Final Results

F&C Smaller Companies PLC
20 June 2005



Date:           20 June 2005

Contact:        Sandy Fleming
                F&C Management Ltd                      020 7628 8000

                Lisa Stanley
                Lansons Communications                  020 7294 3692


                           F&C SMALLER COMPANIES PLC
                   Unaudited Preliminary Statement of Results
                        for the year ended 30 April 2005

SUMMARY OF RESULTS

                                                              30 April           30 April             % change
                                                                  2005               2004

Share price                                                     268.5p             224.0p                +19.9

Net asset value per share (debenture at nominal
value)                                                         308.78p            276.77p                +11.6

Net asset value per share (debenture at market                 
value)                                                         304.26p            272.04p                +11.8

Net assets                                                     £262.2m            £235.4m               +11.4*

Earnings per share                                               4.63p              3.95p                +17.2

Dividends per share                                              4.40p              4.24p                 +3.8

Total expense ratio (based on average net assets)                0.67%              0.80%

*  During the year 125,000 shares were bought back at a cost of £278,000.



MAIN POINTS

  • NAV has risen 11.6% compared to 9.1% for the official benchmark, the
    Extended Hoare Govett Index.

  • Share Price has risen 19.9% due a material narrowing of the discount.

  • The dividend is raised by 3.8%, the 35th year of consecutive increases.

  • Sandy Fleming is retiring at the end of July so he will be standing down
    as manager after the AGM to be succeeded by Peter Ewins.




Chairman's Statement

Dear Shareholder,

Your Company has had a good year.  I am pleased to report that your portfolio
has outperformed both its official benchmark and the overall market, with a
capital return of 11.6% compared to the 9.1% achieved by the Extended Hoare
Govett Smaller Companies Index and the 7.1% return from the FTSE All Share
Index. It is also very welcome that the discount to the net asset value narrowed
significantly during the year and the share price rose 19.9%.  At 268.5p, the
price is up 82.7% from the closing level on 30 April 2003 and is 117% higher
than the 124p recorded when the market reached its low point in March 2003.

In addition to the strong asset and share price performance recorded over the
year, the portfolio has benefited from good growth in dividend income. Your
Board is able therefore to recommend an increase in the final dividend of 4.6%
to 2.96p making the total dividend for the financial year 4.40p. This is an
overall increase of 3.8% which is comfortably ahead of inflation.

Performance

The key objective of your Company is to achieve performance that is better than
its agreed benchmark.  In a perfect world this would happen every year but as
all investors know only too well, the world is not always perfect.  Your Board
encourages the fund manager to take a long term view when evaluating prospective
investments, and we therefore judge the Manager on that basis.  It is therefore
good to see that in a fifteen year period, the returns have been positive in
nearly every period compared to the official benchmark. Indeed, we have only
failed to outperform in four years since the benchmark was adopted 17 years ago.
We have enjoyed strong relative returns everywhere other than in Japan where the
volatility of performance compared to the local indices has caused us to
consider whether we are using the best and fairest basis for comparison.  I will
return to the topic of the official benchmark later.

The Markets

The relative out-performance of smaller companies in 2003/4 continued in the
year under review, albeit at a much slower pace.  However as the discrepancy in
valuations that had developed between large and smaller companies narrowed it
was inevitable that a point would be reached where larger stocks began to
attract active investors.  As expectations of slowing economic growth were
reinforced by ever rising oil and metal prices and the realisation that Chinese
growth could not support the rest of the world indefinitely, markets adopted a
more cautious stance.  The key drivers of markets during the year became
increasingly country specific and as a result there was little commonality of
performance.  The index returns achieved from the various regions covered a
range from the rise of 23.5% in Europe to a decline of 7.2% in Asia.

Growth expectations continue to be reduced, particularly in Europe and the USA,
but the broad economic outlook remains positive and periods of uncertainty
create markets that are ideally suited to our stock picking style.

For several years we have maintained a large exposure to the UK because we felt
that for sterling investors this market offered superior return potential.  As
the valuation gap between large and small companies narrowed and as the risks to
continuing superior economic growth increased it was felt appropriate to switch
money into other regions of the world where both valuations and prospects were
deemed more attractive. Because of the stock specific nature of our investment
philosophy, a shift in geographic focus can result in a change to the industrial
diversification of the portfolio. But the Company continues to find attractive
investment opportunities across the industrial spectrum and, so the portfolio
continues to be widely diversified.

Benchmarks

In the late 1980s, Investment Trusts increasingly identified explicit external
bases on which the performance of the investment managers could be judged.  At
that time, it was decided that although the Company had a global investment
perspective there was no easily identifiable global index, so the Extended Hoare
Govett UK Smaller Companies Index was adopted as the performance yardstick.
This decision was justified on the basis that almost all shareholders were UK
investors. They had chosen a global fund rather than one of the many trusts
entirely focused on the UK, so we thought they would be concerned to see
comparative performance against a UK benchmark.  Since then the validity of the
benchmark has been discussed regularly and in our most recent discussions your
Board concluded that this sole focus on the UK was no longer appropriate as our
overall performance measure as the UK now represents less than half the assets
of the Company.

We have decided therefore that the benchmark should include an international
component but have concluded that the available international smaller companies
indices are too USA focused.  As a result we intend to use a blended benchmark
which will be 40% the Hoare Govett Smaller Companies Index and 60% the MSCI
Global Smaller Companies Index (ex UK).  This new benchmark will be used from
the start of the new financial year to judge the overall performance of the
Company; and local indices will continue to be used to monitor the success in
each geographic region.

I must stress that while I have spent some time explaining this change to our
overall benchmark we will continue to focus on stock selection as the key
provider of performance. Indices are important but we are not an index-tracking
fund and our priority is absolute total shareholder return.

Borrowings and Dividend

As confidence in the markets grew, so our willingness to borrow increased and by
the end of the year effective gearing, based on a market valuation for the
debenture, had risen to 9.1%.  Going forward there is no reason why this should
not rise further, but equally, if our views on the markets change, we will have
no hesitation in reducing the level of debt.  As has been said many times
before, gearing for us is a strategic, not structural, issue.

Although dividends can never be a main focus of a global smaller companies fund
such as ours, we appreciate their importance to many of our shareholders.  For
this reason, during the past three years, your Board has decided that it was
appropriate to utilise the substantial revenue reserve to continue to make
modest increases to dividends.  This year, because of strong dividend growth in
some of our portfolio companies, I am pleased to say that your Board can
recommend an increase in the final distribution without recourse to the revenue
reserve.  The proposed final of 2.96p will lift the full year dividend by 3.8%
to 4.40p. This increase extends the period of uninterrupted dividend progression
to 35 years.

Buy-Backs and Treasury Shares

At the last Annual General Meeting ('AGM') your Board received the normal
authority to buy shares back for cancellation.  It has always been your Board's
opinion that the ability to buy shares for cancellation is an obvious way to
help ensure that, on those occasions when there is a mismatch between supply and
demand, a large seller should not have an excessive impact on the share price,
and, by definition, the discount.  So at the forthcoming AGM we will again be
seeking authority to buy back up to 14.99% of the outstanding share capital for
cancellation.

At the time of writing, the buy-back authority has only had to be used
sparingly. 500,000 shares have been bought in at a discount of 15% since the
authority was renewed at the last AGM.  In the past year there has been a
material narrowing of the discount and your Board is keen to ensure that
shareholder value is not dissipated by allowing it to drift back up to previous
levels, unless, of course, the entire market environment changes. Buybacks will
continue to be evaluated on a case-by-case basis and used where we think it is
in the interest of all shareholders.

We also last year obtained powers that allowed us to put shares that we had
bought back into a Treasury facility for possible subsequent reissue. We made it
clear that our policy on Treasury shares would be kept under review and that no
shares would be sold at a discount to the prevailing net asset value.  Since
last year a great deal of discussion has taken place in the Investment Trust
industry on this issue, and we continue to debate the matter.  Your Board has
decided to renew its commitment not to sell Treasury shares at a discount in the
forthcoming year.

The Board and its Manager

After a long association with the Company stretching back to 1988, Nicholas
Talbot Rice has decided to retire from your Board so will not be seeking
re-election at the forthcoming AGM.  We have benefited very much from Nick's
wise advice over the years and he has been an excellent Board colleague.

At the same time I have no hesitation in supporting the election of both Anthony
Townsend and Jane Tozer, both of whom have joined the Board since the last AGM.
Tony is an ex-Chairman of The Association of Investment Trust Companies and
brings huge knowledge and experience to our work.  Jane is a very successful
business woman with a wealth of experience and contacts. I am sure that both
will make a strong contribution to our Board in the years to come.

Your fund manager, Sandy Fleming, who has managed the company since early 2000,
is retiring from F&C Asset Management and will have no further involvement with
your company after 31 July 2005.  Sandy has been a tower of strength in so many
ways that we will miss him very much. He assumed responsibility for the fund
just at the peak of the TMT bubble and guided us safely through the most severe
bear market for thirty years.  During that difficult period he consistently
focused on two issues.  The first was trying to ensure that during this
difficult time the impact on the discount, and particularly, the volatility of
the discount was minimised by judicious use of buyback powers and attracting new
investors.  However his other key focus was to construct a portfolio that would
provide protection from the worst ravages of the down cycle, while at the same
time providing the potential for outperformance when the markets recovered.
Since March 2003 when markets reached their nadir, we have enjoyed a sustained
recovery in our fortunes.  As I stated earlier, the share price has risen 117%
since the low point in March 2003 while our benchmark is only 77% higher.  At
the same time the number of shareholders has increased and the discount has
narrowed significantly. We wish Sandy a long, healthy and happy retirement.

Peter Ewins, who has worked with Sandy since 1994 and who has been managing the
UK portion of your Company's assets, will take over from Sandy on 1 August 2005.
Peter will bring continuity of style and approach but will also have his own
ideas and opinions.  We look forward very much to working with Peter and seeing
him further advance the affairs of your Company and its performance.

Outlook

We have enjoyed two years of significant gains in smaller company markets with
both the net asset value and our share price showing substantial increases.
While the scale of further progress may be more modest and while there will
undoubtedly be periods when political, economic, or market uncertainties cause
nervousness, I am confident that we can continue to make further advances.

Our ability to move assets to the regions offering the greatest potential
provides the opportunity to achieve superior longer term performance than would
be possible if we were focused on any one market.

We are now the only Investment Trust specialising in global smaller companies
and I see no reason why we should not continue to attract wide shareholder
support.  Our specialist teams will continue, on your behalf, to seek out
under-valued, good quality smaller companies throughout the world.


Gerry Grimstone
June 2005

Balance Sheet

                                                                                    30 April          30 April
                                                                                        2005              2004
                                                                                      £'000s            £'000s
Fixed assets
Investments                                                                          284,246           246,632

Current assets
Debtors                                                                                1,253             3,663
Taxation recoverable                                                                      10                21
Cash at bank and short-term deposits                                                   6,812            16,566
                                                                                       8,075            20,250

Creditors: amounts falling due within one year:
Foreign currency loans                                                              (14,006)          (15,085)
Other                                                                                (6,086)           (6,407)
                                                                                    (20,092)          (21,492)

Net current liabilities                                                             (12,017)           (1,242)

Total assets less current liabilities                                                272,229           245,390

Creditors: amounts falling due after more than one
year:
Debenture                                                                           (10,000)          (10,000)
Net assets                                                                           262,229           235,390

Capital and reserves
Called up share capital                                                               21,231            21,262
Share premium account                                                                 23,132            23,132
Capital redemption reserve                                                             4,952             4,921
Capital reserves                                                                     208,003           181,357
Revenue reserve                                                                        4,911             4,718
Total shareholders' funds - equity                                                   262,229           235,390

Net asset value per ordinary share - pence                                            308.78            276.77

                                                                                      
Geographical distribution of total assets less current liabilities (excluding
loans) at 30 April 2005 was:

United Kingdom 44.4%; North America 22.2%; Japan 14.2%; Europe 10.4%; Far East
8.6% and others 0.2%.


Statement of Total Return (incorporating the revenue account*)
for the year ended 30 April

                                        2005                                        2004
                          Revenue        Capital          Total        Revenue        Capital          Total
                           £'000s         £'000s         £'000s         £'000s         £'000s         £'000s

Gains on investments            -         27,761         27,761              -         81,724         81,724
Exchange gains                  2          1,010          1,012              7             12             19
Income                      5,598              -          5,598          5,012              -          5,012
Management fee              (329)          (766)        (1,095)          (347)          (810)        (1,157)
Other expenses              (583)           (43)          (626)          (587)           (41)          (628)

Net return before
finance costs and
taxation                    4,688         27,962         32,650          4,085         80,885         84,970
Interest payable and
similar charges             (445)        (1,038)        (1,483)          (389)          (907)        (1,296)
                            
Return on ordinary
activities before
taxation                    4,243         26,924         31,167          3,696         79,978         83,674
Taxation on ordinary
activities                  (313)              -          (313)          (231)              -          (231)
                            
Return attributable
to equity
shareholders                3,930         26,924         30,854          3,465         79,978         83,443
                            
Dividends on
ordinary shares:
Interim of 1.44p
(2004 - 1.41p)            (1,223)              -        (1,223)        (1,199)              -        (1,199)
Proposed final of
2.96p (2004 - 2.83p)      (2,514)              -        (2,514)        (2,407)              -        (2,407)
                          
Amount transferred
to/(from) reserves            193         26,924         27,117          (141)         79,978         79,837
                              
Return per ordinary
share - pence                4.63          31.69          36.32           3.95          91.17          95.12


* The revenue column of this statement is the profit and loss account of the
Company.

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


Cash Flow Statement for the year ended 30 April
                                                                                         2005                2004
                                                                                       £'000s              £'000s
Net cash inflow from operating activities                                               3,970               3,513
Cash outflow from the servicing of finance                                            (1,458)             (1,296)
Total tax paid                                                                          (269)               (234)
Net cash (outflow)/inflow from financial investment                                   (8,625)               8,345
Equity dividends paid                                                                 (3,610)             (3,769)
Net cash (outflow)/inflow before use of liquid resources
   and financing                                                                      (9,992)               6,559

Decrease in short-term deposits                                                         8,000               6,885
Net cash outflow from financing                                                         (278)            (12,746)

(Decrease)/increase in cash                                                           (2,270)                 698


The financial information set out in the announcement does not constitute the
Company's statutory accounts for the years ended 30 April 2005 or 30 April 2004.
The financial information for the year ended 30 April 2004 has been extracted
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors reported on those accounts: their report
was unqualified and did not contain a statement under either Section 237(2) or
Section 237(3) of the Companies Act 1985. The statutory accounts for the year
ended 30 April 2005 will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies following the Company's Annual General
Meeting.

During the year to 30 April 2005 the Company purchased for cancellation 125,000
ordinary shares of 25p at a total cost of £278,000.   Since the year end a
further 500,000 shares were purchased for cancellation at a total cost of
£1,385,000.

The Directors propose a final dividend of 2.96p per share payable on 3 August
2005 to shareholders registered on 1 July 2005.

The Report and Accounts will be posted to shareholders in early July. Copies may
be obtained during normal business hours from the Company's Registered Office,
Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board
F&C Management Limited - Secretary
17 June 2005




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