Interim Results

F&C U.S. Smaller Companies PLC
07 February 2008

               
Date:          7 February 2008

Contact:       Robert Siddles
               F&C Management Limited
               020 7628 8000


                          F&C US SMALLER COMPANIES PLC
                         Unaudited Statement of Results
                    for the half-year ended 31 December 2007


SUMMARY OF UNAUDITED RESULTS FOR THE HALF-YEAR ENDED 31 DECEMBER 2007


                                                              31 December 2007       30 June 2007         % Change

Net assets                                                               £61.59m          £73.18m            -15.8

Net asset value per share                                                288.06p          336.06p            -14.3

Russell 2000 Index (sterling adjusted)                                    384.82           415.53             -7.4

Share price                                                              267.25p          300.50p            -11.1

Increase in net asset value per share since
inception on 8 March 1993                                                                                   +198.5

Increase in the Russell 2000 Index
(sterling adjusted) since 8 March 1993                                                                      +144.0


The Chairman, commenting on the results, said:

The six months to the end of December 2007 was a difficult period for the US
equity market. The net asset value per share of your Company fell 14.3% in the
six month period to 31 December 2007 compared with a fall in the Company's
benchmark, the sterling-adjusted Russell 2000 Index of 7.4%.



It has been a period of very poor returns for the value style of investing,
which is employed by your Company.   In the six month period, the Russell 2000
Value Index* performed badly compared to the Russell 2000, falling 13.3% in
sterling terms. This was also the case for 2007 as a whole where the Russell
2000 Value Index dropped 13.0% in sterling terms but the sterling adjusted
Russell 2000 Index fell only 4.4%; by comparison the Company's net asset value
per share declined by 9.5% in the year.



Market Review

During the six month period, the Russell 2000 Index declined by 8.1% in dollar
terms, more than the Standard & Poors Composite Index, which lost 2.3% and in
contrast to the more technology-orientated NASDAQ Composite Index, which
advanced 1.9%.



Smaller companies initially rallied, reaching new highs for the Russell 2000
Index in July before succumbing to a series of sell-offs interrupted by attempts
at rallying. The Russell 2000 Index ended December above the lows seen in
November but fell further after the end of the year.



Earlier in the year the housing crisis was just seen as a severe recession in
one industry and a problem for mortgage lenders.  By July, however the
perception grew that it was becoming a general threat to the provision of credit
throughout the economy. The risk was therefore of a sharp recession. The Federal
Reserve cut the Federal Funds rate three times in the period under review but to
little avail as investors' fears led to actual rises in a number of other market
rates notwithstanding the Fed's actions. Towards the end of the period, the
first signs of a slowdown began to appear in the industrial economy, which up
till then had seemed insulated from the crisis, and these were given further
credence by economic statistics released in January. An additional drag on
growth was the increase of roughly one third in the price of crude oil over the
six month period.



As already mentioned, value shares performed poorly, a trend which began in mid
2006. In dollar terms, the Russell 2000 Value Index fell 14.0% in the six
months. This index lagged as investor confidence in the outlook for US economic
growth faded. Investors instead favoured stocks where growth seemed more
certain, and they appeared willing to pay a high price for this impression of
security.



The best performing sectors were other (a sector containing mostly diversified
companies), healthcare and other energy, whereas the laggards were other
financials, consumer discretionary, and autos and transportation. These moves
reflected fears about the economy and higher oil prices.



Portfolio Review

The overall portfolio positioning has changed since 30 June 2007: exposure is
greater in other energy, producer durables, and technology but lower in consumer
discretionary. The market sell-off in July produced new opportunities that we
took advantage of, for example in coal mining, mining equipment and defence IT
outsourcing. Sales were made of shares that became expensive, for example waste
collection and car part recycling.



The Company had avoided holding banks, mortgage lenders and housing stocks for
some time. The Manager recently began to buy regional banks that operate in
growing parts of the country, have limited consumer exposure but whose shares
appear to have been overly punished.







*The Russell 2000 Value Index is an index of stocks within the Russell 2000 that
have below average valuation.


Whilst the market seemed to be ignoring value stocks, it was pleasing that
others did not: two bids were received for portfolio holdings, one from a
strategic buyer and the other from private equity. The Midland Company, the
leading insurer of manufactured homes, agreed to an offer from Munich Re Group
while Radiation Therapy Services, an operator of cancer treatment centres
announced a leveraged buy-out.



The biggest contributions to performance came from Denbury Resources, a tertiary
oil recovery company, which benefited from higher oil prices, Bucyrus
International, a producer of mining equipment and Foundation Coal, a coal
producer, which were helped by a recovery in US coal prices. The main detractors
from performance were Jarden, a producer of niche consumer products, Beacon
Roofing Supply, a distributor and Conn's, a Texas regional retailer of home
appliances and consumer electronics. All three were affected by fears about
consumer spending. We believe their shares are very inexpensive and have good
recovery prospects.



Looking forward, the stocks in the portfolio offer excellent value, with more
than a third trading on price earnings ratios of 10 or under and many on free
cash flow yields approaching 10% or more.



Buy-backs and Discount

The Company bought back 393,188 of its own shares in the six-month period at an
average discount of 10.8%. The Board will continue to apply its policy of buying
back shares at appropriate times with a view to limiting the discount in the
longer term to around 10%.



The discount narrowed from 10.6% at 29 June 2007 to 7.2% at 31 December 2007. As
at 6 February 2008, the discount was 8.2%.



Outlook

Since the end of December, the economy appears to have weakened further and the
market was unsettled by additional large write-offs by leading financial
institutions. In response to weakening demand, the Fed has taken more aggressive
action to stave off the worst effects of recession and the credit crunch,
cutting the Fed Funds rate by three quarters of one percent. The response of the
market has been to begin to move back into value stocks, a move which if
sustained will benefit shareholders.


Gordon Grender
February 2008


UNAUDITED INCOME STATEMENT


                                            Half-year ended 31 December 2007          Half-year ended 31 December 2006
                                               Revenue    Capital      Total         Revenue      Capital        Total
                                                £'000s     £'000s     £'000s          £'000s       £'000s       £'000s

Losses on investments                                -   (10,551)   (10,551)               -        (504)        (504)
Exchange gains/(losses) on
   currency balances                                 -         10         10               -        (111)        (111)
Income                                             431          -        431             616            -          616
Management fee                                   (259)          -      (259)           (293)            -        (293)
Other expenses                                   (109)        (5)      (114)           (107)          (2)        (109)

Net return before finance
   costs and taxation                               63   (10,546)   (10,483)             216        (617)        (401)
Interest payable and similar charges                 -          -          -               -            -            -

Return on ordinary activities
   before taxation                                  63   (10,546)   (10,483)             216        (617)        (401)
Taxation on ordinary activities                   (59)          -       (59)            (88)            -         (88)

Return attributable to equity
   shareholders                                      4   (10,546)   (10,542)             128        (617)        (489)

Return per ordinary share - pence                 0.02    (48.57)    (48.55)            0.55       (2.67)       (2.12)


The total column is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing
operations.

A statement of total recognised gains and losses is not required as all gains
and losses of the Company have been reflected in the above statement.



UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

                       Called-up      Share           Non-      Capital                                           Total
                           share    premium  distributable   redemption   Special    Capital    Revenue   shareholders'
                         capital    account        reserve      reserve   reserve   reserves    reserve           funds
                          £'000s     £'000s         £'000s       £'000s    £'000s     £'000s     £'000s          £'000s

Balance brought
    forward at 1 July
    2007                   5,444      2,468            841        7,908         -     57,635    (1,119)          73,177
Shares purchased by
    the Company             (98)          -              -           98         -    (1,042)          -         (1,042)
Return attributable to
    equity                     -          -              -            -         -   (10,546)          4        (10,542)
shareholders
Balance carried
    forward at 31
    December 2007          5,346      2,468            841        8,006         -     46,047    (1,115)          61,593

Balance brought
    forward at 1 July
    2006                   5,923      2,468            841        7,429     4,235     55,781    (1,213)          75,464
Shares purchased by
    the Company            (296)          -              -          296   (3,244)          -          -         (3,244)
Return attributable to
    equity                     -          -              -            -         -      (617)        128           (489)
shareholders
Balance carried
    forward at 31
    December 2006          5,627      2,468            841        7,725       991     55,164    (1,085)          71,731

Balance brought
    forward at 1 July
    2006                   5,923      2,468            841        7,429     4,235     55,781    (1,213)          75,464
Shares purchased by
    the Company            (479)          -              -          479   (4,235)    (1,175)          -         (5,410)
Return attributable to
    equity                     -          -              -            -         -      3,029         94           3,123
shareholders
Balance carried
    forward at
    30 June 2007           5,444      2,468            841        7,908         -     57,635    (1,119)          73,177



UNAUDITED BALANCE SHEET

                                                       31 Dec 2007              31 Dec 2006               30 June 2007
                                                            £'000s                   £'000s                     £'000s
Fixed assets
Listed investments                                          61,109                   69,810                     71,472

Current assets
Debtors                                                         67                       81                         52
Cash at bank and short-term deposits                           716                    2,039                      2,128

                                                               783                    2,120                      2,180
Current liabilities                                          (299)                    (199)                      (475)

Net current assets                                             484                    1,921                      1,705

Net assets                                                  61,593                   71,731                     73,177

Shareholders' equity
Called-up share capital                                      5,346                    5,627                      5,444
Share premium account                                        2,468                    2,468                      2,468
Non-distributable reserve                                      841                      841                        841
Capital redemption reserve                                   8,006                    7,725                      7,908
Special reserve                                                  -                      991                          -
Capital reserves                                            46,047                   55,164                     57,635
Revenue reserve                                            (1,115)                  (1,085)                    (1,119)

Total equity shareholders' funds                            61,593                   71,731                     73,177

Net asset value per ordinary share
- pence                                                     288.06                   318.70                     336.06



UNAUDITED CASH FLOW STATEMENT
                                                                                   Half-year ended      Half-year ended
                                                                                  31 December 2007     31 December 2006
                                                                                            £'000s               £'000s

Net cash inflow from operating activities                                                       51                  198
Total tax paid                                                                                (58)                 (89)
Net cash (outflow)/inflow from purchases and sales of investments                            (421)                2,621

Net cash (outflow)/inflow before use of liquid resources and financing                       (428)                2,730
Net cash outflow from financing                                                              (994)              (3,244)

Decrease in cash during the period                                                         (1,422)                (514)

Reconciliation of net cash flow to movement in net funds
Decrease in cash during the period                                                         (1,422)                (514)
Exchange movement                                                                               10                (111)

Movement in net funds in the period                                                        (1,412)                (625)
Net funds at the beginning of the period                                                     2,128                2,664

Net funds at the end of the period                                                             716                2,039



Notes


1    ACCOUNTING POLICIES

The half-yearly financial statements have been prepared on the basis of the
accounting policies set out in the Company's financial statements at 30 June
2007.


2    DIVIDEND

The directors do not propose to pay an interim dividend.


3    RETURN PER ORDINARY SHARE

Returns per ordinary share attributable to ordinary shareholders reflect the
overall performance of the Company in the period.  Net revenue recognised in the
first six months is not indicative of the total likely to be received in the
full accounting year.

                                                     Half-year ended           Half-year ended               Year ended
                                                           31 Dec 07                 31 Dec 06               30 June 07
                                                              £'000s                    £'000s                   £'000s

Revenue return                                                     4                       128                       94
Capital return                                              (10,546)                     (617)                    3,029
Total return                                                (10,542)                     (489)                    3,123

Weighted average number of ordinary
   shares in issue                                        21,713,699                23,079,953               22,666,157


4    RESULTS

The results for the half-year ended 31 December 2007 and 31 December 2006, which
are unaudited, constitute non-statutory accounts within the meaning of Section
240 of the Companies Act 1985. The latest published accounts which have been
delivered to the Registrar of Companies are for the year ended 30 June 2007; the
report of the auditors thereon was unqualified and did not contain a statement
under Section 237 of the Companies Act 1985. The abridged financial statements
shown above for the year ended 30 June 2007 are an extract from those accounts.


By order of the Board
F&C Management Limited, Secretary
Exchange House, Primrose Street, London EC2A 2NY
7 February 2008



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