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Friday 05 September, 2003

Caledonia & Cayzer

Restructuring Prpsls-Pt2-Rplt

Caledonia Realisation & Cayzer Cont
5 September 2003

The 'Restructuring Proposals - Pt.2' announcement for Caledonia Realisation &
Cayzer Cont released today at 07:00 under RNS No 4312P has been re-released to
facilitate onward transmission by third party vendors.

The announcement is unchanged and is reproduced in full below.


Embargoed until 7:00am                                         5 September 2003


   Not for release, publication or distribution in or into the United States,
                           Canada, Australia or Japan


                       Proposals for the restructuring of

Caledonia Investments plc ('Caledonia') and The Cayzer Trust Company Limited ('
                                     CTC')

Introduction

Proposals were submitted on a confidential basis to the boards of Caledonia and
CTC on 10 June 2003 by two newly established Guernsey companies, Cayzer
Continuation Limited ('CC') and Caledonia Realisation Limited ('CR'), seeking
their support for a restructuring of Caledonia and CTC involving an orderly
realisation of the assets of Caledonia and CTC.  The Proposals are designed to
maximise value and to ensure that the full benefits of the restructuring accrue
to existing shareholders. Senior and experienced figures from the financial
services industry, including Sir John Craven, Nick Morrell, Simon Murray,
Stanislas Yassukovich and Hugh Ward, serve on the boards of CC and CR.

The Proposals, if implemented, would lead to the orderly realisation of the
assets of Caledonia and CTC and the creation of a new corporate structure
composed of two new companies: CC and CR.  Under schemes of arrangement,
shareholders in Caledonia and CTC would exchange their shares in Caledonia and
CTC for CC and/or CR shares in such proportions as they wish, depending on their
future objectives.  CC would be the ongoing investment company for those members
of the Cayzer family and other shareholders who wanted to stay invested.  CR
would be the vehicle that would enable shareholders to receive cash as the
assets of Caledonia are realised over time. While initially the management of
the assets of CC would be outsourced to selected asset management companies, the
Proposals envisage the establishment of a new investment management company to
manage these assets and eventually third party assets, thus creating the
prospect of additional value for those shareholders.

The Proposals comprise a restructuring without tax barriers with the full
benefits of the realisation process going to existing shareholders in direct
proportion to their respective interests in Caledonia and CTC. There would not
be any implied takeover premium to Caledonia's current share price under the
terms of the initial share exchange.

The boards of CC and CR had hoped to engage in a constructive dialogue with the
boards of Caledonia and CTC, but on 7 July 2003, the board of Caledonia publicly
rejected the Proposals whilst at the same time the board of CTC wrote to
shareholders indicating that it too had rejected the Proposals. The boards of CC
and CR still believe it is important to ensure that the shareholders of both
Caledonia and CTC are made aware of the details of the Proposals and the
benefits the boards believe they would bring, so that the ultimate beneficial
owners of the relevant companies may have an opportunity to consider the
Proposals themselves.

The Proposals have the support of certain shareholders of Caledonia who together
hold 19.7% of the issued ordinary share capital (representing approximately
37.6% of the Free Float) including the two largest institutional shareholders,
Hermes and Schroders.  These shareholders believe that to continue the status
quo of the Caledonia Group is not an option and accordingly support the
Proposals in the absence of suitable alternative proposals from the board of
Caledonia.

Objectives of the Proposals

The principal objectives of the Proposals are to:

-          realise to the fullest extent possible the underlying NAV of
           Caledonia and eliminate the discount reflected in its share price;

-          deliver maximum cash proceeds to shareholders;

-          provide the opportunity to reinvest the realisation proceeds in a new
           investment company providing a better spread of investments to reduce 
           the concentration of risk;

-          offer maximum value and flexibility for all shareholders of CTC and
           Caledonia;

-          give each reinvesting shareholder a direct say in the investment of
           his or her own assets; and

-          provide a corporate governance structure that is likely to comply
           with new mandatory rules for investment trust governance.

In addition, CTC shareholders would benefit further from:

-          the preservation of the Cayzer family business, with an updated
           structure,  which can meet the needs of the current family and future
           generations;

-          increased liquidity; and

-          elimination of the charge to tax that would otherwise be incurred on
           disposal by CTC of its holding in Caledonia and which effectively 
           represents a further discount suffered by CTC shareholders on 
           disposal of their shares in CTC.

Investment performance of Caledonia

Mercer Investment Consulting ('Mercer') has carried out a detailed analysis of
Caledonia's historic performance.  Mercer has calculated that the total return
generated by Caledonia, including both capital gains and reinvested dividends,
has lagged the FTSE All Share Total Return Index for 48.2% of the rolling five
year periods from 31 March 1993 (i.e. based on performance starting on 1 April
1988 to 31 March 2003).  Mercer would expect an A-rated investment manager, who
would be put forward to clients for new business, to outperform its benchmark at
least 70% of the time.

In addition, Mercer believes there is a perceived risk of investing in
Caledonia, as reflected by the discount of the share price to the underlying NAV
of the company, which is 'significantly higher than average' (source:
Caledonia's presentation of interim results to 30 September 2002).  Even with
the recent improvement in the Caledonia share price, the boards of CC and CR
believe that the current discount of 20.1% as at 31 August 2003 (being the most
recent NAV figure released by Caledonia) is far greater than one would expect
for an investment trust (average global growth investment trust discount of
approximately 13% - source: Caledonia's annual results presentation for the year
ended 31 March 2003).

Summary of the Proposals

The Proposals are intended to be implemented via simultaneous and
inter-conditional share for share exchange transactions creating the new
corporate structure by way of schemes of arrangement.  If implemented, the
assets of Caledonia and CTC would be realised in a controlled and orderly
process over a period expected to be about two years, with the larger disposals
expected to be achieved early on in the process.  The cash proceeds from the
realisation process would be distributed to the two new companies pro rata
according to the elections of Caledonia and CTC shareholders.  The boards of CC
and CR believe that shareholders in both Caledonia and CTC should be able to
realise significant incremental value from their current investments by electing
to receive shares in either or both of the two new companies. The options which
would be open to Caledonia and CTC shareholders would be as follows:

(a)    To receive cash

Shareholders would be able to elect to receive shares in CR which would exist to
distribute the relevant proportion of cash proceeds from the Caledonia
realisation process in the medium term.  The cash proceeds would reflect the
underlying NAV at the time of disposal.  CR, a Guernsey incorporated company,
would list its shares on an appropriate stock exchange.

(b)    To receive shares in an investment company

Shareholders would be able to elect to receive shares in CC which would operate
as an investment company and the relevant proportion of cash proceeds from the
Caledonia realisation process would be re-invested for the benefit of holders of
shares in CC.  Once the Proposals are fully implemented, shareholders in CC
would be able to choose an investment portfolio to be overseen by CC according
to their individual investment requirements.  CC, a Guernsey incorporated
company, would list its ordinary shares on a recognised stock exchange.

(c)    A combination of (a) and (b) above.

The Proposals have been formulated to allow each individual shareholder in CC to
have an investment strategy in relation to the various sub-funds in which CC is
invested tailored to their own risk profile and investment requirements. The
assets of CC would be managed by specialist professional managers. Shareholders
of CC would be able to switch asset classes without incurring capital gains tax.
This would allow shareholders the flexibility to choose an investment policy
to suit their changing requirements.

As part of the Proposals, it is intended that shareholders of CC should also
receive convertible loan notes which would (subject to consultation and a
feasibility study) subsequently be exchanged into shares in a new UK based
investment management business, Cayzer Investment Management Limited ('CIML').
This creates the potential for significant additional value for shareholders of
Caledonia and CTC exchanging their holdings for shares in CC.  This value is
expected to be created by CIML managing assets on behalf of CC shareholders as
well as attracting new assets and forming strategic partnerships with third
parties.  CC shareholders taking advantage of this opportunity would be owners
of a new investment management business which could provide a significant source
of future value not currently recognised in a valuation of Caledonia's
portfolio.

Implementation of the Proposals through share for share exchange offers has
received appropriate clearances from the Inland Revenue.  CC and CR have been
advised by Deloitte & Touche LLP that there is no reason to believe the Inland
Revenue would not give a similar clearance for the implementation of the
Proposals by way of schemes of arrangement, the preferred method of
implementation.

Management of the new investment companies

The boards of both CC and CR are identical and would oversee the Caledonia
realisation process and distribution of cash proceeds and would supervise the
managers appointed by them to manage the assets of CC. Senior and experienced
figures from the financial services industry have agreed to serve on the boards,
including;

Sir John Craven (Chairman).  Sir John has over 40 years' experience in the
financial services sector and was Chairman of the board of Lonrho (now Lonmin)
throughout the period of reconstruction from 1996 to 2001 during which time
Lonrho was turned from a sprawling conglomerate into a focused platinum group.
Sir John previously founded Phoenix Securities, a firm specialising in mergers,
acquisitions and disposals in the financial services industry, was Chief
Executive and then Chairman of Morgan Grenfell & Co. and also served on Deutsche
Bank's Management Board.  Sir John will become Chairman of Fleming Family &
Partners in October 2003.

Nick Morrell (Chief Executive).  Mr Morrell was previously Chief Executive of
Lonmin.  Mr Morrell was responsible for executing the break-up and
transformation of Lonrho referred to above.  This resulted in the creation of
substantial incremental value to shareholders of Lonmin and the return of some
US$500 million of cash to its shareholders.

Stanislas Yassukovich (Non-executive director).  Mr Yassukovich was Deputy
Chairman and CEO of the European Banking Group, Chairman of Merrill Lynch Europe
and Middle East and was a Deputy Chairman of the London Stock Exchange plc.

Simon Murray (Non-executive director).  Mr Murray was Group Managing Director of
Hutchison Whampoa for 10 years and subsequently Managing Director of Deutsche
Bank, Asia.  Mr Murray was the founder and is the Chairman and principal
shareholder of Simon Murray & Associates ('SMA') whose shareholders include
Mitsui, Richemont, GE Capital and Hutchison Whampoa.  SMA manages two private
equity funds investing in Asia with aggregate funds under management of US$500
million.

Hugh Ward (Non-executive director).  Mr Ward was previously CEO of INVESCO UK in
London and is currently a non-executive director of Atlantic Wealth Management
International, CSTIM, Performa and a number of other financial companies.

Rupert Evans (Non-executive director).  Mr Evans is a partner at Ozannes, a
Guernsey based law firm and holds a significant number of other directorships.

The realisation process

The Proposals call for a controlled and orderly realisation of the assets of
Caledonia and CTC over a period expected to be about two years, with the larger
disposals expected to be achieved early on in the process.  Shareholders
electing to receive cash could expect to receive interim cash distributions
during this period.  There would be no absolute deadlines and the boards of CC
and CR would manage the process carefully, on an asset by asset basis, to
maximise value for shareholders, taking into account the need to maintain the
stability of the management and businesses of the underlying investments.

To this end, included on the boards of CC and CR are a number of individuals
with extensive experience in the handling of large and complex disposal
transactions particularly in, but not limited to, the financial services sector
in which the investments of Caledonia are heavily concentrated.  Sir John Craven
has overseen numerous similar realisation processes, including the disposal of
Robert Fleming & Co and Morgan Grenfell that were triggered in both cases
through the disposal of a significant non-controlling stake.  These would be of
particular relevance when realising value from, for example, Caledonia's 17.7%
stake in Close Brothers and 11.7% stake in Rathbone Brothers.  It is worth
noting that the disposal of Robert Fleming & Co and Morgan Grenfell both
resulted in significant strategic premiums being obtained.

An incentive pool would be established for payment of incentive compensation to
the board, management and staff of CC and CR.  This would be capped and would be
directly linked to the value achieved from the realisation process and would not
be payable unless the realisations reached demanding pre-agreed thresholds. In
order to ensure that the interests of the shareholders of Caledonia and CTC are
fully safeguarded, an independent remuneration committee would be established,
which it is intended would comprise a representative of each of the two largest
institutional shareholders of Caledonia, a member of the existing board of CTC
and two representatives of the Cayzer-Rotherwick Group (as defined under '
Shareholder support' below). The realisation incentive pool would be structured
and supervised by the independent remuneration committee, such that the larger
proportion of it would only be paid on achieving realisations at a premium to
NAV. Recipients would include executives, non-executives and staff of CC and CR
(including existing staff employed by Caledonia and CTC).

Timing

The boards of CC and CR have asked the boards of Caledonia and CTC to enter into
a constructive dialogue in order to enable the Proposals to be put formally to
shareholders. With full co-operation, the boards of CC and CR believe that the
restructuring could be implemented in a period of three months or so following
the publication of definitive scheme documents, with the realisation process
commencing immediately thereafter. It is anticipated that the realisation of
Caledonia's assets and transfer of value into CC and CR would take about two
years, with the expectation that most of the value would be transferred early on
in this period.

Shareholder support

It should be noted that the board of CTC has notified the boards of CC and CR
that it 'has received indications from (CTC) shareholders together representing
in excess of 50% of the voting rights that, in the event of the Project
Locksmith proposals (these Proposals) being placed before members in a general
meeting, these votes would be cast against the proposals'. The boards of CC and
CR are surprised at the ability of the board of CTC to make this assertion as
they are not aware of any formal consultation process having been undertaken
with the shareholders of CTC. Nor is it clear to what extent the merits of the
Proposals were properly outlined in a fair manner to the shareholders of CTC. In
any event, the boards of CC and CR believe that if shareholders purportedly
included in the 50% referred to above were given a full and fair explanation of
the merits of the Proposals in an appropriate forum, they may reconsider their
position.  Furthermore, the boards of CC and CR believe that the minority
shareholders in CTC should also have a say and that the Proposals ought
therefore to be properly considered and discussed.

It is worth noting that a 50% shareholding in CTC equates to an interest of only
approximately 19% of the underlying NAV of Caledonia. There is a significant
balance of Caledonia shareholders whose interests need to be taken into account.
The shareholders in Caledonia who support the Proposals (including the two
largest institutional shareholders, Hermes and Schroders) and the
Cayzer-Rotherwick Group (as defined below) together represent over 29.1% by
value of those persons interested in the underlying NAV of Caledonia.

On 29 July 2003, the board of CTC put a counter-proposal to certain CTC
shareholders representing approximately 25% of the voting rights of the shares
in CTC (together 'the Cayzer-Rotherwick Group'). This sought to address that
group's continuing concerns about the current structure of Caledonia and CTC.
Not only did this counter-proposal envisage a conditional exit from their
investment in CTC at an unacceptable discount of over 20% to the underlying NAV
of Caledonia, but it also left the status quo of the corporate structure
unchanged with all its deficiencies.  The board of CTC also made it a condition
to such a counter-proposal that the shareholding of CTC in Caledonia should
remain at or close to its present level.  The board of CTC also sought to take
control of the voting rights of Caledonia shares which the Cayzer-Rotherwick
Group holds directly in order to further extend CTC's control of Caledonia.  The
Cayzer-Rotherwick Group has informed the boards of CC and CR that it has
terminated all such discussions with the CTC board regarding this
counter-proposal.

As stated above, in the absence of suitable alternative proposals from the board
of Caledonia, the Proposals have the support of certain shareholders of
Caledonia who together hold 19.7% of the issued ordinary share capital
(representing approximately 37.6% of the Free Float) including the two largest
institutional shareholders, Hermes and Schroders. These institutional and other
shareholders of Caledonia who have confirmed to CC and CR their support for the
Proposals did so at a time when they had been informed of the purported position
of over 50% of CTC shareholders referred to above.

The support of the CTC board and CTC shareholders is necessary to enable the
Proposals to be put to all shareholders in Caledonia and CTC.  Accordingly, the
boards of CC and CR are currently focussing their attention on seeking the
support of the board and shareholders of CTC for the Proposals. In this context,
for information only, attached at Appendix A is the text of a letter which is
being sent today from the boards of CC and CR to all shareholders in CTC. A
further announcement will be made once this process has been concluded.

Enquiries

Sir John Craven                 Caledonia Realisation Limited      020 7409 5649
                                Cayzer Continuation Limited

Anthony Cardew                  CardewChancery                     020 7930 0777

Phil Brown, Corporate Advisory  Deutsche Bank                      020 7545 8000
James Agnew, Corporate Broking
Nigel Szembel, Press Office

Deutsche Bank, which is regulated by the Financial Services Authority for the
conduct of designated investment business in the UK, is acting for CC and CR and
no one else in connection with the Proposals and will not be responsible to
anyone other than CC and CR for providing the protections afforded to clients of
Deutsche Bank nor for providing advice in connection with the Proposals or any
other transaction or arrangement referred to herein.

Deloitte & Touche LLP is acting for CC and CR and no one else in connection with
the Proposals and will not be responsible to anyone other than CC and CR for
providing advice in connection with the Proposals or any other transaction or
arrangement referred to herein.

Mercer Investment Consulting ('Mercer'), a division of Mercer Human Resource
Consulting Limited, is acting for CC and CR and no one else in connection with
the Proposals and will not be liable to anyone other than CC and CR for
providing the protections afforded to clients of Mercer, nor be responsible for
providing advice in connection with the Proposals or any other transaction or
arrangement referred to herein.

This announcement does not constitute a firm intention to make an offer under
The City Code or an invitation to purchase any securities.

Important Dealing Notice

The attention of shareholders of Caledonia and CTC is drawn to the fact that,
under The City Code, an offer period will commence in relation to Caledonia by
virtue of this announcement, notwithstanding that neither a formal offer for
Caledonia has been made, nor has a formal scheme of arrangement been proposed.
There are certain UK dealing disclosure requirements in respect of relevant
securities during an offer period.

These disclosure requirements are set out in more detail in Rule 8 of The City
Code. In particular, Rule 8.3 of The City Code requires public disclosure of
dealings during an offer period by persons who own or control or would, as a
result of a transaction, own or control 1 per cent. or more of any class of the
relevant securities of Caledonia.

Note 5 on Rule 8 of the City Code specifies the details that are to be included
in a disclosure and makes reference to the Dealing Disclosure Form required to
be submitted, copies of which may be obtained from the Panel at the address
specified below or from the Panel's website, www.thetakeoverpanel.org.uk. A copy
of the entire City Code may also be found at the Panel's website, for further
information.

The obligation for disclosure during an offer period commences with effect from
the date of this announcement in relation to dealings in the shares of Caledonia
and will conclude on the earlier of (i) the date on which either any offer (if
made) becomes or is declared unconditional as to acceptances or any scheme of
arrangement (if proposed) is approved by shareholders at the relevant meetings
(ii) the date on which any offer (if made) or any scheme of arrangement (if
proposed) lapses or (iii) the date on which an announcement is made that talks
regarding a possible offer or scheme of arrangement have been terminated or that
there no longer remains the possibility of an offer being made or a scheme of
arrangement being proposed. Disclosures should be made on a Dealing Disclosure
Form by no later than 12 noon on the business day following the date of the
dealing transaction. These disclosures should be made via a regulatory
information service such as the Regulatory News Service of the London Stock
Exchange, by fax (fax number: +44 (0) 20 7588 6057) or by electronic delivery on
the appropriate form with a copy sent to the Panel (fax number: +44 (0) 20 7256
9386, e-mail: monitoring@disclosure.org.uk). If you are in any doubt as to the
action that you should take with regard to Rule 8 of the City Code you are
requested to contact the Panel on (020) 7382 9026 for further information.


                       APPENDIX A - FOR INFORMATION ONLY


Cayzer Continuation Limited          Caledonia Realisation Limited
(registered in Guernsey, no.40352)   (registered in Guernsey, no 40351)


Directors:                                                  Registered Offices:
Sir John Craven (Chairman)                                 1 Le Marchant Street
Rupert Evans                                                      St Peter Port
Nick Morrell (Chief Executive)                                         Guernsey
Simon Murray CBE                                                        GY1 4HP
Hugh Ward
Stanislas Yassukovich CBE


To the holders of CTC Ordinary and Preferred Ordinary shares

5 September 2003

Dear CTC Shareholder

We are writing to you with respect to the public announcement made earlier today
which set out proposals for a restructuring of Caledonia Investments plc ('
Caledonia') and The Cayzer Trust Company Limited ('CTC') (the 'Proposals').
Your support and the co-operation of the boards of Caledonia and CTC are
necessary to enable the Proposals to be put to all shareholders in both
companies.

The current group structure has been in place for many years and has served the
members of the Cayzer family well over a long period of time.  However, over the
years there have been major changes in the regulatory environment, the
investment industry and the taxation regime. We believe that the current
structure is no longer appropriate in the current investment and regulatory
environment and that the time has come for its root and branch modernisation in
order to meet future investor needs and maximize value for the benefit of all
shareholders.

Certain existing shareholders representing approximately 25% of the voting
rights of the shares in CTC (together 'the Cayzer-Rotherwick Group') fully
support us in our efforts to bring about such a modernisation. Our Proposals
have the support of certain shareholders of Caledonia who together hold 19.7% of
the issued ordinary share capital (representing approximately 37.6% of the Free
Float(1)) including the two largest institutional shareholders, Hermes and
Schroders.  These shareholders believe that to continue the status quo of the
Caledonia group is not an option and support our Proposals in the absence of
suitable alternative proposals from the board of Caledonia.

The scenario is not peculiar to your extended family or to the Caledonia/CTC
structure and circumstances.  Other family groups have restructured their
affairs to better reflect today's financial environment and to preserve and
enhance the wealth of family members now and for future generations. Whilst no
two situations are directly comparable, a recent example of this is perhaps the
Fleming family. You will remember, not least since you participated in the
uplift in and release of value through the significant holding that Caledonia
had in the former Robert Fleming & Co. Ltd, that the Fleming family orchestrated
the sale of the bank through an orderly sale process and achieved a significant
strategic premium.  As an integral element of the process, a new lightly
capitalised fund management company, Fleming Family & Partners Ltd ('FF&P'), was
established to manage the assets of those family members who wished to remain in
the same economic grouping.  The vast majority of the family did and FF&P is now
a well established business managing family and third party assets across the
whole range of asset classes, from traditional public quoted equities and debt
securities, to absolute return hedge funds, real estate and private equity.
Individual portfolios are tailored to the investment requirements of individual
family members.

While no two situations are identical, the Caledonia/CTC structure in our view
requires similar modernisation to address outdated structural issues, to reduce
its tax burden, to broaden the range of investments, to reduce the risks
inherent in the heavy concentration of exposure to a single industry - the UK
financial services industry - and to a small number of large and relatively
illiquid holdings, to give individual family members a direct say in the way in
which their wealth is managed and to give direct access to their wealth for
those who wish it.  The Proposals we have outlined, we believe, would achieve
these aims and represent a continuation of the process that the late Lord Cayzer
espoused in his lifetime.  He oversaw the dismantling of your shipping heritage,
the creation of British & Commonwealth as a financial services company and the
disposal of that holding company in 1987.

To this end, the Proposals were submitted on a confidential basis to the boards
of Caledonia and CTC on 10 June 2003.  We had hoped to engage in a constructive
dialogue with the boards, but on 7 July 2003, the CTC board wrote to you
indicating that it had rejected the Proposals, and they were also publicly
rejected by the board of Caledonia.  The boards rejected the Proposals on the
basis that they represented a '...total realisation of (Caledonia's) assets over
an uncertain period of time' and that 'there is no certainty as to the amount
that would be realised...'.  Of course it will take time and there are no
guarantees as to the precise outcome, but shareholders already bear the risk of
ownership of these assets.  It is a matter of regret therefore that the boards
of Caledonia and CTC chose to make public their response to the Proposals rather
than enter into a more substantive dialogue with us in order to reach a solution
which is in the interests of all shareholders.

In the light of these developments, we believe it is important to ensure that
the shareholders of both Caledonia and CTC are made aware of the details of our
Proposals and the benefits we believe they would bring, so that the ultimate
beneficial owners of the relevant companies may have an opportunity to consider
the Proposals themselves.  To this end, we attach a copy of the press
announcement that was released earlier today outlining the Proposals.

Summary of the Proposals

Our Proposals, if implemented, would lead to the orderly realisation of the
assets of Caledonia and CTC and the creation of a new corporate structure
composed of two new companies: Cayzer Continuation Limited ('CC') and Caledonia
Realisation Limited ('CR').  Shareholders in Caledonia and CTC would exchange
their shares in Caledonia and CTC for CC and/or CR shares depending on their
future objectives.  CC would be the ongoing investment company for those members
of the Cayzer family and other shareholders who wanted to stay invested.  CR
would be the vehicle that would enable shareholders to receive cash as the
assets of Caledonia are realised over time.

Value uplift

We believe our Proposals, if implemented, would generate a significant uplift in
the value of CTC shares.

The most recent net asset value ('NAV') of Caledonia, disclosed by Caledonia as
at 31 August 2003, was 1154p per share.  As at the last business day prior to 31
August 2003, Caledonia shares traded at 922p per share, representing a 20.1%
discount to NAV.  Pursuant to the Proposals, the intention would be to seek to
dispose of Caledonia's assets at or close to NAV.  Assuming this could be
achieved, the Proposals would significantly enhance shareholder value.

In the light of the further discount to NAV at which shares of CTC have
historically traded, the scope for value uplift for CTC if NAV were achieved
should be even greater.  Additional benefits of our Proposals for CTC
shareholders are included below.

Benefits of our Proposals

We believe that adoption and implementation of our Proposals would achieve the
following benefits for CTC shareholders:

-                      the preservation of a Cayzer family business, but one
with an updated structure which can meet the needs and opportunities of the
future, for the current family and future generations by giving shareholders
choice, flexibility and diversification;

-                      a significant reduction in the discount to the underlying
NAV at which the shares of Caledonia and CTC have typically traded as referred
to in the 'Value uplift' section above.  As at 31 August 2003, Caledonia's
shares traded at a discount of 20.1% to its most recently disclosed NAV, despite
the adoption of investment trust status earlier this year.  Over the previous 12
months to 31 August 2003, Caledonia shares traded at an average discount of
24.0% to the underlying NAV;

-                      increased liquidity;

-                      the elimination of the charge to tax that would otherwise
be incurred on the disposal by CTC of its holding in Caledonia - this charge
represents a substantial proportion of the £40 million recently estimated by CTC
as its tax liability on the disposal of all its assets (equivalent to £22.73 per
CTC Ordinary Share and £1.35 per CTC Preferred Ordinary Share) and which
effectively represents a further discount suffered by CTC shareholders on
disposal of their shares in CTC;

-                      a structure in which each CC shareholder would have a
direct say in the investment of his or her own assets;

-                      access to cash for those who desire it; and

-                      a better spread of investments to reduce the
concentration of risk - in particular by the availability of a full range of
asset classes from traditional equities and debt securities to absolute return
hedge funds, real estate and private equity.

In preparing these Proposals we were very conscious of the importance of
dividend income to certain CTC shareholders.  Therefore, our Proposals (as
currently formulated) include a dividend payment to all CTC shareholders at the
same rate as the last dividend which was paid, in order to ensure shareholders
maintain the same level of income in the first transition year. In respect of
subsequent years, investors who wish to maximise dividend income will be able to
do so by shaping their investment portfolio (through their interest in CC) so as
to focus on income yielding assets.

There would be a smooth transition over a period of a year or two with
continuity of service assured by offers of continuing employment to the Cayzer
House staff who have looked after your affairs in the past.  CC and CR will
honour the existing employment rights, including pension rights, of all the
employees of CTC.

The new business model would follow the 'best of breed' approach.  That is to
say that, rather than seeking to manage directly and in-house all the assets of
its shareholders, CC would outsource the management of different asset classes
to independent investment management firms, thus seeking to achieve top quartile
performance across all asset classes.  This is an approach that is more and more
common across the investment management industry and in particular in family
offices.  It reflects the reality that no one investment manager can have a
monopoly of investment wisdom across all asset classes and that there are
economies of scale to be captured by outsourcing.

The responsibility for selecting independent 'best of breed' managers for
individual asset classes and for monitoring their performance would lie with the
board of CC which would retain external advice as and when appropriate.

As mentioned in the enclosed press announcement, we have obtained Inland Revenue
clearance for the implementation of the Proposals through share for share
exchange offers. We have been advised by Deloitte & Touche LLP that there is no
reason to believe the Inland Revenue would not give a similar clearance for the
implementation of the Proposals by way of schemes of arrangement, our preferred
method of implementation. The Inland Revenue clearance unusually also allows for
shareholders opting to take CC shares to receive in aggregate up to £20 million
of convertible loan notes which, if approved by CC shareholders, would
subsequently be exchanged for shares in a new UK investment management business,
Cayzer Investment Management Limited ('CIML').

CC would examine the feasibility and develop a business plan for CIML.  Assuming
it was then established, CIML would take over from CC responsibility for
investment management services to the shareholders of CC and would seek to form
strategic partnerships with specialised fund managers.  CIML would seek to
attract third party clients and thus to build a very substantial new business
matching or exceeding the scale of the current business. Although it is intended
that CIML would have a diversified and growing client base, members of the
Cayzer family would be the initial and probably for the foreseeable future the
largest clients.  This structure is designed both to preserve the Cayzer family
legacy and to create substantial incremental value over time for those Cayzer
family members who opted for shares in CC.

The realisation process

Our Proposals call for a controlled and orderly realisation of the assets of
Caledonia and CTC over a period expected to be about two years, with the larger
disposals expected to be achieved early on in the process.  The cash proceeds
from the realisation process would be distributed to the two new companies pro
rata according to the elections of Caledonia and CTC shareholders.  Shareholders
electing to receive cash could expect to receive interim cash distributions
during this period.  There would be no absolute deadlines and the boards of CC
and CR would manage the process carefully, on an asset by asset basis, to
maximise value for shareholders, taking into account the need to maintain the
stability of the management and businesses of the underlying investments.  To
this end, included on the boards of CC and CR are a number of individuals with
extensive experience in the handling of large and complex disposal transactions
particularly in, but not limited to, the financial services sector in which the
investments of Caledonia are heavily concentrated.

While CC and CR would retain executives and staff in Caledonia and CTC necessary
to serve your requirements as clients and to assist in its orderly realisation
process, it is expected that the current annual running costs of the CTC/
Caledonia structure during this period would be significantly reduced (we
understand these costs currently amount to over £9 million per annum).

An incentive pool would be established for payment of incentive compensation to
the board, management and staff of CC and CR.  This would be capped and would be
directly linked to the value achieved from the realisation process and would not
be payable unless the realisations reached demanding pre-agreed thresholds. In
order to ensure that the interests of the shareholders of Caledonia and CTC are
fully safeguarded, an independent remuneration committee would be established,
which it is intended would comprise a representative of each of the two largest
institutional shareholders of Caledonia, a member of the existing board of CTC
and two representatives of the Cayzer-Rotherwick Group. The realisation
incentive pool would be structured and supervised by the independent
remuneration committee, such that the larger proportion of it would only be paid
on achieving realisations at a premium to NAV. Recipients would include
executives, non-executives and staff of CC and CR (including existing staff
employed by Caledonia and CTC).

Proposed management team

In order to implement the Proposals we have assembled a top quality team. Sir
John Craven has over 40 years' experience in the financial services sector. In
addition, he was Chairman of the board of Lonrho (now Lonmin) throughout the
period of reconstruction from 1996 to 2001 during which time Lonrho was turned
from a sprawling conglomerate into a focused platinum group. The reconstruction
process involved disposals in a variety of sectors including hotels, mining and
oil and gas.

Nick Morrell would be Chief Executive of CC and CR.  He was previously Chief
Executive of Lonmin and in that position was responsible for executing the
transformation of Lonrho referred to above. This resulted in the creation of
substantial incremental value for shareholders of Lonmin and the return of some
US$500 million of cash to its shareholders.

In addition there would initially be four non-executive directors:  Stanislas
Yassukovich, Simon Murray, Hugh Ward and Rupert Evans.

•            Stanislas Yassukovich was Deputy Chairman and CEO of the European
Banking Group, Chairman of Merrill Lynch Europe and Middle East and was a Deputy
Chairman of the London Stock Exchange plc.

•            Simon Murray was Group Managing Director of Hutchison Whampoa for
10 years and subsequently Managing Director of Deutsche Bank, Asia.  Simon was
the founder and is the chairman and principal shareholder of Simon Murray &
Associates ('SMA') whose shareholders include Mitsui, Richemont, GE Capital and
Hutchison Whampoa.  SMA manages two private equity funds investing in Asia with
aggregate funds under management of US$500 million.

•            Hugh Ward was previously CEO of INVESCO UK in London and is
currently a non-executive director of Atlantic Wealth Management International,
CSTIM, Performa and a number of other financial companies.

•            Rupert Evans is a partner at Ozannes, a Guernsey based law firm
and holds a significant number of other directorships.

Members of the boards of CC and CR, which are identical, have been directly
involved in a pivotal way in other similar situations where realisations of
assets, including large minority stakes in significant businesses, were
successfully implemented at attractive valuations. For example, the sale of
Morgan Grenfell & Co. Ltd to Deutsche Bank in 1990 for a price which contained a
large strategic premium was the result of a controlled sale process starting
with a 26% stake in the hands of one advertised seller.  Sir John Craven was at
the time Chairman of Morgan Grenfell and orchestrated this process. Similarly,
the catalyst for the successful offer by Chase Manhattan Bank for Robert Fleming
& Co Limited three years ago was the 29.4% stake in the company owned by members
of the Fleming family who acted in concert to achieve a sale which also included
a significant strategic premium. Again, Sir John Craven played a central role in
this transaction.

We believe that this highly experienced team will be able to oversee the
implementation of the Proposals effectively.

Timing

We have asked the boards of Caledonia and CTC to enter into a constructive
dialogue with us in order to enable the Proposals to be put formally to
shareholders. With full co-operation, we believe that the restructuring could be
implemented in a period of three months or so following the publication of
definitive scheme documents, with the realisation process commencing immediately
thereafter. We anticipate that the realisation of Caledonia's assets and
transfer of value into CC and CR would take about two years, with the
expectation that most of the value would be transferred early on in this period.

Shareholder support

You should be aware that the board of CTC has notified us that it 'has received
indications from (CTC) shareholders together representing in excess of 50% of
the voting rights that, in the event of the Project Locksmith proposals (these
Proposals) being placed before members in a general meeting, these votes would
be cast against the proposals'. We are surprised at the ability of the board of
CTC to make this assertion as we are not aware of any formal consultation
process having been undertaken with the shareholders of CTC. Nor is it clear to
what extent the merits of our Proposals were properly outlined in a fair manner
to the shareholders of CTC. In any event, we believe that if shareholders
purportedly included in the 50% referred to above were given a full and fair
explanation of the merits of the Proposals in an appropriate forum, they may
reconsider their position. Furthermore, we believe that the minority
shareholders in CTC should also have a say and that the Proposals ought
therefore to be properly considered and discussed.

You should also be aware that the board of CTC put a counter-proposal to the
Cayzer-Rotherwick Group in which it sought to address that group's continuing
concerns about the current structure of Caledonia and CTC. Not only did this
counter-proposal envisage a conditional exit from their investment in CTC at an
unacceptable discount of over 20% to the underlying NAV of Caledonia, but it
also left the status quo of the corporate structure unchanged with all its
deficiencies.  The Cayzer-Rotherwick Group has informed the boards of CC and CR
that it has terminated all such discussions with the CTC board regarding this
counter-proposal.

It is worth noting that a 50% shareholding in CTC equates to an interest of only
approximately 19% of the underlying NAV of Caledonia. There is a significant
balance of Caledonia shareholders whose interests need to be taken into account.
The shareholders in Caledonia who support the Proposals (including the two
largest institutional shareholders, Hermes and Schroders) and the
Cayzer-Rotherwick Group together represent over 29.1% by value of those persons
interested in the underlying NAV of Caledonia.

Recommendation

Our ideas are not revolutionary in the industry and although they reflect
considerable effort by ourselves and our advisers, they may well be capable of
improvement and refinement in the light of information about the Caledonia/CTC
group to which only the boards of Caledonia and CTC have access. Such refinement
and improvement can only be achieved by constructive discussion and we would
urge you to bring every pressure you can upon the board of CTC to engage with
us. We strongly believe that the directors of CTC have a fiduciary duty to you
as shareholders to consider and explore the Proposals fully.  You as
shareholders should insist on the board of CTC giving the Proposals a fair and
proper hearing and enter into a meaningful dialogue with us to enable the
Proposals to be put to you formally for your consideration.

Furthermore, we believe that in the current evolving corporate governance
environment, changes to the existing structure of Caledonia and CTC are
inevitable. The Financial Services Authority is expected to publish its new
mandatory rules for investment trust governance in September of this year and
the Financial Reporting Council has recently produced its new best practice
guidelines in the Combined Code. We believe that these developments will require
that the chairman of Caledonia in future would have to be an independent person,
and the bulk of the board would also need to be independent. 'Independence' in
this context would include independence from a major shareholder, such as CTC.
We believe this to be an important additional factor to be taken into account
when assessing the merits of our Proposals.

Leading Counsel has advised us that those shareholders who hold CTC shares on
trust for others must act in the best interest of the beneficiaries of the
relevant trusts so as to obtain the best financial return for those
beneficiaries. We believe therefore that, in the absence of alternative
proposals from the board of Caledonia which would demonstrably ensure a better
financial return than that contemplated under our Proposals, it is incumbent on
such trustees to take appropriate action to ensure that our Proposals are fully
and properly considered by the board of CTC.

We believe there is a compelling case for the modernisation of the Caledonia and
CTC group structure along the lines set out above and that if implemented the
Proposals would lead to a significant uplift in value for all shareholders.
Hermes and Schroders, in the absence of suitable alternative proposals from the
board of Caledonia, have reached the same view and have committed to support the
Proposals.  We believe the Proposals are in the best interests of shareholders
of both Caledonia and CTC as a whole.

Finally, on a personal note, this letter represents the culmination of a
dialogue that Sir John Craven has had with Peter Buckley about your affairs,
initially on behalf of the Cayzer-Rotherwick Group, over a period of nearly
three years. The modernisation described in this letter is a refinement of
something very similar that was proposed to Peter Buckley nearly three years ago
but which he declined to discuss at the time.  We have no particular desire to
seek to replace the board of CTC so as to procure the implementation of this
scheme ourselves. Indeed, we would even at this late stage be happy to withdraw
and leave it to the existing boards to carry through the schemes or to combine
our resources with theirs if this would lead to effective proposals being
implemented. Clearly in these circumstances you and the institutional
shareholders of Caledonia would need convincing evidence that the boards of
Caledonia and CTC genuinely intended to implement any such agreed proposals.

You will find as Appendix I to this letter some Questions & Answers which we
hope will address some of the questions you may have regarding the Proposals.

We hope you will share our wish to modernise the Caledonia and CTC structure in
the interests of all the shareholders of both companies.

Yours sincerely



The Boards of CC and CR

Note

You will have by now received the letter of 3 September from CTC's Chairman,
Peter Buckley, in which he briefly dismisses our Proposals as constituting a
'forced liquidation' of assets and a 'cessation of the business'.  As should be
clear from our letter, this is in fact not the case and you are being given a
misleading and inaccurate impression of our Proposals.  The objective of the
Proposals is to restructure rather than shut down the group and, in the process,
to realise its current assets at or close to their NAV.  The preservation of the
Cayzer family business through Cayzer Continuation is a vitally important
element of the Proposals.  Peter Buckley also said in his letter to you that the
Board of CTC concluded that our Proposals were not in the interests of CTC
shareholders as a whole.  We believe that our Proposals have not had a fair
hearing and should be put to CTC shareholders for them to decide.

This letter should be read in conjunction with the Appendices which form a part
of this letter.

                                  Appendix I

                Questions and Answers relating to the Proposals

Please note that the Proposals represent a refined and therefore complex proposition.  The boards of
directors of Caledonia and CTC each received a detailed summary of the Proposals on 10 June 2003.  The
questions and answers set out below refer to several of the key matters arising under the Proposals,
and it is hoped that this will be of assistance to all CTC shareholders when they consider the
Proposals.

Q.1      Are these Proposals intended to represent the breaking up of CTC?
A.       No, they represent a tax efficient restructuring of the Caledonia/CTC structure intended to:

         -          increase liquidity

         -          eliminate the 'double discount' associated with the current structure (Caledonia's
         discount to its net asset value ('NAV') and the further discount at the CTC level reflecting
         tax and other factors such as illiquidity and transfer restrictions)

         -          ensure the Cayzer family's wealth is able to be re-invested in a new company which
         allows shareholders to switch asset classes without incurring Capital Gains Tax ('CGT') and
         thereby allowing shareholders to tailor their investment policy to suit their changing
         requirements

         -          provide, through the establishment of Cayzer Investment Management Limited ('CIML
         '), the opportunity to create additional value through the formation of a new investment
         management business. It is intended that this value would be created by managing assets on
         behalf of existing shareholders, by attracting new assets and by forming strategic
         partnerships with third parties.  The investment in CIML should qualify for business asset
         taper relief

Q.2      Isn't this a fire sale of all Caledonia's assets?

A.       No, as we would only make disposals when we believe we are maximising value:

         -          all the assets of Caledonia and CTC would be sold over a sufficiently long period
         of time such that we believe we should be able to maximise sale proceeds

         -          the management team in place to implement the disposal programme is highly
         experienced and is focused on maximising returns to shareholders

Q.3      Won't I have to now find a new fund manager to manage my assets?

A.       No, we would propose new fund managers to run the investment portfolio initially. However,
         this would be an evolving process and to assist in this we have a short list of private
         investment managers, all of which have expertise in providing unbiased advice and solutions
         to very wealthy families, advising on asset allocation, manager selection and monitoring, and
         giving guidance on the administrative arrangements to be established.  In addition:

         -          we would expect to retain members of the CTC staff to ensure that there is
         continuity of service following the implementation of the Proposals

         -          if a significant proportion of CTC's shareholders want any specific fund manager
         to be involved in managing the investments going forward, we would be happy to discuss this.
         The Proposals are about creating choice, flexibility and diversification

         -          the proposed creation of CIML to take responsibility for providing 'best of breed'
         investment management and to seek third party clients is designed both to preserve the Cayzer
         Trust legacy and to create substantial incremental value over time for Cayzer family members
         and other shareholders opting for CC shares

Q.4      Has Caledonia not performed well over the last 5 to 10 years?

A.       Mercer Investment Consulting ('Mercer'), a division of Mercer Human Resource Consulting
         Limited, has carried out a detailed analysis of Caledonia's historic performance.  Mercer has
         calculated that the total return generated by Caledonia, including both capital gains and
         reinvested dividends, has lagged the FTSE All Share Total Return Index for 48.2% of the
         rolling five year periods from 31 March 1993 (i.e. based on performance starting on 1 April
         1988 to 31 March 2003).  Mercer would expect an A-rated investment manager, who would be put
         forward for new business, to outperform its benchmark at least 70% of the time.

         In addition, Mercer believes there is a perceived risk of investing in Caledonia, as
         reflected by the discount of the share price to the underlying NAV of the company, which is '
         significantly higher than average'(2).  Even with the recent improvement in the share price
         of Caledonia, the boards of CC and CR believe that the discount as at 31 August 2003 of 20.1%
         is far greater than one would expect for an investment trust (average global growth
         investment trust discount of approximately 13%3).

Q.5      Are there any disadvantages in holding shares in a Guernsey based company?

A.       Guernsey source dividends do not have a 10% tax credit for UK taxpayers, unlike UK source
         dividends. However, this disadvantage for UK taxpayers has to be weighed against the ability
         of shareholders to diversify their portfolios across a broad range of asset classes and the
         ability to make changes to their portfolios without incurring CGT.

         A private investment adviser would be asked to provide a pro forma investment solution for
         the interim period during which the realisation process takes place, until such time as each
         individual shareholder's risk profile can be ascertained. This solution would consider a
         suitable asset allocation that aimed to produce a conservative portfolio designed to preserve
         asset value in real terms and also produce a running yield equivalent to that currently
         enjoyed by shareholders (recognising that the dividends would be paid without an associated
         UK tax credit).

         A further compensating factor is that the proposed structure also eliminates the potential
         tax liability CTC would incur, should it sell its shares in Caledonia.  The tax liability
         that would arise on a disposal by CTC of all its investments was recently estimated by CTC to
         be approximately £40 million in the Greenhill & Co. International LLP counter-proposal dated
         29 July 2003.  The greater proportion (which we estimate to be some £37 million) of this tax
         liability relates to CTC's holding in Caledonia. The Proposals would not eliminate the
         potential tax liability on CTC's other investments.

Q.6      Won't this be expensive to implement?

A.       The board and management of CC and CR will be appropriately incentivised to realise the
         assets of Caledonia and maximise value via a controlled and orderly realisation process. An
         independent remuneration committee would be established to safeguard shareholder interests.
         This would comprise a representative of each of the two largest institutional shareholders of
         Caledonia, a member of the existing board of CTC and two representatives of the
         Cayzer-Rotherwick Group.  Incentivisation payments would only be made on demanding pre-agreed
         thresholds and will be linked to the level at which realisations occur as compared to NAV. It
         is envisaged that the precise terms for that incentivisation arrangement will be agreed with
         representatives of existing shareholders of Caledonia and CTC.

         The professional costs and costs of incentivisation arising during the two year realisation
         process are expected to be approximately £29 million. This takes into account anticipated
         approximate costs of:

         -          £13.5 million associated with retaining current executives and staff in Caledonia
         and CTC necessary to serve your requirements as clients and to assist in the orderly
         realisation process;

         -          £10.5 million of third party advisers' costs associated with the implementation of
         the Proposals and the realisation process; and

         -          £5.0 million of costs associated with remunerating and incentivising the staff and
         employees of CC and CR for the purposes of the realisation process.

         These figures are an estimate of the likely costs based on the professional experiences of
         the directors of CC and CR and the actual costs may be more or less than this sum. The
         intention of the boards of CC and CR will be to seek to minimise these costs where possible,
         without reducing the effectiveness with which the realisation process will be implemented. As
         indicated elsewhere in this letter, the exact basis of remuneration and incentivisation would
         be agreed by an independent remuneration committee.  However, in assessing the total expected
         cost of approximately £29 million over two years, it should be noted that the current annual
         running costs of the CTC/Caledonia structure exceed  £9 million per annum.

Q.7      How long would it all take?

A.       Many of the realisations, particularly for the quoted investments, would be expected to take
         place quite quickly.  However we have deliberately allowed for an orderly and controlled
         realisation process to extract maximum value from the assets and strategic premiums as
         appropriate. We have allowed for a period of about two years to realise the assets in
         Caledonia and either re-invest or return cash to shareholders.  Shareholders electing to
         receive cash could expect to receive interim cash distributions during this period.

Q.8      What would happen to my dividends?

A.       The Proposals (as currently formulated) include a dividend payment to all CTC shareholders at
         the same rate as the last dividend which was paid, in order to ensure shareholders maintain
         the same level of income in the first transition year.

         In respect of subsequent years, investors who wish to maximise dividend income will be able
         to do so by shaping their investment portfolio (through their interest in CC) so as to focus
         on income yielding assets.

Q.9      How experienced is the management team?

A.       A very strong management team has been assembled to implement the Proposals:

         -          Sir John Craven has been involved in similar situations in the past, including the
         Robert Fleming & Co situation;

         -          Nick Morrell has a great deal of experience in rationalising portfolios,
         particularly at Lonrho plc;

         -          Stanislas Yassukovich has extensive experience of the financial services and fund
         management business having been Chairman of Merrill Lynch Europe and Deputy Chairman of the
         London Stock Exchange;

         -          Simon Murray was Group Managing Director of Hutchison Whampoa for 10 years,
         Managing Director of Deutsche Bank, Asia and is now Chairman of Simon Murray & Associates;

         -          Hugh Ward was CEO of Invesco UK, one of the largest managers of assets for private
         individuals in the country; and

         -          Rupert Evans is a partner at Ozannes, a Guernsey based law firm and holds a
         significant number of other directorships.

Q.10     Will I have any liability for tax?

A.       The Inland Revenue has given tax clearances for the implementation of the Proposals through
         share for share exchange offers. We have been advised by Deloitte & Touche LLP that there is
         no reason to believe the Inland Revenue would not give a similar clearance for the
         implementation of the Proposals by way of schemes of arrangement. Accordingly, no tax should
         be due on this initial share for share exchange.  CTC shareholders who elect for CR shares
         would be liable for tax when they receive cash during the realisation process.

         The actual tax due would depend on each CTC shareholder's individual circumstances and on
         whether or not such shareholder splits his or her acceptances between CC and CR.  Further
         details will be provided in the event that formal proposals are put to shareholders.

Q.11     How would the Proposals impact future liability to Inheritance Tax?

A.       We believe that the opportunities for inheritance tax minimisation under the original CTC
         structure have been eroded by legislative changes and a wider diversity of family
         circumstances. As is the situation currently, it would be the responsibility of each
         shareholder to seek advice on tax planning. One of the functions of CIML would be to assist
         shareholders in formulating a financial plan to suit their individual and family
         circumstances. Inheritance Tax planning would form part of this advice.

         As contemplated by the clearances granted by the Inland Revenue, shareholders electing to
         receive shares in CC also would receive a loan note allowing each CC shareholder to
         participate in the capitalisation of CIML. This investment would be held directly and not
         through CC. CIML is expected to qualify for business asset taper relief which, under current
         legislation, attracts CGT at 10%. Over time, we believe this would allow shareholders to
         accumulate a further store of value in a much more tax effective way than that offered by
         CTC.

Q.12     I have read in the newspapers that the Board of Caledonia believes the Proposals to be value
         destructive.  Is this true?

A.       We believe our Proposals, which are supported by the two largest institutional shareholders
         in Caledonia, will maximise value.  The Proposals:

         -          seek to close the discount to NAV that Caledonia's shares currently trade at;

         -          seek to re-organise the CTC / Caledonia group in a tax efficient way; and

         -          would provide shareholders with an opportunity to reinvest the realisation
         proceeds in a new investment company that would give shareholders the ability to invest their
         capital to suit their needs.

         In summary, they are a further evolution of the Cayzer Family's affairs which started with
         the disposal of the shipping business followed by the sale of British & Commonwealth. The
         Proposals essentially privatise the Cayzer family interests in a way which we believe should
         allow it to flourish over the next period in its now long history.




                                  Appendix II

                                    General

1.             The contents of this letter, including the Appendices, for which
the boards of Caledonia Realisation Limited and Cayzer Continuation Limited are
responsible, have been approved by Deutsche Bank AG London ('Deutsche Bank')
solely for the purpose of Section 21 of the Financial Services and Markets Act
2000.

2.             Deutsche Bank, which is regulated by the Financial Services
Authority for the conduct of designated investment business in the UK, is acting
for CC and CR and no one else in connection with the Proposals referred to in
this letter and will not be responsible to anyone other than CC and CR for
providing the protections afforded to clients of Deutsche Bank or for providing
advice in connection with the Proposals or any other transaction or arrangement
referred to herein.

3.             Deloitte & Touche LLP is acting for CC and CR and no one else in
connection with the Proposals and will not be responsible to anyone other than
CC and CR for providing advice in connection with the Proposals or any other
transaction or arrangement referred to herein.

4.             Mercer Investment Consulting ('Mercer'), a division of Mercer
Human Resource Consulting Limited, is acting for CC and CR and no one else in
connection with the Proposals and will not be liable to anyone other than CC and
CR for providing the protections afforded to clients of Mercer, nor be
responsible for providing advice in connection with the Proposals or any other
transaction or arrangement referred to herein.

5.             Each of Deutsche Bank, Deloitte & Touche LLP and Mercer has given
and not withdrawn its consent to the references to themselves in this letter in
the form and context in which they appear.

--------------------------

(1) Total number of issued ordinary shares in Caledonia not owned by CTC or
members of the Cayzer family and related entities (other than the
Cayzer-Rotherwick Group as defined above).

(2) Source:  Caledonia Investments plc interim results presentation to 30
September 2002

3 Source:  Caledonia Investments plc annual results presentation (April 2003)


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