Elective special dividend

Caledonia Investments PLC
17 March 2006

Caledonia Investments plc ('Caledonia')

Proposals for a return of funds to ordinary shareholders

Caledonia announces that it intends to propose a return of funds to shareholders
of up to approximately £125 million.

The proposed return of funds by Caledonia is expected to be implemented by way
of an elective special dividend and capital reduction. Under the proposal,
Caledonia shareholders will be offered the opportunity to receive a special
dividend on a proportion of their ordinary shareholdings. Shares on which a
shareholder elects to receive the special dividend will be cancelled for no
consideration pursuant to a Court approved reduction of capital. The special
dividend per share will be set at a level which will take into account the net
asset value per Caledonia share and the prevailing market price at the time that
full details are announced and will be calculated at a date shortly after the
closing date for receipt of elections from shareholders.

Under the terms of the elective special dividend, it is proposed that
shareholders will be given the following options:

•                     to elect to receive the special dividend on up to their
pro rata entitlements; and

•                     to elect to receive the special dividend on greater than
their pro rata entitlements, with such elections only being accepted to the
extent that other shareholders choose not to participate (the 'over election
option'); or

•                     to elect to receive the special dividend on such number
of shares as will maintain their proportionate interest in Caledonia prior to
the return of funds, in the event that the elections to receive the special
dividend, after taking into account the over election option, are not fully
subscribed.

There will be no obligation on shareholders to elect to participate in the
return of funds.  Shareholders will want to consider both the level of the
elective special dividend, the NAV per share at the time that elections are
made, any potential increase in net asset value per share which would result
from the return of funds and Caledonia's investment strategy.  Shareholders
should also consider their individual circumstances, including their tax
positions.

The Board of Caledonia understands that, if the proposed return of funds is
implemented, The Cayzer Trust Company Ltd, which owns 33.3% of Caledonia's
issued ordinary share capital, is likely to elect to receive a special dividend
which, after taking into account the elections of other shareholders, will
maintain its current percentage shareholding.

The elective special dividend will be financed from Caledonia's internal cash
resources, which at 28 February 2006 were approximately £142 million.

The payment of the elective special dividend will be conditional upon, inter
alia, the approval of ordinary shareholders and the consent of the Court.
Caledonia expects to announce full details of the elective special dividend and
post a circular to shareholders at the same time that it announces its
preliminary results for the year ended 31 March 2006, which will be around the
end of May 2006. Subject to the necessary consents being received, the special
dividend is planned to be paid in July 2006.

Tim Ingram, Chief Executive of Caledonia, comments:

'Given our significant cash position, we believe it is in shareholders'
interests to give them the option, if they so wish, to have cash returned to
them.  Cash that remains in Caledonia will be invested in line with our
continuing long term business strategy, which has produced strong performance
for our shareholders.'


                                                                   17 March 2006
ENQUIRIES:

Caledonia

Tim Ingram, Chief Executive                             Tel: [phone]
Jonathan Cartwright, Finance Director

College Hill

Tony Friend                                             Tel: [phone]
Richard Pearson











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