Interim Results - 6 Months to 31 December 1999

Foreign & Colonial U.S.Smllr.Co PLC 1 March 2000 Date: 01 March 2000 Contact: Graeme Glen Foreign & Colonial Tel: 0171 628 8000 Claire Barry Financial Dynamics Tel. 0171 831 3113 FOREIGN & COLONIAL U.S. SMALLER COMPANIES PLC Unaudited Statement of Results for the Half Year Ended 31 December 1999 Highlights - Share price has increased by 8.6% to 199p in the six months to 31 December 1999 (183.25p : 30 June 1999); - Fully diluted net asset value per share has increased 2.6% to 223.5p (217.8p : 30 June 1999), compared with a 6.2% rise in its benchmark, the Russell 2000 Smaller Companies Index, converted to sterling; - Since the Company's inception in 1993 the fully diluted net asset value per share has outperformed its benchmark index by 30 percentage points; - Share buy backs - to date the Company has bought back 14.9 million shares at an average discount of 11%, enhancing the NAV by £2.8 million; - Warrants - Over the past six months the Company has repurchased 1.96 million outstanding warrants; - Outlook - The Company continues to maintain a low risk profile which should ensure strong long-term returns. 6 months 6 months Year ended ended ended 30 June 31 December 31 December 1999 1999 1998 Net Assets £84.2m £106.7m £116.0m Net Assets per share 237.29p 211.93p 230.30p Net Assets per share (fully diluted) 223.54p 199.40p 217.82p Share price 199.00p 157.00p 183.25p Warrant price 97.00p 65.50p 105.00p Foreign & Colonial U.S. Smaller Companies PLC Unaudited Interim Statement of Results for the half year ended 31 December 1999 Chairman's Statement Results At 31 December 1999, the fully diluted net asset value per share was 223.5p. This was an increase of 2.6% in the period under review, which compares to a rise of 6.2% in our benchmark index the Russell 2000 when converted to Sterling. Over the six months to 31 December 1999 the share price rose 8.6%. The relative under-performance of the net assets was largely a function of our underweight position in the technology group. The Russell 2000 Value Index, which broadly excludes technology, fell 8.4% in sterling terms, over the period under review. Since inception of the Company in March 1993, the growth in fully diluted net asset value has outperformed the Russell 2000 Index by 30 percentage points overall. The value of each initial unit of 5 shares and 1 warrant has risen from 500p at the initial public offering to 1,092p on 31 December 1999. The investment philosophy and strategy that we follow has been clearly laid out in earlier reports. We take a risk averse approach to investing in smaller companies and focus on companies in stable, non-cyclical sectors capable of generating free cash flow in a variety of economic conditions. This differentiates us from our competitors who are mainly growth and momentum orientated. The investment style has led to our maintaining limited exposure to the technology sector. This has not been helpful to performance over the last six months, but we firmly believe that over the long term superior results will be achieved by adhering to our investment process. In line with many trusts, the discount to net asset value at which your Company's shares trade has widened over the past three years. In response to the widening discount, your board has adopted an aggressive share repurchase programme and, over the six months under review, the Company has bought back for cancellation 14.9 million shares at an average discount of 11%, thus enhancing the fully diluted net asset value by £2.8 million. The board has also authorised the repurchase and cancellation of warrants, when this can be achieved at a level that adds to the asset value. Over the past six months 1.96 million warrants have been repurchased at an average price of 92p. These actions together have enhanced fully diluted net asset value by 4.9p per fully diluted share. Your board is committed to buying back further shares with the aim of closing the discount to within single figures over a reasonable period. Foreign & Colonial U.S. Smaller Companies PLC Unaudited Interim Statement of Results for the half year ended 31 December 1999 Outlook The restructuring and deregulation which has taken place over the past ten years in the US corporate sector has significantly improved its worldwide competitive position. International economies are enjoying stronger growth, while US corporations have been early to adopt developing technologies and are well positioned to take advantage of the new information age. Short term we have been in a liquidity-driven bull market that has taken the indices considerably higher than might have been expected earlier in the year. The threat of the millennium bug appears to have been exaggerated and it now seems likely that the Federal Reserve will move to tighten credit conditions in the short-term. After several years of exceptional returns from the stockmarket a period of more subdued investment returns looks likely. Your Manager has maintained a low risk profile which has constrained performance over the last six months but should ensure strong long-term returns particularly in a more rational market environment. FOREIGN & COLONIAL U.S. SMALLER COMPANIES PLC Unaudited results for the half year ended 31 December 1999 ASSETS 31 31 30 June December December 1999 1999 1998 £000's £000's £000's Total assets less current liabilities 84,233 106,706 115,955 Net assets attributable to ordinary shareholders 84,233* 106,706 115,955* Net asset value per share - pence 237.29 211.93 230.30 Net asset value per share (fully diluted) - pence 223.54 199.40 217.82 * The movement in net assets attributable to ordinary shareholders in the six months to 31 December 1999 includes £28,337,000 incurred in respect of ordinary shares bought back for cancellation, and £1,806,000 in respect of warrants repurchased for cancellation. Geographical distribution of the investments at 31 December 1999 was: United States 100% FOREIGN & COLONIAL U.S. SMALLER COMPANIES PLC Unaudited Statement of Total Return of the Company (incorporating the revenue account*) for the half year ended 31 December 1999 6 months to 31 Dec 1999 6 months to 31 Dec 1998 Revenue Capital Total Revenue Capital Total £000s £000s £000s £000s £000s £000s (Losses) on investments - (1,449) (1,449) - (264) (264) Exchange (losses)/gains on currency balances - (119) (119) - 60 60 Income 388 - 388 540 - 540 Management fee (362) - (362) (391) (247) (638) Loss on warrants purchased for cancellation - (1,158) (1,158) - (378) (378) Other expenses (97) (184) (281) (78) (2) (80) Net return before finance costs and taxation (71) (2,910) (2,981) 71 (831) (760) Interest payable and similar charges - - - - - - Return on ordinary activities before taxation (71) (2,910) (2,981) 71 (831) (760) Taxation on ordinary activities (53) - (53) (59) - (59) Return attributable to equity shareholders (124) (2,910) (3,034) 12 (831) (819) Dividend on ordinary shares - - - - - - Amount transferred (from)/to reserves (124) (2,910) (3,034) 12 (831) (819) Return per ordinary share - pence (0.31) (7.27) (7.58) 0.03 (1.65) (1.62) Return per ordinary share fully diluted - pence + + + 0.02 + + * The revenue column of this statement is the profit and loss account of the Company. + The fully diluted return per share exceeds the basic return per share resulting in no dilution. No dividend is recommended for payment on the ordinary shares. The Report and Accounts will be posted to all shareholders on or around 6 March 2000. Copies may be obtained during normal office hours from the Company's Registered Office, Exchange House, Primrose Street, London EC2A 2NY, thereafter. By order of the Board Foreign & Colonial Management Limited Secretary Exchange House, Primrose Street London EC2A 2NY 29 February 2000

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