Final Results

Shires Smaller Companies PLC
17 February 2004

News Release

17 February 2004

Shires Smaller Companies plc
Preliminary Results for the year ended 31 December 2003

Shires Smaller Companies' objective is to provide a high and growing dividend
and capital growth from a portfolio invested principally in the ordinary shares
of smaller UK companies and UK fixed income securities. The Company is managed
by Glasgow Investment Managers.

                                                       2003          2002

Total assets less current liabilities                £64.64   m    £56.49   m
Shareholders' funds                                  £38.87   m    £32.31   m
Market capitalisation                                £40.27   m    £30.53   m

Net asset value per share                             177.6   p     147.6   p
Ordinary share price                                  184.0   p     139.5   p

Premium/(Discount) (share price to net asset value)     3.6   %      (5.5)  %

Revenue return per share                              14.46   p     13.77   p
Dividends per share                                   13.75   p     13.75   p

Gearing                                                72.2   %      84.7   %


   • The total return to a shareholder was 41.8%, ahead of both the Company's
    benchmark, the FTSE Small Cap Index (excluding Investment Companies), at
    40.9% and the FTSE all-Share Index at 20.9%.

   • Over the year there was an improvement in the rating of the Company's
    shares in the stock market, which moved from a discount of 5.5% to net asset
    value per share at 31 December 2002 to a premium of 3.6% at 31 December
    2003.

   • The Company's total return on net assets was 29.6%. This good return in
    absolute terms was below the corresponding return on the benchmark largely
    because the dividend objective limits the number of low-yielding equities,
    which performed well in 2003, that may be included in the portfolio.

   • A proposed final dividend of 4.75p per share brings total dividends to
    13.75p, the same as last year.

   • The yield on the Company's ordinary shares was 7.5% at 31 December 2003.

   • Gearing fell over the year from 84.7% to 72.2%. All of the gearing at 31
    December 2003 was invested in fixed income securities, the majority of which
    are corporate bonds, largely of investment grade.

   • The recovery in confidence among investors and the prospect of renewed
    profits growth suggest that the environment is becoming more supportive of
    investment in the cyclical, higher-yielding shares which make up a large
    proportion of the Company's equity portfolio.

For further information please contact:

David Williams, Managing Director
Glasgow Investment Managers
0141 572 2700


Shires Smaller Companies plc
Annual Report 31 December 2003
Chairman's Statement

Highlights

In my first annual statement to you as Chairman I am pleased to report on a
number of positive results for your Company. Net assets have risen by over £6.5
million since the start of the year, with the net asset value per share
increasing by 20.3% from 147.6p to 177.6p. Over the same period the share price
has risen from 139.5p to 184p and, subject to shareholder approval, the annual
dividend will be maintained at the same level as in 2002, producing a dividend
yield of 7.5% based upon the share price at 31 December 2003.

Background

Once the war in Iraq concluded, stockmarkets around the world began to make
progress as sentiment responded to improving economic forecasts and the prospect
of a recovery in business activity. Against this background the share prices of
smaller companies, particularly those with growth characteristics, outperformed
those of larger capitalisation stocks many of which were affected by the
weakness of the US Dollar and the problems of the Eurozone. The FTSE Small Cap
Index (excluding Investment Companies), the Company's benchmark, returned 40.9%,
well ahead of the 20.9% return on the FTSE All-Share Index.

Investment Performance

The Company's total return on net assets was 29.6%. This good return in absolute
terms was below the corresponding return on the benchmark largely because the
Company's dividend objective limits the number of low-yielding equities which
may be included in the portfolio.

Over the year there was an improvement in the rating of the Company's shares in
the stock market, which moved from a discount of 5.5% to net asset value per
share at 31 December 2002 to a premium of 3.6% at 31 December 2003. As a result
the total return to a shareholder, at 41.8%, was above the return on net assets.

Earnings & Dividends

The revenue return per share was 14.46p. The Board is recommending a final
dividend of 4.75p per share which, together with the interim dividends already
paid, takes the total dividends for the year to 13.75p, the same as last year.

If approved at the Annual General Meeting on 19 March 2004, the final dividend
will be paid on 31 March 2004 to shareholders on the register at close of
business on 5 March 2004.

Portfolio Profile

At 31 December 2003 the Company maintained an ungeared exposure to equities,
which represented 98.7% of net assets compared to 101.2% at 31 December 2002.

Over the year total gearing fell from 84.7% to 72.2% of net assets, due to the
rise in value of the Company's net assets as the prices of ordinary shares held
in the portfolio recovered.

All of the gearing at 31 December 2003 was invested in the high-yielding fixed
income securities which make a major contribution to the high level of income
distributed to shareholders.
In December 2003 £12.1 million of the zero coupon finance, due to mature on 2
August 2005, was replaced with new financing which will run until December 2008.
The cost of the new finance is 5.9% per annum, which compares with 7.2% per
annum on the funds repaid.

This refinancing was undertaken in order to secure lower finance costs for a
further five year period. In addition, by replacing part of the original
financing repayable in 2005, the Board was able to reschedule maturity dates of
medium to long-term funding. Previously all such funding was scheduled to mature
in the second half of 2005.


Longer Term Strategy

In February 2000 the discount stood at over 30%, a matter of considerable
concern to the Board, and in response a change of strategy was introduced in
August 2000. The aim was to raise the yield on the Company's shares and seek to
minimise the discount at which the ordinary share price stood to the net asset
value per share.

To enhance the yield on net assets, additional gearing was introduced by raising
£12 million of zero coupon finance. The proceeds of this financing were invested
in corporate fixed interest securities, largely of investment grade.

Over the three years to 31 December 2003 the dividend yield averaged 8.8%, the
rating of the Company's shares rose from a discount of 16.7% to a premium of
3.6% and the total return to a shareholder was 5.0% per annum, which compared
with -4.9% per annum on the FTSE Small Cap Index (excluding Investment
Companies).

Dividend Payment Policy

The improvement in the rating of the Company's share price indicates that there
is a demand for the shares in the stockmarket which may provide the opportunity
to issue periodically new shares at a premium under the existing disapplication
of pre-emption rights.

Currently there is a two month time lag between the end of a quarter and the 'ex
dividend' date in respect of the dividend payment relating to that quarter. New
ordinary shares issued during that two-month period, therefore, would offer
either the right to dividends which they had not earned or different dividend
rights from those shares already in issue. To avoid the impact upon the revenue
account of paying unearned dividends on newly issued shares or the complications
of maintaining different classes of ordinary share for limited periods of time,
the Board has decided to pay the dividend from income earned in each quarter at
the end of the first month of the following quarter. The first interim dividend
for the year to 31 December 2004, therefore, will be paid on 30 April 2004. The
timetable of future dividend payments is shown on Page 41 of the Annual Report.

Implementation of this new policy requires one further change in practice. As a
final dividend may not be paid without the approval of shareholders and that
cannot be obtained in time to pay a dividend within one month of the fourth
quarter's end, the Board has decided to pay four interim dividends each year in
future, but no final dividend. These new arrangements will not affect the level
of total annual dividends paid per share.

Reclassification

In view of the Company's high income objective and in order to provide a
meaningful comparison with other investment trust companies offering a high
income, the Board approached the Association of Investment Trust Companies to
request that the Company be included in the 'UK High Income' rather than the 'UK
Smaller Companies' category of the Monthly Information Service. The Association
agreed to this reclassification which took effect from 31 January 2004.

Outlook

Forecasts of output growth have been raised in most major economies, with the
USA continuing to lead the recovery supported by Asia and, in particular, China.
The recovery in confidence among investors and the prospect of renewed profits
growth suggest that the environment is becoming more supportive of investment in
the cyclical, higher-yielding shares which make up a large proportion of the
Company's equity portfolio.

Board

The Board was saddened to announce the untimely death of John Stubbs in the 2003
Interim Report but find it a fitting testimony that the strategies introduced
under his leadership have led to the elimination of the discount and the recent
period of good performance.

Mike Balfour was appointed a member of the Board in November 2003, following an
executive search by the Nominations Committee. Mr Balfour has acted as an
investment manager for several investment trusts and is now a director of a
number of other companies.


Annual Report and Annual General Meeting

The Annual Report will be mailed to shareholders on 18 February 2004. Copies may
obtained from the managers, Glasgow Investment Managers Limited, Sutherland
House, 149 St Vincent Street, Glasgow, G2 5DR after that date.

The Annual General Meeting will be held at Trinity House, Tower Hill, London,
EC3N 4DH on 19 March 2004 at 12 noon.



Henry S Cathcart
(Chairman)



Shires Smaller Companies plc
Consolidated Statement of Total Return
(incorporating the Revenue Account*)
for the year ended 31 December 2003

                                   2003                         2002
                      Revenue   Capital    Total   Revenue   Capital     Total
                         £000      £000     £000      £000      £000      £000
Gains/(Losses) on
investments                 -     8,709    8,709         -   (10,148)  (10,148)
Income                  4,205         -    4,205     4,184         -     4,184
Investment
management fee           (260)     (260)    (520)     (289)     (289)     (578)
Other administrative
expenses                 (283)        -     (283)     (254)        -      (254)
                        -------    ------   ------   -------   -------   -------

NET RETURN BEFORE
FINANCE
COSTS AND TAXATION      3,662     8,449   12,111     3,641   (10,437)   (6,796)

Finance costs:
Loans and overdrafts     (497)     (497)    (994)     (612)     (612)   (1,224)
Zero coupon finance         -    (1,546)  (1,546)        -      (955)     (955)
                        -------    ------   ------   -------   -------   -------

RETURN ON ORDINARY
ACTIVITIES BEFORE
TAXATION                3,165     6,406    9,571     3,029   (12,004)   (8,975)

Taxation                    -         -        -       (15)       15         -
                        -------    ------   ------   -------   -------   -------

RETURN ON ORDINARY
ACTIVITIES AFTER
TAXATION
FOR THE FINANCIAL
YEAR                    3,165     6,406    9,571     3,014   (11,989)   (8,975)

Dividends on equity
shares                 (3,009)        -   (3,009)   (3,009)        -    (3,009)
                        -------    ------   ------   -------   -------   -------

TRANSFER TO/(FROM)
RESERVES                  156     6,406    6,562         5   (11,989)  (11,984)
                        -------    ------   ------   -------   -------   -------

Return per share        14.46p    29.27p   43.73p    13.77p   (54.78)p  (41.01)p

Dividends per share     13.75p                       13.75p

* The revenue column of this statement is the consolidated revenue account of
the Group.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.

The financial information set out above and on the following pages does not
constitute the Company's statutory accounts for the years ended 31 December 2002
and 2003 but is derived from those accounts. Statutory accounts for 2002 have
been delivered to the Registrar of Companies and those for 2003 will be
delivered following the Company's annual general meeting. The auditors have
reported on those accounts; their reports were unqualified and did not contain
statements under section 237(2) or (3) of the Companies Act 1985.




Shires Smaller Companies plc
Group Balance Sheet as at 31 December 2003

                                                             2003         2002
                                                             £000         £000
FIXED ASSETS
Ordinary shares                                            38,354       32,706
Convertibles                                                2,912        3,577
Corporate bonds                                            23,074       22,547
Other fixed interest                                        2,613          831
                                                            -------       ------

                                                           66,953       59,661

CURRENT ASSETS
Debtors                                                       734          961
Investments of dealing subsidiary undertaking                 147          140
Cash at bank                                                  465           89
                                                            -------       ------

                                                            1,346        1,190

CREDITORS
Amounts falling due within one year                        (3,655)      (4,360)
                                                            -------       ------

NET CURRENT LIABILITIES                                    (2,309)      (3,170)
                                                            -------       ------

TOTAL ASSETS LESS CURRENT LIABILITIES                      64,644       56,491

CREDITORS
Amounts falling due after more than one year              (25,774)     (24,183)
                                                            -------       ------

NET ASSETS                                                 38,870       32,308
                                                            -------      -------

EQUITY SHAREHOLDERS' FUNDS                                 38,870       32,308
                                                            -------      -------

Net asset value per share                                   177.6p       147.6p




Shires Smaller Companies plc
Consolidated Cash Flow Statement for the year ended 31 December 2003

                                                     2003     2002
                                            £000     £000        £000     £000
OPERATING ACTIVITIES
Dividends and interest received from                4,415                4,060
investments
Income tax recovered                                    -                  108
Deposit interest received                              10                   10
Other cash received                                     1                    2
Administrative expenses paid                         (858)                (638)
Payments to and on behalf of Directors                (55)                 (71)
Dealing subsidiary payments                             -                 (171)
                                                     ------              -------

NET CASH INFLOW FROM OPERATING                      3,513                3,300
ACTIVITIES

SERVICING OF FINANCE
Interest paid                                        (535)              (1,228)

TAXATION
Corporation tax paid                                    -                   (4)

INVESTING ACTIVITIES
Purchases of investments                 (24,158)             (34,400)
Sales of investments                      25,575               38,609
                                           -------               ------

NET CASH INFLOW FROM INVESTMENT                     1,417                4,209
ACTIVITES

EQUITY DIVIDENDS PAID                              (3,009)              (3,009)
                                                     ------              -------

                                                    1,386                3,268
FINANCING
Zero coupon finance                                    40                    -
                                                     ------              -------

INCREASE IN CASH                                    1,426                3,268
                                                     ------              -------




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