Plot
In present-day Scotland, a couple of American tourists meet an old man who, upon request (after seeing the surgeon's photo) tells them about the Loch Ness Monster and why the photo is a fake.
In 1942 during World War II, a boy named Angus MacMorrow lives in the manor house of Lord Killin on Loch Ness with his mother Anne MacMorrow and his sister, Kirstie. Lewis Mowbray comes to work as a handyman there. Angus' father Charles, the former handyman, is a sailor in the Royal Navy, missing since his ship was sunk in the war a year earlier. Angus is unable to accept that he will not return. One day, while collecting seashells, Angus discovers a large egg in the tide pool, which hatches a plesiosaur-like creature, which he names 'Crusoe' after Robinson Crusoe. He decides to keep the creature a secret, eventually telling his sister and Lewis. Lewis explains that it is a genderless "Water Horse" that lays one egg and dies before it hatches.
Royal Artillery troops arrive at the house, commanded by Captain Thomas Hamilton, a friend of Lord Killin. An artillery battery is set up near the lake to defend against German U-boats while the troops set up on the grounds. Meanwhile, Lewis decides Crusoe is so big they have to free him in the loch. Captain Hamilton proclaims Lewis to be a bad influence, and Angus' mother allows him to teach Angus some discipline. After a few days of training, he escapes, returning to the lake and reunites with a full-grown Crusoe, who gets Angus to ride on his back. After some time, he begins to dive. Angus protests diving, but he later enjoys himself and finally overcomes his phobia.
The next day, Captain Hamilton takes the MacMorrow family to a hill overlooking Loch Ness; Crusoe is almost hit by an exploding shell during a firing demonstration. Angus interrupts to save Crusoe from injury or death, enraging Hamilton and irritating his mother, who does not believe him and punishes him to be in his room at six every night for a month. Two fishermen who had seen Crusoe, try to take a photo of the creature for fame and fortune. When they cannot photograph the real thing due to the bombardment, they create an imitation. (The result is the real-life faked photo of The Loch Ness Monster known as "The Surgeon's Photo".) It interests a few soldiers, who go out to hunt it.
Sneaking out of his room with his sister's help, Angus visits the lake, calling for Crusoe. Crusoe rises, still in shock and fear from the earlier bombardment, and nearly bites off Angus's hand before sinking back into the loch. Hamilton's dog Churchill, having smelled Crusoe from the shore, alerts the soldiers of its presence before being eaten by Crusoe. Crusoe then surprises the soldiers and capsizes their boat, but one of them sends out an SOS to Hamilton, who thinks the Germans are attacking. At the loch, Angus calls out to Crusoe, who is attacking Strunk. In his attempt to calm Crusoe, Angus wades into the lake, slips and sinks.
Crusoe rescues Angus and Lewis revives him, and when his mother arrives, she finally believes him when she sees Crusoe. The nearby artillery battery soon opens fire upon Crusoe, mistaking it for a German U-boat. Angus, Hamilton, Anne and Lewis lead Crusoe to safety at the net, where Crusoe escapes into the sea. At sunrise, Angus finally accepts his father's death before they watch Crusoe leave. It is implied that Anne is also ready to move on, having fallen in love with Lewis. Over the years, several people claim spotting it, but Angus never sees Crusoe again while others say that it returns, seeking Angus.
The tourists thank the old storyteller and ask for his name, which he reveals to be Angus MacMorrow. Outside the pub, a mother calls out to her son William, who is walking down the beach. He spots a large "rock", which has an iridescent blue shell like Crusoe's, hinting that Crusoe has left a descendant behind to become the next Water Horse.
