and the scrip dividend booklet may be obtained from Equiniti or from the Company's website at www.costain.com. The terms and conditions of the Scrip Dividend Scheme are also contained in the scrip dividend booklet.
1. A copy of this notice, and other information required by s311A of the Companies Act 2006, can be found at www.costain.com.
1. Except as provided above, members who have general queries about the Meeting should use the following means of communication (no other methods of communication will be accepted):
(i) by contacting the Company's registrars Equiniti in writing at Equiniti Limited, Corporate Actions, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA or by telephoning their shareholder helpline on 0871 384 2277 (overseas callers should use +44 (0) 12 1415 0189). Calls to this number cost 8p per minute plus network extras. Lines open 8.30 a.m. to 5.30 p.m., Monday to Friday, excluding UK public holidays.
(ii) by contacting the Company Secretary in writing at Costain House, Vanwall Business Park, Maidenhead, Berkshire, SL6 4UB or by telephoning her on 01628 842 444 or by emailing her at [email protected]. Please note that shareholders may not use any electronic address provided in either this document or any related documents (including the proxy form) to communicate with the Company for any purposes other than those expressly stated.

(This page has been left blank intentionally.)

Merrill Corporation Ltd, London 14ZAP76201

AI assistant

COSTAIN GROUP PLC — Capital/Financing Update 2014

4669_prs_2014-02-28_9b622311-adc4-446a-885f-4dcee88c8964.pdf

NOTICE TO US INVESTORS

Notice to Overseas Shareholders

TABLE OF CONTENTS

SUMMARY

RISK FACTORS

Risks relating to the Costain Group

1. Adverse economic conditions

2. Competition

3. Environmental, health and safety laws, regulations and standards

4. Major incident exposing an inadequate safety regime

5. Interruption or failure of information technology ('IT') systems

6. Failure to attract, develop and retain appropriately skilled management or personnel

7. Dividends

8. Loss of material contracts

9. Change of government policy

10. Contract mobilisation and bidding

11. Sub-contractor and supplier failure

12. Procurement delay or failure

13. Operational delivery

14. Pension liabilities

15. Major shareholders

16. Costain is exposed to geopolitical risk

17. Insurance

Risks relating to the Capital Raising

18. Prospective investors should be aware that the value of an investment in New Ordinary Shares may go down as well as up and any fluctuations may be material and may not reflect the underlying asset value

19. Any future issue of shares will further dilute the holdings of shareholders of the Costain Group and could adversely affect the market price of Ordinary Shares

20. The market price for Ordinary Shares may decline below the Offer Price

21. Shareholders who do not (or who are not permitted to acquire New Ordinary Shares in the Firm Placing and/or the Open Offer) will experience dilution in their ownership of the Company

22. The ability of Overseas Shareholders to bring actions, or to enforce judgments, against Costain, the Costain Directors or the officers of Costain may be limited

23. Overseas Shareholders may be subject to exchange rate risks

24. Admission of the New Ordinary Shares may not occur when expected

FORWARD LOOKING STATEMENTS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

CAPITAL RAISING STATISTICS

INFORMATION INCORPORATED BY REFERENCE

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS

DIRECTORS

SPONSOR AND FINANCIAL ADVISER

JOINT GLOBAL CO-ORDINATOR, JOINT GLOBAL CO-ORDINATOR, BOOKRUNNER AND BROKER BOOKRUNNER AND BROKER

LEGAL ADVISER TO THE LEGAL ADVISER TO THE LEGAL ADVISER TO THE COMPANY COMPANY SPONSOR, FINANCIAL ADVISER AS TO ENGLISH LAW AS TO JERSEY LAW AND BOOKRUNNERS AS TO ENGLISH LAW

PART I

LETTER FROM CHAIRMAN OF COSTAIN

PROPOSED CAPITAL RAISING

1. Introduction to the Capital Raising

2. Background to, and reasons for, the Capital Raising

3. Information relating to Costain

4. Use of proceeds

5. Financial effects of the Capital Raising

6. Kharafi and UEM relationship

7. Irrevocable undertakings

8. Summary of the principal terms of the Capital Raising

9. Dilution

10. The Firm Placing

11. The Placing and Open Offer

1 Open Offer Share for approximately every 3 Existing Ordinary Shares

12. Overseas Shareholders

United States

Other jurisdictions

NONE OF THE SECURITIES REFERRED TO IN THIS DOCUMENT SHALL BE SOLD, ISSUED OR TRANSFERRED IN ANY JURISDICTION IN CONTRAVENTION OF APPLICABLE LAW.

13. Dividends and dividend policy

14. The New Ordinary Shares

15. Settlement, listing and dealings of the New Ordinary Shares

16. General Meeting

First Resolution

Second Resolution

Third Resolution

17. Actions to be taken

In respect of the General Meeting

In respect of the Open Offer

18. Recommendation and voting intentions

PART II

SOME QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING

1. What is the Firm Placing and the Placing and Open Offer?

2. What is the Company's Open Offer?

3. When will the Capital Raising take place?

4. What is an Application Form?

5. What if I have not received an Application Form?

COSTAIN GROUP PLC Capital/Financing Update 2014