Circular

Caledonia Investments PLC
19 May 2004



Proposals for an elective Special Dividend and certain other matters



•   Circular containing proposals expected to be sent to shareholders today

•   All Caledonia ordinary shareholders to be offered the opportunity to receive 
    a special dividend on terms that they give up part of their shareholdings

•   Special dividend available, on an elective basis, on up to two out of
    every nine shares held

•   Special dividend per share will be at 18% discount to NAV

•   No obligation on shareholders to elect to receive the special dividend
    and give up part of their shareholdings

•   Undertakings received from holders of 44.7% of Caledonia's share capital to 
    vote in favour and from the holders of 37.8% of Caledonia's share capital 
    to elect for the special dividend

•   Enhancement to Caledonia NAV of between 1.6% and 4.7% dependent on take up

•   Proposals to enable Caledonia to make market purchases of its own shares

•   Caledonia's preliminary results also announced today



Tim Ingram, Chief Executive of Caledonia, comments:

 'These proposals, which involve a return of funds being offered to all
shareholders, will result in an enhancement  of NAV and should restore stability
at the Cayzer Trust Company, our largest shareholder.   This will benefit all
shareholders.'

                                                                     19 May 2004

ENQUIRIES:

Caledonia                                 Tel: [phone] (today)

Tim Ingram, Chief Executive               Tel: [phone] (thereafter)




College Hill                              Tel: [phone]

Alex Sandberg

Tony Friend




      Proposals for an elective Special Dividend and certain other matters

The Board of Caledonia Investments plc ('Caledonia') is pleased to announce that
a circular is expected to be posted today to Caledonia's shareholders, detailing
the proposed elective Special Dividend ('Special Dividend Proposals'), details
of which were first announced on 15 March 2004, and certain other matters.

The Special Dividend Proposals will require shareholder approval at an
extraordinary general meeting and class meeting of the company to be held on 11
June 2004.  Under the terms of the Special Dividend Proposals, all ordinary
shareholders will be offered the opportunity to receive a special dividend on
terms that they give up part of their shareholdings. Each ordinary shareholder
of Caledonia is being offered the opportunity to receive the special dividend on
up to two out of every nine shares held.  The special dividend per share will be
an amount equal to Caledonia's net asset value per share calculated on a
specified date, expected to be 25 June 2004, in accordance with a specified
methodology, less a discount of 18%.  The net asset value per share will include
provision for Caledonia's proposed final dividend for the year ended 31 March
2004 of 18.6 pence per share, which will be paid separately to shareholders on
all of their shares, whether or not they elect to receive the special dividend.
Shares on which a shareholder elects to receive the special dividend will then
be cancelled for no consideration pursuant to a Court approved reduction of
capital.  Payment to those ordinary shareholders who elect to receive the
special dividend is expected to occur on 30 June 2004 or as soon as practicable
thereafter, subject to the Court's approval of the reduction of capital at a
hearing scheduled for 29 June 2004.

The Special Dividend Proposals will require the passing of a special resolution
and an extraordinary resolution at the extraordinary general meeting and class
meeting respectively.  The Board of Caledonia has received undertakings from the
holders of 44.7% of Caledonia's ordinary share capital that they will vote in
favour of these resolutions.  The Special Dividend Proposals are also
conditional on (i) the Court approving the reduction of capital by Caledonia and
(ii) the Court approving a scheme of arrangement of The Cayzer Trust Company
Limited ('CTC').

Included in the undertakings referred to above, is an undertaking from CTC, a
37.8% shareholder in Caledonia, which has also given a commitment to elect to
receive its maximum entitlement under the Special Dividend Proposals.  The Board
of Caledonia has also received undertakings from the holders of 7.0% of
Caledonia's ordinary share capital confirming that they will not elect to
receive the special dividend.  Based on valuations as at 30 April 2004 and
taking into account the undertakings referred to above, the elective special
dividend would result in a maximum return of funds of approximately £158
million, assuming that all other shareholders of Caledonia were to elect to
receive the special dividend.

There will be no obligation on shareholders (other than CTC) to elect to receive
the special dividend and give up part of their shareholdings.

The elective special dividend is being financed from the internal cash resources
of Caledonia supplemented by additional borrowings and, to this end, Caledonia
has increased its committed term bank facilities to £200 million.

The return of funds will be at a discount of 18% to net asset value and
therefore the net asset value per share after the elective special dividend and
reduction of capital is expected to be enhanced. Based on valuations as at 30
April 2004, the enhancement of net asset value per share would be between 1.6%
(if only CTC were to take up the special dividend) and 4.7% (if all Caledonia's
shareholders, other than the holders of 7.0% of Caledonia's share capital
referred to above, were to take up the special dividend).

Shareholders' approval will also be sought at the extraordinary general meeting
(i) for a waiver which the Panel on Takeovers and Mergers has agreed to grant
(subject to independent shareholders' approval) of any obligation on the Cayzer
concert party under Rule 9 of the City Code which might arise should Caledonia
make market purchases of its own shares, (ii) for a new authority to make market
purchases of Caledonia's own shares in place of the existing authority and (iii)
for certain other matters.

Caledonia has also today announced its preliminary results for year ended 31
March 2004.



Tim Ingram, Chief Executive of Caledonia, comments:

'These proposals, which involve a return of funds being offered to all
shareholders, will result in an enhancement  of NAV and should restore stability
at the Cayzer Trust Company, our largest shareholder.   This will benefit all
shareholders.'

                                                                     19 May 2004


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