Creation of new fund

Capital & Regional plc
23 March 2004

                                                                   23 March 2004

                         CAPITAL & REGIONAL PLC:
               ESTABLISHES THE X-LEISURE FUND WITH HERMES


Capital & Regional plc ("C&R" or "the Company"), the co-investing property asset
manager, is pleased to announce the creation of the X-Leisure fund.  The new
fund will be a combination of three existing funds which were previously managed
by MWB plc.  C&R took over the management with effect from January 2003 at which
point the funds had only 2-3 years remaining life.  The new X-Leisure fund will
have a 15 year life with an option to extend for a further 5 years.

X-Leisure (the leisure property division of C&R) will be the asset manager and
Hermes the fund manager.  X-Leisure is headed by PY Gerbeau and will be
responsible for the active management and development of the portfolio.  The
introduction of Hermes as fund manager will contribute to the long term
strategic direction of the fund and its governance.

The creation of a single leisure fund with an extended life brings the following
advantages:

  • It removes potential conflicts with cross portfolio tenant negotiations;
  • It achieves the critical mass necessary to introduce new brands and
    marketing strategies; and
  • The increased scale of the fund will enhance liquidity for investors.

The  new fund will focus on large urban entertainment complexes and substantial
leisure parks.  The initial portfolio consists of 19 properties with a value of
approx £500m and initial and equivalent yields of 6.5% and 7.3% respectively.

PY Gerbeau, the Chief Executive of X-Leisure, said:

"I am very excited about the future.  The scale of the fund, combined with a
long life provides the specialist leisure team at X-Leisure with the platform to
really make a difference and ensure outperformance for our investors.  We will
be actively seeking new product as well as adding value to the existing
portfolio where our hands had previously been tied due to potential conflicts
and the short term nature of the three funds."

Rupert Clarke, Head of Property at Hermes, comments:

"We were a founder investor in the establishment of the original funds and are
well placed to offer dedicated expertise to drive the performance of the
X-Leisure fund in the future, working alongside Capital & Regional.

Our role on X-Leisure is consistent with our many other real estate fund
management activities where, to enhance core portfolio performance, we have
built positions in specialist real estate sectors working alongside experienced
market operators."

                                    - ENDS -


For further information:

Capital & Regional plc
Martin Barber, Chief Executive, Capital & Regional          Tel:  [phone]
PY Gerbeau, Chief Executive, X-Leisure                      Tel:  [phone]
William Sunnucks, Group Finance Director                    Tel:  [phone]

Hermes
Rupert Clarke                                               Tel: [phone]

Hudson Sandler
Andrew Hayes / James Benjamin                               Tel:  [phone]


Notes to Editors:

About Capital & Regional plc

Capital & Regional is the co-investing asset manager which founded the Mall and
Junction Limited Partnerships in conjunction with Morley Fund Management.  Its
shares are quoted on the London Stock Exchange, and in addition to its
management contract with and co-investment in the Mall and Junction funds, it
now runs the X-Leisure fund and also has a number of other joint ventures and
developments.  For further information:  www.capreg.com


About Hermes

Hermes is a leading pension fund investment manager, independent of any broader
financial services organisation. Hermes' market-leading investment strategy has
for many years been based on the index/specialist approach and is increasingly
being adopted by other large pension funds.  Hermes currently invests
approximately £44bn (as at 31/12/03) on behalf of around 200 clients including
pension funds, insurance companies, government entities and financial
institutions, as well as charities and endowments.  However, Hermes' largest
client is the BT Pension Scheme (BTPS), who as owner of Hermes, gives its
investment management perspective a unique insight and close alignment to the
needs of other long-term investors and pension funds. Some of Hermes' other
major clients include the pensions funds of Royal Mail, RailPen, Sainsburys,
Unilever, Nippon Life (Japan), CalPERS (USA), PGGM (Netherlands), ATP (Denmark)
and over 30 UK Local Authorities.

At the heart of Hermes' offering are seven passively managed index tracking
funds covering the main regions of the world as well as two UK fixed interest
portfolios. These equity funds deliver reliable and accurate tracking, thereby
meeting requirements for value-creation, whilst the actively enhanced index
funds concentrate on a value-based stock selection process to achieve consistent
outperformance against the relevant benchmark. In addition Hermes invests in
index-linked gilts, property and private equity. The investment process seeks to
reveal markets or securities that are under/over performing Hermes' analysis of
fair value.

Through its exposure to index stocks, Hermes has established a broad knowledge
of business sectors which enables it to make high profile investments in direct
private equity, as well as private equity funds. In addition, Hermes operates an
integrated portfolio management and research-based approach to property
investment, ensuring that only high quality properties, which are well located
and highly competitive in their local market places, are targeted for
acquisition. As well as offering segregated investment, it also offers pooled
property investment through the Hermes Property Unit Trust.

Hermes places great emphasis on exercising stewardship rights in all the
companies in which it invests, particularly because it has long-term holdings in
index stocks and is therefore necessarily exposed to under-performing assets. As
a result, it is at the forefront of the corporate governance movement in the UK.
Hermes is the first major investment institution in the world to have
established both UK and European shareholder engagement funds - the Focus Funds.
Having identified companies underperforming their indices, Hermes' intervention
and involvement as long-term shareholders aims to unlock the latent value that
exists within the companies in which it invests.

Hermes has a 20-year history of innovative long-term fund management. Originally
known as PosTel, the in-house manager of the Royal Mail (previously the Post
Office) and British Telecommunications superannuation pension funds, Hermes was
created in 1995 when it became wholly owned by the BT pension scheme. A
continuing aim to generate value for the Royal Mail and BT pension schemes
remains central to Hermes' activities; however, its expertise has attracted
several other major investors from all areas of the economy.


Property

Property Fund Management is a well established component of the Hermes offer to
both BTPS and its other co-investors. BTPS has one of the largest allocations to
property in the UK with over 13% of its fund allocated to the asset class and
the property manages a portfolio of some £5 billion of assets. Hermes has a
track record of being highly innovative in the property market and has
diversified investment exposures by taking strategic holdings of indirect real
estate investment vehicles alongside a core portfolio.  This has involved a wide
range of transactions including the market leading and hugely successful MEPC
public to private transaction.

In addition, the £420 million Hermes Property Unit Trust was the top-performing
balanced PUT in 2003 and is attracting growing interest from investors.


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