Special dividend

Caledonia Investments PLC
31 May 2006

Caledonia Investments plc



Proposals for an elective Special Dividend and renewal of Authority to Make
Market Purchases of its own shares


•    Circular containing details of proposals first announced on 17 March 2006 
     expected to be sent to shareholders today


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


•    Special dividend per share will be at a 3% discount to NAV per share on or 
     around 7 July 2006


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


•    The Basic Entitlement will be to receive the Special Dividend in respect of
     one for every ten ordinary shares held


•    Ordinary shareholders will be offered the alternative choices of an Under 
     Election Option, an Over Election Option or a Pro Rata Option


•    Caledonia NAV per share will be enhanced following the Special Dividend


•    Approval sought to renew Caledonia's authority to make market purchases of 
     its own shares


•    Caledonia's preliminary results also announced today



Tim Ingram, Chief Executive of Caledonia, comments:


'We are pleased to announce the detailed proposals for an elective Special
Dividend and  associated capital reduction of up to approximately £128 million,
which will enable shareholders, if they so wish, to participate in the strong
cash position that has resulted from a long period of good investment
performance.'

The Board of Caledonia Investments plc ('Caledonia' or the 'Company') is pleased
to announce that a circular is expected to be posted today to Caledonia's
shareholders setting out proposals for an elective special dividend ('Special
Dividend'), details of which were first announced on 17 March 2006, and for a
renewal of the Company's authority to make market purchases of its own shares.

Elective Special Dividend

Under the proposals, shareholders will be offered the opportunity to receive the
Special Dividend on terms that they give up part of their shareholdings. The
Special Dividend per share will be an amount equal to 97 per cent. of the net
asset value per share calculated as at a specified date, expected to be 7 July
2006, and in accordance with a methodology specified in the circular. The shares
on which the Special Dividend is paid will then be cancelled for no
consideration pursuant to a court approved reduction of capital. The net asset
value per share will include a provision for Caledonia's proposed final dividend
for the year ended 31 March 2006 of 20.5 pence per share, which will be paid
separately to shareholders on all their shares, whether or not they elect to
receive the Special Dividend.

The choices available to shareholders under the Special Dividend proposals will
be as follows:

•     to do nothing and therefore continue to hold all of their shares; or

•     to elect to receive the Special Dividend in respect of one for every ten 
      ordinary shares held (rounded down, where appropriate, to the nearest 
      whole number of ordinary shares) (the 'Basic Entitlement'); or

•     to elect to receive the Special Dividend on a number of ordinary shares 
      less than their Basic Entitlement (the ''Under Election Option''); or

•     to elect to receive the Special Dividend on a number of ordinary shares 
      greater than their Basic Entitlement, with such elections only being
      accepted to the extent that other shareholders elect to receive the Under
      Election Option or do not elect to receive the Special Dividend at all 
      (the ''Over Election Option''); or

•     to elect to receive the Special Dividend on such number of ordinary shares
      as to maintain, after taking into account other shareholders' elections
      and those shareholders who do not elect to receive the Special Dividend at
      all, their proportionate interests in Caledonia at the same level as prior
      to the Special Dividend (the ''Pro Rata Option'').

There is no obligation to elect to receive the Special Dividend and shareholders
will wish to make their choice in the light of their own circumstances and
individual tax considerations.

The total number of shares on which the Special Dividend will be paid will be
limited to 6,410,579 shares, based on the 64,105,796 shares currently in issue
(excluding shares held in treasury). Based on Caledonia's unaudited net asset
value per share as at 30 April 2006 and assuming the Special Dividend is elected
on the maximum number of shares, the aggregate total of returned funds would
amount to approximately £128 million and would result in an enhancement in net
asset value per share (net of estimated costs) of approximately 0.3 per cent.
The funds required for the Special Dividend will be financed through a
combination of Caledonia's internal cash resources and, to the extent necessary,
through a £75 million short-term committed facility provided by The Royal Bank
of Scotland Plc.

The Special Dividend proposals will be conditional on

(i)       the approval of shareholders at an extraordinary general meeting and 
          class meeting of the Company to be held on 26 June 2006;

(ii)      unless waived in certain circumstances with the consent of the Panel 
          on Takeovers and Mergers (the 'Panel'), the approval of independent
          shareholders to a waiver by the Panel of the obligation on the Cayzer 
          concert party ('Concert Party') that could arise under the City Code 
          on Takeovers and Mergers to make a general offer to all shareholders 
          of the Company as a result of the cancellation of shares pursuant to 
          the Special Dividend proposals; and

(iii)     the approval of the reduction of capital by the court.

It is anticipated that, if approved, the Special Dividend will be paid on or
around 13 July 2006.

Authority to Make Market Purchases of its own shares

Shareholders' approval will also be sought at the extraordinary general meeting
to the renewal of the Company's authority to purchase up to a maximum of
6,410,500 of its own shares, representing approximately 10 per cent. of the
issued ordinary share capital (excluding  shares held in treasury). Independent
shareholders will also be asked to approve a waiver by the Panel of the
obligation that could arise on the Concert Party to make a general offer to all
shareholders of the Company on the exercise by Caledonia of the authority to
make market purchases of its shares, subject to the condition that the Company
will not make any market purchases which would result in the total percentage of
voting rights held by the Concert Party exceeding 49.9 per cent.

Preliminary results for the year ended 31 March 2006

Caledonia has today announced its preliminary results for the year ended 31
March 2006.


                                                                     31 May 2006

ENQUIRIES:
Caledonia                                    [phone] (today)/ [phone] (thereafter)
Tim Ingram, Chief Executive
Jonathan Cartwright, Finance Director


College Hill                                 [phone]

Tony Friend
Roddy Watt

JPMorgan Cazenove                            [phone]
Julian Cazalet



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