Final Results

FOREIGN AND COLONIAL US SMALLER COMPANIES PLC
23 September 1999


 
       FOREIGN & COLONIAL  US SMALLER COMPANIES PLC
              Unaudited Preliminary Statement
               for the year to 30 June 1999
                             
 
Highlights
 
- Share price has increased 9.1% to 183.25p in the year
  to 30 June 1999 (168.00p : 30 June 1998)
 
- Net asset value per share has increased 7.4% to
  230.26p (214.40p : 30 June 1998), compared with a 5.9% rise
  in its sterling converted benchmark, the Russell 2000
  Smaller Companies Index.
 
- Since its inception in 1993, the Company has
  outperformed its benchmark, the Russell 2000 Smaller
  Companies Index, for the sixth successive year.
 
- Warrants - During the year the Company repurchased
  approximately 16% of the outstanding warrants at prices
  which added to the NAV.
 
- Share buy backs -  to date 14.9% of shares have been
  repurchased, adding 3.0p per share to fully diluted net
  asset value.  Authority to repurchase an additional 14.9%
  of shares was given at the EGM held on 22 September.
 
- Outlook - Smaller companies are currently at
  historically low relative values and therefore appear to
  represent good value.  Such valuations have led to an
  increased level of corporate activity with both domestic
  and international companies acquiring businesses in the US.
  The Company's value-based investment approach tends to
  identify attractive targets for acquisition, and this has
  resulted in five of its portfolio holdings being acquired
  in the past six months.
 
  The Company's portfolio should produce respectable
  returns over the long-term and its risk averse strategy suits those investors
  wanting equity exposure to one of the world's more dynamic, innovative
  and strong economies but who may be wary of the level of the
  overall stockmarket after such a sustained period of strength.
 
 
COMPANY  OBJECTIVE
 
To achieve long-term capital growth by investing in a
diversified portfolio of quoted US smaller and medium sized
companies.
 
 
SUMMARY OF RESULTS
Attributable to equity          30 June    30 June         %
shareholders
                                   1999       1998    Change
                                                            
 
Net assets                     £115.96m    £107.90m     +7.5
                                                            
Net assets per share            230.26p    214.40p      +7.4
 
 
Net assets per share -          217.82p    202.08p      +7.8
diluted
 
Russell 2000 Smaller                                        
Companies Index (sterling       290.34p    274.13p      +5.9
adjusted)
                                                            
Share price                     183.25p    168.00p      +9.1
                                                            
Warrant price                   105.00p     83.50p     +25.7
                                                            
Increase in net asset                                       
value per share since                                       
inception on 8 March 1993                             +138.6
 
 
Increase in the Russell                                     
2000 Smaller Companies                                      
Index since inception -                                +84.1
sterling adjusted

Chairman's Statement
 
Results
 
I am pleased to present the annual report for Foreign &
Colonial U.S. Smaller Companies PLC for the year ended 30 June
1999.  Since its incorporation in 1993 your Company has had
its sixth successful year of outperforming its benchmark, the
Russell 2000 Smaller Companies Index. These consistent returns
have been achieved in a generally strong stock-market
environment. The problems in emerging markets in the summer of
1998 exacerbated falls in the US stockmarket. During this
period, our risk-averse investment strategy enhanced our
relative return. Since September of last year there has been a
change in stockmarket leadership with the emergence of
internet related companies, which despite having limited
revenues and significant losses, have grown to represent 10%
of our benchmark index.  Our investment strategy is not
particularly well suited to this more speculative investment
environment and performance has suffered relative to the major
stockmarket indices.
 
For the year to 30 June 1999, the net asset value per share
rose by 7.4%.  This compares with a 5.9% rise in our sterling
converted benchmark, the Russell 2000 Smaller Companies Index.
Since the inception of the Company in March 1993, the net
asset value has risen by 138.6% which compares to an 84.1%
increase in the Russell 2000.
 
In line with the stated policy in previous years your board is
not recommending that a final dividend be paid for the year to
30 June 1999.
 
Board
 
Mr.  Thomas Griffin, who had been the chairman of the  Company
since  inception,  retired following the 1998  annual  general
meeting  having  reached retirement age.  He  brought  to  the
board  his  exceptional  experience  of  investment  and   the
investment trust industry.  I feel honoured to succeed him  as
chairman and feel sure that shareholders will wish to join the
board in wishing him a happy and prosperous retirement.
 
In  addition Mr Andrew Barker, who had also been a director of
the Company since its inception, retired from the board during
the   year.   This  was  in  line  with  Foreign  &   Colonial
Management's new policy that their executives should not serve
on  the boards of companies managed by it.  Your board regrets
his loss as one of their members but hopes to continue to have
the benefit of his wise counsel in the future.
 
In February we welcomed to the board Mr Norman Bachop who has
over 20 years experience of managing US investments.
 
Warrants
 
The board has authorised the repurchase and cancellation of
warrants if this can be achieved at a level that adds to
diluted net asset value.  During the last financial year the
Company repurchased around 16% of the outstanding warrants at
an average price of 64p.  Since then, the warrants have
recovered to 105p per share.  Since 1994 35% of warrants
issued at the inception of the Company have been repurchased
and cancelled.
 
Share Repurchase
 
In line with many investment trusts the discount to net asset
value at which your Company's shares trade widened over the
past three years and during the correction in the market in
the summer of 1998 the discount increased to over 20%.  This
was a disappointment as the trust has consistently
outperformed its benchmark index.  After the end of the
financial year and, with the widening discount in mind, an
extraordinary general meeting was convened on 12 July 1999 to
authorise the buy back of up to 14.9% of the ordinary shares
of the Company with the stated intention of the board to seek
renewed authority to repurchase a further 14.9% if and when
the initial authority was fully utilised.  In addition the
board undertook that prior to the continuation vote due at the
annual general meeting in 2002 all shareholders would be given
the opportunity to vote on recommended proposals which would
allow them to realise their investment at a price that fairly
reflects the then net asset value.  These proposals received
the support of shareholders and since then 14.9% of the
outstanding shares have been repurchased at a 10% average
discount.  The repurchase programme has added approximately
3.0p per share to fully diluted net asset value. At a further
extraordinary general meeting held on 22 September 1999 the
repurchase of up to a further 14.9% of the Company's ordinary
shares was authorised. Shareholders will be asked to renew
this authority at the forthcoming annual general meeting.
Your board remains committed to an active policy of buying
back the ordinary shares of the Company with the aim of
reducing the discount at which the shares trade to net asset
value and enhancing net asset value per share. At the
extraordinary general meeting held on 22 September 1999 a
resolution to cancel the Company's share premium account was
also passed. Accordingly, as indicated in the circular to
shareholders dated 27 August 1999, your board intends to seek
the approval of the Court for that cancellation, in order to
create a special reserve capable of being used to fund the
purchase by the Company of it's shares.
 
Prospects
 
The US economy has shown great resilience over recent years
and remains one of the fastest growing in the world, driven in
part by productivity improvement, which is partly a function
of efficient implementation of technology.  Profits growth has
started to reaccelerate and expectations are for around 10%
earnings growth for 1999.  Inflation remains under control
although there are some signs of wage inflation. The extraordinary share price
performance of larger companies over the last few years reflects the benefits of
restructuring combined with the dominant position of many of these companies.
Smaller companies by comparison are now at historically low relative valuations
and appear to represent good value.  This has led to a greater level of
corporate activity with both domestic and international companies acquiring
businesses in the US.  Our value-based investment approach tends to identify
attractive targets for acquisition and over the past six months five of our
portfolio holdings have been acquired.
 
The portfolio should produce respectable returns over the long-
term and our risk averse strategy is suitable for those
investors who want equity exposure to one of the most dynamic,
innovative and strong economies in the world but may be wary
of the level of the overall stock-market after such a
sustained period of strength.
 
Gordon Grender,
September 1999
 
 ASSETS
 Attributable to equity shareholders
 
                                  at 30 June   at 30 June
                                        1999         1998
                                      £'000s       £'000s
                                              
                                                         
Net Assets                           115,955      107,900
                                                         
                                                         
Net Asset value per ordinary         230.26p      214.40p
share
Net Asset value per ordinary         217.82p      202.08p
share  (diluted) - pence
                                                         
                                                         
 
Geographical distribution of total assets less current
liabilities (excluding loans) at 30 June 1999 was USA 100.2%,
UK (0.2%).
 
Unaudited Statement  of Total Return (incorporating the Revenue
Account*)
 
                                 1999                  1998   
                       Revenue Capital Total  Revenue  Capital Total
                                                        
                         £'000s  £'000s £'000s £'000s  £'000s £'000s
                                                                   
Gains and losses on           -  8,645  8,645       -  20,215 20,215
investments                                                      
Exchange gains and            -    338    338       -    357    357
losses on currency                   
balances
Income                   1,102       -  1,102   881        -    881
                                                                  
Management fees          (830)       -   (830) (844)   (229)  (1,073)
Loss on warrants           -     (376)   (376)      -  (316)  (316)
purchased for                                 
cancellation
Other expenses           (147)   (173)   (320) (148)    (82)  (230)
Net return before          125   8,434  8,559  (111)   19,945 19,834
finance costs and                                                
taxation
Interest payable and       -         -    -     (1)        -    (1)
similar charges                                     
Return on ordinary        125    8,434  8,559  (112)   19,945 19,833
Activities before                                                
taxation
Taxation on ordinary      (127)      -  (127)  (103)       -  (103)
activities                                   
Return attributable to      (2)  8,434  8,432  (215)   19,945 19,730
equity shareholders                                               
Dividends on ordinary      -         -    -      -         -      -
shares
Amount transferred          (2)  8,434  8,432  (215)   19,945 19,730
(from)/to reserves                                                
 
Return per ordinary        -     16.75  16.75  (0.43)  39.64  39.21
share - pence
 
Return per ordinary        -     16.00  16.00    +     37.56  37.15
share (diluted)-pence
  * The revenue column of this statement is the profit and loss account of
the Company.
   + diluted return is not applicable
 
Total return per ordinary share is based on a weighted average of
50,339,695 ordinary shares in issue during the year. The
diluted total return per ordinary share has been calculated in
accordance with FRS14, under which the Company's outstanding
warrants are considered dilutive only if the exercise price is
lower than the average market price of the ordinary shares
during the year. The dilution is calculated by reference to
the additional number of ordinary shares which warrantholders
would have received on exercise as compared with the number of
ordinary shares which the subscription proceeds would have
purchased in the open market ('dilutive potential shares').
Prior year figures have been restated accordingly.
 
 
By order of the Board
Foreign & Colonial Management Limited - Secretary
22 September 1999