Final Results

Shires Smaller Companies PLC
23 February 2005


News Release


23 February 2005


Shires Smaller Companies plc

Preliminary Results for the year ended 31 December 2004

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.

                                            2004                   2003

Total investments                         £78.98   m             £66.95   m
Shareholders' funds                       £47.33   m             £38.87   m
Market capitalisation                     £49.35   m             £40.27   m

Net asset value (NAV) per share            216.3   p              177.6   p
Ordinary share price                       225.5   p              184.0   p

Premium (share price to NAV)                 4.3   %                3.6   %

Revenue return per share                   13.89   p              14.46   p
Dividends per share                        13.75   p              13.75   p

Gearing                                     66.8   %               72.2   %


   • The total return to a shareholder was 30.0%, significantly ahead of both
     the Company's benchmark, the FTSE Small Cap Index (excluding Investment
     Companies), at 13.1% and the FTSE all-Share Index at 12.9%.


   • At the year end the share price stood at a premium to net asset value of
     4.3%, reflecting the strength of demand for the Company's shares


   • The Company's total return on net assets was 29.5%, again significantly
     higher than the corresponding return on the benchmark.


   • Dividends declared and paid have been maintained at the same level as
     last year, 13.75p.


   • The yield on the Company's ordinary shares was 6.1% at 31 December 2004.


   • With many British companies producing strong levels of cash flow there
     is potential for dividends in general to grow at a higher rate than their
     underlying earnings. A healthy level of dividend growth should help the
     equity market make progress over the next twelve months.


For further information please contact:

Mike Balfour, Chief Executive
Glasgow Investment Managers
0141 572 2700

Shires Smaller Companies plc
Annual Report 31 December 2004
Chairman's Statement

Highlights

I am pleased to report that in the year to 31 December 2004, your Company has
continued the excellent performance reported in 2003. Net assets have risen by
over £8.4 million since the start of the year, an increase in the net asset
value per share of 21.8%, from 177.6p to 216.3p. Over the same period the share
price has risen from 184.0p to 225.5p, a rise of 22.5% and, with the shares
currently trading at a premium to net asset value, demand for the Company's
shares remains strong. Dividends paid during the year have been maintained at
13.75p, producing a dividend yield of 6.1% based upon the share price at 31
December 2004. Further evidence of the Company's continued success came in
October 2004 when it was shortlisted for Investment Week's 'Investment Trust of
the Year' award in the UK Equity Sector.

Background

These results were achieved against a background of continued recovery in the UK
stock market, with the FTSE Small Cap Index (excluding Investment Companies),
the Company's benchmark, returning 13.1%, which was slightly ahead of the 12.9%
return from the FTSE All-Share Index. Small Cap stocks benefited from a strong
and stable domestic economy.

Investment Performance

The Company's total return on net assets was 29.5%. This return is significantly
higher than the total return on the Company's benchmark and the FTSE All-Share
Index. This out performance was mainly due to good stock selection.

Over the year there was a slight improvement in the rating of the Company's
shares in the stock market. The premium at which the share price stood to net
asset value increased from 3.6% at 31 December 2003 to 4.3% at 31 December 2004.
As a result, the total return to a shareholder, at 30.0%, was above the return
on net assets.

Dividends

On 5 January 2005, the Board declared a fourth interim dividend of 4.75p per
share, which was paid on 31 January 2005 to shareholders on the register at
close of business on 14 January 2005. The total of the four interim dividends
declared for the year to 31 December 2004 was 13.75p.

Portfolio Profile and Gearing

At 31 December 2004, 102.8% of net assets were invested in equities compared to
98.7% as at 31 December 2003. Total gearing fell from 72.2% to 66.8% of net
assets, due to the rise in the capital value of the Company's portfolio.

The vast majority of the gearing at 31 December 2004 was invested in
high-yielding fixed income securities, which make a major contribution to the
high level of income distributed to shareholders. This is explained in more
detail in the Investment Managers Review included in the Annual Report.

In the year to 31 December 2005, a significant proportion of the Company's
finance is due for repayment. You will recall that in December 2003 we extended
the majority of the Zero Coupon Finance to 2008. However, around £4 million
matures in August 2005 being the remainder of the original Zero Coupon Finance
taken out in May 2000. In addition, the loan taken out in 1995 is due for
repayment on 31 December 2005. The Board is presently reviewing the best way of
renewing these arrangements, and is hopeful that the Company will benefit from
cheaper finance as a result of the lower interest rate environment which now
exists compared to 1995 and 2000, when these arrangements were entered into.

Share Capital

On 17 January 2005, the Company issued 150,000 shares at a price of 230.0p to
satisfy market demand. These shares were issued at a premium to net asset value,
enhancing net assets per share for existing shareholders and were the first
issue of shares by the Company since the exercise of warrants in June 2000.

In order to meet smaller scale regular demand for shares, the Company also
obtained a block listing facility of 900,000 ordinary shares of 50p each in
October 2004. Shares will not be issued pursuant to the block listing unless at
the time of issue the price of an existing share exceeds the underlying net
asset value of that share. Following the year end 73,227 shares have been issued
pursuant to the block listing at prices ranging from 234.5p to 239.0p.

A source of regular demand for the Company's shares comes from the Glasgow
Investment Collection, through which 8.2% of the Company is owned. The Glasgow
Investment Collection is a collection of savings schemes operated by the
Company's Managers. It allows monthly or lump sum investments in an ISA,
TrustPlan or Children's Plan and also allows PEP transfers. It is a cost
effective method of investing in the Company's shares.

Continuation Vote

As required by the Company's Articles of Association an ordinary resolution will
be proposed at the forthcoming Annual General Meeting that the Company should
continue as an investment trust for a further five year period. The Directors
recommend shareholders vote in favour of the resolution.

The Board believes that continuation is in the best interests of all
shareholders. The Company's performance record under the investment strategy
currently being followed demonstrates its ability to combine provision of a high
dividend yield with growth of both income and capital to achieve a total return
well above the average available from UK equities. Moreover, the premium at
which the share price has recently stood to net asset value per share reflects
the continuing demand for the Company's shares.


Outlook

The UK economy is likely to slow over the next twelve months as previous rises
in interest rates result in weaker consumer spending and a slowdown in the
growth of house prices. This will inevitably lead to a lower rate of corporate
earnings growth. Many British companies are, however, producing strong levels of
cash flow and, with balance sheets relatively conservatively geared, are likely
to use this to increase share buy-backs and grow dividends at a greater rate
than their underlying earnings. A healthy level of dividend growth should help
the market make progress over the next twelve months.

International Accounting Standards

These financial statements will be the last prepared under UK Generally Accepted
Accounting Practice (UK GAAP) and the Investment Trust SORP. International
Accounting Standards (IAS) became effective from 1 January 2005 and the
Company's interim report will be published in the autumn under the revised
format. The Board is currently working with the Managers to implement the new
reporting. In one area, namely accounting for Zero Coupon Finance, there will be
the most tangible change with a move to market value. As at 31 December 2004,
adopting IAS treatment would have reduced net assets by £459,000 or 2.1p per
share. However, it should be noted the total cost of the Zero Coupon Finance
does not change under IAS, only the method of recognising the cost during the
life of the options does as there is a predetermined finite cost should the
underlying FTSE 100 Index Options be held to expiry. IAS also requires
investments to be valued at bid price. At 31 December 2004 this would have
reduced net assets by £80,000 or 0.4p per share.

Board

Mike Balfour resigned from the Board on 12 August 2004 following his appointment
as Chief Executive of Glasgow Investment Managers in May 2004. It was agreed Mr
Balfour would remain on the Board after his appointment to the Managers until
the search for a replacement was nearing conclusion. The Board would like to
thank him for his input over the course of the year.

Mrs Carolan Dobson was appointed to the Board on 14 September 2004, following an
executive search instigated by the Nominations Committee. Mrs Dobson has worked
in the fund management industry for many years with Murray Johnstone and Abbey
Asset Managers and also sat on the Board of the AITC.

Annual Report and Annual General Meeting

The Annual Report will be mailed to shareholders on 28 February 2005. Copies may
be 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 31 March 2005 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 2004

                                    2004                         2003
                       Revenue   Capital    Total   Revenue   Capital    Total
                          £000      £000     £000      £000      £000     £000

Gains on investments         -    10,231   10,231         -     8,709    8,709
Income                   4,135         -    4,135     4,205         -    4,205
Investment management
fee                       (302)     (302)    (604)     (260)     (260)    (520)
Other administrative
expenses                  (278)        -     (278)     (283)        -     (283)
                         -------    ------   ------   -------    ------   ------

NET RETURN BEFORE
FINANCE
COSTS AND TAXATION       3,555     9,929   13,484     3,662     8,449   12,111

Finance costs:
Loans and overdrafts      (514)     (514)  (1,028)     (497)     (497)    (994)
Zero coupon finance          -      (983)    (983)        -    (1,546)  (1,546)
                         -------    ------   ------   -------    ------   ------

RETURN ON ORDINARY
ACTIVITIES BEFORE
TAXATION                 3,041     8,432   11,473     3,165     6,406    9,571

Taxation                     -         -        -         -         -        -
                         -------    ------   ------   -------    ------   ------

RETURN ON ORDINARY
ACTIVITIES AFTER
TAXATION
FOR THE FINANCIAL YEAR   3,041     8,432   11,473     3,165     6,406    9,571

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

TRANSFER TO RESERVES        32     8,432    8,464       156     6,406    6,562
                         -------    ------   ------   -------    ------   ------

Return per share         13.89p    38.53p   52.42p    14.46p    29.27p   43.73p

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 2003
and 2004 but is derived from those accounts. Statutory accounts for 2003 have
been delivered to the Registrar of Companies and those for 2004 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 2004

                                                             2004         2003
                                                             £000         £000
FIXED ASSETS
Ordinary shares                                            48,673       38,354
Convertibles                                                2,358        2,912
Corporate bonds                                            23,790       23,074
Other fixed interest                                        4,155        2,613
                                                           -------       ------

                                                           78,976       66,953

CURRENT ASSETS
Debtors                                                     1,893          734
Investments of dealing subsidiary undertaking                   -          147
Cash at bank                                                    -          465
                                                           -------       ------

                                                            1,893        1,346

CREDITORS
Amounts falling due within one year                       (20,608)      (3,655)
                                                           -------       ------

NET CURRENT LIABILITIES                                   (18,715)      (2,309)
                                                           -------       ------

TOTAL ASSETS LESS CURRENT LIABILITIES                      60,261       64,644

CREDITORS
Amounts falling due after more than one year              (12,927)     (25,774)
                                                           -------       ------

NET ASSETS                                                 47,334       38,870
                                                           -------      -------

EQUITY SHAREHOLDERS' FUNDS                                 47,334       38,870
                                                           -------      -------

Net asset value per share                                   216.3p       177.6p


Shires Smaller Companies plc
Consolidated Cash Flow Statement for the year ended 31 December 2004

                                                     2004                 2003
                                            £000     £000        £000     £000
OPERATING ACTIVITIES
Dividends and interest received from                3,935                4,415
investments
Deposit interest received                               6                   10
Dealing subsidiary receipts                           302                    -
Other cash received                                     2                    1
Administrative expenses paid                         (786)                (858)
Payments to and on behalf of Directors                (58)                 (55)
Dealing subsidiary payments                           (91)                   -
Other payments                                       (350)                   -
                                                    ------              -------

NET CASH INFLOW FROM OPERATING                      2,960                3,513
ACTIVITIES

SERVICING OF FINANCE
Interest paid                                      (1,472)                (535)

TAXATION
Corporation tax paid                                    4                    -

INVESTING ACTIVITIES
Purchases of investments                 (26,557)             (24,158)
Sales of investments                      24,076               25,575
                                         -------              -------

NET CASH (OUTLFOW)/INFLOW FROM                     (2,481)               1,417
INVESTMENT ACTIVITES

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

                                                   (3,998)               1,386
FINANCING
Zero coupon finance                                     -                   40
                                                   ------              -------

(DECREASE)/INCREASE IN CASH                        (3,998)               1,426
                                                   ------              -------




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