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Caledonia Inv PLC (CLDN)

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Thursday 01 December, 2005

Caledonia Inv PLC

Interim Results

Caledonia Investments PLC
01 December 2005

Caledonia Investments plc

Interim results for the six months ended 30 September 2005



Key points


•    2.5% outperformance of NAV per share against FTSE All-Share over six
     months

•    131% total shareholder return outperformance over five years (137% vs 6%)

•    153% total shareholder return outperformance over ten years (268% vs 115%)

•    Company total return for the six months of £150m (237p per share)

•    4.6% increase in interim dividend to 9.1p

•    £57m invested and £111m of assets realised

•    Narrowing of share price discount to NAV from 11% to 7% over the six months





Tim Ingram, Chief Executive, commented:



'Our total returns continue significantly to outperform our benchmarks whilst we
remain, as ever, vigilant in our evaluation of all opportunities. An area of
particular interest to us is India, where we are supporting the launch of the
India Capital Growth Fund and have already made a number of successful
investments. Although we continue to see a strong flow of good opportunities, we
have realised more than we have invested over the past six months and market
conditions suggest that we are likely to remain significantly liquid for at
least the next twelve months.'





                                                                 1 December 2005





Enquiries:

Caledonia Investments plc                       020 7802 8080
    Tim Ingram, Chief Executive
    Jonathan Cartwright, Finance Director

College Hill                                    020 7457 2020
    Tony Friend
    Roddy Watt






Chairman's statement



Results

The first half of our third year as an investment trust company has again shown
outperformance in the growth of our net assets per share compared with the FTSE
All-Share index. The improvement of 14.2% to 1762p compared with an uplift in
the index of 11.7%, speaks for itself and represents the fifth consecutive six
monthly period of outperformance since we became an investment trust. Our longer
term total return performance over five and ten years continues to show handsome
comparisons with our benchmarks, as detailed by Tim Ingram in his chief
executive's report.



Dividends

The directors have declared an increased interim dividend of 9.1p per share,
representing an uplift of 4.6%. This increase is in line with our policy of
maintaining a progressive annual dividend.



Share price

The discount of our share price to the corresponding net assets per share has
continued to narrow over the period under review, reducing from 11.4% to 7.3%. I
would again remind shareholders that our share price is ultimately not within
our control, but we have made determined efforts to widen the appeal of our
shares, particularly to retail investors.



Portfolio

Our portfolio continues to reflect our longer term approach to investment and
the importance which we attach to the quality of investee management teams and
our ability to work closely with them. The period under review, and since, has
seen an eagerness by some to pay high prices for assets and businesses and this
has led to some worthwhile disposals for us. Such high values however are not so
conducive to making investments and, although we continue to see an interesting
flow of opportunities, we remain determined not to overpay. As a result, our
liquidity has increased markedly over the six months from £40m to £82m,
notwithstanding that we have invested some £57m during the six month period.
Since the end of the half year our liquidity has again increased significantly
as a result of further realisations.



Details of the changes in our portfolio are given in the chief executive's
report and include a further reduction of our holding in Kerzner International
and, since the end of the period, the realisation of Paladin Resources and
Sterling Hydraulics. Paladin is by far the largest of the realisations, which
should generate some £108m in cash, giving an expected internal rate of return
in excess of 40%. Our largest new investment comprised £18m for a 22% stake in
Satellite Information Services, a distributor of media to betting offices. We
believe the prospects in India and China offer good scope for economic growth
and we have modestly increased our interests in the former and have made our
first small direct investment in the latter.



Outlook

Stock market values have continued to grow over the past six months,
notwithstanding the substantial increase in the price of oil. In the past, such
increases have impacted markets unfavourably, but this time, because such
increases, when taken over the longer term, have not outrun inflation, markets
have not so far been adversely affected. Other factors, such as the blatant
unwillingness of European governments to foster more open and competitive
economies, cause us greater worry and we are not therefore concerned about our
present strong liquid position. Rather, this gives us the strength to continue
making investments according to our well proven investment strategy, which is
not overly dependent on stages in the economic cycle.




Peter Buckley

Chairman

Chief executive's report



Markets

The six months to 30 September 2005 initially saw some strong gains in equity
markets. Although price multiples are not particularly excessive, the influence
of significantly higher oil prices and faltering consumer spending - with very
high levels of consumer debt - are likely to have some effect on markets.
Although we take a long term view on our investments, we have nonetheless been
increasing liquidity and our cash position over the six months has grown from
£40m (4.0%) to £82m (7.3%). In the two months since the end of September, our
cash position has substantially increased as a result of further investment
sales. As explained in the chairman's statement, this strong cash position does
not so much arise from our taking a deliberate view to become more liquid, but
is more the result of a good period for realisations while also a period where
it has been more difficult to find good new investments at attractive price
levels.



Performance

Our five year total shareholder return ('TSR') to 30 September 2005 was 137%,
while the FTSE All-Share Total Return was just 6%. Over the ten year period, our
TSR of 268% contrasts well with the 115% total return of the FTSE All-Share. Our
TSR performance puts us easily into the top quartile of global growth investment
trusts for both the five and ten year periods.



Since our conversion to investment trust status on 1 April 2003, our published
net asset value ('NAV') per share has increased by 94% to 1762p, representing an
outperformance of 36% over this 30-month period when compared with the FTSE
All-Share index. As explained more fully in the finance director's report, our
NAV per share figure at 30 September 2005 has been prepared for the first time
on an International Financial Reporting Standards ('IFRS') basis, which has had
the effect of reducing the reported NAV per share by 10p (0.6%) compared with
the figure calculated in accordance with UK Generally Accepted Accounting
Practice.



Share price discount

Although our efforts are essentially concentrated on growing NAV per share while
maintaining our progressive dividend policy, we have continued to implement
measures that can have a beneficial effect on narrowing the discount of our
share price to NAV per share. These initiatives have included broadening the
awareness of our shares among retail investors, whom we believe to have long
term aspirations congruent with our own objectives. The percentage of our
shareholder register owned by private shareholders continues steadily to
increase.



In line with these initiatives, our share price discount has continued to narrow
from 11.4% at 31 March 2005 to 7.3% at 30 September 2005.



Activity

In the first six months of our financial year, we have made £57m of new and
follow-on investments. Nearly half of these were new investments and included
£18.0m for a 22% stake in Satellite Information Services, a UK unquoted company
specialising in the distribution of media to licensed betting offices. Follow-on
investments included a further £8.2m in Alok Industries, an Indian listed
textile manufacturing company, bringing the total cost of our investment in Alok
to £11.4m for a 10.6% holding.




Over the same period we realised £111m of investments. These included £24.9m
from our share in the sale of assets of General Practice Group, which builds and
owns doctors' surgeries in the UK, £22.5m from a sale of part of our holding in
Kerzner International, the US listed resorts developer and operator, and £20.4m
from the sale of our entire shareholding in F&C Asset Management, the UK quoted
fund manager.



Since the end of our half year, we announced the sale of 25m shares in the oil
and gas company, Paladin Resources, to Talisman Energy Resources for 355p per
share, producing £88.7m in cash, and that we have given an undertaking to accept
Talisman's agreed public offer for Paladin at 355p per share in respect of our
remaining 5.5m shares, which has now gone unconditional. We agreed to the
outright sale of the 25m shares to enable the public offer to proceed following
recommendations from Paladin's management, whom we have backed for many years.
We also, in October, announced the sale of Sterling Hydraulics, a division of
our wholly owned subsidiary, Sterling Industries, for £33.2m in cash. In
addition, in October, we received £10.7m in cash from our share in the sale of
MORI, the market research company.



Given our increasing liquidity during the first half of our financial year, we
reduced our committed term bank facilities to £10m, and in October cancelled
these altogether, while retaining our £10m overdraft facility for operational
reasons.



The future

We continue to see a strong flow of good business opportunities where our long
term active approach is valued and can create outperformance. We are, however,
cautious in our evaluation of such opportunities and our present expectations
are that we are likely to remain significantly liquid for at least the next
twelve months.





Tim Ingram

Chief executive

Finance director's report



The chairman's statement and the chief executive's report contain information on
the company's performance during the period under review. This report addresses
the effect of adopting International Financial Reporting Standards ('IFRS') for
the first time, our investment valuation policy and discusses the cash position
of the company.



International Financial Reporting Standards

European Union regulation requires the next annual consolidated financial
statements of the company, for the year ending 31 March 2006, to be prepared in
accordance with IFRS.



These interim accounts have been prepared in accordance with IFRS for the first
time. The overall effect as at 30 September 2005 has been to reduce the reported
net asset value ('NAV') per share by 10p to 1762p, compared with the NAV per
share that would have been reported under UK Generally Accepted Accounting
Practice ('UK GAAP'). The key elements affecting the preparation of our
September 2005 results are as follows:


-    The requirement under IAS 39 'Financial Instruments: Recognition and 
     Measurement' to value quoted investments at bid price. We previously 
     reported quoted investments at mid-market price under UK GAAP.


-    The requirement under IFRS 2 'Share-based Payment' to expense the fair 
     value of share options granted over the vesting period. There was no such 
     requirement under UK GAAP.



Valuation policy

Investments have been valued by the directors in compliance with the principles
of the International Private Equity and Venture Capital Valuation Guidelines.



It should be noted that actual proceeds from the disposal of any individual
investment from the portfolio will inevitably depend upon market and economic
conditions prevailing at the time.



Unquoted investments

Unquoted investments are stated at amounts considered by the directors to be a
reasonable assessment of their fair value, subject to the requirement to apply a
degree of caution in making the necessary estimates. Fair value is the amount at
which an asset could be exchanged between knowledgeable, willing parties in an
arm's length transaction.



Investments are valued at cost for a limited period after the date of
acquisition.



The earnings multiple method is used for investments in established businesses
with an identifiable stream of continuing earnings that can be considered to be
maintainable. Profits before interest and tax of the current year will normally
be used and adjusted to a maintainable basis, taxed at the full corporation tax
rate and multiplied by an appropriate and reasonable earnings multiple.



Where a company is loss-making, or the value is derived mainly from the
underlying value of its assets rather than its earnings, the valuation may be
calculated with regard to the underlying net assets.



Where there has been a subsequent recent investment by a third party that is
deemed to be at arm's length, this may be used as the basis of valuation. In
cases where an exit is actively being sought, any offers from potential
purchasers would be relevant in assessing the valuation of an investment and are
taken into account in arriving at the valuation.



Where appropriate, a marketability discount, in the range of 10% to 30%, may be
applied to the investment valuation, based on the likely timing of an exit, the
influence over that exit, the risk of achieving conditions precedent to that
exit and general market conditions.



In arriving at the value of an investment, the percentage ownership is
calculated after taking into account any dilution through outstanding warrants,
options and performance related mechanisms.



Quoted investments

Quoted investments are valued at bid price or the conventions of the market on
which they are quoted subject, if appropriate, to marketability discounts where
formal restrictions on trading exist.



Cash flow and gearing

The company's activities in the six months to 30 September 2005 resulted in net
funds rising from £39.6m to £82.3m. In consequence of this increased liquidity,
we reduced the quantum of our committed bank facilities during the period from
£70m to £10m and, following additional liquidity events after the period end,
have cancelled the remainder whilst retaining an overdraft facility of £10m. We
have placed all but £40m of the funds on term deposit with investment grade
banks, the balance being placed in money market funds where we believe that
enhanced returns should be available at acceptable levels of risk.





Jonathan Cartwright

Finance director

Investment review

Financial



Close Brothers

valuation: £149.5m; holding: 12.4%

Close Brothers is the largest independent quoted merchant bank in the UK and
Caledonia has been a supportive shareholder for nineteen years. The success of
this investment, due in no small part to its sound management, has resulted in
it remaining our largest investment by value at 30 September 2005,
notwithstanding that, in 1998 and 2004, we realised proceeds aggregating to some
£104m.



For its year to 31 July 2005, Close Brothers reported another set of good
results. Earnings before tax and goodwill amortisation rose by 11% despite quite
difficult trading conditions, yielding a return on shareholders' funds amounting
to 26%. The contribution from the asset management division increased strongly
by 83% to £31.8m, with funds under management rising by 27% to £7.1bn. Corporate
finance income rose by 18% and market making continued to make a strong
operating margin of 37% on income, with an even better return on funds employed,
though slightly behind the previous year. Banking produced a higher overall
result despite more difficult trading conditions. It is encouraging to note that
all four divisions have made a good start to their current financial year.



Rathbone Brothers

valuation: £39.7m; holding: 11.1%

Rathbone Brothers is a leading provider of discretionary fund management and
wealth management services for private clients and trustees.



For the six months to 30 June 2005, Rathbones again reported significantly
improved results. Pre-tax profits (before one-off costs of £1.4m associated with
its unsuccessful approach to Rensburg) increased by 21.1% to £16.1m. Total funds
under management rose by 9.1% to £8.4bn, including funds under management in the
unit trust company which are now over £1bn. Reported earnings per share rose by
9.4% to 25.5p (2004 - 23.3p) but, excluding one-off costs, the six months
earnings would have risen by 19.5%. The interim dividend was increased by 9.5%
to 11.5p per share.



Oval

valuation: £17.9m; holding 27.4%

Oval is a UK commercial insurance and financial services broking business with
annualised fee and commission turnover of about £50m. It was established in 2003
to acquire and integrate the best of the regional insurance broking businesses
available in this fragmented sector, using a combination of cash and its own
shares. Caledonia has been involved from the start and has provided a total of
£17m in equity and convertible loan stock. Oval has now acquired, and begun
integrating, the seven businesses of RP Hodson, Bland Bankart, Beddis &
Partners, Halkett Associates, Barfield, Lochain Patrick (a Lloyd's broker now
renamed Oval International) and, most recently, John Eke. Oval made a profit
before tax of £2m in its year to 31 May 2005 and its rapid growth has enabled it
to improve the terms of trade with insurers. Further economies of scale should
be achievable and more acquisitions are planned.



Marketform

valuation £14.7m; holding: 26.8%

Marketform is an unlisted Lloyd's insurance business in which its management has
a substantial stake. It manages the business of a consortium of medical
malpractice underwriters on a fee and profit commission basis and participates
in the consortium through its own syndicate which also underwrites general
liability insurance. All of its business is outside the USA. In 2003, Caledonia
became a minority shareholder through an investment totalling £15m in equity and
convertible loan notes. Marketform made a profit before tax of £6.2m in its year
to 31 December 2004, which was broadly in line with expectations. Premium rates
have steadied and the outlook continues to be attractive.





Leisure and media



Kerzner International

valuation: £91.5m; holding: 8.1%

Kerzner International ('KI') is a leading developer, owner and operator of
luxury resort hotels and gaming properties worldwide. Caledonia has been
involved with KI's management since the 1980s and was a founder investor in KI
in 1994.



In June of this year, Caledonia again top-sliced its holding in KI, realising a
further £22.5m at $58.01 per share. We have now realised about half of our
original holding and the fact that our remaining 2.9m shares still constituted
our fourth largest investment at 30 September gives some indication of its
success.



KI's results for the nine months to 30 September 2005 showed record adjusted net
income of $96.7m, reflecting a 31% increase over the comparable period in 2004.
This improvement reflected a strong performance from Paradise Island in The
Bahamas, which was not affected by hurricane activity this year, and also from
its luxury One&Only resorts group, in which Palmilla in Mexico recorded
particularly strong growth. The company's interest in the Mohegan Sun casino in
Connecticut continued to improve and contributed $28.8m for the nine months.



KI's $730m Phase III expansion on Paradise Island, due to be fully completed in
2007, commenced this year and the plans to build a new Atlantis hotel resort on
The Palm, Jumeirah, in Dubai are progressing well, with construction expected to
start towards the end of the year and with completion in 2008. KI's interest in
this approximately $1.4bn project comprises a $200m 50% equity stake. In July,
BLB, in which KI has an effective 37% interest, completed the $464m acquisition
of the US operations of Wembley plc, of which the major component is the Lincoln
Park racino in Rhode Island. Plans are in hand to redevelop this facility,
including a substantial increase in the number of video lottery terminals.



A G Barr

valuation: £17.6m; holding: 9.4%

Caledonia has been a long term shareholder and supporter of A G Barr which
manufactures, markets and distributes a range of carbonated soft drinks,
including the well known brands of Irn-Bru and Tizer, as well as juice drinks
and mineral water.




A G Barr announced interim results for its six months to 31 July 2005, which
showed pre-tax profit growth of 5.7% before exceptional items on unchanged
turnover and an increase of 5.4% in the interim dividend. The business is
undergoing substantial change with the re-organisation of its Scottish
operations and this was a good performance in tough market conditions for
carbonated drinks. Management remain confident that the restructuring will
deliver significant benefits in due course and of their ability to meet market
expectations for the full year.



Incisive Media

valuation: £15.0m; holding: 9.5%

Incisive Media is one of the UK's foremost specialist providers of business
information. Through leading magazines, consultancy, conferences and
exhibitions, websites and a variety of other platforms, it serves a number of
business sectors, especially in retail and wholesale financial markets.
Caledonia first invested in Incisive Media in April 2004.



For its six months to 30 June 2005, Incisive Media reported an increase in total
revenues of 12% and a 3% growth in pre-tax profits. Diluted earnings per share,
reported on an IFRS basis for the first time, fell by 8%, reflecting both
investment in organic growth and, in part, some weakness in advertising revenues
in the second quarter. Management remain confident of a good second half and
full year prospects.



Incisive Media recently acquired Search Engine Strategies, a market leading
business that arranges trade shows and provides information in the online
marketing sector. We were able to increase our shareholding in Incisive Media
through the placing of equity to finance this acquisition.





Industrial and services



Paladin Resources

valuation: £95.7m; holding: 8.9%

Paladin is an independent oil and gas exploration and production company with
assets in the North Sea, both in the UK and Norwegian waters, Australia,
Indonesia, Romania, Tunisia and Gabon. Paladin reported very strong growth in
its half year results to 30 June 2005. Production levels rose 10% to 46,000
barrels of oil equivalent per day ('boepd'), but the strength of the oil price
was the main driver of financial returns. Revenue rose to £177.4m, with pre-tax
profits rising by 115% to £101.6m and earnings per share increasing from 4.5p to
11.9p. The company announced a 79% increase in its interim dividend to 1.0p per
share and the board outlined plans for a substantial increase in the final
dividend. Most encouragingly, management indicated that they expected production
levels to have reached 60,000 boepd by the year end.



In early October, the board of Paladin announced that it had received and was
recommending an offer from Talisman Energy Resources, a listed Canadian oil and
gas company, to purchase the entire share capital at 355p per share, valuing the
company at £1.2bn. As a result of this offer, Caledonia was able to realise its
entire holding for a sum of £108m, as explained in the chief executive's report.



Our holding in Paladin, which returned over six times our investment, was based
upon our long standing relationship with its management, whom Caledonia had
previously backed in Clyde Petroleum. Roy Franklin and his team should be
congratulated on their consistent ability to create value for shareholders.



Sterling Industries

valuation: £30.3m; holding: 100%

Sterling Industries comprises two divisions, Hydraulics and Thermal Process.
Sterling Hydraulics is a specialist designer and manufacturer of hydraulic
valves primarily used in the construction machinery sector. Following a period
of strong growth, both in the market in which Sterling Hydraulics operates and
in the profits of the company, it was decided to take advantage of consolidation
within this sector and sell this division to Parker Hannifin Corporation of the
US for £33.2m. This sale completed in October 2005.



The remaining Thermal Process division consists of three separate businesses.
Process Combustion Control is an environmental process combustion contractor
specialising in heat transfer and pollution control systems, Bloom Engineering
is a manufacturer of burner systems and GCD designs systems for the production
of fibreglass.



Offshore Logistics/Bristow

valuation £28.1m; holding: 5.6%

Offshore Logistics, together with its affiliate company, Bristow Helicopters, is
a major provider of helicopter transportation services to the oil and gas
industry worldwide. In June 2005, Offshore Logistics reported net income for the
year to 31 March 2005 of $2.29 per diluted share compared with $1.64 for the
previous year on the same basis.



In February 2005, the company announced the initiation of an internal
investigation by outside counsel into certain payments made in a country in
which the company's affiliated entities operate. The review has since been
widened and a number of personnel have left the company. In June 2005, the
company announced that an antitrust investigation of helicopter transportation
providers in the Gulf of Mexico, including Offshore Logistics, had been
commenced by the US Department of Justice. In August 2005, Offshore Logistics
entered into an agreement with its bondholders for a temporary waiver of
defaults that would otherwise have arisen through the late filing of regulatory
returns to the US Securities and Exchange Commission occasioned by the internal
investigation.



Notwithstanding these events, the company continues to explore new business
opportunities as activity levels remain high within the oil and gas support
services sector.



Melrose Resources

valuation: £21.6m; holding: 6.6%

Melrose is an oil and gas exploration and production company quoted in London
with operations in Bulgaria, Egypt and the USA. Melrose announced strong interim
results for its six months to 30 September 2005, highlighting a 301% increase in
production. The half year has also seen significant development of the
portfolio, with a six year extension to the El Mansoura Consession in Egypt and
the award of further exploration ground in south east El Mansoura. Gas
production rose from 3.4 billion cubic feet equivalent ('bcfe') to 13.8 bcfe,
driving post tax profits from $2.4m to $17.7m. Profit for the period included a
net gain of $3.8m on the sale of shares in Renova Energy, which floated on the
AIM market.



Capital expenditure amounted to $31.5m, of which $11.7m was spent on
exploration, mainly in Egypt, and $19.8m on development projects. During the
second half of the year, a comprehensive exploration programme will see
prospects in Egypt and Bulgaria drilled, as well as recent finds in Egypt being
brought into production.



Wallem

valuation: £20.7m; holding: 79.0%

Wallem is a maritime services group based in Hong Kong. Caledonia has been a
shareholder of Wallem for over 13 years. Wallem's activities encompass ship
management, shipping and air cargo agency services, ship and cargo broking and
maritime software development.



Wallem continues to perform very well and reported record operating profits
equivalent to over £5m in the year to 30 September 2005. The growth in the fleet
of ships under management was a major factor in this performance, coupled with
strong agency profits in Japan and encouraging results from other Asian
operations.



Our economic interest in Wallem has increased slightly in the period under
review as a result of Wallem buying in shares owned by former employees.



Satellite Information Services

valuation: £18.0m; holding: 22.0%

The core business of Satellite Information Services ('SIS') is the provision of
an integrated information service consisting of pictures, commentary and data to
the betting industry, predominantly in the UK and Ireland, as well as overseas.
SIS plays a pivotal role in supplying information on horse and greyhound racing
and other betting events via satellite to over 9,000 licensed betting offices in
the UK and Ireland. In addition, SIS provides outside broadcast, media
production and distribution services to domestic and international clients,
including three of the UK's largest news broadcasters.



We invested in SIS and gained board representation in May 2005 when we bought a
22% stake for £18.0m. SIS is performing well against its budget for the year to
31 March 2006 and we are pleased with the progress of this new investment.



Tribal Group

valuation: £12.6m; holding: 7.9%

Tribal Group is a leading UK provider of professional support and consultancy
services. It offers a wide portfolio of consultancy and managed services across
the UK outsourcing market in the areas of consulting, technology, resourcing,
training, property, communications and healthcare delivery. Tribal continued to
deliver revenue growth, with turnover for the year to 31 March 2005 up 24% at
£229.5m (2004 - £185.7m). Caledonia purchased an additional 0.5m shares in
Tribal in September, taking our holding to 7.9%, since when we have increased it
to just over 8.0%.



Easybox

valuation: £12.4m; holding: 100%

Easybox is a self storage business operating in Italy and Spain, founded as a
joint venture in 2000. The business was formed following the sale of Abacus, a
successful UK self storage business, in conjunction with the Abacus management.
Caledonia bought out its joint venture partner in 2003.




The first six month period of this financial year has followed much the same
trend as previous years, notably strong growth from April to mid-July, followed
by a negative trend during the during the second half of July and August when
many businesses are closed and potential new customers are on holiday. However,
a strong performance in September saw a full recovery to the pre-holiday
position and good growth has continued through October. Madrid was the best
performing centre during this period, followed closely by Rome and Milano
Centro.



While we have not yet managed to acquire any new centres this year, we are in
advanced negotiations for two properties in Italy which we hope to add to our
portfolio in the near future. The Spanish property market continues to offer few
opportunities.





Property



Quintain Estates and Development

valuation: £52.2m; holding: 7.0%

Quintain is a property investment and development company specialising in the
more challenging financial characteristics of commercial properties. For the
year ended 31 March 2005, Quintain once again reported strong growth and an
improvement in asset value of 22%, some 7% ahead of the Investment Property
Databank index. It continues to make good progress on its high profile special
projects at Wembley and the Greenwich Peninsula.



Savills

valuation: £16.6m; holding: 3.0%

Savills is a listed property agency and advisory business operating in the UK,
Continental Europe and the Far East. Recognising the strength and calibre of the
management team, and the potential for value creation, Caledonia built up a
stake of just over 3%, mainly in 2003.



For the first six months to 30 June 2005, Savills' revenues and adjusted basic
earnings per share both increased by 12.7%. There was particularly good
performance in the commercial markets both in the UK and overseas, with the
Asian geographical area showing a very strong first half.



Savills' share price further strengthened by nearly 37% during the six months to
30 September 2005 and we have reduced our stake to just under 3%.





Managed general funds



British Empire Securities

valuation:£119.4m; holding: 18.8%

British Empire is a UK investment trust whose objective is to achieve capital
growth from a focused portfolio of investments, particularly in companies whose
share price stand at a discount to estimated underlying net asset value.
Caledonia has been a significant shareholder for almost 15 years. The
performance of British Empire in its year to 30 September 2005 was outstanding.
Net asset value on a total return basis rose by 43.9%, outperforming its MSCI
benchmark index by 22%. British Empire once again performed strongly against its
peers and was ranked first over both three and five year periods in the AITC
Global Growth sector.




Levels of liquidity in the portfolio rose during the year as a result of
realising some profitable holdings. This in turn resulted in higher income and
British Empire was able to declare a special dividend of 1.4p per share in
addition to increasing the basic annual dividend by 29%.



The combination of growth in asset value and the strengthening of the premium at
which its shares trade, resulted in the share price of British Empire rising by
21.4% in the period under review. Caledonia took advantage of this share price
premium to reduce its holding slightly and reinvested part of the proceeds in
the AVI Global Fund, which is an open-ended fund run by the same management
team.



Cobepa

valuation: £26.2m; holding: 9.4%

Compagnie Benelux Paribas SA ('Cobepa') is a Belgian investment company with an
attractive portfolio of listed and unlisted investments. Caledonia was part of a
consortium that purchased Cobepa from BNP Paribas in 2004.



The portfolio was valued at €499m as at 30 June 2005, the largest holding being
Dicobel, the parent company of Autoglass. During the period a number of
divestments occurred, including part of the Dicobel holding, part of the holding
in NAVTEQ, the NYSE listed provider of in-car navigation systems and Groupe
Josi, a Belgian holding company. Investments were made in Carmeuse, a company
based in Belgium, which is one of the two worldwide lime producers, and
Carrieres du Hainaut, a Belgian quarry that produces and sells a unique blue
marble.



Polar Capital funds

valuation: £25.1m

Polar Capital is a research driven fund management company, providing a highly
entrepreneurial environment for talented managers within a structure that offers
a level of marketing, administrative and operational support normally only found
in much larger organisations. Funds under management are in excess of $2bn.



In the last six months, Polar has added utility and currency teams to the
operation, and has plans to expand its European and emerging markets teams.
Performance across the portfolio of funds has been very strong, with the
European Market Neutral fund leading the way.



Aberforth LP fund

valuation: £22.3m; holding: 25.5%

This managed limited partnership fund was launched in March 2001, with an
initial life of four years and potential annual extensions for a further two
years. The fund has entered its first extension period. Caledonia's original
commitment of £25m was called down by 31 March 2003 and by 30 September 2005 had
been fully repaid, together with an additional £9m from underlying realisations.
The carrying value of £22.3m as at 30 September 2005 represents Caledonia's
remaining interest in the fund as at that date.



Cumulative to 30 September 2005, the fund generated an IRR of almost 34% per
annum, based upon both realised and unrealised gains, demonstrating significant
outperformance against both the FTSE All-Share and FTSE Small Cap indices. The
Aberforth team has once again shown considerable skill in both stock selection
and the timing of disinvestment. The Aberforth LP fund has also benefited from
the sale of its significant shareholding in Paladin.



Eddington Triple Alpha Fund

valuation: £18.0m

Eddington Capital was co-founded by Caledonia in 2003 as a specialist manager of
high return fund of hedge funds. Its core fund, the Triple Alpha Fund, in which
Caledonia invested £15m, was launched two years ago and has returned 20.9% since
inception, although the return for the last six months was 4.5%.



The environment for hedge funds since the half year has been challenging and
some of this year's gains in the Triple Alpha Fund have been given up. However,
this is hoped to be short lived and more normal market conditions are expected
to return.





Other



Alok Industries

valuation: £15.8m; holding: 10.6%

Alok Industries is an Indian textile manufacturing business listed in Mumbai,
28.3% owned, and managed by, the Jiwrajka family. Our decision to invest was
based partly on the fact that Alok was well placed to take advantage of the
removal of World Trade Organisation textile export quotas in January 2005. This
event produced excellent market conditions for Alok, which reported post-tax
profits for the year to 31 March 2005 of £11.4m and £5.8m for the six months to
30 September 2005.



The equity stake we have built up represents Caledonia's first significant
investment in India. Following our earlier investment totalling £3.4m, in May
2005, we subscribed £8.2m in a further bond issue, which we also converted to
equity.



A vigorous expansion programme, enabling Alok to grow its output of home
textiles, apparel fabric and garments, is in progress. India's textile
manufacturers provide European and American buyers with a much valued source of
supply, in addition to China. Alok is also well positioned to benefit from the
continued growth in Indian domestic demand for cotton textiles.

Significant holdings


                                                                                           Proportion
                               Equity    Country of                                            of net
Name                          holding    incorporation  Nature of business          Total      assets
                                    %                                                  £m           %
Close Brothers 1,2               12.4    UK             Merchant banking            149.5        13.4
British Empire Securities 1,2    18.8    UK             Investment trust            119.4        10.7
Paladin Resources 1               8.9    UK             Oil and gas exploration      95.7         8.6
Kerzner International 1,2         8.1    Bahamas        Resort owner and             91.5         8.2
                                                        operator
Quintain Estates and              7.0    UK             Property holding/            52.2         4.7
Development 1                                           development
Rathbone Brothers 1,2            11.1    UK             Fund management              39.7         3.6
Sterling Industries 2             100    UK             Engineering                  30.3         2.7
Offshore Logistics/Bristow 1,2    5.6    USA/UK         Helicopter services          28.1         2.5
Cobepa 2                          9.4    Belgium        Investment company           26.2         2.4
Polar Capital funds 3                    UK             Hedge and long only          25.1         2.2
                                                        funds
Aberforth LP fund 3              25.5    UK             Managed fund                 22.3         2.0
Melrose Resources 1               6.6    UK             Oil and gas exploration      21.6         1.9
Wallem 2                         79.0    Cayman         Shipping services            20.7         1.9
Satellite Information            22.0    UK             Betting information          18.0         1.6
Services 2                                              distribution
Eddington Triple Alpha Fund 3            UK             Fund of hedge funds          18.0         1.6
Oval 2                           27.4    UK             Insurance services           17.9         1.6
A G Barr 1                        9.4    UK             Soft drinks                  17.6         1.6
Savills 1,2                       3.0    UK             Property agency              16.6         1.5
Alok Industries 1                10.6    India          Textiles                     15.8         1.4
Incisive Media 1,2                9.5    UK             Publishing                   15.0         1.3
Marketform 2                     26.8    UK             Insurance services           14.7         1.3
Tribal Group 1                    7.9    UK             Support services             12.6         1.1
Easybox 2                         100    Luxembourg     Self storage                 12.4         1.1
Other investments                                                                   167.1        15.0
Total investments                                                                 1,048.0        93.9
Net liquid assets                                                                    67.8         6.1
Net assets                                                                        1,115.8       100.0




1.  Equity securities listed on the UK or overseas stock exchanges.
2.  Board representation.
3.  Advisory committee representation.



The table above shows all holdings representing 1% or more of total assets.


Portfolio distributions



Sector

                                                                                  £m             %
Financial                                                                      252.6          22.6
Leisure and media                                                              155.6          14.0
Industrial and services                                                        254.4          22.8
Property                                                                       103.9           9.3
Managed general funds                                                          254.7          22.8
Other                                                                           26.8           2.4
Net liquid assets                                                               67.8           6.1
                                                                             1,115.8         100.0



Category

                                                                                  £m             %
Equities - quoted                                                              697.8          62.4
Equities - unquoted                                                            179.2          16.1
Loans and fixed income                                                          59.8           5.4
Private equity LPs                                                              52.4           4.7
Hedge and other funds                                                           58.8           5.3
Net liquid assets                                                               67.8           6.1
                                                                             1,115.8         100.0



Geography

                                                                                  £m             %
United Kingdom                                                                 845.0          75.8
Continental Europe                                                              56.2           5.0
North America                                                                  152.0          13.6
Asia and Far East                                                               59.9           5.4
Latin America                                                                    2.7           0.2
                                                                             1,115.8         100.0

Based on country of domicile or underlying spread for funds.



Currency

                                                                                  £m             %
Pounds sterling                                                                947.7          84.9
US dollar                                                                       77.6           7.0
Euro                                                                            43.8           3.9
Other                                                                           46.7           4.2
                                                                             1,115.8         100.0

Based on currency of investment, net of currency hedges.



Sector weighting against the FTSE All-Share

                                                          Portfolio        Portfolio          FTSE
                                                                                         All-Share
                                                                 £m                %             %
Financial                                                     252.6             24.1          21.9
Leisure and media                                             155.6             14.8          10.5
Industrial and services                                       254.4             24.3          27.5
Property                                                      103.9              9.9           4.2
Managed general funds                                         254.7             24.3           2.5
Other                                                          26.8              2.6          33.4
                                                            1,048.0            100.0         100.0

Based on Caledonia's grouping of the FTSE industry sectors.


Company income statement
for the six months ended 30 September 2005 (unaudited)


                          6 mths to 30 Sep 2005   6 mths to 30 Sep 2004   Year to 31 March 2005
                          Revenue Capital  Total Revenue  Capital  Total  Revenue Capital Total
                              £m      £m     £m       £m       £m     £m      £m      £m     £m
Gains/(losses) on
investments
    held at fair value
    through
    profit or loss             -   154.2  154.2        -     34.1   34.1       -   159.0  159.0
Gains/(losses) on forward
    currency contracts         -    (6.7)  (6.7)       -      0.1    0.1       -     5.8    5.8
                               -   147.5  147.5        -     34.2   34.2       -   164.8  164.8
Income
Investment and other         9.3       -    9.3      7.2        -    7.2    18.9       -   18.9
income
Expenses
Management expenses         (5.6)      -   (5.6)    (5.2)       -   (5.2)  (10.6)      -  (10.6)
Transaction costs              -    (0.5)  (0.5)       -     (0.1)  (0.1)      -    (0.2)  (0.2)
Settlement proposals           -       -            (0.4)       -   (0.4)   (0.4)      -   (0.4)
costs
                            (5.6)   (0.5)  (6.1)    (5.6)    (0.1)  (5.7)  (11.0)   (0.2) (11.2)
Profit before finance        3.7   147.0  150.7      1.6     34.1   35.7     7.9   164.6  172.5
costs
Finance costs               (0.7)      -   (0.7)    (0.6)       -   (0.6)   (1.0)      -   (1.0)
Profit before tax            3.0   147.0  150.0      1.0     34.1   35.1     6.9   164.6  171.5
Taxation                       -     0.3    0.3      1.0     (0.6)   0.4     1.9    (2.0)  (0.1)
Profit for the period        3.0   147.3  150.3      2.0     33.5   35.5     8.8   162.6  171.4

Earnings per ordinary
share
Basic                                     237.1p                   52.4p                  260.9p
Diluted                                   236.1p                   52.2p                  260.0p




The total column of this statement represents the company's income statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under guidance published by the Association of
Investment Trust Companies. All items in the above statement derive from
continuing operations.





Company statement of recognised income and expense
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Actuarial gains/(losses) on defined benefit pension schemes              1.2       0.3       1.3
Tax on items taken directly to equity                                      -      (0.1)     (0.3)
Net income recognised directly in equity                                 1.2       0.2       1.0
Transfers
Profit for the period                                                  150.3      35.5     171.4
Total recognised income and expense                                    151.5      35.7     172.4






Company statement of movements in equity
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Balance at period start                                                978.3     917.8     917.8
Total recognised income and expense                                    151.5      35.7     172.4
Ordinary dividends                                                     (12.4)    (13.4)    (18.9)
Elective special dividend                                                  -     (88.0)    (88.0)
Share-based payments                                                     0.2       0.2       0.3
Purchase of own shares                                                  (1.8)     (1.1)     (5.3)
Balance at period end                                                1,115.8     851.2     978.3





Company balance sheet
at 30 September 2005 (unaudited)


                                                                       30 Sep    30 Sep    31 Mar
                                                                         2005      2004      2005
                                                                           £m        £m        £m
Non-current assets
Investments held at fair value through profit or loss                 1,045.2     851.0     944.3
Investments in subsidiaries                                               2.8       2.8       2.8
                                                                      1,048.0     853.8     947.1
Current assets
Operating and other receivables                                           2.4       2.5       4.5
Forward currency contracts                                                3.4       4.0       1.4
Current tax assets                                                        4.1       5.0       3.5
Cash and cash equivalents                                                82.3       2.6      39.6
                                                                         92.2      14.1      49.0
Total assets                                                          1,140.2     867.9     996.1
Current liabilities
Operating and other payables                                             (2.7)     (2.7)     (4.1)
Forward currency contracts                                               (9.4)     (0.1)     (0.7)
Current tax liabilities                                                  (9.0)     (0.6)        -
Borrowings from subsidiaries                                                -     (10.2)    (10.2)
                                                                        (21.1)    (13.6)    (15.0)
Non-current liabilities
Employee obligations                                                     (1.4)     (3.1)     (2.3)
Deferred income tax liabilities                                          (1.9)        -      (0.5)
                                                                         (3.3)     (3.1)     (2.8)
Total liabilities                                                       (24.4)    (16.7)    (17.8)
Net assets                                                            1,115.8     851.2     978.3

Equity
Ordinary share capital                                                    3.6       3.6       3.6
Share premium                                                             1.3       1.3       1.3
Capital redemption reserve                                                1.2       1.2       1.2
Retained earnings - non-distributable                                   752.8     481.9     607.3
Retained earnings - distributable                                       356.9     363.2     364.9
Total equity                                                          1,115.8     851.2     978.3

Net asset value per ordinary share                                      1762p     1338p     1543p






Company cash flow statement
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Cash flow from operating activities
Dividends received                                                       8.5       7.8      15.7
Interest received                                                        3.4       2.6       4.3
Management and other operating expenses paid                            (7.4)     (6.8)    (11.4)
Group relief received                                                    1.1       0.9       1.5
Net cash from operating activities                                       5.6       4.5      10.1
Cash flow from investing activities
Purchase of investments                                                (58.9)    (85.9)   (127.4)
Sale of investments                                                    110.6     145.6     218.5
Receipts from forward currency contracts                                   -         -       8.8
Capital distributions from investments                                     -       5.8       8.8
Proceeds from liquidation of a subsidiary                                9.0         -         -
Net cash from investing activities                                      60.7      65.5     108.7
Cash flow from financing activities
Interest paid                                                           (0.4)     (0.6)     (1.0)
Distributions paid to holders of equity shares                         (12.4)    (13.4)    (18.9)
Elective special dividend paid                                             -     (88.0)    (88.0)
Issue of loans                                                             -       1.3         -
Redemption of long term loans                                          (10.3)     (4.7)     (4.8)
Purchase of own shares                                                  (0.5)     (0.8)     (5.3)
Net cash from financing activities                                     (23.6)   (106.2)   (118.0)
Net increase/(decrease) in cash and cash equivalents                    42.7     (36.2)      0.8
Cash and cash equivalents at period start                               39.6      38.8      38.8
Cash and cash equivalents at period end                                 82.3       2.6      39.6






Consolidated income statement
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Gains/(losses) on investments held at fair value through profit or     133.6      32.8     160.2
loss
Gains/(losses) on forward currency contracts                            (6.7)      0.1       5.8
                                                                       126.9      32.9     166.0
Income
Investment and other income                                              9.1       6.9      16.7
Expenses
Management expenses                                                     (5.6)     (5.2)    (10.6)
Transaction costs                                                       (0.5)     (0.1)     (0.2)
Settlement proposals costs                                                 -      (0.4)     (0.4)
                                                                        (6.1)     (5.7)    (11.2)
Profit from investing operations                                       129.9      34.1     171.5
Trading operations
Revenue from sales of goods and services                                60.4      57.5     123.7
Other operating expenses                                               (55.1)    (56.2)   (122.8)
Gains on investment property                                               -         -       1.1
Share of results of joint ventures                                       0.4       0.2       0.6
Profit from trading operations                                           5.7       1.5       2.6
Profit before finance costs                                            135.6      35.6     174.1
Finance costs                                                           (1.5)     (1.2)     (2.4)
Profit before tax                                                      134.1      34.4     171.7
Taxation                                                                (0.4)     (1.1)     (3.6)
Profit for the period                                                  133.7      33.3     168.1

Attributable to
Equity holders of the parent                                           133.7      33.2     167.9
Minority interest                                                          -       0.1       0.2
                                                                       133.7      33.3     168.1

Earnings per ordinary share
Basic                                                                 211.1p     49.0p    255.8p
Diluted                                                               210.2p     48.9p    254.9p





Consolidated statement of recognised income and expense
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Gains/(losses) on revaluation of available for sale investments          0.7       0.4       0.4
Exchange differences on translation of foreign operations                1.7       0.8      (0.2)
Actuarial gains/(losses) on defined benefit pension schemes              1.0      (0.4)      1.0
Tax on items recognised directly in equity                              (0.3)     (0.1)        -
Net income recognised directly in equity                                 3.1       0.7       1.2
Profit for the period                                                  133.7      33.3     168.1
Total recognised income and expense for the period                     136.8      34.0     169.3

Attributable to
Equity holders of the parent                                           136.8      33.9     169.1
Minority interest                                                          -       0.1       0.2
                                                                       136.8      34.0     169.3






Consolidated balance sheet
at 30 September 2005 (unaudited)


                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Non-current assets
Goodwill                                                                 3.5       4.9       3.6
Other intangible assets                                                  0.6       0.1       0.6
Investment property                                                      4.1       3.0       4.1
Property, plant and equipment                                           76.3      79.5      78.6
Investments held at fair value through profit or loss                  959.6     788.2     881.2
Interests in joint ventures                                              8.8       3.2       7.5
Available for sale investments                                           4.4       3.2       3.9
Deferred income tax assets                                               1.0       1.0       0.8
                                                                     1,058.3     883.1     980.3
Current assets
Inventories                                                             24.2      26.0      23.3
Operating and other receivables                                         28.3      28.3      31.3
Forward currency contracts                                               3.4       4.0       1.4
Current tax assets                                                       3.8       3.4       1.9
Cash and cash equivalents                                              102.2      11.3      51.3
                                                                       161.9      73.0     109.2
Total assets                                                         1,220.2     956.1   1,089.5
Current liabilities
Operating and other payables                                           (26.2)    (24.1)    (29.0)
Forward currency contracts                                              (9.4)     (0.1)     (0.7)
Current tax liabilities                                                 (9.4)    (10.2)    (10.0)
Borrowings                                                              (5.1)     (1.4)     (3.0)
                                                                       (50.1)    (35.8)    (42.7)
Non-current liabilities
Borrowings                                                             (39.5)    (36.9)    (38.1)
Employee obligations                                                   (14.6)    (16.2)    (14.5)
Deferred income tax liabilities                                         (2.5)     (0.3)     (1.4)
                                                                       (56.6)    (53.4)    (54.0)
Total liabilities                                                     (106.7)    (89.2)    (96.7)
Net assets                                                           1,113.5     866.9     992.8

Equity
Ordinary share capital                                                   3.6       3.6       3.6
Share premium                                                            1.3       1.3       1.3
Capital redemption reserve                                               1.2       1.2       1.2
Foreign exchange translation reserve                                     0.1       0.8      (0.2)
Fair value reserve                                                       0.7      (0.3)      0.3
Retained earnings                                                    1,106.0     859.5     985.7
Equity attributable to holders of the parent                         1,112.9     866.1     991.9
Minority interest                                                        0.6       0.8       0.9
Total equity                                                         1,113.5     866.9     992.8






Consolidated cash flow statement
for the six months ended 30 September 2005 (unaudited)


                                                                    6 mths to 6 mths to  Year to
                                                                      30 Sep    30 Sep    31 Mar
                                                                        2005      2004      2005
                                                                          £m        £m        £m
Cash flow from operating activities
Dividends received                                                       8.4       7.3      13.5
Interest received                                                        3.3       2.3       3.7
Management expenses paid                                                (6.4)     (6.6)    (11.4)
Cash received from trade customers                                      62.0      57.5     123.1
Cash paid to trade suppliers                                           (55.4)    (52.3)   (109.2)
Income taxes paid                                                       (1.7)     (1.1)     (2.0)
Net cash from operating activities                                      10.2       7.1      17.7
Cash flow from investing activities
Purchases of property, plant and equipment                              (1.4)     (2.7)     (3.7)
Proceeds on disposal of property, plant and equipment                    1.6       3.1       1.6
Purchases of investments held at fair value through profit or loss     (58.7)    (83.3)   (121.4)
Proceeds on disposal of investments held at fair value through         110.8     144.5     217.6
profit or loss
Proceeds on sale of foreign currency contracts                             -         -       8.8
Purchase of interest in joint venture                                   (1.1)        -      (4.6)
Purchase of subsidiary net of cash acquired                             (0.1)     (1.7)     (2.2)
Proceeds on disposal of subsidiary                                         -       1.8       3.3
Net cash from investing activities                                      51.1      61.7      99.4
Cash flow from financing activities
Interest paid                                                           (1.5)     (1.2)     (2.2)
Distributions paid to holders of equity shares                         (12.4)    (13.4)    (18.9)
Dividends paid to minority interests                                       -      (0.1)     (0.1)
Elective special dividend paid                                             -     (88.0)    (88.0)
Issue of loans                                                           1.7       0.1         -
Redemption of long term loans                                           (0.1)     (6.1)     (4.9)
Purchase of own shares                                                  (0.5)     (0.8)     (5.3)
Net cash from financing activities                                     (12.8)   (109.5)   (119.4)
Net increase/(decrease) in cash and cash equivalents                    48.5     (40.7)     (2.3)
Cash and cash equivalents at period start                               48.4      50.7      50.7
Exchange gains/(losses) on cash and cash equivalents                     0.2      (0.3)        -
Cash and cash equivalents at period end                                 97.1       9.7      48.4




Notes to the financial information



1.  General information

Caledonia Investments plc is an investment trust company incorporated in
England. The address of its registered office is Cayzer House, 30 Buckingham
Gate, London SW1E 6NN. The ordinary shares of the company are listed on the
London and New Zealand Stock Exchanges.



This financial information is presented in pounds sterling because that is the
currency of the primary economic environment in which Caledonia operates.



This unaudited interim financial information has been approved for issue by the
board of directors on 1 December 2005. The comparative figures for the financial
year ended 31 March 2005 are not the company's statutory accounts for that
financial year. Those accounts, which were prepared under UK Generally Accepted
Accounting Practice, have been reported on by the company's auditors and
delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain statements under section 237(2) or (3) of the
Companies Act 1985.





2.  Accounting policies

Basis of preparation

The interim financial information has been prepared in accordance with
International Financial Reporting Standards ('IFRS') for the first time. The
disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS
are given in note 6.



The interim financial information has been prepared on the historical cost
basis, except for the revaluation of financial instruments and investment
properties. The principal accounting polices adopted are set out below.



Caledonia is an investment trust company. However, because it holds majority
stakes in certain investments, it is required to prepare group accounts that
consolidate the results of such investments. In order to present information
that is consistent with other investment trust companies, Caledonia also
publishes separate financial statements of the company, which include
investments in subsidiaries at fair value.



Where presentational guidance set out in the Statement of Recommended Practice
('SORP') for investment trusts, issued by the Association of Investment Trust
Companies ('AITC') in January 2003, is consistent with the requirements of IFRS,
the separate financial information of the company has been prepared on a basis
compliant with the SORP.



Foreign currency translation

The functional currency of the company is pounds sterling. Transactions in
currencies other than pounds sterling are recorded at the rates of exchange
prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date. Gains and losses
arising on retranslation are included in net profit or loss for the period.




On consolidation, the assets and liabilities of the group's overseas operations
are translated at exchange rates prevailing on the balance sheet date. Income
and expense items are translated at the average exchange rates for the period
unless exchange rates fluctuate significantly. Exchange differences arising, if
any, are classified as equity and transferred to the group's foreign exchange
translation reserve. Such exchange differences are recognised as income or as
expenses in the period in which the operation is disposed of.



Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.



Investments

Investments are recognised and derecognised on a trade date where a purchase or
sale of an investment is under a contract whose terms require delivery of the
investment within the timeframe established by the market concerned, and are
initially measured at cost, excluding transaction costs.



Investments held by the company and by subsidiary investment companies as part
of the group's business of investing in financial assets are designated as
measured at fair value through profit or loss. In the separate financial
statements of the company, investments in subsidiaries that are regarded as part
of the company's investing business are also designated as measured at fair
value through profit or loss. Other investments in subsidiaries are accounted
for at cost in the separate financial statements of the company and other
investments held by subsidiaries are designated as available for sale.



Investments designated as at fair value through profit or loss or as available
for sale are measured at subsequent reporting dates at fair value. Gains and
losses arising from changes in the value of investments designated as fair value
through profit or loss are included in net profit or loss for the period. For
available for sale investments, gains and losses arising from changes in fair
value are recognised directly in equity until the investment is disposed of or
is determined to be impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the net profit or loss for the
period.



Quoted investments are valued at bid price or the last traded price when a bid
price is not available. Unquoted investments are valued using recognised
valuation methodologies, in accordance with the International Private Equity and
Venture Capital Guidelines, which reflect the amount for which an asset could be
exchanged between knowledgeable, willing parties on an arm's length basis.



Income

Dividends receivable on equity shares are recognised as revenue for the period
on an ex-dividend basis. Where no ex-dividend date is available, dividends
receivable on or before the period end are treated as revenue for the period.
Provision is made for any dividends not expected to be received. The fixed
returns on debt securities and non-equity shares are recognised on a time
apportionment basis so as to reflect the effective yield on the debt securities
and shares. Interest receivable from cash and short term deposits is accrued to
the end of the period.



For trading subsidiaries, revenue comprises the fair value of the sale of goods
and services, net of value-added tax, rebates and discounts and after
eliminating sales within the group. Sales of goods are recognised when goods are
delivered and title has passed. Sales of services are recognised in the
accounting period in which the services are rendered, by reference to completion
of the specific transaction, assessed on the basis of the actual service
provided as a proportion of the total services to be provided.



Expenses

All expenses are accounted for on an accruals basis. In the separate financial
statements of the company, all expenses are presented as revenue items in the
income statement, except that expenses of acquisition of an investment
designated as held at fair value through profit or loss or expenses of an
aborted acquisition of an investment are presented as capital items and expenses
of disposal of an investment are deducted from the disposal proceeds of the
investment.



Taxation

The tax expense represents the sum of the tax currently payable and deferred
tax.



The tax currently payable is based on the taxable profit for the period. Taxable
profit differs from net profit as reported in the Income Statement because it
excludes items of income or expense that are taxable or deductible in other
periods and it further excludes items that are never taxable or deductible. The
group's liability for current tax is calculated using tax rates that were
applicable at the balance sheet date.



In line with the recommendations of the SORP, tax is allocated between the
revenue and capital columns of the company's Income Statement based on the
nature of the transaction that gives rise to the tax charge or relief.



Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Investment trusts which have approval as such under section 842
of the Income and Corporation Taxes Act 1988 are not liable for taxation on
capital gains.



The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.



Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the Income Statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.



Dividend distribution

Interim and final dividends are recognised in the period in which they are
declared.



Employee benefits - pension schemes

Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.



For defined benefit retirement benefit schemes, the cost of providing benefits
is determined using the projected unit credit method, with actuarial valuations
being carried out at each balance sheet date. Actuarial gains and losses are
recognised in full in the period in which they occur. They are recognised
outside profit or loss and are presented in the statement of recognised income
and expense.




Past service cost is recognised immediately to the extent that the benefits are
already vested and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.



The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised
past service cost and as reduced by the fair value of scheme assets. Any asset
resulting from this calculation is limited to past service cost, plus the
present value of available refunds and reductions in future contributions to the
plan.



Employee benefits - profit-sharing and bonus plans

The group recognises a liability and an expense for bonuses and profit-sharing,
based on a formula that takes into consideration the profit attributable to the
company's shareholders after certain adjustments. The group recognises a
provision where contractually obliged or where there is a past practice that has
created a constructive obligation.



Employee benefits - National Insurance on share option scheme gains

National Insurance contributions payable on the exercise of certain employee
share options at the date of exercise have been charged as an expense. The
charge is based on the difference between the market value of the underlying
shares at the balance sheet date and the option exercise price and calculated at
the latest enacted National Insurance contributions rate.



Share-based payment

The group has applied the requirements of IFRS 2 'Share-based Payment' to all
grants of equity instruments, including those granted on or before 7 November
2002, for which the fair value has been publicly disclosed on the company's
website.



The group issues equity-settled share-based payments to certain employees.
Equity-settled share-based payments are measured at fair value at the date of
grant and the fair value is expensed on a straight-line basis over the vesting
period, based on the group's estimate of shares that will eventually vest.



Fair value is measured by use of a trinomial model. The model takes account of
the early exercise behaviour of employees by assuming that exercise takes place
whenever the stock price reaches a certain multiple of the strike price. The
model also considers the possibility that employees will leave the company
early, before and after the vesting period.



An ESOP trust is used for distributing option shares to employees under
Caledonia's share remuneration schemes. The trustee purchases shares with money
lent interest free by Caledonia and transfers shares to participating employees
on receipt of the requisite consideration.



The transactions the ESOP trust undertakes are considered to be performed by the
trust as an agent for Caledonia. The transactions of the ESOP are included in
the separate financial statements of the parent company and, following the
requirements of SIC 12, in the consolidated financial statements as if they
arose in that company. Own shares held by the ESOP trust as at the balance sheet
date are accounted for as if they were treasury shares.



Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation
and any recognised impairment loss.




Depreciation is charged so as to write off the cost of assets, other than land
or properties under construction, over their estimated useful lives, using the
straight-line method, on the following bases:


Buildings                                    25-40 years
Plant and machinery                          10-15 years
Equipment and motor vehicles                 3-8 years



Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, over the term of the
relevant lease.



The gain or loss on the disposal or retirement of an asset is determined as the
difference between the sales proceeds and the carrying amount of the asset and
is recognised in the income statement.



Investment property

Investment property, which is property held to earn rentals and/or for capital
appreciation, is stated at its fair value at the balance sheet date. Gains and
losses arising from changes in the fair value of investment property are
included in the income statement for the period in which they arise.



Brands and trademarks

Brands and trademarks are measured initially at purchase cost and are amortised
on a straight-line basis over their estimated useful lives.



Goodwill

Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary, associate or jointly controlled entity
at the date of acquisition.



Goodwill is recognised as an asset and reviewed for impairment at least
annually. Any impairment is recognised immediately in profit or loss and is not
subsequently reversed.



On disposal of a subsidiary, associate or jointly controlled entity, the
attributable amount of goodwill is included in the determination of the profit
or loss on disposal.



Goodwill arising on acquisitions before the date of transition to IFRS has been
retained at the previous UK GAAP amounts, subject to being tested for impairment
at that date. Goodwill written off to reserves under UK GAAP prior to 1998 has
not been reinstated and is not included in determining any subsequent profit or
loss on disposal.



Impairment of assets

At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists, an
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount, if any. The recoverable amount is the
higher of an asset's fair value less costs to sell and value in use. For the
purposes of assessing impairment, intangible assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating
units).



Inventories

Inventories are stated at the lower of cost and net realisable value. Cost
comprises direct materials and, where applicable, direct labour costs and those
overheads that have been incurred in bringing the inventories to their present
location and condition. Cost is calculated using the first-in, first-out method.
Net realisable value represents the estimated selling price less all estimated
costs of completion and costs to be incurred in marketing, selling and
distribution.



Receivables

Receivables do not carry any interest and are stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable amounts.



Cash and cash equivalents

Cash comprises cash on hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash and that are subject to an insignificant risk of changes in
value.



Borrowings

Interest-bearing bank loans and overdrafts are recorded at the proceeds
received, net of direct issue costs. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are accounted for on an
accrual basis to the income statement using the effective interest method and
are added to the carrying amount of the instrument to the extent that they are
not settled in the period in which they arise.



Borrowings include preference shares in subsidiaries held by third parties that
fall under the definition of financial liabilities under IAS 32.



Share capital

Equity instruments issued by the company are recorded at the proceeds received,
net of direct issue costs.



Where any group company and the ESOP trust purchases the company's equity share
capital, the consideration paid, including any directly attributable incremental
costs (net of income taxes), is deducted from equity attributable to the
company's equity holders until the shares are cancelled, reissued or sold. Where
such shares are subsequently sold or reissued, any consideration received, net
of any directly attributable incremental transaction costs and the related
income tax effects, is included in equity attributable to the company's equity
holders.



Derivative financial instruments and hedge accounting

Derivatives are recognised at fair value on the date a contract is entered into
and are subsequently re-measured at their fair value.



Changes in the fair value of derivative financial instruments that are
designated and effective as hedges of future cash flows are recognised directly
in equity and any ineffective portion is recognised immediately in the income
statement. The amount in equity is released to income when the forecast
transaction impacts profit or loss.




For an effective hedge of an exposure to changes in the fair value, the hedged
item is adjusted for changes in fair value attributable to the risk being
hedged, with the corresponding entry in profit or loss. Gains or losses from
re-measuring the derivative, or for non-derivatives the foreign currency
component of its carrying amount, are recognised in profit or loss.



Changes in the fair value of derivative financial instruments where hedge
accounting is not applied are recognised in the income statement as they arise.
If capital in nature, the associated change in value is presented as a capital
item in the income statement.



Hedge accounting is discontinued when the hedging instrument or the hedged item
expires or is sold, terminated, exercised or no longer qualifies for hedge
accounting.



Basis of consolidation - subsidiaries

The consolidated financial statements include the financial statements of the
company and entities controlled by the company (its subsidiaries) made up to the
balance sheet date. Control is achieved where the company has the power to
govern the financial and operating policies of the investee entity so as to
obtain economic benefits from its activities.



On acquisition, the assets, liabilities and contingent liabilities of a
subsidiary are measured at fair values at the date of acquisition. Any excess of
the cost of acquisition over the fair values of the identifiable net assets
acquired is recognised as goodwill. Any deficiency in the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e. discount on
acquisition) is credited to the income statement in the period of acquisition.
The interest of minority shareholders is stated at the minority's proportion of
the fair values of the assets and liabilities recognised. Subsequently, any
losses applicable to the minority interest in excess of the minority interest
are allocated against the interests of the parent.



The results of subsidiaries acquired or disposed of during the period are
included in the consolidated income statement from the effective date of
acquisition or up to the effective date of disposal, as appropriate.



Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used in line with those used by
the group.



All intra-group transactions, balances, income and expenses are eliminated on
consolidation.



Basis of consolidation - associates

An associate is an entity over which the group is in a position to exercise
significant influence, but not control or joint control, through the financial
and operating policy decisions of the investee.



As Caledonia is an investment trust company, and its investments held in
associates are designated as held at fair value through profit or loss, the
provisions of IAS 28 'Investments in Associates' do not apply. Such investments
are measured at fair value, with changes in fair value recognised in profit or
loss in the period in which they occur.



No other group company held investments in associates.



Basis of consolidation - joint ventures

A joint venture is a contractual arrangement whereby two or more parties
undertake an economic activity that is the subject of joint control.




As Caledonia is an investment trust company, and its interests in joint ventures
are designated as held at fair value through profit or loss, the provisions of
IAS 31 'Interests in Joint Ventures' do not apply. Such interests are measured
at fair value, with changes in fair value recognised in profit or loss in the
period in which they occur. However, the provisions of IAS 31 do apply to
interests in joint ventures held by other companies in the group, as set out
below.



The results and assets and liabilities of joint ventures are incorporated in
these financial statements using the equity method of accounting, except when
classified as held for sale. Interests in joint ventures are carried in the
balance sheet at cost as adjusted by post-acquisition changes in the group's
share of net assets of the joint ventures, less any impairment in the value of
individual investments. Losses of the joint ventures in excess of the group's
interest in those joint ventures are not recognised.



Any excess of the cost of acquisition over the group's share of the fair values
of the identifiable net assets of the joint ventures at the date of acquisition
is recognised as goodwill. Any deficiency in the cost of acquisition below the
group's share of the fair values of the identifiable net assets at the date of
acquisition is credited in profit or loss in the period of acquisition.



Where a group company transacts with joint ventures of the group, profits and
losses are eliminated to the extent of the group's interest in the relevant
joint ventures. Losses may provide evidence of an impairment of the asset
transferred, in which case appropriate provision is made for impairment.



IFRS restatement

The company has relied on exemptions detailed in IFRS 1 in respect of business
combinations and cumulative translation differences.





3.  Earnings per share

The calculation of the basic and diluted earnings per share, in accordance with
IAS 33, is based on the following:


                                                        Company                  Group
                                                  6 mth   6 mth Year to   6 mth   6 mth Year to
                                                    to      to              to      to
                                                30 Sep  30 Sep  31 Mar  30 Sep  30 Sep  31 Mar
                                                  2005    2004    2005    2005    2004    2005
                                                    £m      £m      £m      £m      £m      £m
Earnings for the purpose of basic earnings
    per share being net profit attributable
    to equity holders of the parent              150.3    35.5   171.4   133.7    33.2   167.9

                                                No '000 No '000 No '000 No '000 No '000 No '000

Weighted average number of ordinary shares
    for the purposes of basic earnings per      
    share                                       63,394  67,780  65,697  63,344  67,730  65,647
Effect of dilutive potential ordinary shares
Share options                                      275     216     224     275     216     224
Weighted average number of ordinary shares
    for the purposes of diluted earnings per    
    share                                       63,669  67,996  65,921  63,619  67,946  65,871





4.  Dividends

                                               6 mth to 6 mth to Year to  6 mth to 6 mth to Year to
                                                30 Sep   30 Sep   31 Mar   30 Sep   30 Sep   31 Mar
                                                  2005     2004     2005     2005     2004     2005
                                                 pence    pence    pence       £m       £m       £m
Interim dividend                                                     8.7                        5.5
Final dividend                                    19.5     18.6     18.6     12.4     13.4     13.4
                                                  19.5     18.6     27.3     12.4     13.4     18.9



The directors have declared an interim dividend of 9.1p per ordinary share
amounting to £5.8m, payable on 10 January 2006 to shareholders registered on 9
December 2005. The shares will be quoted ex-dividend on 7 December 2005.





5.  Net asset value per ordinary share

Company

The net asset value per ordinary share is based on the net assets attributable
to the equity shareholders of £1,115.8m at 30 September 2005 (£851.2m at 30
September 2004 as restated and £978.3m at 31 March 2005 as restated) and on
63.313m (63.596m at 30 September 2004 and 63.396m at 31 March 2005) ordinary
shares, being the number of ordinary shares in issue at the period end.





6.  Restatement of balances

This is the first period that the company has presented its financial
information under IFRS. The following disclosures explain the transition from UK
GAAP to IFRS at the date of transition (1 April 2004) and at the end of the
latest periods presented in the most recent financial statements under UK GAAP
for the company and the group.



Reconciliation of equity from UK GAAP to IFRS

Company


                                At 1 Apr 2004        At 30 Sep 2004         At 31 Mar 2005
                               UK  Adjust-           UK  Adjust-            UK  Adjust-
UK GAAP description    Note  GAAP   ments   IFRS  GAAP1   ments   IFRS    GAAP   ments   IFRS    IFRS description
                               £m      £m     £m     £m      £m     £m      £m      £m     £m
Fixed assets                                                                                     Non-current assets
Investments             d   893.0    (2.8)        857.9    (2.8)         951.4    (2.8)          Investments held at
                                                                                                 fair
                        f            (3.1) 887.1           (4.1) 851.0            (4.3) 944.3    value through
                                                                                                 profit or loss
                        d             2.8    2.8            2.8    2.8             2.8    2.8    Investments in
                                                                                                  subsidiaries
                            893.0    (3.1) 889.9  857.9    (4.1) 853.8   951.4    (4.3) 947.1
Current assets                                                                                   Current assets
Debtors                 i    12.7    (5.7)         11.4    (5.0)           9.4    (3.5)
                        s            (3.9)   3.1           (3.9)   2.5            (1.4)   4.5    Operating and other
                                                                                                 receivables
                        s             3.9    3.9            4.0    4.0             1.4    1.4    Forward currency
                                                                                                 contracts
                        i             5.7    5.7            5.0    5.0             3.5    3.5    Current tax assets
Short term deposits     j    32.8   (32.8)          0.3    (0.3)          36.4   (36.4)
Cash at bank and in     j     6.0    32.8   38.8    2.3     0.3    2.6     3.2    36.4   39.6    Cash and cash
hand                                                                                             equivalents
                             51.5       -   51.5   14.0     0.1   14.1    49.0       -   49.0
                            944.5    (3.1) 941.4  871.9    (4.0) 867.9  1,000.4   (4.3) 996.1    Total assets

Current liabilities                                                                              Current liabilities
Creditors due within    i   (18.5)    0.6         (19.0)    0.6          (27.4)
one year
                        k            13.4                   5.5                   12.4
                        l                                  10.2                   10.2
                        s             0.1   (4.4)                 (2.7)            0.7   (4.1)   Operating and other
                                                                                                 payables
                        s            (0.1)  (0.1)          (0.1)  (0.1)           (0.7)  (0.7)   Forward currency
                                                                                                 contracts
                        i            (0.6)  (0.6)          (0.6)  (0.6)                     -    Current tax
                                                                                                 liabilities
                        l                      -          (10.2) (10.2)          (10.2) (10.2)   Borrowings from
                                                                                                 subsidiaries
                            (18.5)   13.4   (5.1) (19.0)    5.4  (13.6)  (27.4)   12.4  (15.0)
Creditors due after                                                                              Non-current
one year                                                                                         liabilities
Long term borrowings         (4.8)          (4.8)     -              -       -              -    Borrowings
Amounts due to              (10.2)         (10.2)     -              -       -              -    Borrowings from
subsidiaries                                                                                     subsidiaries
                        n            (3.3)                 (2.9)                  (1.9)
                        o            (0.2)  (3.5)          (0.2)  (3.1)           (0.4)  (2.3)   Employee obligations
                        h                      -                     -            (0.5)  (0.5)   Deferred income tax
                                                                                                 liabilities
                            (15.0)   (3.5) (18.5)     -    (3.1)  (3.1)      -    (2.8)  (2.8)
                            (33.5)    9.9  (23.6) (19.0)    2.3  (16.7)  (27.4)    9.6  (17.8)   Total liabilities
Net assets                  911.0     6.8  917.8  852.9    (1.7) 851.2   973.0     5.3  978.3    Net assets

Capital and reserves                                                                             Equity
Called up share               4.0            4.0    3.6            3.6     3.6            3.6    Ordinary share
capital                                                                                          capital
Share premium account         1.3            1.3    1.3            1.3     1.3            1.3    Share premium
                        p             1.2    1.2            1.2    1.2             1.2    1.2    Capital redemption
                                                                                                 reserve
Own shares              w    (4.2)    4.2          (5.1)    5.1           (9.1)    9.1
Non-distributable       f   458.0    (3.1)        492.3    (4.1)         621.9    (4.3)
reserves
                        p            (1.2)                 (1.2)                  (1.2)          Retained earnings -
                        w            (4.2) 449.5           (5.1) 481.9            (9.1) 607.3    non-distributable
Distributable reserves  h   451.9                 360.8                  355.3    (0.5)
                        k            13.4                   5.5                   12.4
                        n            (3.3)                 (2.9)                  (1.9)          Retained earnings -
                        o            (0.2) 461.8           (0.2) 363.2            (0.4) 364.9    distributable
Total shareholders'         911.0     6.8  917.8  852.9    (1.7) 851.2   973.0     5.3  978.3    Total equity
funds


1.  The UK GAAP balance sheet at 30 September 2004 has been restated following the adoption of UITF 37 'Purchases
    and Sales of Own Shares'. The impact has been to reduce Investments and own shares by £0.3m. The UK GAAP
    balance sheet at 30 September 2004 has also been restated to allocate forward currency contracts amounting to
    £3.9m from investments to debtors.







Group




                                At 1 Apr 2004         At 30 Sep 2004         At 31 Mar 2005
                               UK  Adjust-            UK  Adjust-            UK  Adjust-

UK GAAP description   Note   GAAP   ments    IFRS  GAAP1   ments   IFRS    GAAP   ments    IFRS    IFRS description
                               £m      £m      £m     £m      £m     £m      £m      £m      £m
Fixed assets                                                                                       Non-current assets
Intangible assets      a      4.9             4.9    4.7     0.2    4.9     3.2     0.4     3.6    Goodwill
                       b              0.1     0.1            0.1    0.1             0.6     0.6    Other intangible
                                                                                                   assets
                       c              0.5     0.5            3.0    3.0             4.1     4.1    Investment property
Fixed assets           b     84.1    (0.1)          82.4    (0.1)          82.0    (0.6)
                       c                     84.0           (2.8)  79.5            (2.8)   78.6    Property, plant and
                                                                                                   equipment
Investments            c    830.5    (0.5)         798.9    (0.5)         898.5    (1.6)
                       f             (3.1)                  (4.1)                  (4.3)
                       e             (2.9)                  (2.9)                  (7.5)           Investments held at
                                                                                                   fair
                       g             (3.5)  820.5           (3.2) 788.2            (3.9)  881.2    value through
                                                                                                   profit or loss
                       e              3.0     3.0            3.2    3.2             7.5     7.5    Interests in joint
                                                                                                   ventures
                       g              3.5     3.5            3.2    3.2             3.9     3.9    Available for sale
                                                                                                   investments
                       h              0.9     0.9            1.0    1.0             0.8     0.8    Deferred income tax
                                                                                                   assets
                            919.5    (2.1)  917.4  886.0    (2.9) 883.1   983.7    (3.4)  980.3
Current assets                                                                                     Current assets
Stocks                       26.4            26.4   26.0           26.0    23.3            23.3    Inventories
Debtors                i     36.6    (4.1)          35.6    (3.4)          34.6    (1.9)
                       s             (3.9)   28.6           (3.9)  28.3            (1.4)   31.3    Operating and other
                                                                                                   receivables
                       s              3.9     3.9            4.0    4.0             1.4     1.4    Forward currency
                                                                                                   contracts
                       i              4.1     4.1            3.4    3.4             1.9     1.9    Current tax assets
Short term deposits    j     40.2   (40.2)           1.3    (1.3)          38.2   (38.2)
Cash at bank and in    j     14.6    40.2    54.8   10.0     1.3   11.3    13.1    38.2    51.3    Cash and cash
hand                                                                                               equivalents
                            117.8       -   117.8   72.9     0.1   73.0   109.2       -   109.2
                           1,037.3   (2.1) 1,035.2 958.9    (2.8) 956.1  1,092.9   (3.4) 1,089.5   Total assets

Creditors due within                                                                               Current liabilities
one year
Other creditors        i    (50.0)   10.6          (39.8)   10.2          (52.1)   10.0
                       s              0.1                                           0.7
                       k             13.4   (25.9)           5.5  (24.1)           12.4   (29.0)   Operating and other
                                                                                                   payables
                       s             (0.1)   (0.1)          (0.1)  (0.1)           (0.7)   (0.7)   Forward currency
                                                                                                   contracts
                       i            (10.6)  (10.6)         (10.2) (10.2)          (10.0)  (10.0)   Current tax
                                                                                                   liabilities
Short term borrowings        (4.3)           (4.3)  (1.4)          (1.4)   (3.0)           (3.0)   Borrowings
                            (54.3)   13.4   (40.9) (41.2)    5.4  (35.8)  (55.1)   12.4   (42.7)
Creditors due after                                                                                Non-current
one year                                                                                           liabilities
Long term borrowings   m    (42.3)   (0.3)  (42.6) (36.7)   (0.2) (36.9)  (37.9)   (0.2)  (38.1)   Borrowings
                       n            (15.7)                 (16.0)                 (14.1)
                       o             (0.2)  (15.9)          (0.2) (16.2)           (0.4)  (14.5)   Employee
                                                                                                   obligations
Deferred tax           h     (1.5)    1.2    (0.3)  (1.1)    0.8   (0.3)   (0.7)   (0.7)   (1.4)   Deferred income tax
                                                                                                   liabilities
                            (43.8)  (15.0)  (58.8) (37.8)  (15.6) (53.4)  (38.6)  (15.4)  (54.0)
                            (98.1)   (1.6)  (99.7) (79.0)  (10.2) (89.2)  (93.7)   (3.0)  (96.7)   Total liabilities
Net assets                  939.2    (3.7)  935.5   879.9  (13.0) 866.9   999.2    (6.4)  992.8    Net assets

Capital and reserves                                                                               Equity
Called up share               4.0             4.0    3.6            3.6     3.6             3.6    Ordinary share
capital                                                                                            capital
Share premium account         1.3             1.3    1.3            1.3     1.3             1.3    Share premium
Capital redemption            1.2             1.2    1.2            1.2     1.2             1.2    Capital redemption
reserve                                                                                            reserve
Own shares             w     (4.6)    4.6           (5.2)    5.2           (9.5)    9.5
                       q                                     0.8    0.8            (0.2)   (0.2)   Foreign exchange
                                                                                                   reserve
                       g                        -           (0.3)  (0.3)            0.3     0.3    Fair value reserve
Revaluation reserve    r    270.6  (270.6)         241.7  (241.7)         325.4  (325.4)
Profit and loss        a    665.6                  636.4     0.2          676.1     0.4
account
                       c                                    (0.3)                  (0.2)
                       f             (3.1)                  (4.1)                  (4.3)
                       e              0.1                    0.3
                       g                                     0.3                   (0.3)
                       h              2.1                    1.8                    0.1
                       k             13.4                    5.5                   12.4
                       n            (15.7)                 (16.0)                 (14.1)
                       o             (0.2)                  (0.2)                  (0.4)
                       q                                    (0.8)                   0.2
                       r            270.6                  241.7                  325.4
                       t             (0.1)                  (0.1)                  (0.1)
                       w             (4.6)  928.1           (5.2) 859.5            (9.5)  985.7    Retained earnings
Total shareholders'         938.1    (3.5)  934.6  879.0   (12.9) 866.1   998.1    (6.2)  991.9    Equity attributable
funds                                                                                              to parent
Minority interests     c      1.1                    0.9                    1.1    (0.1)
                       m             (0.3)                  (0.2)                  (0.2)
                       t              0.1     0.9            0.1    0.8             0.1     0.9    Minority interests
                            939.2    (3.7)  935.5  879.9   (13.0) 866.9   999.2    (6.4)  992.8    Total equity
1.  The UK GAAP balance sheet at 30 September 2004 has been restated to allocate forward currency contracts
    amounting to £3.9m from investments to debtors and to reclassify own shares held by a subsidiary of £0.5m
    previously included in investments.

Reconciliation of profit from UK GAAP to IFRS

Company


                                                 6 mths to 30 Sep 2004    Year to 31 Mar 2005
                                                    UK  Adjust-             UK  Adjust-
                                           Note   GAAP    ments   IFRS    GAAP    ments    IFRS
                                                    £m       £m     £m      £m       £m      £m
Gains/(losses) on investments held at        f    35.0     (1.0)         160.0     (1.2)
    fair value through profit or loss        u              0.1   34.1              0.2   159.0
Gains/(losses) on forward currency                 0.1             0.1     5.8              5.8
contracts
                                                  35.1     (0.9)  34.2   165.8     (1.0)  164.8
Income
Investment and other income                        7.2             7.2    18.9             18.9
Expenses
Management expenses                          o    (4.9)    (0.1)         (10.0)    (0.3)
                                             v             (0.2)  (5.2)            (0.3)  (10.6)
Transaction costs                            u             (0.1)  (0.1)      -     (0.2)   (0.2)
Settlement proposals costs                        (0.4)           (0.4)   (0.4)            (0.4)
                                                  (5.3)    (0.4)  (5.7)  (10.4)    (0.8)  (11.2)
Profit before finance costs                       37.0     (1.3)  35.7   174.3     (1.8)  172.5
Finance costs                                     (0.6)           (0.6)   (1.0)            (1.0)
Profit before tax                                 36.4     (1.3)  35.1   173.3     (1.8)  171.5
Taxation                                     h     0.1      0.3    0.4    (0.1)       -    (0.1)
Profit for the period                             36.5     (1.0)  35.5   173.2     (1.8)  171.4



Group


                                                  At 30 September 2004       At 31 March 2005
                                                    UK  Adjust-              UK  Adjust-
                                          Note    GAAP    ments    IFRS    GAAP    ments    IFRS
                                                    £m       £m      £m      £m       £m      £m
Gains/(losses) on investments held at       f     34.9     (1.0)          161.5     (1.2)
    fair value through profit or loss       g              (0.4)                    (0.5)
                                            q              (0.8)                     0.2
                                            u               0.1    32.8              0.2   160.2
Gains/(losses) on forward currency                 0.1              0.1     5.8              5.8
contracts
                                                  35.0     (2.1)   32.9   167.3     (1.3)  166.0
Income
Investment and other income                 e      6.9              6.9    17.4     (0.7)   16.7
Expenses
Management expenses                         o     (4.9)    (0.1)          (10.0)    (0.3)
                                            v              (0.2)   (5.2)            (0.3)  (10.6)
Transaction costs                           u              (0.1)   (0.1)            (0.2)   (0.2)
Settlement proposals costs                        (0.4)            (0.4)   (0.4)            (0.4)
                                                  (5.3)    (0.4)   (5.7)  (10.4)    (0.8)  (11.2)
Profit from investing operations                  36.6     (2.5)   34.1   174.3     (2.8)  171.5
Trading operations
Revenue from sales of goods and services    a     56.4      0.6           122.7      0.5
                                            q               0.5    57.5              0.5   123.7
Other operating expenses                    a    (55.6)     0.2          (121.9)     0.4
                                            c              (0.3)                    (0.3)
                                            n                                       (0.5)
                                            q              (0.5)  (56.2)            (0.5) (122.8)
Gains on investment property                                          -     1.1              1.1
Share of results of joint ventures          e               0.2     0.2              0.6     0.6
Profit from trading operations                     0.8      0.7     1.5     1.9      0.7     2.6
Profit before finance costs                       37.4     (1.8)   35.6   176.2     (2.1)  174.1
Finance costs                               m     (1.2)            (1.2)   (2.3)    (0.1)   (2.4)
Profit before tax                                 36.2     (1.8)   34.4   173.9     (2.2)  171.7
Taxation                                    h     (1.0)    (0.1)   (1.1)   (2.9)    (0.7)   (3.6)
Profit for the period                             35.2     (1.9)   33.3   171.0     (2.9)  168.1

Attributable to
Equity holders of the parent                      35.1     (1.9)   33.2   170.7     (2.8)  167.9
Minority interest                           m      0.1              0.1     0.3     (0.1)    0.2
                                                  35.2     (1.9)   33.3   171.0     (2.9)  168.1



In the table above, the UK GAAP numbers incorporate the results previously
reported in the consolidated profit and loss account and in the consolidated
statement of total recognised gains and losses.



Notes to the reconciliations from UK GAAP to IFRS.

a    Under IFRS 3 'Business Combinations', goodwill acquired in a business combination is recognised as an
     asset and subject to impairment testing in accordance with IAS 36 'Impairment of Assets'. Under UK
     GAAP, goodwill on acquisitions was capitalised and written off over its useful economic life. This
     adjustment represents the write back of previous goodwill amortisation, less any impairment.


b    Under UK GAAP, trademarks and brands were included in 'Tangible fixed assets'. Under IFRS, these have
     been reallocated to 'Other intangible assets'.


c    Under IAS 40 'Investment Property', investment property, which is property held to earn rentals and/or
     for capital appreciation, is stated at its fair value at the balance sheet date. Under UK GAAP,
     certain property was included in 'Fixed assets' at cost less depreciation and in 'Investments' at fair
     value. This adjustment reallocates investment property to IFRS 'Investment property', reverses the
     previously charged depreciation and charges the loss arising from changes in the fair value to profit
     or loss. The gains or losses arising on changes in the fair value have been included in the income
     statement.


d    In separate financial statements, IAS 27 'Consolidated and Separate Financial Statements' requires
     investments in subsidiaries to be accounted for at cost or in accordance with IAS 39 'Financial
     Instruments: Recognition and Measurement'. Most investments in subsidiaries are regarded as part of
     the company's investing business and are therefore designated as measured at fair value through profit
     or loss. Other investments in subsidiaries that do not form part of the company's investing business
     have been reallocated from UK GAAP 'Investments' to IFRS 'Investments in subsidiaries' and accounted
     for at cost.


e    Under IAS 31 'Interests in Joint Ventures', joint ventures should be identified and stated as a one
     line item at cost plus the investor's share of retained post-acquisition profits and other changes in
     net assets, where accounted for using the equity method. Under UK GAAP, interests in joint ventures
     were not considered to be material and were included in 'Investments' at cost less provision. This
     adjustment represents the reallocation of interests in joint ventures stated at net assets at the date
     of transition to IFRS and the movement in post-acquisition profits and other changes in net assets
     since.


f    Investments have been designated as held at fair value through profit or loss and, under IFRS,
     instruments quoted on a stock market should be valued at bid prices on the reporting date. This
     adjustment represents the decrease in the values of quoted investments at the reporting dates and the
     movement in the period when valued at bid prices compared with valuing at mid price under UK GAAP.


g    Investments held by trading subsidiaries that are not considered to be part of the group's business of
     investing in financial assets, are classified as available for sale and held at fair value, with
     changes in fair value recognised in equity. Under UK GAAP, these holdings were included in '
     Investments' at fair value. This adjustment reallocates such investments to IFRS 'Available for sale
     investments'.


h    The deferred income tax has been recalculated in accordance with IAS 12. This adjustment comprises a
     number of items. A deferred tax liability has been recognised for the amount of tax calculated on the
     unrealised gains of investments in controlled foreign companies - deferred tax on unrealised gains was
     not permitted under UK GAAP, but is required under IFRS. A deferred tax asset has been recognised in
     respect of the pension deficit recognised in the balance sheet in accordance with IAS 19 (see note '
     n') to the extent that the asset is considered to be recoverable. A deferred tax asset has been
     recognised in respect of the National Insurance contributions provided on share option gains (see note
      'o') to the extent that the asset is considered to be recoverable.


i    Under IAS 1, tax assets and liabilities should be shown separately from other assets and liabilities
     on the face of the balance sheet. Current tax assets and liabilities previously included in UK GAAP '
     Debtors' and 'Creditors falling due within one year' have been reallocated to IFRS 'Current tax
     assets' and 'Current tax liabilities'.


j    Under UK GAAP, 'Short term deposits' were shown separately from 'Cash at bank and in hand'. Under
     IFRS, these lines have been combined into 'Cash and cash equivalents'.


k    Under IFRS, dividends proposed after the balance sheet date but before the financial statements are
     finalised, are treated as a non-adjusting post balance sheet event and are not accrued. This
     adjustment represents the change in treatment from UK GAAP, under which dividends proposed after the
     balance sheet date were accrued in the financial statements.


l    Under UK GAAP, 'Creditors falling due within one year' included a loan from a subsidiary, which has
     been reallocated to IFRS 'Borrowings from subsidiaries'.


m    IAS 32 'Financial Instruments: Disclosure and Presentation' defines equity instruments as any contract
     that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
     Certain subsidiaries of the company have outstanding preference shares held by third parties. Under UK
     GAAP, these instruments have been included in 'Minority interests - non-equity' in the balance sheet.
     Under IFRS, they should be treated as non-current liabilities. This adjustment reflects the change in
     accounting treatment. Preference dividends payable to the holders of these shares have been
     reallocated to finance costs.


n    Under IAS 19 'Employee Benefits', the pension scheme deficits should be included in the balance sheet.
     This adjustment reflects the change in treatment from UK GAAP where, under SSAP 24 'Accounting for
     Pension Costs', the pension scheme deficits were not included in the balance sheet.


o    Under IFRS, National Insurance contributions payable on the exercise of employee share options should
     be provided in full when the options are granted. This adjustment represents the change in treatment
     from UK GAAP, which, in accordance with UITF 25 'National Insurance contributions on share option
     gains', requires the National Insurance contributions to be charged to profit and loss over the
     performance period. This calculation resulted in an immaterial amount and, accordingly, no provision
     was made under UK GAAP.


p    Under UK GAAP, the company's 'Non-distributable reserves' included the capital redemption reserve.
     This has been reallocated to the IFRS 'Capital redemption reserve'.


q    In accordance with IFRS, a foreign currency translation reserve has been recognised in respect of the
     exchange movements arising on consolidation since 31 March 2004. IAS 21 'The Effects of Changes in
     Foreign Exchange Rates' requires the revenue and expenses of a foreign entity to be translated at
     exchange rates at the dates of the relevant transactions or at an appropriate average rate. This
     adjustment represents the difference in treatment from UK GAAP, where the profit and loss of a foreign
     entity was translated at the closing rates.


r    Under IFRS, consolidated reserves are presented as the single line 'Retained earnings'. Under UK GAAP,
     reserves have been shown as split between 'Revaluation reserve' and 'Profit and loss account'. This
     reallocation combines these two reserves.




s    Under IFRS, amounts due to and from counterparties in respect of forward currency contracts are shown
     separately. Under UK GAAP, these contracts were included either within debtors or creditors or within
     investments.


t    Under UK GAAP, the minority's share of the retained losses of certain subsidiaries was set off against
     minority interests. Under IAS 27, this is required to be written off, unless there is an obligation on
     the minority to fund the loss.


u    Under IAS 39, transaction costs on investments designated as measured at fair value through profit or
     loss are charged immediately to the income statement. Under UK GAAP, costs relating to the acquisition
     of investments were included in the cost of the investment. This adjustment represents the change in
     treatment from UK GAAP.


v    Under IFRS 2, the fair value of equity-settled share-based payments is required to be expensed in
     profit or loss over the vesting period. An equivalent charge was not required to be made under UK
     GAAP. This adjustment represents the change in treatment from UK GAAP.


w    Under UK GAAP, 'Own shares' are shown separately. This has been reallocated to the company IFRS '
     Retained earnings - non-distributable' and the group IFRS 'Retained earnings'.





Cash flow statement

The company and group cash flow statements have been prepared in accordance with
IAS 7 'Cash Flow Statements'. Under IAS 7, the cash flow statements show the
movement in cash and cash equivalents, being defined as cash on hand, demand
deposits and short term highly liquid investments that are readily convertible
into known amounts of cash and which are subject to an insignificant risk of
change in value. Under UK GAAP, the company and group cash flow statements
showed the movement in cash repayable on demand only and in particular, excluded
short term deposits.



For the six months to 30 September 2004, this change in definition from cash to
cash and equivalents resulted in the UK GAAP decrease in cash of £3.6m in the
company and £1.8m in the group changing to a decrease in cash and cash
equivalents of £36.2m in the company and a £40.7m in the group under IFRS. For
the year to 31 March 2005, the UK GAAP decrease in cash of £2.8m in the company
and £0.5m in the group changed to an increase in cash and cash equivalents of
£0.8m in the company and a decrease of £2.3m in the group under IFRS.



All other adjustments made to the cash flow statements from IFRS represent
reclassifications between line items and have not impacted actual cash flows.



Independent review report by KPMG Audit Plc

to Caledonia Investments plc



Introduction

We have been engaged by the company to review the financial information set out
between the heading 'Company income statement' and the end of the section 'Notes
to the financial information' and we have read the other information contained
in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.



This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state in
this report and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have reached.



Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.



As disclosed in note 2 to the financial information, the next annual financial
statements of the group will be prepared in accordance with IFRS as adopted for
use in the European Union. The accounting policies that have been adopted in
preparing the financial information are consistent with those that the directors
currently intend to use in the next annual financial statements.



Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.



Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2005.





KPMG Audit Plc
Chartered Accountants
London



1 December 2005


The information in this news release does not constitute statutory accounts
within the meaning of schedule 240 of the Companies Act 1985 (the 'Act'). The
statutory accounts for the year ended 31 March 2005 have been delivered to the
Registrar of Companies in England and Wales in accordance with section 242 of
the Act. The auditor has reported on those accounts; the report was unqualified
and did not contain a statement under section 237(2) or (3) of the Act.



Copies of this statement are available at the company's registered office,
Cayzer House, 30 Buckingham Gate, London SW1E 6NN, England, or from its website
at www.caledonia.com.


                      This information is provided by RNS
            The company news service from the London Stock Exchange