KIER GROUP PLC — AGM Information 2010

Oct 13, 2010

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt about the action you should take, you should contact your stockbroker, bank manager, solicitor, accountant or other professional adviser authorised under the Financial Services and Markets Act 2000, as amended. If you have sold or transferred all of your shares in Kier Group plc, please send this document and all other enclosures to the stockbroker or agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

KIER GROUP PLC

CIRCULAR TO SHAREHOLDERS

Kier Group plc Tempsford Hall Sandy Bedfordshire SG19 2BD 13 October 2010

Dear Shareholder

This letter accompanies the notice of annual general meeting (the "Notice") of Kier Group plc (the "Company") to be held on 12 November 2010.

Among the business to be conducted, details of which are set out in the Notice, are ordinary resolutions to establish the new Kier Group plc 2010 Long-Term Incentive Plan (the "LTIP"), as the Company's 1999 Long-Term Incentive Plan (the "1999 LTIP") expired on 17 December 2009, and to allow an increased shareholding to be held by the Company's employee benefit trust (the "EBT").

To remain competitive and successful, the Company needs to continue to attract, motivate and retain talented executives and senior managers. The Remuneration Committee of the board of directors of the Company (the "Committee") has undertaken a review of the Company's existing executive share incentives and it is now proposed that the Company adopt the LTIP which will largely reflect the 1999 LTIP, subject to the following principal modifications:

Performance measures

The Committee proposes the introduction of a relative "total shareholder return" measure for 50 per cent. of the awards in order to provide an external assessment of long-term performance and increase the alignment of the interests of the senior management team with those of shareholders. The remaining 50 per cent. of awards will continue to be based on "earnings per share" performance, but measured on a cumulative basis to improve the robustness of performance target calibration.

Participation

It is proposed that participation in the LTIP, which has historically been limited to the executive management team of approximately 32 executives, be extended to cover the entire senior management team of approximately 170 individuals. Currently, those not participating in the LTIP receive cash-based awards, subject to the same performance targets. By denominating awards in shares rather than cash, the Committee believes that alignment with shareholders' interests and across management as a whole will be further strengthened.

As a result of the increased number of participants in the LTIP and the new deferred bonus arrangements that the Company is proposing to introduce (as described in the Annual Report and Accounts accompanying this circular), it is likely that the number of shares in the Company held by the trustees of the EBT may exceed 5 per cent. of the Company's ordinary share capital from time to time. Shareholders are therefore requested to approve the EBT holding up to 10 per cent. of the Company's issued ordinary share capital at any time.

Retention of LTIP shares

The Committee intends to introduce a requirement for executive directors to retain 50 per cent. of their vested LTIP shares, on a net of tax basis, until they have reached their shareholding requirement of one times salary.

A summary of the new LTIP is set out below as part of this circular.

The board of directors of the Company believes that resolutions 16 and 17 (as set out in the Notice) are in the best interests of shareholders and recommend that all shareholders vote in favour of such resolutions, as they themselves intend to do so in respect of their aggregate holding of ordinary shares in the capital of the Company (amounting to approximately 2.08 per cent. of the issued share capital of the Company as at 28 September 2010, the last practicable date before publication of this circular).

Yours sincerely

Phil White Chairman

SUMMARY OF THE RULES OF THE KIER GROUP PLC 2010 LONG-TERM INCENTIVE PLAN

The following is a summary of the rules of the Kier Group plc 2010 Long-Term Incentive Plan (the "LTIP"). Copies of the rules are available for inspection at the Company's registered office during normal business hours on any weekday (Saturdays, Sundays and public holidays excluded) from the date of this circular until the close of the annual general meeting referred to above (the "Meeting") and at the place of the Meeting from at least 15 minutes prior to and until the conclusion of the Meeting.

Terms and expressions which are used in this summary but not defined herein shall have the meanings given to them in the letter from the Chairman on page 1 of this circular.

(a) Eligibility

All employees of the Company and its subsidiaries (the "Group") (including executive directors who are employees) are eligible to participate in the LTIP (the "Qualifying Employees"), subject to the absolute discretion of the Committee.

(b) Type of Awards

The LTIP provides for the grant of performance related awards to acquire ordinary shares in the capital of the Company (whether by purchase or subscription) (the "Shares") in such form as the Committee shall determine in its absolute discretion (together the "Awards").

(c) Grant of Awards

Awards may be granted by the board of directors of the Company (the "Board") or the trustee (the "Trustee") of the Kier Group 1999 Employee Benefit Trust (in each case, the "Grantor") to Qualifying Employees selected by the Committee in its absolute discretion during the period of 42 days from the date on which the LTIP is adopted or within any 42 day period following (i) the announcement of the Company's results for any financial period, (ii) the commencement date of a Qualifying Employee's employment with the Group or (iii) the occurrence of an exceptional event relating to or affecting the Company or Group. No Awards may be granted more than 10 years after the adoption of the LTIP.

(d) Price

The price at which a holder of an Award may acquire Shares on the vesting of an Award (if any) shall be determined by the Grantor, after consultation with the Committee and may, for the avoidance of doubt, be nil. In the case of an Award to subscribe for Shares, the price shall be no less than the nominal value per Share.

(e) Company Dilution Limits

The number of Shares over which Awards to subscribe for Shares may be granted under the LTIP on any date shall be limited so that:-

• (i) the total number of Shares issued and issuable in respect of awards granted in any rolling ten (10) year period under the LTIP and any other discretionary share incentive scheme operated by the Group is restricted to five (5) per cent. of the Company's shares in issue calculated at the relevant time; and
• (ii) the total number of Shares issued and issuable pursuant to rights granted under any employee share scheme operated by the Company in any rolling ten (10) year period is restricted to ten (10) per cent. of the Company's shares in issue calculated at the relevant time.

For the purposes of these limits (and for the avoidance of doubt) no account will be taken of options or awards which have lapsed or otherwise ceased to be capable of vesting and no account will be taken of options or awards granted over (or in respect of) Shares purchased (or to be purchased) in the market by the Trustee.

(f) Individual Limits

Awards may be granted at nominal or nil cost on an annual basis. However, the maximum original market value of Shares granted under the LTIP to a Qualifying Employee in any financial year may not exceed 200 per cent. of the Qualifying Employee's annual salary for that year.

(g) Vesting / Performance Conditions

Awards will vest, subject to continued employment with the Group and on the satisfaction of challenging performance conditions. The period from the relevant date of grant until the relevant date of vesting shall be known as the "Vesting Period". If the performance conditions have not been satisfied at the end of the relevant Vesting Period, then there will be no re-testing and the awards relating to that Vesting Period will lapse and cease to be exercisable.

It is currently proposed that the first Awards granted under the LTIP to executive directors following its adoption will be subject to a three year Vesting Period and the achievement of the performance conditions which are summarised below:

• (i) 50 per cent. will vest by reference to the compound annual growth rate (CAGR) in cumulative earnings per share (EPS) of the Company. Cumulative EPS will be calculated by aggregating together the EPS in each of the three years of the Vesting Period. In respect of this half of the Award, nothing will vest if the CAGR achieved is less than 5 per cent., 25 per cent. will vest if the CAGR achieved is 5 per cent. and 100 per cent. will vest if the CAGR achieved is 15 per cent. The Award will vest on a straight line basis between these two points; and
• (ii) 50 per cent. will vest by reference to the Company's total shareholder return (TSR) outperformance of a revenue-weighted index based on the FTSE ASX Construction index and the FTSE ASX Support Services index. Outperformance will be calculated on a multiplicative basis. For each award cycle, the revenue weightings will be fixed based on the Group's prior year revenue mix. For the first Awards, these weightings will be 75 per cent. on the Construction index and 25 per cent. on the Support Services index. For example, if Construction index TSR is 16 per cent. and Support Services index TSR is 12 per cent., then the Group's TSR will need to be at least 15 per cent. (= (75% x 16%) + (25% x 12%)) for this element of the LTIP award to vest. In relation to this half of the Award, nothing will vest if the Company underperforms the weighted index, 25 per cent. will vest if the Company performs in line with the weighted index and 100 per cent. will vest if the Company outperforms the weighted index by 12 per cent. per annum or more. The Award will vest on a straight-line basis between these two points.

The Committee undertakes to review these performance conditions prior to granting subsequent Awards to ensure they remain stretching and achievable. Accordingly, subsequent Awards may be subject to different performance conditions, which will be determined by the Committee, in its absolute discretion, on or prior to the relevant date of grant.

If events occur which cause the Committee reasonably to believe that the original performance conditions are no longer a fair measure of performance, then the conditions may be amended or waived in such manner as may be fair and reasonable in the Committee's discretion provided that any amended performance conditions can not be more difficult to achieve than the original performance conditions were considered to be when they were first set.

Further, the Committee in its absolute discretion may adjust the proportion of awards vesting to ensure the amounts are a true reflection of the underlying performance of the Company. Such application of a discretionary adjustment will be final and binding on all parties.

(h) Cessation of Employment

Awards will normally only vest if the holder of the Award is still an employee of the Group and all subsisting Awards will lapse (vested or otherwise) on cessation of employment, save in the circumstances set out below.

If a holder of an Award ceases to be an employee by reason of (i) death, (ii) ill-health, injury or disability, (iii) retirement with the agreement of the Company, (iv) the sale of the business or the company in the Group for which he works and (v) any other circumstances approved by the Committee in its absolute discretion then he or she shall be treated as a 'good leaver'. Good leavers will be entitled to retain their Awards until the normal vesting date at which point their Awards will vest subject to the satisfaction of any performance conditions in the usual way. Further, a pro rata reduction will apply to the number of Shares subject to a good leavers' Award by reference to the time that has elapsed between the relevant date of grant and the relevant date of cessation. The Committee also has discretion on an individual case-by-case basis to (i) permit accelerated vesting (i.e. vesting earlier than the normal vesting date based on its assessment of performance at that time) and/or (ii) not apply a pro rata reduction to the number of Shares subject to a good leavers' Award by reference to the time that has elapsed between the date of grant and the date of cessation.

(i) Corporate Events / Change of Control

Awards will vest on an accelerated basis in the event of a change of control of the Company (whether by way of general offer or scheme of arrangement or otherwise) as well as in the event of a voluntary winding up of the Company (the "Relevant Event"). In such circumstances, the Committee will determine the extent to which the Awards will vest taking account of (i) the time that has elapsed since the relevant date of grant; (ii) the amount of progress made by the holder of the Award or the Company towards meeting any performance conditions attaching to the Awards, (iii) the likelihood of the performance conditions being met had the Relevant Event not taken place and (iv) any other factors that the Committee considers, in its absolute discretion, to be relevant. For the avoidance of doubt, having taken the foregoing into account, the Committee is permitted to allow accelerated vesting in full.

(j) Variation of Share Capital

In the event of a capitalisation issue or offer by way of rights (including an open offer), or upon any consolidation, subdivision or reduction or other variation of the Company's capital, the number of Shares the subject of an Award and/or the price payable on vesting (if any) may be adjusted by the Grantor (following consultation with the Committee) in such a way as the Committee considers to be fair and reasonable.

(k) Amendments and General

No rights under an Award may be transferred by a holder of an Award to any other person except in the event of that holder's death. Awards granted under the LTIP will not be pensionable.

The LTIP may be amended by the Board (following consultation with the Committee) in any way provided that:

• (i) no amendment may be made which would materially prejudice the interests of holders of Awards in relation to Awards already granted to them under the LTIP unless the sanction of holders of Awards has been obtained; and
• (ii) all amendments to the advantage of holders of Awards to the provisions relating to the definition of "Qualifying Employee", the Company and/or individual limits on the number of Shares which are subject to Awards, the leaver provisions, the provisions relating to change of control and/or the provisions relating to the variation of share capital will require the prior consent of the Company in general meeting unless they are minor amendments to benefit the administration of the plan or to obtain or maintain favourable tax, exchange control or regulatory treatment for holders of Awards, the Company or a member of the Group.

The Board may amend the LTIP to enable it to be operated overseas.

The above is a summary of the principal terms of the proposed LTIP. The directors of the Company reserve the right (up to the time of the Meeting) to make such amendments and additions to the rules of the LTIP as they may consider necessary or desirable provided that such amendments and additions do not conflict in any material respect with the summary set out above.