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Caledonia Inv PLC (CLDN)

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Friday 05 September, 2003

Caledonia Inv PLC

Response to announcement

Caledonia Investments PLC
05 September 2003


                           CALEDONIA INVESTMENTS PLC

The Board has noted today's announcement of proposals for the liquidation of
Caledonia Investments plc ('Caledonia' or 'the Company').  These proposals are
essentially the same as those received by the Company in June 2003.  As the
Company announced on Monday 7 July 2003 the Board had considered the proposals
with its financial advisers, N M Rothschild & Sons Limited and Cazenove & Co.
Ltd., and unanimously had concluded that the proposals are not in the best
interests of shareholders.

In assessing whether an effective liquidation of the Company would have been
appropriate, the Board has examined whether the Company is meeting its
objectives and has considered the Company's prospects in the light of its
historic performance.  Caledonia has an outstanding record in delivering
shareholder value:

•      The proposals have been made against a background where, according to the
latest Association of Investment Trust Companies' statistics (as at 31 July
2003), the Total Shareholder Return of Caledonia Investments plc is in the top
decile of its sector for all periods up to 10 years (i.e. 3 months, 6 months, 1
year, 3 years, 5 years and 10 years).

•      The Company's dividend per share has increased every year over the last
36 years, representing a compound annual growth of 9.3% over the period.

The Board believes its successful long term strategy should continue to deliver
outperformance going forward.

In 2002 Caledonia's management was strengthened with the appointment of a new
Chief Executive, Tim Ingram.  Following his initial review of the Company,
proposals to convert Caledonia to investment trust status were announced in
November 2002.    Since converting to investment trust status, the discount of
Caledonia's share price to its NAV has continued to narrow.  Specifically, the
discount stood at 33.5% on 30 September 2002 (the last date on which the NAV was
published before the announcement of Caledonia's intention to convert to an
investment trust), was 29.8% on 31 March 2003 (the last date on which the NAV
was published before Caledonia's conversion to an investment trust) and was
20.1% on 31 August 2003 (the date of the last published NAV).

Valuing the proposals

Shareholders should note that the proposals include no firm cash offer and
provide no certainty as to the level of proceeds that would be received by
shareholders nor to the timing of receipts. Rather, the proposals are for a new
management team to take responsibility for the Caledonia portfolio, to liquidate
all of the assets over an estimated period of two years and distribute the net
proceeds either in cash or by reinvestment into a new investment vehicle.  The
announcement indicated that 'the professional costs and costs of incentivisation
arising during the 2 year process are expected to be approximately £29 million'.

The Board of Caledonia believe that the proposals would be likely to result in
the level of proceeds received eventually by shareholders being at a significant
discount to the prevailing net asset value.

Cayzer Trust Company ('CTC')

The proposals outlined in the announcement require the support of the
shareholders of CTC, as well as the support of the shareholders of Caledonia (of
which CTC is a 37.7% shareholder), in order to be implemented.

The announcement made earlier today states that CTC 'has received indications
from (CTC) shareholders, together representing in excess of 50% of the voting
rights that, in the event of the Project Locksmith proposals (these Proposals)
being placed before members in a general meeting, these votes would be cast
against the proposals'.  On this basis, the proposals cannot be implemented.


The Company, therefore, believes that the proposal is not in the best interests
of shareholders, and anyway cannot be implemented.

Tim Ingram, Chief Executive of Caledonia, said:

 'We have considered these proposals carefully and concluded that they are not
in the best interests of our shareholders.  They would only have served to
destroy a company that has been producing outstanding returns in the short, and
medium, and long term.  We remain firmly committed to our strategy of delivering
total shareholder return outperformance'.

                                                                5 September 2003


Caledonia Investments plc                      Tel:  +44 (0)20 7802 8080
Tim Ingram, Chief Executive

College Hill                                   Tel:  +44 (0)20 7457 2020
Alex Sandberg
Tony Friend

N M Rothschild & Sons Limited and Cazenove & Co. Limited are acting for
Caledonia in connection with the proposals referred to in this announcement and
no one else and will not be responsible to anyone other than Caledonia for
providing the protections offered to clients of N M Rothschild & Sons Limited
and Cazenove & Co. Limited nor for providing advice in relation to such

The Association of Investment Trust Companies ('AITC') statistics quoted are
derived from the Monthly Information Service dated August 2003 from the AITC
prepared by Fundamental Data Limited on behalf of AITC Services Limited.


Caledonia is a long established investment company with international scope
listed on the London Stock Exchange.  Since April 2003 Caledonia has been
classified in the AITC Global Growth sector of investment trusts where its
investment performance puts it in the top decile by reference to all the main
reference periods used by the AITC, i.e. 3 months, 6 months, 1 year, 3 years, 5
years and 10 years (to 31 July 2003 - the most recent date for which AITC data
is available).  Caledonia's strategy has delivered outperformance against its
benchmark FTSE All-Share Total Return index of 56% over the five year period to
31 August 2003 and 76% over the ten year period to 31 August 2003.  Its total
shareholder return outperformance for the 12 months to 31 August 2003 was 38%.
Caledonia has a policy of delivering progressive annual dividends with a 36-year
record of unbroken annual dividend increases.  Through holding a diversified
portfolio, Caledonia aims to maintain a medium overall risk position.

At 31 August 2003, Caledonia had an unaudited Net Asset Value of 1154p per
ordinary share.  Based on the share price as at the end of August 2003 the
discount to its Net Asset Value per share was 20.1%.

Caledonia's strategy is to focus on a portfolio of around 30 to 40 principal
investments, where it has significant and influential stakes with a policy that
at least 50% of the total portfolio should be in quoted securities or other
liquid assets.  New investments will typically be in the range £10 million to
£25 million.  Careful control is exercised over costs, notwithstanding
Caledonia's active and participative management style.  The Board believes that
Caledonia has a long established and valuable reputation for being a supportive
long term investor, which brings a strong deal flow of opportunities not always
available to others.

Caledonia's investments are focused on a selected range of sectors where it has
good in-house knowledge that can add value to management of investee companies.
Where particular expertise is not held in-house, investments may be made through
third party managed funds where Caledonia will often seek a significant stake in
the management company.

Caledonia's selected sectors are: Financial: comprising 34% of total assets,
including holdings in Close Brothers, ICAP and Rathbone Brothers; Leisure and
Media: comprising 19% of the total assets, including holdings in Kerzner
International and The Sloane Club; Managed General Funds: comprising 19% of the
total assets including holdings in British Empire Securities and a fund managed
by Aberforth Partners; Industrial and Services: comprising 15% of the total
assets, including investments in Offshore Logistics and Paladin Resources;
Property: comprising 10% of the total assets, including a holding in Quintain
Estates; and Other: comprising 3% of the total assets.   The percentages of the
total assets quoted are as at 31 August 2003.

As an investment trust Caledonia is not subject in the future to liability for
corporation tax on chargeable gains.  As a result, Caledonia believes it will be
able to build greater value for shareholders and be more appealing to retail
shareholders which ultimately should contribute towards a lower discount of
Caledonia share price to Net Asset Value per share.

Shown below is a table# illustrating how the value of £100 invested in Caledonia
over a period of 1 year, 3 years, 5 years and 10 years to 31 July 2003 (the
latest date for which all comparative data is available) compares with an
equivalent theoretical investment in:

(i)                 The Association of Investment Trust Companies ('AITC')
                    Global Growth weighted average index

(ii)                The FTSE All-Share Total Return Index, and

(iii)               UK Savings 25,000*

Period invested to 31 July 2003

                                                           1yr           3yr           5yr          10yr
                                                            £             £             £             £
Caledonia                                                   135.5         131.4         127.9         279.7

AITC Global Growth                                          103.7          67.5          88.3         169.2

FTSE All-Share Index                                        103.4          72.9          85.6         195.5

UK Savings 25,000*                                          102.1         108.4         117.3         146.5

As can be seen in the table above, £100 invested in Caledonia shares would have
generated a significantly higher return over 1 year, 3 years, 5 years and 10
years than alternative investments in either the overall AITC Global Growth
Investment Trust sector, the FTSE All-Share Index or an index representative of
the building society industry.

# Source data prepared by Fundamental Data Limited on behalf of AITC Services

* UK Savings 25,000 is an index compiled from an aggregate of 20 bank building
society rates to represent the industry, for a deposit of £25,000 up to 90-day
notice accounts.

Caledonia is a member of the Association of Investment Trust Companies (AITC).

For further information please visit

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

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